Dustar Pty Ltd v Equititour Pty Ltd
[2007] QSC 300
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- Notable Unreported Decision
- Dustar Pty Ltd v Equititour Pty Ltd[2007] QSC 300
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Dustar Pty Ltd v Equititour Pty Ltd[2007] QSC 300
Dustar Pty Ltd v Equititour Pty Ltd[2007] QSC 300
SUPREME COURT OF QUEENSLAND
CITATION: | Dustar P/L v Equititour P/L & Ors [2007] QSC 300 |
PARTIES: | DUSTAR PTY LTD ACN 078 990 771 as trustee for THE CHRIS SEETO FAMILY TRUST |
FILE NO/S: | BS 6048 of 2006 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 24 October 2007 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 12 October 2007 |
JUDGE: | Martin J |
ORDER: | Judgment be entered for the first, second, third and fourth defendants pursuant to UCPR 293 |
CATCHWORDS: | LIMITATION OF ACTIONS – CONTRACTS, TORTS AND PERSONAL ACTIONS – WHEN TIME BEGNS TO RUN – PARTICULAR CAUSES OF ACTION – OTHER CAUSES OF ACTION – where plaintiff was the purchaser of three units from the first defendant – where contract included a lease back arrangement – where the contract was entered on the basis of certain representations – where plaintiff claims damages for negligence, and also under the FTA and TPA – where plaintiff’s claim was one for the diminution in value and also for loss of investment returns – where defendants plead that each cause of action is statute barred – when the plaintiff’s cause of action could be said to have accrued – nature of the plaintiff’s interest said to be infringed – whether action statute barred PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER RULES OF COURT – SUMMARY JUDGMENT – where plaintiff contends that case involves complex issues of law and fact that demand a trial – whether case should be summarily dismissed Fair Trading Act 1989 (Qld), s 6, s 99, s 100 Limitation of Actions Act 1974 (Qld), s 10 Trade Practices Act 1974 (Cth), s 82 Uniform Civil Procedure Rules 1999 (Qld), r 293 Commonwealth v Cornwell (2007) 234 ALR 148, considered Hawkins v Clayton (1998) 164 CLR 539, considered HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640, applied Wardley Australia Limited & Anor v Western Australia (1992) 175 CLR 514, distinguished |
COUNSEL: | S J Carius for the plaintiff/respondent T J Bradley for the first, second and fourth defendants/ applicants J D McKenna SC with D S Piggott for the third defendant/ applicant |
SOLICITORS: | Quinn & Scattini for the plaintiff/respondent Minter Ellison for the first, second and fourth defendants/ applicants Mallesons Stephen Jaques for the third defendant/applicant |
- MARTIN J: There are two applications before me. Each seeks that judgment be entered against the plaintiff pursuant to UCPR 293 or, in the alternative, that the whole of the Further Amended Statement of Claim be struck out or that certain paragraphs be struck out.
The parties
- The plaintiff (“Dustar”) was the purchaser of three home units at the Radisson Palm Meadows Resort & Conference Centre. The first defendant (“Equititour”) was the owner of the development and the vendor of the units. The second defendant (“Sullivan”) is a director of Equititour. The third defendant (“Radisson”) is a hotel operator which, at the relevant time, was the hotel operator at Radisson Palm Meadows Resort & Conference Centre and was then called Radisson Hotels Pty Ltd. The fourth defendant (“Dodd”) was a sales person who dealt with the director of Dustar.
- The owners of units were required to lease them to Radisson in return for which they would receive an income derived from the operation of the hotel so far as those units were concerned.
A claim
- Dustar claims damages:
- for negligence;
- pursuant to s 100 of the Fair Trading Act 1989 (“FTA”);
- pursuant to s 82 of the Trade Practices Act 1974 (“TPA”).
- More particularly, Dustar calculates its loss under the following heads:
- the difference in value between the purchase price paid and the true market value of the three units – approximately $300,000;
- interest on that difference at 9 per cent for eight years – $216,000;
- incidental costs of acquisition – approximately $20,000;
- net holding cost – approximately $74,000, calculated from 1998;
- loss of investment returns – approximately $218,000, calculated from February 1998; and
- incidental costs of disposal – approximately $10,000.
- Dustar pleads that:
- it entered into the contracts for sale of the units relying on representations made by Equititour, Sullivan and Dodd.
- had it known what it pleads was the true situation it would not have purchased the units.
- so far as Radisson is concerned, Dustar pleads that:
- it approved of and authorised the representations and, in so doing, breached a duty it owed to Dustar, and
- it breached the TPA by its involvement with the making of the representations.
- Dustar also alleges fraud against Equititour and Radisson based on the assertion that the representations made in a particular document were made recklessly not caring whether they were true or false.
The representations
- The representations pleaded are in two broad categories. The first could fairly be described as “puffing”, e.g., “[the] Palm Meadows Resort and Conference Hotel is destined for success”. In contrast with that sort of broad assertion the other category is more specific. For example, the “key fact sheet” promoting the project contained a detailed list of projected returns to the owners of units from year one to year ten of ownership.
- It is reasonable to draw from the pleadings that, of the many misrepresentations alleged, there are six which are central to Dustar’s case. They are:
- Radisson would be associated with the development and Dustar would financially benefit from this association;
- “20 years of rental returns – 5 year lease 3-5 year rights of renewal by the operator…Assured…”;
- Radisson’s projections as to future returns for owners were represented for years 6-10 of the lease (2003-2007) in the key fact sheet;
- it was implied that after the initial term of five years the investor had an option to renew the lease in favour of Radisson for three additional periods of five years totalling 20 years;
- it was implied that in virtue of Radisson’s involvement the plaintiff would have a guaranteed income stream for a period of 10 years;
- it was guaranteed that the investment would return 36 per cent of the purchase price in the first five years and $107,606 in the next five years.
Chronology
- Mid-1997The representations were made to Dustar.
30 June 1997Dustar entered into contracts of purchase for each unit. Each contract provided that the sale was subject to a lease between Dustar and Radisson. A copy of the lease was annexed to each sale contract.
5 February 1998Each contract settled.
Mid-January 2000Actual returns for each unit for year two made known to Dustar.
December 2002Leases expired. Radisson did not exercise its option to renew.
21 July 2006 Claim filed.
The limitation period
- Each defendant pleads that each cause of action alleged by Dustar is statute-barred. Dustar has not served a reply.
- The relevant limitation periods are:
- for negligent misrepresentation – six years from when the cause of action accrued (Limitation of Actions Act 1974 (Qld), s 10(1));
- for fraudulent misrepresentation – six years from when the cause of action accrued – the exception concerning hidden fraud is not pleaded by Dustar;
- for a breach of the Fair Trading Act 1989 (Qld) – three years from when the cause of action accrued;
- for a breach of the Trade Practices Act 1974 (Qld) – either three or six years depending upon when the cause of the action accrued.
When did the causes of action accrue?
- The applicants contend that the cause of action accrued when the contract was completed as that was when Dustar suffered damage. Dustar argues that the cause of action did not accrue until December 2002 when Radisson decided that it would not exercise its option for a further lease but informed Dustar that it was prepared to operate the resort and pay something in the order of one third of the rent it would have had to pay had the lease been renewed.
- A plaintiff cannot sue for damages in negligence until the cause of action accrues and, when it accrues, time commences to run. In Commonwealth v Cornwell (2007) 234 ALR 148, Gleeson CJ, Gummow, Kirby, Hayne, Heydon & Crennan JJ said at [5]‑[6]:
“…to show the existence of a completely constituted cause of action in negligence, a plaintiff must be able to show duty, breach, and damage caused by the breach; accordingly, in the ordinary case, it is at the time when that damage is sustained that the cause of action ‘first accrues’ for the purposes of a provision such as s 11 of the Limitation Act.
In Hawkins v Clayton, which turned upon a provision of the New South Wales legislation…, this court refused to place a particular gloss upon the statutory text. The court rejected the proposition that, at least in the case of claims in negligence for economic loss, time does not run until the plaintiff discovers, or could on reasonable inquiry have discovered, that damage has been sustained.”
- In Hawkins v Clayton (1998) 164 CLR 539, Gaudron J said, at 601:
“In actions in negligence for economic loss it will almost always be necessary to identify the interest said to have been infringed to determine whether the risk of loss or injury to that interest was reasonably foreseeable and whether a sufficient relationship of proximity referrable to that interest was present so as to establish a duty of care. If the interest infringed is the value of property, it may be appropriate to speak of a cause of action in negligence for economic loss sustained by reason of latent defect as accruing when the resultant physical damage is known or manifest… If, on the other hand, the interest infringed is the physical integrity of property then there is a certain logic in looking at the time when physical damage occurs… So too, if the interest infringed is an interest in recouping monies advanced it may be appropriate to fix the time of accrual of the cause of action when recoupment becomes impossible rather than at the time when the antecedent right to recoup should have come into existence, for the actual loss sustained only when recoupment becomes impossible.”
- The importance of identifying the interest said to have been infringed was emphasised by Gaudron J in Hawkins v Clayton where, at 601-602 her Honour observed:
“The various and complex economic relationships which are a feature of present day economic organisation suggest that loss may manifest itself in various forms, and it is for this reason that there may be occasions when it is necessary to identify precisely the interest which has been infringed.
It would be too simplistic to restrict analysis of economic loss merely to a consideration of reduced value or increased liability.”
- The importance of determining the interest infringed was also considered by the majority in Wardley Australia Limited & Anor v Western Australia (1992) 175 CLR 514, at 527:
“The kind of economic loss which is sustained and the time when it is first sustained depend upon the nature of the interest infringed and, perhaps, the nature of the interference to which it is subjected. With economic loss, as with other forms of damage, there has to be some actual damage. Prospective loss is not enough.”
- Further consideration of the appropriate principles can be found in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640. The facts, briefly, were that, before purchasing a small arcade, a prospective purchaser obtained advice from the valuer about the local retail tenancy market, but not the value of the arcade itself. A new shopping centre was being constructed nearby and the valuer advised that that construction was not likely affect existing retail tenancy levels adversely. The purchaser entered into the contract to buy the small arcade in reliance upon that advice. Three years later, after the opening of the new shopping centre, the arcade suffered a collapse in gross rental income with a concomitant fall in value. The purchaser sued the valuer alleging breach of duty by failing to warn that the effect of the new shopping centre on the retail tenancy market was uncertain. The High Court held that it was erroneous to say that the purchaser had suffered no loss at the outset, and erroneous to say that it only suffered a loss when it was reasonably ascertainable what effect the new shopping centre would have. The Court said, at [28]:
“If the plaintiff had learned the day after entering the contract to buy the [arcade], or the day after completing that contract, that the defendant’s conduct had been misleading in the sense ultimately found by the trial judge, it could have started proceedings then and there.”
- The evidence which was unchallenged was that on either of those dates the plaintiff was in fact worse off as a result of the defendant’s breach, since the market value was less than the price. I note that that is the basis upon which Dustar calculates its first head of damage, viz, the difference in value between the purchase price paid and the true market value.
- In Astonland, the High Court distinguished the facts of that case from those in Wardley. In Wardley it was held that a risk of loss is not itself a category of loss, and that if a plaintiff enters a contract exposing it only to a contingent loss or liability, the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual. In this case the events which occurred after purchase, e.g., the non-renewal of the lease by Radisson, go to demonstrate the true value of the property obtained not the first existence of damage. As was said by Dixon J, with respect to the purchase of shares, in Potts v Miller (1940) 64 CLR 282 at 299:
“[The] real value of what the plaintiff got must be ascertained in the light of the events which afterwards happened, because those events may show, for instance, that what the shares might have sold for was not their true value or that it was a worthless company.”
- As the High Court noted at [39] in Astonland:
“In the same way, in Kizbeau Pty Ltd v W G & B Pty Ltd this Court pointed out that, in many fields of law, assessments of compensation or value at one date are commonly made taking account of all matters known by the later date when the court’s assessment is being carried out.”
- The manner in which the claim by Dustar is pleaded in this case demonstrates that it falls clearly into that category of case in which one looks to the difference in value between purchase price and true value of the asset acquired. It was argued on behalf of Dustar that this was a case in which it was not merely purchasing an asset – it was purchasing an ongoing revenue stream that was guaranteed by the leasing arrangement with Radisson. Dustar argued that there was no actual loss until Radisson elected not to renew the lease, causing a significant diminution in the stream of income. Dustar relies upon the fact that Radisson did not renew its lease when able to do so in December 2002 and, therefore, the cause of action did not accrue until that time.
- In making that submission, counsel for Dustar relied upon the analysis by McGill DCJ in Bullock v O'Sullivan & Ors [2003] QDC 155. In other words, Dustar categorises its case as being a “contingent-loss case” in which the cause of action does not arise until a particular event occurs.
- I cannot accept that argument. The claim made by Dustar, apart from the claim for diminution in value in the units purchased, is also for the loss of investment returns with such loss being dated from the time of the settlement of the contracts in 1998.
- The unchallenged evidence was that Dustar was made aware that the projected income had not been reached at the end of the second year and the projected income was not reached for any year up to and including 2002. Dustar argued that the loss only crystallised when Radisson declined to renew its lease. However, that does not sit with the evidence that the true position about the income stream was made known to Dustar through management reports some three years before that.
- In paragraph 50 of the Further Amended Statement of Claim it is alleged that, as a result of the negligence etc. of Equititour and Radisson, Dustar suffered loss and damage. That loss and damage is particularised as being constituted by, among other things:
- the entry into and completion of the contracts for sale, and
- the suffering of the loss particularised in paragraph 55 of the Further Amended Statement of Claim.
- The loss particularised in paragraph 55 included:
- the difference in value between the purchase price and the true market value of the units,
- the interest on that difference from the time of settlement of the contracts for the purchase of those units,
- the net holding cost for the period from 1998, and
- the loss of investment returns calculated from 1998.
- The causes of action, as pleaded by Dustar, were complete upon the settlement of the contracts, at the latest. There were, of course, consequential losses available to be claimed by Dustar after that. The case for Dustar cannot be supported as being one brought within time.
The Fair Trading Act claim
- The cause of action relied upon by Dustar under this statute is constrained by s 100(9) of the FTA. It provides:
“(9)It shall not be competent to the court to make an order under this section merely because of loss or damage suffered or likely to be suffered by a person because of a contravention of section 38 or 39 or a code of practice unless the person is a consumer.”
- Dustar pleads that Equititour and Sullivan breached s 38 of the FTA and so, because of s 100(9), Dustar can only recover if it is a “consumer”. Dustar pleads that it is a consumer – but it is not.
- The word “consumer” is defined in s 6 of the FTA:
“(1)In this Act—
consumer means a person who, in a particular transaction, whether a separate contract or separate transaction within a contract, acquires goods or services or an interest in land as a consumer.
(2)A person acquires goods or services or an interest in land as a consumer under subsection (1) if—
(a)the person—
(i)is an individual; and
(ii)acquires the goods, services or interest otherwise than for a business carried on by the person, whether as an individual or a member of a business partnership; or
(b)the price of the goods, services or interest is not more than $40000, after discounting for any GST payable on the supply of the goods, services or interest.
(3)If a person acquires goods for resupply by way of sale, exchange, lease, hire or hire-purchase, the person does not acquire the goods as a consumer.
(4)For the purposes of subsection (2)(b), if the price of goods or services or an interest in land cannot be decided by reference to a cash price specified in the contract concerned, the price is taken to be the reasonable cash price having regard to the circumstances of the case.
(5)If it is claimed in a proceeding or about an issue under this Act that a person is a consumer of particular goods or services or an interest in land, it must be presumed unless the contrary is proved that the person is a consumer of the goods, services or interest.”
- As Dustar is a corporation it will only be a consumer within the definition in s 6(2)(b) if the price of the interest in land it purchased was not more than $40,000. As the price for each of the interests in land purchased by Dustar was $171,900 it is not a “consumer” and it follows that it is “not competent” for a court to make an order of the type sought under s 100 of the FTA.
- The FTA claim is struck out on that basis.
- I note that, under s 99(3) and s 100(5) of the FTA, a claim had to be commenced within three years “after the date on which the cause of action accrued”. There is no cause of action in these circumstances under the FTA until damage has been suffered. Even on Dustar’s argument that damage did not occur until December 2002 this part of the action was out of time in December 2005, some seven months before the claim was filed.
The Trade Practices Act claim
- Dustar pleads that Equititour and Sullivan breached the TPA and, as a result, it suffered damage. The statutory remedy under s 82 of the TPA is only available if the action begins within six years after the day on which the cause of action accrued – s 82(2). The final element of a TPA cause of action is suffering of damage and, for the same reasons that the common law action is out of time, so is the TPA claim.
Summary judgment – the principles
- UCPR 292 provides:
“293 Summary judgment for defendant
(1)A defendant may, at any time after filing a notice of intention to defend, apply to the court under this part for judgment against a plaintiff.
(2)If the court is satisfied—
(a)the plaintiff has no real prospect of succeeding on all or a part of the plaintiff’s claim; and
(b)there is no need for a trial of the claim or the part of the claim;
the court may give judgment for the defendant against the plaintiff for all or the part of the plaintiff’s claim and may make any other order the court considers appropriate.”
- The “summary judgment will not be obtained as a matter of course and the judge determining such an application is essentially called upon to determine whether the respondent to the application has established some real prospect of succeeding at a trial; if that is established then the matter must go to trial.” (per Williams JA, Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 at 236-237).
- Where each of the causes of action is out of time, then Dustar has no real prospect of success at trial.
- It was contended for Dustar that, putting to one side the question of the accrual of the cause of action, this was not an appropriate case for summary dismissal as there are complex issues of law and fact that demand a trial. There is nothing in this case which strikes me as being unusual. It is not uncommon for cases of this nature to be agitated and the principles to be applied are well known.
Decision
- The finding that the cause of action upon which Dustar’s case rests arose more than six years before the claim was filed leads, inevitably, to the conclusion that the applicants have made out their case with respect to each cause of action (including the statutory causes of action) and that judgment should be entered for the first, second, third and fourth defendants pursuant to UCPR 293.