TOR LIMITED DISTRIBUTIUN JUDGMENT No. 53) gp BL IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG No. 184 of 1987 GENERAL DIVISION Between: WILDTREK LIMITED, ANDREW MARSHALL, CORMARSHALL PTY. LIMITED and ROBERT NICHOLAS THURLOW ASHFORD (Applicants) AUSTRALIAN WORLD EXPEDITIONS PTY. LIMITED, AUSTRALIAN HIMALAYAN EXPEDITIONS PTY. LIMITED and GORONWY PRICE (Respondents) MINUTES OF ORDER JUDGE MAKING ORDER : RYAN J. DATE OF ORDER: 6 OCTOBER 1987 THE COURT ORDERS THAT: 1. The statement of claim herein be struck out. 2. The applicant have leave to file and serve a further statement of claim within 21 days. 3. The respondents' motion on notice dated 20 August 1987 (as amended) and the directions hearing herein be adjourned to 6 November 1987. 4. The applicants pay the respondents' costs of the hearing orm 7A 21 August 1987 and of this day. ~ BOCT 1287 ERAL GOUnT OF ; FED AUSTRALIA ha PRINCIPAL, REGISTRY NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRIC Is VG No. 184 of 1987 www wurw G DIVISION Between: WILDTREK LIMITED, ANDREW MARSHALL, CORMARSHALL PTY. MITED and RO T NICHOLAS THURLOW ASHFORD (Applicants) And: AUSTRALIAN WORLD EXPEDITIONS PTY. LIMITED AUSTRALIAN HIMALAYAN EXPEDITIONS PTY. LIMITED and GORONWY PRICE (Respondents) Coram: Ryan J. Date: 6 October 1987 REASONS FOR JUDGMENT By their statement of claim, the applicants have Pleaded that in January 1987 they concluded an agreement with the respondents, "... whereby in substance the businesses of the firstnamed Applicant and the second and thirdnamed Respondents would be amalgamated so that a major adventure travel company would be formed assimilating both their businesses and wherein the second, third and fourthnamed Applicants and the thirdnamed Respondent would have interests." It is next alleged that it was a term of the agreement that, ",.- it would be settled and the various share transfers and other matters that had to be done to complete the agreement would be done by 28th March, 1987." In paragraph 9 of the statement of claim there are listed eight distinct acts which the applicants did or refrained from doing "in reliance on the agreement and in the furtherance of the object of amalgamation at the request of the respondents". It is then alleged that the respondents repudiated the agreement and the applicants accepted that repudiation. The concluding paragraphs of the statement of claim (omitting particulars of loss and damage subjoined to paragraph 20) are in the following terms: "15. At no time did the Respondents intend to settle and complete the agreement, or alternatively to settle and complete the agreement within the time or on the figures or on the terms of the agreement. 16. The Respondents by their conduct both in leading up to the entry into of the agreement prior to the 2lst January, 1987 and subsequent to the 28th March, 1987 led the Applicants to believe that they regarded the agreement as a good and subsisting one which they would honour and perforn. 17. The Applicants in reliance thereon did the things referred to in paragraph 9 hereof. 18. The said conduct of the Respondents was carried out by them in trade and commerce. 19. The said conduct of the Respondents was misleading and deceptive conduct contrary to the provisions of section 52 of the Trade Practices Act. 20. By reason of the matters aforesaid the Applicants are entitled to damages from the Respondents. 21. Alternatively, the Applicants and each of them claim against the respondents and each of them the costs and expenses and other losses referred to in paragraph 9 thereof as restitution for such losses." By motion on notice dated 20 August 1987 the respondents have sought an order that the applicants' proceedings be dismissed on the grounds that: "(a) the proceedings are vexatious and oppressive; (b) the pleadings do not disclose a cause of action; (c) the proceedings do not come within the meaning of section 52 of the Trade Practices Act." Before me Mr. John Kaufman of Counsel who appeared for the respondents did not press paragraph (a) of those grounds but confined himself to a two-pronged attack on the statement of clain. It was first argued that the statement of claim did not disclose a cause of action under s.52 of the Trade Practices Act because it failed to identify any allegedly misleading and deceptive conduct, except by indicating that it consisted partly in "leading up to the entry into the agreement prior to the 21st January 1987" and was partly "subsequent to the 28th March 1987". Usually representations of intention to enter into a contract containing certain terms cease to operate to sustain a cause of action after a contract containing those terms has been concluded. That is because the representee has got what he was promised and any cause of action on the representation merges in the cause of action on the concluded contract. However, in Ransley _v. Medical Benefits Fund of Australia Ltd (1980) 3 ATPR 40-160 at 42,256 Smithers J. adverted to circumstances in which a pre-contractual representation may remain available to support a cause of action other than on the contract. His Honour there said: "It is always possible that a contract may be made in circumstances in which not only is the contract concluded, but a party also represents to the other that he intends to carry out his obligations thereunder. As was pointed out in R. v. Sunair Holdings Ltd. by MacKenna J. (1973) 2 All E.R. 1233 at p.1236, 'A promise ... may contain by implication a statement of present fact. The person who makes the promise may be implying that his present intention is to keep it or that he has at present the power to perform it. ...' And in this case where an offer is contained in a document advising the obligations a@ party is willing to assume and is introduced by Phrases such as 'the MBF will pay to all contributors' various benefits, and 'benefits are provided up to' specified amounts, there may be some ground for the contention that an implied representation of intention to observe the provisions of the contract, if made, does arise. But I am far from satisfied that in this case there is any such representation. Basically, the brochure does no more than describe the benefits which the defendant will undertake to supply and offer to undertake to supply if a person becomes a contributor. It was notifying the legal obligations which it was willing to undertake in the contract between itself anda contributor. The transaction offered and ultimately concluded between Mr. Duffy and the defendant was one containing promises on the part of the defendant to make payments in specified circumstances in consideration of contributions being made. It would have been something quite different and superfluous to introduce the notion that the defendant was saying that in addition to promising to provide the benefits it was also representing that it intended to provide then. Contractual promises not representations of intent were the subject of interest. That there is an intention on the part of the parties entering into a contract to observe the obligations undertaken is no doubt normally assumed by all parties to the contract. But that a party making an offer to enter into a contract containing specified promises not only intends to accept legal responsibility in respect of his promises but also represents that he intends to perform them is not to be inferred in the absence of evidence significantly pointing to the making of such a representation and in this case the evidence would have to be strong enough to raise the inference beyond reasonable doubt. Merely to offer to conclude a bargain in legal form or to enter into a contract offered is not enough. Compare L. Grollo Darwin Management Pty. Ltd. v. Victor Plaster Products Pty. Ltd. (1978) 2 ATPR 40-072 at p.17,737." In L. Grollo Darwin Management Pty. Ltd. v. Victor Plaster Products Pty. Ltd. to which his Honour referred, the relevant paragraphs in the statement of claim were in these terms: "ll. The defendants alternatively one of them did, in trade and commerce, engage in conduct which was misleading and deceptive within the meaning of sec. 52 of Pt. 5 of the said Act in that it entered into the said arrangement with the plaintiffs or one of them when at all times they or alternatively one of them had no intention whatsoever of observing or keeping the said arrangement so made. 12. As a result of the matters alleged in para. 11 hereof the plaintiffs alternatively one of them have suffered loss and damage by an act of the defendants alternatively one of them which was done in contravention of the said sec. 52 of the said Act." Of the cause of action sought to be pleaded in that way, the Full Court (Smithers, St. John and Fisher JJ) observed, at 17,736: "It may well be within the range of misleading and deceptive conduct, in certain circumstances, to enter into an arrangement having no intention to observe the obligations undertaken therein. Whether misleading or deceptive communication of the relevant intention or the factor of reliance upon some implied representation of such intention or some other factors would be essential elements in any cause of action based upon sec. 52 are questions to be determined. However, the general allegation in para. 11 is that the conduct described was misleading and deceptive and committed in trade and commerce, and that in para. 12 is that the plaintiff suffered damage as a result of that conduct. Thus the statement of claim isin terms wide enough to comprehend every element reasonably necessary to constitute an arguable cause of action under sec. 52 (cf. the High Court decision in Hornsby Building Information Centre Pty. Ltd. & Anor. v. Sydney Building Information Centre Ltd. delivered on 19 April 1978) £(1978) ATPR 40-0671. Accordingly we are of the same opinion as the learned Judge that it is not appropriate to dismiss or stay the action on the ground that the statement of claim discloses no reasonable cause of action. But that does not mean that the statement of claim is such that the respondents should have been required to plead to it. In this respect it is enough to say that it is not for the appellants to require the respondents to speculate as to what is comprehended within the general allegations made in the statement of claim or what are the circumstances alleged to give to the facts alleged the quality of being misleading or deceptive. Merely to enter into an arrangement which creates legal obligations, which it is seen from other parts of the statement of claim the arrangement sued on is alleged to do, whilst having no intention to carry out such obligations is not per se misleading or deceptive conduct. So far as appears from those bare facts each or either party may have been satisfied to do business on the ground that the other undertook the legal obligations which were created without reference to the intention of the other in relation to the performance of those obligations. Moreover a party is not necessarily misled or deceived if legal obligations are undertaken by another in circumstances that that party does not intend to perform them. But this is all that the statement of claim does allege. It says merely that the conduct alleged was misleading or deceptive within the meaning of sec. 52 of the Act 'in that' the defendants entered into the arrangement when they or one of them had no intention of observing or keeping it. There is no allegation of facts essential to give to that conduct the alleged quality of being misleading or deceptive. In the absence thereof the statement of claim is defective and the respondents cannot reasonably be required to deliver a defence." In my view the attempt in the present case to plead a cause of action under s.52 of the Trade Practices Act suffers from the same vice as that identified in the passage just quoted from L. Grollo Darwin Management Pty. Ltd. v. Victor Plaster Products Pty. Ltd. All that is pleaded in paragraphs 15 and 16 is that the respondents entered into the agreement not intending to observe or keep it and that lack of intention persisted after 28 March 1987. In the words of the Full Court, "there is no allegation of facts essential to give to that conduct the alleged quality of being misleading or deceptive." I consider that the pleading of a cause of action of this kind requires first the identification of each act, the doing of which or refusing to do which is relied on as constituting "conduct" as defined in s.6(2), which allegedly contravened s.52 of the Trade Practices Act. There must then be pleaded each fact which is material to the conduct thus identified, in the sense of giving it the alleged quality of being misleading or deceptive. I was referred by Mr. Ginnane for the applicant to P. J. Berry Estates Pty. Ltd. v. Mangalore Homestead Pty. Ltd. (1984) 6 ATPR 40-489 where in paragraphs 10, 11, 12, 13 and 14 of a statement of claim it had been pleaded that the respondents made certain representations and warranties to the applicants in consideration of its entering into an agreement, that the representations were false to the knowledge of the respondents and the warranties were broken, and that the applicant entered into the agreement in reliance on the representations or in consideration of the warranties. It was then pleaded in paragraph 18 that: "Further and alternatively, by reason of the matters referred to in paragraphs 10, 11, 12, 13 and 14 hereof, the Firstnamed Respondent in the course of trade or commerce in Australia:- (a) has engaged in conduct that is misleading and/or deceptive; (b) has engaged in conduct that is likely to mislead and/or deceive; in contravention of sections 52 ... of the Act." At p.45,631 of the report Sweeney J. observed:- "This amended Statement of Claim was based upon common law precedents. In it the alleged contraventions of the Act, which found the jurisdiction of this Court, were pleaded as alternatives to the common law claims, and the conduct relied upon was described by reference back to those claims. It would be of more assistance to respondents and to the Court if causes of action said to arise under the Act were pleaded directly in the first instance, with particulars which did not relate back to common law claims." It was argued that although his Honour there deprecated the form of pleading, he implicity acknowledged that it was not defective in the sense of failing to disclose a cause of action. However, it must be remembered that Sweeney J's observations occurred in the course of a judgment given after the trial of the application, and not on a motion to strike out the statement of clain. In the second place, the Pleading in P. J. err Estates Pty. Ltd. v. Mangalore Homestead Pty. Ltd. did identify conduct which allegedly contravened 3.52 of the Trade Practices Act and the matters which were said to give it the quality of being misleading or deceptive by incorporating by reference in the pleading of the cause of action under the Act, the paragraphs in which the common law claim in contract had been pleaded. By contrast, in the present statement of claim there is no plea of any misrepresentation or breach of warranty which has been incorporated by reference in the attempt to plead misleading or deceptive conduct. It was also contended on behalf of the respondents that the transaction disclosed by the statement of claim was, on its face, not one which occurred in trade or commerce so as to bring the allegedly misleading or deceptive conduct, assuming it to have been properly identified, within the purview of the Trade Practices Act. Reference was made to Q'Brien v. Smolonogov (1983) 53 ALR 107 where a Full Court of this Court (Fox, Sheppard and Beaumont JJ) held that certain false and misleading statements made by the vendors of a parcel of approximately 588 acres of rural land were not made in trade or commerce. After referring to a number of authorities on the question of what constitutes "trade or 10. commerce" including Re Ku-ring-qai Co-Operative Building Societ No. 12) Ltd. (1978) 36 FLR 134; 22 ALR 621, the Court concluded, at 113: "In the present case, it cannot be suggested that the lands acquired by the appellants became trading stock (see FC of T v. St. Hubert's Island Pty. Ltd. (in liq) (1978) 19 ALR 1; 138 CLR 211). Nor is it a case where the taxpayer's activities amounted to more than the mere realization of a capital asset and constituted the carrying on of land development (see FC of T v. Whitfords Beach Pty. Ltd. (1982) 39 ALR 521). The land itself was not used for any business activity: it was not used for farming or grazing. It follows, in our opinion, that' the only possible feature of the case which could conceivably be relied upon to suggest that the impugned conduct occurred in trade or commerce was the resort by the appellants to a newspaper as a medium of public advertisement of the land and the use made by the parties of the telephone for the purpose of conducting negotiations. It is true, as the learned judge observed, that the use of such facilities is common practice in the conduct of trade or commerce. It is also true, as Mason J. observed in Whitfords Beach, supra (at 537) that there is ambiguity in the adjectives 'business', 'commercial' and 'trading' which 'have about them a chameleon- like hue, readily adapting themselves to their surroundings'. As his Honour said, in some contexts, phrases such as 'business deal' and 'operation of business' may signify a transaction entered into by a person in the course of carrying on a business; in other contexts they 'denote a transaction which is business or commercial in character' (at 537). The same may be said of 'commercial' or 'trading'. But, in our view, the mere use, by a person not acting in the course of carrying on a business, of facilities commonly employed in commercial transactions, cannot transforma dealing which lacks any business character into something done in trade or commerce. Of course, the facilities mentioned have applications which are not commercial in any sense: advertisements in newspapers and the telephone are usd by persons for purposes which are not commercial at ail. With all respect to the learned judge, we are not persuaded that resort to them can create the business context required by the reference to 'trade or commerce' in 3.53A. The conduct ll. complained of was not something done by the appellants in the course of carrying on a business and it lacked trading or commercial character as a transaction. It thus fell outside the scope of s.53A." Mr. Kaufman for the respondents also referred to Bevanere Pty. Ltd. v. Lubidineuse (1985) 7 ATPR 40-565 where another Full Court (Morling, Neaves and Spender JJ) held, distinguishing O'Brien v. Smologonov (supra), that the making of arrangements to dispose of a business of a cosmetic clinic was "part and parcel of the totality of the appellant's activites in trade or commerce". It was argued for the present respondents that the making of arrangements for the merger or amalgamation of two businesses as described in the present statement of claim could not be regarded as part of the respondents' activities in trade or commerce. However, I consider it inappropriate to attempt, on what has been argued as a motion to strike out the statement of claim, to characterize the arrangements here pleaded as having been made in, or outside, trade or commerce. That characterization essentially involves questions of fact which will have to resolved in the light of all the evidence if the respondents join issue with paragraph 18 of the statement of clain. It will be apparent from what I have said in the earlier part of these reasons that I regard the statement of claim in its present form as defective. However, I do not consider that its defects are such that no conceivable amendment of the statement of claim could result in its disclosing a reasonable cause of action within the 12. jurisdiction if this Court. I therefore propose to follow the course adopted in L. Grollo Darwin Management Pty. Ltd. ry Plaste roducts - Ltd. (supra) and by Northrop J. in H_ 1976 Nominess Pty. Ltd. v. Galii and Apex Quarries Ltd. (1979) 30 ALR 181, by ordering that the statement of claim be struck out and that the applicants have leave to file and serve a further statement of claim. Accordingly, the orders which I propose to make, unless I am persuaded by counsel to vary them, are that: The statement of claim herein be struck out. The applicant have leave to file and serve a further statement of claim within 21 days. The respondents' motion on notice dated 20 August 1987 (as amended) and the directions hearing herein be adjourned to 6 November 1987. The applicants pay the respondents' costs of the hearing on 21 August 1987 and of this day. I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgement herein of his Honour Mr. Justice Ryan. FPF 7 CX Et 2 KE Associate Dated & Cc 6e1 "9° 7