Federal Court of Australia|1992-08-20|Before: French J

Re Hunt Contracting Co Pty Ltd v Roebuck Resources Nl; Peter Allchurch and Samuel Warne [1992] FCA 401; (1992) 110 ALR 183 (20 August 1992)

And: ROEBUCK RESOURCES NL; PETER ALLCHURCH and SAMUEL WARNE

Practice and Procedure - pleading - strike out motion - misleading or deceptive conduct - representations - statements of opinion and predictions - whether misleading by virtue of non-fulfilment - estimates - whether involving statements of existing fact - s.51A of the Trade Practices Act 1974 - pleading - need to identify specific representations in respect of which s.51A is invoked.

Trade Practices - misleading or deceptive conduct - representations - statements of opinion and predictions - whether misleading by virtue of non-fulfilment - estimates - whether involving statements of existing fact - s.51A of the Trade Practices Act 1974 - pleading - need to identify specific representations in respect of which s.51A is invoked.

Bill Acceptance Corporation Ltd v. GWA Limited [1983] FCA 269; (1983) 50 ALR 242

Global Sportsman Pty Ltd v. Mirror Newspapers Pty Ltd [1984] FCA 180; (1984) 2 FCR 82

Adelaide Petroleum NL v. Poseidon Ltd (1988) ATPR 40-901

Rhone-Poulenc Agrochimie SA v. UIM Chemical Services Pty Ltd (1986) 12 FCR 477

Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd [1988] FCA 40; (1988) 79 ALR 83

State Government Insurance Corporation v. Government Insurance Office of New South Wales (1991) 101 ALR 259

Futuretronics International Ltd v. Gadzhis [1992] VicRp 63; (1992) 2 VR 217

Turner v. Kinian Pty Ltd (unrep Fed Ct 19/8/92 French J.)

State of Western Australia v. Bond Corporation Holdings Ltd [1990] FCA 522; (1991) ATPR 41-081

Solicitors for the Respondents: Williams and Hughes

1. Paragraphs 19, 21 and 22 of the statement of claim be struck

out.

2. The applicant have liberty to amend the statement of claim.

3. That each party bear its own costs of the motion so far as it

relates to the striking out of the statement of claim.

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

On 6 June 1990, Hunt Contracting Co. Pty Ltd agreed to purchase from Roebuck Resources NL various mining tenements, plant and equipment comprising a gold mining operation at Mary River in the Kimberley Region of Western Australia. Hunt Contracting now says it was induced to make the purchase by various representations to one of its directors, William Bindley Wreford, which are said to have been misleading or deceptive and/or negligent. By a motion filed on 30 June 1992, the respondents seek an order that the statement of claim be struck out. Before turning to the various contentions for and against the order sought, it is necessary to outline the content of the statement of claim. The outline is narrative in form and reflects the applicant's allegations. It does not involve any finding of fact.

2. Hunt Contracting is a company incorporated in Western Australia which carries on business as an earthmoving contractor (para.1). William Wreford is a director of the company (para.2). Roebuck Resources was the registered proprietor of various mining tenements in the Mary River area of the Kimberley Region of Western Australia (para.4). Peter Allchurch is a geologist and managing director of Roebuck Resources (para.5). Samuel Warne holds himself out as a geologist and was a joint venturer with Roebuck Resources in an alluvial gold mining operation conducted in the tenements (para.6).

3. During a meeting held at the offices of Hunt Contracting, at a date not pleaded, Allchurch is said to have told Wreford that the tenements and mining plant and equipment were for sale and to have suggested that Hunt Contracting consider purchasing them (para.7). In order to induce Hunt Contracting to purchase the tenements and plant it is alleged that Allchurch made various representations. These were that the tenements contained a very large quantity of alluvial gold which could be economically recovered, that they contained not less than 1 million cubic metres of gold bearing ore with an average grade of 0.4 to 0.5 grams per loose cubic metre and that the operation if conducted by an owner/operator could be very profitable (para.8(a)). Allchurch is said to have given Wreford a document entitled "Mary River Gold Mine Tenement and Equipment Valuations" representing that the tenements contained "Present Measure of Resources", "Inferred Resources" and "Potential Resources" of various specified amounts and that they had a total gross resource value of $13.47 million (para.8(b)). Representations contained in a letter dated 17 May to Wreford are also pleaded that:

1. With good management, after slight modification the

existing plant and equipment was capable of treating

1,000 cubic metres of gold bearing ore per day;

2. The coarse tailings heap on the tenements comprised

between 60,000 and 100,000 cubic metres of material

bearing gold at a grade of between 0.2 and 0.35 grams per

cubic metre and accordingly represented a substantial and

easily accessible gold resource (para. 9(a)).

Documents enclosed with the letter were the valuations document referred to earlier, another document dated March 1990 called "Mary River Gold Project Information Memorandum" and a document dated December 1989 called "Mary River Joint Venture Alluvial Gold Resources Estimate and Sampling Results for Mary River, Thompson Creek, Car Body Creek, Susan-Peter Creek Area - Technical Report No. 123 by S.B. Warne". Extracts from the Information Memorandum containing representations relating to deposit volumes and grades, measured and indicated resources, inferred resources and potential resources are set out in the statement of claim (para.10). Representations said to be contained in the Warne Report relating to volumes of deposits, assessed resources, unassessed resources and grades are also set out. A table of resources "assessed to lie within the tenements", which was embodied in the report, is also set out in the statement of claim.

4. Wreford inspected the tenements, plant and equipment with Allchurch and Warne on or about 30 and 31 May 1990 and in the course of that inspection Warne is said to have made oral representations to the following effect:

"(i) the material in the vicinity of Thompson

Creek bore gold at a grade of 0.5 grams

per loose cubic metre;

(ii) the material in the wash areas on the

banks of the Mary River bore gold at a

grade of 0.4 to 0.5 grams per loose cubic

metre;

(iii) the material in the old channel areas

comprised not less than 1,000,000 cubic

metres bearing gold at a grade of 0.4 to

0.5 grams per loose cubic metre;."

Both Allchurch and Warne are said to have represented orally to Wreford on this occasion that:

"(i) the tenements contained not less than

1,000,000 cubic metres of material bearing

gold at a grade of between 0.4 and 0.5

grams per loose cubic metre;

(ii) the tenements could be mined profitably."

(para.13)

5. Acting in reliance upon the various representations it is said that Hunt Contracting offered to acquire the tenements, plant and equipment from Roebuck Resources on 31 May 1990 for a price of $625,000, which offer was accepted shortly thereafter. On 6 June 1990, it is pleaded that Hunt Contracting and Roebuck Resources agreed to vary the price to $450,000 due to Hunt Contracting's difficulties in obtaining finance to complete the purchase (para.15). Settlement of the purchase was effected on 21 August 1990 and from then until about February 1992 Hunt Contracting has mined the tenements (para.16).

6. The various representations pleaded are said to have been false (paras. 17 to 20). Falsifying facts are set out which it is not necessary to quote in full here. At para.21, s.51A of the Trade Practices Act 1974 is invoked in the following terms:

"In the alternative, in so far as the representations

pleaded above constitute representations as to future

matters, the Applicant relies upon section 51A of the

Trade Practices Act and section 9 of the Fair Trading

Act respectively."

Further and in the alternative, it is alleged that so far as the representations constituted expressions of opinion, they each carried an implied representation to the effect that there were reasonable grounds for forming the opinion which implied representation was in each case false in that there were no reasonable grounds for forming that opinion (para.22). By reason of the foregoing it is alleged that Roebuck Resources, Allchurch and Warne had in trade or commerce, engaged in misleading or deceptive conduct in contravention of the Trade Practices Act 1974 by Roebuck Resources and of the Fair Trading Act 1987 (WA) by Allchurch and Warne.

7. At para.24 it is pleaded that when the various representations were made each of the respondents was under a duty to Hunt Contracting to take all reasonable care to ensure their accuracy. In breach of that duty the respondents are alleged to have failed to ensure the accuracy of the representations (para.25). The particulars of negligence relied upon are failure to make any or any adequate inquiry and making the representations contrary to the requirements of the Australasian Code for Reporting of Identified Mineral Resources or Ore Reserves. The "requirements" referred to relate to the determination of measured resources, indicated resources, inferred resources and the use of the term "resource".

8. Damages are claimed comprising $100,000, the amount actually paid for the tenement, $170,000 being loss on resale of the plant and equipment, $1,126,096 operating loss and $112,500 which, it is said, was the amount that Hunt Contracting would have been able to earn through the exertions of its directors had they not been engaged in the attempt to mine the tenements.

9. A defence to the statement of claim was filed on 15 July 1992.

10. The respondent moves to strike out the statement of claim as disclosing no reasonable cause of action and/or having a tendency to cause prejudice, embarrassment or delay in the proceedings. The principles regulating the exercise of the strike out power are well established. It is to be exercised sparingly and only when the claim as pleaded is manifestly untenable.

11. The respondents say that the representations as pleaded involve statements of fact, estimates and predictions and that the pleading of contravention is based in each case upon an allegation that the representation was false. The submission is made that an estimate or prediction does not become misleading merely because it is not borne out by events. I accept that there is authority for that proposition in respect of predictions and promises, but I am not persuaded that the full amplitude of s.52 has been explored to the extent that the pleading, if so contending, should be struck out as manifestly untenable. There is, as I have said, authority against such a plea. In Bill Acceptance Corporation Ltd v. GWA Limited [1983] FCA 269; (1983) 50 ALR 242 at 250, Lockhart J. said:

"The mere fact that representations as to future

conduct or events do not come to pass does not make

them misleading or deceptive, notwithstanding that the

applicant has relied on them and has altered his

position on the faith of them."

In Global Sportsman Pty Ltd v. Mirror Newspapers Pty Ltd [1984] FCA 180; (1984) 2 FCR 82 at 88 the Full Court considered the characterisation of unfulfilled promises or predictions by reference to implied representations associated with them:

"The non-fulfilment of a promise when the time for

performance arrives does not of itself establish that

the promisor did not intend to perform it when it was

made or that the promisor's intention lacked any, or

any adequate, foundation. Similarly, that a

prediction proves inaccurate does not of itself

establish that the maker of the prediction did not

believe that it would eventuate or that the belief

lacked any, or any adequate, foundation. Likewise,

the incorrectness of an opinion (assuming that can be

established) does not of itself establish that the

opinion was not held by the person who expressed it or

that it lacked any, or any adequate, foundation.

The applicants argued that, nevertheless, the

statement of an incorrect opinion is misleading or

deceptive or likely to mislead to deceive merely

because it misinforms or is likely to misinform. An

expression of opinion which is identifiable as such

conveys no more than that the opinion expressed is

held and perhaps that there is basis for the opinion.

At least if those conditions are met, an expression of

opinion, however erroneous, misrepresents nothing.

To this point, attention has been concentrated upon

the making of statements, whether of fact or opinion.

Whether a statement is a statement of past or present

fact, a promise, a prediction or an expression of

opinion, the making of it constitutes conduct which is

misleading or deceptive or likely to mislead or

deceive if the statement contains or conveys a

misrepresentation."

12. The analysis in the passage quoted from that judgment seems to rest upon the assumption that conduct is not misleading or deceptive unless it conveys some representation, that is to say, a mis-statement of past or existing fact. As I pointed out in Adelaide Petroleum NL v. Poseidon Ltd (1988) ATPR 40-901 at 49,699 there is support for that proposition in a number of decisions. However its generality was called into question by two later decisions of the Full Court, Rhone-Poulenc Agrochimie SA v. UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489 and 505 and Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd [1988] FCA 40; (1988) 79 ALR 83 at 93. In my view it is at least open to argue that it is not logically a necessary condition for the characterisation of conduct as misleading or deceptive or likely to mislead or deceive that it should convey some representation. To so require is to impose a gloss on the words of the statute - see State Government Insurance Corporation v. Government Insurance Office of New South Wales (1991) 101 ALR 259. This view derives some support from Greig and Davis in The Law of Contract where it is said at p 814-815:

"So too in the case of promissory statements, it is

arguable that the necessary conduct can consist of

both the initial promise and its subsequent breach.

It will be recalled that the High Court, in the

Hornsby Building Centre case [1978] HCA 11; (1978) 140 CLR 216 and

Parkdale v. Puxu [1982] HCA 44; (1982) 149 CLR 191... had said that a

contravention of s 52 is constituted by conduct which

reasonably leads the applicant into error. If the

respondent makes a contractual promise, the applicant

may reasonably believe that it will be performed; when

the promise is not performed, the applicant's belief

is found to be erroneous, and it may fairly be said

that the respondent's original promise, together with

his subsequent repudiation thereof, is conduct which

has led the applicant into error.

The essential question is the nature of the error into

which the applicant has been led."

A conclusion to the contrary was reached in the comprehensive discussion of this question by Ormiston J. in Futuretronics International Pty Ltd v. Gadzhis [1992] VicRp 63; (1992) 2 VR 217 at 238. His Honour there said:

"If a promissory statement is to be the subject of

complaint, it is also necessary to asks how did it

amount to misleading or deceptive conduct. It is

wrong to view every contractual obligation as an

unqualified promise to perform the stipulated act.

Indeed it is rare that a contractual promise is not in

some way qualified by some reciprocal obligation to be

performed by the promisee or by some other

circumstance. If the promise induced the other party

to enter into the agreement, as one can readily accept

it would, then it is that promise and the

circumstances then surrounding it which must be

examined. The promise can only be said to be

misleading or deceptive if it was in some way

inaccurate; otherwise every unfulfilled mutual

contractual promise will constitute misleading or

deceptive conduct, a consequence which I cannot

believe those who drafted the Act intended. If

intention be relevant, the promise may be misleading

if the promisor had no intention to fulfil it at the

time it was made and accepted. If intention be

irrelevant, then the promise may be misleading if the

promisor had no ability to perform it at that time.

If one were to go to the breach to determine whether

there has been misleading or deceptive conduct, the

breach may, but only may, provide some evidence from

which one could infer that the promisor never intended

or never had the ability to fulfil his obligation.

Otherwise, if one combines promise and breach, the

question must arise: in what way has the plaintiff

been deceived or led into error? If it be said that

he was misled into entering into the contract, then

the breach is irrelevant, for that breach could have

played no part in misleading him. If one moves to the

later stage, it is possible that the two events might

induce the other party to take some further step, but

the promisor's combined actions could not be

characterised as misleading or deceptive at the time

the promisee was induced to accept the promise because

the breach had not occurred at that stage. In my

opinion the mere acceptance of the promise by a

promisee cannot ordinarily be characterised as being

led into error."

There is a logical analogue of the above argument applicable to unfulfilled predictions which induce entry into contractual relationships.

13. A case which goes forward in reliance upon the making of an unfulfilled prediction as constituting misleading or deceptive conduct does so in the face of a number of judicial statements against that proposition. Notwithstanding that fact, I am not satisfied that such a plea is manifestly untenable. This is an area in which there is room for development in the law and it would be wrong to stifle that development by disposing, in a summary way, of a pleading which may be seen as raising that contention. In relation to such of the representations as are said to be estimates, I am not satisfied that they cannot be regarded as statements of existing fact. A quantitative estimate may be characterised as a statement of quantitative fact subject to the reasonable uncertainty attendant upon approximation. It may be falsified if the true position is outside the reasonable range of error consistent with the content and context of that estimate. What that range is in a particular case may be a matter for evidence and debate at trial. It is not necessary, in my opinion, to specify it as a material fact in the statement of claim.

14. The representations pleaded in paras.8(a)(i) and (ii), although in part embodying a prediction in 8(a)(i) that the gold in the tenements could be economically recovered, are representations of existing fact as to the quantities of alluvial gold and gold bearing ore and the grades of that ore. They are properly falsified by the pleading in paras.17(a) and (b). The allegation in para.8(a)(iii) is that it was represented that alluvial gold mining operations on the tenements conducted by an owner/operator would be very profitable. This involves statements of a predictive kind necessarily based upon assessment of present quantities, grades and recoverability of the gold on the tenements. It is said to be falsified by the plea that alluvial gold mining operations on the tenements could not be conducted profitably (para.17(c)). There are no doubt many variables which could affect profitability and the respondents would be entitled to know the facts relied upon by Hunt Contracting to support the falsifying plea in para.17(c). But that, in my opinion, is a matter for particulars rather than for a strike out order and repleading.

15. In para.18 the representations made in the Information Memorandum are falsified by reference to various pleaded facts. One such fact pleaded at 18(a) is that the quantities of material in the vicinity of Dam and Thompson Creeks, Thompson Creek, Car Body Creek and Susan-Peter Creek bearing gold in the range 0.3 to 0.5 grams per cubic metre were "much less than 250,000 bank cubic metres". The respondents are plainly entitled to know how much less. Again I think this is a matter for particulars rather than for striking out the pleading. The same is true of the pleading in para.18(b).

16. Paragraph 19 refers back to the falsifying facts pleaded in paras. 17 and 18 as follows:

"19. By reason of the facts pleaded in the preceding two

paragraphs, each of the representations made:

(a) in the document handed to Wreford during the

meeting and pleaded in paragraph 8(b) above;

(b) in the Warne Report pleaded at paragraph 11

above;

(c) during the site inspection pleaded in paragraph

13 above;

were false."

In my opinion, this does not satisfactorily expose the applicant's case with respect to the various sets of representations relied upon. The facts said to falsify the representations in the Valuations document referred to in para.8(b) should be specifically identified even if only by reference to the particular sub-paragraphs of paragraphs 17 and 18 relied upon. The same is true of the plea in para.19 as to the falsity of the Warne Report and the representations made during the site inspection. In my opinion para.19 in its present form is embarrassing and should be struck out and repleaded. I do not, however, accept the criticism that para.20 does not adequately falsify the representations alleged in para.9 which are said to be contained in a letter dated 17 May 1990 from Allchurch to Wreford.

17. The plea in para.21 which invokes s.51A of the Trade Practices Act does so in a way that is embarrassing for failure to adequately disclose the applicant's case. As I said in Turner v. Kinian Pty Ltd (unrep Fed Ct 19/8/92 French J.), a party invoking s.51A of the Trade Practices Act 1974 does not discharge the duty of informing the Court and the respondent of its case by resorting to an ambit claim for the application of the section in respect of any representation which might turn out to be a representation as to future matter. If the section is to be invoked then the representations to which it is sought to be applied must be identified. The general approach to pleading a s.51A case was outlined in State of Western Australia v. Bond Corporation Holdings Ltd [1990] FCA 522; (1991) ATPR 41-081 at 52,279. A party invoking s.51A in respect of a representation as to a future matter should make clear that it is doing so. In this way the respondent will know that, if the representation was made, it has the burden of showing and must plead that there were reasonable grounds for making it. The proposition that the specific representations relied upon must be identified is a corollary of that statement. There are obvious evidentiary implications for a respondent's case if the section is applicable to a particular representation. The respondents are entitled to know which of the representations pleaded are alleged to constitute representations as to future matters in respect of which s.51A is invoked. In its present form para.21 is embarrassing. So too is para.22 for its failure to identify which of the alleged representations are said to have been statements of opinion not based upon reasonable grounds.

18. As to the particulars of circumstances said to give rise to a duty of care and the particulars of negligence they are sufficient to stand as particulars although it may be that the respondents will be entitled to further and better particulars in due course.

Re Hunt Contracting Co Pty Ltd v Roebuck Resources Nl; Peter Allchurch and Samuel Warne [1992] FCA 401;

At a glance

Court

Decision date

Before

Source

Judgment (53 paragraphs)

Re Hunt Contracting Co Pty Ltd v Roebuck Resources Nl; Peter Allchurch and Samuel Warne [1992] FCA 401; (1992) 110 ALR 183 (20 August 1992)

Parties

Legislation Cited (2)

Cases Cited (9)