TRADE PRACTICES - misleading or deceptive conduct - action for recovery of loss or damage suffered as result of contravention - iamitation period. Trade Practices Act 1974 55.80, 82 and 87 GEORGE FENECH and JULIAN FENECH v ROBERT STERLING No. G 344 of 1983 Woodward, St. John and Spender JJ. Sydney 29 October 1984 IN_ THE FEDERAL COURT OF AUSTRALTA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G 344 of 1983 ) GENERAL DIVISION ) BETWEEN: GEORGE FENECH and JULIAN FENECH Appellants and ROBERT STERLING Respondent ORDER JUDGES MAKING ORDER : Woodward, St. John and Spender Jg. DATE OF ORDER : 29 October 13984 WHERE MADE : Sydney THE COURT ORDERS THAT: 1. The appeal be upheld and the decision of Davies J. sat aside. 2. The matter be remitted to Davies J. to be dealt . with in accordance with these reasons for tudgmenk. 3. The respondent pay the appellants' taxed costs of the appeal. IN THE FEDERAL COURT OF AUSTRALIA } . ) so WALES DISTRIC STRY } No. G 344 of 1983 ) ) GENERAL DIVISION GEORGE FENECH and JULIAN FENECH Appellants and ROBERT STERLING Respondent JUDGES: Woodward. St. John and Spender JJ. DATE: 29 October 1984 REASONS FOR JUDGMENT This appeal raises the short point whether the Particular application made under s.87(1A) of the Trade Practices Act 1974 ('the Act') is subject toa three-year period of limitations. The facts are set out fully inthe judgment of Davies J. (reported in (1983) 51 ALR 205), who heard the application for orders under 5.87(1A) and dismissed it on the ground that the period of limitation did apply and had expired before the application was filed. His Honour also made other findinas, referred to below, which are not the subject of appeal. The facts of the case which are relevant for present purposes may be summarized as follows. The appellants, along with a number of other people, were induced by a series of false representations to invest in a large land development project near Ballarat in Victoria. This occurred in 1975. The investors believed they were getting a haif-acre piece of land for themselves, on which one or two houses could be erected, and which would appreciate rapidly in value as the project developed. Pursuant to the contract which the appellants signed on 12 November 1975, they paid a deposit of $650 on the same day and the balance of purchase money, namely $3000, on 21 November 1975. In fact the scheme was little better than a sham, because the company purporting to sell that land, Robert Sterling Pty. Ltd., did not own it, there was no planning permission to use it for residential purposes, no sub-division had been approved, and all the appellants received for their money was a document headed "Memorandum of Title" which proclaimed that they owned "as tenants common, 4/80ths in the whole of the land" which was then imprecisely described by reference to the contract of sale, which in turn spoke only of "20 acres or thereabouts being part of" the land contained in an identified certificate of title. The representations complained of were made either in written advertisements or by a salesman employed by the selling company, which was a company of which the respondent was managing director and, apart from his wife, the sole shareholder. The appellants did not realize they had been tricked 'until they read a report in a newspaper, dated 6 September 1978, under the heading "200 LOSE $1.5m IN LAND RIP-OFF". Proceedings were taken by the Trade Practices Commission against the respondent personally and, in a detailed reserved judgment. delivered on 21 February 1980, Lockhart J. found that the selling company had engaged in misleading and deceptive conduct in contravention of 5.52 of the Act, and the respondent had been knowingly concerned in and party to those contraventions. The appellants then filed an application to the Court, on 31 October 1980, seeking orders pursuant to 55.82, 87(1A) and B7(2)(c) and (d) of the Act. This application was later amended to make clear that, 1m addation to relying on the combined effect ef the named provisions, the applicants claimed alternatively under 5.82, s8.87(1A) and 87(2)(c), and 55.87(1A) and 87(2){d). The matter came on for hearing before Davies J. who, on 24 June 1982, determined a number of preliminary points of law pursuant to Ord.29 r.2 of the Federal Court Ruies. Among the questions which his Honour then answered were several relating to the central question in this appeal. His Honour held that, at the time the events in this case occurred, no action under 5.82 of the Act lay against a person in the respondent's position, and the later amendment to that section in 1977 did not create a retrospective right of action. Section 87(1A) did provide a right of action because it was expressed to have retrospective ' operation. However, insofar as the applicants sought remedies under it that were to the same effect as a claim under 5.82, the three-year period of limitation in 5.82(2) of the Act would apply. Then, on 13 October 1983, Davies J. proceeded to give judgment in the application, relying upon the findings of Lockhart J. and an aareed statement of facts. He found that the appellants' cause of action accrued not later than the date when they paid the balance of their purchase price, on 21 November 1975. Since the application was not filed until almost five years later, his Honour applied the view expressed in his preliminary rulings on points of law and dismissed the application under 8.87(1A) as statute-barred, reserving questions of costs for later consideration if necessary. The present appeal raises no question about the time at which the cause of action under 5s.87(1A) accrued. It is confined to the question whether the three-year limitation period prescribed by s.B2(2) applied directly or at all to the application under s.87(1A). His Honour's conclusion on this point was expressed in his final decision in the following terms: "As I stated in my reasons of 24 June 1982, I am of the view that the limitation period prescribed by 8.B2(2) should be applied to the present proceedings whether they are proceedings brought under 5.82 or under s.87(1A). The proceedings seek to recover from the respondent Robert Sterling the amount of the loss or damage suffered by the applicants as a result of the contravention of a provision of Part V of the Trade Practices Act. The proceedings are therefore within the description of the cause of action provided by s.82(1) as it now reads and Parliament has indicated its intention that there be a three year limitation period with respect to such a proceeding. As I said on 24 June 1982, "The legislature has made plain its antention that - actions for loss or damage against the person who does an act in contravention of a provision of Part IV or V of the Trade Practices Act or against any person involved in the contravention shall be brought within three years after the date on which the cause of action accrued." Later, in the second last paragraph of his reasons for judgment, his Honour said, "IT have already, on 24 June 1982, expressed my view that, whether or not the present proceedings are brought under 5.82(1) or under 5.87(1A), the limitation period provided by 5.82(2) should he applied because 5.87(1A) is discretionary and, in the exercise of that discretion, the intent of Parliament expressed in 5.82(2) should be given full force and effect. The result is that, in the present case, the proceedings were not brought within three years of the contravention under Part V of the Act, of Robert Sterling's involvement in that contravention and of the suffering of loss as a result of that contravention and involvement. The discretion conferred by 5.87(1A) should therefore not be exercised in the applicants' favour." We note in passing that it was not suggested, either before Davies JI. or before this Court, that any period of limitation imposed by state law was applicable to the present case (see John Robertson & Co. Ltd. v Ferquson Transformers Pty. Ltd. (1973) 129 CLR 65). In order to determine the inter-relationship between the provisions of s5s.82 and 87 of the Act it 15 necessary to place them in their context and then to consider them in detail. The sections appear in Part VI of the Act. under the heading 'Enforcement and Remedies', which deals with the effect of contraventions of Parts IV and V. Section 76 provides for substantial pecuniary penalties for contraventions of Part IV; 5.77 provides a six-year period of limitation for actions to recover such penalties. Section 79 provides for a range of fines on conviction for contraventions of provisions of Part V of the Act other than 5.52. Section 21 of the Crimes Act 1914 requires that informations in cases such as these must be laid within 12 months of the date on which the offence was committed. Section 80 of the Act provides for the Court to grant injunctions to restrain contravention of Parts IV and V. No limitation period is expressed, but it 15 to be presumed that the Court would exercise a discretion, similar to that exercised in Courts of Equity, to deny a remedy to parties who had slept on their rights, or in cases where delay had unfairly prejudiced the respondent in some way. The power to order divestiture, given by s.81 in cases ' where the merger provisions of s.50 of the Act have been contravened, is subject to a three-year period of limitation. It is against this background that the provisions of 88.82 and 87 fall to be considered. It is to be noted that these are the only. sections which provide remedies other than injunction (5.80) and corrective publication (s5.80A) for the false and misleading conduct proscribed by 5.52. Section 82 applies to any contravention of Parts IV and V of the Act, as does sub-section {1) of 5.87. Sub-section (1A) of 5.87 is confined to contraventions of Part V (which contains 5.52). The sections in question read as follows: "B2.(1) 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. (2) An action under sub-section (1) may be commenced at any time within 3 years after the date on which the cause of action accrued. aneae 87.41) Where, in a proceeding instituted under, or for an offence against, this Part, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this sub-section) in contravention of a provision of Part IV or V, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 80A or 82, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in sub-section (2) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. (1A) The Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this sub-section) in contravention of a provision of Part V, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved an the contravention (including all or any of the orders mentioned in sub-section (2)) if the Court considers that the order or orders concerned wili compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. (2) The orders referred to in sub-sections (1) and (1A) are - (a) an order declaring the whole or any part of a contract made between the person who suffered, or 18 likely to suffer, the loss or damage and the person who engaged in the conduct ora person who was involved in the contravention constituted by the conduct, or of a collateral arrangement relating to such a contract, to he void and, if the Court thinks fit, to have been void ab anitio or at all times on and after such date before the date on which the order is made as is specified in the order; (b) an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after such date before the date on which the order is made as is so specified; (c) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage; (d) (e) (f) (a) (b) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage; an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at his own expense, to repair, or provide Parts for, goods that had been supplied by the person who engaged in the conduct to the person who suffered, or is likely to suffer, the loss or damage; and an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at his own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage. {3) Where a provision of a contract made, or a covenant given, whether before after the commencement of the Trade Practices Amendment Act, 1977 - (i) in the case of a provision of a contract, is umenforceable by reason of section 45 in so far as it confers rights or benefits or imposes duties or obligations on a corporation; or (ii) in the case of a covenant, is unenforceable by reason of section 45B in so far as it confers rights or benefits or imposes duties or obligations ona corporation or on a person associated with a corporation; or the engaging in conduct by a corporation in pursuance of or in accordance with a contract made before the commencement of the Trade Practices Amendment Act 1977 would constitute a contravention of section 47, the Court may, on the application of a party to the contract or of a person who would, but for sub-section 45B(1)}, be bound by, or entitled to the benefit of, the covenant, as the case may be, make an order - ~10- {c) varying the contract or covenant, or a collateral arrangement relating to the contract or covenant, in such manner as the Court considers just and equitable; or (ad) directing another party to the contract, or another person who would, but for sub-section 45B(1), be bound by, or entitled to the benefit of, the covenant, to do any act in relation to the first-mentioned party or person that the Court considers just and equitable. (4) The orders that may be made under sub- section (3) inelude an order directing the termination of a lease or the increase or reduction of any rent or premium payable under a lease. {5) The powers conferred on the Court under this section in relation to a contract or covenant do not affect any powers that any other court may have in relation to the contract or covenant in proceedings instituted in that other court in respect of the contract or covenant." With the comprehensive provision of limitation periods set out above, 1t is at first sight strange that no limitation provision appears in s.87, but it must be assumed that this was the deliberate antention of the legislature and not a mere oversight. When the section is analysed, a possible explanation for the apparent omission appears. Sub-section (1), read with sub-section (2), provides a range of remedies to a person who is already a party to a proceeding under Part VI of the Act. No problem arises in sucha case because, as explained above, each form of action which can be taken under the Part carries its own limitation period. - ll - In the case of sub-section (1A), Davies J. held that an application under its provisions can stand on its own feet; it does not have to be founded upon any other proceeding, although such an application will often spring from some earlier action. This decision of Davies J. was not challenged on appeal, and we would respectfully agree with it. The result is that any person who has suffered loss or damage. because of the conduct of another person which 1s in contravention of Part V of the Act, may apply to the Court for relief in any of the forms contemplated by sub-sections (1A) and (2). One could imagine such an application being made in the course of the hearing of another proceeding under Part VI. It could be made by a person not a party to the proceeding - perhaps a witness who had suffered loss or damage similar to or consequent upon the loss or damage of an applicant in such proceedings. It would be for the Court to decide in such a case what degree of formality was required in such an application, what notice should be given to the person against whom the claim was made, and whether the matter should be determined concurrently with or separately from the current proceeding. Other applications could be brought in the ordinary way, pursuant to the Federal Court Rules. The applicant in such a case might be able to take advantage of 5.83 of the Act which makes findings of fact in certain earlier proceedings prima facie evidence of such facts in an application under 5s.87(1A). -12- In either of these ways, an application under s.87(1A) 'could be said to be related to proceedings under other sections having varying time limitations. Alternatively such an application could stand alone, with the applicant bearing the burden of establishing all the necessary facts to enable the claim to succeed. The possibilities, when sub-sections (1) and (1A) are considered together, are so diverse that one can easily understand how diffacult it would be for a parliamentary draftsman to frame a limitation provision for 5.87. In any event, the simple fact 15 that no such limitation provision is to be found. Sub-section (2) of 5.82, which provides a three-year limitation period, is expressly limited to "an action under sub-section (1)". It could have been expressed more broadly in terms which would have comprehended all or some of the claims which can be made under s.87(1A). A clear opportunity to do this arose when s.82 was repealed and re-enacted in amended form by the 1977 amendments, at the same time that sub-section (1A) was added to s.87 and a number of other substantial amendments were made to the Act. The opportunity was not taken. The result, in our opinion, is that s.87(1A) is free of any prescribed period of limitation. However the remedies it provides. when read with sub-section (2), are discretionary (unlike the entitlement to damages given by s.82) and the Court - 13- must give full weight to the general legislative intention 'evinced by 5.82(2) of the Act. The influence of this 'consideration will be particularly strong when reliance is placed by the applicant on 8.87(2)(d) of the Act, which is in substantially the same terms as 8.82. It will be much less strong ina case where, for example, the return of property is sought under s5.87(2)(c), or where the avoidance or variation of a contract is sought uner s.87(2)(a) or (b). Other factors which might affect the exercise of discretion could include the time which has elapsed since the applicant became aware of the contravention or, for example, the reasonableness of the applicant's conduct in awaiting the outcome of other proceedings before making an application under 5.87(1A). Further, in the exercise of the discretion, the Court could properly have regard to the nature of the contravention and the degree of involvement of the person from whom relief is sought. It is to be remembered that 5.52, for example, covers both innocent and fraudulent misrepresentations; they might well be treated differently in the exercise of discretion. Finally, the Court should not necessarily be concerned to define with precision the time at which the contravention occurred. It should he prepared to take a broad view of the matter in cases where there is a continuing relationship between the person involved in the contravention and the person who has suffered the loss. For example, in the present case the appellants paid money under a contract which eventually turned out to be little better than a - 14- shar. But they were entitled to believe, over a considerable : period of time, that matters would be set right and they would eventually obtain what they believed they had been promised. For the reasons given, we believe that Davies J. was in error when he concluded that the limitation period prescribed by 5.82(2) was directly applicable to a claim under 5.87(1A). It is to be noted that in answering the preliminary questions of law his Honour specifically left aside the claim under 5.87(1A) in combination with (2)(c). He said, "There was no discussion before me as to any claim for an order directing the respondent Robert Sterling to pay to the applicants monies being the purchase price of the land and interest payments thereon or as to whether such a claim was a claim for a refund of money within the meaning of s.87(2)(c) (the sums having been paid to Robert Sterling Pty. Ltd.) and, if so, whether the limitation period prescribed by 5.82(2) or some other limitation period or no limitation period should be applied. In the circumstances, it would be inappropriate for me to make any comment upon these matters." His Honour did not return to this question in his final judgment. We would have thought that it was strongly arguable that the principal of a company can be called upon to "refund", from his own pocket, money paid to his company as a result of his misleading and deceptive conduct. He could certainly he ordered to return property which was within his control. And the refunding of money, being in the nature of an act of restitution, - 15 - may well have different connotations from an award of damages when questions of limitations are being considered. But we express no concluded view on the proper meaning of 'refund' in s.87(2){(c) since the point was not fully argued before us. We also note that in the second last paragraph of his veasons for judgment, quoted earlier, Davies J. spoke for the first time of a discretion with regard to the application of a lamitation period to s.87(1A). He had not seemed tao regard himself as having a discretion in the earlier passages quoted from each of his judgments, and even in this passage it is clear that his Honour saw no real scope for the exercise of a discretion. In our view he had, on the facts of this case, Particularly since no claim was available against the respondent under 5.82 at the time the contravention occurred, a very wide discretion to entertain the application. His Honour should now have an opportunity to exercise that discretion. Before leaving this appeal we should refer to the decision of Woodward gd. ain Bate v International Computers (Australia) Pty. Ltd. 1984 ATPR 40-475. There his Honour, without the benefit of argument, followed the reasoning of Davies J. in the present case to the extent that he said, "The Trade Practices Act 1974 provides, in 5.82(2), for a three-year period for damages claims brought under s.82(1) of the Act, as this claim clearly is (see below). In my view the same limitation period must apply to the other claims under 5.87 of the - 16- Act which are supplementary and ancillary to that basic claim for damages. This must clearly be so if s.87(1) is invoked, as appears to be the case here (see below), because its availability is wholly dependent upon the claim under 5.82. Even 1f 5.87(1A) were relied upon, enabling the other Claims to stand on their own feet, I believe that the scheme of the Act requires that claims 50 closely related to damages claims as are the claims in this case must meet the same limitation requirements; see Fenech v Sterling 1983 ATPR 40-413. The situation may well be different if claims under 5.87(1A) were appended to an application for an injunction under 5.80, as to which there is no limitation period in the Act - although the Court would no doubt be slow to grant relief where an application had been long delayed." The passage quoted, insofar as it may suggest that some Claims for loss and damage under 5.87(1A) are subject to a three-year limitation period as a matter of law and not merely as a matter of discretion, should now be read in the latter sense. For the reasons given, the appeal will be upheld with costs, the decision of Davies J. set aside, and the matter remitted to his Honour to be dealt with in accordance with these reasons for judgment. Fo + on -e - a - 4 Frerees Gs) oy ep teh ' | fea orth' nsurs | wt, S WOODWARD, ST. tdounm v SPEHOER