CATCHWORDS PRACTICE AND PROCEDURE - motion to strike out statement of claim and application - need to plead material facts not conclusions or evidence - need to plead with sufficient particularity - whether unacceptable degree of generality - whether statement of claim establishes requisite federal element. Trade Practices Act: s. 52 Federal Court Rules: oO. 11 r. 16, O. 20 r. 2 VAZSONY PTY. LIMITED v. TOOHEYS LIMITED and AUSTOTEL MANAGEMENT PTY. LIMITED G204 of 1987 LOCKHART J. SYDNEY 17 JUNE 1987 - \ Lom ceuRr OF ~! \ \ FEL a eh A ff IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES REGISTRY GENERAL DIVISION No. G 204 of 1987 BETWEEN: VAZSONY PTY. LIMITED Applicant AND: TOOHEYS LIMITED First Respondent AUSTOTEL MANAGEMENT PTY. LIMITED Second Respondent JUDGE MAKING ORDER: LOCKHART J. WHERE MADE: SYDNEY DATE ORDER: 17 JUNE 1987 MINUTE OF ORDER THE COURT ORDERS THAT: 1. NOTE: The statement of claim be struck out. The applicant pay the respondents' costs of the notice of motion filed on 19 May 1987. Leave be granted to the applicant to file and serve a fresh statement of claim and an amended application on or before l July 1987. The application be adjourned for further directions to 9 July 1987. Settlement and entry of orders is dealt with in Order 36 of the Federal Court rules. IN THE FFDFRAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES REGISTRY ) No. G 204 of 1987 ) ) GENERAL DIVISION BETWEEN: VAZSONY PTY. LIMITED Applicant AND: TOOHEYS LIMITED First Respondent AUSTOTEL MANAGEMENT PTY. LIMITED Second Respondent 17 June 1987 REASONS FOR JUDGMENT LOCKHART J. Tooheys Limited ("Tooheys"") and Austotel Management Pty. Limited ("Austotel") (together called "the respondents") move to strike out the application and statement of claim on the grounds that the statement of claim discloses no reasonable cause of action and has a tendency to cause embarrassment in the proceeding (0. 11 r. 16 of the Rules). It was also contended that the proceeding 1s frivolous or vexatious (0. 20 r. 2 of the Rules). It 1S necessary to set out the material allegations in the statement of claim. It alleges that:- - Tooheys leased and managed hotels for the sale _ and consumption of liquor in New South Wales and that it was the owner of land at Five Dock on which was erected a hotel known as the Five Dock Hotel (paras. 4 and 6) - in or about July 1986 Tooheys announced the formation of the Austotel Trust. The trust had acquired an interest in the majority of Bond Corporation hotels, including the Five Dock Hotel. Austotel would manage the trust and rentals would continue to be collected by Tooheys until further notice (para. 7) - the applicant, Vazsony Pty. Limited ("Vazsony"), has conducted the business of a hotelier as a tenant of Tooheys of the Five Dock Hotel since 1980; the terms of the lease are partly embodied in a memorandum of 21 March 1980 (para. 9) - since on or about 31 March 1981 when the fixed term expired Vazsony has remained as a tenant of Tooheys under a holding-over provision. The memorandum of lease stipulates a total rent of $122,536 payable as to $34,336 on or before the signing of the lease and thereafter by twelve consecutive monthly instalments of $7,350 each payable on 1 April 1980 and thereafter on the first day of each month (para. 11) - thereafter Tooheys from time to time stipulated variations of the payment of monthly rental, but did not in those variations stipulate that they incorporated, pursuant to covenant (B)2 of the memorandum of lease, an allocation of any land tax charge in respect of the premises (para. 12) - on or about 23 September 1986 Austotel wrote to Vazsony withdrawing and terminating all offers and negotiations which 1t had made or was to make on behalf of Tooheys in respect of Vazsony's 3. possible long term occupation of the hotel as a result of Vazsony lodging a caveat to protect its interests in respect of 1ts occupancy of the premises (para. 13) - on or about 6 January 1987 Austotel offered Vazsony a ter year lease free of any premium at a commencing rental of $84,000 per annum payable in advance by monthly instalments of $7,000 (para. 14) - Austotel in its offer indicated that, should Vazsony continue to hold over under the terms of the expired lease as a monthly tenant, having not accepted the proposal set forth in paragraph 14, then the rental would be increased to $10,000 per month commencing on 1 Marct 1987 and that Tooheys- would, if Vazsony held over, consider itself free to sell or in any way deal with the premises subject to Vazsony's monthly tenancy (para. 15) - on or about 26 January 1987 VazsSony protested in writings against the "threat" contained in the letter of 6 January 1987; the threat apparently being the suggestion or statement that Tooheys was entitled to unilaterally increase the monthly rental to $10,000 if Vazsony did not accept the "offer" (para. 16) - on or about 30 January 1987 Austotel rejected the assertions made by Vazsony and asserted that it was content that, 1f the offer made by it was not acceptable, Vazsony could continue as a monthly tenant on exactly the same conditions as existed prior to 1ts purchase of the premises (para. 17) 4. - at the time the representations referred to in paragraphs 13 to 15 and 17 were made, Austotel either did not believe what was stated or made the representations with reckless indifference as to their accuracy (para. 18) - On or about 4 February 1987 Vazsony wrote to Austotel acknowledging receipt of its letter of 30 January 1987 and indicated that it treated that letter in substance as an unequivocal withdrawal of the proposals contained in the letter of 6 January 1987 (it is common ground that the letter is wrongly described in the statement of claim as dated 30 January 1987) (para. 19) - by letter written on or about 17 February 1987 Austotel did not withdraw the proposals it had made but urged Vazsony to negotiate an increase in rental (para. 20) - Vazsony did not thereafter seek to negotiate an increase in rental and on or about 16 April 1987 Tooheys without notice made demand upon Vazsony in the sum of $9.002.99 alleged to be an allocation of land tax charge in respect of the premises (para. 21) - On or about 22 and 24 April 1987 Vazsony protested at the demand (para. 22) - the conduct of Tooheys and Austotel constitutes misleading or deceptive conduct or conduct that is likely to mislead or deceive within the meaning of s. 52 of the Trade Practices Act 1974 ("the Act") (para. 23) 5. - the demands so made by Tooheys are in all the circumstance: unconscionable (para. 24). - the conduct of Tooheys constitutes a breach of its contract with Vazsony (para. 25) - the conduct of both Tooheys and Austotel constitutes the exercise of exertion or of illegitimate pressure upon Vazsony (para. 26) - the actions of Austotel constitute direct and deliberate interference with the contractual obligations between Vazsony an3 Tooheys (para. 27) The application states the relief sought by Vazsony, namely: - a declaration that the conduct referred to in paragraphs 10, 11, 12, 13, 14, 15, 17, 20 and 21 of the statement of claim constitutes conduct that is misleading or deceptive or 1s likely to mislead or deceive within' the meaning of s. 52 of the Act (para. 1) - a declaration that upon the true construction of the lease Tooheys is not entitled to claim from Vazsony an allocation of land tax charges for the 1986 tax year in the sum of $9,002.99 (para. 2) - an injunction restraining the respondents from putting into effect the conduct foreshadowed in the letters of 6 and 30 January 1987 and 16 April 1987 (para. 3) - an injunction restraining the respondents from preventing or ainterfering with Vazsony's occupation and quiet enjoyment of the Five Dock Hotel (para. 4) - interlocutory injunctions (para. 5) - damages (para. 6). Counsel for the respondents submitted that paragraph 18 of the statement of claim is a critical allegation and it reads: . Further at the time the said representations referred to in paragraphs 13 to 15 and 17 were made, it is alleged that such representations were made by the Second Respondent who did not believe what was stated or who made the representations with reckless indifference as to their accuracy." Counsel for the respondents made submissions with respect to paragraph 18. He argued that, although paragraph 1 of the application seeks a declaration that the conduct referred to in paragraphs 13, 14, 15 and 17 constitutes misleading or deceptive conduct under s. 52 of the Act, it also states that the conduct referred to in paragraphs 10, 11 and 12 constitutes misleading or deceptive conduct, yet those three lastmentioned paragraphs are not picked up by paragraph 18. Counsel 7. submitted that paragraphs 10, 11 and 12 do not allege conduct that could constitute a representation and therefore there is nothing that could arguably fall within the scope of misleading or deceptive conduct. It was submitted that paragraph 18 is simply an allegation that representations were made by Austotel with reckless indifference as to their accuracy or Austotel did not believe what was stated; there is no allegation that any of the representations were in fact false or misleading. Counsel for the respondents submitted that many of the other material paragraphs in the statement of claim did not plead representations capable of being misleading or deceptive conduct under s. 52 of the Act and they should therefore be struck out. Similarly some conduct is pleaded that might conceivably be construed as a representation, but no facts are pleaded as to why any such representation is false or misleading. For example, the statement in paragraph 15 that Austotel in its offer of 6 January 1987 indicated that, should Vazsony continue to hold over under the terms of the expired lease as a monthly tenant, having not accepted the proposal set forth in the offer document, then the rental would be increased to $10,000 per month. It was submitted that this 1s simply a statement that the rental would be increased in those circumstances, It was submitted that other paragraphs are bad as they only plead matters of evidence rather than basic or constitutive facts; for example, paragraph 16. Other paragraphs were said to be mere conclusions of fact without the facts themselves being pleaded and therefore must be embarrassing. Paragraph 23 was cited as one example. AS to paragraph 24 which pleads unconscionable conduct, it was submitted by counsel for the respondents that there is no common law cause of action which is recognised by this' pleading. Unconscionable conduct may be a ground for setting aside a transaction in equity but paragraph 24 does not allege any transaction entered into as a result of unconscionable conduct and therefore 1t must be bad in law. It was submitted that paragraph 27, which pleads unlawful interference with contractual relations, was embarrassing in form as no cause of action was disclosed and as it pleads a mere conclusion without the basic facts being pleaded. Generally it was said that no cause of action 1s disclosed. Therefore it was submitted that Vazsony seeks declarations, injunctions and damages, some of which are unrelated to allegations in the statement of claim, that nothing is pleaded in support of the order for an injunction restraining the respondents from interfering with Vazsony's quiet enjoyment of the premises and that, so far as injunctive relief is concerned, there is no legal basis disclosed in the statement of claim for it. It was submitted that, as there is no foundation for the cause of action based upon s. 52 of the Act, no common law claim can be appended to it. Therefore in the circumstances the whole of the statement of claim and the application should be struck out. 9. Counsel for Vazsony submitted that the facts and matters pleaded in the earlier paragraphs of the statement of claim, especially paragraphs 1 to 12 inclusive, were all background matters that facilitated the understanding of the material allegations which commenced in paragraph 13. Counsel for Vazsony submitted that, on a fair reading of the statement of claim, it asserts that Austotel on behalf of Tooheys said to Vazsony that the respondents wished to offer Vazsony a ten year lease of the premises, but 1f Vazsony did not wish to negotiate or discuss this then Vazsony could remain in the premises as a monthly tenant on exactly the same conditions as existed prior to the purchase of the premises by Austotel; one such term and condition being that Vazsony would not be required to pay land tax in respect of the premises. If Vazsony did not negotiate increased rentals or a new lease then 1t was said that this would not lead to the imposition upon 1t of new imposts such as land tax being demanded by Tooheys or Austotel. This was said to be a representation in the sense of a promise for the future of the kind mentioned in L.E. Stack v. Coast Securities No. 9 Pty. Ltd (1983) 46 A.L.R. 451 at 456 and Bill Acceptance Corporation Ltd v. GWA Limited (1983) 50 A.L.R. 242 at 246-247. In my opinion paragraphs 1 to 12 inclusive must be read as introductory or by way of background to the assertions that follow in later paragraphs. The first declaration sought in the application is that the conduct referred to in the paragraphs therein mentioned, including paragraphs 10, 11 and 12, constitutes misleading or deceptive conduct. The conduct pleaded in paragraphs 10, 11 and 12 is not caught up by paragraph 18 of the statement of claim as a representation which it is asserted was made without Austotel 10. believing in its truth or with reckless indifference as to its accuracy. I think that, on a fair reading of the application, 1¢ should be treated as seeking a declaration that when the paragraphs named in the first declaration are read as a whole they establish misleading or deceptive conduct. The statement of claim is, however, not readily comprehensible. Many of the paragraphs narrate evidence rather tha basic or constitutive facts; for example, the contents of correspondence passing between the parties 1s set out in full. In the result the pleader tends to leave it to the reader to analyse, sift and probe for the purpose of determining what 1s and is not an allegation of basic fact which is said to constitute misleading or deceptive conduct within the meaning of s. 52 of the Act. Paragraph 13 1s the first important paragraph and 1t does not plead a representation at all; nor does paragraph 14. Paragraph 15 does contain the germ of a representation. It asserts that Austotel in a letter of 6 January 1987 written to Vazsony- "indicated that should the Applicant continue to hold over under the terms of the expired lease from the First Respondent as a monthly tenant, having not accepted the proposal set forth 1n paragraph 14 hereof, that the rental would in the event of the applicant continuing to hold over, be increased to $10,000 per month commencing on and from 1 March, 1987 and that the Second Respondent would in the circumstances of the Applicant continuing to hold over consider itself free to sell or in any way deal with the property, subject to the Applicant's monthly tenancy". The assertion that the rental would in the event of Vazsony continuing to hold over be increased to $10,000 per month commencing on and from ll. ] March 1987 is capable of constituting a representation falling within s. 52 of the Act; but there are no facts pleaded as to why any such representation about the rental increase is false or misleading. There is simply a statement that the rent would be increased in a certain event. In paragraph 18 the further assertion is made that what 1s said to be a representation in paragraph 15 was made by Austotel which did not believe what was said or which made the representation with reckless indifference as to its accuracy. However, the allegations made in paragraph 16, which are really mere evidence, do suggest that Vazsony was not misled by the representation to which I have referred in paragraph 15 so that there are internal indications that, even if the assertion as to a rental increase in paragraph 15 could be treated as a representation for the purposes of s. 52 of the Act, the only person who could be said to have been misled was not in fact misled. The allegation in paragraph 17 1S in essence that Austotel asserted, presumably to Vazsony, that Austotel was content in the circumstances there mentioned for Vazsony to continue as a monthly tenant on exactly the same conditions as existed prior to Austotel's purchase of the property. If one can glean a representation at all from these assertions it can only be a representation as to Austotel's own state of mind or, in the lanquage of the pleader, its contentment. This could not, in the circumstances of the case, constitute misleading or deceptive conduct. Paragraph 18 asserts that the representations made in paragraphs 13, 14, 15 and 17 were made by Austotel which did not believe what was stated or which made the representations with 12. reckless indifference as to their accuracy. There is no relevant representation pleaded in any of the paragraphs mentioned in paragraph 18, namely, paragraphs 13, 14, 15 and 17. Paragraph 19 is a mere assertion of evidence; no basic or material or constitutive facts are pleaded. Paragraph 20 also asserts evidence although it adds that, by a letter of 17 February 1987, Austotel "urged the Applicant to negotiate an increase in rental". Paragraph 21 is also an allegation of matters of evidence. No representation is pleaded there, nor 1s one pleaded in paragraph 22. Paragraph 23 pleads in some comprehensive or rolled up form that the conduct of the respondents constitutes misleading or deceptive conduct. This paragraph pleads a mere conclusion of fact without the relevant facts being themselves pleaded either in that paragraph or in the preceding paragraphs. Material facts are not pleaded such as could disclose a cause of action. It suggests that by enveloping all the conduct of the first or second respondents one finds misleading or deceptive conduct, Since none of the earlier conduct as pleaded constitutes misleading or deceptive conduct paragraph 23 can take the matter no further by its conglomerate form. Paragraph 24 pleads that the demands made by Austotel are, in all the circumstances, unconscionable. Counsel for Vazsony said that this is an allegation of the matters essential to found a claim at common law or in equity that the alleged conduct of Tooheys was unconscionable and would therefore lead to intervention by equity to 13. prevent the demand being executed and to prevent ejectment. The cause of action was said to be based on the unconscionable conduct of Tooheys which would constitute a breach of covenant (B)2 of the memorandum of lease by Tooheys as landlord. Counsel for Vazsony stated that it was not intended by paragraph 24 or any other paragraph to plead reliance upon s. 52A of the Act relating to unconscionable conduct in the course of trade or commerce. Paragraph 24 does not allege any facts, matters or transactions entered into as a result of which the conduct of Tooheys can be said to be unconscionable. Hence, the pleading does not assert the necessary ingredients to found the alleged cause of action. Paragraph 25 alleges that the conduct of Tooheys constitutes a breach of its contractual obligations with Vazsony. Aqain one has to search through the whole preceding paragraphs of the pleading to glean what may be the conduct that could constitute a breach of contract by Tooheys. The only matter which could possibly fall within this description is the demand for land tax payments which 1s referred to in the correspondence set out in the pleadings. If it 1s intended to assert a breach of contract, then the proper foundation must be laid to ground the assertion and this has not been done. Paragraph 26 asserts that the conduct of Tooheys and Austotel constitutes the exertion of illegitimate pressure upon Vazsony. Again one has to search back through the earlier paragraphs to see what this conduct may be and it is difficult to see how it relates to anything except the assertions made in paragraph 24. I have already dealt with that paragraph and as particularised I see no cause of action sufficiently pleaded. 14. Paragraph 27 asserts that the actions of Austotel constitute a Girect interference with the contractual obligations between Vazsony and Tooheys. This was said in essence to be a pleading of matters relevant to the tort of unlawful interference with contractual relations, namely, the contract between Vazsony and Tooheys. The assertion in paragraph 27 is a mere conclusion from facts not pleaded. If it is intended to embody in a rolled up form earlier assertions, then the earlier assertions must be more precisely identified than they are at present. In my opinion the statement of claim, in so far as it relies on alleged contraventions of s. 52 of the Act, must be struck out for the reasons which I have given. It follows that there 1s no Federal base upon which the other assertions relating to the general law can be supported. Counsel for Vazsony conceded this. However, I have dealt with the other assertions and find that, in any event, they have not been properly pleaded and should also be struck out on that ground. No reasonable cause of action has been disclosed. The paragraphs should be struck out i1n some cases on that ground and in other cases on the ground that they are embarrassing in the sense in which that expression is used in the relevant rules of this Court. Vazsony has said, by 1ts counsel, that it wishes to plead a case that Tooheys or Austotel represented to Vazsony that if Vazsony did not wish to negotiate a long term lease it could remain in possession pursuant to the holding-over clause in the lease on the terms and conditions which then existed and which included no obligation on the part of Vazsony as tenant to pay land tax charges. 15. The subsequent demand by Tooheys or Austotel that Vazsony pay land tax constituted a breach of the contract between Vazsony and Tooheys. I say nothing as to whether, 1f properly pleaded, these assertions could answer the description of misleading or deceptive conduct within the Meaning of s. 52 of the Act. In all the circumstances I do not propose to dismiss the application. I propose to strike out the statement of claim, but to give the applicant a further opportunity, if 1t wishes, of repleadins its case. In deciding that the statement of claim should be struck out I have, of course, had regard to the principles which govern these Matters and that are set out in cases such as Dey v. Victorian Railway Commissioners (1949) 78 C.L.R. 62 especially per Dixon J. at 91; General Steel Industries Inc. v. Commissioner for Railways (NSW) (1964) 112 C.L.R. 125 especially per Barwick J. at 129; Universal Telecasters (Queensland) Ltd. v. Ainsworth Consolidated Industries Ltd. (1983) A.T.P.R. 40-384 at 44,525-6; and Bill Acceptance Corporation Ltd. v. GWA Limited (supra) at 249-252. The Court orders that the statement of claim be struck out and that the applicant pay the costs of the respondents of the notice of motion filed on 19 May 1987. I give leave to the applicant to file and serve a fresh statement of claim and an amended application on or before 1 July 1987. The application is adjourned for further directions to 9 July 1987. I certify that this and the preceding fourteen (14) pages are a true copy of the reasons for judgment herein of his Honour Mr. Justice Lockhart. Dated: 17 June 1987 f Associate Counsel for the Counsel for the Date of Date of and solicitors applicant and solicitors respondents Hearing: Judgment: 16. R.W.R. Parker Q.C. with S.J. Stanton instructed by Messrs. Photios, Slater & Co. K.R. Handley Q.C. with P. Comans instructed by Messrs. Hemsley. 4 June 1987 17 June 1987 Allen Allen &