Westpac Banking Coporation v Klef Pty Ltd
[1998] QCA 311
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- Westpac Banking Coporation v Klef Pty Ltd[1998] QCA 311
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Westpac Banking Coporation v Klef Pty Ltd[1998] QCA 311
Westpac Banking Coporation v Klef Pty Ltd[1998] QCA 311
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Brisbane
| Before | McMurdo P. Pincus J.A. Jones J. |
Appeal No. 8204 of 1998
[Westpac v. Klef P/L]
BETWEEN:
WESTPAC BANKING CORPORATION
(ARBN 007 457 141)
(Defendant) Applicant
AND:
KLEF PTY LTD
(ACN 002 311 453)
(Plaintiff) Respondent
Appeal No. 8205 of 1998
[Westpac v. Klef P/L]
BETWEEN:
WESTPAC BANKING CORPORATION
(ARBN 007 457 141)
(Defendant) Applicant
AND:
DYNIES PTY LTD
(ACN 008 586 570)
(Plaintiff) Respondent
REASONS FOR JUDGMENT - THE COURT
Judgment delivered 16 October 1998
- These are applications for leave to appeal under s. 118(3) of the District Court Act 1967 against orders of the District Court dismissing summonses issued by the applicant in actions pending in that court to strike out paragraph 15 of each of the respondent’s plaints, which are in similar terms. The two applications raise the same issues and it is convenient to deal with them by discussing only the first application, that relating to the action brought by Klef Pty Ltd. We propose to call that company the plaintiff and the applicant Westpac Banking Corporation will be called the defendant. With the consent of all parties, full argument was heard as to the merits of the appeals: should the applicant be successful, that argument was not significantly more complex than, and was interconnected with, the argument relied on in the applications for leave to appeal.
- The plaintiff issued proceedings in the District Court claiming monies said to be recoverable by it from the defendant, on three grounds. The application brought in this Court relates to one of the bases of the plaintiff’s claim, namely that of damages for fraudulent misrepresentation. The plaint alleges in effect that the defendant advised the plaintiff that it had approved the establishment of an offshore currency loan on terms including that all payments by the plaintiff to the defendant should be free of deductions. The plaint says that the defendant’s letter of approval suggested that the plaintiff accept the terms the defendant proposed, including a term that payments should be free of deductions and that was said to have an effect of imposing on the plaintiff an obligation to pay withholding tax. Then, the plaint alleges, the defendant provided the plaintiff with a letter proposing acceptance by the plaintiff of an offshore loan facility on conditions including one which was to the effect that payments made by the plaintiff should be free of taxes "unless [the plaintiff] is compelled by law to deduct or withhold the same", in which event the plaintiff should pay such additional amount as would result in the receipt by the defendant of the sum it would have got "had no such deduction or withholding been made".
- The plaintiff’s case based on fraud is, in essence, that the defendant implicitly represented that these arrangements were lawful, whereas they were in fact unlawful. The plaint goes on to say, in substance, that the loan arrangements foreshadowed were made and carried out, that the defendant further represented that it was entitled "to charge the plaintiff with withholding tax" and that, acting in reliance upon the representations set up, sums reimbursing withholding tax were paid by the plaintiff to the defendant. The plaint made allegations which, if correct, appear to bring the case within the decision of the High Court in David Securities Pty Limited v. Commonwealth Bank of Australia,[1] insofar as that case decided that certain sorts of arrangements between mortgagor and mortgagee are void under s. 261(1) of the Income Tax Assessment Act 1936 ("the Act").
- Then, having alleged that the defendant’s terms were void under s. 261 of that Act, the plaint said that the defendant knew or ought to have known that. By way of particulars, the plaint said in effect that the defendant would or should have been aware that the plaintiff’s agreement to pay the withholding tax was void under s. 261 of the Act and "recklessly failed to take appropriate steps to so inform itself". The defendant’s solicitors wrote a letter to the effect that they desired certain documents and particulars to be supplied. They said they could not plead a defence until this was done. That assertion, if one examines the particulars sought, appears not to be very candid. The defendant’s solicitors required to know the times at which it was alleged the defendant either possessed or ought to have possessed the relevant knowledge of the covenants and stipulations which it was alleged the defendant knew to be void, which of the defendant’s servants or agents possessed the relevant knowledge and matters of that kind - requests for information possession of which seemed most unlikely to have any bearing upon the content of the defence. Some of the defendant’s requests were answered and some not. The defendant applied to the chamber judge at the District Court Brisbane for relief including that the claim for damages for fraudulent misrepresentation be struck out.
- The arguments advanced below were, we gather from the reasons of the learned Chief Judge of the District Court who dealt with the matter and from the outline of argument there relied upon by the defendant, that there was no allegation that the representations were made with the intention of inducing the plaintiff to enter into the borrowing arrangement; that the representation pleaded cannot be extracted from documents and conversations particularised and that the particulars are inadequate. The judge rejected all these contentions.
- The argument advanced in this Court had a different emphasis from that submitted below. Counsel for the defendant additionally argued that the allegation of fraud made was one based on inferences and should be struck out as an abuse of process: reference was made to the decision of the Federal Court in White Industries (Qld) Pty Ltd v. Flower & Hart (a firm),[2] in which it was held that, in circumstances there set out in some detail, a claim brought in fraud in that Court was an abuse of process. It was argued in this case that it is evident on the face of the pleading that the fraud claim has this character.
- It is convenient to begin by referring to some remarks of Lord Herschell in Derry v. Peek,[3] to which authority counsel for the applicant referred us. Lord Herschell there referred with approval to a statement to the effect that in a fraud action if the defendants -
". . . stated a fact which was untrue for a fraudulent purpose, they at the same time not believing that fact to be true, in that case it would be both a legal and moral fraud". (367)
Then at p. 374 Lord Herschell expressed the opinion that fraud is proved -
". . . when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false". (emphasis added)
The plaintiff has not pleaded its case using the language we have quoted, but that circumstance cannot prevent it from arguing, depending on the evidence given at the trial, that it can succeed on the basis that the defendant made an implicit representation of law fraudulently, without believing it to be true. Evidence at a trial commonly raises issues of fact not precisely covered by the pleadings: Southern Resources Ltd v. Residues Treatment and Trading Co. Ltd.[4] The plaintiff can hardly be expected to know now precisely what was the state of the defendant’s belief with respect to the legality of requiring the plaintiff to meet the tax obligation. It would, nevertheless, be wise for the plaintiff to heed the requirement to plead allegations of fraud specifically, should it become aware of additional relevant facts or issues upon which it intends to rely: see Ghazal v. Government Insurance Office of New South Wales.[5]
- It is unnecessary to state a concluded view about all the propositions advanced. It is clear that the submission that the case of fraud pleaded is an abuse of process has no real substance on the material before this Court. If one is to consider what commonsense inferences might be drawn, depending on the evidence at the trial, a judge might infer that the defendant formed a view about the legality of its requirement to be reimbursed for withholding tax - a requirement which, it is alleged, was not a lawful one. Counsel for the plaintiff has, in this connection, drawn our attention to the fact that in the David Securities case, the proposition that the corresponding obligation there in question was made void by s. 261 of the Act was not challenged, when the case was before the Full Court of the Federal Court, by counsel on behalf of the major bank which was the defendant in that case.
- One should not attempt to predict precisely the inferences a trial judge might draw. There will at that stage presumably be documents before the court showing what view the defendant took at relevant times on the s. 261 issue. Of course, if the defendant produces no material on that point, a judge may be able to legitimately decide the case on the basis that such material could not have assisted it. But it is in our view evident that a trial judge might conclude, depending on the evidence adduced or not adduced, that the defendant probably knew there was very good reason to doubt the legality of its demand and dishonestly induced the plaintiff to think otherwise.
- It is a strong thing to shut a plaintiff out, on the basis of the content of its pleading, and that can never be done unless it is clear that on no evidence admissible under that pleading could the case succeed: General Steel Industries Inc. v. Commissioner for Railways (N.S.W.).[6] Further, the argument advanced before us is not one which, so far as may be deduced from the reasons given below and the outline of submissions there relied upon by the defendant, was put before the primary judge.
- An application for leave to appeal from an interlocutory judgment will commonly be refused unless it appears that the decision from which it is sought to appeal is attended with sufficient doubt to warrant its being reconsidered and also that, supposing the decision below to be wrong, substantial injustice would result if leave were refused: Decor Corporation Pty Ltd v. Dart Industries Inc.[7]
- The defendant claims that if the fraud plea is struck out, the question as to whether the plaintiff’s remaining cause of action is statute barred could be determined as a separate question in the action. It further claims it will be forced to incur costly interlocutory steps, especially by way of discovery, should the fraud plea remain. Whilst the cost of interlocutory steps is concerning, neither of these matters in our view constitutes substantial injustice in this case, warranting the granting of leave to appeal.
- Further, the defendant has not demonstrated that there is a question of law involved in such a case as to warrant the grant of leave, nor does any other consideration support the making of such an order. Indeed, the interests of justice would seem to be best served by a trial on the merits in the District Court. The applications for leave to appeal are refused.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Brisbane
Appeal No. 8204 of 1998
[Westpac v. Klef P/L]
BETWEEN:
WESTPAC BANKING CORPORATION
(ARBN 007 457 141)
(Defendant) Applicant
AND:
KLEF PTY LTD
(ACN 002 311 453)
(Plaintiff) Respondent
Appeal No. 8205 of 1998
[Westpac v. Klef P/L]
BETWEEN:
WESTPAC BANKING CORPORATION
(ARBN 007 457 141)
(Defendant) Applicant
AND:
DYNIES PTY LTD
(ACN 008 586 570)
(Plaintiff) Respondent
McMurdo P.
Pincus J.A.
Jones J.
Judgment delivered 16 October 1998
Judgment of the Court
APPLICATIONS FOR LEAVE TO APPEAL REFUSED.
| CATCHWORDS: | CIVIL - Section 118(3) District Court Act 1967 applications for leave to appeal from an interlocutory judgment - plaints alleging fraud in defendants’ implicit representation that arrangements were lawful when in fact unlawful David Securities Pty Ltd v. Commonwealth Bank of Australia (1992) 175 C.L.R. 353 White Industries (Queensland) Pty Ltd v. Flower & Hart (a firm) [1998] 806 F.C.A. (14 July 1998) Derry v. Peek (1889) 14 App.Cas. 337 Decor Corporation Pty Ltd v. Dart Industries Ltd (1991) 33 F.C.R. 397 |
| Counsel: | Mr P.A. Keane Q.C. with him Mr J.K. Bond for the applicant in each case. Mr P.R. Dutney Q.C. for the respondent in each case |
| Solicitors: | Allen Allen & Hemsley for the applicant in each case. Quinn & Scattini for the respondent in each case. |
| Hearing Date: | 6 October 1998 |