Re Dieter William Dorfler v Fourways Holdings Pty Ltd and Australia and New Zealand Banking Group Limited [1991] FCA 409; 103 ALR 699 (30 August 1991)

FEDERAL COURT OF AUSTRALIA

Re: DIETER WILLIAM DORFLER
And: FOURWAYS HOLDINGS PTY LTD and AUSTRALIA AND NEW ZEALAND BANKING GROUP
LIMITED
No. QLD G130 of 1990
FED No. 545
Trade Practices
[1991] FCA 409; 103 ALR 699

COURT

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Spender J.(1)

CATCHWORDS

Trade Practices - ss. 52, 82 and 87 Trade Practices Act 1974 - limitation of actions - whether application to be struck out summarily.

HEARING

BRISBANE
30:8:1991

Counsel for the applicants: Mr Harrison QC with Mrs Mullins

instructed by Deacon and Milani

Counsel for the respondent: Mr Muir QC with Mr Kirk
instructed by Blake Dawson Waldron

ORDER

The notice of motion be dismissed.

The respondent in the principal proceedings pay the first applicant's costs of and incidental to the notice of motion, to be taxed if not agreed.

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

DECISION

This is a notice of motion by which the respondent seeks to strike out those paragraphs of the application and statement of claim which allege a cause of action based on ss. 52, 82 and 87 of the Trade Practices Act 1974 in respect of a foreign currency loan. The respondent seeks to invoke the Court's discretion to dismiss a claim under Order 20 Rule 2 of the Federal Court Rules, on the basis that the claim for relief based on s.52 of the Trade Practices Act is time-barred by s.82(2) and s.87(1CA).

2. The statement of claim also contains claims based on contract and on negligence. In the statement of claim, the alleged misleading and deceptive conduct which is said to constitute a contravention of s. 52 is also alleged to constitute a breach of a duty of care.

3. The statement of claim alleges that in late 1984, the first applicant requested information from Graham Swan, an officer of the respondent at the respondent's Clayfield branch, as to Swiss franc loans at low interest rates. It is alleged that the applicant and Swan had several discussions concerning foreign currency loans and on one occasion Swan gave the applicant a copy of a document entitled "Foreign Currency Loans - Non-Trade (FCL-NT)" and on another occasion showed the applicant a graph showing the relationship between the value of the Australian dollar and the Swiss franc. The applicant alleges that the respondent represented that the risks in borrowing foreign currency were very slight, the relationship between the Australian dollar and the Swiss franc had been fairly constant, the fluctuations between the Australian dollar and the Swiss franc had been minor and would continue to be minor, there was an advantage in the favourable interest rate differential between the rates on Swiss franc loans and the prevailing Australian rates, a foreign currency loan facility was suitable for the first applicant's borrowing requirements and the respondent held itself out as having experience and skills in arranging foreign currency loans and held Graham Swan out as able to advise and inform the first applicant about foreign currency loans.

4. It is further alleged that these representations were misleading and deceptive or likely to mislead or deceive and that the first applicant, in reliance on the representations, made an application for a foreign currency loan and was advanced the sum of A$500,000 in Swiss francs on 6 February 1985.

5. The application in these proceedings was filed on 12 October 1990.

6. Paragraph 34 of the statement of claim asserts that the first applicant has suffered loss and damage "full particulars of which will be provided to the respondent prior to the hearing of the action herein". Particulars have not yet been supplied. It is not immaterial for present purposes to note the requirement for particulars under O. 11 r. 2, and O. 12 rr. 1 and 4 of the Federal Court Rules and the fact that the respondent has brought this application in the context of the lack of definition by the applicants as to what loss or damage is alleged and when that loss or damage is said to have arisen. Paragraph 31 does allege that the Australian dollar commenced to decline significantly against the United States dollar on 4 February 1985, paragraph 10 says that the respondent claimed repayment of the principal due on 30 January 1991 in the sum of A$931,296.70 and paragraph 12 alleges that the respondent debited the applicant's account with the sum of A$978,070.62 on account of the principal sum of A$931,296.70 claimed by the respondent and interest.

7. By a document called "Foreign Currency Loan Application - Form C" which was dated 16 January 1985, the first applicant applied for a loan facility of A$500,000. The Schedule to that application provided for the loan facility to be A$500,000 and for full clearance of the loan to be effected within 5 years of the drawdown of the loan. The availability period (during which advances could be drawndown) was one month from the date of the application. The loan application provided for "interest periods" being (subject to agreement between the respondent and the first applicant) periods of six months commencing on the expiry of the earliest interest period, with the first interest period commencing on the date on which the loan was drawn down.

8. Section 82 provides:

"(1) A person who suffers loss or damage by conduct of another person
that was done in contravention of a provision of Part IV or V may
recover the amount of the loss or damage by action against that
other person or against any person involved in the contravention.
(2) An action under sub-section (1) may be commenced at any time
within 3 years after the date on which the cause of action accrued
(3) ..."

9. Paragraph 3 of the application simply claims relief "under s.87". It is not clear whether both s.87(1) and s.87(1A) are relied upon.

10. Section 87(1) provides:

"...where, in a proceeding instituted under, or for an offence against,
this Part, the Court finds that a person who is a party to the
proceeding has suffered, or is likely to suffer, loss or damage by
conduct of another person that was engaged in...in contravention of a
provision of Part IV or V, the Court may, whether or not it grants an
injunction under section 80 or makes an order under section 80A or 82,
make such order or orders as it thinks appropriate against the person
who engaged in the conduct or a person who was involved in the
contravention (including all or any of the orders mentioned in
sub-section (2) of this section) if the Court considers that the order
or orders concerned will compensate the first-mentioned person in whole
or in part for the loss or damage or will prevent or reduce the loss or
damage".

11. And s. 87(1A) provides:

"...the Court may, on the application of a person who has
suffered, or is likely to suffer, loss or damage by conduct
of another person that was engaged in...in contravention of
a provision of Part V,...make such order or orders as the
Court thinks appropriate against the person who engaged in
the conduct or a person who was involved in the
contravention (including all or any of the orders mentioned
in sub-section (2)) if the Court considers that the order or
orders concerned will compensate the person who made the
application,...in whole or in part for the loss or damage,
or will prevent or reduce the loss or damage suffered, or
likely to be suffered, by such a person."

12. By s.87(1C), s.87(1A) is capable of supporting an independent cause of action - the application of s.87(1A) is not dependent upon proceedings being instituted under another provision of Part VI. Section 87(1CA) provides a specific period of limitation for the commencement of applications under s.87(1A) and its effect in the present case is that proceedings under s.87(1A) based on an alleged breach of s.52 must be issued within three years after the day on which the cause of action accrued. Section 87(1CA) is not directed at s.87(1).

13. The power of the Court to make orders under s.87(1) is dependent upon proceedings being instituted under, or for an offence against, one of the other provisions of Part VI. In this case, the proceeding which brings s.87(1) into play is the claim for damages under s.82(1). The period of limitation contained in s.82(2) refers to an action commenced under s.82(1). It follows that this action, so far as it relates to relief under s.87(1), is required to be commenced within the period specified by s.82(2).

14. A cause of action accrues under s. 82 when the applicant has suffered loss or damage. A cause of action under s. 87(1A), may accrue as soon as loss or damage is likely to be suffered. In State of Western Australia v Wardley Australia Limited (1991) ATPR paras. 41-131, the Full Court of the Federal Court said at p 52,929:

"It follows that the cause of action under sub-s. 87 (1A) may
accrue as soon as loss or damage is likely to be suffered.
This means that the time bar in sub-s. 87 (1CA) upon
applications under sub-s. 87 (1A) may, in a given case, have
a different operation to that in sub-s. 82 (2)."

15. Submissions in the present case were not directed towards when a likelihood of loss or damage arose. The respondent submitted, however, that the applicant's cause of action occurred when the contract was entered on 16 January 1985, or at drawdown, or, at the latest, by the first date for the payment of interest six months later. Consequently, it was submitted, the application filed on 12 October 1990 is out of time so far as it relates to s.52. The applicant contends that its loss did not arise until the time for repayment of the loan.

16. In a schedule to the statement of claim is set out the dates on which interest was paid and the amounts of those payments. The first of these dates is 5.8.85. In the statement of claim, the applicants claim that the interest demanded (and paid) was excessive, and included withholding tax.

17. An affidavit filed on behalf of the respondent bank refers to "rollovers of the facility" and also says that "the First Applicant swapped to various currencies throughout the course of the facility." It was submitted by senior counsel for the first applicant that the expression "rollover" was inappropriate to a case such as the present. In its primary sense the term may be used in relation to bills of exchange where a fresh set is issued where the previous set matures: see K. D. Morris and Sons v Bank of Queensland [1980] HCA 20; (1980) 146 CLR 165 at 173 cited in Tamar Management Pty Ltd v James (1985) ATPR paras. 40-627 at p 47,125, where the Full Court of the Federal Court (Sweeney, Sheppard and Beaumont JJ.) said:

"To put the matter at its lowest from the respondents'
standpoint, the proper construction of sec. 82(2) is at
present very much an open question. So far as we are aware,
there is, as yet, no authority squarely in point and
authorities in other areas, such as Forster, dealing with
liability under the general law for professional negligence,
may well be distinguishable. It is unnecessary to pursue
these difficult questions. Their mere statement is
sufficient to indicate that the learned Judge rightly
refused the application.
If it were necessary, it could be added that, in addition to
the question of the proper interpretation of sec. 82(2)
already mentioned, it would seem that a further question
will arise as to its application to the facts of the present
case having regard to the circumstance that the security
given to the bank was based upon a bill line facility which
provided for roll-overs at variable rates of interest. This
raises the point, one of construction, whether in February
1981, the respondents and the bank entered into one entire
contract in that connection or whether they embarked upon a
fresh transaction on each occasion the bill was rolled (see
K D. Morris and Sons Proprietary Limited (In Liquidation) v
Bank of Queensland [1980] HCA 20; (1980) 146 CLR 165)."

18. Toohey J., who had been the primary judge in the Tamar Management Case, in James v Australia and New Zealand Banking Group Limited (No.2) 9 FCR 448 at 456, referred to this passage of the judgment of the Full Court, and continued:

"The Full Court was at pains to point out that the question
of limitations under s. 82(2) is not some abstract question
of law but a matter to be determined on the evidence."

19. The material in the present case does not suggest any rollover, in the sense used by Stephen and Wilson JJ. in the K. D. Morris Case.

20. In respect of a switching of currency (for which provision was made in clause 6.01 of the agreement), it is not possible on the present material to conclude whether there was a switching in the sense of an actual repayment of the outstanding loan and a fresh advance in foreign currency. It may be that one may properly speak of a loss crystallising at the point when there is a conversion into a different currency.

21. In Magman International Pty Limited v Westpac Banking Corporation (1991) ATPR 41-097, Sheppard J. was concerned with a foreign currency loan which had interest periods of six months in the absence of prior notice by the borrower. A letter from Westpac setting out the terms on which the facility would be made available had provided that the borrower might repay the loan in full on any interest payment date prior to the determination date by giving thirty days prior notice. At p 52,551 his Honour considered whether it could be said that at the time of the "second rollover" the applicants had suffered damage. He said:

"I confess that I have not found this an easy problem, but
bearing in mind the principles propounded by the Full Court
in the Jobbins case, I think that the better view is that
the applicants did suffer damage at or about the time of the
second rollover because of the substantial fall in the value
of the Australian dollar which had then occurred. That was
the view adopted by Cole J. in the Supreme Court of New
South Wales in Ralik Pty. Limited v Commonwealth Bank of
Australia (unreported, 14 August 1990) see p 126.
I say 'better view' because I confess that my mind has
fluctuated about the matter. In many ways I am attracted to
the proposition that, although hindsight shows that the
Australian dollar never recovered its former value after the
second rollover date, one could not have known at that time
that the trend which had set in was irreversible. There is
much to be said for the view that it was only when it was
time to repay the loan in 1989 that one could say that
losses had in fact been suffered. I feel constrained,
however, to take the view that the material date was 6
September 1985 because of the decision in the Jobbins case."

22. Senior counsel for the first applicant submitted, consistent with the proposition which Sheppard J. found attractive but felt constrained not to follow, that where a lender is bound to leave the money outstanding at any point at which the loan is "rolled over", or at any point where interest is required to be calculated and paid, whether a loss is suffered is to be determined only at the time for final repayment. There may be a probability of loss until that time for final repayment, but the possibility exists that a movement in exchange rates in the other direction which would result in no loss being made.

23. It was submitted for the first applicant that even in the situation where there were "rollovers", a loss only crystallises once there is an obligation to pay out more Australian dollars than were originally received. It was said that the present was a case where the applicant had undertaken a liability which may or may not have been more onerous and was to be distinguished from those cases where an applicant acquired property or rights which were at the time of acquisition less valuable than the price paid for them.

24. The question has been the subject of two decisions of the Full Court of the Federal Court. In Jobbins v Capel Court Corporation Limited [1989] FCA 538; (1989) 25 FCR 226 the Full Court read s. 82 of the Trade Practices Act in the context of the interpretation of statutes of limitation. A different approach was adopted by the Full Court in Wardley (supra) where the Court said at p 52,925:

"Contrary to the approach taken in Jobbins, (supra) at
228-229, in our view it is unsafe in the process of
statutory construction of s. 82 to turn first to, or to
rely too heavily upon, analogies drawn from the
interpretation by other courts of statutes of limitation
controlling causes of action arising under the general
law or other statutes."

25. In Wardley the Court preferred to construe s. 82 in the context of its setting among the range of remedies set out in Parts V and VI of the Act.

26. In Wardley the Court said at p 52,930:

"In our view, the mere assumption of an executory and
contingent legal obligation, the future performance of
which is likely to be more onerous than would have been
the case had the representations in reliance upon which
the obligation was assumed been true rather than false,
is not the suffering of loss or damage the amount of
which is forthwith recoverable by action under s. 82.
At that stage, the cause of action will not have
accrued, may never accrue, and will not accrue whilst
the suffering of the loss or damage remains a likelihood
rather than a reality."

27. The Court distinguished "the mere assumption of an executory and contingent legal obligation" from the 'lemon' cases in which the applicant is misled into buying property which is in truth less valuable than the price paid.

28. Recently, Pincus J. in Thannhauser v Westpac Banking Corporation (unreported, 9 August 1991) had occasion to consider the difference in the views of the Full Court in Jobbins and in Wardley. His Honour commented that in Wardley the Court appeared to recognise that:

"...'where an applicant has been misled into purchasing
property, the true value of which at the time of the
transaction was less than the price paid', the cause of
action accrues immediately." (p 3)

His Honour said:

"...the reasons imply that the 'mere assumption of an
executory and contingent legal obligation' is subject to a
different rule. Whether, in truth, it should be inferred
that assumption of an obligation other than one of a
'mere...executory and contingent' kind is subject to a rule
different from that applicable to acquisition of property is
unclear." (p 4)

Wardley was a case of indemnity and this differs from the assumption of obligation inherent in a loan transaction. His Honour adverted to the approach in Wardley suggesting that the time limit for actions to recover damages under s. 87 may have quite a different operation from the time limit under s. 82, and he said:

"It may be that, in a case like Thannhauser, where a
liability has been assumed, there will be an early accrual
of a cause of action under s. 87 and a later accrual of a
second cause of action under s. 82 in respect of the same
loss - perhaps with a gap of years during which there is no
cause of action."

29. As is apparent from Jobbins, Magman, Wardley and Thannhauser, the question of when loss and damage might be said to accrue in the context of a foreign currency loan is attendant with real difficulty. That difficulty is exacerbated when there is allied to a claim for damages a claim for relief under s. 87, the precise nature of such relief being unspecified.

30. In my view, as at 16 January 1985 it was not possible to say that loss or damage as a consequence of entering into the loan facility transaction was anything more than a possibility. As at the time of the date for the first payment of interest, currency movements were such as to suggest an adverse result for the applicant, but there remained a possibility of contrary currency movements which might more than offset any loss anticipated as at that date were the currency position not to improve.

31. What is abundantly clear is that the matter is such as to preclude the summary termination of the proceedings so far as they rely on s. 52.

32. A judge at first instance should not exercise the discretion to strike out parts of an application and statement of claim, the practical effect of which would be to preclude the applicant from arguing a significant part of the application which was directed to obtaining a substantial part of the relief sought, unless the case is "so clearly untenable that it cannot possibly succeed": Day v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at p 91; General Steel Industries v Commissioner for Railways N.S.W. [1964] HCA 69; (1964) 112 CLR 125 at 135.

33. An order striking out a pleading or part of a pleading should only be made in a "plain and obvious case" and "a debatable question of law" should not ordinarily be decided on such an application; Davis v The Commonwealth [1986] HCA 66; (1986) 61 ALJR 32 at 35. It is not an irrelevant consideration that the strike out application is directed substantially at material which forms the basis of alternative claims. The effect of the strike out application would not obviate the necessity for a trial or, in my opinion, substantially reduce the burden of preparation for trial, factors to which Burchett J. adverted in Sun Earth Homes Pty Ltd v Australian Broadcasting Corporation (1991) 19 IPR 201 at 213.

34. For the above reasons I decline to grant the relief sought in the notice of motion. The respondent in the principal proceedings should pay the first applicant's costs of and incidental to the notice of motion, to be taxed if not agreed.