Hutchinson & Anor v Equititour Pty Limited & Ors [2010] 104
Introduction
In this case, the Queensland Court of Appeal considered when time begins to run and the calculation of limitation periods for negligent and fraudulent misrepresentations together with statutory misleading and deceptive conduct. The trial judge having found the claim was statute barred.
Primary decision
The plaintiffs alleged they had been induced to purchase three holiday units in a resort development by misrepresentations made by and on behalf of the developer in the company which was to operate the resort. The proceedings were commenced approximately nine years after the alleged misrepresentations were made and more than eight years after the purchase contracts were settled. The plaintiffs / appellants argued the proceeding were not statute barred because its loss was a contingent one which did not crystallise (and the limitation period did not start to run) until, contrary to the representations made, the operator of the resort failed to renew certain leases of the units, causing a dramatic reduction in the income earned by the plaintiffs. This occurred within the limitation period.
The primary Court rejected the plaintiffs argument and found that the causes of action were complete and time began to run, upon settlement of the purchase contracts.
Court of Appeal decision
The Court of Appeal considered the application of the High court decision of Banque Commercial SA en liquidation v. Akhil Holdings Limited [1990] 169 CLR 279 which imposed a six year limitation period on the bringing of an action for breach of trust subject to a proviso which stated that the limitation should not 'affect any action suit or other proceeding where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy....'
In applying this decision to the present case the court held there was no evidence adduced on behalf of the plaintiffs / appellants to demonstrate when they discovered the matters which they alleged constituted the fraudulent conduct of the defendants / respondents. There had also been a failure to establish that they did not discover those matters until after the limitation date. Furthermore, the court held the evidence did not address when they could, with reasonable diligence have discovered those matters.
The Court of Appeal also considered when there was an accrual of the cause of action. Under section 10 of the Limitations Act, the plaintiffs / applicants were entitled to institute proceedings based on their claims other than the claim under the Trade Practices Act ('TPA'), within six years from the date on which their causes of action arose. For a claim under section 82 of the TPA a cause of action under that section accrued before 26 July 1998 has a limitation period of three years and where the cause of action accrued at a later date, six years.
The court referred to the decision in Sullavan & Anor v. Teare [2010] QCA 70, a case factually similar to the present case in which Chesterman JA stated that 'The notion that a limitation period does not begin to run unless a plaintiff knows of the facts which constitute his cause of action and make it complete is contrary to the highest authority'. Accordingly, in the present case the court considered that it follows that the plaintiffs' / applicant's causes of action accrued, at the latest, when the contract settled in 1998.
The plaintiffs / applicants sought to argue what they were purchasing was an asset which was capable of producing an income stream, therefore in such a case, no detriment is suffered until the stream's projected flow is not achieved.
However, the court considered that this was not the only economic interest of the plaintiffs relating to the transaction. One interest was their interest in receiving a property which had a value commensurate with its purchase price.
The plaintiffs also sought to argue that the cause of loss was contingent upon the occurrence of an event subsequent to completion of their contract. However, the court held that from the outset, the plaintiffs incurred losses resulting from their ownership of the unit. Therefore, the loss was not contingent upon an event after the completion of their contract, but rather commenced from the outset of their ownership.
The court concluded that the capital loss suffered by the plaintiffs occurred before the limitation date. To the extent that the transaction costs represent recoverable damage, a cause of action based on this loss also accrued before the limitation date. Revenue losses commenced from about the time of completion of the contract. Accordingly, a cause of action based on loss of revenue accrued once outgoings exceeded receipts, at least unless there was a real prospect that the position would reverse in the short term, resulting in an overall profit. That was not the case. Accordingly, if there was a separate cause of action in relation to lost revenue, it accrued before the limitation date.
Furthermore, so far as the revenue stream became less than was projected, this was not a separate incident of the occurrence of damage, so as to constitute a fresh cause of action. Rather it was reflected in the 'true value' of the land at the date of the settlement.
Conclusion
This decision illustrates that plaintiffs that enter into a contract on the basis of representations which are later established as false or fraudulent may face difficulties seeking to claim the limitation period does not start to run until the happening of some contingency, particularly if it can be shown that some losses occurred before that contingency. In the present case the plaintiffs / applicants' case was not assisted by a general lack of evidence.
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