IN THE FEDERAL COURT OF AUSTRALTA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION BETWEEN: ORDER Quended erded » ) ) ) No. G4 of 1984 ) ) TERRENCE BERTRAM KLIESE First Applicant - and - PEGGY KLIESE " Second Applicant WILLIAM RONALD JOHNSTON First Respondent JOHN WOODS Second Respondent ALLIED MARKETING INDUSTRIES PTY. LIMITED Third Respondent CUDWORTH PTY. LIMITED Fourth Respondent DONALD ATTHOW Fifth Respondent ~ and - RICHARD ANDREWS Sixth Respondent REA WE JUDGE MAKING ORDER: Neaves J. DATE OF ORDER: 1 June 1984 WHERE MADE: Canberra THE COURT ORDERS THAT: 1. The statement of claim filed herein on behalf of the applicants on 1 February 1984 be struck out. 2. The applicants have liberty to file and serve an amended statement of claim within 28 days after the date of this order. 3. The costs of this application be the first, second, third and fourth respondents' costs in the cause. ween Lo oS2 GRIEPRCRSRRERET AMEE IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION BETWEEN: CORAM : Neaves J. DATE: 1 June 1984 No. G4 of 1984 we we TERRENCE BERTRAM KLIESE First Applicant - and - PEGGY KLIESE Second Applicant WILLIAM RONALD JOHNSTON First Respondent JOHN woops Second Respondent ALLIED MARKETING INDUSTRIES PTY. LIMITED Third Respondent CUDWORTH PTY. LIMITED Fourth Respondent DONALD ATTHOW Fifth Respondent - and - RICHARD ANDREWS Sixth Respondent REASONS FOR JUDGMENT A proceeding has been commenced in this Court by Terrence Bertram Kliese and Peggy Kliese ("the appli- cants") by the filing, in accordance with Order 4, rule 1 of the Federal Court Rules, of an application claiming - 1. An order relieving the applicants from any obligation to pay any further sums under a franchise agreement in relation to a franchise retail furniture outlet at Lismore in the State of New South Wales made on or about 3 May 1983; 2. Damages of $40,000 for breach of sections 52 and 59 of the Trade Prac- tices Act 1974, breach of contract and misrepresentation in relation to the retail furniture outlet; and 3. Costs. Section 52 of the Trade Practices Act 1974 provides that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to milead or deceive. Section 59, so far as material, provides that where a corporation, in trade or commerce, invites, whether by advertisement or otherwise, persons to engage or participate, or to offer to apply to engage or participate, in a business activity requiring the investment of moneys by the persons concerned and the performance by them of work associated with the investment, the corporation shall not make, with respect to the profitability or risk or any other material aspect of the business activity, a statement that is false or misleading in a material particular (sub-section (2)). The application names as respondents to the proceeding William Ronald Johnston ("the first respondent"), John Woods ("the second respondent"), Allied Marketing Industries Pty. Limited ("the third respondent"), Cudworth Pty. Limited ("the fourth respondent"), Donald Atthow ("the fifth respondent") and Richard Andrews ("the sixth respondent"). With the application the applicants filed a statement of claim. The second and third respondents have applied by motion on notice, under Order 11, rule 16 of the rules, for an order striking out the whole of the statement of claim as containing matters which tend to prejudice, embarrass or delay the proceeding. Alternatively, the second and third respondents seek an order that speci-~ fied paragraphs of the statement of claim be struck out as containing matter which has a tendency to cause prejudice, embarrassment or delay in the proceeding or which is merely evidence of the facts upon which the applicants rely. In the further alternative, the second and third respondents seek an order that the applicants supply particulars of specified allegations in the statement of claim. When the matter came on for hearing the first and fourth respondents sought leave to intervene to support the application of the second and third respondents. Leave was granted but, as those respondents sought to raise some matters additional to those raised by the second and third respondents, L directed that the first and fourth respondents file an application setting out the relief which those respondents sought. The statement of claim begins by alleging the sex and the residential address of each of the applicants and that the second applicant is the wife of the first applicant. It then alleges the sex and business address of each of the four respondents who are natural persons. It alleges that those four respondents are engaged in inter-State trade and commerce and in trade or commerce within the meaning of section 52 of the Trade Practices Act 1974. The third and fourth respondents are alleged to be trading or financial corporations formed within the limits of the Commonwealth within the meaning of section 51(xx) of the Constitution and are engaged in inter-State trade and commerce and in trade or commerce within the meaning of section 52 of the Trade Practices Act 1974. It is alleged that the respondents caused an advertisement to be published in a newspaper circulating in Lismore on 4 April 1983. Neither the subject matter nor the contents of the advertisement are disclosed. Thereafter follow details in narrative form of conversa- tions which one or other of the applicants had with the first and second respondents relating to the sale to the applicants of a franchise for a new and used furniture store to open in Lismore. Paragraph 10 of the statement of claim sets out in sub-paragraphs lettered (a) to (f) what the first respondent is alleged to have "represented to and promised to" the applicants at a meeting held on 8 April 1983. Paragraph 13 sets out further matters which the first and second respondents are alleged to have "represented to and promised to" the applicants at a meeting on 15 April 1983. Paragraph 16 alleges that on or about 2 May 1983 the first applicant was handed by the first and second respondents a franchise agreement between the applicants of the one part and Strata Industries International of the other part. The second respondent is alleged to have represented that the contract was in accordance with the standard format of the Real Estate Institute of Queensland. The applicants allege that they signed the franchise agreement on 3 May 1983. They say that they paid sums totalling $23,800. The statement of claim then details certain events which the applicants allege took place, including the delivery of furniture by the respondents to the applicants, and certain alleged defaults on the part of the respondents. It is alleged that the Lismore franchise store opened on 4 June 1983 but that business "failed to reach the level of gross earning and otherwise the levels of risk or profitability represented and promised" by the respondents (see paragraphs 24 and 26). The business closed, so it is alleged, onor about 16 October 1983. Paragraph 27 alleges that in breach of the franchise agreement and in breach of the representations and promises made by the respondents to the applicants, the respondents failed or refused to fulfil their obligations in a number of specified respects. Paragraph 29 particularises the respects in which it is alleged that the conduct of the respondents has been misleading or deceptive or likely to mislead or deceive within the meaning of section 52 of the Trade Practices Act 1974. Paragraph 30 says that the appli- cants rely upon the same matters to support the claim under section 59 of that Act. The applicants claim the relief specified in the application to which I have already referred. A properly drawn statement of claim will contain and contain only, a statement in a summary form of the material facts on which the party relies, but not the evidence by which those facts are to be proved (see Order 11, rule 2). The material facts should be stated accur- ately, clearly and intelligibly and must be sufficient to raise the legal claim on which the party relies. The statement of claim filed on behalf of the applicants falls far short of complying with the above principles. A consideration of paragraph 29 indicates the difficulties with which the respondents are faced in drawing a defence. The misleading or deceptive conduct relied upon is alleged to consist, in part, of false representations and promises made by the respondents. The first comment to be made is that there is no co- relation between the representations and promises specified in paragraph 29 as being false and those alleged to have been made by the first and second respondents elsewhere in the statement of claim. For example, sub-paragraph 29(a) (i) implies that a representation or promise had been made by the respondents that "a chain of such retail franchise outlets" had been or would be established. No representation or promise in those terms is alleged else- ' where in the statement of claim. Similarly paragraph 29(a)(v) implies that a representation was made that the average weekly gross earning of the Lismore franchise was or would be $1,800 whereas a representation in those terms is 1 not alleged to have been made. Again one may infer from sub-paragraph 29(a)(viii) that a representation was made that the respondents or one or more of them answered the description of "a national retail furnisher"™ yet no such representation is alleged. Conversely, an examination of paragraphs 10, 13 and 16 of the statement of claim discloses allegations of representations and promises being made in respect of which no allegation of falsity is made. To that extent the allegations would seem irrelevant to any claim which the applicants seek to make. A further difficulty to which paragraph 29 gives rise is that in a number of its sub-paragraphs the ' falsity alleged is simply the non-fulfilment of the promise or representation alleged: there is no allegation in those instances that the promise or representation was false at the time it was made (cf sub-paragraphs (i), (ii), (iv), and , (vi) on the one hand and sub~-paragraphs (iii), (v), (wii), (ix) and (x) on the other). Further, in relation to the latter group of sub~-paragraphs no particulars are given of the respondents' lack of intention to carry out what ~ is alleged to be represented or promised. Again, it is not alleged that the applicants relied upon the repres- entations or promises alleged as inducing them to enter into the franchise agreement or otherwise to act to their detriment. Another difficulty with the statement of claim is that the representations and promises relied upon are said to have been made only by the first and second res- pondents. It is not alleged that they did so as the servants or agents of the other respondents or, in the case of the respondent corporations, as directors thereof. Indeed, except in so far as the statement of claim alleges matters against "the respondents" in general texms it provides no basis for relief in relation to the corporate respondents or the fifth and sixth respondents. There are also difficulties so far as the claim is said to arise in contract. An allegation is made that a franchise agreement was entered into by the applicants, the other party to the agreement being identified only by the business name "Strata Industries International" (paragraph 16). It is not alleged that that business name was used by any of the respondents, the only allega- tions being that the first respondent represented and promised that he and the fifth respondent were duly authorised by their respective principals, including Strata Industries International, to open negotiations with the applicants for the franchise outlet (sub-paragraph 10(c)) and that the first and second respondents repres- ented and promised that the second respondent was the managing director of Strata Industries International (paragraph 13). The statement of claim does not set out the terms of the contract relied upon nor identify clearly the breaches which are alleged. The matters identified in paragraph 27, for example, as being matters in re- lation to which the respondents failed or refused to fulfil their obligations are indifferently described as being "In breach of the franchise agreement and in breach of the representations and promises made by the Respondents to the Applicants." It is apparent from what has been said that the statement of claim does not define with reasonable clarity and precision the matters on which the applicants rely as being sufficient to support the claim for damages which they seek to maintain against each of the respondents. It does not give fair and proper notice to the respondents of the case they have to meet. During the course of argument criticism was made of a number of individual paragraphs of the statement of claim. In the light of the conclusion to which I have come and as the defects in the statement of claim cannot. be cured by piecemeal amendment I have found it unnecessary to deal with each of those matters seriatim. They are, however, matters that should be brought to the attention of the draftsman so that he may consider them in drawing an amended statement of claim. 10. For the reasons I have given the statement of claim is struck out, the applicants to have liberty to file and serve on all the respondents against whom they wish to proceed an amended statement of claim within 28 days after the date of this order. The costs of this application will be the first, second, third and fourth respondents' costs in the cause. I-certify that this and the preceding ten (10) pages are a true copy herein of the Reasons for Judgment of the Honourable Mr. Justice Neaves. Date: 1 June 1984 Clhopernn ' AssocL 11.