Williams v FAI Home Security Pty Ltd (No 2) [2000] FCA 726

FEDERAL COURT OF AUSTRALIA

Williams v FAI Home Security Pty Ltd (No 2) [2000] FCA 726 PRACTICE AND PROCEDURE – representative proceeding – misleading and deceptive conduct – representations made to group members – precision of statement of claim – specificity of representations in particulars – whether particulars exposed substance of representations. PRACTICE AND PROCEDURE – representative proceeding – accessorial liability – actual or constructive knowledge – whether pleading supported claim for accessorial liability – not to be decided prior to hearing. Federal Court of Australia Act 1976 (Cth): s 33C Bruce v Odhams Press Ltd [1936] 1 KB 697 cited Connell v Nevada Financial Group Pty Ltd (1996) 139 ALR 723 cited Philip Morris (Australia) Ltd v Nixon [2000] FCA 229 considered Bright v Femcare (1999) 166 ALR 743 cited Yorke v Lucas (1985) 80 FLR 143 cited Pereira v Director of Public Prosecutions (1988) 82 ALR 217 cited Wickstead v Browne (1992) 30 NSWLR 1 cited

TIMOTHY WILLIAMS and SUSAN WILLIAMS v FAI HOME SECURITY PTY LTD & ANOR (No 2) V 383 of 1999 GOLDBERG J 2 JUNE 2000 MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V 383 of 1999

BETWEEN: TIMOTHY WILLIAMS and SUSAN WILLIAMS

Applicants

AND: FAI HOME SECURITY PTY LTD

(ACN 050 064 214)

First Respondent

FAI FINANCE PTY LTD

(ACN 053 262 561)

Second Respondent

JUDGE: GOLDBERG J

DATE: 2 JUNE 2000

PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 On 14 December 1999 I gave the applicants leave to file and serve a further amended statement of claim and to file and serve further and better particulars of pars 9, 11, 16 and 18 of the then current statement of claim or of such paragraphs as were equivalent paragraphs in any further amended statement of claim. On 22 December 1999 the applicants filed and served a further amended statement of claim ("the statement of claim") and further and better particulars of the statement of claim. 2 By notice of motion filed on 14 February 2000 the respondents seek orders that: · certain paragraphs in the statement of claim be struck out and that further and better particulars of certain paragraphs in the statement of claim be provided; · the applicants provide particulars under various paragraphs of the statement of claim in respect of further group members as they became known to the applicants; · the respondents' solicitors be released from an undertaking given earlier not to disclose to the respondents the identity of group members whose identity had been supplied by the applicant's solicitors · the applicants disclose the identity of any new group member within fourteen days of any new group member becoming known to them. 3 The applicants bring the proceeding pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth) ("the Act") as a representative party. The group members to whom the proceeding relates are persons who on or after 9 July 1993 purchased home alarm systems, known as Security Guard I and Security Guard II, from the first respondent ("FAI Security"). It is alleged that the group members entered into loan contracts with the second respondent, ("FAI Finance") to finance the purchase of the alarm systems. It is alleged that it was represented to the group members that the systems were the latest technology available and that they acted on the faith of the representations by entering into the sales contracts and loans contracts and thereby suffered loss and damage. 4 In the statement of claim it is alleged that FAI Security carried on the business of supplying the alarm systems and that FAI Finance carried on the business of providing credit to consumers in relation to the acquisition of goods and services, including the alarm systems. It is alleged that FAI Security established a distribution network through various distributors for the door‑to‑door sale of the alarm systems and prepared and supplied to the distributors various written materials for use in their sale. It is alleged that on various dates after 9 July 1993 the distributors made sales presentations to consumers in accordance with the script prepared by FAI Security and entered into negotiations with the consumers in respect of the sale of the alarm systems. 5 Paragraph 16 of the statement of claim is in the following terms: "In the course of the sales presentation referred to in paragraph 10 and the negotiations referred to in paragraph 11, the distributors, following the FAI instructions: (a) said to each of the consumers in respect of the first home alarm system or the second home alarm system, as the case may be, words to the effect that the system was the latest technology available; and (b) further said to some of the consumers in respect of the first home alarm system or the second alarm system, as the case may be, words to the effect that the system was: (i) the best on the market; and/or (ii) for sale at much less than comparable systems." Particulars of those representations are then given under para 16 in the following terms: "The representations were partly written, partly oral and partly to be implied. Insofar as they were written, they were contained in the sales kit. Insofar as they were oral, they were constituted by conversations between the consumers and the relevant distributors on various dates and at the homes of the group members in the course of the sales presentation: (i) in relation to the representation that the relevant system was the latest technology available, words to that effect and/or words to the effect that the system was: (A) the latest in wireless infrared technology (B) a revolutionary new type of radio‑based alarm system; (C) a brand new type of security system; (D) a brand new type of security package; and/or (E) the latest available in electronic surveillance The substance of which was that the relevant system was the latest technology available; (ii) in relation to the representation that the relevant system was the best on the market, words to that effect and/or words to the effect that: (A) the system was a security package unlike any other; (B) FAI had to provide the consumer's family with the best that FAI could provide; (C) the system would provide the consumer's family with the maximum protection; and/or (D) the system was rated by independent research as the best of the best The substance of which was that the relevant system was the best on the market; (iii) in relation to the representation that the relevant system was for sale at much less than comparable systems, words to that effect and/or words to the effect that: (A) FAI could sell its package anywhere from $3,000 to $3,500 because that was what a lot of companies would charge just for their alarm system; (B) the system was easily marketable for around $2,900‑$3,200; and/or (C) the system was far superior to at least a $5,000 alternative The substance of which was that the relevant system was for sale at much less than comparable systems. Insofar as they were to be implied, they were to be implied from showing the sales kit to the group members during the course of the sales presentation, and from the ordinary meaning of the words alleged above." In the further and better particulars of par 16 which have been delivered the applicants have supplied particulars of the representations specifically made to the applicants and to six group members known to the applicants. 6 It is then alleged that the consumers entered into sales contracts in reliance upon the representations which were financed by loans entered into with FAI Finance, that the alarm systems were not the best on the market or the latest technology available and were not for sale at much less than comparable systems. It is alleged that the conduct of the respondents was in contravention of s 52, s 53 and s 74G of the Trade Practices Act 1974 (Cth). There is also a plea of negligent misstatement against FAI Security, and a claim against FAI Finance under s 73 of the Trade Practices Act. 7 It is alleged that the distributors made the representations as agents of FAI Security and in the alternative it is alleged that FAI Security was involved in the contraventions by the distributors within the terms of s 75B of theTrade Practices Act. 8 At an earlier stage of the proceeding the respondents challenged the applicants' claim that there were seven group members as required by s 33C of the Act. The applicants' solicitors agreed to provide the respondents' solicitors with the names of the group members at that time on the basis that those names not be disclosed to the respondents and be kept confidential by the respondents' solicitors. The names of the group members were provided on that basis.