Fencott v Muller [1983] HCA 12

High Court of Australia Gibbs C.J. Mason, Murphy, Wilson, Brennan, Deane and Dawson JJ. Fencott v Muller [1983] HCA 12

ORDER Appeal dismissed with costs, excluding any additional costs resulting from the removal of these proceedings (No. Wag 3 of 1982) into this Court which are to be paid by the Attorney-General for the Commonwealth under the order made by this Court on 14 May 1982. Order that the proceedings be remitted to the Federal Court of Australia.

Cur. adv. vult.

The following written judgments were delivered:—

1983, April 28 Gibbs C.J.

This is an appeal from a judgment of the Federal Court of Australia (Toohey J.) by which an objection to the jurisdiction of that Court was allowed in part but was otherwise dismissed [1] . The appellants, who are three of the respondents to the proceedings in the Federal Court, contend that the proceedings are entirely outside the jurisdiction of the Federal Court, and that the objection to the jurisdiction should accordingly have been allowed in full. There is no cross-appeal against the judgment in so far as it held that certain parts of the proceedings were beyond jurisdiction. The appeal was brought to the Full Court of the Federal Court, but has been removed into this Court on the application of the Attorney-General for the Commonwealth.

1. (1982) 57 F.L.R. 35; 39 A.L.R. 496.

The proceedings were commenced in the Federal Court by Mr. Muller and Scrid Nominees Pty. Ltd. ("Scrid"), the present respondents, and the facts alleged in their amended statement of claim, as explained in some respects in the course of argument, but excluding those paragraphs which Toohey J. held raised matters not within the jurisdiction of the Court, are as follows. Scrid, as trustee of a trust called the O'Connors Unit Trust, was the assignee of the leasehold interest in premises in Hay Street, West Perth, and conducted on those premises a business of restaurateur and wine bar operator. Until 6 February 1981 the first appellants, Mr. and Mrs. Fencott, were the sole directors and shareholders of Scrid. At some time in or before January 1981, Mr. and Mrs. Fencott decided to sell the business, and gave instructions accordingly to H. & T. Holdings ("H. & T."), a company which carried on business as a real estate agent and business broker. One James John Hondros, who was employed by H. & T. as a salesman or agent, entered into negotiations with the first respondent, Mr. Muller, and in the course of those negotiations made certain false representations as to the profits, turnover and operating expenses of the business. The representations were made on behalf of Scrid, and with the intention of inducing Mr. Muller to purchase the business from Scrid, and the making of the representations was authorized or initiated by Mr. and Mrs. Fencott, or alternatively by H. & T., or alternatively by Mr. Hondros, in the knowledge that the representations were false, or alternatively with reckless indifference to their truth or without belief in their truth, or in the further alternative, negligently. In yet a further alternative, it was alleged that the representations became conditions or warranties of the contract about to be mentioned. In reliance on the representations, Mr. Muller entered into a written agreement dated 27 January 1981 for the sale and purchase of the business, for a price of $150,000 plus stock at valuation. It was a term of the agreement that Scrid should pay all debts and liabilities of the business incurred or accrued prior to transfer of possession, which in fact was given on 23 February 1981, and should indemnify Mr. Muller in respect of all claims and proceedings in respect thereof. The agreement was conditional upon either the assignment of the lease by Scrid to Mr. Muller or alternatively upon the transfer of the shareholding in Scrid to Mr. Muller. The second of these alternative conditions was satisfied by the transfer by Mr. and Mrs. Fencott of their shares in Scrid to Mr. Muller on 6 February 1981. Subsequently the second appellant, Oakland Nominees Pty. Ltd. ("Oakland"), was appointed as trustee of the O'Connors Unit Trust in place of Scrid.