Craven v St Clears Pty Ltd [2001] FCA 755

FEDERAL COURT OF AUSTRALIA

Craven v St Clears Pty Ltd [2001] FCA 755

PRACTICE AND PROCEDURE – costs – summary dismissal of proceeding – evasive defence – bare denials – whether respondents should be awarded costs GORDON JAMES CRAVEN & ANOR V ST CLEARS PTY LTD & ORS T6 OF 2001 HEEREY J 20 JUNE 2001 MELBOURNE (HEARD IN HOBART)

IN THE FEDERAL COURT OF AUSTRALIA

TASMANIA DISTRICT REGISTRY T6 OF 2001

BETWEEN: GORDON JAMES CRAVEN and JANET CRAVEN

APPLICANT

AND: ST. CLEARS PTY LTD

ACN 005 646 220

FIRST RESPONDENT

DENIS LESLIE BIGNOLD

SECOND RESPONDENT

GWENDA BIGNOLD

THIRD RESPONDENT

PETER GRAEME BIGNOLD

FOURTH RESPONDENT

RONALD BARNABY

FIFTH RESPONDENT

JUDGE: HEEREY J

DATE OF ORDER: 20 JUNE 2001

WHERE MADE: MELBOURNE (HEARD IN HOBART)

THE COURT ORDERS THAT: 1. The application is dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

TASMANIA DISTRICT REGISTRY T6 OF 2001

BETWEEN: GORDON JAMES CRAVEN and JANET CRAVEN

APPLICANT

AND: ST CLEARS PTY LTD

ACN 005 646 220

FIRST RESPONDENT

DENIS LESLIE BIGNOLD

SECOND RESPONDENT

GWENDA BIGNOLD

THIRD RESPONDENT

PETER GRAEME BIGNOLD

FOURTH RESPONDENT

RONALD BARNABY

FIFTH RESPONDENT

JUDGE: HEEREY J

DATE: 20 JUNE 2001

PLACE: MELBOURNE (HEARD IN HOBART)

REASONS FOR JUDGMENT 1 In March 1999 the applicants entered into a contract for the sale to the first respondent St Clears Pty Ltd ("the Company") of a property at Orford on the East Coast of Tasmania ("the Orford property") together with the tourist accommodation business conducted thereon. The applicants have claimed that the true identity of the individuals behind the Company was concealed with the result that the applicants were not aware that those individuals owned nearby land and thus would or might have been prepared to pay a higher price. 2 On 13 October 1999 the applicants commenced proceeding T 24 of 1999 against the Company, Gwenda Bignold and a third respondent described as "R Barnaby". The respondents cross-claimed alleging that certain agreed items were not provided on settlement. After a mediation before the District Registrar the proceeding was settled on payment by the respondents to the applicants of $30,000. On 13 March 2000 the parties entered into a deed of settlement and release and on the same day a consent order was made dismissing the application and cross-claim. 3 On 13 March 2001 the applicants commenced the present proceeding T6 of 2001 against the Company, Denis Leslie Bignold, Gwenda Bignold, Peter Graeme Bignold and Ronald Barnaby. The second and third respondents are husband and wife. The fourth respondent is their son The fifth respondent is the brother of the third respondent. On 11 April 2001 the first to fourth respondents filed a notice of motion seeking an order that the application be dismissed under O 20 r 2 of the Federal Court Rules on the grounds that no reasonable cause of action was disclosed and the proceeding was frivolous, vexatious and an abuse of the process of the Court. In the alternative the motion sought an order under O 11 r 16 that the statement of claim be struck out as disclosing no reasonable cause of action and having a tendency to cause prejudice, embarrassment and delay in the proceeding and being otherwise an abuse of process of the Court. On 12 April the fifth respondent filed a notice of motion seeing the same relief. 4 On the hearing of the motions before me Mr David Morris appeared instructed by Simmons Wolfhagen for the applicants. Both counsel and solicitors acted pro bono. This was the first occasion in both proceedings when the applicants have had legal representation. The presentation of the applicants' case by Mr Morris put everything that could be reasonably said on their behalf and was of considerable assistance. He conceded at the outset that the statement of claim was not in proper form and should be struck out. However he submitted the applicants should be given leave to replead. The hearing then proceeded on the basis, agreed to by all counsel, that Mr Morris should outline the way the applicants sought to put their case and that if the respondents persuaded me that there was no reasonable prospect of success for such a case the appropriate course would be to refuse leave to replead and dismiss the substantive application. 5 The applicants say that during the course of negotiations to sell the Orford property in January 1999 their agent advised them that he had received two telephone calls from a person identifying himself as Ron Barnaby, then in England, and also a fax expressing an interest in purchasing the property for $250,000. The agent passed a copy of that fax on to the applicants and they also received a copy direct from the sender. 6 The fax bears the imprint of a machine programmed for "Gwenda Barnaby" and a United Kingdom fax number. Parts of the fax implicitly suggest the senders are not familiar with Orford. It is said, inter alia: "We contacted the local council and others in Orford and found that the real estate market in Orford is very poor at the moment." The fax bears the signature "R Barnaby". 7 The contract was signed on 18 March 1999 with completion due on 1 April 1999. The day before completion the applicants accidentally discovered an address of 56 Alma Road, Orford on the back of a document for the transfer of the business registration. They complained to their solicitor and on 3 April he wrote to the solicitors for the Company alleging concealment of a number of matters including that "persons known as Gwenda Barnaby and R Barnaby were undeclared representatives of (the) Company" and that the Company was a "resident property developer/speculator in the town of Orford and is in the process of acquiring a development property in the immediate vicinity of Riverside Villas Orford". It does not appear there was any direct response to that letter. There was some dispute over the provision of planning permits and a purported termination of the contract by the applicants. However after the Company had threatened legal action and lodged caveats the purchase was settled on 20 April 1999. 8 As already mentioned, the applicants commenced T 24 of 1999 on 13 October 1999. In their statement of claim they pleaded the following in relation to the third respondent R Barnaby: "1. At all material times to this action … (d) The thirdnamed respondent was a person knowingly concerned and material to the claims of this action who is known to the first and secondnamed respondents. The full description and relationship to St Clears of the thirdnamed respondent also known as Ron Barnaby is yet to be established as this information is being withheld by the firstnamed and secondnamed respondents." 9 The statement of claim goes on to allege that during pre-contractual negotiations the respondents provided a false and/or misleading or deceptive name or names and identity or identities and wilfully and actively concealed and conspired to conceal the true identity of the proposed purchaser, who was the Company, by representations of oral communication and written communications consisting of business letters to the applicants and the applicants' agents. In par 12 it is said that the thirdnamed respondent R Barnaby in conspiracy with the first and second respondents by oral communications and fax in January 1999 from a location in the United Kingdom stated his name to be Ron Barnaby and signed R Barnaby and allowed the applicants to be misled and deceived the applicants by unsolicited selective representations to the applicants of recent depressed real estate activity in Orford and actively concealed that the respondents were directly involved in that activity. It was said that the third respondent "actively concealed" a number of matters including that he was representing the Company and that the Company was the proposed purchaser, that it was an owner of "substantial real estate" in Orford and was negotiating to purchase a property called "Bridge House" which was the immediate neighbouring waterfront property to the Orford property. 10 On 10 November 1999 a Hobart firm of solicitors entered an unconditional appearance on behalf of all respondents. In the notice of appearance R Barnaby was described as "Manager C/- 56 Alma Road, Orford in the State of Tasmania". 11 On 1 December 1999 the applicants filed a notice of motion returnable on 7 December, which was the first directions day, seeking leave to amend their statement of claim and also an order that the third respondent disclose "his relationship with the firstnamed respondent and the directors and shareholders of the firstnamed respondent" and that he disclose "any other name or names that he may be known by and his relationship with a person known as Gwenda Barnaby" and that all respondents disclose "if the person known as Gwenda Barnaby is known to them by other name or names". 12 The motion came on for hearing before me. In the course of the hearing counsel for the respondents formally conceded that Gwenda Barnaby and Gwenda Bignold are the same person and that Mr R Barnaby "is more fully known as Mr Ron Barnaby and is the brother of Gwenda Bignold nee Barnaby". Counsel further conceded that Mrs Bignold was one of the shareholders of the Company. He also said: "… and it is hardly a concession or if it is your Honour it is a negative concession, Mr Ron Barnaby has never had any involvement with St Clears Pty Ltd. And that of course is clear your Honour from the company records." 13 After the applicants then indicated they were going to file a defence I said: "Well I am going to direct a defence and I particularly ask Mr Estcourt, as I would any respondent, that the defence disclose as fully as possible what their case is. In other words that it just does not deny this and not admit that, that it says what their true case is in effect and the claim that there is – for example, if it is alleged that having discovered the identity of the purchaser you elected to proceed anyway. I have no idea whether that is true or not, but the defence will say that and give proper details about that, and once that was done I would propose to refer the matter to mediation." I directed a defence on or before 15 January and made an order for mediation. 14 On 20 December 1999 the applicants filed an amended statement of claim. Paragraph 1 alleged, inter alia, that until transfer of ownership and possession to the Company the applicants resided in and conducted a tourist accommodation business on the Orford property (sub-par (a)), that the Company was from 12 March 1999 an immediate neighbour of the Orford property by virtue of a contract for the purchase of Bridge House (sub-par (b)), and that the second respondent was the Secretary of the Company and one of two equal beneficial shareholders in the Company and the legal owner of the property at 56 Alma Road Orford (sub-par (c)). Sub-par (d) was as follows: "(d) The thirdnamed Respondent is known as Ron Barnaby and is the brother of the secondnamed Respondent and has his address care of 56 Alma Road, Orford potentially neighbouring the Orford lands and business." 15 Paragraph 3 alleged that during the pre-contractual negotiations the respondents, in the course of wilful deceit and misleading or deceptive conduct or unconscionable conduct, concealed and conspired to conceal the true identity and description of the proposed purchaser and that the proposed purchaser was a resident or business resident of Orford and a neighbour or potential neighbour of the applicants. This was said to contravene ss 51AA, 51AC and 52 of the Trade Practices Act 1974 (Cth), s 14 of the Fair Trading Act 1990 (Tas). It was said that the respondents committed the torts of deceit and conspiracy and "committed conduct whereby the applicants claim exemplary damages". Particulars were given in relation to exemplary damages as follows: "Exemplary Damages are claimed pursuant to section 22 of the Federal Court of Australia Act 1976 because:- (A) the Respondents have calculated and conspired to make a benefit which may exceed the compensation payable to the Applicants; and '(B) the Respondents have calculated and conspired to make an unconscionable and deceptive entitlement to disrupt, delay or rescind a contract for the sale and purchase of the Orford lands and Business; and (C) the Respondents have shown a contumelious and contemptuous disregard for the Applicants rights and the fair trading laws of Australia, and by, at all material times failing to concede or correct and rectify their delinquencies and unlawful conduct, have aggravated that conduct and the losses and damages to the Applicants." 16 By par 5 liability of the second and third respondents under s 75B of the Trade Practices Act was alleged. Particulars of "wilful and active concealment" were given under that paragraph. In the case of the second respondent Mrs Bignold that included stating her name to be Gwenda Barnaby and not Gwenda Bignold the Secretary of the Company and implying that she was a resident of the United Kingdom and portraying herself to be a person of naivety regarding property development who wished to relocate to Orford. She was alleged to have actively concealed matters, including that she was a resident of Orford, that the Company owned other substantial real estate in Orford, had purchased Bridge House and planned to incorporate the Orford property into a major development. It was said she "actively concealed the description and relationship to (the Company) of the thirdnamed respondent". 17 In the case of the third respondent Mr Barnaby it was said he actively concealed the involvement of the Company in real estate in Orford and concealed other matters, substantially as alleged against Mrs Bignold. 18 The amended statement of claim alleged further matters, including in par 8 that the respondents' solicitors on 5 March 1999 sent a draft contract to the applicants with a covering letter titled "Craven to St Clears Pty Ltd (Barnaby)" and giving an address for the Company in Chatswood, NSW. 19 On 13 January 2000 the respondents filed a defence and cross-claim. In that pleading the respondents denied the allegations in par 1 of the amended statement of claim. Notwithstanding my directions at the directions hearing, the defence consisted mostly of denials. All of the facts in par 1 of the amended statement of claim were denied, including the allegation in par 1(d) that the thirdnamed respondent is known as Ron Barnaby and is the brother of the secondnamed respondent and has his address care of 56 Alma Road, Orford potentially neighbouring the said Orford lands and business. This was denied, notwithstanding the concession made on 7 December 1999 and the entry of appearance on his behalf. 20 The only factual admission made was that the second respondent admitted that she undertook negotiations with the applicants using her maiden name of Barnaby. The defence pleaded that in the alternative the applicants elected to proceed with and complete the agreement. Particulars of election were that on 8 March, 3 April and 8 April 1999 the applicants were aware that Gwenda Barnaby was Gwenda Bignold, that the applicants entered into a written agreement for sale with the Company, that Gwenda Bignold and Denis Bignold were directors and secretary of the Company on 18 March 1999 and that the Company owned property in and around Orford. 21 As already mentioned, T 24 of 1999 was settled at the mediation and the parties entered into a deed of settlement and release dated 13 March 2000. Mr Barnaby was a party to the deed and it was signed by a solicitor as his attorney under power. On 21 March 2000 the applicants obtained a copy of that power of attorney from the Deeds Office and formed the view that the signature of Mr Barnaby thereon was different from the signature appearing on the fax they had received in January of the previous year. Following substantial correspondence with the respondents' solicitors the applicants commenced the present proceeding on 13 March 2001. 22 On the hearing of the present motion Mr Barnaby was separately represented. He swore an affidavit deposing that he was the brother of the third respondent Mrs Bignold and stating the following: "3. On a date which I do not now recall in about mid March 2000, I was contacted by telephone by my brother-in-law, the second respondent in these proceedings. He said that my name had been used in negotiations leading to a property purchase and that the vendor had sued, seeking more money. He indicated that these proceedings had been sorted out and that they needed a power of attorney from me to put that into effect. 4. A short time later I received a power of attorney in the mail. I executed that on 15 March 2000." A copy of the power of attorney was annexed to the affidavit. The accuracy of this affidavit was not challenged by the other respondents. 23 Mr Barnaby says nothing about the signature on the fax in January 1999. It is implicit in his affidavit that he knew nothing about the negotiations in January 1999 and did not sign the fax. If he did not sign the fax, it can only have been prepared and signed by Mr or Mrs Bignold or by someone else at their instigation. 24 On behalf of the applicants Mr Morris said that they had been misled in the negotiations because they believed the deception was not as great as they initially thought. They had originally believed that there was no such person as "R Barnaby". However in the light of the concession made in court on 7 December 1999, they thought that if Ronald Barnaby had nothing to do with the making of the phone calls and the sending of the fax it would not be appropriate to make a concession that the person named as the third respondent was the brother of Mrs Bignold. Moreover, it now appeared that he had no knowledge of the proceeding T24 of 1999 prior to mid-March 2000 and there was no authority for the other respondents to enter an appearance on his behalf or to make the concession on 7 December 1999. Mr Morris contended that the concession was arguably fraudulent because it was known by the persons causing it to be given (not counsel who made it) to be false. In the circumstances the concession as to the identity of Mr Barnaby and his relationship with Mrs Bignold was literally true but nevertheless false and misleading because it conveyed to the applicants by reason of the circumstances that Mr Barnaby, the brother of Mrs Bignold, was involved in the oral and written communications alleged against the "R Barnaby" in the proceeding. This was untrue because Mr Barnaby had no such involvement. The respondents created the impression that the trick was less grave than the applicants had perceived it to be, although still a trick. In reliance on that representation the applicants formed the view that their action might have less chance of success, or that their damages might be less. As against Mr Barnaby it was said he had "constructive notice of the equitable fraud". No claim however was made against him under the Trade Practices Act and it was not suggested that he owed any fiduciary duty to the applicants. 25 In my view the concession on 7 December 1999 was not capable of meaning anything more than its literal meaning that R Barnaby was Mr Ronald Barnaby and the brother of Mrs Gwenda Bignold. There is a clear distinction between, on the one hand, admitting the identity of a person who is sued and, on the other hand, admitting the factual and legal allegations made against that person. Any misconception by the applicants to the contrary could not in law be a ground for complaint under the Trade Practices Act or otherwise against the respondents. 26 Nor would there be any legal significance in a party believing that a misrepresentation was not as bad as in fact it was. Damages under the Trade Practices Act are not determined according to degrees of reprehensibility. 27 It is true that the applicants are claiming exemplary damages and for that purpose the moral quality of a defendant's conduct is relevant. However, by the time of the mediation and settlement in mid-March 2000 the applicants had become appraised of the substance of the respondents' duplicity, as their amended statement of claim shows. I do not see that the Bignolds' use of the name of a real person called Ronald Barnaby without his consent is morally any worse (or better) than the use of that name where no such person exists. While in both cases there is a purpose of deception – to disguise the true identity of the purchaser so as to deceive the vendor – in an exemplary damages assessment I do not see how one would warrant a higher award of damages than the other . 28 As to Mr Barnaby, it seems to be accepted that he had nothing to do with the initial negotiations. There is no basis for any claim against him. 29 I conclude that the present proceeding does not have any reasonable prospect of success, and that therefore the applicants should not be granted leave to replead and that their application should be dismissed. 30 There remains the question of costs. The first four respondents and Mr Barnaby seek not only costs but indemnity costs against the applicant. However I do not propose to make any order as to costs at all. The initial cause of all this litigation was an attempted trick by the would be purchasers. This went far beyond a party contracting at arm's length and declining to volunteer useful information to the opposite party. There was deliberate deception in the use of the faxes, including a false signature of Mr Barnaby, and an entry of appearance purportedly on his behalf. None of this has anything to do with subsequent ratification. Mr Barnaby never became a principal because he was never a purchaser. Rather his identity was used as part of a ruse to deceive the applicants. 31 These problems were compounded by the evasive nature of the defence filed in T24 of 1999 notwithstanding my express direction (a direction which really should be unnecessary for practitioners conversant with modern practices in litigation). The extent of this is shown by the fact that a party making a cross-claim even denied the existence of the primary contract and did not set up an alternative version of it. If the respondents had frankly put forward in their defence a true and informative account of events, and in particular the role of Mr Barnaby, this further proceeding would probably not have been brought. 32 Mr Barnaby has been drawn into this litigation by the unauthorised use of his name in the faxes and, in T 24 of 1999, the entry of appearance, the concession and the defence. To the extent that he has suffered loss and expense he should look to the other respondents. 33 The substantive application will be dismissed. I certify that the preceding thirty three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.