St, "LIMITED DISTRIBUTION" sq IN THE FEDERAL COURT OF AUSTRALIA } ) VICTORIA DISTRICT REGISTRY ) V. Nos. ) ! G17S5, i76 & 177 GE 1996 GENERAL DIVISTON BETWEEN : ALLAN GEOFFROI JULIAN HUGHES and OTHERS Applicants and KLOCKNER-MOELLER PIY. LTD. and OTHERS Respondents COURT: NORTHROP J. DATE: ll DECEMBER 1986 PLACE: MELBOURNE MINUTES OF ORDER THE COURT ORDERS THAT: - 1. The statement of claim be struck out. 2. The respondents have leave to move the Court on notice for leave to file and serve an amended statement of claim; any such motion to be made returnable before the Court at the next directions hearing. 3. The directions hearing be adjourned to Thursday, 5 February 1987 at 10.15 a.m. 4, The motion for consolidation be adiourned to the next directions hearing. 5s. The applicants to pay the respondents' costs of the motions ts data. Rules of Court.) IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY Ve. Nos. G 175, 176 & 177 of 1996 GENERAL DIVISION BETWEEN : ALLAN GEOFFROT JULIAN HUGHES and OTHERS Applicants and KLOCKNER-MOELLER PTY. LTD. and OTHERS Respondents COURT: NORTHROP J. DATE: 11 DECEMBER 1986 PLACE: MELBOURNE REASONS FOR JUDGMENT Important issues are raised by motion in these three proceedings relating to whether a corporation under the Trade Practices Act 1974 ("the Act"), in trade or commerce, engages im conduct that 15 misleading or deceptive or is likely to mislead or deceive when negotiating conditions of employment with prospective employees or with employees. Three former employees have each commenced proceedings in the Court against their former employer seeking relief based ona contravention of 3.52 of the Act and relief upon the accrued jurisdiction of the Court, based on breach of contract and on tort. In each proceeding, pursuant to 0.20 r.2, the employer is moving the Court upon notice that each proceeding be —_—— stayea or dismissead or alternatively that the statement of claim in each proceeding be staved, alternatively taat pursuanr to 0,29 6.5, the three proceedings b@® consolidated. With the consent of all parties, toe three motions were heard together. There are some differences of fact between each proceeding, but those differences do mot affect the basic issues raised of each motion. In addition to the application and statement of claim in each proceéding, the material before the Court comprise the letters of apvointment of each of the applicants as employees and the superannuation deed dated 7 September 1976. The additional material was admitted under 0.20 r.2(2). In matter V. No. G 175 of 1386, the applicant Hughes 15 suing Klockner-Moeller Pty. Ltd. ("the amployer"). The statement of claim alleges that the employer 15 a trading corporation under the Act being an importer and marketer of electrical switchgear. It alleges also that the employer 1s the sole trustee of a superannuation fund ("the Scheme") established to provide superannuation benefits for ats employees and constituted by a trust deed dated 7 September 1976 entered into between the employer and New Zealand Victoria Life Ltd. That trust deed 15 before the Court. The statement of claim, by paragraph 3, alleges that on 18 July 1380, the employer presented a proposed contract of employment to Hughes thereby representing to him that if he continued in employment with the employer on the terms of the contract, upon termination of his employment the employer would pay ¢o him under the Scheme an amount equal to the contributions made by the employer and himself with accumulated interest. The proposed contract referred to in that paragraph 15 not in evidence before the Court. There is in evidence a similar proposed contract with Hughes dated 14 December i373 from the parent company of the employer, namely, Kiockner-Mcoeller GMBH, a company incorporated in West Germany. That proposed contract which was accepted by Hughes on 19 December 1973, contains a tearm as follows:- "2. Superannuation A 5% by company / 5% by employee superannuation scheme will apply. Membership will be immediate." Apparently Hughes was employed pursuant to the terms of that contract. He joined the Scheme referred to in that contract. That contract was varied by the new contract cf 18 July 1986. The new contract referred to the Scheme created by the deed dated 7 September 1976. Under that deed, the employer contributes 6.5% and the employee 5%. Paragraph 4 of the statement of claim alleges that Hughes relied upon the representations set out in paragraph 3 and thereby agreed to continue his employment upon the terms set out in the proposed contract. Paragraph 5 alleges that the representation was false in that upon the termination of his employment, the employer paid to him the amount of his contributions together with interest thereon only. Paragraph 6 alleges that the conduct of the respondent rererread to in paragraphs 3 and 5 of the statement of claim constitutes conduct by the employer ain trade or commerce that is misleading or deceptive or likely to mislead or deceive contrary to sub-section 52(1) of the Act. Under the terms of the Scheme dated 7 September 1976, the employer is required to contribute an amount in respect of @ach member equal to 6.5% of the earnings of the member and the employee 15 required to contribute 5%. Onder the terms of che Scheme, upon an employee ceasing his employment for any reason other than specified reasons not relevant for present purposes, the entitlement of the member under the Scheme 15 the amount of the contributions made by the employee together with interest thereon. Paragraph 15 of the statement of claim alleges that in a conversation between Hughes and one Quayle (who is the applicant 1n proceeding V. No. G 177 of 1986) for and on behalf of the employer, the employer adopted and/or repeated the representation referred to in paragraph 3 of the statement of claim. Paragraph 16 alleges a further conversation between Hughes and Quayle for and on behalf of the employer in about April 19381 1n which the employer represented to Hughes that the moneys due to Hughes under the Scheme would be .permitted to remain ain the scheme after termination of employment and would be paid, together with interest, when requested by Hughes. Paragraph 17 alleges that Hughes relying upon the representations set out in paragraph 15, terminated his employment in April 1981. Paragraph 13 alieqas chat the representations contained in paragraphs 15 and 16 were false in chat when Hughes aid eeceélve his payment under the Scheme in Mav 1985 he received his own contributions only together with interest thereon. The statement of claim does not allege that the conduct referred to ain paragraphs 15 and 16 contravened sub-section 52(1) of the Act, but the submissions proceded on the basis that such an allegation had been made. The other paragraphs of the statement of claim relate to the claims based on contract or on tort. Unless a claim is made out based upon the act, the Court has no jurisdiction to hear and determine those other claims. The Court has not heard argument and has not considered the question of whetner it should, in tne exercise of its discretion and on the assumption that tne statement of claim discloses a cause of action based on the Act, exercise its accrued jurisdiction to hear and determine the claims based upon contract and tort. In matter V. No. G 176 of 1986, the applicant Clencie 1s suing the employer and Munns and Atzl, the latter two alleged to be directors and employees of the employer. The statement of claim is in similar form to that in matter V. No. Gi175 of 1986. Paragraph 4 alleges the proposed contract of employment was dated February 1981 and constituted a representation that if Clencie accepted a continued employment tne terms of employment would include a term that the employment would not be terminated otherwise than upon three months written notice by either party and a term re payment of superannuation similar to that with respect to Hughes. Paragraph 5 alleges that Clencie relied upon that representation. The proposed contract was accepted by Clencie on 29 May 1981. It contaans the following terms: - "The agreement can be cancelled by either party upon written notice of three months being given. aaa 2. Superannuation A 6.5% by company / 8% by employee superannuation scheme will apply." Paragraphs 6 and 7 of the statement of claim aré in similar form to paragraphs 5 and 6 of the statement of claim in matter V. No. G 175 of 1986 and need not be summarised. Paragraphs 16, 17 and 18 are similar to paragraphs 15, 16, 17 and 18 of the statement of claim in matter V. No. G 175 of 1986. The differences are that the second set of representations were made by Munns and Atzl for and on behalf of the employer in March 1985 and were to the effect that if Clencie accepted aimmediate termination of employment, the employer would pay to Clencie under the Scheme an amount equal to the contributions made by the employer and Clencie together with interest, that Clencie relied upon those representations and accepted immediate termination but was paid his own contributions together with interest thereon only. Paragraph 13) alleges that the conduct referred to in Paragraphs 15 and 18 constitutes conduct by the employer in contravention of sub-section 52:1) of the Act. There 15 no separate claim against Munns and Atzl. The otner paragraphs of the statement of claim relate to matters which might come within the accrued jurisdiction of the Court. In matter V. No. G 177 of 1986, the applicant Quayle is suing Klockner-Moeller GMBH, the employer, Munns and Atzl. The statement of claim is similar to that in matter V. Wo. G 176 of 1986. The date of the proposed contract was i+ December 1973. It contained the term enabling either party to terminate the employment on three months written notice and the superannuation provision was on a 6.5% company / 5% employee basis. With necessary alterations as to dates, paragraphs 5, 6, 7 and 8 correspond to paragraphs 4, 5, 6 and 7 of the statement of claim in matter V. No. G 176 of 19386. The allegations are that the employer terminated Quayle's employment by letter dated 15 March 1985 with effect from 29 March 1985 and paid under the Scheme the amount of the contributions paid by Quayle to 29 March 1985 together with interest thereon. Paragraphs 17, 18, 19 and 20 correspond to paragraphs 16, 17, 18 and 19 of the statement of claim in matter V. No. G176 of 1986. The allegations are that the representations were made by Munns and Atzl for and on behalf of the employer in March 1985 and were to the effect that if Quayle accepted immediate termination of employment, the employer would make certain payments to Quayle, that Quayle accepted the immediate termination of employment but the employer did not make those payments, that the representations were false and constituted conduct an contravention of sub-section 52(1) of the Act. There 1s no separate claim against Munns and Atzil. The other paragrapns of the statement of claim relate to matters which Might come within the accrued jurisdiction of the Court. Leaving aside for the moment difficulties arising from the question of whether the employer 15 being sued in its capacity as employer or in 1ts capacity as trustee of the Scheme, the questions of law raised by the motions are:- 1. In making an offer of employment to the applicant in each proceeding, was the employer engaging in "trade or commerce" within 5.52 of the Act? 2. Where the conduct alleged constitutes a representation and that representation relates to future conduct which is not fulfilled, does that representation disclose a cause of action an the absence of an allegation that at the time the representation Was made the yepresantor's belief was different from what was stated or that the representor did not believe what was stated or was recklessly indifferent as to what was stated? ba Where the conduct allegea constitutes a representation and that representation becomes a term of the agreement, does ai subsequent breach of that term of the agreement constitute a contravention of 5.52 of the Act? Before considering these questions, it should be noted that in the proceeding in which Quayle 15 the applicant, the relevant contract of emplcyment was entered into in December 15973 and that the alleged representations took place before that date. At that date, the Act was not an operation. Lixewise, the contract of employment entered into by Hughes was dated September 1576 but was varied in July 1980 and that the alleged representations took place before those dates and that the contract of employment entered into by Clencie was dated May 19381. At present, no defences have been filed but if the proceedings continue, it is anticipated that these matters will be raised by defence including defences based upon sub-section 82(2) of the Act. I consider first, question 2. In Bill Acceptance Corporation Ltd. v. GHA Ltd. (1983) 50 A.L.R. 242 at p.250, Lockhart J. said:- "The mere fact that representations as to future conduct or events do not come to pass does not make them misleading or deceptive, notwithstanding that the applicant has relied on them and has altered his position on the faith of them. aa If the respondent had made representations or statements with knowledge of their falsity or with reckless indifference to their accuracy the applicant's case may then fall within what I believe to be the present law on this -— - 1O - subject as expressed by Fitzgerald J. on Stack's Case to which I have already referred. However, the applicant has not gleaded any intent on the pact of the respondent to mislead or deceive, nor has it pleaded anv reckless indifference as ta the accuracy of the statements made." That principle has been appliea time and time again. In my opinion, 1t 15 a correct statement of principle and should be applied to the facts of this case. None of the statements of claim contain allegations of the type indicated and to that extent, none of the statements of claim disclose a cause of action under s.52 of the Act. However, 1f this was the only question raised, the statements of claim, 1f proper instructions were obtained, could be amended to disclose a cause of action. For this reason, it 1s necessary to consider the other questions. Question 1 raises an issue of general importance. There 15 no doubt that the employer and its parent company, Klockner-Moeller GMBH, are each corporations. Each 15 engaged in trade or commerce. The issue, however, 15 whether, when engaging in negotiations with prospective employees, are they engaged in trade or commerce? They are not engaging in the business of an employment agency. They are seeking employees to enable them to engage in trade or commerce. I do not find it necessary to form any final view on this question. — -~.ll- Question 3 must be considered in conjunction with question 1. In substance, the conduct alleged consisted of representations that 1f the applicants entered into the contract of employment, they would be required to enter anto the Scheme and thus become entitled to the benefits conferred upon them under the Scheme. Each applicant accepted that obligation and joined the Scheme. The terms of the Scheme became banding upon each applicant and the emplover. Under the deed canstituting the Scheme, the employer is both the employer and the trustee. As employer, the employer is required to make payments into the scheme. As trustee, the employer 15 required to make payments, the amount of which is determined in accordance with the Scheme. Tf an employee seeks to enforce payment of moneys due under the Scheme, he Must sue the employer, as trustee, and must rely upon the terms of the Scheme. In the present cases, each applicant, upon entering into his employment, became a member of the Scheme. As a result, each applicant made contributions to the fund. Upon termination of his employment, each was entitled to payment under the Scheme. The obligation to make that payment was imposed upon the employer in its capacity as trustee of the Scheme. - 4a a In each proceeding, the applicant alleges a representation by the employer, in its capacity as employer, with respect to the ankiclement of the applicant under che Scheme. Hughes alleges an agreement with the amployer that 1f he terminated his empioyment, the moneys due to him under the Scheme could be kept in the Scheme and would be paid to him upon request with accumulated interest. He alleges that this constituted a representation which was false since the amount paid to him was calculated in accordance with the terms of the Scheme; it did not include the contributions made by the employer. Clencie alleges an agreement with the employer that if he terminated his amployment immediately, the moneys due to him under the Scneme would, contrary to the terms of the Scheme, constitute both the contributions made by the employer and by himself together with accrued interest. In fact he received his own contributions and interest only. A similar situation arises as with respect to Clencie. These allegations have all the appearances of agreement and claims for damages for breaches of contract. The alleged representations are alleged to be terms of the agreements. As was said at the beginning of these reasons, important issues are raised by the motions before the Court. The statements of claim have been drawn without adequate consideration being given to the law applying to the facts giving rise to the claim. The duties of the trustee under the Scheme have not been adverted to in the statements of claim. The effect of a representation being made a term of a oF -— ~ 13 - contract has not been adverted to. Representations as toa future conduct have not been fully considered. Neither has the question of whether tne conduct complained of is in trade or commerce. A mumber of these matters were not argued fully on behalf of the applicants at the hearing of the motions. The statements of claim should be set aside based on the answer to question ¢. Having regard to all the circumscances, this is not a case where each application should be dismissed. Rather, in each application the statement of claim should be = struck out and leave be given to each applicant to move the Court for leave to file and serve an amended statement of claim. If, after proper consideration of the matters, the applicants desire to adopt that course, they could prepare an amended statement of claim and, on notice, move the Court for leave to file and serve that amended statement of claim. At the hearing of that motion, final consideration could be given to the matters raised in these reasons. In addition, any question of the application of sub-section 82(2) could be raised and decided. em Accordingly, the following orders are made in proceeding: - 1. The statement of claim be struck out. The respondents have leave to move the Court on notice for leave to file and serve an amended statement of claim; any such motion to be made returnable before the Court at the next directions hearing. The directions hearing be adjourned to Thursday, 5 February 1987 at 10.15 a.m. The motion for consolidation be adjourned to the next directions hearing. The applicants to pay the respondents' costs of the motions to date. sob oA stm : l 1 certify that this and the thir kee GS preceding pages are @ ae ony be Reasons for Judgment berem ° Jonourable Mr. Justice Northrep ing (Ldardle each