Carlisle v Filaria Pty Ltd (Acn 056 933 843) and Ors [2002] ACTSC 33 (2 May 2002)

Last Updated: 4 May 2002

GRACE CARLISLE v FILARIA PTY LIMITED (ACN 056 933 843) and INDEPENDENT GROUP PTY LTD (ACN 008 659 792), and JOHN CHRISTOPHER RUNKO, and TERENCE JOHN CHAMBERLAIN, PETER LAWRENCE CROWLEY, JOHN DAVID BRADLEY, PHILIP RAYMOND SMITH, CHRISTOPHER JOHN CROWLEY, WILLIAM BRIAN LOFTUS, THOMAS FRANCIS MEAGHER, NICHOLAS JOHN SYMONS, KEITH ARTHUR BRADLEY, ALFONSO DEL RIO, ANNE MARIE PROCTOR, JOHN SNELL, ROSEMARY ELIZABETH TOWNSEND, SALLY JOAN SHEPPARD [2002] ACTSC 33 (2 May 2002)

CATCHWORDS

PRACTICE AND PROCEDURE - application to further amend Statement of Claim to add causes of action said to be statute barred - relevant principles.

PRACTICE AND PROCEDURE - applications for orders striking out claims said to disclose no cause of action and/or to be statute barred or, alternatively, for summary judgment in favour of defendants - relevant principles - whether claims clearly untenable because loss not caused by breaches of contract, misrepresentations or negligent acts alleged - whether any alleged breaches of retainer by plaintiff's solicitors occurred outside limitation period - whether cases of action for negligence commenced not from purchase of property or only from occurrence of loss upon subsequent expiration of lease - whether claims clearly outside limitation periods - whether claims against estate agent and former employee for misrepresentation and statutory claims statute barred.

Trade Practices Act (1974) (Cth), ss 52, 82

Limitation Act 1985, s 11

Fair Trading Act 1992, subs 50(7)

Weldon v Neal [1887] 19 QBD 394

Bowler v Hilda Pty Ltd (unreported) [2000] FCA 899 (7 July 2000)

Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215

Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302

Republic of Peru v Peruvian Guano Co (1887) 36 Ch D 489

Wentworth v Rogers (No 5) (1986) 6 NSWLR 534

Stergiou v Citibank Savings Ltd (1998) 148 FLR 244

Mathaman v Nabalco Pty Ltd (1969) 14 FLR 10

Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62

Inglis v Commonwealth Trading Bank of Australia (1972) 20 FLR 30

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164

State of South Australia v Corporation of the Town of Hindmarsh (unreported, SASC, Bollen J, 10 March 1993)

March v E and M H Stramare Pty Ltd (1991) 171 CLR 521

McGee v Yeomans [1977] 1 NSWLR 273

Klobucar v Neocuat (unreported, ACTSC, Higgins J, 1 October 1999)

Proctor v Jetway Aviation [1984] 1 NSWLR 166

ANZ v Larcos (1987) 13 NSWLR 286

Cropper v Smith (1884) 26 Ch D 700

Clough v Frog (1974) 48 ALJR 481

Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146

Sali v SPC Ltd [1993] HCA 47; (1993) 67 ALJR 841

Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541

Scarcella v Lettice [2000] NSWCA 289; (2000) 51 NSWLR 302

Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514

Cartledge v E Jopling & Sons Ltd [1963] AC 758

Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539

Sutherland Shire Council v Heyman [1985] HCA 41; (1988) 157 CLR 424

Refshauge, R (Ed), Civil Procedure ACT, Butterworths, par 8915.5

No. SC 885 of 1999

Judge: Crispin J

Supreme Court of the ACT

Date: 2 May 2002

IN THE SUPREME COURT OF THE )

) No. SCC 885 of 1999

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: GRACE CARLISLE

Plaintiff

AND: FILARIA PTY LIMITED

(ACN 056 933 843)

First defendant

AND: INDEPENDENT GROUP PTY LTD (ACN 008 659 792)

Second defendant

AND: JOHN CHRISTOPHER RUNKO

Third defendant

AND: TERENCE JOHN CHAMBERLAIN PETER LAWRENCE CROWLEY JOHN DAVID BRADLEY

PHILIP RAYMOND SMITH CHRISTOPHER JOHN CROWLEY WILLIAM BRIAN LOFTUS THOMAS FRANCIS MEAGHER NICHOLAS JOHN SYMONS KEITH ARTHUR BRADLEY ALFONSO DEL RIO

ANNE MARIE PROCTOR

JOHN SNELL

ROSEMARY ELIZABETH TOWNSEND

SALLY JOAN SHEPPARD

Fourth defendants

ORDER

Judge: Crispin J

Date: 2 May 2002

Place: Canberra

THE COURT ORDERS THAT:

1. subject to order 2 hereof, the plaintiff have leave to further amend the Statement of Claim in the terms set out in the Third Amended Statement of Claim, which was filed in Court by leave on 12 March 2002;

2. paragraphs 15, 16, 17 and 17A, sub-paragraphs 22(c)(i) and (iA) be struck out with the particulars presently contained in sub-paragraphs 17(a) to 17(r) remaining as particulars of negligence as alleged in paragraph 19; and

3. the applications be otherwise dismissed.

1. This was an application by the second, third and fourth defendants for orders striking out various paragraphs in the Second Amended Statement of Claim pleading causes of action against them or directing that summary judgment be entered in their favour in respect of those claims.

2. At the hearing of the motions I was informed that the present proceedings concerned but one of fifty-nine cases commenced by various plaintiffs in relation to the purchase of units in the Canberra International Hotel. In each case the proceedings involved allegations that the plaintiff had been induced to purchase a unit or units by representations made by the first defendant, which had been the vendor, and/or by the second defendant, which had acted as the first defendant's agent. In some cases individuals who had been employed by the second defendant and allegedly made representations on its behalf had also been joined as parties to the proceedings. The third defendant in the present case was one such person. Furthermore, in forty-nine cases, solicitors who had acted for the plaintiffs had also been joined as defendants and causes of action based upon allegations of breach of retainer and negligence had been pleaded against them. In thirty-five cases the actions against the solicitors had commenced more than six years after contracts for sale had been exchanged, and in some cases more than six years after the relevant sales had been completed.

3. The motions raised two issues: firstly, whether the pleadings disclosed any reasonable cause of action against the second and/or third defendants; and, secondly, whether any causes of action pleaded against the second, third or fourth defendants were statute barred.

4. There had apparently been some discussion amongst the legal representatives for the parties as to the possibility of having similar motions determined in relation to all proceedings at the one hearing. However, it was conceded in argument that, whilst there were common issues of law and fact, the cases were different in material respects and that each would need to be assessed in the context of the particular facts and circumstances pleaded.

5. Mr Foster SC, who appeared for the second and third defendants, and Mr Davies SC, who appeared with Mr Williams for the fourth defendant, each moved on motions relating only to the present case and, whilst Mr Meagher, who appeared for the plaintiff, protested that he had come to court expecting to deal with other proceedings as well, I concluded that the hearing should be confined to the issues raised in those motions. However, all counsel joined in asking me to determine as to whether, if the present claims were statute barred because they were brought more than six years after the purchase of the unit had been settled, similar claims brought within six years of settlement but after six years had elapsed since the exchange of contracts would be similarly barred. I agreed to consider that issue in the event that it became relevant to do so.

6. During the course of the hearing Mr Meagher sought leave to further amend the pleadings in terms set out in a draft Third Amended Statement of Claim that was filed in Court. Ms Scheul, who appeared for the first defendant, and Mr Davies did not oppose the amendments insofar as they affected the claims against their clients and I gave leave for the pleadings to be amended to that extent. However, Mr Foster did oppose the amendments insofar as they related to the causes of action pleaded against the second and third defendants, arguing that the foreshadowed changes would not provide any answer to the contentions that would be propounded in support of the present applications, and that if those contentions were accepted then the proposed amendments would be futile. On the other hand, if a different view were to be taken of the relevant legal principles, the amendments might have the effect of introducing a new cause of action outside the relevant limitation period contrary to the rule in Weldon v Neal [1887] 19 QBD 394. Hence, he submitted, any question of amendment of the allegations pleaded against his clients should be left until the more substantive arguments had been heard. Mr Meagher did not demur from this suggestion and I agreed to defer consideration of this issue until that time.

7. The Second Amended Statement of Claim alleged that the contract for sale of the relevant unit was executed on 6 August 1993 and that the purchase of the property was completed on 10 November 1993. The purchasers were the plaintiff and Gordon Geoffrey Carlisle. The latter subsequently transferred to the plaintiff all of his right title and interest in both the property and the causes of action pleaded.

8. The causes of action pleaded against the first, second and third defendants were based upon allegations that the plaintiff and Mr Carlisle were induced to enter into the contract to purchase the unit by a series of representations each of which are alleged to have been false. The representations were as follows:

(i) the property could legally be used as a residential unit.

(ii) the property could legally be used by the plaintiff and Gordon Geoffrey Carlisle for their own purposes.

(iii) there was flexibility of use of the unit.

(iv) the acquisition of the property enabled the plaintiff and Gordon Geoffrey Carlisle to take advantage of the strongest market at the time.

(v) the acquisition of the property was a unique investment in one of Canberra's famous establishments to the benefit of the plaintiff and Gordon Geoffrey Carlisle.

(vi) the acquisition of the property enabled the plaintiff and Gordon Geoffrey Carlisle to participate in one of the strongest growth industries in Canberra in that the property was capable of being

(vii) the arrangement between the plaintiff and Gordon Geoffrey Carlisle and their tenant, Jaywood Pty Ltd (ACN 051 214 165) was of long term benefit to the plaintiff and Gordon Geoffrey Carlisle.

(viii) ongoing returns of over 11 per cent per annum on the purchase price of the property or alternatively substantial ongoing returns were available to the plaintiff and Gordon Geoffrey Carlisle.

(viiiA) the terms of the contract included the term that the unit entitlements of all units were to be reasonable, having regard to the respective values of the units of the Units Plan.

(ix) the acquisition of the property represented one of the most lucrative real estate opportunities on offer.

(x) there was an extraordinary performance of the property from an investment perspective.

(xi) the terms of the contract included the term that the agreement contain the whole of the agreement between the plaintiff and the first defendant, and that no other document existed related to the use of the property or the rights of the plaintiff as a purchaser.

9. The proposed amendments involved, inter alia the deletion of a claim for damages based upon the difference between the total amount paid for the purchase of the unit with associated costs and the actual value of the unit at the time of purchase. Mr Meagher explained that, despite the fact that this allegation had been pleaded, evidence would be adduced at the hearing to the effect that the value of the property at the time of the purchase had been at least as great as the purchase price together with other acquisition costs. He maintained that the plaintiff had sustained no loss until about five years after the purchase when the lease to Jaywood Pty Ltd expired. It apparently then proved impossible to negotiate a further lease on equally beneficial terms and differences of opinion among owners led to a situation in which two groups of units are separately managed and there are, in effect, two hotel businesses competing against each other within the one building. As a consequence of these developments both the value of the units and the income derived from them have plummeted.

10. The case against the fourth defendants was, of course, quite different. It was alleged that they had breached an implied term of retainer that they would act for the plaintiff and Mr Carlisle on the purchase of the property in a competent, careful and skilful manner, that they had breached an implied warranty that they would carry out the work with due care and skill and that they had breached the duty of care that they owed to the plaintiff and Mr Carlisle by carrying out the work negligently.

11. In relation to each of these causes of action the plaintiff provided the following particulars:

(a) Failing to advise or warn the plaintiff and Gordon Geoffrey Carlisle of the risks to them in proceeding with the purchase.

(b) Failing to explain to the plaintiff and Gordon Geoffrey Carlisle the restrictions created by the purpose clause for the unit and in particular clause 3.1 of the purpose clause for the unit plan number 932.

(c) Failing to warn the plaintiff and Gordon Geoffrey Carlisle that the two uses, namely motel unit or serviced apartment, restricted the use to which the property could be put.

(d) Failing to warn the plaintiff and Gordon Geoffrey Carlisle that any use of the property for a different purpose was in breach of the purpose clause and could not legally be carried out.

(e) Failing to give the plaintiff and Gordon Geoffrey Carlisle a copy of the terms and conditions of the relevant units plan pursuant to which the unit was held or would be held before contractual exchange or at any time.

(f) Failing to provide the plaintiff and Gordon Geoffrey Carlisle with any advice or information in respect of the transaction which would enable them to assess the risks of themselves becoming the owners.

(g) Failing to advise the plaintiff and Gordon Geoffrey Carlisle of the risks that are undertaken as owners of the property with such a specialised purpose clause.

(h) Failing to advise the plaintiff and Gordon Geoffrey Carlisle that the restriction on use would be relevant to the resale on the market for the motel suites and services apartments as opposed to residential units.

(i) Failing to warn the plaintiff and Gordon Geoffrey Carlisle that the marketability of the unit was dependent upon the quality of the management of the hotel, any income being received by the plaintiff in respect of the unit, the hotel industry in particular, the economy in general, the relationship between the hotel manager and the managers of ROF Units and the owners of the unit and the relative value of the investment compared to investment in residential units.

(j) Failing to warn or advise the plaintiff and Gordon Geoffrey Carlisle of the risks of failure by Jaywood Pty. Ltd. to honour the terms of its lease to the plaintiff and Gordon Geoffrey Carlisle, the risk that Jaywood Pty. Ltd. might not renew the lease at the end of the term on favourable conditions to the plaintiff and Gordon Geoffrey Carlisle, the risk that the plaintiff and Gordon Geoffrey Carlisle could not find a tenant at the end of five years and that they then would earn little or no income or may find it difficult to earn income themselves from the unit.

(k) Failing to warn or advise of the risk of problems concerning the management or operation of the Canberra International Hotel resulting in little or no income for the plaintiff and Gordon Geoffrey Carlisle and an inability to sell the property for a satisfactory price while such problems continued.

(l) Failing to warn or advise the plaintiff and Gordon Geoffrey Carlisle of the problems concerning the servicing of the units, resulting in little or no income for the plaintiff and Gordon Geoffrey Carlisle and an inability to sell the property for satisfactory price while such problems continued.

(m) Failing to warn or advise the plaintiff and Gordon Geoffrey Carlisle that they could not live in the unit themselves or rent out the unit themselves.

(n) Failing to advise the plaintiff and Gordon Geoffrey Carlisle of the terms of trust relating to the ROF units and of the risks of the plaintiff and Gordon Geoffrey Carlisle involving therefrom.

(o) Failing to advise the plaintiff and Gordon Geoffrey Carlisle of the terms of the special privilege referred to in clause 37 of the contract and the risks to the plaintiff and Gordon Geoffrey Carlisle resulting therefrom.

(p) Failing to advise the plaintiff and Gordon Geoffrey Carlisle that a prospectus required by the corporations law should have been issued to the plaintiff and Gordon Geoffrey Carlisle by the vendor or Jaywood Pty. Ltd.

(q) Failing to advise the plaintiff and Gordon Geoffrey Carlisle of the vendor's obligations and Jaywood Pty. Ltd's obligations pursuant to the Corporations Law for a joint investment with other persons.

(r) Failing to advise the plaintiff and Gordon Geoffrey Carlisle of the unsuitability of the property for long term investment.

12. Mr Foster's contention that the Second Further Amended Statement of Claim disclosed no reasonable cause of action against his client was based upon the proposition that the only action that the plaintiff and Mr Carlisle had allegedly been induced to undertake by the false representations had been to enter into the contract for the purchase of the unit. He submitted that, since Mr Meagher had effectively conceded that the unit had been worth at least what the plaintiff and Mr Carlisle had paid for it, it was obvious that no loss had thereby been sustained. He maintained that any subsequent losses had clearly been caused by the difficulties that had ensued following the expiration of the lease to Jaywood Pty Ltd and that neither of his clients could be blamed for those difficulties.

13. In support of these submissions he relied heavily upon the decision of Finn J in Bowler v Hilda Pty Ltd (unreported) [2000] FCA 899 (7 July 2000). That was a somewhat similar case in that it concerned a claim by a purchaser of a unit in a former hotel and his Honour was required to assess damages on the basis that the purchase of the unit had been induced by a false representation that it could be lived in, rented out privately or rented out as a serviced apartment. His Honour noted that there had been no significant dispute between the parties as to the principles that should be applied in assessing damages for breach of s 82 of the Trade Practices Act (1974) (Cth) and proceeded to make the following observations at [115]:

. . . Under the shadow of the decisions of the High Court in Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1988) 196 CLR 494 and Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281, they have been expounded regularly by judges of this Court in appellate and first instance decisions: see eg Anema E Core Pty Ltd v Aromas Pty Ltd [1999] FCA 904; Radferry Pty Ltd v Starborne Holdings Pty Ltd (unreported, FCA, 18 December 1998, Full Court); Carlton v Pix Print Pty Ltd [2000] FCA 337; see also Jacobs, Damages in a Commercial Context, Ch 7. Here I need only advert to the following.

(i) In assessing damages under s 82, the Court is not constrained by, though it may be assisted by, doctrines developed at common law and in equity. "The question presented by s 82 . . . is what loss or damage has been caused by the conduct contravening the Act": Marks v GIO Australia Holdings Ltd, above, at 512. That loss is to be gauged by a comparison "between the position in fact of the party which alleges loss and the position that would have obtained had there been no contravention": Radferry Pty Ltd v Starborne Holdings Pty Ltd, above.

(ii) The usual starting point in a case of the present kind is to measure the difference between the price paid for the property acquired and its value in fact at the date of acquisition. That latter value is to be assessed "according to what price freely contracting, fully informed parties would have offered and accepted for it": Marks, at 514 (emphasis added). The value in fact is the "real value" of what was acquired and this is not necessarily the same as its market value: see the discussion in Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd (1997) 148 ALR 271 at 310-317.

(iii) Though value in fact is to be assessed as at the date of acquisition, subsequent events may be looked at insofar as they illuminate the value of the thing at that date:

"A distinction is drawn, however, between subsequent events that arise from the nature or use of the thing itself and subsequent events that affect the value of the thing but arise from sources supervening upon or extraneous to the fraudulent inducement. Events falling into the former category are admissible to prove the value of the thing, those falling into the latter category are inadmissible for that purpose."

Kizbeau Pty Ltd v WG & B Pty Ltd, above, at 291; see also Anema E Core Pty Ltd v Aromas Pty Ltd, above.

(iv) "[W]here property acquired in a transaction induced by a misrepresentation subsequently declines in value, damages are not awarded in respect of that decline if it is attributable to an independent, extrinsic or supervening cause": Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 77 FCR 307 at 330.

(v) Though the comparison between price paid and value in fact will generally provide a measure of the loss suffered, there may nonetheless be other ways as well in which loss has been suffered. "For example, consequential loss may be suffered": Marks, at 514.

(vi) A causal connection must be established between the loss or damage suffered and the conduct done in contravention of the Act: Marks, at 513. In order to recover losses subsequent to purchase, it is not enough to show that the transaction was induced by the misrepresentation and that the losses would not have occurred but for the transaction: Anema E Core Pty Ltd v Aromas Pty Ltd, at [43]. The factual question in each case is "whether the loss claimed resulted directly from the misleading and deceptive conduct, rather than from some supervening cause": ibid, at [40]; Janssen-Gilag Pty Ltd v Pfizer Pty Ltd [1992] FCA 437; (1992) 37 FCR 526 at 530.

14. In that case the applicant had claimed damages on the basis of a comparison of total outlays and receipts, in reliance upon the principle that such losses may be compensible if flowing directly from the breach: Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215 at 222-3; Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302 at 312-4. After discussing the competing contentions advanced on behalf of the parties, Finn J said that when a business had been acquired in consequence of conduct contravening the Trade Practices Act and the purchasers had carried on trading thereafter it might sometimes be appropriate to assess damages by reference to the difference between receipts and outlays because such consequential losses will also have flowed directly from the contravention. His Honour observed, however, that losses were not compensible merely because they would not have occurred but for the purchase of the unit. To be compensible they must result directly from the contravening conduct and not from some other cause. In the case before him his Honour concluded that the dramatic loss in anticipated earnings had resulted not from the contravening conduct of the defendant but from the materialisation of a risk of which the purchaser had been aware and had taken into account at the time of the purchase. Accordingly, that aspect of the claim failed.

15. However, his Honour's decision in that case was based upon due consideration of the issues after a full trial of the action; not upon an application for summary judgment or an order striking out the relevant portions of the Statement of Claim. Issues of causation and remoteness of damage do not always emerge with sufficient clarity from the pleadings to enable an adequate consideration of them prior to trial.

16. The test that must be applied when a defendant seeks to have a pleading struck out on the ground that it discloses no reasonable cause of action is a stringent one. It must be demonstrated that the pleading is defective in substance and not merely in the manner in which the claim has been stated: Republic of Peru v Peruvian Guano Co (1887) 36 Ch D 489 at 496. Furthermore, the claim must be clearly untenable. The authorities reveal a profusion of different formulations. Butterworths' loose leaf service Civil Procedure ACT, lists the following, at paragraph 8915.5:

"Cases which are plain and obvious": Hubbuck & Sons Ltd v Wilkinson Heywood & Clark Ltd [1899] 1 QB 86 at 91; "obviously unsustainable": Attorney-General for the Dutchey of Lancaster v London & North Western Railway Co [1892] 3 Ch 274 at 277; "so obviously untenable it cannot possibly succeed": Burton v Shire of Bairnsdale [1908] HCA 57; (1908) 7 CLR 76 at 92; Reed International Books Australia Ltd (t/as Butterworths) v King and Prior Pty Ltd (1993) 44 FCR 587 at 592; 11 ACSR 560 at 565; General Industries Inc v Commissioner of Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130; "so manifestly faulty that it does not admit of argument": Wall v Bank of Victoria Ltd (1890) 16 VLR 2 at 4; "plain and obvious": William Charlick Ltd v Smith [1922] SASR 364 at 367; Arbon v Anderson [1942] 1 All ER 264 at 266; "clear beyond all doubt": Kellaway v Bury (1892) 66 LT 599 at 602; Woods v Wilson (1902) 19 WN (NSW) 147 at 148; "palpably and unmistakably bad": Hill v Scott (1892) 8 WN (NSW) 98 at 99; "obviously and almost incontestably bad": Dyson v Attorney-General [1911] 1 KB 410 at 414, 419; Murex Diagnostics Australia Pty Ltd v Chiron Corporation [1995] FCA 1040; (1995) 128 ALR 525 at 538; "a clear decision that could not be altered by any evidence that could be adduced at trial": Dey v Victorian Railway Commissioner [1949] HCA 1; (1949) 78 CLR 62 at 85; "unarguable": Nagle v Fielden [1966] 2 QB 633 at 651; [1966] 1 All ER 689 at 697; "something worse than demurrable": Walters v Sunday Pictorial Newspapers Ltd [1961] 1 WLR 967; [1961] 2 All ER 758; Republic of Peru v Peruvian Guano Co Ltd (1887) 36 Ch D 489 at 496; "manifestly groundless" and "discloses a case which the court is satisfied cannot succeed": General Steel Industries Inc v Commissioner of Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129.

17. If obliged to make a selection from this semantic smorgasbord I would unhesitatingly choose the formulation that the claim be so obviously untenable that it cannot possibly succeed. However, I am inclined to think that the diversity of language merely reflects different attempts to articulate the same concept.

18. The test to be applied on an application for summary judgment by a defendant is also a stringent one though attempts to define it have again produced a profusion of formulations. It has been said that the plaintiff's case must be:

"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 . . . [the claim] to stand would involve useless expense"; . . . "so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed"; "so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; [or] "so to speak apparent at a glance": General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129.

19. As with applications to strike out claims, an application for summary judgment should not be granted to a defendant when the pleading has merely been ill expressed: Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 536; Stergiou v Citibank Savings Ltd (1998) 148 FLR 244 at 249. It is clear that substantial questions of law may be determined on such an application: Mathaman v Nabalco Pty Ltd (1969) 14 FLR 10 at 18. Furthermore, as Dixon J observed in Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 62, argument, perhaps even of an extensive kind, may be necessary to demonstrate that the claim is so clearly untenable that it cannot possibly succeed. Despite these observations, it has been suggested that if there is a substantial and difficult question of law involved in deciding the matter, the application should be dismissed and the defendant left to proceed by making a further application for the relevant point of law to be resolved at a separate hearing prior to trial pursuant to O 29 r 2 or in some other manner: Inglis v Commonwealth Trading Bank of Australia (1972) 20 FLR 30 per Woodward J at 35. I accept that this course may sometimes be appropriate but doubt that the proposition should be accepted as a principle of general application. More importantly, the authorities have stressed that a court must exercise care to ensure that a plaintiff is not improperly deprived of the opportunity to have his or her case properly tried: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130; Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164 at 175. It has also been suggested that the burden on a defendant may be even higher than that on a plaintiff seeking to obtain summary judgment against a defendant: State of South Australia v Corporation of the Town of Hindmarsh (unreported, SASC, Bollen J, 10 March 1993). Again, however, I doubt that this proposition should be accepted as a general principle though it may, perhaps, reflect the formidable nature of the difficulties that may be encountered by defendants in particular cases.

20. Mr Foster may ultimately prove to be correct in his contention that any loss or damage suffered by the plaintiff was attributable to difficulties arising upon the expiration of the lease to Jaywood Pty Ltd and was not causally related to the allegedly tortious conduct, applying the "common sense" test adopted by the High Court of Australia in March v E and M H Stramare Pty Ltd (1991) 171 CLR 521. However, at this stage of the proceedings I am unable to be satisfied that the plaintiff's case on this issue is so obviously untenable that it could not possibly succeed.

21. Apart from any other difficulty that may lie in the path of Mr Foster's argument, the amendments foreshadowed by the plaintiff include the addition of two further allegations of misrepresentation in the following terms:

[T]he property would earn an excellent return to the plaintiff and Gordon Geoffrey Carlisle.

[A] substantial increase in value or alternatively an increase in value was available to the plaintiff and Gordon Geoffrey Carlisle on the purchase price of the property after the expiry of the lease back period to Jaywood Pty Ltd.

22. These amendments would have the effect of extending the ambit of the Statement of Claim to include an allegation that the plaintiff and Mr Carlisle purchased the unit in reliance upon a misrepresentation by, inter alia, the second and third defendants, that a capital gain would be realisable after the expiry of the lease to Jaywood Pty Ltd. If those allegations were to be accepted, it would obviously be difficult for Mr Foster to argue that losses sustained when the promised capital gains failed to materialise and values actually plummeted were not causally related to the purchase of the unit in reliance on such a representation.

23. As I have mentioned, Mr Foster sought to counter this difficulty by arguing that the proposed amendment should not be allowed, maintaining that it would involve an obvious infringement of the rule in Weldon v Neal by permitting a new cause of action to be added to an existing pleading at a time when the standard limitation period relevant to that cause of action had already expired. Mr Meagher submitted that the relevant limitation period had not expired but that even if it had, the Court clearly had the power to permit the cause of action to be added: McGee v Yeomans [1977] 1 NSWLR 273; Klobucar v Neocuat (unreported, ACTSC, Higgins J, 1 October 1999); Proctor v Jetway Aviation [1984] 1 NSWLR 166 and ANZ v Larcos (1987) 13 NSWLR 286.

24. The general principle is that an amendment to the pleadings necessary to raise a viable claim or defence should be permitted unless injustice would thereby be caused to the other party or parties. This principle has long been recognised. In Cropper v Smith (1884) 26 Ch D 700 at 710 Bowen LJ said:

I think it is a well established principle that the object of Courts is to decide the rights of the parties and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. Speaking for myself, and in conformity with what I have heard laid down by the other division of the Court of Appeal and by myself as a member of it, I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment as a matter of favour or of grace.

25. In Clough v Frog (1974) 48 ALJR 481 at 482 a majority of the High Court of Australia adopted the remarks of Bowen LJ in Cropper v Smith and held that an application for leave to amend in order to add a new defence should have been allowed because the defence, if established, would have been a complete answer to the actions, neither fraud nor improper concealment of the defence had been suggested and with one exception, the matters relied upon in opposition to the amendment consisted of delay and irregularity which the Court held was relevant to costs but did not constitute injustice in the sense in which that expression was used. In the subsequent case of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 the High Court revisited the issue after a majority of the Full Court of the Federal Court of Australia rejected an application which sought to amend a defence, adverting to the passage of time since 1884, and even since 1974, referring to issues of case management, efficiency, practice and procedure and citing remarks from the judgment of Toohey and Gaudron JJ in Sali v SPC Ltd [1993] HCA 47; (1993) 67 ALJR 841 at 849. The majority said at 154 that the passage from Sali v SPC Ltd should not be taken as sanctioning any departure from the principles established in Cropper v Smith and accepted in Clough v Frog. Their Honours said at 155:

Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the Court, was in this case the relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination on issue between the parties.

26. It is true, of course, that there may well be injustice when a pleading is amended by adding a cause of action outside the limitation period. The potential for prejudice to be caused by permitting claims to be litigated after extended periods of time has long been recognised and was discussed by the High Court of Australia in Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541, particularly by McHugh J at 555. In other cases, however, an amendment to permit the inclusion of a further cause of action, albeit one based upon events that occurred outside the relevant limitation period, may give rise to little apparent prejudice. For example, a plaintiff may seek to put a new legal complexion upon facts and circumstances already raised on the pleadings.

27. In the present case, the further allegations of misrepresentation may properly be regarded as further causes of action. However, the plaintiff had previously pleaded extensive allegations of other misrepresentations said to have been made by the same defendants during the same course of negotiations and, in the absence of any evidence to that effect, I would not be prepared to assume that the inclusion of these further allegations at this stage of the proceedings would cause the relevant defendants substantial prejudice.

28. Furthermore, the first of these additional allegations appears to be merely a more generalised form of the representation alleged in par 6(viii) of the existing Statement of Claim. The second would give rise to causes of action in relation to which the relevant limitation periods could have commenced no earlier than the time at which the lease to Jaywood Pty Ltd expired, and the warranted increase in value should have occurred; that being the time when the representation proved to be false, misleading, deceptive and/or contrary to the statutory provisions pleaded. Since it is common ground that that did not occur until sometime in 1998, the causes of action other than, perhaps, the one brought under s 52 of the Trade Practices Act, would not be statute barred.

29. Whilst I have carefully considered the arguments which Mr Foster has quite properly presented in relation to this matter, I am satisfied that the amendments should be allowed.

30. Mr Davies was on somewhat firmer ground in his reliance upon s 11 of the Limitation Act 1985. That section provides that an action is not maintainable if brought after the expiration of six years from the date on which the cause of action accrued. It is common ground that, whilst in contract the cause of action expires six years after the date of the breach of contract, in tort it expires six years from the date that the damage is first suffered.

31. The actions in contract pleaded against the fourth defendants were not based upon allegations that those defendants had warranted a future increase in income or capital value, breach of which might have given rise to a new cause of action well after the purchase of the unit. The actions were based rather on breaches of contract consisting of failures to perform the work they were retained to do in a competent, careful and skilful manner and breaches of an implied warranty to perform the work with due care and skill. Any such actions necessarily became unmaintainable once six years had elapsed from the breach.

32. Whilst the purchase of the property occurred more than six years before the commencement of the present action, Mr Meagher argued that I should not be satisfied that the action had become statute barred because the retainer had remained in existence for a substantial period after settlement. Furthermore, the amendments effected by the Third Amended Statement of Claim include an allegation that if they had received the advice and warnings said to have been appropriate in the circumstances they would have rescinded the contract and regained the purchase price.

33. It is, of course, axiomatic that the limitation period runs from the date of the relevant breach of the contract irrespective of whether the contract was then terminated. Hence, the mere allegation of a continuing retainer could not defer the commencement of that period and any actions based upon alleged breaches of that retainer which allegedly occurred more than six years prior to the commencement of the proceedings are clearly unmaintainable. It is obviously conceivable that an action might be brought for breach of retainer in failing to advise a client of grounds upon which he or she might have been entitled to rescind the contract. However, in the present case the only retainer alleged is one which required the fourth defendants, as the plaintiff's solicitors "to act on their behalf on the proposed purchase of the property". I accept that a failure to advise may be a continuing breach of a contract of retainer and that there may be circumstances in which a solicitor for a purchaser might have a duty to advise a client of a possible right of rescission even after settlement. However, the extent of the contractual obligations which solicitors undertake is obviously dependent upon the nature of the retainer and the mere advertence to such theoretical possibilities do not, of themselves, have the effect of indefinitely deferring the commencement of a limitation period.

34. In the present case all of the failures attributed to the fourth defendants and alleged to have amounted to breaches of retainer appear to be matters about which any advice should have been given to the plaintiffs prior to them entering into any binding commitment to purchase the property. It is not alleged that any relevant information subsequently came to the fourth defendant's attention or, indeed, that they became aware of any facts or circumstances that might have entitled the plaintiff's to rescind the contract. The relief sought in the present action extends to an order declaring the contract to have been void ab initio pursuant to subs 50(7) of the Fair Trading Act 1992 or par 87(2)(a) of the Trade Practices Act, but while such relief is sought against all defendants it is obviously founded upon the allegations of misrepresentation against the first, second or third defendants and it is not alleged that the fourth defendants were either guilty of any misrepresentation or that they were informed of the misrepresentations allegedly made by others. Hence, I am not satisfied that even the Third Further Amended Statement of Claim effectively pleads any breaches of contract subsequent to the settlement of the purchase. The mere assertion that a breach of contract that occurred outside the relevant limitation period may have had further consequences within that period is not, of course, sufficient to delay the running of that period or otherwise preserve the relevant cause of action. Hence, in my opinion, the actions for breach of retainer are statute barred.

35. As previously mentioned, the parties sought an indication as to whether any claim found to be statute barred upon the expiration of a period of six years from settlement would have been similarly barred once such a period had elapsed from the date upon which contracts for the purchase of the unit had been exchanged. In my opinion, the claims to which I have referred would have been so barred.

36. On the other hand, cause of action in tort is not complete until the plaintiff has suffered actual loss or damage and the limitation period does not commence to run until that time. The loss or damage must be actual rather than merely contingent or prospective. Furthermore, as Handley JA pointed out in Scarcella v Lettice [2000] NSWCA 289; (2000) 51 NSWLR 302 at 306 the damage must be "measurable", to use the description employed by the majority of the High Court of Australia in Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 531, or "beyond what can be regarded as negligible", to use the words of Lord Reid in Cartledge v E Jopling & Sons Ltd [1963] AC 758 at 772. Further injury arising from the same tortious act or omission does not give rise to a further cause of action.

37. At least in the case of claims for economic loss there is no general overriding qualification that time under a limitation provision does not commence to run until the plaintiff has discovered or could on reasonable inquiry discovered that the loss had been sustained: see Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539. However, as Deane J pointed out in the subsequent case of Wardley Australia Ltd v Western Australia at 540, in some cases where an action lies in negligence of pure economic loss no relevant loss will be sustained until some adverse consequence of the negligence is known or becomes manifest. Loss due to latent defects in a building plainly fall into this category: see Sutherland Shire Council v Heyman [1985] HCA 41; (1988) 157 CLR 424 at 503-505. It has also been suggested that the legislative intention underlying statutes of limitations did not extend to barring causes of action as a result of time running during periods in which the wrongful act itself effectively precluded the institution of proceedings: see Hawkins v Clayton per Deane J at 590 and Gaudron J at 600.

38. In economic loss cases it has been suggested that ascertainment of the accrual date involves two steps: namely, identification of the interest that has allegedly been infringed and identification of the time at which the plaintiff lost the capacity to remedy the situation: see, Hawkins per Gaudron J at 600 and Wardley per Mason CJ, Dawson, Gaudron and McHugh JJ at 527, 533 and Toohey J at 555-6.

39. When a plaintiff has been induced by fraudulent or negligent misrepresentation to enter into a contract to purchase a property, damages will usually be measured by the difference between purchase price and the value of the property at the date of contract and, when appropriate, any consequential loss: see Wardley at 530. As Brennan J pointed out in the same case, at 535, in such circumstances the difference between the price and the value of the asset represents "how much worse off" the plaintiff is as a result of entering into the transaction. His Honour later observed, at 537-538 that the loss is suffered once the plaintiff becomes bound to the transaction. His Honour explained:

The die has been cast and what follows can be viewed as evidence proving the extent of the loss suffered when the first binding step was taken. That may be the correct analysis when the first binding step is such that, whatever extrinsic circumstances may transpire, a loss must be suffered.

40. Hence, in most cases the limitation period will commence to run from the time contracts for the purchase of the property have been exchanged. Until the amendments contained in the Third Amended Statement of Claim the plaintiff in the present case had actually claimed damages based upon the difference between the purchase price and the value of the property at the time of the purchase, and if that claim had remained extant it would have been clear that the causes of action in negligence were also statute barred.

41. However, that claim has been deleted and, whilst conceding that a plaintiff could not bring herself within a limitation period merely by abandoning a head of loss occurring more than six years prior to the commencement of the proceedings, Mr Meagher maintained that at the time of the purchase the value of the property actually exceeded the purchase price and that no loss had been sustained until some five years later. Mr Foster also submitted that the claims against his clients were statute-barred. However, as I am conscious of Mr Foster's rejoinder that in these circumstances the plaintiff had sustained no loss as a consequence of any of the misrepresentations pleaded but, for the reasons previously given, I am not satisfied that this contention provides such an inescapable answer to the plaintiff's claims that they should not be permitted to proceed to trial.

42. Mr Davies argued that the position was similar to that confronting the New South Wales Court of Appeal in Scarcella. This was not a case in which the loss was merely potential or contingent until the occurrence of some subsequent event. On the contrary, the plaintiff had been promised that upon purchasing the unit she would acquire certain rights, including the right to use the property for her own purposes, but the purchase of the property and the ancillary transactions into which she entered did not give her those rights. Hence, he submitted, it did not matter whether the property was worth what the plaintiff and Mr Carlisle had paid for it. It was abundantly clear that they had not received the rights that they had been promised. Accordingly, the cause of action arose from that time.

43. However, the Statement of Claim does not allege that any representation made by the first, second or third defendants amounted to a warranty that the plaintiff and or Mr Carlisle would have such rights. On the contrary, what seems to be alleged are representations to the effect that such rights would be conferred by the purchase of the unit and the ancillary transactions. In these circumstances, as Handley JA pointed out in Scarcella, damages cannot be assessed by reference to the value which such rights might have had if they had been duly acquired by the plaintiff, but rather by reference to any losses arising as a consequence of the plaintiff being induced to enter into the relevant transactions.

44. Despite the arguments which Mr Davies has advanced, I am unable to be satisfied that the causes of action in negligence which have been pleaded against the fourth defendants are so clearly statute barred that the plaintiff should be prevented from having them tried. In my opinion, this is a case in which any determination of that issue should be left to the trial of the action.

45. As loss or damage is an element of each of the causes of action pleaded against the second and third defendant such causes of action accrued if at all, from the time the relevant loss or damage was sustained rather than from the time of the representations. Hence, despite Mr Foster's arguments to the contrary, similar difficulties arise in relation to the claims against the second and third defendants and I am again unable to be satisfied that these causes of action must have commenced, if at all, outside the relevant limitation period.

46. For these reasons the paragraphs in the Statement of Claim pleading contractual claims against the fourth defendant will be struck out but the applications will otherwise be dismissed.

47. I will hear counsel as to costs.

I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Crispin.

Associate:

Date: 2 May 2002

Counsel for the plaintiff: Mr B Meagher

Solicitor for the plaintiff: Gillespie-Jones & Co

Counsel for the first defendant: Ms K Scheul

Solicitor for the first defendant: Meyer Clapham

Counsel for the second & third defendants: Mr L Foster SC

Solicitor for the second & third defendants: Sparke Helmore

Counsel for the fourth defendant: Mr D Davies SC & Mr D Williams

Solicitor for the fourth defendant: Minter Ellison

Date of hearing: 12, 13 March 2002

Date of judgment: 2 May 2002