FEDERAL COURT OF AUSTRALIA Dresna Pty Ltd v Misu Nominees Pty Ltd [2004] FCAFC 169 PROCEDURE – appeal – application for leave to further amend statement of claim – whether leave to appeal should be granted – whether proposed amendments raised arguable causes of action and substantial injustice would be caused to appellant if not able to pursue them TORTS – tort of conspiracy – conspiracy to injure by unlawful means – requirement that conspirators have an intention to injure the applicant – whether requirement of intention to injure is satisfied where there is an intention to injure a member of an indeterminate class of which the injured applicant is a member – whether breach of undertaking given under s 87B of the Trade Practices Act 1974 (Cth) can constitute 'unlawful means'– what constitutes the use of 'unlawful means' – whether breach of undertaking given under s 87B of the Trade Practices Act 1974 (Cth) is considered to be wrongful – whether making of 'false suggestions' to the Australian Competition and Consumer Commission can constitute 'unlawful means' TRADE AND COMMERCE – meaning of 'in trade or commerce' for the purposes of s52 of the Trade Practices Act 1974 (Cth) – whether conduct was an aspect or element of activities or transactions which of their nature bear a trading or commercial character Statutes Criminal Code Act 1995 (Cth) s 137.1 Patents Act 1952 (Cth) s 100(1)(k) Trade Practices Act 1974 (Cth) ss 87B, 52, 87B(4), 87B(1), 53, 87B(3) Cases Al Raschid v News Syndicate Co, Inc 191 NE 713 (1934) Cited Australian Competition & Consumer Commission v Signature Security Group Pty Ltd [2003] FCA 3 Cons Australian Petroleum Pty Ltd v ACCC (1997) 73 FCR 75 Refd Beach Petroleum NL v Johnson (1993) 43 FCR 1 Refd Brown v Riverstone Meat Co Pty Ltd (1985) 60 ALR 595 Cited Coal Miners Industrial Union of Workers of Western Australia, Collie v True (1959) 33 ALJR 224 Refd Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 Appl Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd (1998) 157 ALR 135 Cited Crofter Hand Woven Harris Tweed Company, Limited v Veitch [1942] AC 435 Cited Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 Foll Gale v Ryan 31 NYS 2d (1941) Cited Goodchild Fuel Distributors Pty Ltd v Holman (1992) 59 SASR 454 Cited Grupo Torras SA v Sheikh Fahad Mohammed Al-Sabah [1999] All ER (D) 698 Cons Hearn v O'Rourke [2003] FCAFC 78 Cons Kelite Products Inc v Binzel 224 F (2d) 131 (1955) Cited Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173 Cons Lonrho Plc v Fayed (1990) 2 QB 479Cons Lonrho Plc v Fayed [1992] 1 AC 448 Cons McWilliam v Penthouse Publications Ltd [2001] NSWCA 237 Refd Merman Pty Ltd v Cockburn Cement Ltd (1988) 84 ALR 521 Cited Morrison v National Broadcasting Company, Inc 266 NYS 2d 406 (1965) Cited National Phonograph Company, Limited v Edison-Bell Consolidated Phonograph Company, Limited [1908] 1 Ch 335 Cited Penn-Ohio State Corporation v Allis-Chalmers Manufacturing Company 272 NYS 2d 266 (1966) Cited Prestige Group (Australia) Pty Ltd v Dart Industries Inc (1990) 26 FCR 197 Cons Torquay Hotel Co Ltd v Cousins (1969) 2 Ch 106 Cited Vickery v Taylor (1910) 11 SR (NSW) 119 Refd Williams v Hursey (1959) 103 CLR 30 Refd Other Authorities Clerk and Lindsell on Torts, 18th edn, gen ed AM Dugdale, Sweet & Maxwell, London, 2000 JD Heydon in Economic Torts, 2nd edn, Sweet & Maxwell, London, 1978 WVH Rogers, Winfield and Jolowicz on Tort, 16th edn, Sweet & Maxwell, London, 2002 DRESNA PTY LTD v MISU NOMINEES PTY LTD, KANDARA PTY LTD, LINKNARF MANAGEMENT SERVICES PTY LTD (IN LIQUIDATION) FORMERLY FRANKLINS MANAGEMENT SERVICES PTY LTD, LINKNARF LIMITED (IN LIQUIDATION) FORMERLY FRANKLINS LIMITED, COLES MYER LIMITED V277 OF 2004 KIEFEL, MARSHALL AND JACOBSON JJ BRISBANE (HEARD IN MELBOURNE) (VIA VIDEO LINK TO MELBOURNE) 30 JUNE 2004 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V277 OF 2004 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: DRESNA PTY LTD (ACN 097 346 784) APPELLANT AND: MISU NOMINEES PTY LTD (ACN 004 986 001) FIRST RESPONDENT KANDARA PTY LTD (ACN 005 524 943) SECOND RESPONDENT LINKNARF MANAGEMENT SERVICES PTY LTD (IN LIQUIDATION) FORMERLY FRANKLINS MANAGEMENT SERVICES PTY LTD THIRD RESPONDENT LINKNARF LIMITED (IN LIQUIDATION) FORMERLY FRANKLINS LIMITED (ACN 000 929 902) FOURTH RESPONDENT COLES MYER LIMITED FIFTH RESPONDENT JUDGES: KIEFEL, MARSHALL AND JACOBSON JJ DATE OF ORDER: 30 JUNE 2004 WHERE MADE: BRISBANE (HEARD IN MELBOURNE) (VIA VIDEO LINK TO MELBOURNE) THE COURT ORDERS THAT: 1. The applicant has leave to appeal. 2. The appeal be allowed in part. 3. Pars 1(a), (b), (c) and (d) of the order of 18 February 2004 be set aside. 4. In lieu it is ordered that the appellant have leave to further amend its statement of claim by adding pars 77 to 81, 82 and 83 and 94(c) of the proposed pleading which appears as exhibit AJF13 to the affidavit of Alan James Foster sworn on 22 July 2003. 5. The appellant pay the costs thrown away by the further amendments. 6. The costs of the appeal and the proceedings below remain reserved. THE COURT DIRECTS: 7. The appellant file and serve its written submissions as to the issue of costs within seven days from today. 8. The respondents file their submissions as to costs within fourteen days from today. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V277 OF 2004 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: DRESNA PTY LTD (ACN 097 346 784) APPELLANT AND: MISU NOMINEES PTY LTD (ACN 004 986 001) FIRST RESPONDENT KANDARA PTY LTD (ACN 005 524 943) SECOND RESPONDENT LINKNARF MANAGEMENT SERVICES PTY LTD (IN LIQUIDATION) FORMERLY FRANKLINS MANAGEMENT SERVICES PTY LTD THIRD RESPONDENT LINKNARF LIMITED (IN LIQUIDATION) FORMERLY FRANKLINS LIMITED (ACN 000 929 902) FOURTH RESPONDENT COLES MYER LIMITED FIFTH RESPONDENT JUDGES: KIEFEL, MARSHALL AND JACOBSON JJ DATE: 30 JUNE 2004 PLACE: BRISBANE (HEARD IN MELBOURNE) (VIA VIDEO LINK TO MELBOURNE) REASONS FOR JUDGMENT KIEFEL and JACOBSON JJ: 1 The appellant ('Dresna') appeals from a decision refusing leave to further amend its statement of claim ([2003] FCA 1537). Some amendments that were proposed were allowed. The amendments in question concern conspiracies on the part of the respondents to injure Dresna, or a class of persons to which it belonged, by unlawful means. 2 Dresna was at the relevant time an independent operator of supermarkets in Victoria. The proceedings concern its attempt to purchase a store at Mentone in Victoria from Franklins. It is convenient to adopt the descriptions used by his Honour the primary judge of the respondents: the first and second respondents as 'the lessor'; the third and fourth respondents as 'Franklins'; and the fifth respondent as 'Coles'. Dresna's written submissions furnish a generally useful summary of the relevant allegations which were sought to be made in the proposed further amended statement of claim ('PFASC'): (a) In the year 2000 Franklins was one of three major supermarket retailers operating in Australia, the others being Woolworths Limited and the Coles-Myer group of companies; (b) In January 2001 Franklins announced a strategic review of its Australian operations; (c) On or about 18 April 2001 Franklins announced that its parent company was to commence a managed sell-down of Franklins' assets in Australia; (d) In June 2001 the parent company and Franklins gave undertakings to the Australian Competition and Consumer Commission (the 'ACCC') pursuant to s 87B of the Trade Practices Act 1974 (Cth)('the Act'). It is alleged that it can be inferred from the terms of the undertakings that their purpose was to ensure, so far as possible, that the remaining Franklins stores were to be sold to independent supermarket retailers rather than to Woolworths or Coles. The term 'independent supermarket retailers' is particularised as those supermarket retailers not associated with Coles and Woolworths. This was to be achieved by a process known as the Joint Independent Divestiture Alliance process ('the JIDA process') which was referred to in the undertakings and pursuant to which a committee was formed to supervise and administer the process of bidding by independent supermarket retailers; (e) In May 2001 Mr Leo Blake entered into an agreement with Franklins to purchase the business of Franklins conducted at Mentone and at North Blackburn for a total of $2.8m, with the right to nominate a substitute purchaser; (f) On 8 August 2001 Dresna, Mr Blake's nominee, entered into a Business Sale Agreement with Franklins to purchase the Franklins business at its Mentone store for $2.3m ('the Mentone BSA'); (g) Shortly after entering into the Mentone BSA Franklins and Dresna sought to obtain the consent of the lessor of the Mentone premises to an assignment of the lease of the premises to Dresna. Franklins' lease had at this time approximately 14 years remaining in its term, together with options; (h) In the period between August and October 2001 Franklins and Dresna made three requests for the lessor's consent to an assignment of the lease, each of which was rejected; (i) In September 2001 Franklins and Dresna agreed to commence proceedings ('the Litigation Agreement') against the lessor to procure an assignment of the lease; (j) Pursuant to the Litigation Agreement, on 16 October 2001 a proceeding was commenced in the Supreme Court of Victoria; (k) Dresna alleges that the Litigation Agreement was in the nature of a joint venture between Franklins and Dresna, giving rise to fiduciary duties; (l) On 28 November 2001 Franklins gave seven days notice of its termination of the Mentone BSA, on the ground that it had not been possible to procure the consent of the lessor to the assignment of the lease; and also that the third respondent (Franklins Management Services) would withdraw as the first plaintiff in the proceeding against the lessor; (m) On or about 20 December 2001 Franklins sold its supermarket business in the Mentone store to Coles. 3 Whilst these matters were being undertaken Dresna's proposed pleading alleges that secret dealings were taking place between the respondents: (a) It is alleged that in or about the year 2001 Coles devised a scheme to acquire the supermarket businesses conducted by Franklins at a number of stores which were to be sold to independent operators under the JIDA process; (b) In June 2001 Coles commenced dealings with the lessor in relation to a lease of the Mentone store; (c) On or about 29 June 2001, Coles and the lessor entered into an agreement by letter for the lease of the store to Coles. The terms of the agreement were that, if legally entitled to do so, the lessor would negotiate with Franklins to purchase items of stock, plant and equipment of Franklins nominated by Coles for a price not more than a figure to be nominated by Coles; and for Coles to pay or reimburse the lessor for the Franklins stock, plant and equipment which would be transferred to Coles; (d) On about 24 August 2001 Coles conducted a site visit of the Mentone store after further dealings between it and the lessor; (e) At some time between September and November 2001 Franklins and Coles reached an agreement, arrangement or understanding that Franklins would sell to Coles the businesses conducted at a number of stores listed in a schedule to the undertakings by Franklins to the ACCC; (f) In or about October 2001 Franklins became aware that Coles had 'done a deal in principle' with the lessor to lease the Mentone store, based on vacant possession. Franklins did not disclose this fact to Dresna or the ACCC; (g) On 23 November 2001 Franklins addressed a confidential submission to the ACCC seeking consent to sell the Mentone supermarket business to Coles. This was not disclosed to Dresna. The submission did not refer to the agreement which had been reached between Coles and the lessor to lease the Mentone premises, of which Franklins is alleged to have known; (h) On or about 28 November 2001 Coles commenced to carry out 'due diligence' on the Franklins Mentone business. This was not disclosed to Dresna; (i) On 5 December 2001 Coles provided a supporting submission to the ACCC in which it stated that '[it] has not sought to interfere with the divestment process agreed to by Franklins and incorporated into the undertakings provided to the ACCC by Woolworths … and Franklins' and '[it] has respected the [divestment] process and has not sought to undermine it by negotiating with landlords in a bid to frustrate the process'; (j) On 5 December 2001 the ACCC refused to consent to the sale but on or about 20 December 2001 gave its consent for the sale of the Mentone business to Coles. 4 From these facts it is alleged that Coles and Franklins conspired to deprive Dresna of the benefit of the Mentone BSA and cause it harm. In doing so it adopted unlawful means. There are three unlawful means identified. It is alleged that Franklins breached its undertakings to the ACCC by entering into the arrangements or understandings with Coles and by failing to inform the ACCC of matters affecting the undertakings or their purpose. It is further alleged that Franklins' confidential submission to the ACCC, seeking its consent to its sale to Coles, amounted to 'false suggestions' and was misleading and deceptive because it did not refer to the fact that Coles had already entered into an agreement for lease with the lessor and did not refer to the arrangement or understanding between it and Coles. Thirdly, it is alleged that the conduct of Coles and Franklins in connexion with the confidential submission to the ACCC was misleading and deceptive or likely to mislead and deceive in contravention of s 52 of the Act. 5 It is alleged that there was a conspiracy to injure Dresna on the part of Coles and the lessor by unlawful means, namely breaches of the Mentone lease. This allegation refers to the lessor's obligation not unreasonably to withhold its consent. The conduct of the lessor and Coles however here occurred prior to 10 August 2001, the date when Dresna acquired interests under the Mentone BSA. The harm to Dresna is not therefore alleged to be the loss of those interests. The matter is pleaded in this way in par 103(b) of the PFASC: '(prior to about 10 August 2001) with an intention to deprive the independent operator that entered into an agreement to purchase the Franklins' business at Mentone, of the benefit of that agreement, and thereby cause it harm'. 6 His Honour the primary judge refused leave to amend to plead par 103(b) and to plead the unlawful means relevant to the conspiracy alleged as between Coles and Franklins (pars 77 to 81; pars 82 and 83; and par 94(c)). His Honour's orders are interlocutory and Dresna requires leave to appeal. It is necessary however in this case to consider its arguments on the appeal grounds before resolving that issue. THE CONSPIRACY PRIOR TO 10 AUGUST 2001 7 His Honour the primary judge accepted the respondent's submission that, until the Mentone BSA was executed, the lessor and Coles could not have acted in concert with the intention of depriving Dresna of anything. The tort requires an intention to injure. An agreement to do an unlawful act that results in damage to another party is not the same as a conspiracy to injure that party. It had been held that a plaintiff, in order to prove conspiracy, must show that the wrongful act complained of was done with a design of injuring him, and that it did so: Vickery v Taylor (1910) 11 SR (NSW) 119 at 130-131. In that case Street J said that a conspiracy could be directed not only at a particular individual but at a class, but it was also apparent that his Honour had in mind that a conspiracy was directed to all the members of that class. In the present case, his Honour the primary judge observed, Dresna could not plead that the lessor or Coles intended to injure the entire class of persons known as 'independent operators' who could be any member of public apart from the large supermarket operators. 8 Dresna submitted on the appeal that it should be sufficient for it to establish that the lessor intended to injure whichever independent supermarket operator was awarded the contract to the Franklins Mentone business. It should not matter if its specific identity was not known at the time the alleged conspiracy was entered into. After all, it submits, there could be only one victim, even if the class from which that victim comes is to an extent indeterminate. The authorities on the question of intention are not so clear as to suggest that the claim is wholly untenable. 9 His Honour the primary judge referred to cases which, he considered, hold that there be proved an intention to injure: Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd (1998) 157 ALR 135 at 150; Beach Petroleum NL v Johnson (1993) 43 FCR 1 at 19; McWilliam v Penthouse Publications Ltd [2001] NSWCA 237 at [13] ('McWilliam'). Dresna conceded as much. In particular in a passage cited by his Honour (at [125]) Mason P said in McWilliam [at 13]: 'These principles emphasise that a plaintiff in a case such as the present must establish intent to injure the plaintiff. It is not enough to establish that the acts of the conspirators necessarily involved injury to the plaintiff or that the plaintiff was a person reasonably within the contemplation of the conspirators as a person likely to suffer damage …'. It seems plain enough, as his Honour the primary judge held, that the cases hold that the intention must be directed to a particular person, the person who makes the claim for loss and damage. 10 Dresna submitted that cases such as Coal Miners Industrial Union of Workers of Western Australia, Collie v True (1959) 33 ALJR 224 at 227; Williams v Hursey (1959) 103 CLR 30 at 78, 108, 122-123; Goodchild Fuel Distributors Pty Ltd v Holman (1992) 59 SASR 454 at 481; Beach Petroleum NL v Johnson at 19, hold that it is necessary to prove that damage to the plaintiff results from an unlawful act which the defendants continued to carry out but that is all that is required. The cases do support the first proposition but do not hold that the act need not be directed to the party injured. Indeed it is clear that in those cases the acts were so directed. 11 Reliance was also placed by Dresna on the decision in Grupo Torras SA v Sheikh Fahad Mohammed Al-Sabah [1999] All ER (D) 698 ('Grupo Torras') where Mance LJ said: 'In my judgment, if it suffices that a conspiracy is "aimed or directed at" the plaintiff, in circumstances where it can only be said that "it can reasonably be foreseen that it may injure him", then rigorous insistence on a need for specific intent to injure the particular plaintiff appears unjustified. I remain of the view which I expressed at the jurisdiction stage, that, in circumstances where persons combine to abstract monies from a group and then to cover up and account for the abstraction in any way they can, an intent to injure or defraud any company which, as a result of their operations, ends up bearing the loss, may readily be inferred.' His Honour the primary judge here considered that the decision in Grupo Torras was distinguishable from Dresna's case. We would respectfully agree. It is apparent from Grupo Torras that every member of the class to whom the conspiracy might have been directed was ascertainable. The fraud was perpetrated upon a group of companies and it was held that the intention was referrable to each and every one of those companies in the group. 12 The test for an action based upon a conspiracy is what was the object in the mind of those combining when they acted as they did: Crofter Hand Woven Harris Tweed Company, Limited v Veitch [1942] AC 435 at 445. As is pointed out inWVH Rogers, Winfield and Jolowicz on Tort, 16th edn, Sweet & Maxwell, London, 2002, p 649, [18.24] ('Winfield and Jolowicz'), what is required is that they should have acted in order that, not with the result that, the plaintiff should suffer damage. And it may be observed that it was for this reason that the plaintiff failed in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173. In that case an order had been made under the Southern Rhodesia Act 1965 making it an offence to supply oil to Southern Rhodesia. Lonrho did not continue supply through a pipeline from a port in Mozambique. It alleged that Shell and others had provided oil and that this affected the period of disuse of the pipeline. Winfield and Jolowicz point out with respect to the case (at p 652, [18.28]) that, whilst injury to Lonrho's business was foreseeable, it was not Shell's purpose to bring it about. In no sense were the acts 'aimed at' Lonrho. 13 In our view his Honour the primary judge was correct to hold that there was no basis in law for the claim as pleaded and was right to decline leave to amend. the unlawful means breach of the section 87B undertakings 14 His Honour the primary judge did not accept that a breach of an undertaking given under s 87B of the Act is an 'unlawful act' for the purposes of the tort of conspiracy by unlawful means. The section does not confer private rights and was not intended to do so. It would be inappropriate in these circumstances, his Honour held, to permit the section to be invoked indirectly as the 'unlawful means' for the tort of conspiracy. 15 If a breach of statute was capable of founding the 'unlawful means' used by conspirators it would not seem to matter that the statute did not also give a private right to the person injured, in our respectful view. The question whether a contravention of statute can amount to the relevant 'unlawful means' is a distinct question. That is not to say that there may not, in the present case, be problems with causation as between the means said to be employed and the suffering of damage, and it may be that his Honour had this in mind. But that issue is not raised by the respondents on the appeal. 16 The intimidation of an employer, inducing a breach of contract and the breach of statutes dealing with restrictive trade practices, has been held to involve the use of unlawful means: Torquay Hotel Co Ltd v Cousins (1969) 2 Ch 106 at 119 and 139. JD Heydon in Economic Torts, 2nd edn, Sweet & Maxwell, London, 1978 at pp 67-69 goes further. In addition to crimes and torts the learned author lists defamation, trespass, breach of the rules of natural justice, abuse of confidential information and misstatements as unlawful means. It is said that the unlawful means may be constituted by actions which are improper although not actionable in themselves (at 70). Clerk and Lindsell on Torts, 18th edn, gen ed AM Dugdale, Sweet & Maxwell, London, 2000 at [24-77] states that the general approach appears to be that a person is using unlawful means if they are doing an act which they are not at liberty to commit. It would therefore appear arguable that a breach of the undertakings might constitute the use of unlawful means. 17 Coles and Franklins also submitted that there was nothing to suggest that a breach of an undertaking given to the ACCC is wrongful. Section 87B of the Act does not prohibit a breach, it is submitted. The submission does not take account of the wider view of what constitutes unlawful means and that it is not necessary that there be an express statutory prohibition. Nevertheless it may be observed that the submission is wrongly based and that the section should be read as saying that an undertaking given should not be breached. Section 87B provides: Enforcement of undertakings (1) The Commission may accept a written undertaking given by a person for the purposes of this section in connection with a matter in relation to which the Commission has a power or function under this Act (other than Part X). (2) The person may withdraw or vary the undertaking at any time, but only with the consent of the Commission. (3) If the Commission considers that the person who gave the undertaking has breached any of its terms, the Commission may apply to the Court for an order under subsection (4). (4) If the Court is satisfied that the person has breached a term of the undertaking, the Court may make all or any of the following orders: (a) an order directing the person to comply with that term of the undertaking; (b) an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person has obtained directly or indirectly and that is reasonably attributable to the breach; (c) any order that the Court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach; (d) any other order that the Court considers appropriate. 18 The section does not state that the undertakings given must be complied with. There are however consequences which follow, regardless of whether the ACCC determines to exercise its discretion to pursue such the course allowed by subs (4). It follows in our view that a breach of undertakings given is considered to be wrongful. The party giving the undertakings is not entitled to act in that way. 19 In our respectful view the question whether a breach of the undertakings given under s 87B(1) can constitute 'unlawful means' is arguable and leave to amend pars 77 to 81 of the PFASC and that part of par 94(c) of the PFASC which relates to the Franklins undertakings ought to have been granted. false suggestion 20 Dresna explains that the references to false suggestions in par 82 of the PFASC were in the nature of false statements made to a regulatory authority in aid of an application for a grant licence or consent, or some such advantage. They are analogous, it is submitted, to cases involving false suggestions to the Crown or officers of the government and which can lead to revocation of a right such as a patent. It can be inferred that such an action is regarded as unlawful. The false statements are alleged to have been made in the confidential submission to the ACCC in order to secure the purchase of the Franklins stores. It will be contended at trial that the statements made to the ACCC were made deliberately and in the knowledge that they were not true, even if this is not presently clear from the PFASC. 21 Before his Honour the primary judge Dresna relied upon Lonrho Plc v Fayed (1990) 2 QB 479 at 489-490 and 492 and [1992] 1 AC 448 at 470 ('Lonrho') and the observations of Gummow J in Prestige Group (Australia) Pty Ltd v Dart Industries Inc (1990) 26 FCR 197 at 213-219 ('Prestige') in support of its proposed claims. His Honour accepted the respondents' submission that these cases did not assist Dresna. The respondents argued that false suggestions were not part of the case considered by the Court of Appeal and the House of Lords in Lonrho and that Prestige was concerned specifically with a statutory provision in the Patents Act 1952 (Cth) and not a general common law right. 22 To found an action at common law the lies, relied upon as false statements or suggestions, must be themselves unlawful, his Honour held. His Honour doubted that telling a lie to a regulatory authority such as the ACCC could be so regarded. What was necessary was some specific statutory proscription to bring about that result. There was nothing in the Trade Practices Act which rendered a false statement unlawful per se. His Honour considered that it might be possible for Dresna to base its claim on s 137.1 of the Criminal Code Act 1995 (Cth), which prohibits knowingly giving false or misleading information to a 'Commonwealth entity'. Dresna has not sought to pursue such a claim. 23 In Lonrho the plaintiff alleged that three defendants had made false statements about their financial capacity to acquire the share capital in a company in which the applicant was seeking to gain control. The company's board of directors and the Secretary of State had thereby been persuaded not to refer the defendants' bid to the Monopolies and Mergers Commission. The defendants were alleged to have thereby tortiously interfered with the plaintiff's right to bid for shares or conspired against it. The case was conducted on the basis of an intention to injure the plaintiff by unlawful means. The issue before the House of Lords was whether it was necessary that the defendants' intention to cause injury to the plaintiff was a predominant purpose of this unlawful conduct and it was held that it was not. The question whether false statements amounted to the use of unlawful means was not addressed. It should not in these circumstances be inferred that it was assumed to be correct. 24 Section 100(1)(k) of the Patents Act provides that a patent may be revoked where it is 'obtained on a false suggestion or representation'. Gummow J (at 213-219) in Prestige traced the history of such a power, which resided in the Crown, to revoke the grant of letters patent which had resulted from false statements. As his Honour observed, what the King granted was considered to be capable of repeal through the use of the writ of scire facias. The 'false suggestion' involved would today be understood as being more akin to equitable fraud. 25 His Honour explains that the practice developed of permitting the prosecution of the writ, which issues out of Chancery, to a private prosecutor. Subject to obtaining the fiat of the Attorney-General and providing security for costs, a remedy which was public in form was placed in private hands. 26 It is not necessary to refer in detail to the statutory provisions, with which his Honour was concerned, and which replaced the writ procedure. It may be observed that in the United Kingdom and Australia the procedure was replaced by a procedure involving a petition for revocation of the patent on the basis that it was obtained on a 'false suggestion' or representation. This suggested the recognition by the legislature that this was a ground for repeal of a patent. 27 It may be accepted from the foregoing that a misrepresentation which resulted in the grant of a monopoly right was regarded as a public wrong and could be said to be unlawful conduct. It cannot be inferred however that every false statement made to a government official assumes that character. 28 Support for Dresna's claim is however to be found in Heydon's Economic Torts at pp 68-70. It will be recalled that it is there said that unlawful means may be constituted by improper actions. The learned author expresses the view that it is sufficient that a lie is told, although it does not amount to deceit (National Phonograph Company, Limited v Edison-Bell Consolidated Phonograph Company, Limited [1908] 1 Ch 335) and it may be to a third party or a government official (Al Raschid v News Syndicate Co, Inc 191 NE 713 (1934); Gale v Ryan 31 NYS 2d (1941); Kelite Products Inc v Binzel 224 F (2d) 131 (1955); Penn-Ohio State Corporation v Allis-Chalmers Manufacturing Company 272 NYS 2d 266 (1966)). Although not all of these cases concern actions based upon a conspiracy to injure by use of unlawful means, they do show an acceptance of misstatements causing damage as founding a cause of action. The test, it is said by the author, appears to be whether conventional moral standards have been infringed: referring to Morrison v National Broadcasting Company, Inc 266 NYS 2d 406 (1965) at 415. 29 Whether the misrepresentations alleged to have been made to the ACCC constitute unlawful means would appear to be at least arguable in our view. Leave to amend by adding par 82 and part of par 94(c) of the PFASC ought therefore to have been given. BREACH OF Section 52 AS UNLAWFUL MEANS 30 His Honour the primary judge held that the conduct of Franklins in putting forward the confidential submission to the ACCC and of Coles in supporting that submission could not constitute conduct 'in trade or commerce' for the purposes of s 52 of the Act. His Honour referred to the decision in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 ('Concrete Constructions') in reaching that conclusion. His Honour held that the confidential submission and supporting letter could not be viewed as conduct 'in trade or commerce'. It is not sufficient that they were written with a view to gain. This did not bring them within the 'central conception' of trading and commercial activities. At most, in his Honour's view, it places them within some proximity of that conception. 31 Dresna relies upon the decision of Wilcox J in Brown v Riverstone Meat Co Pty Ltd (1985) 60 ALR 595 where his Honour held that statements made to the Department of Primary Industry in an application to obtain approval for the sale of meat constituted conduct 'in trade or commerce' for the purposes of s 53 of the Act. The decision was followed in Merman Pty Ltd v Cockburn Cement Ltd (1988) 84 ALR 521. Franklins and Coles point out that these decisions were made prior to that in Concrete Constructions. In our view it is not necessary to resort to them. It is sufficient in the present case to consider what was said in Concrete Constructions. 32 The difficulty in s 52, identified in the judgment of Mason CJ, Deane, Dawson and Gaudron JJ in Concrete Constructions, arises from the requirement that the conduct, to which the section refers, be 'in' trade or commerce. The phrase 'in trade or commerce' might bear a wide meaning and extend to activities which are undertaken in the course of or incidental to the carrying on of an overall commercial business. Their Honours went on (at 603): 'Alternatively, the reference to conduct "in trade or commerce" in s. 52 can be construed as referring only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. So construed, to borrow and adapt words used by Dixon J. in a different context in Bank of N.S.W. v. The Commonwealth [(1948) 76 CLR 1 at 381], the words "in trade or commerce" refer to "the central conception" of trade or commerce and not to the "immense field of activities" in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business.' 33 As a matter of language the arguments were finely balanced but their Honours clearly favoured the narrower one. Their Honours said (at 603-604): '… when the section is read in the context provided by other features of the Act, which is "An Act relating to certain Trade Practices", the narrower (i.e. the second) of the alternative constructions of the requirement "in trade or commerce" is the preferable one. Indeed, in the context of Pt V of the Act with its heading "Consumer Protection", it is plain that s. 52 was not intended to extend to all conduct, regardless of its nature, in which a corporation might engage in the course of, or for the purposes of, its overall trading or commercial business. Put differently, the section was not intended to impose, by a side-wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities. What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character.' 34 The conduct here in question is the statements made by Franklins in the course of seeking the ACCC's consent to sell one of its businesses to Coles. The question then is whether it is 'an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character'. We understand his Honour to have viewed the seeking of consent as removed from the sale transaction. Certainly the sale by Franklins of its assets could be seen as it acting in commerce even if its primary business was the conduct of supermarkets. It would, with respect, appear to be at least arguable that the seeking of consent could be seen as part of the overall sale transaction. 35 Dresna also relied upon a decision of a Full Court of this Court in Hearn v O'Rourke [2003] FCAFC 78 where the majority (Finn and Jacobson JJ) held (at [8]) that for representations to have the necessary character, of being in trade or commerce, they had to be made in dealings 'in the course of an activity which, of its nature, bears a trading or commercial character'. This would appear to strengthen Dresna's case. 36 In our respectful view leave to amend par 83 and part of par 94(c) of the PFASC ought to have been given. LEAVE TO APPEAL 37 Leave should be granted because, in relation to three of the four proposed amendments, there was sufficient doubt as to whether the amendments raised arguable causes of action and substantial injustice would be caused to the appellant if it could not pursue them; see Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397. As the appellant submits, if leave is not granted, the refusal of leave to amend would be incapable of practical redress on appeal because it is likely that material facts in respect of those causes of action will not have been explored at trial. orders 38 There will be an order granting leave to appeal. The appeal will be allowed in part. The exceptions to the grant of leave to amend expressed in his Honour's order at paragraph 1(a), (b), (c) and (d) should be set aside and in lieu it be ordered that Dresna have leave to further amend its statement of claim by adding pars 77 to 81, 82 and 83 and 94(c) of the proposed pleading. Dresna should pay any costs thrown away by those further amendments. 39 So far as concerns the costs of the proceedings and of the appeal at least one party has requested that they be given an opportunity to make further submissions and we consider that the parties should have that opportunity. Dresna shall have seven days to file and serve its written submissions on costs and the respondents fourteen days. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kiefel and Jacobson. Associate: Dated: 30 June 2004 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V277 OF 2004 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: DRESNA PTY LTD (ACN 097 346 784) APPELLANT AND: MISU NOMINEES PTY LTD (ACN 004 986 001) FIRST RESPONDENT KANDARA PTY LTD (ACN 005 524 943) SECOND RESPONDENT LINKNARF MANAGEMENT SERVICES PTY LTD (IN LIQUIDATION) FORMERLY FRANKLINS MANAGEMENT SERVICES PTY LTD THIRD RESPONDENT LINKNARF LIMITED (IN LIQUIDATION) FORMERLY FRANKLINS LIMITED (ACN 000 929 902) FOURTH RESPONDENT COLES MYER LIMITED FIFTH RESPONDENT JUDGE: MARSHALL J DATE: 30 JUNE 2004 PLACE: BRISBANE (HEARD IN MELBOURNE) (VIA VIDEO LINK TO MELBOURNE) REASONS FOR JUDGMENT 40 The matter before the Full Court is an application for leave to appeal from an interlocutory judgment of Weinberg J ("the primary judge") dated 19 December 2003 (Dresna Pty Ltd v Misu Nominees Pty Ltd [2003] FCA 1537) and consequential orders made by his Honour on 18 February 2004 ("the Orders"). Those Orders delineated the ambit of the applicant's statement of claim in the substantive proceeding. 41 Before the primary judge, the applicant ("Dresna") sought leave to amend and enlarge its statement of claim to include various further causes of action against one or more of the respondents. 42 At [18] of his reasons for judgment, the primary judge set out in summary form, the causes of action which, by its proposed further amended statement of claim ("the PFASC"), Dresna sought to plead against the respondents. These included: · a claim in contract against Franklins for breach of the Mentone BSA; · a claim in contract against Franklins for breach of the Litigation Agreement, and a claim in equity for breach of fiduciary duty; · a claim in tort against Coles for inducing breach of contract; · a claim in tort against Franklins and Coles for conspiracy; · a separate claim in tort against the Lessor and Coles for conspiracy; and · a claim against Franklins for breach of s 52 of the Trade Practices Act 1974 (Cth) ("TPA"). 43 Before the Full Court, Dresna challenged the decision of the primary judge, reflected in paragraphs (a), (b), (c), (d) and (f) of paragraph 1 of the Orders, refusing Dresna leave to amend its statement of claim to plead the following: · Ground 1 - breaches of undertakings given by the fourth respondent ("Franklins") to the Australian Competition and Consumer Commission ("ACCC") under s 87B of the TPA as constituting the unlawful means for the tort of conspiracy by unlawful means; · Ground 2 - that Franklins and the fifth respondent ("Coles") made false suggestions (alternatively, knowingly made false representations) to the ACCC as unlawful means for the tort of conspiracy by unlawful means; · Ground 3 - that Franklins and Coles had, in making false and misleading submissions to the ACCC to gain its consent to the sale of the Mentone business to Coles, engaged in misleading and deceptive conduct, or conduct that was likely to mislead or deceive, "in trade or commerce", contrary to s 52 of the TPA; and · Ground 4 - that the first and second respondents (collectively "the Lessor") and Coles committed a conspiracy by unlawful means aimed at "the independent operator that entered into an agreement to purchase the Franklins' business at Mentone". 44 Dresna also challenged the costs order set out in paragraph 2 of the Orders. 45 In argument before this Court, it soon became apparent that, despite some ambiguity in the draft notice of appeal dated 23 February 2004 (in particular with the expression of ground 3), the totality of the appeal is concerned with pleadings where the substantive cause of action is a tort of conspiracy by unlawful means. The unlawful means alleged were, respectively, (in order of the grounds referred to above and set out in the draft notice of appeal) a breach of s 87B undertakings, the making of false suggestions, a breach of s 52 of the TPA and a combination of acts aimed at "the independent operator" and committed prior to 10 August 2001. 46 For ease of reference, and adopting the nomenclature assumed in the course of the proceeding before the Full Court and in the decision of the primary judge, I will refer at this point forward to each of these grounds as "the s 87B claim", "the false suggestions claim", "the s 52 claim" and "the paragraph 103(b) claim", the last being a reference to the relevant paragraph of the PFASC. The s 87B Claim 47 Dresna contended that the primary judge erred by refusing it leave to amend the PFASC to incorporate the s 87B claim. 48 The s 87B claim relies for its efficacy on undertakings given to the ACCC by Franklins and Dairy Farm (the parent company of Franklins) in June 2001. These undertakings, which were referred to in the decision of the primary judge as "the Franklins Undertakings", were made pursuant to s 87B of the TPA. 49 At [6] of his reasons for decision, the primary judge said, in respect of the Franklins Undertakings: "Their apparent purpose was to ensure, so far as possible, that the remaining Franklins stores were sold to "independent operators" rather than to Coles or Safeway." 50 Dresna, in paragraphs 77-81 of the PFASC, sought to introduce a cause of action based on the tort of conspiracy by unlawful means, where the unlawful means are the alleged breaches by Franklins of the Franklins Undertakings. 51 The primary judge refused leave to amend the PFASC to include the s 87B claim, on the basis that breaches of s 87B undertakings cannot be regarded as "unlawful acts" for the purpose of the tort of conspiracy by unlawful means. At [129] of his reasons for judgment, his Honour said: "The section does not confer private rights and was plainly never intended to do so. It would be inappropriate, in those circumstances, to permit the section to be invoked indirectly as the "unlawful means" for the tort of conspiracy". 52 Dresna submitted on the appeal that the question of whether a statute confers private rights is simply not relevant to a determination of whether a breach of the statute constitutes unlawful means. In support of this proposition, it cited some authorities including: Coal Miners' Industrial Union of Workers (WA), Collie v True (1959) 33 ALJR 224 at 227; Williams v Hursey (1959) 103 CLR 30 at 78-80, 108, 122 et al (see paragraph 18 of the applicant's outline of submissions). 53 Dresna contended that the reasons of the primary judge were flawed to the extent that they were limited to a consideration of the conferral of private rights by s 87B without more. It was submitted by Dresna that, the primary judge failed to consider, as a separate issue, whether a breach of an undertaking given pursuant to s 87B of the TPA would constitute unlawful means for the purpose of pleading the tort of conspiracy. 54 In its written outline and in oral submissions, Dresna relied primarily on two arguments to support the proposition that a breach of s 87B would, in fact, constitute "unlawful means". 55 The first, implicit in the language employed in Dresna's written outline (see, for example, at [18]-[19]), was that a breach of a s 87B undertaking is a contravention of statute and automatically constitutes unlawful means. In the alternative, it was submitted that a breach of a s 87B undertaking is analogous to a breach of contract and on this basis should constitute unlawful means for the purpose of the tort of civil conspiracy. Related to this last submission, Dresna also contended that, as there is no authority to conclusively remove a breach of s 87B from the ambit of wrongs that the common law recognises as constituting unlawful means, Dresna should at least have the opportunity to argue the s 87B claim at trial. 56 In my respectful view, each of these submissions is wrongly based. The alleged breach by Franklins of the Franklins Undertakings does not amount to a breach of statute. At its highest, it involves conduct by Franklins, which, may enliven s 87B(3) and the discretion of the ACCC to take enforcement action. Assuming that a decision is made to take enforcement action, the Court may find (after first satisfying itself that the undertakings were lawfully accepted by the ACCC) that an undertaking has been breached and make orders of the type prescribed under s 87B(4). However, none of this is automatic. The statutory scheme articulated at s 87B does not proscribe behaviour but rather sets up the means by which, following the satisfaction of at least two preconditions, the ACCC may obtain orders pertaining to conduct that contravenes arrangements that govern a relationship between itself and the person giving the undertakings. 57 Further, I do not accept that a breach of a s 87B undertaking is analogous to a breach of contract. As Coles submitted, the giving and acceptance of an undertaking under s 87B(1) is an administrative arrangement sanctioned by the statute: see Australian Petroleum Pty Ltd v ACCC (1997) 73 FCR 75. 58 In Australian Competition & Consumer Commission v Signature Security Group Pty Ltd [2003] FCA 3, Stone J said at [41]: "The purpose of a corporation giving undertakings to the ACCC is, at least in part, to avoid unnecessary litigation by voluntary undertakings that the corporation will not engage in conduct of the type precluded by the terms of the undertakings." 59 In my respectful opinion, to find that a breach of an undertaking given in this restricted context (typically following a period in which the parties are engaged in private negotiations) can constitute the unlawful means for the tort of conspiracy is to extrapolate to an untenable degree. It is not helpful to refer, as Dresna did, to questions of public interest as a basis for treating by way of analogy, a breach of a s 87B undertaking as a breach of contract. 60 I also reject the submission of Dresna that, in the absence of any authority that establishes that a breach of a s 87B undertaking is not "unlawful means" for the purpose of the tort of conspiracy, the pleading should be allowed to proceed. In my view, the absence of positive authority on the issue does not elevate the untenable s 87B claim to the status of arguable. 61 Accordingly, I consider that his Honour the primary judge was correct to hold that there was no basis in law for the s 87B claim and was right to decline leave to amend, in that respect. The False Suggestions Claim 62 Dresna submitted that the making of false suggestions by Franklins to the ACCC, in circumstances where what is sought is some form of licence or consent, constitutes unlawful means for the purpose of the tort of conspiracy by unlawful means. In support of this proposition, Dresna relied on the observations of Gummow J in Prestige Group (Australia) Pty Ltd v Dart Industries (1990) 26 FCR 197 at 213-219 and Lonrho Plc v Fayed (1990) 2 QB 479 at 489-490 and [1992] 1 AC 448 at 470. For the reasons set out by their Honours Kiefel and Jacobson JJ, I am of the view that these cases should be properly confined to their facts, involving misrepresentations given to procure the grant of monopoly rights and not regarded as authority for a more general proposition concerning false statements made to government agencies. 63 I am unable to accept that as a general proposition, the telling of lies, or "gilding of the lily", to a regulatory agency, can of itself, amount to unlawful means. 64 I am also unable to agree with the views of Kiefel and Jacobson JJ at [28] that the false suggestions claim is arguable based on a view contained in a textbook on economic torts. None of the cases referred to in the text provide clear and unequivocal support for the existence of any such cause of action. 65 I consider that the primary judge was correct to decline leave to amend the PFASC to incorporate the false suggestions claim. The false suggestions claim did not disclose a cause of action recognisable at law and consequently was untenable. The s 52 Claim 66 For the reasons set out in the joint judgment of their Honours Kiefel and Jacobson JJ, it is my view that leave to plead the s 52 claim ought to have been given by the primary judge. It is at least arguable that the provision of the confidential submission and/or the sending of the supporting letter by Franklins and Coles is conduct "in trade and commerce" and this question is one, contrary to the s 87B issue, that may be sensibly resolved when re-visited in its proper factual context at trial. The Paragraph 103(b) Claim 67 For the reasons set out in the joint judgment of their Honours Kiefel and Jacobson JJ, I consider that the primary judge was correct to hold that there was no basis in law to plead the paragraph 103(b) claim and was right to decline leave to amend. Orders 68 In my view, leave to appeal should be granted and the appeal allowed only in respect of the s 52 claim. To the extent that the Orders prohibit the pleading of the s 52 claim they should be set aside and instead, Dresna have leave to further amend its statement of claim by adding paragraph 83 and a revised version of paragraph 94(c) that deletes all reference to the Franklins Undertakings and false suggestions. Dresna should pay the costs thrown away by these further amendments. 69 I agree with their Honours Kiefel and Jacobson JJ that the parties have the opportunity to make submissions as to the costs of the proceedings before the primary judge and of the appeal and order that Dresna have seven days to file and serve its written submissions on costs and the respondents fourteen days. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. Associate: Dated: 30 June 2004 Counsel for the Appellant: R M Garratt QC with M KMoshinsky Solicitors for the Appellant: Foster Hart Lawyers Counsel for the First and Second Respondents: M M Gordon SC Solicitors for the First and Second Respondents: Arnold Bloch Leibler Counsel for the Third and Fourth Respondents: M J Colbran QC with G J Fitzgerald Solicitors for the Third and Fourth Respondents: Home Wilkinson Lowry Counsel for the Fifth Respondents: J H Karkar QC with M N Connock Solicitors for the Fifth Respondents: Allens Arthur Robinson Date of Hearing: 24 May 2004 Date of Judgment: 30 June 2004