When asked in the witness box whether he would have signed the guarantee if he had been made aware of the alleged assurances given to Pridmore, he said he would need to discuss that matter with Horrobin. This was a curious answer. The answer is ambiguous but to some extent it supports the argument by UBA that Horrobin was the directing force and mind in the Trawl litigation.
I gained the firm impression from the way in which Sands gave his evidence that he was to a large extent very conscious of the case being put forward by the applicants and strove to support that case, rather than attempting to carefully and accurately recall events and discussions which had taken place, and to give the Court the benefit of his best recollection.
Sands would not agree that Pridmore had misled him by failing to tell him the basis on which Pridmore had signed the guarantee. This is hard to accept in view of other evidence by him, that Pridmore should have told him before execution of the guarantee, that Pridmore's guarantee was not binding on him.
Moreover, Sands swore that he first became aware of the bank's assurances around June 1992, whereas Pridmore testified that he probably told Sands and Horrobin of the assurances before July 1988, almost 4 years earlier.
This contradiction in evidence between the applicants calls for considerable caution in accepting their versions of oral statements made up to 7 years earlier.
Lees
Lees also proved to be an unsatisfactory witness, and his evidence must be examined with extreme caution and carefully considered against the established facts and events, together with the contemporary documentation.
His testimony, both in this Court and the Supreme Court proceedings before Cole J, was confused and riddled with inconsistencies and contradictions.
He admitted that he was prepared to tell half-truths if necessary. To this extent he could be said to have been disarmingly frank about his lack of frankness and honesty.
No doubt it was with an acute appreciation of these difficulties that in the written submissions UBA structured its case basically on the documentary material and the surrounding circumstances having regard to an inherent commercial probability.
In his favour, it must be pointed out that Lees did not have the formal education of the applicants but he was entrusted with wide discretions in relation to purchasing raw materials up to tens of millions of dollars and there is no substance in an argument fairly advanced that he in any way lacked authority to make representations on behalf of UBA of the type under consideration in this case. It was suggested that his views were not always those of UBA, but as far as the alleged representations are concerned I have no doubt that they were made with full authority and in the course of his employment.
He does not have any apparent financial interest in the outcome of the proceedings and he no longer works for UBA. He obviously and understandably took a strong stance in negotiations. He was frank about his view of the 26 March 1987 Heads of Agreement and the lack of any binding effect of that document, and other similar documents. He did, when pressed, make concessions, or admit fairly obvious matters, but was extremely reluctant to do so.
Again, as in the case of the three individual applicants, I do not accept Lees' uncorroborated oral evidence of conversations or representations made up to 7 years ago, unless otherwise admitted. I prefer to rely on the documentation and objective circumstances and behaviour as disclosed in the evidence.
Litigious History
The present litigation before me forms part of a complex web of inter-related proceedings arising from the Trawl investment which it is useful to outline since these earlier proceedings do bear on matters such as credit and damages in the present proceedings.
1987-1988
Since the events of February/March 1987, there has been a series of proceedings instituted in relation to the contractual arrangements between the applicants and respondent and also between ANZ and the applicants on personal guarantees. On 24 February 1988, ANZ commenced an action in the Supreme Court of Victoria against Cumbeline, seeking a declaration that it had a valid lien on Atasco shares in Trawl. Cumbeline counter-claimed and alleged that ANZ had misrepresented certain matters to it. Those matters included representations that:
(a) To ANZ's knowledge, information and belief Atasco's financial condition was sound and that it enjoyed a good relationship with ANZ and that it was in a position to bear its one half share of any guarantees that might be required to support Trawl's indebtedness to ANZ.
(b) ANZ approved the March 1987 shareholders' agreement including a term that Atasco would not charge its shares in Trawl without the prior written consent of all shareholders which consent should not be unreasonably withheld.
(c) That in the event of the March 1987 shareholders' agreement being executed ANZ did not intend to take a charge over the shares in Trawl held by Atasco.
It is then stated that in reliance on those representations and induced thereby Cumbeline entered into and became bound by the March 1987 shareholders' agreement and subscribed for shares and injected substantial funds into Trawl. There is then an allegation that the representations were false and untrue in that ANZ knew that Atasco's financial condition was not sound and it did not enjoy a good relationship with ANZ and that Atasco was not in a position to bear its one half share of any guarantees or securities and that in the event of the March 1987 shareholders' agreement being executed by Cumbeline, ANZ intended to take a lien or charge over shares in Trawl held by Atasco. There is then an allegation of negligence, misleading conduct under s 52 of the TPA, together with unconscionable conduct under s 52A of the TPA.
On the basis of the above claim by Cumbeline it was asserted that Cumbeline was entitled to orders declaring that the scrip lien claimed by ANZ was void.
This litigation was settled on 6 July 1988, when Cumbeline and Horrobin, Sands and Pridmore, entered into a Deed of Acknowledgment to the effect that the guarantees given by them were binding and effective, and by entering into a fresh guarantee to secure a further advance from ANZ. Those parties later argued that the guarantees were void due to alleged representations made by ANZ to Pridmore.
Proceedings before Cole J - July-August 1989
Proceedings were instituted by Trawl against UBA on 17 April 1989, in the Supreme Court of New South Wales. The applicants in the present proceedings were not parties in these proceedings. They were heard by Cole J. As originally constituted these proceedings made no reference to any misrepresentation but were simply an action for breach of the Heads of Agreement of 7 June 1988, particularly relating to the cost plus provision of that contract. The pleadings simply alleged a breach of contract by UBA. This claim was expanded on 24 May 1989 to raise a representation that the price payable under the 6 June 1988 contract was one under which mackerel price was required to be one which provided a reasonable commercial profit to the plaintiff. There was no reference to any other representation.
On 14 June 1989, points of claim were filed and again the claim was expanded to include an allegation based on misrepresentation. This representation was stated to be that the price was to be determined by establishing the plaintiff's total costs by checking the company's records, deducting contributions from sources other than jack mackerel and adding a profit margin sufficient to provide the plaintiff with a reasonable commercial profit. This is the first reference to the claim under s 52 of the TPA, more than two years after the representations were said to have been made.
Later on 30 July and 2 August 1989 the Trade Practices allegations were again expanded. This time they raised for the first time, the misrepresentations relating to the 18 March 1987 discussion, the representations in June 1987 and from late February to early March 1988.
The matter came on for hearing before Cole J on 31 July 1989.
By consent on 8 August 1989 his Honour ordered that other claims including the s 52 claim should be heard separately. He dealt with questions concerning the interpretation of the 7 June 1988 Heads of Agreement and whether either party had repudiated that agreement. He also dealt with a question raised by UBA as to uncertainty arising from the price clause. He decided that the Heads of Agreement were not uncertain and that Trawl had repudiated that agreement. An appeal to the Court of Appeal of New South Wales was unanimously dismissed in March 1992. See Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd Trading as "Uncle Bens of Australia" (1992) 27 NSWLR 326.
The evidence of Horrobin relating to the oral representation to the effect that the total cost to Trawl would be established by looking at the records of Trawl and adding a profit margin was not accepted by Cole J. In coming to that conclusion his Honour referred to the absence of any note by either Pridmore or Horrobin and to "material discrepancies" in the evidence of Horrobin and referred to "previous pricing practices". He referred to a number of other considerations particularly the absence of any sound commercial basis, in the case advanced by Trawl, on this point. His Honour also noted that the recollection of Lees was "imprecise".
Other Proceedings
By action commenced on 24 April 1992 ANZ sued Sands, Pridmore, Horrobin and Cumbeline in the Supreme Court of Victoria on the personal guarantees. Pridmore filed a defence that his guarantee was given on an assurance from ANZ's officers that it was to be for clerical purposes only, and would not or could not, be enforced against him personally. Sands, Horrobin and Cumbeline amended their defences by defence dated 18 August 1992, and relied on the non-disclosure of the assurances given to Pridmore as a basis for claiming invalidity of the guarantees as against them. They relied on s 52 of the TPA.
On 12 May 1994 ANZ commenced action in the Supreme Court of New South Wales for possession of the homes of Horrobin and Sands, under the mortgage to NMRB, whose assets had passed by that time to ANZ. The action was based on guarantees given to secure a loan to Idobook, which was a company in which Sands held a major interest.
The defence relies on a cross-claim which is verified by Horrobin and Sands. It asserts a range of misrepresentations by ANZ relating to the "clerical purposes" assurances allegedly given to Pridmore by ANZ.
It also asserts that ANZ engaged in misleading conduct under s 52 of the TPA.
It must be noted that the claims of Horrobin, Sands, Pridmore and Cumbeline in these proceedings before me, claim amounts which they assert are due by Trawl to ANZ under guarantees to that bank, whereas they have already denied on oath in the defences and counter-claims raised against the banks that any such debts exist.
Neither the 1992, nor the 1994 proceedings in relation to the guarantees has yet been heard.
In the light of these previous proceedings counsel for UBA sought to highlight the large number of misrepresentations alleged by the applicants not only in the present proceedings, but also in the other proceedings referred to above. It was suggested in cross-examination that the applicants appeared to have been the subject of an exceptional number of misrepresentations by a variety of bodies, including UBA and ANZ, and the Atasco directors, J Wilson and Fasham. The submission was also made that the applicants had more than a passing acquaintance with the law of misrepresentation and were using it in effect as "a tool of trade", in the course of this extensive web of litigation. I think there is substance in these submissions.
Attention was also drawn by UBA in address to the gradual way in which the misrepresentations alleged against UBA emerged in stages as the result of amendments to the pleadings and to the fact that they were not raised at all initially. The initial case in 1989 was of course founded on breach of contract. The suggestion was that the misrepresentation claims were an afterthought and had not in most instances been the subject of any complaint to UBA before July 1989, when the first claim, apart from the cost plus allegations, was made for misrepresentation.
Legal Principles
The relevant legal principles and guidelines for consideration of the present matter are set out below:
Section 52
(a) The section is cast in wide terms. It provides a norm of conduct. It does not in itself create liability but where the norm is contravened it may give rise to a wide range of remedies including damages or injunctive relief as set out in Part VI of the TPA (sections 75B - 87C inclusive). The ordinary meaning of the words of the section must be applied without preconception as to any limitations on the words. Some guidance can be obtained from the common law. See Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 at 348-349
(b) The section being remedial in nature should be given a broad interpretation.
(c) Whether conduct is misleading or deceptive is a question of fact to be determined in the context of each particular case as considered at the time when the conduct occurred. See Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 36.
(d) It is not necessary that the conduct or misrepresentation was intended to deceive or mislead. It is immaterial that the respondent did not know that the representation was false when made. The essential facts to be established include the making of the representation and the falsity of the representation: Yorke v Lucas (1985) 158 CLR 661 at 675-6.
(e) The Court must take into account the relative experience and positions of the parties such as their familiarity with the subject matter and their experience and knowledge. The common understanding of commercial people must be taken into account in determining what is likely to mislead or deceive but the section does not require arm's length negotiations to be completely open or require full disclosure in every situation. The particular facts must be considered in the light of the ordinary incidents and character of commercial behaviour: General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 at 177-178.
The pertinent question must be whether any member of the class of persons affected by the conduct, excluding only the quite unusually stupid or those with quite unusually great expectations of disclosure, would have expected that the information in question would be disclosed. If the class of persons affected are "commercial people", then the conduct must be assessed by reference to the expectations of all such people, and not by reference to the expectations of a reasonable member of that class.
(f) Silence may constitute misleading or deceptive conduct where the circumstances give rise to a reasonable expectation that a particular matter or fact would be disclosed. However, the section does not impose any new general statutory duty to disclose. The question for the Court is simply whether the silence would as a matter of fact be misleading or deceptive in the particular circumstances of the case. See Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32 per Black CJ. See also, Andrew Robertson, "The Circumstances in Which Silence can
Constitute Misleading or Deceptive Conduct" (1991) Queensland Law Society Journal (February 1991) 21.
(g) A true statement or a half truth can be misleading or deceptive where it is coupled with silence: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 227-228.
(h) Where parties in a commercial situation negotiate at arm's length there is not necessarily an obligation to disclose information which might cause the other party to adopt a different negotiating position or tactic. This would normally only follow if there was a duty to make full disclosure. Such a duty could arise from a particular feature of the relationship, for example, a fiduciary relationship, or because there was a duty to correct earlier information: Lam v Ausintel Investments Australia Pty Ltd (1990) 12 ATPR 50,866 at 50,880 per Gleeson CJ. Section 52 does not strike at the "traditional secretiveness and obliquity of the bargaining process." Bargaining may be hard without being misleading or deceptive in the statutory sense: Poseidon (supra) at 26.
(i) Not all information need be disclosed. However, the process of bargaining is not a licence to deceive: Poseidon (supra) at 26. See also Warren Pengilley, "But You Can't do That Any More!" - The Effect of Section 52
on Common Negotiating Techniques, (September 1993) 1 TPLJ 113.
(j) A warranty in a contract may amount to a representation for the purposes of s 52. Insofar as it relates to a future state of affairs it will be necessary to see whether there were reasonable grounds for making it under s 51A. It is no objection to relief under Part VI that the misleading conduct is found in the making of a contractual provision and the complainant does not have contractual privity with the defendant: Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470. As to the relationship between s 52 and the law of contract see D J Harland "The Statutory Prohibition of Misleading or Deceptive Conduct in Australia and its Impact on the Law of Contract" (1995) 111 LQR 100.
(k) Where an act is carried out for reasons completely independent of any misleading conduct, and there is no reliance on that conduct, there is no remedy under s 82. See Lam v Ausintel (supra) at 50,881, where the finding was that the applicant entered into an agreement not because of reliance on representations but on the basis of his own view as to his commercial interests.
(l) Where a material representation is made, which is calculated to induce a representee to enter into a
contract, and the contract is in fact entered into, then there is an inference of fact that reliance was placed on the representation. This inference can be displaced by showing there was no reliance because, for example, the representee knew the true facts: Gould v Vaggelas (1985) 157 CLR 215 at 236-7; Ricochet Pty Ltd v Equity Trustees Executors and Agency Company Ltd (1993) 41 FCR 229 at 233-235. See also Warren Pengilley, "Causation and Reliance in Misleading and Deceptive Conduct Law" (1994) 2 Competition & Consumer Law Journal 134.
(m) Failure by an applicant to verify representations or to take adequate measures to check them as a result of which the falsity of the conduct or representation is not unveiled does not prevent recovery for breach of s 52. See Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 at 558-559; J D Heydon "The Relevance of the Victim's Level of Care in Misleading and Deceptive Conduct Actions" (1995) 2 Competition & Consumer Law Journal 230.
(n) There is no general duty as between parties negotiating a contract at arm's length in a commercial negotiation to disclose or explain the interpretation or effect of the contract by either party. Thus, silence concerning a view of the proper interpretation of a contract, or silence on the subject of whether a contract will be enforced, would rarely, if ever, constitute misleading or deceptive
conduct. Otherwise, the basis of objective interpretation of contracts, referred to by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352, would be destroyed. See Halton Pty Ltd v Stewart Bros Drilling Contractors Pty Ltd (1992) 14 ATPR 40, 146 at 40, 152-153 per Palmer AJ; Mander Forklift Pty Ltd v Dairy Farmers Co-operative (1990) 12 ATPR 53,227 at 53,228.
(o) Finally, it appears from the authorities that, unlike positive conduct, silence must be deliberate in order to breach s 52, pursuant to s 4(2) of the TPA. See Lawson v Ampol Ltd (1993) ATPR 41-204 at 40, 864.
The Heads of Agreement
(p) Arrangements embodied in a document with a title such as "Heads of Agreement" can give rise to binding legal obligations. It is a question of considering the language used in the context of the surrounding factual matrix and deciding whether the parties intended to be legally bound thereby and whether the terms are sufficiently certain to be enforceable. The title "Heads of Agreement" does not of itself necessarily mean that the document is merely a preliminary outline of a proposed contract to be drawn up at a later stage which is not intended to be binding or which is too uncertain. Language used may disclose an intention by both parties to be immediately bound to a
specific obligation or set of obligations which is enforceable. See Hooper v Commonwealth of Australia (unreported, Sup Ct, New South Wales, Comm Div, Gleeson CJ - 16 Nov 1990).
(q) Heads of Agreement may be in the form of a contract to negotiate a contemplated agreement in good faith. In some, such an arrangement may be enforceable and give rise to a cause of action for breach. Breach of such a promise may, for example, found a damages claim but the damages may be nominal only, depending on the circumstances. See Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 per Kirby P at 25-26. Waddell AJA agreed "generally" with the reasons of Kirby P. Handley JA dissented on the ground that the content of the promise to negotiate in good faith was uncertain and that the promise itself was illusory and was not therefore enforceable. The trial judge in Coal Cliff Collieries, Clarke J, took the view that the promise to negotiate both would, and did, give rise to a binding obligation to negotiate.
In my opinion the preferable view is that an obligation to negotiate in good faith on matters such as price, supply, quantity and timing, confers an entitlement to bring a party to the negotiating table and such a right could give a commercial advantage. If the parties have agreed to follow such a procedure I think the promise should be given effect to
by the Court unless the circumstances say it is pointless to do so, as where there is clearly no prospect of any agreement being reached. I do not consider such a right empty, meaningless or illusory. The question, in each case, must depend on the circumstances, and the effect of such a promise is very much an open question on which informed legal opinion can and has, over the years, quite reasonably differed.
The Representations
The applicants' further amended statement of claim ("FASC") propounds twenty four representations.
Representations (i)-(iv) - 16 March 1987 - W17299
The first four alleged misrepresentations are as follows:
(i) That UBA had entered into a binding contract with Trawl for the supply by Trawl to UBA of 6,250 tonnes of fish in 1987, subject to the terms and conditions of that contract ("the first representation").
(FASC, para 3(a), 4A).
(ii) That UBA intended to honour its obligations under that contract ("the second representation").
(FASC, para 3(b), 4A).
(iii) That the contract was a genuine contract intended to be fulfilled by the parties to it ("the third representation").
(FASC, para 3(c), 4A).
(iv) That Trawl presently had and/or would have the ability and capacity to supply 6,250 tonnes of fish in accordance with the terms and conditions of the contract ("the fourth representation").
(FASC, para 3(d).