And: THE CHAMBER OF COMMERCE AND INDUSTRY (S.A.) INCORPORATED; WOODS BAGOT

PTY. LTD; GLENN FRANK McMAHON and BAGAD (No.4) PTY. LTD.

Practice and Procedure - Application to strike out statement of claim - submission that no cause of action established - submission that applicant was merely seeking future unascertained damages - applicant has claimed that misleading and deceptive conduct of the respondent induced applicant to take a long term lease on an office building - applicant will incur future costs of repairs and renovations and claims from sub-lessees for breach of covenant for quiet enjoyment - held that cause of action sufficiently pleaded and that the damages claimed were those referable to a claimed diminution in the value of the lease at time of acquiring the lease.

Solicitors for the Applicants: Corrs Chambers Westgarth

The question of costs be reserved for further argument.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Application to dismiss or strike out statement of claim with respect to the third named applicant.

2. The following summary of facts has been extrapolated from the amended statement of claim, leave to file which was granted on 18 September 1991; for the purposes of dealing with this application I am to assume that those facts are correct.

3. The respondent, The Chamber of Commerce and Industry S.A. Incorporated ("the Chamber of Commerce") entered into an agreement in writing on 28 June 1985 with the first named applicant, Guiseppe Emanuele ("Mr Emanuele"). The agreement granted Mr Emanuele or his nominee the option to purchase from the Chamber of Commerce a large office building in Adelaide's Central Business District ("the property"). On or about 17 July 1985, Mr Emanuele nominated the second named applicant, Industry House Pty. Ltd. ("Industry House") as his nominee to effect the purchase of the property and on 25 July Industry House "exercised the option and thereby agreed to purchase the property and settlement of the purchase of the property occurred on 30 September 1985" (paragraph 10 of the statement of claim).

4. The third applicant in these proceedings is "Pirie Partners" which is described in paragraph 3 of the statement of claim as "a registered partnership having been formed on 30 September 1985". On the next day, 1 October 1985, Pirie Partners and Industry House entered into an agreement whereby Pirie Partners agreed to take a lease of the property for ten years; since that date, Pirie Partners has entered into a variety of sub-leases with respect to various parts of the property.

5. At the core of these proceedings is the claim by the applicants that on or about 26 November 1986 a considerable quantity of asbestos was found within the property. The claim has been made that in the course of negotiations which led to the grant of the option and the ultimate purchase of the property, representations were made, in the name of and on behalf of the Chamber of Commerce, to the effect that "there was no asbestos in the property". (Those quoted words were defined in paragraph 6 of the statement of claim as "the statement" and I will also use that term in these reasons).

6. The statement of claim contains allegations that "the statement", although made to Mr Emanuele, was also effectively made to Industry House because he was a director of that company and to Pirie Partners because he was a director of a company which was one of the partners in the partnership. It also claims that each of the applicants relied on the truth of "the statement" and that each was thereby induced respectively to enter into the option agreement, the agreement to purchase and the agreement to lease. In paragraphs 15 to 21 of the statement of claim there are detailed pleas of the state of knowledge that the Chamber of Commerce had or ought to have had about the extent to which any purchaser of the property and any subsequent lessee of the property would know of and rely on the accuracy of "the statement".

7. The second applicant, Industry House, has sought damages against the Chamber of Commerce for misrepresentation and for breach of a collateral agreement and warranty. In addition both Industry House and Pirie Partners seek damages for a breach of s.52 of the Trade Practices Act, 1974 (Cth) and damages in negligence.

8. The Chamber of Commerce has denied that "the statement" was made in its name or on its behalf; but it has added that, if it was made, then it was made because it (the Chamber of Commerce) had made "all reasonable enquiries" of its architects, the first cross respondent, Woods Bagot Pty. Ltd, ("Woods Bagot") of the second cross respondent Bagad (No.4) Pty. Ltd, ("Bagad") who is described in the defence as "an expert asbestos removalist" and of the Department of Labour and Industry. The Chamber of Commerce thus seeks to advance the positive proposition that it had reasonable grounds to believe, and did believe, that "the statement" was true. In addition, the Chamber of Commerce has raised the issue of contributory negligence against the applicants, claiming that they knew of the fact that some asbestos had originally been present in the property and that, it being incumbent on them, they failed to make their own enquiries.

9. The Chamber of Commerce has alleged in its cross-claims that in late 1984 and early 1985, the cross respondents Woods Bagot and Bagad were retained respectively to report on the presence of asbestos in the property and to remove any asbestos that was found. The Chamber of Commerce has charged failures on the part of the cross-respondents to report on and to remove the asbestos. But each of them and the additional cross-respondent Glenn Frank McMahon, a director of Bagad, have denied, for differing reasons, any liability to indemnify the Chamber of Commerce.

10. Mr Emanuele makes no claim for damages as he assigned to Industry House his present and future rights against the Chamber of Commerce by Deed dated 22 May 1987. He remains an applicant in the proceedings only as a matter of pleading practice for the purpose of effectuating that assignment.

11. By its Notice of Motion dated 26 June 1991 the Chamber of Commerce sought an order that -

"the third applicants' claim be dismissed pursuant to Order

20 Rule 2 of the Federal Court Rules."

In a later Notice of Motion dated 7 August 1991, the Chamber of Commerce sought an alternative order that -

"the Statement of Claim, insofar as it applied to the third

applicant be struck out pursuant to Order 11 Rule 16 of the

Federal Court Rules...."

12. The Chamber of Commerce alleges that the statement of claim does not reveal a good cause of action on behalf of Pirie Partners because it lacks sufficient material facts upon which a claim for losses can be based and because Pirie Partners does not have, at law, any remedy against the Chamber of Commerce for the losses that it has claimed. On the other hand, it acknowledges that Mr Emanuele correctly remains as an applicant and that the several causes of action that have been pleaded by Industry House presently appear to be sustainable on the allegations that are contained in the statement of claim.

13. The provisions of the statement of claim that make specific reference to Pirie Partners or that clearly include Pirie Partners in their ambit are as follows:

(1) Paragraph 19: it is alleged in this paragraph that the Chamber

of Commerce knew or ought to have known that any purchaser of the

property might or would lease it to a lessee who, in turn, might

or would sub-lease the property to sub-lessees.

(2) Paragraph 20: following on from the allegation in paragraph

19, there is an allegation that "the statement" would become known

to any such lessee and that any such lessee would rely on the

accuracy of "the statement" in determining whether or not to take

a lease on the property.

(3) Paragraphs 21 and 23: the combined effect of these two

paragraphs and their application to Pirie Partners is that the

Chamber of Commerce knew or ought to have known of the existence

of the asbestos and that any lessee of the property would thereby

suffer loss and damage; those circumstances constituted conduct

that was said to be misleading or deceptive.

(4) Paragraphs 24 and 25: these two paragraphs encapsulate the facts

already pleaded as the base upon which to plead the existence and

breach of a duty or care

(5) Paragraph 26: this is the paragraph in the statement of claim

most strongly criticised by Mr Phelps, counsel for the Chamber of

Commerce. It is the paragraph in which the applicants have

quantified their losses. The thrust of the claim that has been

made by Pirie Partners is that it has suffered damage by way of a

diminution of the worth of its asset:- that is, its ten year lease:-

"As a result of the considerable quantity of asbestos being

present in the Property the lease of the Property is worth

less than it otherwise would be, such loss and damage and

general damages being fairly represented by the amount of

the likely losses which will be claimed against Pirie

Partners by the Sub-lessees of the Property for breach of

their respective covenants of quiet enjoyment in the

Sub-leases whilst the asbestos is being removed from the

Property. The Sub-leases have been discovered by Pirie

Partners; the Sub-leases will be referred to at the trial

for their full terms and effect. The amounts are calculated

on the basis that the likely loss will be one calendar

month's rent by each sub-lessee."

14. There then follows a list of 22 sub-lessees together with their individual calendar monthly rentals; those rentals total $114,622.72. Mr Phelps submitted that this reliance by Pirie Partners on the sub-leases means that the sub-leases should have been (but were not) fully and adequately particularised in the statement of claim; I agree and I add that they must also be discovered and made available for inspection. But I do not believe that the lack of particularity is a sufficient ground - at least, not at this stage - for a striking out order or, worse, an order for dismissal.

15. Mr Phelps attacked the argument about insufficient material facts in another way; he said that if Pirie Partners had truly suffered damage by way of a diminution in the value of its lease, then an attempt to quantify the value of its damage by reference to unascertained and future claims from sub-lessees (that may or may not be made) for damages for breach of covenants for quiet enjoyment was inappropriate. That argument may or may not be sound but it is not an argument that can be entertained at this stage on this application. Pirie Partners has identified its alleged damage and it has chosen an interesting and unusual formula to quantify that damage. It will be for the trial Judge to determine whether the evidence that is led at trial on the subject does or does not satisfy the onus that Pirie Partners will be carrying.

16. Mr Phelps' next complaint was that the introduction of the likely future losses of rent was a material shift by Pirie Partners; there had been no such claim in the original statement of claim that had been filed on 30 September 1988 nor in subsequent particulars. He referred to the decisions of the Court of Appeal in Perestrello e Companhia Limitada v United Paint Co. Ltd. (1969) 1 WLR 570 and Domsalla v Barr (1969) 1 WLR 630. However, I cannot see how either of those authorities can assist his argument. Perestrello was a case where a plaintiff had quantified his damages for breach of contract by limiting them to the costs that had been incurred by way of wasted expenditure on adaptions to his factory. There was no claim for loss of profit although that subject had been alluded to in a letter before trial. Five years after the issue of the Writ and just before the hearing the plaintiff sought but was denied leave to amend its statement of claim to plead loss of profits. These present proceedings must be directed to the contents of the statement of claim in its amended form; as mentioned earlier, leave was given on 18 September 1991, immediately prior to hearing argument on this application, to file the amended statement of claim. Domsalla v Barr was a case dealing with personal injuries. The plaintiff led evidence that although he possessed the necessary academic qualifications, his injuries resulting from the accident had prevented him from setting up business as a steel erector of his own account. It was held, on appeal, that such a special circumstance should have been pleaded and, even though the evidence was led without objection, its absence from the pleadings meant that an entirely new element had been introduced into the case which had not been adumbrated in the statement of claim. As with Perestrello, this case has no present application to these proceedings. If it is to have any relevance, that will only surface during the course of the trial when the evidence that is led by Pirie Partners can be scrutinized.

17. Mr Phelps next argued that notwithstanding the language of the pleadings, including the particular reference to a diminution in the value of the lease, the reference to "likely losses" and breaches of covenants for quiet enjoyment (which have not yet occurred and which, if they do occur, will only occur at some unspecified date or dates in the future) means that the claim that has been formulated in the name of Pirie Partners is a claim, in reality, for future losses. He submitted that where an applicant such as Pirie Partners is suing in tort, it must establish, not only a breach of a duty owed by the respondent to the applicant, but also that the breach of duty has occasioned damage; this proposition is clearly correct: Ubaf Ltd. v European American Banking Corporation (1984) 2 All ER 226 at p 234: Fenech v Sterling (1983) 51 ALR 205 at p 221 per Davies J. Arcadi v Colonial Mutual Life Assurance Society Ltd. (1984) 6 ATPR 40-473 at p 45,453-4 per Toohey J. As a covenant for quiet enjoyment is a continuing covenant upon which damages may be recovered from time to time as they accrue, it is also true, as Mr Phelps submitted, that a tenant cannot sue for future damage: McGregor on Damages 14th Ed. para 773; nor can a plaintiff sue for damages that might arise but have not yet arisen: Van Win Pty. Ltd. v Eleventh Mirontron Pty. Ltd. [1986] VicRp 49; (1986) VR 484.

18. However, these authorities are not in point for the argument that has been derived from them confuses the nature of the damages that have been claimed with the method by which Pirie Partners claims that it will establish those damages. In other words, Pirie Partners is not seeking to prove damages for the future loss of one month's rent; it is seeking to prove damages that fairly represent a reduction in the value of its capital asset. It hopes to convince the Court that the reduction in value can be proved by equating it with the amount of one month's rent. In my opinion therefore the statement of claim does not seek to claim damages that may or may not arise in the future; Pirie Partners is claiming damages which, according to its pleadings, have already occurred.

19. The conclusions that have thus far been reached mean, so far as the claim for loss or damage is concerned, that there has been due compliance with the provisions of the Trade Practices Act. The primary complaint by all applicants is that "the statement" amounted to misleading or deceptive conduct on the part of the Chamber of Commerce within the meaning of s.52. But an applicant looks to s.82 to ground his claim. That section, so far as material to these proceedings provides:-

"A person who suffers loss or damage by conduct of another

person that was done in contravention of a provision of Part

IV or V may recover the amount of the loss or damage by

action against that other person or against any person

involved in the contravention."

20. Hence the proven existence of some loss or damage arising from the impugned conduct is a prerequisite to any recovery. However I have formed the opinion that, as pleaded, Pirie Partners has satisfied these requirements.

21. If, as has been claimed, the Chamber of Commerce knew or ought to have known that a party such as Pirie Partners would take a lease of the property and thereafter proceed to sub-let it, then conduct by the Chamber of Commerce that is misleading or deceptive can, in appropriate circumstances, entitle a party such as Pirie Partners to claim damages as a consequence of the contravention of s.52. Prudential Finance Ltd. v SMA Motors Ltd, an unreported decision of Wilcox J. delivered 19 April 1990, is an example of the proposition that it is no defence to a claim by a party such as Pirie Partners for the Chamber of Commerce to say that it did not know of the identity of Pirie Partners. If the respondent was guilty of the conduct that has been attributed to it in the statement of claim and that conduct caused loss to the party who had taken a lease of the property for ten years, that could be a sufficient connection to ground a cause of action against the Chamber of Commerce at the suit of Pirie Partners.

22. I have therefore come to the conclusion that the Chamber of Commerce has failed to make out any ground that would justify the making of the orders sought; its application is therefore dismissed.

23. I will hear the parties on the questions of costs; the file reveals extreme tardiness on the part of the applicants in the proper prosecution of these proceedings. It was only at the last minute that an amended statement of claim was filed that overcame the numerous deficiencies in the earlier pleading.