COURT
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Spender(1), Gummow(1) and Lee(1) JJ.

CWDS
  Practice and Procedure - application for leave to appeal against decision on
strike out application - correctness of the reasoning in Commercial Bank of
Australia v Carruthers (1964) 6 FLR 247 - proper construction of s. 6 of Lord
Tenterden's Act 1828 (Imp.) - whether grant of leave appropriate - leave
refused.
  Bankruptcy Act 1966
  Trade Practices Act 1974
  Usury, Bills of Lading, and Written Memoranda Act 1902 (N.S.W.) Companies
(Queensland) Code
  Statute of Frauds Amendment Act 1828 (9 Geo. IV, c. 14) (U.K.) ("Lord
Tenterden's Act")
  Commercial Bank of Australia v Carruthers (1964) 6 FLR 247
  Diamanti v Martelli (1923) NZLR 663
  The Mutual Life and Citizens' Assurance Company Limited v Evatt (1968) 122
CLR 556
  Clydesdale Bank Limited v J. and G. Paton (1896) AC 381

HRNG
PERTH
#DATE 17:7:1991
  Counsel and solicitors       Mr E.M. Heenan QC and
for the appellant:             Mr R.E. Cock instructed by the State
                               Crown Solicitor.
Counsel and solicitors         Mr D.M.J. Bennett QC and
for the third respondent:      Mr M.J. Stevenson, instructed by Messrs
                               Jackson McDonald.

ORDER
  The application for leave to appeal be refused.
  There be no order as to costs of the application.

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

JUDGE1
  By motion dated 26 February 1991, the third respondent ("Mr Connell") seeks
leave to appeal from orders made on 15 February 1991 by a Judge of this Court
(French J.) upon a motion by Mr Connell, dated 23 January 1991, in which
orders had been sought dismissing the action or striking out portions of the
Amended Statement of Claim in this consolidated proceeding.  On 22 February
1991, French J. extended up to and including 26 February 1991, the time
limited to Mr Connell for filing the present motion for leave to appeal.  The
application for leave was opposed by the applicant in the principal proceeding
("the State").
2.  The nature of the principal proceeding out of which the present
application for leave to appeal arises, is outlined in the Reasons for
Judgment in appeal No. WA G17 of 1991, and these reasons should be read
against the background of what is there said.  But it should be noted that the
State brings its action against the respondents upon differing grounds.
Against the first, second and fourth respondents, the allegation is that the
State has suffered loss or damage by contravention of s. 52 of the Trade
Practices Act 1974 ("the Act"). Against Mr Connell, it is alleged that within
the meaning of s. 75B of the Act, he was involved in the contravention of s.
52 by Rothwells Limited ("Rothwells").  Rothwells itself is not sued.  In that
regard, the State asserts in para. 4 of the Amended Statement of Claim:
      "4.   The third respondent ('Connell') was at all material times a
            duly appointed director of Rothwells Limited (in
            Liquidation) ('Rothwells') and the chairman of the board of
            directors of Rothwells and insofar as is material hereto
            acted within his authority as director and chairman of the
            board of directors of Rothwells."
The State also pleads against Mr Connell an action in deceit, within the
accrued jurisdiction of the Court.
3.  We were assisted in ascertaining the import of the grounds put forward by
the applicant in the Draft Notice of Appeal, by a written outline of
submissions.  From this, it became apparent that complaints were made that the
primary Judge had not acceded to submissions that the pleading was
embarrassing in various respects.  But, in addition, two points of law were
put forward.  It was said that if made out each would have a significant
effect upon the outcome of the proceedings, and each disclosed defects in the
pleading which could not be cured by amendment. It is convenient to turn first
to these two points.
4.  The first concerns the significance for the present case of the reasoning
in Commercial Bank of Australia v Carruthers (1964) 6 FLR 247, a judgment of
Manning J. sitting in Commercial Causes in the Supreme Court of New South
Wales.
5.  In paras. 40 - 47 of the Amended Statement of Claim, it is alleged that
after 27 October 1987, Rothwells drew down $150 million pursuant to the
facility granted by National Australia Bank Limited ("NAB"), that the facility
was repaid by Rothwells to the NAB on or about 17 October 1988 at a time when
Rothwells was insolvent, that provisional liquidators were appointed to
Rothwells on 3 November 1988, that they contended that the payment by
Rothwells of $150 million constituted a voidable preference, that they
demanded payment to them of that sum by the NAB, that NAB and the State denied
that the payment in 1988 constituted a voidable preference, that NAB called on
the indemnity dated 26 October 1987 ("the Indemnity") in respect of the demand
by the provisional liquidators, and that a dispute arose between the State and
the NAB in relation to the Indemnity, the State contending that the 1988
payment by Rothwells discharged the Indemnity whilst the NAB contended that
the Indemnity still remained in full force and effect.  Then it is alleged
(para. 47) that the dispute between the State and the NAB, and the claim by
the provisional liquidators against the NAB, were "reasonably settled" by
certain payments.
6.  It was submitted to the primary Judge that the Indemnity was discharged
once and forever when Rothwells made the payment to the NAB on 17 October
1988, and that even if the payment constituted a voidable preference under the
provisions of s. 122 of the Bankruptcy Act 1966, as applied to the liquidation
of Rothwells under the Companies (Queensland) Code, the liability of the State
as guarantor was not "revived".
7.  On the present application for leave, counsel for Mr Connell submitted
that, as a matter of law, this was not a case where the State might have been
liable on the Indemnity to NAB upon its call in respect of the demand by the
provisional liquidators upon NAB.  For that proposition, counsel relied upon
Carruther's Case supra.
8.  In response to a submission to the same effect, the primary Judge had
stated that the decision of Manning J. could not be taken "to be unarguably
correct".  His Honour noted that the reasoning in Carruthers' Case supra,
particularly in its treatment of earlier English decisions and in the
distinctions drawn between the relevant British and Australian legislation,
was criticised by Professor O'Donovan and Mr Phillips in their work "The
Modern Contract of Guarantee", 1985, pp 199-202.  His Honour also noted that
the terms of the Indemnity with which the present dispute is concerned
differed, arguably in material respects, from the terms of the guarantee
considered in Carruthers' Case.
9.  It is sufficient for present purposes to say that in our view there is
sufficient cogency in the points made by the primary Judge to make it the
preferable course to leave this issue for resolution at the trial.  It is to
be remembered also that the instrument in question in the present proceedings
is expressed in terms not merely as a guarantee, but as an indemnity, a
distinction which may be significant; see "Chitty on Contracts", 25th Ed.,
Vol. 2, paras. 4406, 4419, 4434, O'Donovan and Phillips, supra at 21-26.
10.  The second point of law urged by the applicant arises under s. 6 of the
Statute of Frauds Amendment Act 1828 (9 Geo. IV, c. 14) (U.K.), "Lord
Tenterden's Act", which, we were informed, is in force in the State of Western
Australia and has not been re-enacted by the Parliament of that State.
11.  Section 6 is in the following terms:
      "6.   No action shall be brought whereby to charge any person upon
            or by reason of any representation or assurance made or
            given concerning or relating to the character, conduct,
            credit, ability, trade, or dealings of any other person to
            the intent or purpose that such other person may obtain
            credit, money, or goods upon, unless such representation or
            assurance be made in writing, signed by the party to be
            charged therewith."
The word "upon" where it secondly appears in this section is meaningless and
is to be disregarded in construing the section: Diamanti v Martelli (1923)
NZLR 663 at 667 per Salmond J.
12.  In paras. 18 (a) and 37 (a) of the Amended Statement of Claim, the State
alleges that by failing to inform, inter alia, the representatives of the
State at a meeting on Saturday 24 October 1987 that certain representations by
other parties were not correct, Mr Connell represented to the State that
Rothwells was a sound financial institution which had substantial net assets,
whereas he knew or did not care whether it was true or false that Rothwells
was not a sound financial institution and did not have substantial net assets.
In para. 21, it is alleged that at all material times Rothwells was not a
sound financial institution, and did not have substantial net assets.
13.  These allegations are put forward as one integer in the cause of action
by the State against Mr Connell in deceit.  Counsel for Mr Connell contends
that the allegation which we have detailed involves the State in bringing an
action of a description to which s. 6 of Lord Tenterden's Act applies.  The
result would be that Mr Connell would have a good defence to that much of the
allegations in deceit.  The primary Judge dealt with a submission to that
effect by saying that it was arguable whether the statute did apply to the
action in deceit, but that it was a matter to be distinctly pleaded by way of
defence.
14.  Counsel for the State submitted that it was no part of the State's claim
that the representation in question as to Rothwells was made by Mr Connell to
the intent or purpose that Rothwells obtain credit, money or goods within the
meaning of the statute.  Counsel contended that the provision by the State of
the Indemnity to NAB in respect of the loss to NAB which might arise by
default of Rothwells did not fit within the terms of the statute, and that, at
the very least, there was an arguable point which should be tried out.  In
that regard, he referred to the construction of the statute (as it appeared in
the Usury, Bills of Lading, and Written Memoranda Act 1902 (N.S.W.)) by
Barwick C.J. in The Mutual Life and Citizens' Assurance Company Limited v
Evatt (1968) 122 CLR 556 at 580-581.  (This point was not taken on further
appeal to the Privy Council (1971) AC 793.)  On his part, counsel for Mr
Connell sought to derive comfort from authorities including Clydesdale Bank
Limited v J. and G. Paton (1896) AC 381, which concerned the impact of the
statute upon liabilities arising on bills of exchange.  But, in the result, we
would not grant leave to test the rival contentions at this stage.
15.  There is another point which bears upon the grant of leave. Counsel for
the State indicated that if the State were successful on the limitation point
agitated in the appeal No. WA G17 of 1991, the State would be seeking general
leave to amend.  That would bear upon para. 4 of the Amended Statement of
Claim as it now stands.  We have set out the text of this earlier in these
reasons.  As pointed out in argument on the application for leave, it is not
clear as para. 4 now stands, whether or not the deceitful representations
alleged elsewhere in the pleading against Mr Connell, were made on his own
behalf so that in addition to being the acts or omissions of Rothwells, they
were the acts or omissions of Mr Connell.  The consequence may be that there
is a liability in deceit, so far as Mr Connell is concerned, but that the
representations in question remain the conduct of Rothwells for the purpose of
ascertaining whether Lord Tenterden's Act has any application.  Upon this
particular hypothesis, the Act would not appear to have an application.
16.  All of these considerations lead to the conclusion that the defence
raising Lord Tenterden's Act should be separately and distinctly pleaded after
such amendment as may be made to the Amended Statement of Claim in the light
of the outcome on the appeal, No. WA G17 of 1991.
17.  The remaining grounds in respect of which leave is sought concern alleged
deficiencies in the pleading of allegations against Mr Connell. Counsel
complained that the pleading did not make plain in para. 19 the nature of the
adoption of the Bond Saturday Fee Representation found in sub-para. 12 (a)
(iii).  He further contended that the primary Judge was in error in holding
that sub-para. 37 (b) sufficiently pleaded the falsity of the 1987 audited
accounts of Rothwells even when read in association with paras. 21 and 22.
Other criticisms of like nature were made of the pleading, reflecting what
counsel for Mr Connell says was a failure to plead the cause of action in
deceit in the time honoured manner, namely, (i) representation, (ii) falsity,
(iii) knowledge of falsity, (iv) intent to induce, (v) actual inducement, and
(vi) damage. Counsel submitted, with considerable cogency, that the Statement
of Claim suffered from the presence of rolled-up allegations which it was then
embarrassing, in the technical sense, to expect the defendant to disentangle.
18.  As we have indicated, we understood the tenor of the address of counsel
for the State to be that he recognised the need of amendment, and in the light
of the outcome in appeal No. WA G17 of 1991, an application for general
amendment may now be expected.
19.  In all the circumstances, we would refuse the application for leave to
appeal.  However, we would make no order for costs on the application.