Re Hongkong Bank of Australia Limited v Stuart Campbell Roberts and Carolyn Joy Roberts [1992] FCA 36 (10 February 1992)

FEDERAL COURT OF AUSTRALIA

Re: HONGKONG BANK OF AUSTRALIA LIMITED
And: STUART CAMPBELL ROBERTS and CAROLYN JOY ROBERTS
No. V G31 and 241 of 1991
FED No. 23
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY
GENERAL DIVISION
Northrop(1), Jenkinson(1) and Lee(1) JJ.

CATCHWORDS

Practice and Procedure - appeal from decision granting leave to amend statement of claim - whether cause of action disclosed - whether addition of cause of action oppressive.

Trade Practices Act 1974 ss.51A, 52, 82, 87

Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc. [1981] HCA 39; (1981) 148 CLR 170

HEARING

MELBOURNE
10:2:1992

Counsel for the Applicant/Appellant: Mr J.L. Dwyer, QC with

Mr T.J. Ginnane

Solicitors for the Applicant/Appellant: Mallesons Stephen Jaques

Counsel for the Respondents: Mr J.D. Loewenstein

Solicitors for the Respondents: Messrs Rigby Cooke

ORDER

The applicant be given leave to appeal.

The appeal be allowed.

The order of 13 August 1991 granting leave to amend the statement of claim be set aside.

The application for leave to amend the statement of claim filed 16 July 1991 be dismissed.

The respondents pay the costs of the dismissed application and of this appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

On 13 February 1991, Mr and Mrs Roberts ("Roberts") commenced proceedings in this Court against Hong Kong Bank of Australia Ltd ("the Bank") seeking damages for breach of a contract of employment made between the Bank and Mr Roberts. The statement of claim also alleged that representations had been made by the Bank in respect of a loan facility extended to Roberts by the Bank and that the making of the representations involved conduct which contravened the provisions of s.52 of the Trade Practices Act 1974 ("the Act"). Roberts sought an order under s.87 of the Act varying the terms of the loan agreement and of the mortgage securing the loan and an injunction restraining the Bank from taking any steps to enforce the mortgage.

2. In due course a defence and cross-claim was filed and Roberts filed a reply and a defence to the cross-claim. On 24 May 1991 the Bank filed a reply to the defence to its cross-claim. By 27 May 1991 the parties had requested and received further and better particulars of their respective pleadings.

3. Each party had provided discovery of its documents by 14 June 1991.

4. At a directions hearing on 24 May 1991, the parties were given leave to administer interrogatories by 21 June 1991 and answers to any interrogatories so administered were to be provided by 12 July 1991. No interrogatories were administered by the parties.

5. On 18 June 1991 the documents discovered by the Bank were inspected by Roberts and, on 25 June 1991, copies of documents discovered by the Roberts were provided to the Bank at its request.

6. On 16 July Roberts filed a notice of motion seeking leave to amend the statement of claim by adding 22 paragraphs which alleged additional facts and pleaded other conduct of the Bank said to be in contravention of s.52 of the Act and to attract liability under s.82 of the Act and in negligence and made additional claims for loss or damage suffered in respect of those causes of action.

7. On 13 August 1991 a Judge of this Court granted leave to amend the statement of claim in the manner requested by Roberts.

8. The Bank now seeks leave to appeal from that interlocutory decision, the grounds of appeal being that his Honour erred in exercising his discretion to allow the amendments by failing to hold that the proposed amendments disclosed no cause of action or alternatively, by failing to give sufficient weight to the consideration that the amendment to the statement of claim would vastly enlarge the ambit of the proceedings at a late stage of preparation of the matter for hearing.

9. At the commencement of the hearing of the application for leave the Bank sought leave to rely upon further evidence, both on the hearing of the application for leave and upon the hearing of the appeal, if leave to appeal were granted.

10. The Court granted leave to the Bank to rely on the affidavit in respect of its application for leave to appeal, but reserved its decision as to any further use of the affidavit thereafter.

11. In their statement of claim Roberts pleaded that between 1981 and January 1985 Mr Roberts was employed by Wardley Australia Ltd ("Wardley") and that from February 1985 to February 1990 Mr Roberts was employed by the Bank. In its defence the Bank alleged that Mr Roberts commenced his employment with the Bank on 1 February 1986.

12. It was pleaded in the statement of claim, inter alia, that in the period of Mr Roberts' employment with the Bank, the Bank engaged in conduct in trade or commerce that was misleading or deceptive in that the Bank made representations to Roberts that in the event of termination of Mr Roberts' employment certain concessions would be made in respect of any loan facility provided to Roberts by the Bank, when the Bank always intended to reserve a right to act in a manner contrary to those representations.

13. The amendments to the statement of claim include causes of action under s.82 of the Act and in negligence against the Bank in respect of events which occurred before Mr Roberts commenced his employment with the Bank.

14. The amendments plead that in September/October 1984, one Tomkins, Executive Director and Manager of Wardley made representations to Mr Roberts as follows:

"In or about September-October 1984 the said Tomkins,
on behalf of Wardley, represented and stated to (Mr)
Roberts, with the intention that (Mr) Roberts rely
thereon that -
(a) (Mr) Roberts (then aged 47 years of age) had better
career-prospects and job-security if he were to relocate
from Wardley, Sydney to Wardley, Melbourne;
(b) Wardley would increase the Staff Housing Loan then provided
to (Mr) Roberts and/or Mrs Roberts, as an incentive and
advantage to (Mr) Roberts in re-locating from Sydney to Melbourne;
(c) it was almost certain that the Australian Government would
issue to the Bank or alternatively the Hongkong company as
one of the foreign banks to be licensed to operate in Australia."

15. It may be noted that it is expressly pleaded that in so acting Tomkins acted on behalf of Wardley.

16. The amendments go on to plead that the following representations are to be implied from the express representations set out above:

"It was implied by and from the representations and
statements referred to in the immediately preceding
paragraph (and it was intended to be understood by
(Mr) Roberts as such) that -
(a) (Mr) Roberts would have long-term security
in employment, more particularly given
(Mr) Roberts' age;
(b) (Mr) Roberts would secure for himself
financial stability and security of employment;
(c) (Mr) Roberts would be able to capitalise
(so far as his employment and generally
was concerned) on the bank being granted
to (sic) licence as aforesaid;
(d) (Mr) Roberts, by being employed by Wardley
and thereafter the Hongkong company and/or
the Bank could be assured that given the
nature and standing of the Bank and the
Hongkong company, the prudential manner in
which the Hongkong company conducted its
affairs and business and the security
which working in the banking-industry in
Australia afforded and offered, that his
employment with Wardley and/or the Bank
and/or the Hongkong company was not only
secured and stable but also additionally
provided career-prospects;
(e) The Directors, Chief Executive Officers
and Manager of the Bank and/or the
Hongkong company would, consistent with
good banking practice and management
conduct the business of the Bank and/or
the Hongkong company responsibly and so
prudently as not to, inter alia, -
(i) place the profitability or
viability of the bank and/or
the Hongkong company at risk;
(ii) benefit themselves;
(iii) place at risk the
employment of those employed
by the Bank and/or the
Hongkong company."

At once it may be said that there appears to be little foundation for the implications pleaded in items (c), (d) and (e) and indeed it may be said that it is not even arguable that any such representations may be implied from the limited express representations pleaded.

17. Furthermore, the linking of the Bank with the representations appears to rely upon no more than a pleading that Wardley, at a later date, became a wholly owned subsidiary of the Bank and the Bank became a wholly owned subsidiary of the Hongkong and Shanghai Banking Corporation Limited ("the Hongkong company") at about the time a banking licence was issued to the Bank.

18. The amendments also plead that when the representations were made by Tomkins the Bank "did not form any or any adequate belief as to whether the Bank would abide by the said representations...". Perhaps that pleading is to be understood as notice from Roberts that they intend to rely upon the provisions of s.51A of the Act. The paragraph goes on to plead that the Bank did not intend to "adhere" to the representations or was recklessly indifferent to whether it would "adhere to or abide by or be bound by" the representations or "observe or keep the various matters, the subject of the representations ...".

19. The amendments allege that Mr Roberts relied upon the representations and that the representations were false.

20. There is an additional pleading in negligence which treats the same representations as negligent mis-statements and the implied representation (e) referred to above as the foundation for a continuing duty of care. In that pleading, however, the representations are said to have been made by the Bank. No additional material facts are pleaded to show how that is so. In a separate paragraph, it is pleaded as an alternative that the Bank "by its servants and/or agents made the representations" referred to, but again, no further facts are pleaded to show how that assertion is to be established.

21. Apart from pleading a corporate relationship, the statement of claim is conspicuous in its failure to plead that the Bank as a separate entity was aware of and/or adopted the representations of Tomkins made as an employee of Wardley.

22. The pleading may have been sufficient to expose a cause of action against Wardley, but in the absence of any further pleading it was wholly inadequate to raise any cause of action against the Bank.

23. In Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc. [1981] HCA 39; (1981) 148 CLR 170, Gibbs C.J., Aicken, Wilson and Brennan JJ. said the following at p 177:

"Nor is there any serious dispute between the parties
that appellate courts exercise particular caution in
reviewing decisions pertaining to practice and
procedure. Counsel for Brown urged that specific
cumulative bars operate to guide appellate courts in
the discharge of that task. Not only must there be
error of principle, but the decision appealed from
must work a substantial injustice to one of the
parties. The opposing view is that such criteria are
to be expressed disjunctively. Cases can be cited in
support of both views: for example, on the one hand,
Niemann v Electronic Industries Ltd ((1978) VR 431 at
p 440); on the other hand, De Mestre v A.D. Hunter
Pty Ltd ((1952) 77 WN (NSW) 143 at p 146). For
ourselves, we believe it to be unnecessary and indeed
unwise to lay down rigid and exhaustive criteria. The
circumstances of different cases are infinitely
various. We would merely repeat, with approval, the
oft-cited statement of Sir Frederick Jordan in In re
the Will of F.B. Gilbert (dec). ((1946) 46 SR (NSW)
318 at p 323):
"...I am of opinion that... there is a
material difference between an exercise of
discretion on a point of practice or
procedure and an exercise of discretion
which determines substantive rights. In
the former class of case, if a tight rein
were not kept upon interference with the
orders of Judges of first instance, the
result would be disastrous to the proper
administration of justice. The disposal
of cases could be delayed interminably,
and costs heaped up indefinitely, if a
litigant with a long purse or a litigious
disposition could, at will, in effect
transfer all exercises of discretion in
interlocutory applications from a Judge in
Chambers to a Court of Appeal."
See also, Brambles Holdings Ltd v Trade Practices
Commission ((1979) [1979] FCA 80; 40 FLR 364 at p 365; [1979] FCA 80; 28 ALR 191 at
p 193); Dougherty v Chandler ((1946) 46 SR (NSW) 370
at p 374). It is safe to say that the question of
injustice flowing from the order appealed from will
generally be a relevant and necessary consideration."

24. Although the decision of his Honour has not determined any substantive right, it does preclude the Bank from applying to strike out the amendment that has been allowed and substantial additional costs will be incurred before the defect in the pleading is exposed by a finding.

25. The new causes of action added by the amendment cannot succeed as the pleading now stands and to allow them to proceed would be futile. On the hearing of the application for leave to appeal no indication was given by counsel for Roberts that an application would or could be made to seek to make any further amendment to the pleading which may remedy the fatal defects. In these circumstances the amendment remains futile and his Honour's decision to allow the amendment should be set aside.

26. We now comment on the further ground of appeal that in exercising his discretion his Honour should have given greater regard to the oppressive result that would follow amendment of the statement of claim to introduce the issue of the manner of conduct of the business of the Bank in the period of Mr Roberts' employment.

27. The principal facts relevant to causes of action under the Act and in negligence are those which bear upon the misleading or deceptive nature of the representations or the negligent conduct of the Bank at the time the representations were made and it would be difficult to see how any issue as to the subsequent management of the activities of the Bank could arise in respect of those causes of action. However, if the pleading is intended to extend, as appears to be the case, to allege a duty of care on the part of the Bank to manage its affairs in a manner that was consistent with an implied representation as to how the Bank would conduct its business, the entire history of the Bank's business would be in issue and would expand enormously the scope of the trial.

28. Although his Honour did not refer expressly to that issue, it may be taken that having heard the arguments of counsel on the point, his Honour gave it appropriate consideration in arriving at his decision. It was a matter for his Honour as to whether it was appropriate to include the further cause of action at that stage of preparation of the matter for trial or to leave it to be pleaded in a separate proceeding and if the outcome of the application for leave to appeal were to turn on that ground we would not be disposed to grant leave.

29. With regard to the additional evidence to which the Bank sought leave to refer on the hearing of the appeal, namely that the Bank was not incorporated until June 1985 and did not receive the grant of a banking licence until February 1986, in the light of our conclusion that leave to appeal should be granted and the appeal allowed, it is unnecessary to determine whether leave to rely on that additional evidence should be granted. However, it may be said that the absence of any explanation as to why the evidence now said to be material was not presented to his Honour, does not assist the Bank's application.

30. The Bank will be given leave to appeal and the appeal will be allowed. The order of 13 August 1991 granting leave to amend the statement of claim will be set aside and an order made that the application for leave to amend the statement of claim filed 16 July 1991 be dismissed. There will be an order that Roberts pay the costs of the dismissed application and of this application for leave to appeal and this appeal.