Bates, Michael John t/as Riot Wetsuits v Omareef Pty Ltd t/as Quiksilver Wetsuits & Ors [1997] FCa 834

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 230 of 1994

BETWEEN: MICHAEL JOHN BATES t/as riot wetsuits

Applicant

AND: OMAREEF PTY LIMITED (acn 004 010 806)

t/as quiksilver wetsuits

Respondent

quiksilver garments pty ltd

(acn 005 575 548)

second Respondent

john eric howitt

third Respondent

BRUCE ERNEST RAYMOND

Fourth Respondent

THOMAS VICTOR CARROLL

Fifth Respondent

RODNEY ALLAN BROOKS

Sixth Respondent

ALISTAIR (ALSO KNOWN AS ZOC) ZORICA

Seventh Respondent

BRUCE ANDREW EDWARDS

Eighth Respondent

JUDGE(S): EMMETT J

DATE: 20 AUGUST 1997

PLACE: SYDNEY

EX TEMPORE REASONS FOR JUDGMENT (No. 3) HIS HONOUR: An application has been made on behalf of the applicant to amend the statement of claim. There are several discrete amendments. I will deal first with an amendment proposed to be made to paragraphs 44 and 45, they being the only amendments that have yet been the subject of argument and I will hear later argument in relation to the other amendments. The proposed new allegations are that: (1) The respondents, between 22 January and 9 May 1991, represented to Mr Bates that a fourth container of neoprene rubber had been ordered and was in the course of being shipped to arrive at Mr Bates' factory in late April or early May 1991. (2) In reliance upon that representation: (a) Mr Bates took no steps to order alternative supplies of neoprene for use in his manufacturing process to substitute for the fourth container of neoprene or to obtain alternative orders for the manufacture of other goods to allow for the possibility that there would be no work to perform by Mr Bates' staff if the fourth container did not arrive in late April or early May. The amendment is opposed. It is common ground between Mr Bates and the respondents that there was a contract between Mr Bates and Omareef for Mr Bates to manufacture wetsuits. Generally, the conditions upon which that manufacture was to occur are also common ground. The only real issue so far as the terms of the contract are concerned, and I am oversimplifying to some extent, concerns the period during which the contractual relationship was to last. A second significant dispute in relation to the contractual claim concerns the circumstances in which the contract came to an end, it being common ground that the contract came to an end very soon after 9 May 1991. Mr Bates contends that the contract was for a period of about three and a half years being the balance of the term of the licence which Omareef held from the second respondent, Quicksilver Garments Pty limited. Omareef, on the other hand contends that the contract was in effect to manufacture the winter season supply of steamer wetsuits which would have taken the contract to some time in about June 1991. Alternatively, it is said that the contract was terminable on reasonable notice in any event. It is also contended by Omareef, however, that there were express terms, breach of which would entitle Omareef to terminate the contract peremptorily. Omareef's case is that, in the events which happened, those terms were not performed and that it was entitled to terminate peremptorily which it did on 9 May 1991. That is clearly an issue which I will have to determine as well as the issue as to the period of the contract. However, whatever might be the outcome of those issues, it seems to me that there is no utility for the applicant in pleading a representation such as that alleged. The only entitlement to which Mr Bates had for the supply of neoprene was under the contract whatever it might be its terms. It is common ground that the contract came to an end on or shortly after 9 May 1991 either by reason of termination by Omareef for breach by Mr Bates or, alternatively, by repudiation of the contract by Omareef which was accepted by Mr Bates. The question then arises as to the quantum of any damage to which Mr Bates would be entitled if the contract was in fact wrongfully terminated. It is not suggested that there was any entitlement on the part of the applicant to rubber apart from the contract. Accordingly, a representation that neoprene had been ordered and was in the course of being shipped could only give rise to any reasonable conduct on the part of Mr Bates in relying upon such a representation if the contract had continued to exist or to remain on foot. Since it is common ground, as I have said, that the contract had come to an end, the representation simply does not lead anywhere. In any event, bearing in mind that the application is brought at a time when the applicant is about to close his case and some weeks after the cross-examination of Mr Bates was completed, I would only permit an amendment if there was already evidence which would support both the representation and the alleged reliance and it was not unfair to the respondents to permit an amendment at this stage. The evidence of Mr Bates appears to me to be quite inconsistent with the case now sought to be made, namely that in reliance upon a representation about a container of neoprene he took no steps to order alternative supplies and took no steps to obtain alternative orders. The evidence as I have understood it and the way in which the case has been presented and the way in which the cross-examination was pursued by Mr Foster was that Mr Bates believed and understood that there was a contract on foot. That, it seems to me, would as matter of fact be what induced Mr Bates to take no steps, assuming he did make a conscious decision to take no steps. In other words, so long as Mr Bates believed (as he has said he did, and I have no reason to doubt his evidence in that regard) that there was a contract on foot, there would be no occasion for him to order alternative supplies or to obtain alternative orders since that could itself have led to a breach of the contractual obligations as he understood them. In addition, there was rejected, on the ground of form but it was not sought to be re-agitated, a statement in an affidavit sworn by Mr Bates on 6 February 1996, that he could not afford, as at 23 or 25 May 1991, to import more raw materials from Asia to continue the manufacture of Riot wetsuits. There is no reason to suggest that he would have been in any better position a month earlier. Thus, even if he wanted to, Mr Bates would not have been in a position to order more neoprene. It seems to me, therefore, that it would be unfair at this late stage for Omareef to have to meet a case to the effect that because of statements made about the supply of neoprene in the performance of the contract, Mr Bates was induced not to make alternative arrangements which would only be relevant if there were no contract. Mr Foster was entitled to conduct his cross-examination of Mr Bates on the basis of the pleadings as they then existed and there was no suggestion at that stage that Mr Bates had declined to take steps because of his reliance upon a representation rather than a reliance upon the existence of a contract. In the circumstances, even if there were some utility in allowing the amendment, I consider it would be unfair to allow it at this stage. Accordingly, I reject the application. [Counsel addressed further.] The second amendment sought to be made is to amend paragraphs 46, 47, 48, and 49 of the fifth amended statement of claim, to rely on the Fair Trading Act 1987 (NSW) as well as the Trade Practices Act 1974 (Cth). Counsel for Mr Bates contends that it ought to have been obvious to the respondents that a claim was being made against the respondents personally. Paragraph 46 alleges that the relevant representations were made by the non-corporate respondents "on behalf of themselves" in trade and commerce and were misleading and deceptive. It is contended on behalf of Mr Bates that the amendment would not in any way extend the hearing and would not involve any additional evidence. It seems patently clear that such a pleading will fail insofar as it relies upon the Trade Practices Act. Paragraph 46 as presently pleaded makes clear that reliance is placed only on the Trade Practices Act. There is no reliance upon the aiding and abetting provisions of the Trade Practices Act which could impose liability upon individuals as distinct from corporations. Nor is any reliance on any of the other provisions of the Trade Practices Act which extend its operation to conduct by individuals by reason of other Commonwealth powers. Indeed, the fact that the application is now made to plead the Fair Trading Act, indicates that no reliance is placed on any other head. However, there are four matters which it seems to me lead to the rejection of the application. The first is a matter about which I consider I am entitled to draw some inferences since the individual respondents have been engaged in these proceedings with a common legal representation to that of the corporate respondents. They have been entitled to assume, having denied the assertions made in paragraphs 46 to 49, that they have a good answer to a claim against them personally based on the Trade Practices Act. The observations of Lord Griffiths in Ketteman v Hansel Properties Ltd [1987] AC 189 have been approved by both the New South Wales Court of Appeal and the High Court in recent times, respectively in Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 and in Queensland v JL Holdings Pty Ltd (1997) 141 ALR 353. His Lordship said (at 220): Whether an amendment should be granted is a matter for the discretion of the trial judge and he should be guided in the exercise of the discretion by his assessment of where justice lies. Many and diverse factors will bear upon the exercise of this discretion. ...But justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes and the legitimate expectation that the trial will determine the issues one way or the other. Furthermore, to allow an amendment before a trial begins is quite different from allowing it at the end of the trial to give an apparently unsuccessful defendant an opportunity to renew the fight on an entirely different defence. The last observation applies equally to this case, except that it may involve giving Mr Bates the opportunity of raising an entirely new contention. It is not suggested that reliance on the Fair Trading Act would involve any additional factual issue. However, I consider that the respondents are entitled to have me assume that they have conducted this case on the assumption that they have been advised that they have a good answer to a claim based on the Trade Practices Act. No evidence has been adduced to indicate why this application has not been made before. It may well be that I could draw the inference that it was an oversight. However, in the absence of any clear evidence to that effect, bearing in mind that there have been three firms of solicitors together with counsel retained on behalf of Mr Bates at various times in the past, I am not sure that I should draw the inference necessarily that this was an oversight on the part of all of those legal advisers. There may well have been some good reason why a decision was made not to rely on the Fair Trading Act, although as I have said, I cannot at the moment see what that reason might have been. That absence of evidence is exacerbated by the history of this matter. There has been read on the hearing of the application an affidavit of Richard John Flitcroft, which contains disconcerting evidence as to the conduct of the proceedings on behalf of Mr Bates. There have been several occasions where there has been a failure to comply with directions to the extent that Hill and Lindgren JJ have on occasion made observations that further failure to comply would justify striking out applications. Another matter which is relevant to the exercise of discretion in favour of Mr Bates concerns his apparent inability to meet any order for costs that might be made by reason of any amendment or any other failure to comply on his part. For example, on one occasion, Lindgren J indicated that if there was a substantial quantity of irrelevant material in Mr Bates' affidavits which was struck out then he would be disposed to make an order for the payment of costs on an indemnity basis. The first week of this hearing has been taken up in doing just that. Two other matters it seems to me are relevant in considering the application. They both go to the question of the utility of the amendment. The representations which remain are to be found in paragraphs 44(2) and 44(5) of the fifth amended statement of claim. Paragraph 44(5) is a representation that the respondents would continue to supply materials to Mr Bates in order for him to continue to manufacture and supply to the respondents wetsuits at the specified number. Clearly that is no more than a representation that the respondents would perform their obligations under the contract. For the reasons that I have indicated in rejecting the earlier amendment application, the evidence before me indicates that Mr Bates believed that there was a contract on foot. It seems to me impossible that there would be any finding of fact that Mr Bates relied on a representation that the respondents would continue to supply him materials in circumstances where there was no contract on foot. It seems to me therefore that paragraph 44(5) leads no where. Paragraph 44(2) is a representation that the respondents would continue to order from Mr Bates an increasing number of wetsuits: - throughout the period of contract 1 as varied and any extension of the term of contract 1 as varied. There is some ambiguity as to what the words which I have quoted signify. "Contract 1" is a term defined in paragraph 25. Paragraph 25 is an allegation that Mr Bates and Omareef entered into an agreement in consideration of which Mr Bates would manufacture and supply certain products to Omareef. There is, as I have said in the reasons I gave earlier, a dispute as to what was the period during which that contract would remain in existence. I read paragraph 44(2) as alleging a representation that Omareef would continue to order the relevant number of wetsuits throughout the period during which the contract was on foot, whatever period that might be. In those circumstances it seems to me that paragraph 44(2) also leads nowhere in terms of the evidence to which I have referred. That is to say, I do not see how I could conclude that Mr Bates was induced to do anything by reason of a representation that there would be an order beyond the obligation to place those orders in accordance with the contract. The second matter which seems to me goes to the utility of the amendment concerns the limitation which arises under the Fair Trading Act. The cause of action would have had to have been brought within three years after it first arose. The pleading is obscure as to precisely what damage is alleged as the consequence of a misrepresentation on the one hand or a breach of contract on the other. Paragraph 49 alleges that as a consequence of the contravention the applicant suffered loss and damage. The particulars are said to be the particulars set out in paragraph 41 which are also the particulars of the breach of contract. While it may be that there is some damage asserted there which occurred less than three years before today, it is by no means apparent and I have not been taken to any evidence in the applicant's case to date that indicates that there is evidence of any damage having been suffered less than three years before today's date. In the circumstances, it seems to me that if a limitation period were pleaded there must be fairly strong prospects of its succeeding. I cannot of course decide that question now since it would really depend upon all of the evidence. However, that, coupled with the other matters to which I have just referred, suggests to me that even if the amendment were allowed to rely on the Fair Trading Act it is highly likely that it would fail in any event. When I add those considerations to the other matters to which I have referred, I consider that justice would not be done by allowing them in. Accordingly I refuse the application. I order the applicant to pay the costs of the application for leave to amend made ore tenus this morning and I order the applicant to pay the costs thrown away by the amendments that were made this morning by consent or without opposition. I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett