Lyons, Dennis Aloysius & Anor v Kern Konstructions (Townsville) Pty Ltd & Anor [1983] FCA 68

Federal Court of Australia|1983-04-19|Before: Fitzgerald J

PRACTICE & PROCEDURE ~ application for leave to plead

in terms of a proposed Amended Statement of Claim - whether a statement sworn to by the applicants bears the meaning pleaded - pleading a prediction as itself constituting

a breach of s.52 of the Trade Practices Act - respondents' ,

fazlure to correct a prediction ~ promissory representations ~ - particulars of agency required before leave to proceed

against second respondent granted - particulars of damage.

DENNIS ALOYSIUS LYONS and LEONIE KAY LYONS v. r KERN RONSTRUCTIONS (fOWNSVILLE) PTY LTD (First Respondent) ,

and PROPERTY UNIT NOMINEES (NO. 2) PTY LTD (Second Respondert)

DRIP IPO ne pete re ee rte nan ene yong nneeprment nie a ee men ones

QUEENSLAND DISTRICT REGISTRY ) Qla G105 of 1982 GENERAL DIVISION ) BETWEEN:

Applicants AND: KERN KONSTRUCTIONS (TOWNSVILLE) PTY LTD First Respondent AND: PROPERTY UNIT NOMINEES (NO. 2) Pry LTD Second Respondent ORDER JUDGE MAKING ORDER: Fitzgerald J. DATE OF ORDER: 19 Apral 1983 WHERE MADE: Brisbane

. 1. The application is adjourned to 9.30 a.m. on Tuesday, 16 May 1983, to permit the applicants to reformulate the proposed amended Statement of

QUEENSLAND DISTRICT REGISTRY ) Q1d G105 of 1982 GENERAL DIVISION ) BETWEEN: ad

Applicants AND: KERN KONSTRUCTIONS (TOWNSVILLE) PTY LTD First Respondent AND: PROPERTY UNIT NOMINEES (NO. 2) PTY LTD Second Respondent FITZGERALD J. 19 APRIL 1983

On 7 March 1983, I struck out the applicants' Statement of Claim, refused them leave to deliver the Amended Statement of Claim then proposed, but gave them liberty to apply for leave to deliver a further Amended Statement of Claim. That application came before me on 14 April 1983 when the applicants sought leave to plead in terms of a proposed Amended Statement of Claim which théy had furnished. The application for leave to amend was opposed by the respondents. The background to the present application generally appears from my previous

filed further affidavits since that time and their presently proposed pleading considerably restricts the alleged conduct relied upon as contraventions of

Part V of the Trade Practices Act. Although the conduct

alleged is asserted to breach other provisions also, the matter has been debated before me solely by reference

The first conversation now relied'on and the consequences sought to be attributed to it are dealt with in paragraphs 4, 5(a) and (c), 6, 7, 8, 10(a), (c) and (d), 21 and 35 of the proposed pleading (after part was abandoned in the course of argument) which paragraphs respectively provide:

"4, In or about the month of March or April, 1979, the First Respondent by its agent David Campbell discussed with the Applicant the prospect of the

Applicants leasing a shop in the said shopping centre.

In the course of those conversations the said Campbell informed the Applicants:-

(a) That there were only two (2) shops left to be let in the shopping Centre;

In making the statements alleged in paragraph 5(c) hereof the said Campbell represented to the

Applicants that the Respondent or the said Campbell knew facts, or that facts existed, which justified the making of the said statements.

(At the time at which the said statements were made more than two (2) shops remained to be let in the said shopping centre.

When the said shopping centre opened in November, of 1979, Shops 41, 49 and 55 were untenanted. .

10(a) The statement particularised in paragraph 5(a) hereof was incorrect.

(c) At no time prior to the Applicants signing the said agreement for Lease did the First Respondent inform the Applicants that contrary to the statement contained in paragraph 5(c) hereof all of the shops in the said shopping centre would not be tenanted at the date of opening of the shopping centre.

(ad) At the time of making the said statements and at the time at which the Applicants signed the said agreement for lease neither the First Respondent nor the said Campbell knew of facts warranting the said statement, nor were they any such facts.

The said conduct and the Statements and representations were made by the First Respondent

by its agent as alleged with the intention and effect of inducing the Applicants to enter into an agreement for lease of shop premises in the said shopping centre and in reliance thereon the Applicants did so enter into such an agreement on the 19th day of October, 1979 with the First Respondent as proposed lessor.

As a result of the said misleading and/or deceptive conduct and/or false or misleading statements the Applicants have suffered damage estimated in the amount of EIGHTY THOUSAND DOLLARS ($80,000.00) and

the Applicants will provide particulars prior to Trial."

It is convenient and, 1n my opinion, not inappropriate to test the sufficiency of each of the alleged statements as a foundation of the applicants' claim against the first respondent separately, although keeping in mind, as was urged by counsel for the applicants, that there was but one conversation and that the statements, which ina general sense relate to the same topic, must be seen in

although a somewhat similar statement had been deposed to by the applicants, no attempt had previously been made to

only two shops left ..." is materially different from and does not bear the meaning pleaded; the words "to be let" are an unwarranted gloss; the words sworn to meant no more than that there were only two shops

unavailable although not let, e.g. because of being

the importance of factor (b) is that paragraphs 7 and 10(a), which assert the falsity of the statement, are wholly founded on paragraph 8,

I have concluded that the applicants should be permitted to advance this part of their case. It does not seem to me clearly obvious that the statement deposed to by the applicants could not have borne the meaning which their pleading asserts they attributed to it. It is true that the fact that three shops were not let when the shopping centre was opened does not inevitably lead to the conclusion that more than two were not let some six months earlier. A fortiori, it is possible that, although three were not let when the centre opened, only two were available at the tame the statement was made. However, having regard to the respective capacities of the parties to produce evidence on the topic, proof that three shops were not let in November 1979 might shift an evidentiary onus onto the first respondent to explain the position in March or April 1979 and, in the absence of evidence from the first respondent, it might be possible, even if not necessary,

to draw an inference that there were more than two shops which

were unlet or even available at the earlier date when the statement was made. The applicants' case may in fact be

a little stronger than the proposed pleading reveals. One Konidis, who also leased a shop in the centre, has sworn that he was informed by an agent of the first respondent in

July 1979 that there were then "three shops left", which

he -identifies. Two of the three shops referred to are different from the three not let when the centre opened

and the three shops referred to do not include the shop

which the applicants agreed to lease shortly before the

Accordingly, I do not thank that it is justifiable to shut the applicants out from having this part of their case determined in the context of the full evidence which will be adduced at the trial. However, they must provide particulars of any additional matters e.g. the position in

I will deal later with the damages alleged by the appellants against the first respondent in relation to this

The statement alleged in paragraph 5(c) is put forward as a contravention on two different bases. The first of these is to be found in paragraphs 5(c), 6, 8, and

"10(d). Paragraph 8 provides the sole basis for paragraph

There is no need to consider whether the prediction can be construed as alleged in paragraph 6 or whether, if it

can, the applicants have not already shown that they did not

This is precisely the same case with respect to "Vacant Shops" as that which was previously struck out. It 1s merely formulated in a different manner. Previously,

instead of paragraph 10(d), the applicants pleaded that

at the time the prediction was made the respondents had no reasonable expectation that the shopping centre would be fully tenanted when it opened. I held that the

applicants were engaged on a fishing expedition. -I said:

"Their position simply is that they should be able to make the allegations in general terms and then find out whether they are right or wrong, and what if anything there is to support them, by access to the respondents' records. ... In my opinion, the approach adopted by the applicants exceeds any reasonable latitude which might be permissible in order to accommodate any disadvantage they are under in trying to plead and prove the state of the respondents' minds."

Counsel for the applicants acknowledges that the new pleading constitutes an attempt to circumvent the Rules of Court which deal with particulars of allegations made as to a party's state of mind. In my opinion, the device failed. Paragraph 10(d)}, although expressed entirely in the negative, in truth asserts a positive case: cf£. the authorities in relation to pregnant negatives dealt with in relation to traverses in the

1982 White Practice at para 18/12/31 and in Williams

Supreme Court Practice (Victoria) Vol. 1 para 19.7.42.

It is for the applicants to establish what the facts were and/or what the facts known to the respondents were when the prediction was made. It is therefore incumbent on the

applicants to plead what they say was the position.

In any event, the respondents do not have to rely here upon the general position with respect to the pleading of such a case. The applicants seek leave to raise these allegations. Their own evidence and statements by their counsel reveal that they have no basis for them beyond the fact that three shops were untenanted when the centre opened. It has already been held against the applicants that that provides no basis for the allegations which they wish to make. The position in relation to the presently material prediction 1s obviously different from the position in relation to the statement of existing fact alleged in paragraph 5(a). Proof of paragraph 8 at the trial and a lack of evidence from the respondents could not support any greater inference than that the prediction proved inaccurate. That would not support a conclusion that it

It may be that discovery in relation to the issues raised by the statement alleged in paragraph 5(a) will arm the applicants with further information which will allow them to seek again to raise the prediction in paragraph 5(c) as a contravention or that they will otherwise come by such information, if any exists. However, they are not, in my opinion, entitled to leave

to raise the issue without any basis in order to have

discovery in relation to it for the purpose of ascertaining

whether or not any ground exists for their allegations.

The other basis upon which the applicants rely on the prediction in paragraph 5(c) 1s to be found in paragraphs5(c), 8 and 10(c), and in the allegation in paragraph 21 that the prediction was made with the intention of inducing the applicants to enter into the agreement for lease. The prediction is not, on this basis, put forward as itself constituting a breach but as a relevant circumstance to support a conclusion that the respondent's failure to correct it was a contravention. The presently proposed pleading glosses over the period between execution of the agreement (paragraph 10(d)) and the later opening of the shopping centre (paragraph 8), but it can probably be taken that it is the applicants' case that the period was so short that a conclusion is warranted that the first respondent must have known when the agreement for lease was executed that there would be, or

would likely be, untenanted shops when the centre opened.

In my earlier judgment, 1n elaborating why I proposed to permit the applicants a chance to attempt to

"Purther, particularly in relation to the allegations concerning the occupation of

be another basis upon which the applicants could put their case. Even if no . contravention was involved in the making of the statement, one arguably may have occurred by the respondent's subsequent failure to correcting it if it was known to be unaccurate, e.g. at the time the agreement for lease was entered into. Section 52 of the Act 1s concerned with conduct and is plainly not confined to statements.

to include some inactivity: see sub- paragraphs (a) and (c). Reference has been made to this elsewhere: see, e.g. Leo v. Brambles Holdings Ltd (judgment delivered

6 August 1982, unreported). A comparable position exists in respect of misrepresentation at common law: see Cheshire and Fifoot's Law of Contract, 3rd Aust. Ed., pp. 290-291."

Although I have reservations about the width of the important assertion in paragraph 21, which it seems may attribute to the first respondent's knowledge of its agent's conduct and an intention that it should be acted on by the applicants, I am not persuaded that the applicants should not be permitted to raise this case. It is arguable that the allegations in question would, if made out, support a case

in deceit: see Lockhart v. Osman [1981] V.R. 57, 69-70.

No question of fishing arises in relation to this part of

The second conversation relied on and the consequences sought to be attributed to it are dealt with in paragraphs 11, 12, 13, 14, 21 and 35 of the proposed pleading. The latter two paragraphs are set out above. Paragraphs 11-14

"11. In or about the months of August or September, 1979, the First Respondent by its agent, one Alan Goodfellow told the Applicants that a walkway would be constructed from a nearby Council carpark to the shopping centre within a period of twelve (12) months. ~

In making the said statement the said Goodfellow represented to the Applicants that he or the First Respondent knew facts, or that facts existed, which warranted the making of such a Statement.

At the time of making the said statement and at the time at which the Applicants entered into the said agreement for lease neither the said Goodfellow nor the First Respondent knew of facts warranting the making of such statement nor were there any such facts.

The First Respondent by its agent Alan Goodfellow was therefore guilty of misleading and/or deceptive conduct and/or making a false or misleading statement in that:

(b) At no time prior to the Applicants signing the said agreement for lease did the First Respondent inform the Applicants that, contrary to the statement particularised in paragraph 11 hereof, the walkway would not or might not be constructed within a period of twelve (12) months or at all;

(c) At the time of making the said statement and at the time at which the said agreement for lease was executed neither the Respondent nor the said Goodfellow knew of facts warranting the said statement nor were there any such facts."

The statement as to the future in paragraph 11 is sought to be relied on by the applicants in the same two ways as the prediction in paragraph 5(c). Although the pleading is in my view deficient, the affidavits now faled Glearly demonstrate that in this part of their case the applicants are not fishing and so much was conceded by the

respondents. Accordingly, provided that particulars of the

facts, including the first respondent's knowledge, are

given, I am satisfied, subject to one matter to which

I will now turn, that the applicants should be permitted to pursue this part of their case. If the affidavits which have been filed state this part of the applicants' case compendiously

then a statement that the particulars are to be seen in the

The submission for the respondents was that the statement alleged in paragraph 11 was promissory and that s.52 does not relate to promises, even though the facts at the time when a promise 1s made are such that it will not, or that it is unlikely that it will, be able to be carried

Gates, judgment 18 February 1983, as yet unreported, the

Full Court held that findings that statements were both a collateral warranty or contract and representations which contravened s.52 and sub-s. 53{g) of the Act were inconsistent.

Nonetheless, it seems to me that the respondents' submissions

Section 52 is not confined to representations. It is concerned with conduct which is misleading or deceptive or Hkely to'mislead or deceive. Not every promise has contractual force or effect. There 1s no reason why s.52 should not apply in appropriate cases to non-contractual promises, whatever may be the position in relation to

contractual terms. No attempt has been made by the applicants

to allege that the statement in paragraph 11 was a collateral warranty. Often, such a claim is advanced un the alternative. There may be good reasons why that has not been done here. It may still be a possibility if the respondents by their defence assert that the statement

un paragraph 11 gave rise to a contractual promise.

However, that all lies in the future. There may be Many reasons, including the formal documentation and the

rule in Hoyts' Pty Ltd v. Spencer (1919) 27 C.L.R. 133,

why the statement in clause 11 could not have contractual force, It is plain in my view that those are not matters for decision at this stage and no attempt was made to argue

to raise this claim subject to the condition earlier mentioned.

The third statement relied on and the consequences sought to be attributed to it are dealt with in paragraphs 15, 16, 17, 18, 19, 20, 21 and 35 of the proposed pleading. Paragraphs 21. and 35 are set out above. Paragraphs 15-20

"15. In or about the months of August or September, 1979 the said Goodfellow informed

the Applicants that the First Respondent had done a feasibility study or a projected traffic flow before the building of the said shopping centre started and that the number of people expected to pass through Northtown was estimated at between 30,000 and 50,000 per week.

In making the said statements the said Goodfellow represented to the Applicants that he or the First Respondent knew facts which warranted the making of such statements or that such facts existed.

No survey or projected traffic flow had been conducted.

Alternatively, if such survey or projected traffic flow had been conducted, then the results of that survey or projected traffic flow did not warrant the statement that it was expected that between 30,000 and 50,000 per week would pass through the said shopping centre.

Neither the said Goodfellow nor the First Respondent was in possession of facts which warranted the making of the said statement nor were there any such facts.

The First Respondent was guilty of misleading and/or deceptive conduct and/or making a false or

misleading statement in making those statements by its agent Goodfellow."

This is again substantially similar to a part of the

which was previously struck out. Once again, by paragraphs

16-19 the applicants seek to rephrase their earlier allegation

that the statement was made without "reasonable expectation"

in order to avoid the need to plead the facts upon which

they rely for their assertion. For the reason given above

in relation to paragraph 5(c) I am of opinion that the

filed convinces me that the applicants are not merely

fishing on this part of the case and ought not be refused

leave to amend provided they plead properly. Evidence

conversations with the applicants concerning the topic

the subject of paragraph 15. He gives a different version.

If the applicants' evidence be accepted at the trial, it

will likely if not certainly flow from Mr Goodfellow's

evidence that there was no basis for the statement which

it will have been found was made. If that is the applicants

case, however, 1t 1s that case, and not one more widely

framed, which they should be permitted to set up. They

paragraphs 17-20 in order to see what they can discover.

second respondent is to.be found in paragraphs 23-31A

and 35 of the proposed pleading. Paragraph 35 is set out

"23. On the 5th day of November, 1979 the Applicants entered into a lease with the

Second Respondent for three (3) years commencing on the 7th November, 1979 pursuant to the terms of the said agreement for lease.

After the centre opened on the 7th day of November, 1979 the Second Respondent by its agent, one Alan Goodfellow told the Applicants that a walkway would be constructed from the nearby Council carpark to the shopping centre by December, 1980.

%In making the said statement the said Goodfellow represented to the Applicants that he or the Second Respondent knew facts which warranted the making of such a statement or that such facts existed.

At the time of making the said statement, neither the said Goodfellow nor the Second Respondent knew of facts warranting the making of such statement nor were there any such facts.

The walkway to the centre from the Council carpark has never been constructed.

No application had been made at any time by neither the First Respondent or the Second Respondent or by any person on their behalf to the Council of the City of Townsville for approval to construct the walkway.

Since the building was opened on the 7th day of November, 1979 the Second Respondent has altered certain internal walls to make it difficult if not impossible to now construct the walkway as represented by Alan Goodfellow.

The Second Respondent by its agent Alan Goodfellow was therefore guilty of misleading and/or deceptive conduct and/or Making a false or misleading statement in that:-

(a) The statement particularised in paragraph 24 was not true;

(b) At no time prior to the Applicants ceasing to-be a tenant of the Second Respondent on the 22nd day of January, 1982 did the Second Respondent inform the Applicants that contrary to the statement particularised in paragraph 24 the walkway would not or might not be constructed by the expiration of the term of their tenancy on the 6th November, 1982.

Had the Applicants been informed that no walkway was to be constructed, or alternatively that no walkway would be constructed prior to the expiry of their term, they would have abandoned the said shop and lease thereof, limiting their future loss to amounts payable under the said lease.

31A. In fact the Applicants remainded in possession and trading, incurring further losses particulars of which will be provided prior to trial."

In paragraph 8 of the affidavit filed since the previous decision, the male applicant has sworn that after the centre opened, "the landlord's representatives" informed them that the walkway would be constructed. However, I propose to proceed on the basis that the pleader, who doubtless had that affidavit, deliberately

related the case against the second respondent to the

single statement by Mr Goodfellow alleged in paragraph 23.

It would be consistent with my view that the applicants should be permitted to prosecute a claim against the first respondent in terms of paragraphs 11-14 to permit them to proceed also against the second respondent on the allegations now under consideration. However, the respondents object on the basis that the applicants' own evidence shows that Mr Goodfellow was an employee of the first respondent and not an agent of the

I do not accept that the evidence goes so far. Although the general tenor of the evidence is that Mr Goodfellow was an employee of the first respondent,

paragraph 7 of one of his affidavits 1s in the following

them in accordance with my instructions, that the walkway would be completed by December, 1980.

My employment with the Kern Group ceased in approximately November/December 1979." (Emphasis added)

In my opinion, it would be neither permissible, fair to the second respondent, nor in the applicants' own best interests to permit the question of Mr Goodfellow's apparent lack of relationship with the second respondent to be disguised in this way. In my earlier judgment, I mentioned the limited extent of the connection between

Mr Goodfellow is obviously co-operating with the applicants. I do not propose to grant leave to proceed against the second respondent unless particulars are given of the agency alleged and an affidavit verifying such matters is obtained from Mr Goodfellow. That course seems to me called for in the particular circumstances of this case in which the applicants have failed on

As appears from my previous reasons, the applicants have sworn in detail to losses which they claim to have sustained. The position must now be largely crystallized. The lease is at an end and they no longer operate the shop. Once again, their attempt to postpone particulars of their losses to trial affords an obstacle to the proper delineation and limitatzon of the disputes. That is particularly so since the true position in relation to some of the matters relied on, e.g. the alleged statements as to the vacant shops, must have been obvious to them from the opening of the centre. Questions may therefore exist

as to whether losses were caused by the respondents' conduct.

As discussed during the hearing, I propose to postpone making any order giving leave to amend until

the proposed particulars of damage have been provided.

Relief The need for the applicants to modify the relief

sought was accepted by all concerned during the hearing.

The only order which I make at this time is that the application be adjourned to 9.30am on Tuesday, 16 May 1983, to permit the applicants to reformulate the proposed amended Statement of Claim 1n accordance with these reasons. The applicants must pay the costs thrown away.

On the assumption that the applicants will provide the respondent with the final version of the proposed pleading well before 16 May and that any remaining difficulties will have been discussed and hopefully agreed by that date, I will then give directions for the future conduct of these proceedings. It seems to me that they should be able to move forward swiftly. The respondents will have not only a considerably narrowed case to prepare for but much if not all of the applicants' case in the form of affidavits.

immediately. Further, there 1s no reason why the parties

should not largely if not wholly complete their preparations _ for discovery during the period for the reformulation of the

iStatement of Claim. Indeed, one would think that the major

area for discovery by the applicants will be in respect of

damages and that preparation for discovery in that respect will serve to focus their attention on the real extent to which they claim their losses can be attributed to the respondents and assist them to plead fully and accurately, taking into account the alterations from time to time in their state of knowledge after they took possession of the shop and commenced to trade. As at present advised, I would think that there would not be many issues calling for discovery by the respondents, although there will be some and they may be important. Subject to argument, I would propose to order discovery, leaving it for the respondents to claim privilege from production if they wished and thought that they could sustain a claim: see

Pyneboard Pty Ltd v. Trade Practices Commission, judgment

delivered 18 March 1983, per Mason A.C.J., Wilson and Dawson JJ

citing the decision of Deane J. in Refrigerated Express Line

(A'Asia) Pty Ltd v. Australian Meat and Livestock Corporation

(1979) 42 F.L.R. 204. It may be that, with these instructions, the parties will be able to agree on an appropriate set of directions 1n which case, if a consent is signed, it may be possible to avoid a further appearance

on 16 May 1983 and thereby avoid unnecessary costs.

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Judgment (176 paragraphs)

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