JUDGMENT No. 771 7... IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G1l6 of 1987 GENERAL DIVISION ) BETWEEN: SALICA PTY. LTD. Applicant AND: HERTZ AUSTRALIA PTY. LIMITED Respondent MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 4 DECEMBER 1987 WHERE MADE: BRISBANE THE COURT ORDERS THAT: E iO ie tea l. Leave to amend generally the statement of claim be granted to the applicants. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. an FEDC?. .wunr oF otf AUS ALIA coe PUNSIPAL ' AeGiSiny IN THE FEDERAL COURT OF AUSTRALIA ) UEENS DIS' CT REGISTRY ) QLD G116 of 1987 GENERAL DIVISION ) BETWEEN: SALICA PTY. LTD. Applicant AND: HERTZ AUSTRALIA PTY. LIMITED Respondent PINCUS J. 4 DECEMBER 1987 REASONS FOR JUDGMENT There is a motion by the respondent to the principal application, seeking orders that the application be dismissed or stayed on the ground that there is no reasonable cause of action or that all or part of their statement of claim be struck out. In addition (by paragraph 4) the motion asks that the respondent be relieved of a certain undertaking. I have already dealt with the question of the undertaking, by freeing the respondent as it desired, but the other aspects of the motion remain to be dealt with. There is also a motion by the applicant for leave to amend its statement of claim, which motion was expanded during the course of argument by asking for a further amendment of the proposed amendment. The matter is complicated by the circumstances that it is necessary, in order to understand the case the applicant intends to set up, to examine the reply as well as the statement of claim, and one must also form a view as to the effect of certain of the documents referred to in the statement of claim. It is necessary to go to the statement of claim in some detail, but one may conveniently summarize it by saying that it has three elements: it sets up a contract between the applicant and the respondent, it alleges that the respondent was guilty of conduct infringing s.52 of the Trade Practices Act 1974 and it complains also of breaches of s.46 of that Act. It should be stated at the outset that I am by no means satisfied that the applicant's case as to any of these matters is insufficiently substantial, at least as far as the pleading shows, to permit the case on it to go to trial; it is my opinion, however, that the statement of claim needs to be amended to clarify the issues. The respondent, represented by Mr. Cooper Q.C. and Mr. Bain, argued that it 1s clear from the documents that the applicant's rights in contract are against companies incorporated in the United States and that there is plainly no contract with the respondent. It was said that "the respondent does not grant licences in its own behalf and only undertakes to enforce the rights of Hertz International Ltd. under licences which it grants." Mr. Cooper Q.C. also contended that in its original statement of claim the applicant had set up a case that it had a contract with the respondent but had abandoned that in reply and should not be allowed to restore it by way of amendment. Mr. Boyce Q.C., with whom Mr. Heyworth-Smith and Mr. N.Jd. Thompson appeared for the applicant, objected that the application to strike the pleading out was very late, that the Court should not decide debatable questions of law on such an application and matters of that sort. Although the statement of claim should not be struck out, it appears to need some attention, in the interests of the parties, as well as that of the Court. The case is likely to bea fairly complex one - at one stage it was suggested by counsel that the hearing might take five weeks - and my impression 1s that deficiencies in the statement of claim are likely to increase the difficulty of determining the disputes between the parties. In its existing form, the statement of claim alleges that at relevant times the respondent held a licence from Hertz International Ltd., a United States corporation, permitting the respondent to grant Hertz franchises in Australia and elsewhere. The proposed new statement of claim says much the same. The defence to the existing statement of claim alleges, as to the matters just mentioned, that there was an agreement made in 1977 between Hertz International Ltd. and a company called Douglas John Pty. Ltd., entitling the latter to use the Hertz system for conducting the business of renting and leasing vehicles until the year 2,002 and that Douglas John Pty. Ltd. had assigned its rights to the respondent. The defence also says that the "licence", presumably meaning the 1977 agreement, permitted Hertz International Ltd. to license third parties designated by the respondent. Mr. Cooper Q.C. relied heavily on the fact that the reply abandoned (by paragraph 1) the allegations in paragraphs 4 and 5 of the original statement of claim and admitted those in the defence which I have briefly summarised. On the face of it, the point by Mr. Cooper Q.C. seems unanswerable. Apart from anything else, it 1s a departure, which eccurs "when the second plea containeth matter not pursuant to his former, and which fortifieth not the same", as Sir Edward Coke put it: see Odgers "Principles of Pleading and Practice" 27th Ed., p-212. It is wrong to have the reply contradicting the case set up in the statement of claim and appears to be wrong to let the plaintiff, without some special reason, renew allegations which 1t has expressly withdrawn. My impression 1s that the inconsistency just referred to was an accident and not a result of a conscious decision to revert to that which the reply abandoned. The proposed new statement of claim goes on to say (in paragraph 6) that representatives of the respondent negotiated with the applicant and that led to the acquisition by the applicant of certain Hertz franchises, that in the course of such negotiations a paperwriting, the terms of which are set out in paragraph 10, was proffered and that, at the conclusion of negotiations, it was agreed the applicant would acquire three franchises from the respondent and one from an existing franchisee. The defence does not make it very clear what the respondent's case is about the matters just mentioned. As I have explained, Mr. Cooper Q.C. argued that the only relevant contract was with foreign corporations not party to the proceedings, but Paragraph 5 of the defence, responding to part of the allegations by the applicant which I have just outlined, says "the respondent agreed to grant the applicant certain licenses (sic) ..." When [I pointed this out to Mr. Cooper, he said in effect that that was a mistake and it was intended to convey merely that the respondent had agreed to designate the applicant to Hertz International Ltd., which became the contracting party; 1t has to be conceded that that point appears to emerge from paragraph 5(c) of the defence. That sub-paragraph alleges an assignment to the respondent of fees payable by the applicant to Hertz International Ltd. and says that the respondent was authorised to enforce, on behalf of Hertz International Ltd., the terms of the licences. I have been shown the relevant documents referred to in the pleadings. The licence agreements are, as Mr. Cooper. says, plainly made between the applicant and Hertz International Ltd. However, the clarity of that is muddied by a document called "Addenda" which refers toa "Hertz System International Licence Agreement dated 21 April 1977" between Hertz International Ltd. and Douglas John Pty. Ltd. (mentioned above), and an assignment agreement between Douglas John Pty. Ltd., the respondent, and Hertz International Ltd. The "Addenda" gives notice to the applicant of an assignment to the respondent of all "Hertz system fees and licence fees" payable to Hertz International Ltd. under a certain provision of the licence agreement and gives notice to the applicant that Hertz International Ltd. has authorised the respondent to enforce on behalf of Hertz International Ltd. the "terms covenant and conditions" on the part of the applicant. Clause 2 of the "Addenda" contains a promise by the respondent to perform and observe the rights and duties conferred on it by Hertz International Ltd. "pursuant to the agreements referred to in clause 1 of this Addenda". Those agreements are three: the "Addenda" itself, the licence agreement between Hertz International Ltd. and Douglas John Pty. Ltd., and the assignment agreement. It seems arguable that clause 2, to which I have just referred, is a promise by the respondent in favour of the applicant; precisely what is promised 1s, however, not very clear and 1t 1S inappropriate, at this stage, to delve into that further. To return to the statement of claim, I have mentioned that paragraph 10 sets out "so far as its terms are relevant to this action" certain terms of the paperwriting mentioned in Paragraph 9. One of the terms said to be relevant, set out in clause 2, is that renewal of the initial franchise term is "subject to agreement and consent of both parties. Agreement from Hertz will mot be unreasonably withheld." This provision is picked up much later in the pleading - clause 26(b). It is said, in paragraph ll, that it was agreed between the applicant and the respondent that the applicant would acquire from the respondent the original franchises and in paragraph 12 it is said that that occurred. It appears that it did not in fact occur and that the applicant entered into agreements with Hertz International Ltd.; it may be that the "correction" of the statement of claim in the reply was intended to convey that idea. Paragraph 16 of the statement of claim says that the respondent gave the applicant an option to acquire a further francise area based on Southport, Queensland; again, that provision is picked up in paragraph 26(c). Paragraph 19 says that the terms on which "the applicant acquired and held the Salica francise" from the respondent were those in the paperwriting referred to in paragraph 9, those set forth in the standard form of francise agreements, in a certain manual and in bulletins and directives, which are unidentified. Paragraph 21 says in effect that one Jackson, on behalf of the respondent, stated orally the terms as to renewability of franchises to which I have already referred, and also said that notwithstanding anything contained in any other document, the terms in the paperwriting referred to in paragraph 9 were those which the respondent invariably applied in its dealings with franchisees. Paragraph 22 says that the respondent represented that if the applicant did certain things it would derive substantial profit; paragraph 23 says that "all of these representations howsoever made" were of an inducing kind and paragraph 25 explains various steps which the applicant is said to have taken in consequence of the inducement. Paragraph 26, in the form which it took when the motion first came before me, alleged merely breaches of contract, two of which I have already mentioned. Paragraph 27 alleged loss in consequence of such breaches, and paragraph 28 alleged, very vaguely, breach of s.52 of the Trade Practices Act. During the course of argument, Mr. Boyce Q.C. put forward that the proposed amended statement of claim should be further amended in two respects. Firstly, he desired to add to paragraph 26(d) allegations to the effect that the representations "contained in the paperwriting referred to in paragraph 10 hereto and the oral representations referred to in paragraph 21" were false. It may seem a rather pedantic point, but this provision is. obviously misplaced; the work of paragraph 26 in its present form is to allege various breaches of contract. Mr. Boyce also said that he wished to delete the proposed paragraph 28 and put in its stead a paragraph alleging, in effect, that "in reliance upon the aforesaid representations made to the applicant on behalf of the respondent by the said Bryan Jackson" and by reason of the matters set out in paragraph 26(b) - the new provision just discussed - there was misleading conduct. Neither applicant nor respondent appears to be at all sure what the contractual relations between the parties were - who contracted with whom and on what terms. It appears to me desirable that the applicant replead its case in this respect. I am not content to leave that to be derived from historical analysis of the old statement of claim, the old reply (which it is not proposed to amend, apparently), and the new statement of claim. It is desirable that the statement of claim, insofar as it relies upon allegations of breach of contract, be more precisely pleaded. I think the pleading would also gain from careful dissection of the statutory case based on the Trade Practices Act from that based on allegations of breach of contract; the proposed pleading, like the existing one, tends rather to mix the two together. I take the force of Mr. Boyce's contentions that attempts to strike out pleadings on the ground that they disclose no reasonable cause of action are not favoured. On the other hand, experience suggests that, even where it is seen that there may well be an arguable case pleaded, confusion and lack of logical arrangement in pleading makes the work of counsel and the judge at the trial more difficult. I pass now to consider the case based on s.46 of the Trade Practices Act. Mr. Cooper urged upon me the view that the applicant's allegations with respect to market power and use of market power did not found a cause of action. His contention seemed to amount to this: the applicants complain of use or abuse of contractual powers; whether what the respondent has done is justified by the contracts into which it has entered or not, the steps it has taken purporting to be so justified have nothing to do with monopoly power. As anexample, Mr. Cooper took a complaint made with respect to Hertz credit cards. The pleading - 10. ina series of sub-paragraphs which, for some reason, have no number - said that by reason of various events, the respondent had been obliged to indemnify the applicant in respect of indebtedness under Hertz credit cards, but had refused to do so, depriving the applicant of working funds. It is by no means clear to me that such an allegation as this must be irrelevant to a s.46 case. It is my opinion that acts or omissions may be argued to be proscribed under 3.46, although they are also breaches of contract. I do not hold, of course, that the respondents are guilty of a breach of s.46 if they behaved as alleged with respect to the Hertz credit cards, but merely that there is an arguable legal point involved. Similar considerations apply to another example taken by Mr. Cooper - again in an unnumbered provision of the pleading, on p.19 - relating to the Archerfield area. This alleges a breach of an agreement concerning that area and says it is also a breach of s.46; an account is claimed; whether that is on the basis of a contractual breach or the s.46 breach is unclear. I agree with Mr. Boyce's contention that the s.46 case does not come close to being one which should be struck out, having regard to the authorities dealing with such applications. It appears to me, however, that there is a degree of obscurity in that part of the pleading: I am uncertain whether the pleader's intention is that if the s.46 case fails, the allegations of breach of contract included within the pleading of that case are to be considered on their own merits; the example just given a ll. illustrates the point; I do not know whether the account claimed is said to be an entitlement under s.46, or by reason of the breach of contract, or both. In my opinion, leave to amend should be given as sought, but the leave should be general and not confined to the documents put forward at the hearing. I expect that the applicant will, in pursuance of the leave, file and serve an amended statement of claim making the sort of case already set up, but one drawn having regard to the criticisms mentioned in these reasons. If that is not done, I foresee unnecessary difficulties arising at the trial and, indeed, at interlocutory stages. I will direct that the amended statement of claim need not discriminate between new and old allegations. It will be necessary for an amended defence to be filed and served and I will hear the parties as to the appropriate times for these steps. As to costs, the basic case advanced by Mr. Cooper on behalf of the respondent has failed; that is, I have rejected his contentions that the allegations of breach of contract and based on s.46 can be seen to have no substance. On the other hand, I have come to the conclusion that the applicant's pleading needs attention, particularly to clarify what its case is, insofar as based on breach of contract, and to dissect that out from the s.52 case. As to the applicant's motion for leave to amend, it has 12. succeeded, but again, that success is qualified. Counsel may make submissions on costs, having regard to my views just expressed. i certify that this and the // preceding pages are a true copy of the reasons for judgment herein of His Honour Mr. Justice Pincus Associate Dated 4 Decomber (787