Doran, M.A. & Anor v Cottam, M.A. & Ors [1995] FCA 274

CATCHWORDS PRACTICE AND PROCEDURE - misleading or deceptive conduct - amendment to statement of claim - objections by respondents - whether proposed amendments futile - no point of principle. MARK ANTHONY DORAN & ANOR v. MICHAEL TRISTRAM COTTAM & ORS WAG 83 of 1994 CARR J. PERTH 10 MARCH 1995

IN THE FEDERAL COURT ) OF AUSTRALIA ) WESTERN AUSTRALIA ) No. WAG 83 of 1994 DISTRICT REGISTRY ) GENERAL DIVISION ) B E T W E E N : MARK ANTHONY DORAN First Applicant and WAIMEX PTY LTD A.C.N. 009 453 525 Second Applicant and MICHAEL TRISTRAM COTTAM First Respondent and COTTAM PTY LTD A.C.N. 003 903 455 Second Respondent and PETER VAN HALEWYN Third Respondent and TRINITY ENTERPRISES PTY LTD A.C.N. 009 466 362 Fourth Respondent JUDGE MAKING ORDER: CARR J. WHERE MADE: PERTH DATE OF ORDER: 10 MARCH 1995 MINUTE OF ORDER THE COURT ORDERS THAT: 1. The applicants have leave to amend the statement of claim in terms of the minute of proposed re-amended statement of claim filed 25 November 1994 and amended on 28 February 1995.

2. The applicants pay any costs thrown away by the respondents as a consequence of the above amendments. The costs of the motion including costs reserved on 6 February 1995 be the respondents' costs in the cause. NOTE: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT ) OF AUSTRALIA ) WESTERN AUSTRALIA ) No. WAG 83 of 1994 DISTRICT REGISTRY ) GENERAL DIVISION ) B E T W E E N : MARK ANTHONY DORAN First Applicant and WAIMEX PTY LTD A.C.N. 009 453 525 Second Applicant and MICHAEL TRISTRAM COTTAM First Respondent and COTTAM PTY LTD A.C.N. 003 903 455 Second Respondent and PETER VAN HALEWYN Third Respondent and TRINITY ENTERPRISES PTY LTD A.C.N. 009 466 362 Fourth Respondent CORAM: CARR J. DATE: 10 MARCH 1995 PLACE: PERTH REASONS FOR JUDGMENT By this motion the applicants seek leave to re-amend the statement of claim. The respondents object to such leave being granted. In the principal application the applicants seek damages said to have been caused by conduct in breach of s.52 when read with s.51A of the Trade Practices Act. The matter concerns the purchase by the applicants from the first and second respondents, through the agency of the third and fourth respondents, of the second respondent's former business. The basis of the respondents' objections to the applicants being granted leave to re-amend their statement of claim is, in summary, that the proposed re-amended statement of claim has so many defects as a pleading that it should not be allowed. In essence, the respondents' objections seem to be based on the proposition that the amendments are thus futile: Horton v. Jones (No. 2) (1939) 39 S.R. (NSW) 305 at pp.309-310; Simpson v. Union Bank of Australia (1912) 14 W.A.R. 18 at p.19. To understand those objections it is necessary for me to summarise what is contained in the minute of the proposed re-amended statement of claim, which document I shall refer to as the statement of claim. I shall do so as briefly as possible. Paragraphs 1 to 7 deal with introductory matters. These are either admitted or not denied by the first and second respondents and are admitted by the third and fourth respondents. They recite the facts that: . The first applicant, Mr Doran, is a director and shareholder of the second applicant Waimex Pty Ltd ("Waimex"); . The first respondent, Mr Cottam, is the managing director of Cottam Pty Ltd ("Cottam") and engaged in conduct on behalf of Cottam within the scope of his actual or apparent authority; . Cottam was formerly called Waimex Pty Ltd; . Before and during 1993 Cottam carried on the business of an international marketing consultant; . The third respondent, Mr Van Halewyn, was the servant or agent of the fourth respondent, Trinity Enterprises Pty Ltd ("Trinity"), and engaged in conduct on Trinity's behalf within the scope of his actual or apparent authority; . Trinity carried on business as a business broker and was engaged by Mr Cottam to offer Cottam's international marketing consultancy business for sale. It seems to be common ground that on 2 June 1993 Mr Van Halewyn caused an advertisement to be published in "The West Australian" newspaper. The text of the advertisement is set out in paragraph 8 of the statement of claim and apparently it contained various assertions in summary form, including: "* Diverse range of blue chip clients * Opportunity for outstanding growth * Netting $94,900 pa." The advertisement contained a telephone number at which Mr Van Halewyn could be contacted. Paragraph 8 also contains the allegation that Mr Cottam saw that advertisement and by "standing by and not correcting the representations" in it engaged in conduct. This is particularised as Mr Cottam not telling Mr Doran that there was not a diverse range of blue chip clients, that there was no opportunity for outstanding growth and that the business was not netting and never had netted $94,000 per annum. The particulars state that this conduct occurred at various times. The first was on the occasion of Mr Cottam's meeting with Mr Doran on 5 June 1993. The second was on 9 June 1993 when Mr Cottam signed the agreement for the sale of the business. The third was on 11 June 1993 when it is said that Mr Cottam gave Mr Doran financial accounts for Cottam's business for the nine month period ended 31 March 1993. The fourth occasion was on 17 June 1993 when it is said that Mr Cottam gave Mr Doran a cash flow forecast for the twelve months ending 30 June 1994 showing a net profit of $90,250 and a document described as the "Current Client List". Finally, it is said that Mr Cottam should have told Mr Doran about the above three matters prior to settlement of the purchase of the business on 9 July 1993. The statement of claim continues with a reference (in paragraph 9) to a meeting on 3 June 1993 between Mr Doran and Mr Van Halewyn at which it is alleged that Mr Van Halewyn repeated the representations made in the newspaper advertisement referred to above by giving Mr Doran a one page document containing those representations. It is also alleged that Mr Van Halewyn represented that the business carried on by Cottam had a "prestigious client list" - a reference to something contained in page 2 of a brochure given by Mr Van Halewyn to Mr Doran on that occasion. Paragraph 10 of the statement of claim refers to a meeting said to have taken place on 5 June 1993 between Mr Doran and Mr Cottam. It is alleged that at that meeting Mr Cottam told Mr Doran that the second respondent had "some 485 clients on its computer database and that those clients were current or prospective clients and that it was a client base from which the first applicant could work." It is also alleged (in paragraph 11 of the statement of claim) that at that meeting Mr Cottam gave to Mr Doran a document styled "Waimex Client List" and said words to the effect "We have business with these people and they are our clients". In paragraph 12 of the statement of claim it is pleaded that in reliance on the two sets of representations referred to above Mr Doran made a written offer on 8 June 1993 whereby he or his nominee would purchase the business, an offer which was accepted by Mr Cottam on behalf of Cottam. The first and second respondents complain about paragraph 12 on the basis that it is not alleged that either applicant suffered any loss by the first applicant offering to purchase the business. First, it should be noted that the proposed amendment refers to the offer to purchase being by the first applicant or his nominee. Secondly there is in paragraph 25 a plea that by reason of the various alleged instances of misleading and deceptive conduct the first applicant's nominee under the sale agreement, the second applicant, proceeded to settle the purchase of the business on 9 July 1993 and that the first and second applicants have suffered loss and damage. In my view paragraph 12 is at the very least a legitimate pleading of factual background by way of narrative. It is also a material fact in the chain of events leading to the matters giving rise to the applicants' claims. Accordingly, in my opinion, the challenge to paragraph 12 is not sustained.