CATCHWORDS PRACTICE - Pleadings - Striking out - No triable issue - No arguable claim - Claim untenable - Whether different tests Dey v. Victorian Railways Commissioners (1949) 78 CLR 62 General Steel Industries Inc v. Commissioner for Railways (NSW) (1964) 112 CLR 125 DAVID ARTHUR BROWN, ELIZABETH JOAN BROWN, STEVEN BRIAN MURPHY and ANNE FRASER MURPHY v FOREST HILL SHOPPING CENTRE PTY LTD, L C STEVENSON ESTATES PTY LTD, HUGH McMASTER and DIANE McMASTER; FOREST HILL SHOPPING CENTRE PTY LTD v DAVID ARTHUR BROWN, ELIZABETH JOAN BROWN, STEVEN BRIAN MURPHY and ANNE FRASER MURPHY VG 99 of 1994 COURT: Sundberg J PLACE: Melbourne DATE: 11 August 1995 IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISTRY ) No VG 99 of 1994 GENERAL DIVISION ) BETWEEN: DAVID ARTHUR BROWN, ELIZABETH JOAN BROWN, STEVEN BRIAN MURPHY and ANNE FRASER MURPHY Applicants AND: FOREST HILL SHOPPING CENTRE PTY LTD, L C STEVENSON ESTATES PTY LTD, HUGH McMASTER and DIANE McMASTER Respondents AND BETWEEN: FOREST HILL SHOPPING CENTRE PTY LTD Cross-Claimant AND: DAVID ARTHUR BROWN, ELIZABETH JOAN BROWN, STEVEN BRIAN MURPHY and ANNE FRASER MURPHY Cross-Respondents COURT: Sundberg J DATE: 11 August 1995 PLACE: Melbourne MINUTES OF ORDER The Court orders that: 1. Paragraphs 5A, 5B, 5C and 5E of the Applicants' Fourth Amended Statement of Claim filed 18 August 1994 be struck out. 2. The Applicants pay the Respondents' costs of the Notice of Motion filed 8 June 1995. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISTRY ) No VG 99 of 1994 GENERAL DIVISION ) BETWEEN: DAVID ARTHUR BROWN, ELIZABETH JOAN BROWN, STEVEN BRIAN MURPHY and ANNE FRASER MURPHY Applicants AND: FOREST HILL SHOPPING CENTRE PTY LTD, L C STEVENSON ESTATES PTY LTD, HUGH McMASTER and DIANE McMASTER Respondents AND BETWEEN: FOREST HILL SHOPPING CENTRE PTY LTD Cross-Claimant AND: DAVID ARTHUR BROWN, ELIZABETH JOAN BROWN, STEVEN BRIAN MURPHY and ANNE FRASER MURPHY Cross-Respondents COURT: Sundberg J DATE: 11 August 1995 PLACE: Melbourne REASONS FOR JUDGMENT SUNDBERG J: This is an application by the first respondent to strike out paragraphs 5A, 5B, 5C and 5E of the applicants' Fourth Amended Statement of Claim. The way in which the first respondent's argument was presented makes it necessary to say something of the history of the Third Amended Statement of Claim. In their Third Amended Statement of Claim the applicants alleged that in February 1990 the first respondent leased shop 118 in the Forest Hill Shopping Centre to the second, third and fourth respondents for six years from 12 September 1989. According to paragraph 5(c) of the Statement of Claim it was a term of the Lease that the First Respondent would not during the continuance of the Lease lease any part or parts of the Shopping Centre (other than the leased premises) to a lessee whose main business activity is that of on-site manufacture and retail sale of donuts ("the Restriction") .... Paragraph 5A pleaded in the alternative to paragraph 5(c) that it was a term of the Lease that the First Respondent would not during the continuance of the Lease lease any part or parts of the Shopping Centre (other than the leased premises) to a lessee where such lease provides that the main business activity to be carried on in such part or parts of the Shopping Centre is to be that of the on-site manufacture and retail sale of donuts ("the Alternative Restriction"). Paragraph 5B pleaded in the alternative to paragraphs 5(c) and 5A that it was a further term of the Lease that the First Respondent would not during the continuance of the Lease permit any other person to carry on in any part or parts of the Shopping Centre (other than the leased premises) any business where such other person's main business activity is that of on-site manufacture and retail sale of donuts ("the Prohibition") .... The term was said to be partly in writing and partly to be implied. Insofar as it was in writing it was stipulated in the Lease and in particular clause 19. Insofar as it was implied, it was implied in order to give business efficacy to the terms of the Lease and in particular clause 19. It was then alleged that in August 1991 the applicants purchased the second, third and fourth respondents' business, and took an assignment of the Lease with the consent of the first respondent. The applicants claim that prior to paying the purchase price and taking possession of the business, the respondents represented to them and/or warranted that the Restriction, the Alternative Restriction, the Prohibition and the terms set out in paragraph 5B continued to apply to the Lease after its assignment. The applicants claim that in April 1992 the first respondent breached the Restriction, the Alternative Restriction, the Prohibition and the terms set out in paragraph 5B. The Particulars to paragraph 14 put the breach in two ways. First, that the first respondent granted a lease to Keatsville Pty. Ltd. ("Keatsville") which provided that Keatsville could conduct a business from the shop, the main business activity being the on-site manufacture and retail sale of donuts. Secondly, that the first respondent permitted Keatsville to conduct such a business from the shop. In May 1994 the applicants applied for an interlocutory injunction to restrain the first respondent from terminating the Lease and re-entering the shop. I need not rehearse the events leading up to that application, but I do need to set out part of clause 19 of the Lease: The Lessor hereby covenants with the Lessee that the Lessor will not during the continuance of the Lease lease any part or parts of the Centre (other than the demised premises) to a Lessee where such lease provides that the main business activity to be carried on in such part or parts of the Centre is to be that of the on-site manufacture and retail sale of donuts .... It will be seen that this clause is reflected in paragraph 5A of the Statement of Claim. On 14 July 1994, after hearing argument from the applicants' counsel on the meaning of clause 19, Heerey J. ruled that the clause did not impose any obligation on the lessor in relation to the enforcement of obligations of other lessees concerning their business activities. He also held that the grant of the lease to Keatsville was not a breach of the clause. After the luncheon adjournment counsel for the applicants told his Honour that the respondents wished to appeal to the Full Court against the clause 19 ruling. Discussion ensued as to whether there could be an appeal from a ruling in the course of running, and his Honour said that he thought his ruling was interlocutory and not final, because it was made in the course of an application for an interlocutory injunction. I mention this because the ruling on the proper construction of clause 19, if read without the aid of the transcript, has the appearance of a final ruling. Argument then resumed, at the conclusion of which his Honour dismissed the application for interlocutory relief. He did not think there was a triable issue as to the existence of the implied term pleaded in paragraph 5B. His reasons were that the "whole agreement" clause in the Lease (clause 11.15(b)) applied, that the implied term was inconsistent with clause 19, and the term was not "so obvious that it goes without saying". The applicants then filed a Fourth Amended Statement of Claim. The old paragraph 5(c) was deleted and was replaced by what had formerly been paragraph 5A. Thus the new paragraph 5(c) now reflected clause 19 of the Lease. Paragraph 5B was replaced with a fresh paragraph 5A which is in part as follows: it was a further term of the Lease that the First Respondent would, during the continuance of the Lease, take all reasonable steps in order to prevent any other person carrying on in any part or parts of the Shopping Centre (other than the leased premises) any business activity where such business' main business activity is the on-site manufacture and retail sale of donuts ("the Prohibition") .... This term is said to be implied because "it is reasonable and equitable", "it is necessary to give business efficacy to the terms of the Lease", and "it was obviously intended to be a provision of the Lease". Paragraphs 5B to 5E are new. Paragraph 5B is as follows: Further or in the alternative, the First Respondent as landlord and registered proprietor of the Shopping Centre owed to the Applicants a duty of care to monitor and take reasonable steps to: (a) ensure that the Applicants enjoyed the benefits of the exclusivity in the conduct of their business as contemplated by the term of the Lease referred to in paragraph 5(c) above ...; (b) prevent other shop premises in the Shopping Centre being used by other persons in contravention of the exclusivity contemplated by the term of the Lease referred to in paragraph 5(c) above .... In paragraph 5C the applicants set out a number of matters which they say created a relationship of proximity between them and the first respondent. In paragraph 5D it is alleged that the first respondent breached its duty of care, and in paragraph 5E that as a result the applicants have suffered loss and damage. The pleading does not identify what constitutes the breach, but it is presumably the grant of the lease to Keatsville. As I have said, the first respondent applies to strike out paragraphs 5A to 5E. In my view what was said by Heerey J. in relation to the old paragraph 5B is applicable to the new paragraph 5A. His Honour said that there was no "triable issue" as to the existence of the implied term, and that there was no "arguable right to damages arising from the action of the first respondent in granting a lease of Shop 154A to another tenant". The difference between the old paragraph 5B and the new paragraph 5A is that the former asserted an obligation on the part of the first respondent not to permit any one else to operate a donut shop, whereas the latter alleges an obligation to take reasonable steps to prevent such an operation. If it is not arguable that the former obligation is to be implied, it is not arguable that the latter obligation is to be implied. Heerey J. was applying tests (no triable issue, no arguable right to damages) appropriate to the grant or refusal of an interlocutory injunction. The test to be applied under O.20 r.2 is sometimes expressed in terms of "no real question to be tried". More often it is said that it must be plain and obvious that the impugned parts of a statement of claim are unarguable or clearly untenable and cannot possibly succeed. I doubt that there is much, if any difference, between saying that a part of a pleading does not raise an arguable case and saying that it is clearly untenable and cannot possibly succeed. See Dey v. Victorian Railways Commissioners (1949) 78 C.L.R. 62, at p.91 per Dixon J. and General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 C.L.R. 125, at pp.129-130 per Barwick C.J. If the test under O.20 r.2 is higher than that employed by Heerey J., it is in my view satisfied in relation to paragraph 5A for the reasons which his Honour gave. Paragraph 5B alleges a duty in tort to take reasonable steps to ensure that the applicants enjoyed "the benefits of the exclusivity in the conduct of their business as contemplated by ... paragraph 5(c)", and clause 5D alleges a breach of the duty, presumably constituted by the grant of the Keatsville lease. As I have said, Heerey J. held that the grant of the lease to Keatsville was not a breach of clause 19. It was thus not a breach of the term alleged in paragraph 5(c), which reproduces clause 19. If the grant of the lease to Keatsville was not a breach of clause 19 (paragraph 5(c)), the first respondent cannot, by granting the lease, be in breach of a duty to ensure that the applicants enjoyed the benefits contemplated by clause 19. Those "benefits" did not include the "exclusivity" asserted. The same applies to the alleged duty to take reasonable steps to prevent other shops being used in contravention of the exclusivity contemplated by clause 19 (paragraph 5(c)). Clause 19 does not "contemplate" exclusivity of the type asserted. In my view the allegations made in paragraphs 5B and 5D do not raise an arguable case and are clearly untenable. If these clauses fall, clauses 5C and 5E fall with them. For the avoidance of doubt I should note that counsel for both parties referred to clause 19 of the Lease, and there was no suggestion that I should determine this application by reference to the pleading alone. Accordingly, paragraphs 5A, 5B, 5C, 5D and 5E of the Fourth Amended Statement of Claim should be struck out with costs. I certify that this and the preceding 7 pages are a true copy of the reasons for judgment of the Honourable Justice Sundberg ............................................ Associate 11 August 1995 Counsel for the Applicant: M Goldblatt Solicitors for the Applicant: G W P Aarons & Co Counsel for the Respondent: T J North Solicitors for the Respondent: Pryles & Defteros Date of Hearing: 31 July 1995 Place of Hearing: Melbourne Date of Judgment: 11 August 1995