Wardley Australia Limited v The State of Western Australia

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No. QG 215 of 1993 BETWEEN: HARRY MATTHEWS Applicant AND: ROSS NEILSON INVESTMENTS PTY LTD First Respondent AND: REEVE STREET INVESTMENTS PTY LTD Second Respondent AND: MITCHELL OGILVIE MENSWEAR PTY LTD Third Respondent AND: ROSS ANDREW NEILSON Fourth Respondent AND: JAMES BERESFORD LOEL Fifth Respondent AND: MITCHELL GERARD OGILVIE Sixth Respondent CORAM: Kiefel J. DATE: 14 December 1995 PLACE: Brisbane REASONS FOR JUDGMENT The applicant seeks leave to effect substantial amendments to his statement of claim. That pleading was filed on 17 December 1993 and since then not only have there been directions made and interlocutory steps completed, but the matter was listed for hearing this week. The question of amendment arose only when the respondents took objection to the witness statements delivered by the applicant and in particular that of the applicant himself, which referred to representations other than those pleaded. The hearing was adjourned. The action concerns the applicant's purchase of a commercial property in Brisbane in December 1990 for $2.34M. He says it was not worth that sum, but only $2.155M and, but for certain representations, he would not have entered into a contract for the larger sum. The question now is what representations induced him to do so. In the original statement of claim it was alleged that "in representing to the applicant that the land was the subject of various lease agreements... the vendors represented to the applicant that there were no significant fact(s) within the knowledge of the vendors such that it was probable that any lessee of the property would not be capable of making rental payments under each lease as and when rental fell due thereunder..." and that the representations were "... as to the future capacity of Billboard to pay rent under its lease with the vendor". There were in fact three existing tenants of the property: the applicant's company, another electrical retailer (Brash Holdings Ltd), and Billboard Pty Ltd. Billboard's business was the lease of billboard space for advertisements. The representations were said to have been made by the vendors "by allowing DT to advertise the property for sale making reference to such leases". DT was Debenham Tewson Pty Ltd, the real estate agent for the sale. The case pleaded is somewhat ambiguous. On one view, it implies that reference to the existence of the leases conveyed the opinion that the lessees were financially viable or, which appears more likely given some later particulars, that the applicant is said to have relied upon the vendors' silence as to the difficulties with respect to Billboard's financial capacity, as a representation. One might think an applicant may well have difficulties making out such a case. Now it is sought to add a series of six representations as follows: "The vendors made the following representations to the applicant in the course of the negotiations leading up to the entry by the applicant into the written contract of purchase. (a) by an undated advertising brochure ("the brochure") that the net annual rental for the land was $246,500.00; (b) by the brochure that the leases were leases favourable to the Landlord; (c) by the brochure that the lessees were to good quality lessees who could be expected to meet their obligations under their respective leases; (d) by Bristow that Billboards' lease would generate a rental of $30,000.00 per annum with 8% annual increases; (e) by Bristow that if the applicant purchased the land either for a cash price of 2.355 million or for a cash price of 2.34 million and allowed Billboards a 12 month rent free period, he would achieve a net yield of at least 10% by purchasing the land; (f) by Bristow that Brash Holding Ltd would be taking a sublease of the sign from Billboards", although it is later said that they also amount to a representation to the same effect as that earlier pleaded namely that "there was no significant fact within the knowledge of the vendors such that it was probable that any lessee of the property would not be capable of making rental payments under each lease as and when rental fell due thereunder". With respect, it says no such thing. The positive representations convey, or at least that in paragraph 10A(f) does, that there was reason to believe that Billboard would be able to meet the rent because it had a secure tenant. The pleader may have been conscious of the limitations of O.13 r.2(7) since the respondents had foreshadowed an argument that the limitation period had expired. In this respect it is noteworthy that it is not sought to join the agent (Mr Bristow) to the proceedings, but to attempt to render the vendors liable for his statements. The case now sought to be pursued is not however one based on substantially the same facts. A separate and distinct action now arises and it is based upon the conduct in making what seems to me to be the critical representation, that Brash Holdings would be taking a lease of the billboard, and reliance and inducement is based upon that and not upon what the vendors themselves failed to say to the applicant. The other representations listed, which were accurate as far as they went, only gain their colour from that representation. The question then is whether the period of three years limited by s.82(2) Trade Practices Act 1974 to this claim which relies on conduct in contravention of s.52, has expired. That of course requires a determination as to when loss or damage was sustained: Wardley Australia Limited v. The State of Western Australia (1992) 175 CLR 514, 525. I do not consider that Wardley permits the conclusion that it was occasioned upon the signing of the contract for a less valuable property, as was submitted. Forster v. Outred & Co [1982] 1 WLR 86, upon which reliance was placed, turns upon its own facts, as the majority in Wardley pointed out (529). In Forster, on the signing of the mortgage, the plaintiff suffered loss because the value of the equity of redemption of her property was reduced. It might also be said that the alteration of position which gave rise to the loss in Forster was "reasonably ascertainable" at that point. That loss or damage may be said to have accrued when it is "reasonably ascertainable" was the interpretation the Full Court in Karedis Enterprises Pty Limited & Anor v. Antoniou & Anor (1995) ATPR ¶41-427 placed upon Wardley. The resolution of the question as to when, at the latest, the applicant was aware of Billboard's inability to pay is relatively simple. On 19 July 1993 the applicant pleads that he was advised that an administrator was appointed to that company because it could not pay the rent due. Prior to that time and up to June 1993 he had the protection of guarantees from the vendors provided whilst the licence to rent the space was being obtained by Billboard. On those facts the period had not expired. If there be an earlier time when it was obvious that Billboard was insolvent it is not apparent from the material before me. It would, in any event, require the resolution of facts not appropriate for summary determination. Nevertheless I am not persuaded that it would be just to allow the amendment which would have the effect of the action, for the most part, starting afresh. Why ought that burden and delay be borne by the respondents and not the applicant and his solicitors? No explanation is offered as to why the representation as to Brash Holdings being Billboard's tenant was not pleaded in 1993. I am not told whether it was because of the applicant's failure to instruct, in which case I would of course have reason to doubt the veracity of the claim now sought to be made; or whether the solicitor was instructed and omitted to include it in the papers given to counsel who settled the pleadings. The point made by Lord Griffiths in Ketteman v. Hansel Properties Ltd [1987] 1 AC 189, 219 is apposite: "If a defendant decides not to plead a limitation defence and to fight the case on the merits he should not be permitted to fall back upon a plea of limitation as a second line of defence at the end of the trial when it is apparent that he is likely to lose on the merits. Equally, in my view, if a defence of limitation is not pleaded because the defendant's lawyers have overlooked the defence the defendant should ordinarily expect to bear the consequences of that carelessness and look to his lawyers for compensation if he is so minded." Whilst conscious of the need to avoid a multiplicity of proceedings, a matter to which O.13 r.2(2) directs attention, what also needs be borne in mind in my view, beyond the interests of the litigants themselves, is the necessity that litigation be undertaken efficiently: Bomanite Pty Limited v Slatex Corp Aust Pty Limited (1991) 32 FCR 379, 387. It is also of some significance that when the matter was first pleaded, attention obviously had been directed by the applicant and his legal representatives to what had or had not been said about potential tenants for the billboard. Paragraph 16(h) alleged: "At no time did Billboard have prospects of customers for its billboards. The only such customer, Brash Holdings Pty Ltd in fact approached had declined to advertise on the billboard." The need for explanation as to how it is now said that more was conveyed about Brash Holdings as a prospective tenant becomes obvious. In these circumstance I consider that justice is better served by leaving the applicant to any remedy he may have against his legal practitioners, which of course would require him to establish that the instructions were given at the outset.

Leave was also sought to amend the pleading to add a claim for damages for fraud, but this claim relies upon the same representations I have dealt with above. In any event the plea is not in proper form and in some respects is inaccurate since, as I have said, not all the representations were untrue. The application for leave to amend will be dismissed. I will deal with the question of costs after hearing as to the continuation of the proceedings in its present form. I certify that this and the preceding six pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel. Associate Date: 14 December 1995 Counsel for the applicant: Mr P Dunning Solicitors for the applicant: O'Mara Patterson Perrier town agents for LA Evans, Solicitor Counsel for the respondents: Mr M Stewart Solicitors for the respondents: Clarke and Kann Date of Hearing: 13 December 1995 Place of Hearing: Brisbane Date of Judgment: 14 December 1995