CATCHWORDS PRACTICE AND PROCEDURE - Application to stay or strike out certain paragraphs of cross-claim - negligence - investment scheme involving life insurance policies - duty to disclose alleged - whether requisite special relationship of proximity established - whether duty of care to avoid economic loss - whether duty of utmost good faith and fair dealing - whether failure to speak in circumstances where silence would be misleading and deceptive conduct within s.52 of the Trade Practices Act 1974 (Cth) - requires reasonable expectation that information would be disclosed - whether breach of duty of utmost good faith by insurer sounds in damages. PRACTICE AND PROCEDURE - Application by respondent for leave to cross-claim - whether any right of indemnity under insurance policy vested in trustee in bankruptcy by virtue of s.117 of the Bankruptcy Act 1966 (Cth) - claim not a derivative action nor to enforce causes of action personal to bankrupt or trustee - interest sought to be advanced the separate interest of the insurer - whether proposed cross-respondent has standing in respect of respondent's cross-claim against third cross-respondent - whether claim notified within period of insurance or whether s.40(3) of the Insurance Contracts Act 1984 (Cth) applies a question of fact - possible estoppel or waiver of any non-compliance with contractual condition or breach of warranty - whether respondent's cross-claim against second cross-respondent untenable - contribution or indemnity between several contraveners of s.52 of the Trade Practices Act 1974 (Cth) - whether contribution may arise under the general law or in equity - consideration of discretionary issues. Trade Practices Act 1974 (Cth) ss.51A, 52, 87 Life Insurance Act 1945 (Cth) s.87 Bankruptcy Act 1966 (Cth) s.117 Insurance Contracts Act 1984 (Cth) s.40(3) Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s.5 Federal Court Rules O.11 r.16, O.22 r.2(1)(a), O.6 r.8 Sutherland Shire Council v. Heyman (1985) 157 CLR 424 - Appl. Burnie Port Authority v. General Jones Pty Ltd (1994) 179 CLR 520 - Appl. Gala v. Preston (1991) 172 CLR 243 Jaensch v. Coffey (1984) 155 CLR 549 - Foll. Hawkins v. Clayton (1988) 164 CLR 539 - Foll. San Sebastian Pty Ltd v. The Minister (1986) 162 CLR 340 - Appl. Trade Practices Commission v. Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164 - Cons. General Steel Industries Inc. v. Commissioner for Railways (NSW) (1964) 112 CLR 125 - Appl. Munnings v. Australian Government Solicitor (1994) 68 ALJR 169 Gibson v. Parkes District Hospital (1991) 26 NSWLR 9 - Cons. Banque Keyser Ullman S.A. v. Skandia (UK) Insurance Co Ltd [1991] 2 AC 249 - Foll. Demagogue Pty Ltd v. Ramensky (1992) 39 FCR 31 - Foll. Warner v. Elders Rural Finance Limited (1993) 41 FCR 399 General Newspapers Pty Ltd v. Telstra Corporation (1993) 45 FCR 164 N.R.M.A. Holdings Ltd v. Fraser (1995) 127 ALR 577 - Appl. Scarel Pty Ltd v City Loan and Credit Corporation Pty Ltd (1988) 17 FCR 344 Russell v Westpac Banking Corporation (1994) 61 SASR 583 JN Taylor Holdings Ltd v. Bond (1993) 59 SASR 432 - Cons. Wolmershausen v. Gullick [1893] 2 Ch 514 Hansen v. Marco Engineering (Aust) Ltd [1948] VLR 198 Soole v. Royal Insurance Co. [1971] 2 Lloyds Rep. 332 Fraser v BN Furman (Productions) Ltd [1967] 1 WLR 899 Re La Rosa; Ex parte Norgard v. Rodpat Nominees Pty Ltd (1991) 31 FCR 83 - Cons. Australia and New Zealand Banking Group Limited v. Turnbull and Partners Limited (1991) 33 FCR 265 - Refd. Trade Practices Commission v. Manfal Pty Ltd [No. 3] (1991) 33 FCR 382 - Refd. All-State Life Insurance Co. v. Australian and New Zealand Bank Group Limited (Unreported, Beaumont J, 14 February 1995) - Refd. Christopher James Dorrough and Carole Hazel Dorrough v. Bank of Melbourne Limited No. QG196 of 1993 Cooper J., Brisbane, 27 September 1995 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No. QG196 of 1993 BETWEEN: CHRISTOPHER JAMES DORROUGH and CAROLE HAZEL DORROUGH Applicants AND: BANK OF MELBOURNE LIMITED (ACN 007 270 448) Respondent AND BETWEEN: BANK OF MELBOURNE LIMITED (ACN 007 270 448) Cross-Claimant AND: CHRISTOPHER JAMES DORROUGH and CAROLE HAZEL DORROUGH First Cross-Respondents AND: THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED (ACN 004 020 437) Second Cross-Respondent AND MAURICE BERNARD BYRNE Third Cross-Respondent JUDGE MAKING ORDER:Cooper J. WHERE MADE: Brisbane DATE OF ORDER: 29 September 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. Paragraphs 27A to 27R inclusive of the amended defence and cross-claim of Bank of Melbourne Limited be struck out. 2. Bank of Melbourne Limited pay National Mutual Life Association of Australasia Limited its costs of and incidental to the notice of motion to strike out, including reserved costs, if any, to be taxed if not agreed. 3. The second cross-respondent, National Mutual Life Association of Australasia Limited, have leave to cross-claim against FAI General Insurance Company Limited. 4. FAI General Insurance Company Limited pay National Mutual Life Association of Australasia Limited its costs of and incidental to the notice of motion for leave to cross-claim, including reserved costs, if any, to be taxed if not agreed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No. QG196 of 1993 BETWEEN: CHRISTOPHER JAMES DORROUGH and CAROLE HAZEL DORROUGH Applicants AND: BANK OF MELBOURNE LIMITED (ACN 007 270 448) Respondent AND BETWEEN: BANK OF MELBOURNE LIMITED (ACN 007 270 448) Cross-Claimant AND: CHRISTOPHER JAMES DORROUGH and CAROLE HAZEL DORROUGH First Cross-Respondents AND: THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED (ACN 004 020 437) Second Cross-Respondent AND MAURICE BERNARD BYRNE Third Cross-Respondent CORAM: Cooper J. PLACE: Brisbane DATE: 29 September 1995 REASONS FOR JUDGMENT The applicants to the principal proceedings, James and Carole Dorrough ("the borrowers") have sued the respondent Bank of Melbourne Limited ("the bank") for damages and other relief for breach of contract, misleading and deceptive conduct in the giving of advice in relation to a loan and the investment of the loan monies and for negligence in the performance of its obligations under a contract of loan. The bank has now claimed by its amended defence and cross-claim against two cross-respondents, National Mutual Life Association of Australasia Limited ("the insurer") and Maurice Byrne ("the promoter") seeking contribution and indemnity. The insurer has sought to have paragraphs 27A to 27R of the amended defence and cross-claim struck out under O.11 r.16 of the Federal Court Rules. Alternatively it has sought under O.22 r.2(1)(a) to have the proceedings based on paragraphs 27A to 27R stayed on the ground that those paragraphs disclose no cause of action against the insurer. The borrowers allege that in October 1990 the promoter, who was an insurance agent and financial adviser, was promoting an investment scheme (statement of claim ("S/C") para. 2). The essential elements of the scheme were :- (a) The promoter purchased approximately fifty (50) "Pure Endowment Policies of Insurance" issued by the insurer from the owners of such insurance policies. (b) The insurance policies so purchased would be on-sold for a profit; (c) For the purposes of the scheme each investor would borrow $100,000.00 and deposit such sum in a common pool under the management of the promoter; (d) Upon deposit of the sum of $100,000.00 the investor would receive by way of security the transfer of one unencumbered insurance policy to secure repayment of the $100,000.00 invested; (e) The bank would take a deed of defeasance over the insurance policy as the bank's security for the $100,000.00 loaned by it to the investor. (S/C: para. 2). The borrowers further allege that on 8 November 1990 each was offered a loan, the terms of which are pleaded in paragraphs 3 and 4 of the statement of claim, which offer included the representations that if the borrower accepted the loan offer, the bank would not pay any money to a third party if the security, that is the insurance policy, was encumbered in any way or any money was outstanding and unpaid in relation to the security (S/C: para. 6). The borrowers further allege that on 21 December 1990 Mr Dorrough on their behalf sought the advice of the bank from Byron Lye, the bank's Queensland manager, as to the commercial risk of accepting the loan and investing it in the scheme (S/C: para. 8) and were advised by Mr Lye on behalf of the bank that :- (a) Mr Lye knew all about the investment scheme; (b) Mr Lye was happy to accept the policies offered as security for the loan; (c) There was no risk because the policies could always be cashed in to get the money back. (S/C: para. 9). The borrowers allege that in reliance upon the representations pleaded in paragraphs 6 and 9 of the statement of claim they accepted the loans and instructed the bank to proceed in accordance with the terms of the contract of loan (S/C: para. 11). It is alleged (S/C: para. 7) that the written representations pleaded in paragraph 6 were misleading by virtue of s.51A of the Trade Practices Act 1974 (Cth). In paragraph 12 of the statement of claim it is alleged that the oral representations alleged in paragraph 9 were misleading and made negligently because on 21 December 1990 Mr Lye knew that :- (a) the investment was unusual and risky; (b) the investment was highly speculative; (c) there was a real risk that the applicants would or might lose some or all of the borrowed money if they proceeded with the scheme. The borrowers allege that on 9 January 1991, in breach of the loan contract and negligently, the bank paid over an amount of $200,000.00 to Maurice Byrne Insurance Nominees Pty. Ltd when the insurance policies provided as security were each registered in the name of that company and not in the name of the borrowers and were encumbered by the company to the insurer as security for a debt of the company to the insurer of approximately $142,000.00. That is, in breach of the loan agreement the bank paid over the loan monies without obtaining the securities it was obliged to receive under the loan agreement before disbursing the loan funds (S/C: para 13.). The borrowers allege (S/C: para. 14) that but for the misleading oral representations pleaded in paragraph 9, they would not have borrowed the money or proceeded with the loans and become liable to repay to the bank the principal and interest due under the loan agreement if the same is enforceable by the bank. The loss and damage alleged to have occurred as a result of misleading conduct, breach of contract and negligence is :- (a) the incurring of the liability to the bank for principal and interest; (b) the loss of the money invested because the investment was valueless and, inferentially, the sum invested is irrecoverable. The right to an indemnity or contribution alleged by the bank against the insurer is based upon the existence of an alleged tortious duty of care owed by the insurer to the borrowers (amended cross-claim ("ACC") para. 27H) which it is alleged was breached by the insurer (ACC: paras. 27M to 27P), thereby causing the borrowers to suffer loss and damage (ACC: para. 27Q). In those circumstances a right of indemnity or contribution is claimed (ACC: para. 27R). It must be said immediately that the borrowers make no allegation that they were induced by any conduct on the part of the promoter or the insurer to obtain the loan or to make the investment. Nor do the borrowers allege as against the promoter or the insurer any duty of care or other duty to the borrowers which has been breached and which has been causative of the loss or damage claimed against the bank or otherwise. The common law imposes no prima facie duty to rescue, safeguard or warn another from or of reasonably foreseeable loss or injury (Sutherland Shire Council v. Heyman (1985) 157 CLR 424 at 502). Before there can arise a relevant duty to take reasonable care to avoid a reasonably foreseeable and real risk of injury, it is necessary that there be established a relationship of proximity which identifies the case as one falling within a category of case to which such a duty attaches at common law (Burnie Port Authority v. General Jones Pty Ltd (1994) 179 CLR 520 at 543-544; Gala v. Preston (1991) 172 CLR 243 at 252-253, and the cases cited there). Proximity is directed to the relationship between the parties insofar as it is relevant to the allegedly negligent act of one person and the resulting injury sustained by the other. It involves notions of physical proximity in terms of nearness or closeness in time or space, circumstantial proximity such as an overriding relationship of employer and employee or professional and client and causal proximity in the sense of the closeness or directness of the relationship between the particular act and the cause of the injury sustained (Jaensch v. Coffey (1984) 155 CLR 549 at 584-585). The identity and relative importance of the factors which are determinative of the existence of a relevant relationship of proximity vary in different categories of case (Hawkins v. Clayton (1988) 164 CLR 539 at 577, Jaensch v. Coffey at 585; Sutherland Shire Council v. Heyman at 497, 498). Where the claim is one for pure economic loss, the relationship must have something more than a mere physical, circumstantial or causal proximity which is sufficient to give rise to a duty of care not to cause injury to another's person or property. In Hawkins v. Clayton Deane J said (at 576) :- "... As has been stressed in a number of recent cases in this Court (see, e.g., the judgment of the majority of the Court in Cook v. Cook (1986) 162 C.L.R. 376, at pp. 381-382), a relevant duty of care will arise under the common law of negligence only in a case where the requirement of a relationship of proximity between the plaintiff and the defendant is satisfied. In the more settled areas of the law of negligence involving direct physical injury or damage caused by negligent act, the reasonable foreseeability of such injury or damage is, of itself, commonly an adequate indication that the relationship between the parties possesses the requisite element of proximity: see, e.g., Wyong Shire Council v. Shirt (1980) 146 C.L.R. 40, at p. 44; Jaensch v. Coffey (1984) 155 C.L.R. 549, at pp. 581-582. That cannot, however, be said of cases in the area where the plaintiff's claim is for pure economic loss. In that area, the categories of case in which the requisite relationship of proximity is to be found are properly to be seen as special in that they will be characterized by some additional element or elements which will commonly (but not necessarily) consist of known reliance (or dependence) or the assumption of responsibility or a combination of the two: see, generally, Sutherland Shire Council v. Heyman (1985) 157 C.L.R. 424, at pp. 443-444, 466-468, 501-502. As was pointed out in the judgment of the majority of the Court in San Sebastian Pty. Ltd. v. The Minister (1986) 162 C.L.R. 340, at p.355: `The notion of proximity, because it limits the loss that would otherwise be recoverable if foreseeability were used as an exclusive criterion of the duty of care, is of vital importance when the plaintiff's claim is for pure economic loss. When the economic loss results from negligent misstatement, the element of reliance plays a prominent part in the ascertainment of a relationship of proximity between the plaintiff and the defendant, and therefore in the ascertainment of a duty of care. But when the economic loss results from a negligent act or omission outside the realm of negligent misstatement, the element of reliance may not be present. It is in this sphere that the absence of reliance as a factor creates an additional difficulty in deciding whether a sufficient relationship of proximity exists to enable a plaintiff to recover economic loss.' Implicit in that passage is the recognition that the requisite relationship of proximity must exist with respect to the allegedly negligent class of act and the particular kind of damage which the plaintiff has actually sustained." His Honour continued at 579 :- "The content of the duty of care in a particular case is governed by the relationship of proximity from which it springs. It may, in some special categories of case, extend to require the taking of positive steps to avoid physical damage or economic loss being sustained by the person or persons to whom the duty is owed. Apart from cases involving the exercise of statutory powers or where the person under the duty has created the risk, the categories of case in which a relationship of proximity gives rise to a duty of care which may, according to circumstances, so extend are, like those in which there is a duty of care to avoid pure economic loss, commonly those involving the related elements of an assumption of responsibility and reliance. The relationship of solicitor and client is, as has been seen, a relationship of proximity which ordinarily involves the combination of those elements with respect to foreseeable loss which may be caused to the client by the performance of professional work. It is a relationship of proximity of a kind which may well give rise to a duty of care on the part of the solicitor which requires the taking of positive steps, beyond the specifically agreed professional task or function, to avoid a real and foreseeable risk of economic loss being sustained by the client. Whether the solicitor-client relationship does give rise to a duty of care requiring the taking of such positive steps will depend upon the nature of the particular professional task or function which is involved and the circumstances of the case." Likewise Gaudron J in Hawkins v. Clayton recognised the special situation of a claim for pure economic loss. Her Honour said (at 592-593) :- "However, there is a special problem when it is sought to recover damages for economic loss by reason of a failure to disclose or volunteer relevant information. That difficulty lies in the importance which has been ascribed to reliance as indicative of a relationship of proximity sufficient to give rise to a duty to exercise care in the giving of information where the damage suffered is economic loss. The problem was identified in the judgment of Gibbs C.J., Mason, Wilson and Dawson JJ. in San Sebastian (1986) 162 C.L.R., at p. 355 where it was stated: `The notion of proximity, because it limits the loss that would otherwise be recoverable if foreseeability were used as an exclusive criterion of the duty of care, is of vital importance when the plaintiff's claim is for pure economic loss. When the economic loss results from negligent misstatement, the element of reliance plays a prominent part in the ascertainment of a relationship of proximity between the plaintiff and the defendant, and therefore in the ascertainment of a duty of care. But when the economic loss results from a negligent act or omission outside the realm of negligent misstatement, the element of reliance may not be present. It is in this sphere that the absence of reliance as a factor creates an additional difficulty in deciding whether a sufficient relationship of proximity exists to enable a plaintiff to recover economic loss.' It may be that in a particular context failure to disclose some matter where other information is being imparted brings about a situation, foreseeable by the information giver, which amounts to the recipient treating that non-disclosure as a statement of some relevant fact. Shaddock & Associates Pty. Ltd. v. Parramatta City Council [No. 1] (1981) 150 C.L.R. 225 was such a case. In those circumstances reliance may be an appropriate and sufficient test of proximity. There may be other situations in which, although non-disclosure cannot in its context be regarded as equivalent to misstatement, the failure to disclose may give rise to a liability because of the reliance by the injured party upon care being taken to disclose all relevant information in circumstances where the other party ought to know of such reliance, whether or not that other party assumed a responsibility to impart all relevant information." The circumstances pleaded by the bank as giving rise to a duty of care are those contained in paragraphs 27A to 27G of the amended defence and cross-claim which pleads :- "27A. By 7 February 1990, National Mutual had become aware: (a) of the use by agents of sales presentations depicting the cash (or surrender) value of BSDPZ policies; (b) that the sale presentations made by some of its agents encouraged the short term surrender of BSDPZ policies. 27B. On or about 7 February 1990, National Mutual introduced new terms and conditions which required all the proposals for BSDPZ policies to be accompanied by a copy of the sales illustration signed by the prospective policy owner and a `Letter of Comfort' signed by the prospective policy owner or the prospective policy owner's accountant. 27C. On or about 20 February 1990 National Mutual, having become aware of the potential of a widespread misuse of sales presentations to depict enhanced or accelerated surrender values on BSDPZ contracts, advised its agents not to accept any further submissions of new BSDPZ business. 27D. By 20 February 1990, National Mutual was aware that Byrne and C.F. Planners had, since December 1989, engaged in extensive marketing of BSDPZ policies, and had reasonable grounds to suspect that Byrne and C.F. Planners in marketing those policies had told prospective policy owners that the policies were self-funding after their second year. PARTICULARS (a) National Mutual received a `Special Report on BSDPZ Business', prepared by one Bill Francis, the Administration Manager of the group of agents formed by Byrne and C.F. Planners to market BSDPZ business, which in paragraph 10.2 stated: `Generally, the product self-funds after the second year, as long as the application of the product to the client's needs has been put in place properly'; (b) National Mutual administered BSDPZ policies which had been written by Byrne, C.F. Planners and their associated agents, including Packenham Finance Pty Ltd, London Brick Pty Ltd, Phoque Court Pty Ltd, Bill Francis and Terry Green. 27E. By 30 June 1990, National Mutual: (a) knew that many of the aforesaid BSDPZ policies had lapsed or were at risk of lapsing through non-payment of premiums; (b) had demanded in a letter to Byrne and C.F. Planners dated 22 June 1990 that debit balances of $106,223.12 on its commission accounts be repaid immediately; (c) knew that Byrne and C.F. Planners were seeking funds to pay premiums on BSDPZ policies written by them. 27F. Between June and October 1990, National Mutual: (a) continued to press Byrne and C.F. Planners to pay premiums in respect of BSDPZ policies written by them; (b) threatened to recover commissions in respect of policies in respect of which premiums were unpaid; (c) became aware that: (i) Byrne and C.F. Planners were seeking to fund the aforesaid premiums by having BSDPZ policies assigned; (ii) that the Cross-Claimant had received applications for loans from several persons to permit funding to be made to pay premiums in respect of BSDPZ policies; (d) received assignments of BSDPZ policies from some of the aforesaid persons. 27G. By October 1990, National Mutual knew or ought to have known: (a) that Byrne and C.F. Planners were seeking prospective clients to become assignees of BSDPZ policies; (b) that in order to induce persons to take such assignments, Byrne and C.F. Planners would provide sale illustrations and make representations, including representations to the effect that the policies involved an investment which was self-funding, relatively risk free and a good investment; (c) that Byrne and C.F. Planners were obtaining assignments of BSDPZ policies without obtaining a `Letter of Comfort' directed to National Mutual from assignees, or any other document by which assignees were made aware of the risks associated with acting upon sales presentations made by Byrne and C.F. Planners." C.F. Planners is a company, C.F. Planners Pty Ltd, of which it is alleged the promoter was a director, employee or agent and whose business was that of arranging contracts of insurance or in promoting investment by persons in insurance policies marketed by the insurer (ACC: para. 21(b)). The alleged duty of the insurer is pleaded in paragraph 27H of the amended defence and cross-claim :- 27H. In the premises, by October 1990, National Mutual was under a duty to prospective transferees of BSDPZ policies marketed by Byrne and C.F. Planners, including the Applicants: (a) to disclose facts known to National Mutual which were material to the entry by them into BSDPZ policies which a prudent person would take into account in deciding whether or not to enter into such a policy; (b) to disclose that on 7 February 1990, National Mutual had resolved not to accept BSDPZ proposals unless they were accompanied by a copy of the sales illustration to be signed by the prospective policy owner and a `Letter of Comfort' to be signed by the prospective policy owner or the prospective policy owner's accountant; (c) to disclose that on 20 February 1990, National Mutual had resolved not to accept any further submissions of new BSDPZ business; (d) not to register assignments of BSDPZ policies, and not to receive premiums from prospective policy owners without obtaining a `Letter of Comfort' signed by the prospective policy owner or the prospective policy owner's accountant, or some other document by which the prospective policy owner advised that he or she was aware of the risks associated with acting upon sales presentations made by Byrne and C.F. Planners; (e) to otherwise ascertain the sales illustrations given and representations made by Byrne and C.F. Planners in sales presentations made by them to prospective policy owners." The circumstances of the alleged dealings between the borrowers and the promoter are pleaded in paragraph 27I :- 27I. Between October and December 1990, Byrne and C.F. Planners induced the Applicants to become the transferees of two BSDPZ policies. PARTICULARS The policies were Policy No. 6885, 422/3 in respect of the life of Kirsten Joanne Stiles and Policy No. 6885, 421/5 in respect of the life of Lesley Elizabeth Stiles, and were owned by Ross Leonard Stiles (`the policies')." The state of knowledge of the insurer as to the transaction and the policies is pleaded in paragraphs 27J, 27K and 27L :- 27J. On a date prior to 15 January 1991, which the Cross-Respondent cannot further particularise until discovery herein, National Mutual became aware that Byrne and C.F. Planners had arranged for the Applicants to pay the annual premium of $100,000.00 in respect of each of the aforesaid policies and to become transferees of the policies. 27K. The policies: (a) had commenced on 27 December 1989; (b) had lapsed on 27 July 1990. 27L. National Mutual permitted Maurice Byrne (Insurance Nominees) Pty Ltd: (a) to become registered as owner of the policies; and (b) to encumber the policies in respect of moneys owed by Maurice Byrne (Insurance Nominees) Pty Ltd to National Mutual." The duty alleged in paragraph 27H was allegedly breached (ACC: para. 27P) by the conduct pleaded in paragraphs 27M and 27N :- 27M. National Mutual failed to disclose to the Applicants: (a) that the policies which were to be transferred to them had previously lapsed; (b) that the policies would not be transferred from Ross Leonard Stiles directly to the Applicants, but would be used to secure loans from National Mutual to Maurice Byrne (Insurance Nominees) Pty Ltd; (c) that the advancing of loans by National Mutual to Maurice Byrne (Insurance Nominees) Pty Ltd against the value of the policies was contrary to guidelines adopted by National Mutual whereby two years' premiums had to be paid and the policy had to be in existence for two years before `loan backs' could be made; (d) that on 7 February 1990, National Mutual had resolved not to accept BSDPZ proposals unless they were accompanied by a copy of the sales illustration to be signed by the prospective policy owner and a `Letter of Comfort' to be signed by the prospective policy owner or the prospective policy owner's accountant; (e) that on 20 February 1990, National Mutual had resolved not to accept any further submissions of new BSDPZ business; (f) that there were risks associated with acting upon sales presentations made by Byrne and C.F. Planners. 27N. National Mutual failed to make any inquiry of the Applicants, Byrne and C.F. Planners or otherwise ascertain the sales illustrations which had been given and the representations which had been made by Byrne and C.F. Planners to the Applicants in order to induce them to become transferees of BSDPZ policies." The conduct alleged in paragraphs 27M and 27N was engaged in for the purposes specified in paragraph 27O :- "27O. National Mutual failed to take any of the aforesaid steps or to disclose the aforesaid matters: (a) in order to induce prospective transferees of BSDPZ policies to pay premiums in respect of those policies; (b) in order to revive BSDPZ policies which had lapsed or to prevent further BSDPZ policies from lapsing; (c) in order to thereby reduce the amount of commission due to it from agents who had written BSDPZ policies which had lapsed or were about to lapse." Finally, it is alleged that in consequence of the alleged breaches of duty the borrowers suffered loss and damage. However that loss and damage is not particularised. The case pleaded by the bank against the insurer is one of pure economic loss being suffered by the borrowers. There is no allegation that they have suffered injury in respect of any of their property including any rights relevantly held by them under the loan agreement. There is no relationship of physical proximity in terms of time and space pleaded; there was on the pleadings no direct dealing with the insurer. All the dealing was between the borrowers and the promoter or the borrowers and the bank. Nor is there any overriding relationship between the borrowers and the insurers of the type discussed in the authorities referred to. The circumstances pleaded do not reveal any relationship whereby there was actual reliance by the borrowers upon the insurer providing any information at all let alone the information alleged in paragraphs 27H(a), (b) or (c) and 27M or the assumption of a responsibility on the part of the insurer to provide such information. Nor could it be said that in the circumstances pleaded there was any basis for the borrowers to reasonably believe that the insurer would make such disclosures. Can it then be said that there is such a closeness in the failures to make the disclosures and in the failure to refuse to register assignments of the insurance policies that there is a causal relationship of proximity of the type referred to in the above authorities between the pleaded omissions and the alleged loss and damage suffered by the borrowers. Before any conclusion can be drawn on this issue it is necessary to identify, on the borrowers case, what loss and damage they suffered which they seek to recover against the bank and in respect of which the bank now claims indemnity or contribution. The borrowers did not suffer any loss or damage by agreeing to become investors in the investment pleaded in paragraph 2 of the statement of claim. As pleaded, there was no obligation to deposit the sum of $200,000.00 in the common fund until the concurrent obligation of providing security by the transfer of unencumbered policies of insurance into the names of the borrowers was performed. Lapsed policies of insurance, registered in the names of another or others and encumbered in an amount of approximately $142,000.00 for whatever reason, would not satisfy the contractual obligation. Therefore on the pleadings no occasion for the payment of the sum of $200,000.00 ever arose. The loss or damage of the borrowers occurred when the bank, in breach of the loan agreement and/or its mandate, paid over the sum of $200,000.00 and failed to receive in exchange the stipulated security. At that time the borrowers, if they then became liable to repay the same to the bank with interest, suffered loss and damage in such sum as the investment and the security provided upon realisation failed to cover the principal sum and interest due to the bank. The failure to give the information pleaded in paragraphs 27M(a), (b) and (c) of the amended cross-claim did not cause the relevant loss and damage. Each of the matters went to the title or the quality of the security which in terms of the pleaded obligations of the bank only to disburse the loan money in exchange for unencumbered insurance policies transferred to the borrowers, could have been remedied by the reinstatement of the policy, discharging the encumbrance in favour of the insurer and transferring the policies into the names of the borrowers. Had that occurred, disclosure of the information would not have permitted the borrowers to refuse to perform their obligations to make the deposits in exchange for the requisite securities. Similarly, the non-disclosure of the information in paragraphs 27H(a), (b) and (c) and 27M(d), (e) and (f) was not causative of the loss and damage claimed. At the highest the bank may allege (which it has not done) that if the information had been disclosed, the borrowers would not have agreed to invest in the scheme because of the risk attaching to the investment or the risks associated with acting upon the promoter's sales presentations and marketing. Even if this is correct, it is not pleaded that it was the entering into the investment and its subsequent failure by reason of the identified risks becoming a reality which caused the loss and damage claimed. On the borrower's pleading, the investment failed because the security provided, having regard to the encumbrance to the insurer, was valueless and inferentially could not be realised to generate funds sufficient to pay to the bank the principal borrowed and the interest thereon. There is no allegation that absent the failure to obtain the stipulated unencumbered insurance policies the investment would have failed in any event and the borrowers would thereby have suffered loss and damage in the amount of the principal and interest payable to the bank. The allegation in paragraph 27N is embarrassing. It is not alleged that in October 1990 at the time at which it is pleaded the duty arose the insurer was aware of the identity of the borrowers or could have ascertained their identity at that time. Further, it is not alleged that if inquiries had been undertaken what those inquiries would have revealed, if anything, as to sales illustrations or representations given or made to the borrowers by the promoter. Nor is it alleged, having regard to what would have been revealed, what, if anything, the insurer would have been obliged to do in the light of the information, if any, revealed upon the inquiry. Likewise it is not alleged that the discharge of the duty in the form in which it is pleaded would have led to the borrowers adopting any other course from that which they allege, namely seeking the advice of the bank as to the commercial risks of the loan and the investment. The allegation that the insurer was under a duty not to register assignment of BSDPZ policies as alleged in paragraph 27H(d) or the allegation implicit in the paragraph that the insurer had the power or discretion to refuse registration, ignores the provisions of s.87 of the Life Insurance Act 1945 (Cth) which then applied to the transaction in issue. In my view the insurer was obliged to register an assignment of a policy made by memorandum of transfer in accordance with or substantially in accordance with the Fifth Schedule to that Act (s.87(1)(a) and (2)). There cannot be a duty of care at common law which requires an insurer to act contrary to and in breach of its statutory obligations. Whatever the imperfections or imprecision of proximity as a concept, it operates at least to identify the relevant categories which give rise to a duty of care. As was said in the joint judgment of Mason CJ, Deane, Dawson, Toohey and Gaudron JJ in Burnie Port Authority v. General Jones Pty Ltd 179 CLR 520 at 543 :- "... As a general conception deduced from decided cases, its practical utility lies essentially in understanding and identifying the categories of case in which a duty of care arises under the common law of negligence rather than as a test for determining whether the circumstances of a particular case bring it within such a category, either established or developing. See, generally, Jaensch v Coffey (1984) 155 CLR at 585; Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR at 53; Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465, at 524-5." In these circumstances where there is an application to strike out a pleading as not disclosing a cause of action, the material facts pleaded as giving rise to the relationship of proximity must be sufficient to identify one of the categories referred to by their Honours in the passage cited above. The bank seeks to have accepted the proposition that where A (the insurer) engages in conduct (refraining from making the disclosure in ACC: para. 27M) which is intended to cause B (the borrowers) or a class of persons (potential investors in the scheme to be administered by the promoter) to act in a particular manner (to invest in the scheme), A (the insurer) comes under a duty of care to B or any member of the class induced to act in that manner. Alternatively the bank submits that A (the insurer) comes under a duty of care when it has an interest (having the premium paid) in inducing such action. Those propositions were rejected in San Sebastian Pty Ltd v. The Minister (1986) 162 CLR 340 in the joint judgment of Gibbs CJ, Mason , Wilson and Dawson JJ at 357-358. As to the first proposition, their Honours said :- "... The deficiency in that submission may be expressed by saying that it is necessary not only that A intends that B or members of a class of persons should act or refrain from acting in a particular way, but also that A makes the statement with the intention of inducing B or members of that class, in reliance on the statement, to act or refrain from acting in the particular way, in circumstances where A should realize that economic loss may be suffered if the statement is not true. In cases where the defendant intends the statement to operate as a direct inducement to action, the reasonableness of the reliance will not be a critical factor, although in other cases the defendant's appreciation of the reasonableness of reliance will be relevant." The bank does not, and on the facts disclosed in the pleadings cannot, plead against the insurer a case in terms of the necessary formulation set out in the reasons cited above. The alternative formulation was significantly qualified by their Honours. They said (at 358) :- "The appellants' alternative proposition derives from the American Restatement of the Law of Torts (2d), §552, which speaks of the liability of a person who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, for pecuniary loss caused to them by their justifiable reliance on the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. Whether this principle of liability extends to liability on the part of statutory and local authorities in respect of negligent misstatements made in development plans was not made clear by the argument." Although their Honours did not accept that the statement was applicable to a local authority exercising functions as such, they did not reject the American restatement as not reflecting the law in this country in respect to cases falling within its terms. Therefore for the purpose of this application it is at least arguable that the restatement identifies a category of case in which a duty of care will arise. However, factually this case as pleaded does not come within the category. The bank next submits that the fact that the insurer would receive a benefit by way of a payment in respect of a policy that had no value, coupled with the fact that these policies had some feature about them which induced the insurer in February 1990 to take steps to protect people who were purchasing these policies, created the relationship of proximity. The bank further submits that the additional factors which went to create the relationship were that the promoter had been paid commission against the policies which commission was repayable in the event of non-payment of future premiums, that the insurer was receiving assignments of policies, that the promoter was making misleading statements that the policies were self-funding and relatively risk free, and finally that the promoter was not obtaining from the investors documentation which it has previously sought from purchasers of new policies. The difficulty with these submissions is that the bank seeks to kaleidoscope a collection of disparate facts occurring at different times, in relation to different circumstances and in relation to commercial transactions different to that pleaded by the borrowers in the statement of claim against the bank, and thereby seek to erect a relationship of proximity in October 1990 between the borrowers and the insurer. It is necessary to disentangle the allegations to identify on the pleadings what it is alleged were the material facts and when they occurred. It is important to record that the investment scheme which the borrowers plead was not one whereby the borrowers were to subscribe for an endowment life policy to be issued by the insurer to them. On the pleadings the insurer had ceased to write such insurance on or about 20 February 1990. Nor was the investment one where the borrowers were to buy from an insured an existing endowment policy and to take an assignment of the policy in order to obtain title to the property. Nor was the scheme pleaded one where the borrower was to undertake the obligation to pay the premium due and payable under any policy. The scheme as pleaded in paragraph 2 of the borrowers statement of claim and repeated in paragraph (viii) of the particulars to paragraph 24 of the amended defence and cross-claim was for the deposit of money into a common fund to be managed by the promoter and used in the business of buying and selling existing endowment policies which had been issued by the insurer. The assignment of a policy to an investor was to secure the advance of $100,000.00 to the common fund. The investment pleaded was not to purchase one endowment policy for $100,000.00 from either the insurer or the owner of the policy. Under the pleaded investment scheme the promoter was to purchase approximately fifty of such policies from their owners. The material facts pleaded in paragraphs 27A, B, C and D of the amended defence and cross-claim are that on or about 7 February the insurer required that proposals for new BSDPZ policies of life insurance be supported by a "letter of comfort" and by 20 February 1990 determined not to write any new business of that category and further that in selling policies of that type up until that time the promoter had probably told prospective policy owners that the policies were self-funding after their second year. The material fact alleged in paragraph 27E is that the insurer knew in June 1990 that due to the non-payment of premiums existing policies in respect of which the promoter had received commission had lapsed or were about to lapse and that the promoter was seeking funds to pay the premiums to avoid repaying the commissions. The pleading in paragraph 27F(c), if it is meant that there was a scheme put in place between June and October 1990 whereby persons acquired policies of insurance by assignment and paid the premiums, pleads a different scheme to that which the borrowers plead. So too is the scheme pleaded in paragraph 27G(a), (b) and (c) different from the scheme pleaded by the borrowers. The nature of the scheme pleaded as at October 1990 of which it is alleged in paragraph 27G that the insurer had notice is not the scheme which the borrowers plead they were induced to invest in in December 1990. The bank submits that the duty which the insurer owed to the borrowers in October 1990 as a member of a class of prospective transferees of BSDPZ policies arose, by reason of the fact that the promoter, to the knowledge of the insurer, was attempting to keep in order endowment policies in respect of which it had received commissions which commissions were or would be repayable if the policies lapsed for want of payment of the premium, and further to the knowledge of the insurer the promoter had in the past misstated the commercial risk of the policy achieving a represented return and the ability of the policy to self-fund the payment of future premiums after two years premiums had been paid. There is no pleading that the policies which the promoter was seeking to assign to the class, including the borrower, were valueless or that the payment of the premiums then due or falling due would not maintain or enhance the value of the policies. Even on the bank's pleading these policies had had at least one year's premium previously paid. The premiums in issue in 1990 were the second or subsequent premiums on the said policies. The complaint made by the borrowers in their claim against the bank is that the insurer allowed a company associated with the promoter to borrow against the value of the policies in question and to secure that indebtedness against the value of the policies. As at October 1990, the material facts pleaded which I have listed above were irrelevant to the borrowers in terms of the investment which the borrowers plead they entered into with the promoter and the obligations pleaded against the bank as to its entitlement to disperse the loan monies. It is not pleaded, nor was it alleged by the bank in argument, that the promoter and the insurer conspired to defraud the borrowers by the promoter representing and becoming party to a scheme to be operated in the manner pleaded by the borrowers when at all times it was the intention of the promoter and insurer that the promoter would breach his obligations as manager of the investment and fail to provide the borrowers with complying security while taking and using the borrowers' funds on deposit. Importantly the bank does not plead that if the promoter had performed his obligations in accordance with the terms of the investment scheme the borrowers plead they invested in they would have lost all or any of the money invested. At their highest the material facts pleaded against the insurer as at October 1990 were that the promoter was endeavouring to obtain funds from potential investors in order to pay premiums on endowment policies issued by the insurer in respect of which the promoter or an associated company had received a commission on sale and that in doing so misrepresented the commercial risk attaching to an investment which relied upon the surrender value of the policy. If successful in that attempt to raise funds the insurer would receive the benefit of a premium but would remain burdened by its obligations under the policies to the parties insured. In my view those facts do not disclose a sufficient proximity between the persons approached as possible investors and the insurer as a party already bound by the existing policies, or one liable to be further bound if any lapsed policy was reinstated, to give rise to a duty of care to the borrowers including a duty to make the inquiries or the disclosures alleged. It was submitted for the bank that the court needs to be careful to ensure that in giving effect to the application it does not prevent a party from making a case which it is entitled to make and that strike out applications are inappropriate to determine matters of substance. Those observations are qualified to the extent that the power to strike out may be exercised where the result is clear beyond question (Trade Practices Commission v. Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164 at 172). I do not understand the Full Court in Pioneer Concrete to be stating any different test to that stated by Barwick CJ in General Steel Industries Inc. v. Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-130) :- "... It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; `so obviously untenable that it cannot possibly succeed'; `manifestly groundless'; `so manifestly faulty that it does not admit of argument'; `discloses a case which the Court is satisfied cannot succeed'; `under no possibility can there be a good cause of action'; `be manifest that to allow them' (the pleadings) `to stand would involve useless expense'. At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or `so manifest on the view of the pleadings, merely reading through them, that is a case that does not admit of reasonable argument'; `so to speak apparent at a glance'. As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same. Dixon J. (as he then was) sums up a number of authorities in Dey v. Victorian Railways Commissioners (1949) 78 C.L.R. 62 where he says (at p.91): `A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process'. Although I can agree with Latham C.J. in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings (1949) 78 C.L.R., at p. 84, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed." (See also Munnings v. Australian Government Solicitor (1994) 68 ALJR 169 at 170). In my opinion the case pleaded by the bank as to the existence of a relationship of proximity between the borrowers and the insurer giving rise to a duty of care on the part of the insurer to do the acts alleged in the circumstances pleaded in paragraphs 27A to 27R is so clearly untenable that it cannot possibly succeed. If the duty was not sustainable as one arising at common law under the law of negligence, counsel for the bank submits that with some amendment the duty alleged in the paragraphs in issue and its breach with consequential loss and damage can be supported on the basis of either :- (a) a breach of the duty of utmost good faith owed by the insurer to the borrowers; or (b) a failure to speak in circumstances where to remain silent would be conduct which was misleading and deceptive in contravention of s.52 of the Trade Practices Act 1974 (Cth). Neither of these bases has been pleaded and neither looks a likely source of either a duty or a right to recover damages. Whether or not as a question of law there existed any duty of utmost good faith between the borrowers and the insurer prior to the registration of the assignment of the policies into the names of the borrowers was simply not addressed by counsel for the bank. The case as pleaded was not one of the borrowers and the insurers negotiating a contract of insurance so as to attract an obligation of utmost good faith in their dealings leading up to and culminating in such a contract. Notwithstanding that the bank has not formulated a case against the insurer beyond what has been pleaded to sustain a duty of care at common law, the bank seeks to gain some assistance to found a new independent duty of utmost good faith and fair dealing from the decision of Badgery-Parker J in Gibson v. Parkes District Hospital (1991) 26 NSWLR 9. There his Honour allowed an amendment to join and plead against the Government Insurance Office of New South Wales, as the insurer under the Workers Compensation Act 1926 (NSW), a cause of action for breach of a duty to act in good faith in processing a worker's compensation claim. His Honour was of the view that such a claim was not so untenable that it would be struck out in a summary way. In his reasons Badgery-Parker J reviewed the American decisions and writings and concluded that the action in tort in the United States was founded upon an implied contractual covenant of good faith and fair dealing and the existence of a special relationship, eg. insurer and insured (see 26 NSWLR at 17-21). He concluded (at 34-35) :- "It does not appear to me that the existence of such a duty should be seen to depend upon the implication of a term in the contract of employment or in the contract of workers' compensation insurance requiring good faith and fair dealing, which is the theory underlying the American cases. It is clear that in this jurisdiction at common law (the enactment of the Insurance Contracts Act 1984 (Cth) has altered the position) the mutual duties of good faith to which an insurer and an insured were subject were duties imposed by law as an incident of the existence of the contract of insurance but not as implied contractual terms. The duty attached to the relationship of insurer and insured created by the contract, but it was not a duty imposed by the terms of the contract (indeed, it existed prior to the formation of the contract, being attached by law to the relationship between parties negotiating a contract of insurance, though perhaps no breach of the duty would acquire legal significance unless a contract of insurance purportedly resulted from such negotiations): Distillers Bio-Chemicals (Australia) Pty Ltd v Ajax Insurance Co Ltd (1973) 130 CLR 1 at 31 per Stephen J; Deaves v CML Fire and General Insurance Co Ltd (1979) 143 CLR 24 at 76 per Murphy J and Banque Keyser Ullman SA v. Skandia (UK) Insurance Co Ltd [1990] 1 QB 665; Banque Financičre de la Cité SA (formerly Banque Keyser Ullman SA) v Skandia (UK) Insurance Co Ltd (1990) 6 ANZ Insurance Cases ¶60-987 at 76,586. In the last-mentioned case, the trial judge held that the plaintiffs were entitled to damages (but not in tort: see [1990] 1 QB 665 at 775-776) for breach by the insurer of its duty of utmost good faith, but that decision was reversed by the Court of Appeal whose view was affirmed in the House of Lords. The duty of good faith not being contractual, breach of it did not sound in damages but gave rise only to a right to rescind the contract. In the light of those authorities it is not open to this Court to hold that a contract of insurance (except by virtue of the provisions of s 13 of the Insurance Contract Act 1984 (Cth), not here relevant) contains an implied term that the parties will deal fairly and in good faith. Nor is there in this jurisdiction any general principle by which a duty of good faith is implied in every contract. However, the American insistence that although the duty exists as a contractual term in every contract, the tort arises from the breach of that duty only in the presence of a special relationship supports, in my view, the proposition that the tort may arise where the nature of the relationship brought about by the contract, as distinct from the terms of the contract, is such as to impose a duty to act in good faith. On that basis, the duty is a true tort duty, not a contractual duty and the existence of a contractual term is not a necessary foundation for it." His Honour had earlier (at p.25) equated the special relationship to which he refers in the final paragraph of the above passage as being in the nature of a relationship of proximity under the law of negligence. If in the present case there is no basis for a relationship of proximity to give rise to a duty of care under the common law of negligence, there can be no sufficient relationship to give rise to a duty of the type considered in Gibson v. Parkes District Hospital. Further, there was on the pleadings no negotiations between the borrowers and the insurer leading to a concluded contract of insurance to give rise to a duty of utmost good faith in those negotiations under the common law of insurance. Even if there had been such a concluded agreement, any breach of a duty of utmost good faith on the part of the insurer would not sound in damages. Nor does any breach of such duty constitute actionable tortious conduct (Banque Keyser Ullman S.A. v. Skandia (UK) Insurance Co Ltd [1991] 2 AC 249 at 280, 281). To make the silence of the insurer in respect of the matters of pleaded non-disclosure actionable as conduct in contravention of s.52 of the Trade Practices Act 1974 (Cth), the bank must demonstrate more than that the disclosures were not made. In Demagogue Pty Ltd v. Ramensky (1992) 39 FCR 31, Gummow J, with whom Black CJ and I agreed, said (at 40-41) :- "The use of the term `duty' is apt to suggest a necessary connection with the general law, which does not exist and is not required by the statute: cf Lam v Ausintel Investments Australia Pty Ltd [1990] ATPR 50,866 at 50,880-50,881. I agree with what was said by Samuels JA in Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 at 88: `[S]ilence is not misleading only where there is a duty to disclose at common law or in equity. It may simply be the element in all the circumstances of a case which renders the conduct in question misleading or deceptive.' See also Lee Gleeson Pty Ltd v Sterling Estates Pty Ltd (1991) 23 NSWLR 571 at 582, per Brownie J. It is true, as was pointed out by French J in State Government Insurance Corporation v Government Insurance Office of New South Wales (1991) 28 FCR 511 at 561-562, that the large number of cases brought under the Act in respect of conduct analogous to passing-off has encouraged the notion that some representation must be demonstrated as an element of conduct in contravention of s 52. But, consistently with regard to the natural meaning of the terms of s 52, the question is whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive. Conduct answering that description may not always involve misrepresentation: see Henjo (supra) at 93, per Lockhart J, and see Mr Justice R S French's paper `Law of Torts and Part V of the Trade Practices Act' in P D Finn (ed), Essays on Torts (1989), pp 186-188. I agree also with the remarks by French J in Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 53,193 at 53,195 where, after referring to various authorities, his Honour said: `If in a particular case silence would, as a matter of fact, constitute misleading or deceptive conduct, s 52 by virtue of its prohibition of such conduct imposes its own statutory duty to make disclosure. The cases in which silence may be so characterised are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist.'" Black CJ said (at 32) :- "Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of `mere silence' or of a duty of disclosure can divert attention from that primary question. Although `mere silence' is a convenient way of describing some fact situations, there is in truth no such thing as `mere silence' because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed." See also Warner v. Elders Rural Finance Limited (1993) 41 FCR 399 at 402-403; General Newspapers Pty Ltd v. Telstra Corporation (1993) 45 FCR 164 at 194; N.R.M.A. Holdings Ltd v. Fraser (1995) 127 ALR 577. There is nothing in the pleaded circumstances which would arguably sustain a finding that the borrowers had a reasonable expectation that the insurer would disclose the information which the bank contends ought to have been disclosed. Nor in those circumstances is anything which would support a conclusion that the borrowers relied upon that silence in any way in making a decision to borrow from the bank and to place the borrowed funds on deposit with the promoter as an investment. The insurer is entitled to have paragraphs 27A to 27R inclusive of the amended cross-claim struck out as disclosing no cause of action. The insurer has also sought leave to cross-claim against FAI General Insurance Company Limited ("FAI"). At all material times FAI was the professional indemnity insurer of the promoter Maurice Byrne. The promoter is bankrupt and since December 1994 has not sought to defend the cross-claim which the insurer has brought against him for indemnity or contribution. The material filed in support of the joinder alleges that FAI acted on the promoter's behalf in relation to the defence of the action up to December 1994. On 19 December 1994 the insurer wrote to FAI a letter which contained the following :- "National Mutual now asks that FAI answer the following questions:- 1. Has FAI granted Byrne unconditional indemnity in respect of the claims made in the proceeding by:- (a) the Bank of Melbourne; (b) National Mutual? 2. Has FAI granted Byrne conditional indemnity in respect of the claims made in the proceeding by:- (a) the Bank of Melbourne; (b) National Mutual? If so state the conditions applicable to the indemnity and provide copies of all relevant correspondence and documents. 3. Has FAI denied Byrne indemnity in respect of the claims made in the proceeding by:- (a) the Bank of Melbourne; (b) National Mutual? If so state the grounds for the denial of indemnity and provide copies of all relevant correspondence and documents." On 9 January 1995 FAI responded with a letter which included the following :- "9. National Mutual has sought answers from FAI to questions appearing at the foot of page 1 of your letter and at the top of page 2 of your letter numbered respectively 1, 2 and 3. Please inform us of the basis at law, whether statutory or otherwise, which founds the authority for National Mutual to ask questions and obtain answers from FAI in the terms sought. ..... 12. We shall not debate these issues with you directly for, in any event, we will take the benefit of legal advice, as we are entitled to do. We require any response you have to this letter to be directed to Richard Lukin, Gadens Ridgeway, GPO Box 129, Brisbane, 4001, facsimile (07) 229-5850, who has been instructed to consider any properly articulated requests." The insurer, in a draft cross-claim against FAI, seeks the following relief against it :- "A. A declaration that the Cross-Respondent is obliged to indemnify Byrne pursuant to the policy in consequence of any judgment entered against Byrne in this proceeding. B. A declaration that the Cross-Respondent is obliged to pay the amount up to $1,000,000.00 of any sums awarded in favour of the Respondent (the Bank of Melbourne Limited) and the Cross-Claimant against Byrne in this proceeding. C. An order that the Cross-Respondent pay the amount up to $1,000,000.00 of any sums awarded in favour of the Respondent (the Bank of Melbourne Limited) and the Cross-Claimant against Byrne in this proceeding. D. Costs." FAI resists the joinder on the following grounds :- 1. the declarations would serve no purpose. 2. the insurer has no standing in respect of the claims by the bank against the promoter and any obligation of FAI to indemnify the promoter in respect of those claims. 3. the claim of the promoter is outside the period of the insurance. 4. the relief sought in B and C above is inappropriate. 5. the claims by the bank against the insurer are untenable. 6. on discretionary grounds it is neither convenient nor necessary that FAI be joined and a joinder will only prolong and delay the trial at great expense. FAI contends that any right of indemnity under the policy of insurance has vested in the trustee of the promoter's bankrupt estate by virtue of s.117 of the Bankruptcy Act 1966 (Cth). As the trustee is not a party to the proceedings and it was submitted, was not a privy in estate in respect of the right of indemnity under the policy so that the trustee would not be bound by the proceedings, joinder will not avoid duplicity of proceedings. In my view the objection is misconceived. The claim which the insurer seeks to bring against FAI is not a derivative action nor one to enforce in the name of the bankrupt or the trustee rights or causes of action which are personal to them and in respect of which decisions to enforce or not to enforce the rights by action ought generally to be left to the trustee (see Scarel Pty Ltd v. City Loan and Credit Corporation Pty Ltd (1988) 17 FCR 344 at 350-352; Russell v Westpac Banking Corporation (1994) 61 SASR 583 at 584-586 which cases relate to the position of a liquidator. However there is no difference in principle). The insurer's claim is different. The interest sought to be advanced in the proceedings is the separate interest of the insurer and was explained by King CJ, with whom Prior and Perry JJ agreed in JN Taylor Holdings Ltd v. Bond (1993) 59 SASR 432 (at 437-438) :- "The learned judge summarised his reasons for holding that the question sought to be determined was theoretical only, at this stage, as follows: `The plaintiffs do not have an interest sufficient to maintain an action unless and until they succeed in this action and are able to obtain the consent of the trustee in bankruptcy to prosecute an action in his name to enforce the right of indemnity provided by the policy or, failing that consent, have the leave of the Court to prosecute such an action in the name of the trustee in bankruptcy. It might also be said that the issues which the plaintiffs seek to have determined by the application for a declaration in this action are hypothetical until they succeed in an action against the defendants.' I think that that is too narrow a view of the interest of the plaintiffs required to render the issue real rather than theoretical. It is true that the plaintiffs have to surmount certain obstacles before they can gain recourse to the proceeds of the indemnity, but the first and most important of those obstacles is the determination of whether the insurer is liable to indemnify the directors under the policy in respect of any judgment the plaintiffs might recover. If that question is determined against the insurer concurrently with the determination of the defendant directors' liability to the plaintiffs, the plaintiffs will avoid the costs of a further trial of that issue. Moreover, armed with a declaration of the insurer's liability to indemnify the directors, the plaintiffs will be far better placed to secure the consent of the trustee in bankruptcy, or alternatively authority to sue in the trustee's name. It is true that the issue of the insurer's liability will cease to be a live issue if the plaintiffs fail in their action against the defendants, but, to my mind, their interest in obtaining a declaration of the insurer's liability concurrently with that of the liability of the defendants, is undeniable." If the insurer obtains a successful declaration and if FAI pays when called upon to indemnify the promoter, the sum so paid forms no part of the bankrupt estate and is payable by the trustee to the party who obtains the benefit of the order against the bankrupt (s.117(1) of the Bankruptcy Act). The declaratory relief is sought in the insurer's own interest in order to generate a fund which will pass to it and not the trustee if any order for indemnity or contribution is made in its favour against the bankrupt. Nor, in my view, is there any substance in the contention that the insurer has no standing in respect of the bank's claim against the promoter. To the extent that the bank also claims an indemnity and contribution from the insurer in respect of the same liability, the insurer has an interest in ensuring that the promoter, as a co-contributory, discharges his share of the co-ordinate liability if the insurer is found liable to contribute or indemnify the bank on the basis of its liability for the conduct of the promoter as a servant or agent, and may prior to itself satisfying the order to contribute or indemnify, seek an order that the promoter pay his proportionate share of any co-ordinate liability to the bank (Wolmershausen v. Gullick [1893] 2 Ch 514 at 528-529). Whether or not the claim was in fact notified within the period of insurance or whether s.40(3) of the Insurance Contracts Act 1984 (Cth) has a relevant application to enable the promoter to claim against FAI under the policy of insurance, is a question of fact and not readily amenable to a final determination on an application for joinder. There is the additional feature that it appears FAI, until December 1994, conducted the defence of this litigation on behalf of the promoter. Such conduct may constitute an estoppel preventing the insurer from denying that the claim is one covered by the policy (Hansen v. Marco Engineering (Aust) Ltd [1948] VLR 198 at 209 ff; but see Soole v. Royal Insurance Co. [1971] 2 Lloyds Rep. 332 at 338-342) or a waiver of any non-compliance with a contractual condition or a breach of warranty (Fraser v BN Furman (Productions) Ltd [1967] 1 WLR 899 at 909 (CA)). It therefore cannot be said beyond argument that any issue of the liability of FAI to indemnify the promoter must be determined in favour of FAI. The insurer does not press the relief claimed in paragraphs B and C of its draft statement of claim. Therefore any basis of objection to joinder on this ground has gone. FAI contends that the bank's claims against the insurer are untenable, a proposition with which the insurer would not disagree. However, the insurer wishes that the issue be determined between all relevant parties in the one proceeding so as to bind them all, particularly in the event that the contention of FAI is wrong. It remains to see whether the claims as pleaded are untenable in any event. It was argued by FAI that the claim in paragraphs 20-26 of the amended defence and cross-claim must fail because the borrowers do not allege in their statement of claim that they were induced by any conduct on the part of the insurer to do anything which caused them loss or damage. The bank for its part argues that on trial it will show that the proximate cause of the borrowers' loss and damage was the conduct of the promoter, even if the borrowers do not admit it. At worst the bank will contend that its conduct as pleaded by the borrowers, if established, was only a contributing cause and not the sole cause. It remains available to the bank to establish its defence to the claim brought against it by showing that the effective and proximate cause of the loss was the conduct of the promoter which induced the borrowers to obtain the loan and make the investment, which conduct the bank alleges was conduct for which the insurer was vicariously responsible. The claim in paragraphs 26A to 26G relates to representations made to the bank by the promoter which induced the bank to make the loan whereby the bank has suffered loss and damage itself. This conduct, it is alleged, is conduct for which the insurer is vicariously responsible. It is no answer for FAI to say that in the circumstances pleaded the promoter must have been acting for the borrowers and not the insurer. That issue is one of fact or mixed law and fact and cannot be determined on this application. If the bank establishes that the effective and proximate cause of the borrowers' loss was solely the conduct of the promoter, then no question of contribution or indemnity arises. However, if on trial it is established that the conduct of the bank and the promoter, including conduct for which the insurer was responsible, all contributed to the suffering of the same loss and damage, an issue of contribution and indemnity does arise. The claims under paragraphs 26A to 26G of the amended defence and cross-claim do not relate to a claim for contribution or indemnity; they concern loss and damage sustained by the bank in consequence of representations made to the bank itself. The issue of indemnity or contribution therefore only relates to the claim in paragraphs 20 to 26 of the amended defence and cross-claim. FAI submits that there can be no contribution or indemnity between several contraveners of s.52 of the Trade Practices Act 1974 (Cth) and relies upon the decision in Re La Rosa; Ex parte Norgard v. Rodpat Nominees Pty Ltd (1991) 31 FCR 83. It was held in La Rosa that s.87 of the Trade Practices Act did not, in its terms nor as a matter of necessary implication, provide for contribution or indemnity between several contraveners. That view has been maintained in a number of first instance decisions and from a perusal of the Act is, with respect, correct (see Australia and New Zealand Banking Group Limited v. Turnbull and Partners Limited (1991) 33 FCR 265; Trade Practices Commission v. Manfal Pty Ltd [No. 3] (1991) 33 FCR 382; All-State Life Insurance Co. v. Australian and New Zealand Bank Group Limited (Unreported, Beaumont J, 14 February 1995). However contribution may arise in appropriate cases under the general law or in equity and operate where the Trade Practices Act imposes several liabilities on the part of the contraveners in respect of the same loss and damage (see La Rosa at 88ff; Trade Practices Commission v. Manfal [No. 3] at 387 ff; Campbell "Contribution, Contributory Negligence and s.52 of the Trade Practices Act" (1993) 67 ALJ 87 at 92). Although Sheppard J in ANZ Banking Group v. Turnbull and Partners was of the view that a breach of s.52 of the Trade Practices Act was not a tort and thus outside s.5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), it is not clear to what extent the argument was researched or developed before his Honour. Campbell QC in his article in the Australian Law Journal develops a substantial argument that a breach of s.52 of the TPA does constitute a tort and that the various contribution statutes of the States have a relevant operation by virtue of s.79 of the Judiciary Act. The issue as to the right to indemnity or contribution at common law or equity or the operation of the contribution legislation in Queensland was not argued by FAI before me. In my view it is clearly arguable that a right of contribution can be made out on grounds other than s.87 of the Trade Practices Act. Accordingly, joinder should not be refused solely for the reason that the Trade Practices Act provides no such remedy as between several contraveners of s.52. Finally, FAI argued that joinder should not be allowed for discretionary reasons, and in particular that issues as to the promoter's conduct vis á vis FAI as his professional indemnity insurer, would delay and expand the issues on trial. The expansion of the areas of dispute beyond those which are raised in the borrowers' statement of claim against the bank and the possibility of prejudice to the borrowers has been a matter of concern to me. However, as the entirety of the dealings between the borrowers and the promoter goes to the bank's defence on causation, examination of that conduct to determine whether it was fraudulent and outside the cover under the policy will not significantly broaden those issues. If there are other issues which might conveniently be heard separately to determine whether FAI is obliged to indemnify the promoter, such a course can be considered at a later time. Contrary to its submission, FAI has not demonstrated any basis upon which the joinder should be conditioned upon the insurer paying costs on an indemnity basis if it fails against FAI on the trial of the action. In all the circumstances the insurer ought to have leave to join FAI as a cross-respondent. I see no basis to award costs in respect of each notice of motion on other than the ordinary basis that costs follow the event. THE COURT ORDERS THAT: 1. Paragraphs 27A to 27R inclusive of the amended defence and cross-claim of Bank of Melbourne Limited be struck out. 2. Bank of Melbourne Limited pay National Mutual Life Association of Australasia Limited its costs of and incidental to the notice of motion to strike out, including reserved costs, if any, to be taxed if not agreed. 3. The second cross-respondent, National Mutual Life Association of Australasia Limited, have leave to cross-claim against FAI General Insurance Company Limited. 4. FAI General Insurance Company Limited pay National Mutual Life Association of Australasia Limited its costs of and incidental to the notice of motion for leave to cross-claim, including reserved costs, if any, to be taxed if not agreed. I certify that this and the preceding thirty-nine (39) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper. Date: 29 September 1995 Associate Counsel for the Applicants/First Cross Respondents: Mr JB Sweeney Solicitors for the Applicants/First Cross Respondents: Hillhouse Burrough McKeown Counsel for the Respondent/Cross Claimant: Mr P Applegarth Solicitors for the Respondent/Cross Claimant: Corrs Chambers Westgarth Counsel for the Second Cross-Respondent: Mr G McArthur Solicitors for the Second Cross-Respondent: Sly & Weigall Cannan & Peterson Counsel for FAI General Insurance Company Limited: Mr S Couper QC Solicitors for FAI General Insurance Company Limited: Gadens Ridgeway Date of Hearing: 27 February 1995 Place of Hearing: Brisbane Date of Judgment: 29 September 1995