Lashansky v Bruvecchis Pty Ltd (ACN 054 177 427) [2004] FCA 837

FEDERAL COURT OF AUSTRALIA

Lashansky v Bruvecchis Pty Ltd (ACN 054 177 427) [2004] FCA 837 PRACTICE AND PROCEDURE – trade practices – misleading or deceptive conduct – alleged promise by shopping centre tenant to provide financial assistance to group litigation by other tenants against landlord – no relevant implied representation – no pleaded causal connexion to actionable loss and damage – no reasonable prospect of repleading – statement of claim struck out – application dismissed. Trade Practices Act 1974 (Cth) ROBERT JAMES LASHANSKY v BRUVECCHIS PTY LTD (ACN 054 177 427) AND JOSEPH BRUNI W 79 OF 2004 FRENCH J 29 JUNE 2004 PERTH

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY W79 OF 2004

BETWEEN: ROBERT JAMES LASHANSKY

APPLICANT

AND: BRUVECCHIS PTY LTD

(ACN 054 177 427)

FIRST RESPONDENT

JOSEPH BRUNI

SECOND RESPONDENT

JUDGE: FRENCH J

DATE OF ORDER: 29 JUNE 2004

WHERE MADE: PERTH

THE COURT ORDERS THAT:

1. The statement of claim be struck out.

2. The application be dismissed.

3. The applicant pay the respondents' costs of the application.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY W79 OF 2004

BETWEEN: ROBERT JAMES LASHANSKY

APPLICANT

AND: BRUVECCHIS PTY LTD

(ACN 054 177 427)

FIRST RESPONDENT

JOSEPH BRUNI

SECOND RESPONDENT

JUDGE: FRENCH J

DATE: 29 JUNE 2004

PLACE: PERTH

REASONS FOR JUDGMENT ON MOTION TO STRIKE OUT STATEMENT OF CLAIM 1 On 21 April 2004, Robert James Lashansky filed an application claiming damages and other relief for misleading or deceptive conduct against Bruvecchis Pty Ltd ('BPL') and its director, James Bruni. A statement of claim was filed at the same time. 2 On 26 May 2004, the respondents filed a motion seeking orders that the statement of claim be struck out and that the action be dismissed under O 20 r 2 on the grounds that: '1.1 no reasonable cause of action is disclosed; 1.2 the proceeding is frivolous and vexatious; 1.3 the proceeding is an abuse of the process of the Court.' 3 According to the statement of claim BPL was a tenant at the Colonnade Shopping Centre carrying on a bakery and cafe business from November 1995 until the end of 1997. Mr Lashansky is a solicitor currently suspended from practice in the State of Western Australia. Early in 1997 he was asked by Mr Bruni, on behalf of BPL, to assist him with regard to a tenancy dispute with the owners and managing agents of the shopping centre. According to Mr Lashansky, after several months of investigation, he formed the view that BPL and other tenants had valid claims under the Trade Practices Act 1974 (Cth) against the owner of the shopping centre, Lyrical Holdings Pty Ltd, and its leasing agents, Realmark Pty Ltd and Chesterton Pty Ltd. 4 According to pars 9 and 10 of the statement of claim various meetings of potential litigants were held and it was eventually decided by a number of them that they would bring litigation as a joint action in a 'single combined writ' in the Federal Court. The meetings were held at the Colonnade Shopping Centre at the offices of Mr Lashansky's then employer, Halperin Fleming Meertens and at the Peninsula Tavern over a period of several months. 5 In the course of the meetings, according to Mr Lashansky, it became apparent that several of the tenants were trading poorly and would be unable to fund expensive Federal Court litigation. The best hope of recourse for the majority lay in a joint action in the Federal Court where a single firm of solicitors and a single barrister could be employed. He alleged that it was also 'acknowledged' in the course of the meetings that less financially strong tenants risked being left in a severely compromised position if the respondents in the proposed litigation settled the claims of the financially stronger members of the tenant group. It was agreed that the litigation would be conducted on the basis that it would aim to set 'a strong precedent for the enforcement of tenants rights' (sic). It was also allegedly agreed at these meetings by BPL and others that the litigation would 'proceed with the interests of group, as opposed to the interests of individual tenant members of the group afforded paramountcy'. 6 In par 15 Mr Lashansky alleged: 'In order to give effect to the decisions arrived at the meetings referred to in paragraph 9 and 10 above that [Mr Bruni] together with a certain Conrad Tye who operated 2 tenancies at the Colonnade Shopping Centre namely Temptations Cafe and Mr Samurai Subiaco, represented to the Applicant and the other potential litigants that they would assist any tenant suffering hardship. PARTICULARS OF REPRESENTATION A. The representations were oral and were made at the meetings referred to in paragraph 9 and 10 above. B. Insofar as any of the representations were as to a future matter the Applicant will rely inter alia on s51A of the trade practices Act. (sic) C. The Applicant will inter alia refer to certain correspondence from the Applicant dated 28 August 1997 addressed to all Colonnade litigants wherein the offer of assistance from Conrad Tye and [Mr Bruni] in paragraph 15 above has been reduced to writing at the Trial herein for its true meaning and full effect. D. Further and better particulars will be provided after Discovery and/or the Administration of Interrogatories.' In par 17 he alleged: 'The representations pleaded in paragraph 15 as having been made by [Mr Bruni] were false in that neither [BPL] nor [Mr Bruni] in his personal capacity assisted various tenants who were experiencing severe financial hardship.' Mr Lashansky went on to plead demands for payment made by a forensic accountant, Mr Lieberfreund, who had been employed to provide expert services in the litigation. On 22 April 1998, the expert witness presented an account for $23,764.97 of which $11,039.97 was payable by return. Failing immediate payment of that sum he said he would refuse to sign his expert witness reports or complete any additional work. Mr Lashansky alleged that his request to Mr Bruni to pay the expert's account was refused on the grounds of 'alleged financial hardship' and another litigant, Zeroz Pty Ltd, paid that account on behalf of all the litigants. 7 According to Mr Lashansky, Mr Bruni and his wife had caused another company controlled by them to purchase a commercial property during March 1998 in Morley and were actively engaged in re-establishing a wholesale muffin business and cafe from portions of the Morley property. He alleged that '... had [Mr Bruni] so wished the account of Mr Lieberfreund referred to in paragraph 18 and 19 above could easily have been met'. This accords with Mr Lashansky's contention in oral argument on the strike out motion that Mr Bruni had the financial capacity to provide the represented financial assistance. He then pleaded: '22. [BPL] not only did not assist with payment of several other litigants who were suffering financial hardship but [BPL] was tardy in paying its own legal account.' 8 In mid 1998 Mr Lashansky again approached BPL and Mr Bruni on several occasions when it became clear that the costs of litigation had vastly exceeded counsel's initial estimate of about $100,000. Mr Bruni allegedly told him that he could not assist as all his available moneys were on loan to another man who was a client of Mr Lashansky. According to Mr Lashansky, Mr Bruni said that if Mr Lashansky could recover those loan moneys Mr Bruni would agree to lend them to Mr Lashansky in order to fund the Colonnade litigation. Requests for repayment of the loan were however unsuccessful. Assistance was eventually provided by another client. 9 Paragraph 29 of the statement of claim was in the following terms: 'On the eve of the Trial in the Colonnade litigation which was set down to commence for 28 days during June 1999, and despite an offer from the director of Zeroz Pty Ltd, Mr Sam Novatscov, to allow an asset controlled by him, namely the Peninsula Tavern in Maylands to be used as security for the cost of the litigation and despite [Mr Bruni] becoming aware of the contents of document 1220 during the process of inspection of the discovered documentation of the Second Respondent in the Colonnade litigation, Realmark Pty Ltd's discovery, which tended to prove conclusively that [Mr Bruni], had been lied to during the course of the fit-out of [BPL's] tenancy and in the face of vehement objections of the Applicant elected to pursue settlement negotiations which eventually led to the settlement of the Colonnade litigation with conditions of extreme confidentiality attached which defeated the entire public interest purpose of the litigation.' 10 This paragraph does not make grammatical sense. However the thrust of it seems to be that BPL and Mr Bruni settled their dispute with the owners and managers of the shopping centre over the opposition of Mr Lashansky on the basis that the settlement was adverse to his perception of 'the entire public interest purpose of the litigation'. In par 30, Mr Lashansky alleged that several of the tenants were 'vehemently opposed to the settlement' pleaded in par 29 but for various logistical reasons and on the basis that they had previously agreed that the entire group would follow the majority decision, the Colonnade litigation was terminated. 11 Mr Lashansky alleged in his statement of claim that, in the course of the Colonnade litigation, he turned down 'several lucrative offers of work' including shopping centre litigation in Victoria offered to him through the Victorian counterpart to the WA Retailers Association. He claimed that he had thereby lost several valuable alternative commercial opportunities. At the request of Mr Bruni he had undertaken substantial additional legal work including comprehensive work involving other tenants at the shopping centre. He said he was induced into undertaking a far higher degree of responsibility for his clients' welfare undertaking a considerable amount of additional research and legal work including liaison with parliamentarians and members of the press. 12 In par 34 of the statement of claim Mr Lashansky alleged: '34. The making of the representations pleaded at paragraphs 15 and the breaching by [BPL] and/or [Mr Bruni] of the agreements to pursue the Colonnade litigation with a view to setting a strong precedent for the enforcement of tenants rights as is set out in paragraph 13 above and instead electing to settle the matter on the basis of strict confidentiality constituted misleading and deceptive conduct within the meaning of that term in the Trade Practices Act 1974 (CTH) which has caused the Applicant to suffer loss and damage including the opportunity of pursuing alternative more commercially lucrative opportunities that were available to him. (sic) PARTICULARS OF LOSS AND DAMAGE A. Full particulars of loss and damage will be filed separately. B. During November and December 1999 the Defendants in the Colonnade litigation elected not to pay to the Applicant's Colonnade Clients a payment due by them pursuant to the settlement arrived at in June 1999 which necessitated the Applicant spending approximately 3 weeks in an eventually successful endeavour to obtain the payment in question.' 13 The statement of claim does not disclose any reasonable cause of action. It pleads in substance that Mr Bruni and his company promised unspecified financial assistance to shopping centre tenants proposing to engage in litigation against their common landlord and its managers. The level of that assistance was not pleaded either expressly or by implication. There is no allegation that the assistance promised would be sufficient to enable the litigation to be undertaken either by reason of that assistance or in conjunction with assistance from other sources. Absent any pleading as to a promised level of assistance, it is difficult to see what erroneous belief it could have induced in the mind of any promisee. In any event, it is pleaded only as a promise which was broken. It is well established that the making of a promise which is subsequently broken is not of itself misleading or deceptive conduct. It is necessary to assert some implied representation such as a representation of a capacity or intention to perform the promise which is shown to be false. Where it is asserted that the promise conveys an implication of reasonable grounds for making it, eg on the basis of capacity and/or linked with present intention, then s 51A places the onus of establishing reasonable grounds upon the promisor. There is, however, no suggestion in this case that the pleader is seeking to rely upon any implied representation that there were such grounds. 14 In this case the pleading appears to support the proposition that Mr Bruni and his company actually had the capacity to provide financial assistance – 'had [Mr Bruni] so wished the account of Mr Lieberfreund referred to in paragraphs 18 and 19 above could easily have been met' (par 21). Requests for further assistance in mid 1998 were refused because Mr Bruni's available moneys were on loan to a Mr Pevcic although he said that money could be advanced to assist the litigation if the loan could be recovered (par 25). This does not involve any assertion that in 1997, when the promise of financial assistance was allegedly made, Mr Bruni lacked capacity or intention to provide assistance, assuming for the sake of argument that some minimum level of assistance was to be implied in the promise. 15 There is no tenable plea of any misleading or deceptive conduct on the part of BPL or Mr Bruni. Nor is there any plea that the promise actually induced Mr Lashansky to do anything or caused him to suffer any loss or damage. There is no causal connexion between the loss he claims to have suffered and the promise allegedly made. 16 The other aspect of the misleading or deceptive conduct alleged is the settlement by Mr Bruni and/or BPL of their claims against the landlord and its managers. There is again, no intelligible basis on which this could constitute misleading or deceptive conduct for the purposes of the Trade Practices Act. 17 Counsel for the respondents also sought to raise a limitation point. It is neither necessary nor appropriate to deal with that point as the pleading is simply too confused to enable any reasonable assessment of how a limitation issue would arise. 18 I should add that much of the pleading in the statement of claim is irrelevant to any cause of action and appears rather designed to communicate Mr Lashansky's moral dissatisfaction that his former clients sought to pursue their own interests which were not coincident with his interests or those of the other tenants. The statement of claim will be struck out in its entirety. 19 At present, and having regard to Mr Lashansky's oral submissions, I can see no basis upon which any reasonable cause of action could be raised against the respondents. Mr Lashansky said in argument that he should have pleaded that Mr Bruni impliedly represented that he had the financial capacity to honour his promise. He then said, however, that he had already pleaded that Mr Bruni did have the financial capacity to do so. It was put to him that he was merely alleging broken promises on the part of Mr Bruni. He said that '... there was an inducement to change position' and that he, as solicitor in the case, had acted on the faith of Mr Bruni's promise. This was not pleaded. 20 Mr Lashansky then said he could replead the statement of claim. But nothing in what followed that assertion to the Court indicated that Mr Lashansky had in mind any repleading that would raise a viable cause of action. He seemed to suggest that if Mr Bruni did have the financial capacity to honour his promise at the time it was made (assuming a relevant implied representation) his circumstances had changed subsequently and that by his silence in that respect he had engaged in misleading or deceptive conduct. 21 Nothing that Mr Lashansky said could escape the fundamental difficulty that the nature of the promise attributed to Mr Bruni could not, as a matter of logic or any proper implication, involve a commitment to any particular level of financial assistance much less whatever minimum level would be necessary to sustain the litigation. In my opinion, having regard to the statement of claim and what Mr Lashansky has said about his intentions in respect of repleading, the action has no prospect of success. In my opinion, the respondents should not be exposed to the further cost and inconvenience that would inevitably arise if I were to permit Mr Lashansky to replead. I propose therefore to dismiss the application with costs. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.