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- SEQ Homemaker One Pty Ltd v Spar Corporate Pty Ltd[2015] QDC 238
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SEQ Homemaker One Pty Ltd v Spar Corporate Pty Ltd[2015] QDC 238
SEQ Homemaker One Pty Ltd v Spar Corporate Pty Ltd[2015] QDC 238
DISTRICT COURT OF QUEENSLAND
CITATION: | SEQ Homemaker One Pty Ltd v Spar Corporate Pty Ltd & Ors [2015] QDC 238 |
PARTIES: | SEQ HOMEMAKER ONE PTY LTD as trustee for the SEQ HOMEMAKER TRUST 1 ACN 154 270 783 and SPAR CORPORATE PTY LTD ACN 120 856 279 and DIGWOOD PTY LTD ACN 010 342 873 and SPAR AUSTRALIA PTY LTD ACN 102 281 167 |
FILE NO/S: | 1163/15 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court, Brisbane |
DELIVERED ON: | 24 September 2015 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 16 September 2015 |
JUDGE: | Smith DCJA |
ORDER: |
|
CATCHWORDS: | PRACTICE AND PROCEDURE – whether claim for estoppel should be struck out – whether claim for rectification should be struck out Uniform Civil Procedure Rules 1999 (Q) rr 171, 292, 293 Austotel Pty Ltd & Anor v Franklin Self-Serve Pty Ltd (1989) 16 NSWLR 582 Bowler v Hilda Pty Ltd (in liq) (2001) 112 FCR 59; 183 ALR 81 Legione v Hateley (1983) 152 CLR 406 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 Pihiga Pty Ltd v Roche (2011) 278 ALR 209; [2011] FCA 240 Robert Bax and Associates v Cavenham Pty Ltd [2011] QCA 53 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Webster & Anor v Lampard (1993) 177 CLR 598 |
COUNSEL | Mr P Somers for the plaintiff Mr B Le Plastrier for the first defendant |
SOLICITORS: | Russells for the plaintiff Clamenz lawyers for the first defendant |
Introduction
- [1]This is an application by the plaintiff pursuant to r 171 of the Uniform Civil Procedure Rules 1999 (Q) (“UCPR”) to strike out paragraphs 4, 4A, 5, 18, 19, 20, 28, 28A, 29, 30, 30A, 31, 31A, 31B, 32, 33 and 34 of the defendant’s amended counter claim served on 29 July 2015.[1]
- [2]Alternatively, summary judgment is sought in favour of the plaintiff dismissing paragraphs 27 to 37 of the counterclaim.
The pleadings
- [3]The plaintiff’s claim is against the first defendant for damages for breach of lease in the sum of $383,415.29. $129,820.18 represents damages for failure to pay rent and other expenses owed under the lease; $150,000 represents damages for breaches of warranties given under the lease for tenants’ fittings and $103,595.11 represents costs incurred by the plaintiff as a result of the first defendant’s breaches. The sum of $150,000 is claimed as damages for conversion as against the second defendant and the third defendant, alternatively, $150,000 against the third defendant for damages for inducing breach of contract.
- [4]Turning to the statement of claim, the plaintiff was the lessor of a shopping centre known as the “The Zone” at Rothwell. It is alleged that on 14 September 2012 the plaintiff and the first defendant entered into a lease of a shop at the shopping centre for a period commencing on 15 October 2012 and expiring on 14 October 2022.[2]The lease was for the retail sale of fruit, vegetables, groceries and meat.
- [5]The lease was secured by a guarantee given by Mr Barry Edmonds.[3]
- [6]As at 15 October 2013 the annual rent exclusive of GST was $416,568.05.[4]
- [7]On 17 April 2014 solicitors for the plaintiff issued a form seven notice to remedy breach of covenant as $56,535.21 was owed under the lease.[5]This amount was paid.
- [8]On 16 May 2014 a further form seven notice to remedy breach of covenant was served on the first defendant for failure to pay rent and other expenses totalling $108,304.58.[6]
- [9]The first defendant did not pay this amount. It is alleged in the statement of claim that this was a breach of an essential term of the lease which entitled the plaintiff to terminate the lease.[7]On or about 3 June 2014 the plaintiff terminated the lease by reason of the first defendant’s breaches.[8]
- [10]By reason of clause 17.8(1) of the lease the plaintiff alleges that it is entitled to recover the difference between the aggregate of rent and other money payable by the tenant for the remainder of the term of the lease, less any money the plaintiff receives from any new tenant.[9]Following termination the premises remained vacant until 25 June 2014 at which point in time the plaintiff entered into a new lease with a new tenant.[10]It is alleged that the difference between the rent and the old lease and the new lease amounts to $145,781.41.[11]Taking into account monies received under the guarantee and rent from the sub-lessee it is alleged that the first defendant owes to the plaintiff $129,820.18.[12]
- [11]Further, it is alleged that by clause 18.1(2) of the lease, the tenant was to remove all of the tenant’s fittings when the lease was at an end. The tenant failed to do this and as a result the plaintiff exercised its option to purchase the fittings under clause 18.3 of the lease.[13]
- [12]It is alleged that the fittings included the stock,[14]however, on or about 19 June 2014 the first defendant, second defendant, third defendant and Farmer Pats Rothwell Pty Ltd entered into a deed of settlement and release whereby Farmers Pats acquired the stock from the third defendant for the sum of $150,000.[15]It is alleged that by clause 18.3(4) of the lease the first defendant warranted that the fittings (including stock) were not the subject to any rights of any third party.[16]It is then alleged that the first defendant breached clauses 9.4(1) and 18.4 by not protecting the plaintiff’s option.[17]In the result the plaintiff claims the first defendant is liable for the value of the stock.[18]It also alleges the first defendant is liable to reimburse costs in the sum of $103,595.11.[19]
- [13]Further claims are brought against the second and third defendants for the value of the stock which I have mentioned.
- [14]Turning then to the defence, the first defendant alleges that by reason of matters pleaded in the counterclaim the plaintiff was not entitled to issue the notice to terminate.[20]It further says, in respect of the stock claim, that the term “tenants’ fittings” did not include stock.[21]It also alleges that the plaintiff failed to mitigate its loss and damages as found due to the first defendant claimed in the counterclaim should be set off against any claim found due to the plaintiff.[22]
- [15]Turning to the counterclaim, the first defendant claims rectification of the lease on the basis that the intention of the parties was that “tenants’ fittings” did not include stock.[23]
- [16]It alleges that the plaintiff engaged in misleading or deceptive conduct within the meaning of s 18 of the Australian Consumer Law and in breach of s 22 of the Retail Shop Leases Act 1994 (Q) by failing to disclose that it had made, with another party, a development application to the Moreton Bay Regional Council which proposal included the development of a shopping centre in which Woolworths was to be a tenant nearby.[24]The counterclaim alleges that, with the assistance of the plaintiff, the redevelopment was carried out in August or September 2013 and on or about 7 May 2014 Woolworths commenced operation in the Woolworths site as a supermarket and became a competitor to the first defendant.[25]It alleges that the failure to disclose these material facts was conduct which was misleading and/or deceptive and in breach of the Retail Shop Leases Act 1994 (Q).[26]In the premises the first defendant claims loss and damage and compensation.[27]
- [17]Further, it is alleged that the plaintiff in or about 24 April 2014 erected signage which directed traffic flow away from the first defendant’s premises to the newly developed Woolworths and, as a result of this misleading or deceptive signage, the first defendant has suffered loss of sales and a declining revenue.[28]It further alleges that it was an express term of the lease that the plaintiff should not reduce the flow of pedestrians or materially alter access to the premises and the redevelopment did this as a result of which the first defendant suffered loss and damage.[29]
- [18]As to the termination of the lease, the first defendant alleges that on or about 21 May 2014 the first defendant raised issues with the conduct of the plaintiff and proposed a commercial settlement of those issues.[30]It is further alleged that these actions “ought to have conveyed to the plaintiff that the proposed commercial settlement encompassed a resolution of the matters raised in the plaintiff’s notice to remedy breach of covenant of 16 May 2014”.[31]It is alleged that the plaintiff’s representative did respond to this letter on or about 2 June 2014.[32]It is alleged the first defendant relied upon this representation by taking no further action in relation to the notice to remedy breach of covenant.[33]It is alleged that the plaintiff’s conduct induced this reliance and it knew this.[34]As a result of the plaintiff’s conduct the plaintiff is estopped from relying on the notice to terminate the lease before issuing the anticipated response.[35]In the premises the notice to terminate lease was wrongfully issued and amounted to a repudiation of the lease which was accepted by the first defendant.[36]Alternatively, it is said the plaintiff was not entitled to issue the notice to terminate because a reasonable time had not elapsed after the notice to remedy breach of covenant had been issued.[37]Unconscionable conduct is also relied upon.[38]
- [19]I now turn to the applications made by the plaintiff.
Estoppel
- [20]Paragraphs 27-34 of the counterclaim relate to this issue.
- [21]Turning then to the specific evidence related to the alleged estoppel, it is common ground that the form seven was served on 16 May 2014.
- [22]On 21 May 2014 the first defendant’s solicitors wrote to the plaintiff’s solicitors[39]headed “without prejudice save as to costs”. In that letter the first defendant alleged:
“We are instructed that the new development opened on 7 May 2014, and as such, our client denies that it could not be possible that any loss or damage has been suffered on their part. Our client has experienced a declining revenue to unsustainable proportions as a result of your clients conduct. We confirm that in addition to our client claiming for loss of profits to date, our client will be claiming for future loss of profits as a result of your client’s actions, including knowingly and intentionally taking actions to harm our client’s business by directing customers away from the premises towards Woolworths, discussed in detailed below.”
- [23]The issues of signage, the development application and the duty to disclose were then raised. It was then stated:
“Offer
We refer to our client’s offer in our letter dated 29 April 2014 and request that you seek your client’s instructions in order to resolve the present issue without incurring unnecessary costs by both parties. This offer will remain open until 5pm on 27 May 2014. We note that this letter should be read in accordance with the principles espoused in Calderbank v Calderbank [1975] 3 All ER 333 and our clients reserve their rights to rely on these principles in an application for indemnity costs should the matter proceed to litigation… our client reserves all rights with respect to any claims and/or remedies they may have against you.”
- [24]
“We have recently been retained by SEQ. Please direct all correspondence in relation to the above matter to us. We have to hand a copy of your letter dated 21 May 2014. Once we have had a chance to take instructions from our client, we will provide a substantive response to your letter.”
- [25]At 9.07 a.m. an email was sent by the first defendant’s solicitors to the plaintiff’s solicitors stating: “Dear Derrick your letter is noted thank you.”
- [26]At 3.24 p.m. on 2 June 2014 the first defendant’s lawyers sent a further email to the plaintiff’s lawyers[41]noting:
“Dear Derrick we refer to our call earlier today, a letter from your client’s prior solicitors dated 16 May 2014 and our letter dated 21 May 2014. We confirm that our clients are currently negotiating a dispute between them and note that your client has not provided a response to our letter dated 21 May 2014. Our client is waiting on a response from your client so that it can assess its position in light of your response. So that we can appropriately advise our client with regard to its dispute with your client and its position in respect of your client, please confirm that your client will not take further action with regard to our client and the lease entered into between our clients until a period of at least 7 days after your client has provide (sic) a substantive response to our latest correspondence.”
- [27]On 3 June 2014 a notice to terminate the lease was served on the first defendant.[42]On 4 June 2014[43]the first defendant’s solicitors wrote to the plaintiff’s solicitors noting that the clients had been negotiating a dispute between them. It pointed out that no substantive response to the issues raised in the letter dated 21 May 2014 was received. It pointed out that:
“no response was received to our letter dated 21 May 2014, our telephone call on 2 June 2014 or our email dated 2 June 2014 despite our request for an urgent response. Your client issued our client with a notice of termination of the lease on 3 June 2014.”
- [28]It was pointed out that the conduct was misleading, deceptive, unconscionable and that the notice provided was not reasonable notice and it was alleged, in the circumstances, there was no proper right to terminate the lease.
- [29]The plaintiff in its submissions[44]submits that the pleading should firstly be struck out because the correspondence of 21 May 2014 was made without prejudice. Secondly, it submits that the matters pleaded in paragraphs 28, 28A and 29 of the counterclaim do not establish a representation on which the first defendant can rely to establish an estoppel. It is next submitted that there was no reliance on any alleged representation but, in any event, there is inadequate particularisation. Further, 31B of the counterclaim should be struck out because unconscionable conduct has not been established and no material facts are pleaded to support the allegation here.
- [30]On the other hand, the defendant in its submissions[45]submits that an exception to the without prejudice correspondence rule is where an estoppel has arisen. It is further submitted that the strike out application is hopeless and should be dismissed.
Relevant law
- [31]I firstly note that when one is concerned with the summary termination of a proceedings one should have regard to that which was stated by the High Court in Webster & Anor v Lampard.[46] The power to order summary judgment must be exercised with exceptional caution and should never be exercised unless it is clear there is no real question to be tried.
- [32]There is no doubt also that the without prejudice rule is not absolute and does admit of some exceptions.[47]Facts giving rise to an estoppel are one of these exceptions. This much is accepted by the plaintiff in its submissions.
- [33]Turning then to the principles surrounding estoppel, in Austotel Pty Ltd & Anor v Franklin Self-Serve Pty Ltd[48] it was held “for equitable estoppel to operate there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a conflict will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, and in reliance on that by the plaintiff, in circumstances where departure from that assumption by the defendant would be unconscionable.”
- [34]In Legione & Anor v Hateley[49] the vendors and purchasers entered into a contract for the sale of land in Victoria on 14 July 1978. A deposit of $6,000 was paid and the balance of $29,000 was due to be paid on 1 July 1979. On 29 June 1979 the purchasers sought an extension of three months in which to pay the balance of the price which request was refused. On 26 July 1979, the vendors served a notice of default giving 15 days in which to rectify the default. On 9 August 1979, the purchasers’ solicitor telephoned the vendors’ solicitors and spoke to the secretary of the partner of the firm handling the matter, he told her that the purchasers had arranged bridging finance from the ANZ Bank and would be ready to settle on 17 August 1979. The secretary said “I think that’ll be alright but I’ll have to get instructions.” On 14 August 1979 the vendors’ solicitors delivered a letter stating the contract had been rescinded and the tender of the balance of the purchase price was rejected.
- [35]The majority of the High Court found against an estoppel. It was held by Mason J and Deane J that a representation must be clear before it can found an estoppel and must be “unambiguous”.[50]Their Honours referred to:
“the highest standard of clarity required of a promise or a representation relied upon to found an estoppel if compared with that required when a representation is put forward as an agreed variation of contract.”[51]
- [36]Brennan J noted:
“Miss Williams did not in terms extend the time for compliance with the notice, but she expressed her expectation that the vendors would agree to accept the payment on 17 August, and that statement clearly implied that she expected that the time for compliance with the notice would be extended by the vendors and that the contract would be kept on foot thereby. But she expressed no more than her expectation. She made no promise or representation on behalf of the vendors that they would extend the time or would keep the contract on foot until 17 August; on the contrary she said that she had to obtain the vendors’ instruction. A principal is not bound by an act of an agent who declares that he has no authority from his principle to bind him by that act.” [52]
And further:
“Negotiations between solicitors are negotiations between agents and the known limits of the authority – albeit the apparent or implied authority – of the respective agents define the ambit of their negotiations and thus shape the promises or representations binding upon the clients which can be inferred from the course of the negotiations.”[53]
- [37]I consider that Legione is substantially similar to the instant case.
- [38]Another case of some relevance is Waltons Stores (Interstate) Ltd v Maher[54]. In that case Waltons negotiated with the Mahers to lease property at Nowra. The Mahers proposed to demolish existing buildings at the site and erect a new one suitable for Waltons. Waltons’ solicitors sent a proposed lease to the Mahers’ solicitors. Also the Mahers’ solicitors advised Waltons’ solicitors that demolition work had commenced and that it was essential the agreement be concluded as labour and supplies could not be organised before Christmas. The lawyer at Waltons’ solicitors advised that he had verbal instructions that proposed amendments to the lease were acceptable and he would send an amended copy of the lease and he would get “formal instructions.” He would also let the Mahers know the next day whether Waltons disagreed with any amendments in the redraft. No objections were raised by Waltons the next day nor at all. A few days later on 21 November 1983 Mahers’ solicitors sent an executed copy of the lease to Waltons solicitors. Waltons had second thoughts about entering into the lease, was advised it was not bound to proceed and instructed its lawyers to “go slow.” It was aware of the demolition work. In early January 1984 the Mahers commenced construction work. On 19 January 1984 Waltons’ solicitors wrote to the Mahers’s solicitors advising it did not intend to proceed with the lease. It was held that Waltons were estopped from denying it was bound by the lease.
- [39]Mason CJ and Wilson J held that a mere reliance on an executory promise to do something resulting in the promisee changing its position, does not of itself give rise to an estoppel. There must be something in the other party’s conduct which creates or encourages an assumption that a contract will come into existence or a promise will be performed when the party has relied on this assumption to the knowledge of the other party[55]. Their Honours also held that the mere exercise of the legal right not to exchange contracts could not be said to amount to unconscionable conduct[56].
- [40]Brennan J noted that it cannot be unconscionable for a party to withdraw from negotiations at any time before a contract is made. It is only if “a party induces another party to believe that he the former party, is already bound and his freedom to withdraw has gone that it could be unconscionable for him to assert that he is legally free to withdraw.” Also it is essential for an estoppel that the party who induces the assumption or expectation knows or intends that the other party will rely on the assumption or expectation[57].
- [41]I consider Waltons to be a different case to the instant one. In that case there was a communication that it was believed the relevant formal approval would be obtained, that the lawyer had verbal instructions and the Mahers had forwarded the executed lease to Waltons. Waltons also well knew that there was reliance and detriment. There is no similar suggestion in this case.
Disposition
- [42]I gave the first defendant the opportunity to place affidavit evidence before the court on the issue of estoppel. Instructions were obtained and the court was advised that it was not intended to place before the court any more evidence.
- [43]It is my view, based on the evidence provided, that there was no representation sufficient to give rise to an estoppel in this case. All that the plaintiff’s solicitors did was say they would get instructions. There was no positive and clear representation here. In particular there was no suggestion that no action would be taken with respect to the breach. In those circumstances I do not consider that this element of estoppel has been established.
- [44]Further, it seems to me that there was no reliance on any alleged representation when one considers the terms of the email at 3.24pm.
- [45]I also do not consider any detriment may be proved.
- [46]In those circumstances I consider there is insufficient evidence in the material before the court to establish an estoppel.
- [47]I do not consider that paragraphs 28-34 sufficiently establish an estoppel and, in the circumstances, pursuant to UCPR r 171 I strike out those paragraphs as I am satisfied that they do not establish a reasonable defence or have the tendency to delay or prejudice the fair trial of the proceeding.[58]
- [48]In those circumstances I consider that common interest privilege (in the absence of any other exception) still applies to the letter dated 21 May 2014.
- [49]I do not intend to grant summary judgment at this point. There may be other evidence which bears on this point.
- [50]An ancillary question was whether paragraph 36 should also be struck out. I consider this to be a question of fact to be determined at trial and decline to strike out paragraph 36.
The rectification point
- [51]The plaintiff submits that these paragraphs should also be struck out. It submits that there is a presumption that a written document executed by the parties is a true record of their agreement.[59]It is said that the pleadings here are insufficient as they are merely a bald assertion that the plaintiff had the alleged intention. Therefore, paragraphs 4, 4A and 5 of the counterclaim are liable to be struck out.
- [52]In oral submissions the first defendant submitted that it was highly unusual to reach a conclusion that “fittings” would include stock and really, it was not a case where the pleading should be struck out, but more rather a matter of particulars.
Disposition
- [53]
“What is of importance is that the purpose of the remedy [rectification] is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately. And there has been a firm insistence on the requirement that the mistake as to writing must be common to the parties and not merely unilateral, except in cases of a special class to which I shall refer later. It is now settled that the existence of an antecedent agreement is not essential to the grant of a relief by way of rectification. It may be granted in cases in which the instrument sought to be rectified constitutes the only agreement between the parties, but does not reflect the common intention.”
- [54]Rectification will be granted where a party establishes either:
- (a)the written record of the agreement does not reflect the alleged prior agreement the parties struck; or
- (b)the intention of the parties is mistakenly expressed in the final written instrument.
- [55]I agree with the first defendant’s submissions. It would be highly unusual that fittings would include stock. However, I agree that as presently pleaded further particulars are needed of the allegations bearing in mind only natural persons can have an intention.
- [56]I decline to strike out the pleadings concerning rectification
- [57]It may be that this point simply turns on the meaning of tenants’ fittings in the contract.
Conclusion
- [58]In conclusion, for the reasons mentioned, I strike out that part of the counterclaim dealing with the issue of estoppel but not that part dealing with the issue of rectification.
- [59]I am prepared to make further directions on the future conduct of the matter prior to the trial if requested. I will hear the parties on the question of costs.
Footnotes
[1] The application to strike out paragraphs 18, 19 and 20 was not pressed in the submissions.
[2] Paragraph 6 of the statement of claim.
[3] Paragraph 7 of the statement of claim.
[4] Paragraph 9 of the statement of claim.
[5] Paragraph 10 of the statement of claim.
[6] Paragraph 12 of the statement of claim.
[7] Paragraph 15 of the statement of claim.
[8] Paragraph 16 of the statement of claim.
[9] Paragraph 18 of the statement of claim.
[10] Paragraph 19 of the statement of claim.
[11] Paragraph 21 of the statement of claim.
[12] Paragraph 23 of the statement of claim.
[13] Paragraph 26 of the statement of claim.
[14] Paragraph 27 of the statement of claim.
[15] Paragraph 30 of the statement of claim.
[16] Paragraph 31 of the statement of claim.
[17] Paragraph 33 of the statement of claim.
[18] Paragraph 34 of the statement of claim.
[19] Paragraph 36 of the statement of claim.
[20] Paragraph 15 of the defence.
[21] Paragraph 27 of the defence.
[22] Paragraphs 44 and 45 of the defence.
[23] Paragraphs 4, 4A and 5 of the counterclaim.
[24] Paragraph 7 of the counterclaim.
[25] Paragraphs 9-11 of the counterclaim.
[26] Paragraph 16 of the counterclaim.
[27] Paragraph 17 of the counterclaim.
[28] Paragraphs 18-22 of the counterclaim.
[29] Paragraphs 23-26 of the counterclaim.
[30] Paragraph 28 of the counterclaim.
[31] Paragraph 28A of the counterclaim.
[32] Paragraph 29 of the counterclaim.
[33] Paragraph 30 of the counterclaim.
[34] Paragraph 30A of the counterclaim.
[35] Paragraph 32 of the counterclaim.
[36] Paragraphs 33 and 34 of the counterclaim.
[37] Paragraph 36 of the counterclaim.
[38] Paragraphs 38 and 39 of the counterclaim.
[39] Page 166 of the exhibits to the affidavit of Michael John Miller filed 15 June 2015, Document 6.
[40] Page 171, exhibits to affidavit of Michael John Miller filed 15 June 2015, Document 6.
[41] Page 4 exhibits to the affidavit Nicholas James Josey sworn 15 September 2015.
[42] Page 172, exhibits of the affidavit of Michael John Miller filed 15 June 2015, Document 6.
[43] Exhibit 3.
[44] Exhibit 1.
[45] Exhibit 2.
[46] (1993) 177 CLR 598 at 602-603 per Mason CJ, Deane and Dawson JJ.
[47] See Pihiga Pty Ltd v Roach (2011) 278 ALR 209; [2011] FCA 240 at 86.
[48] (1989) 16 NSWLR 582 at p 610.
[49] (1983) 152 CLR 406.
[50] Ibid. p 435.
[51] Ibid. p 436.
[52] Ibid. p 452.
[53] Ibid. p 453.
[54] (1988) 164 CLR 387.
[55] Ibid. p 406.
[56] Ibid. p 407.
[57] Ibid. p 423.
[58]Robert Bax and Associates v Cavenham Pty Ltd [2011] QCA 53 at [16].
[59]Bowler v Hilda Pty Ltd (in liq) (2001) 112 FCR 59; 183 ALR 81 at pp 85-86.
[60] (1973) 128 CLR 336.