Wott rn a CATCHWORODS TRADE PRACTICES - s.52 - state of mind and intention of respondents ~ whether able to be misrepresented - whether "reckless indifference" as to intention may constitute misleading and deceptive conduct. PRACTICE AND PROCEDURE - application to strike out statement of claim - allegations of "reckless indifference" to adherence to promise - pleading vague but allowed to stand. Trade Practices Act s.52 Rupert James Hamer & Anor. v. Westpac Banking Corporation Qld G27 of 1987 PINCUS J. BRISBANE 9 JULY 1987 FEDERAL COUR? j? AUSTRALIA OF / ' PRINCIPAL . REGISTRY cf IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G27 of 1987 GENERAL DIVISION ) BETWEEN: RUPERT JAMES HAMER and BRIAN RICHARD GOLDSMITH Applicants AND: WESTPAC BANKING CORPORATION Respondent MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 9 JULY 1987 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application made to strike out the statement of claim be dismissed. 2. The costs of the application to strike out be the costs in the proceedings of Rupert James Hamer and Brian Richard Goldsmith, the applicants in the principal proceedings. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. 2 fsrs IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G27 of 1987 GENERAL DIVISION ) BETWEEN: RUPERT JAMES HAMER and BRIAN RICHARD GOLDSMITH Applicants AND: WESTPAC BANKING CORPORATION Respondent PINCUS J. 9 JULY 1987 REASONS FOR JUDGMENT This is an application to strike out the statement of claim in proceedings brought in reliance upon s.52 of the Trade Practices Act 1974. The application relates to misrepresentations alleged to have been made 1n 1983. The representations, speaking generally, constitute or imply promises - i.e. they are "with respect to any future matter" within the meaning of s.51A of the Trade Practices Act. However, that provision was not in force when the cause of action (if any) arose. The case falls to he decided under s.52 on the basis that the question is whether the respondent has engaged "in conduct that 1s misleading or deceptive or is likely to mislead or deceive". Since the disposition of a pleading point 1s, at least in part, a discretionary question, it should be noted that the statement of claim attacked 1s an amended version. When the matter first came before me on 30 March 1987, objection was taken on the part of the respondent to the form of the then pleading. It was said that it did not disclose a case under s.52 of the Trade Practices Act. On my antimating that I agreed with the respondent's contention, counsel asked for leave to amend, which was given. In its amended form, the statement of claim alleges that a company, Jojoba Management Limited, had an account with the respondent bank styled "Advance Commission Account" which was opened to pay advance commission to salesmen employed by the company. The statement of claim then alleges that a branch manager of the respondent bank asked the applicants to guarantee the account, and in order to induce them to do so, represented: "(a) The said guarantee was in respect of and limited to the Advance Commission Account. (b) The Advance Commission Account would be utilized solely for the purpose of paying advanced commissions to salesmen of Jojoba. (c)} The Advance Commission Account would be closed as soon as anil balance was achieved in the account. (d) As soon as anil balance was achieved inthe Advance Commission Account the guarantee aforesaid would terminate. (e) It would take too long to prepare a form of guarantee to reflect the terms of the agreement and the respondent's standard guarantee form could be signed as a mere formality." Then para.12A of the statement of claim, added by amendment, alleges: "The representations referred to 1n paragraph 12 herein were made with a reckless indifference to whether they would be adhered to or not." The pleading goes on to assert that the applicants entered into a guarantee in reliance on the representations, that the account reached a nil balance on or about 26 July 1984, but was not closed and drawings were allowed on the account other than for the purpose mentioned in representation (b); 1t 1S said that the respondent knew or ought to have known of the circumstances just mentioned, but that it has demanded of the applicants the moneys wrongly drawn. The statement of claim asserts that the making of the representations constituted conduct of the kind mentioned in s.52 of the Trade Practices Act. But, although representation (a) could be regarded as a representation as to the content of the form of guarantee signed, it is clear from the terms of allegation (e) and the course the argument took that in fact the applicants do not intend to allege that any of the limitations in paragraphs (a), (b), (c) or (da) were thought to be embodied in the documents signed. The case intended to be made is solely that promises made orally with respect to the use of, and scope of liability under, the guarantee were not kept. Counsel for the respondent, Mr. McGill, says that it is not enough to allege "reckless indifference to whether" the promises "would be adhered to or not"; as set up in para.12A. He urges further that the pleading should be struck out because there is no reason to think it can usefully be amended. Mr. McGill argues that the question is whether or not the respondent made, by its agent, a true or untrue representation as to its then state of mind, and that one cannot be recklessly indifferent on that question. Mr. Wyvill Q.C., senior counsel for the applicants, argues that the applicants may succeed at' the trial on their pleading without any finding of non-existence of an appropriate state of mind. The leading case on the topic appears still to be the decision of the Full Court in Global Sportsman Pty. Ltd. v. Mirror Newspapers Pty. Ltd. (1984) 2 F.C.R. 82. The applicants complained there was a publication of a statement of opinion and 1t was for that reason that the question of the respondent's state of mind came to be discussed. The Court said, at p.88, that: "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 wee 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." Had it not been for those remarks, it might have seemed an arguable question whether s.52 was intended to provide any remedy for broken promises. [In Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. (149) C.L.R. 191, 1t was suggested that s.52 should not be "beneficially construed" (p.198) and that some principles developed by the common law apply under s.52 (p.219). And there was certainly direct authority under' the general law against the view that promises and representations of intention could be relied onin actions for misrepresentation: see for example The Civil Service Co-operative Society of Victoria Limited v. Blyth (1913) 17 C.L.R. 601 at p.607 per Griffith C.J. and Yorkshire Insurance Company Limited v. Craine (1922) 2 A.C. 541 at 553. But the weight of authority was the other way. Craine's case just mentioned was decided by the High Court on the basis that "... a presently existing intention may be the existing factor" for the purposes of the law of estoppel by representation (1920) 28 C.L.R. 305 at p.324. Further, there 1s a line of authority in company law that false statements as to intention in a prospectus may constitute actionable misrepresentations: Edgington v. Fitzmaurice (1885) 29 Ch.D. 459 1s a clear example, as is Aaron's Reefs, Limited v. Twiss [1896] A.C. 273 at p.284. Very few of such cases ever seem to have been brought, and perhaps that is because of the difficulties of proof referred to in Clarke and Lindsell on Torts (15th ed.) p.836: "The mere fact that the intention which was represented to exist was not eventually carried into effect is little or no evidence of the original a non-existence of the intention." In any event, it seems clear that I should follow Global Sportsman dicta as to promise, according as they do with the general law. That is not the end of the difficulties of the case for Mr. McGill says one cannot tell from the pleading precisely what the misrepresentation was. The pleading does not make i1t clear whether the applicants' case is that there was indifference as to the maker's state of mind or indifference as to some other matter bearing on the likelihood of the promise's being kept. Counsel referred me to Gardiner v. Suttons Motors (Homebush) Pty. Ltd. (1983) 48 A.L.R. 142, in which a respondent was held liable, by inference from subsequent events, on the ground of reckless indifference to whether "representations" would be adhered to or not, the representations being statements as to intention; see the judgment of Sheppard J. at pp.152, 153. Although the pleading has the direct support of the language used in Gardiner''s case at the place just referred to, the learned judge who decided that case was not concerned to prescribe the correct form of a pleading. It has to be said in favour of the respondent that in a practical sense the pleading contains little indication of the case desired to be made. Such an allegation as is made could presumably be pleaded in almost any case of a broken promise. It would seem to be futile to order particulars; plainly the applicants could give none. All they claim to know, and all they say, 1s that what was promised did not happen. They will ask that an inference of "reckless indifference" as to some as yet unspecified point should be drawn at the hearing. For example, if the representations are found to have been made, but were not noted by the manager in the bank's records, the applicants might perhaps argue that the omission showed there is no intention of ensuring that the promises would be carried out. Although there is reason to be somewhat uneasy about doing so, it appears that the correct course is to let the pleading stand. Its real defect is its vagueness, but the applicant can hardly be expected at this stage to remedy that. The application to strike out will therefore be dismissed. In the circumstances, however, it seems to me fair to make the costs the applicants' costs in the proceedings and that will be done. i certify that this and the 6 preceding pages ara a true copy of the reasons for judgment herein of His Honour Mr Justice Pincus scret Associate Dated G July 195) Counsel for the applicants: Mr. L.F. Wyvill Q.C. with Mr. S.M. Ure Solicitors for the applicants: Messrs. Bowdens Counsel for the respondent: Mr. D.d. McGill Solicitors for the respondent: Messrs. Feez Ruthning & oO. Date of Hearing: 27 May 1987