CATCHWORDS PRACTICE and PROCEDURE - application to strike out defence - whether leave to re-plead ought to be given - previous attempts to plead - whether claims seriously contended PRACTICE and PROCEDURE - application by director to appear for company - whether company unable to meet legal costs Trade Practices Act 1974 ss 47(2), 47(10), 52 Federal Court Rules O 9 r 1(3) ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 Refd Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238 Refd Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68 Refd Solomons Franchise Systems Pty Ltd & Ors v Taydex Pty Ltd & Ors No VG30 of 1994 Kiefel J Brisbane 4 April 1995 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No. VG 30 of 1994 BETWEEN: SOLOMONS FRANCHISE SYSTEMS PTY LTD Applicant AND: NO. 1 RABEREM PTY LTD Second Applicant AND: NO 2 RABEREM PTY LTD Third Applicant AND: NO. 3 RABEREM PTY LTD Fourth Applicant AND: TAYDEX PTY LTD First Respondent AND: MICHAEL ROY PARR Second Respondent AND: CLIVE JOHN WALKER Third Respondent JUDGE MAKING ORDER: Kiefel J. DATE OF ORDER: 4 April 1995 WHERE MADE: Brisbane MINUTES OF ORDERS APPLICANTS' MOTION TO STRIKE OUT DEFENCE THE COURT ORDERS THAT: 1. Paragraphs 21,24,25,26 and 31 and paragraphs 27-30 be struck out with leave to further plead paragraph 24 to raise the plea by way of cross claim on condition that the further pleading identify the particular relief sought and the basis for that relief. 2. The further pleading be filed and served by 4.00 p.m. on 2 May 1995. 3. The matter be listed for further directions at 10.00 a.m. on 5 May 1995 4. The first and second respondents pay the applicants' costs of and incidental to the application, including reserved costs, to be taxed. SECOND RESPONDENT'S MOTION TO APPEAR FOR THE FIRST RESPONDENT THE COURT ORDERS THAT: 1. The application be dismissed. 2. The second respondent pay the applicants' costs of and incidental to the application, including reserved costs to be taxed. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No. VG 30 of 1994 BETWEEN: SOLOMONS FRANCHISE SYSTEMS PTY LTD Applicant AND: NO. 1 RABEREM PTY LTD Second Applicant AND: NO 2 RABEREM PTY LTD Third Applicant AND: NO. 3 RABEREM PTY LTD Fourth Applicant AND: TAYDEX PTY LTD First Respondent AND: MICHAEL ROY PARR Second Respondent AND: CLIVE JOHN WALKER Third Respondent CORAM: Kiefel J. DATE: 4 April 1995 PLACE: Brisbane REASONS FOR JUDGMENT In this action the applicants sought injunctions restraining the use of their trademarks and, with respect to the first applicant, orders declaring that a franchise agreement was terminated in February 1994. These matters, I am told by Mr Parr, the second respondent, who appeared for himself and sought leave to represent the first respondent, are no longer the subject of dispute. The only aspect of the applicants' claim which will proceed is that for monies owing for goods delivered, about $61,000. The first and second respondents filed a defence in March 1994, and amended it by a document dated 24 June 1994 which however was struck out as to paragraphs 12A to 12L of the defence and as to the whole of the cross claim with leave to re-plead within three weeks from 4 August 1994. The respondents then had legal representation and apparently a document was produced in September but never filed in compliance with the order. When Mr Parr first appeared before me it appeared he might be assisted by a friend who had completed his law degree and for that reason and for matters personal to Mr Parr I adjourned the matter to enable him to file the amended defence and cross claim upon which he would rely. The applicants submit that even if an extension of time for compliance with the order of Branson J. has been granted, parts of the pleading so filed are still liable to be struck out as embarrassing. Paragraph 21 introduces a new claim which however pleads as a defence and not, as it should, as a cross claim, that interest payments totalling $793.90 were wrongly charged. In any event as the claim stands, it is quite confusing. It is not at all clear from the pleading whether it is alleged that those sums were paid and that the first applicant is therefore liable to refund the first respondent. Paragraphs 22 and 23 are also new and say, in effect, that the first applicant set itself up in competition to the first respondent in breach of an implied term that it would not affect the first respondent's ability to conduct business profitably. It is said that it is necessary to plead material facts giving rise to the implication but it seems to me more likely it would resolve upon a question of construction of the document and of law. Paragraph 23 is unparticularised, but these are matters within the knowledge of the first applicant. Paragraph 24 alleges a pre-contractual representation that the franchise fee of 2.5% in the franchise agreement would be reduced to 1.5% after three years. Given the fact of the later written agreement, the applicant may have difficulty with this claim. For present purposes, however, it is unclear whether a failure to fulfil the promise is relied upon as founding a claim for damages for loss under s.52 of the Trade Practices Act 1974 or relief by way of variation or rectification of the agreement on equitable principles. It is also stated as a matter of defence when it should be by way of cross claim. Paragraphs 25 and 26 allege that monies paid by franchisees such as the first respondent under an advertising levy (clause 4C) were not paid into a trust account as required. As it stands, it is unclear what is said to follow from it, eg. whether it is said that it did not advertise as was the purpose of the payment of those monies and therefore suffered loss to the business. My enquiries of Mr Parr however revealed that what is sought is a general accounting, although it seems none has been formerly sought. It is not presently suggested that the first respondent apprehends some misuse or misappropriation of the monies but rather that it simply wishes to know what has become of them. Without clarification it certainly stands as embarrassing in its present form. If struck out I am however aware that after a proper request, if there be a basis for doing so, there are other procedures in Queensland trusts legislation which could be pursued, if the information is genuinely sought. Paragraph 31 raises a new claim, generally as to the supply of inferior quality products different from that ordered. It is then baldly asserted that the first applicant thereby engaged in misleading and deceptive conduct. Paragraphs 21,24,25,26 and 31 are, as presently pleaded, embarrassing and liable to be struck out. The question then is, however, whether leave to further re-plead ought to be given. In this connection it is relevant I consider, to observe that in the face of what is basically a claim for debt there are a number of new claims. Some of them are very general in nature and have never before raised although considerable opportunity has been given to do so. This, to an extent, raises my concerns as to whether they are to be seriously contended for or raised as matters of obstacle and delay. There has to date already been considerable delay resulting in part from the respondents' attempts to re-plead, and I consider at this point it an appropriate approach to allow leave to re-plead only where there is identifiable an allegation of substance, as distinct from those claims which can be seen to be trifling (paragraph 2), fishing or lack a genuine connection with the action (paragraphs 25 and 26) or so wide and general that I must conclude the almost certain delay in further attempts to particularise would not be justified (paragraph 31). With respect to paragraphs 21,24,25,26 and 31 there will be an order striking them out with leave to further plead restricted however to paragraph 24, to raise the plea by way of cross claim and on condition that the further pleading identify the particular relief sought and the basis for that relief. Paragraphs 27-30 require separate consideration. They are the third attempt to plead a contravention of s.47(2) Trade Practices Act. Clauses 5A(a) and (b) of the franchise agreement are said to require the first respondent to sell only products approved by the first applicant and obtained through distribution centres designated by it. The effect pleaded is that the first respondent could not acquire cheaper goods from the first applicant's competitors. The problem which remains in the pleading is the deficiency of allegations with respect to the requirement (s.47(10)) that there be a purpose or effect of substantially lessening competition in the identified market, which is compounded by the identification of the market in question. No purpose is pleaded. The effect is said to be as stated above which is joined with an allegation that all franchise agreements had a similar clause in them, from which one may conclude that there are said to be a number of franchises in Australia (the geographic market being the capital cities, and the product market being that for the sale by wholesalers of carpet products to retailers) who were unable to obtain products from competitors at a cheaper price. The pleading in no way identifies or describes the nature and extent of the market in question and its state or condition (see ASX Operations Pty Ltd v. Pont Data Australia Pty Ltd (No. 1) (1990) 27 FCR 460, 478) and facts from which one could glean the extent to which competition in it is affected (see Dandy Power Equipment Pty Ltd v. Mercury Marine Pty Ltd (1982) 64 FLR 238, 259-60). The paragraphs numbered 27-30 are so deficient in their particularity as to be embarrassing and I will order they be struck out. Given the attempts already to plead similar contraventions, I do not consider further leave to re-plead is appropriate. The second respondent also seeks the leave of the Court, pursuant to O. 9 r. 1(3) to himself defend the proceedings on behalf of the first respondent and not by solicitor. Mr Parr described the first respondent now as in effect himself, which by itself hardly seems a compelling reason for the grant of leave. In practical terms it is presently though accurate, in that the only other director, Mr Parr's son, has recently died and there has not yet been an appointment of a replacement director, but which raises the question of the company's approval, by resolution, to have Mr Parr act for it. It is, in substance, the inability of the company to meet legal costs which is the basis of the application, and whilst there is a dearth of authority as to the principles guiding their applications, this aspect was considered in Molnar Engineering Pty Ltd v. Burns (1984) 3 FCR 68. What concerns me however is whether a conclusion of inability to pay can confidently be drawn on the basis of general assertions and unexplained accounting as between the first respondent company and another company which also seems to be under the control of Mr Parr. It is said by Mr Parr that the first respondent has not operated as a trading company since 30 December 1993, although he does disclose that it has been engaging in transactions, which however are said to be associated with debts incurred as a result of the first applicant's actions. The financial position of the first respondent and the other company, Oxgold Pty Ltd , are then disclosed by a financial statement which is not verified. It does however show that there has been a loan by the first respondent to Oxgold of some $54,000 and it seems Oxgold is the tenant of the former premises of the first respondent. I do not, in view of the sketchy picture of the second company's financial position and arrangements thus far presented, consider it appropriate to make the order sought. If however further material is made available in the very near future, and which would include a full disclosure of the details of arrangements entered into between the two companies and properly verified accounts, Mr Parr might renew his application. I certify that this and the preceding six pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel. Associate Date: 4 April 1995 Counsel for the applicant: Mr P.J. Flanagan Solicitors for the applicants: Freehill Hollingdale & Page Second respondent: In person Date of Hearing: 23, 30 March 1995 Place of Hearing: Brisbane Date of Judgment: 4 April 1995