FEDERAL COURT OF AUSTRALIA McIntyre v Eastern Prosperity Investments Pte Ltd [2001] FCA 1734 PRACTICE AND PROCEDURE - pleadings - claim for damages for misleading or deceptive conduct and unconscionable conduct - shopping centre - numerous representations alleged against shopping centre owners and managers - no adequate pleading to indicate how representations were misleading, deceptive or unconscionable - no causal connection apparent between conduct complained of and loss or damage claimed - free-standing claim of neglect of premises - unconnected to any apparent cause of action - inadequate falsification of representations - statement of claim fatally flawed - statement of claim struck out - leave to file substituted statement of claim. Federal Court of Australia Act 1976 (Cth) Trade Practices Act 1974 ( Cth) s 82, s 87, s 52, s 51AC, s 51A McIntyre v Eastern Prosperity Investments Pte Ltd [2001] FCA 1655 DONALD COLIN MCINTYRE (FOR AND ON BEHALF OF HIMSELF AND PATRICIA ANN MCINTYRE AND AS A REPRESENTATIVE OF THE GROUP MEMBERS REFERRED TO IN THE APPLICATION) v EASTERN PROSPERITY INVESTMENTS PTE LTD and DBF PROPERTY HOLDINGS PTY LTD AS TRUSTEE FOR THE FREARSON FAMILY TRUST W243 of 2000 FRENCH J 6 DECEMBER 2001 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W243 OF 2000 BETWEEN: DONALD COLIN MCINTYRE (FOR AND ON BEHALF OF HIMSELF AND PATRICIA ANN MCINTYRE AND AS A REPRESENTATIVE OF THE GROUP MEMBERS REFERRED TO IN THE APPLICATION) APPLICANT DONALD COLIN MCINTYRE AND PATRICIA ANN MCINTYRE TRADING AS VICTORIA PARK TRAVELWORLD (SHOP 24) First Group Member PAUL STANLEY SCRUTTON AND BEVERLEY MAUREEN SCRUTTON TRADING AS PHOTOMAT VICTORIA PARK (SHOP 20) Second Group Member DENNIS BEAUMONT AS TRUSTEE FOR THE BEAUMONT FAMILY TRUST TRADING AS INNERSPIN COMPACT DISCS (SHOP 8) Third Group Member KERRY GEORGE AND FREDERICK WILLIAM GEORGE TRADING AS THE HEART COFFEE LOUNGE (SHOP 21) Fourth Group Member PHIMCHAI SMITH TRADING AS PHUKET THAI RESTAURANT (SHOP 44) Fifth Group Member KENNETH JECKS AND IRENE FUSSELL TRADING AS PLAYFUL PETS (SHOP 31) Sixth Group Member ARMIN PODGORNY AND SABINA PODGORNY TRADING AS GOURMET AVIGNON (SHOP 33) Seventh Group Member DAVID THAMBIPILLAI TRUSTEE FOR THE NEW DAY TRUST TRADING AS CURRY BOWL INDIAN TAKEAWAY (SHOP 45) Eighth Group Member BRENDAN REIDY-CROFT CEASED TRADING AS ZIPPY MULTI SERVICES (SHOP 47) Ninth Group Member MILAN SIMIC AND ANNA SIMIC TRADING AS MARTINS SKEWERS (SHOP 10) Tenth Group Member ALLAN AND HELEN LAWRENCE CEASED TRADING AS HAVA LOOK DISCOUNTS (SHOP 23) Eleventh Group Member KIM LIEN LAM TRADING AS FAIRY PATISSERIE (SHOP 26) Twelfth Group Member THIONG AIK GAN AND BEE TIN TAN TRADING AS TEONGBEE MALAYSIAN FOODS (SHOP 42) Thirteenth Group Member SHIRLEY JANE FRUDE CEASED TRADING AS AZALEA FLORIST AND GIFT BASKET (SHOP 9) Fourteenth Group Member AND: EASTERN PROSPERITY INVESTMENTS PTE LTD (ACN 065 747 006) FIRST RESPONDENT DBF PROPERTY HOLDINGS PTY LTD (ACN 082 702 103) AS TRUSTEE FOR THE FREARSON FAMILY TRUST SECOND RESPONDENT JUDGE: FRENCH J DATE OF ORDER: 6 DECEMBER 2001 WHERE MADE: PERTH THE COURT ORDERS THAT: On the First Respondent's motion filed 30 October 2001 and the Second Respondent's motion filed 25 May 2001: 1. The statement of claim is struck out as against both Respondents. 2. The Applicant has leave to file and serve a substituted statement of claim on or before 31 January 2002. 3. The Applicant is to pay the First and Second Respondents' costs of the motions. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W243 OF 2000 BETWEEN: DONALD COLIN MCINTYRE (FOR AND ON BEHALF OF HIMSELF AND PATRICIA ANN MCINTYRE AND AS A REPRESENTATIVE OF THE GROUP MEMBERS REFERRED TO IN THE APPLICATION) APPLICANT DONALD COLIN MCINTYRE AND PATRICIA ANN MCINTYRE TRADING AS VICTORIA PARK TRAVELWORLD (SHOP 24) First Group Member PAUL STANLEY SCRUTTON AND BEVERLEY MAUREEN SCRUTTON TRADING AS PHOTOMAT VICTORIA PARK (SHOP 20) Second Group Member DENNIS BEAUMONT AS TRUSTEE FOR THE BEAUMONT FAMILY TRUST TRADING AS INNERSPIN COMPACT DISCS (SHOP 8) Third Group Member KERRY GEORGE AND FREDERICK WILLIAM GEORGE TRADING AS THE HEART COFFEE LOUNGE (SHOP 21) Fourth Group Member PHIMCHAI SMITH TRADING AS PHUKET THAI RESTAURANT (SHOP 44) Fifth Group Member KENNETH JECKS AND IRENE FUSSELL TRADING AS PLAYFUL PETS (SHOP 31) Sixth Group Member ARMIN PODGORNY AND SABINA PODGORNY TRADING AS GOURMET AVIGNON (SHOP 33) Seventh Group Member DAVID THAMBIPILLAI TRUSTEE FOR THE NEW DAY TRUST TRADING AS CURRY BOWL INDIAN TAKEAWAY (SHOP 45) Eighth Group Member BRENDAN REIDY-CROFT CEASED TRADING AS ZIPPY MULTI SERVICES (SHOP 47) Ninth Group Member MILAN SIMIC AND ANNA SIMIC TRADING AS MARTINS SKEWERS (SHOP 10) Tenth Group Member ALLAN AND HELEN LAWRENCE CEASED TRADING AS HAVA LOOK DISCOUNTS (SHOP 23) Eleventh Group Member KIM LIEN LAM TRADING AS FAIRY PATISSERIE (SHOP 26) Twelfth Group Member THIONG AIK GAN AND BEE TIN TAN TRADING AS TEONGBEE MALAYSIAN FOODS (SHOP 42) Thirteenth Group Member SHIRLEY JANE FRUDE CEASED TRADING AS AZALEA FLORIST AND GIFT BASKET (SHOP 9) Fourteenth Group Member AND: EASTERN PROSPERITY INVESTMENTS PTE LTD (ACN 065 747 006) FIRST RESPONDENT DBF PROPERTY HOLDINGS PTY LTD (ACN 082 702 103) AS TRUSTEE FOR THE FREARSON FAMILY TRUST SECOND RESPONDENT JUDGE: FRENCH J DATE: 6 DECEMBER 2001 PLACE: PERTH REASONS FOR RULING ON MOTIONS TO STRIKE OUT STATEMENT OF CLAIM 1 Donald Colin McIntyre and Patricia Ann McIntyre carry on business as travel agents at the Heart of the Park Shopping Centre situated at 366 Albany Highway, Victoria Park. Mr and Mrs McIntyre and a number of other tenants of the shopping centre are in dispute with its owner, Eastern Prosperity Investments Pte Ltd and the shopping centre manager, DBF Property Holdings Pty Ltd. On 22 December 2000, the McIntyres filed an application under Pt IVA of the Federal Court of Australia Act 1976 (Cth) on behalf of themselves and the proprietors of various businesses who are or were tenants of the shopping centre. The application names as first respondent Eastern Prosperity Investments Pte Ltd and as second respondent, DBF Property Holdings Pty Ltd. 2 Since the application was filed there have been a number of motions before the Court. One of those motions, relating to the continuing existence of Eastern Prosperity Investments and the authority of its lawyers to act was dismissed in a judgment delivered on 22 November 2001 - McIntyre v Eastern Prosperity Investments Pte Ltd [2001] FCA 1655. There are presently two motions seeking to strike out the statement of claim. The first in time was filed by DBF Property Holdings on 25 May. The second was filed by Eastern Prosperity Investments on 30 October. Written submissions were lodged and argument on the motions heard on 22 November. Before considering the merits of the motion it is necessary to outline the structure of the statement of claim. 3 Mr and Mrs McIntyre are named as applicants in the action and as representatives of the group members specified therein. Each group member comprises a past or present tenant of the shopping centre. Including the McIntyres there are altogether fourteen group members. 4 After the first twelve paragraphs,which identify the parties, pars 13 to 38 set out, inter alia, representations made to the McIntyres in various ways and at various times by or on behalf of Eastern Prosperity Investments and DBF Property Holdings. The representations are said to have been false and their making to have constituted misleading and deceptive conduct by the respondents in contravention of s 52 of the Trade Practices Act 1974 (Cth) and also unconscionable conduct in contravention of s 51AC. The McIntyres say that by reason of that conduct they have suffered loss and damage. A similar structure is followed for each of the successive group members. So it is that the statement of claim presently occupies some 221 pages. 5 The McIntyres say that at all material times they traded from Shop 24 at the shopping centre under an assignment of a written Deed of Renewal of Lease dated 19 November 1997. The lease which was between Eastern Prosperity Investments and the previous owner of the business, Rojo Pty Ltd, was assigned to the McIntyres under a written Deed of Assignment of Lease dated 1 November 1998. The McIntyres commenced trading on or about 2 November 1998. They originally purchased the business from the previous owners for a purchase price of $55,000 and a further assumption of liabilities of the previous owners. 6 The McIntyres allege representations made to them at various times and in various ways relating to prospective alterations and refurbishments of the shopping centre: Date Representor Mode of Representation October 1998 Jodi Costello, Centre Oral to Mr and Mrs McIntyre Manager, Employee of DBF Property Holdings 12 January 1999 Jodi Costello Letter to Mr McIntyre 26 March 1999 Jodi Costello Letter to all tenants 8 June 1999 Jodi Costello Memo to all tenants entitled "Progress on Renovations" 27 August 1999 Jodi Costello Memo to all tenants entitled "Planning Approval for Interior Changes" October 1999 Jodi Costello Oral conversation with Donald McIntyre 9 November 1999 Jodi Costello Memorandum to all tenants entitled "Renovations" 20 January 2000 Jodi Costello Letter to all tenants 18 February 2000 Jodi Costello Memorandum to all tenants entitled "Redevelopment HOTP" Particulars of the representations alleged are set out in respect of each of the pleaded communications and in each case it is asserted that insofar as the representations are as to future matters, the first group member will rely on s 51A of the Trade Practices Act. 7 The first allegation of falsity in relation to the representations made to the McIntyres appears in a free-floating particular, designated "A", immediately following par 33 which deals with the representations made on 18 February 2000. The particulars of falsity are stated thus: "A. Contrary to the written representations set out in the correspondence and memorandums dated 12 January 1999, 26 March 1999, 8 June 1999, 27 August 1999, 9 November 1999, 20 January 2000 and 18 February 2000, and the oral representations made during October 1998 the First Respondent has failed, refused and neglected to attend to the refurbishment and alterations in the shopping centre." Then it is said that the conduct of Eastern Prosperity Investments and DBF Property Holdings in making the various pleaded representations was: "a) in trade or commerce within the meaning of that term in s52 of the Trade Practices Act; b) misleading or deceptive in contravention of the meaning of that term in s52 of the Trade Practices Act." (par 34) It is also said that Eastern Prosperity Investments' conduct in making the oral and written representations was in trade or commerce and, in all the circumstances, unconscionable conduct with regard to the supply of goods or services within the meaning of that term in s 51AC of the Act. The written and oral representations are again said to have been misleading or deceptive and that is particularised thus: "A. Contrary to the written representations set out in the correspondence and memorandums dated 12 January 1999, 26 March 1999, 8 June 1999, 27 August 1999, 9 November 1999, 20 January 2000 and 18 February 2000 and the oral representations of October 1998 the First Respondent has failed, refused and neglected to attend to the completion of the refurbishment and alterations to the shopping centre. B. The First and Second Respondents by permitting the commencement of the refurbishment and alterations to the shopping centre, which refurbishment and alterations have been suspended in there (sic) entirety, has caused further disruption to trading conditions at the shopping centre which are continuing to further deteriorate." 8 It is then pleaded that by reason of the alleged misleading or deceptive conduct and unconscionable conduct the McIntyres have suffered loss and damage. The loss and damage is particularised thus: "A. Diminution in the value of the First Group Member's business; B. Loss of goodwill of the First Group Member's business; C. Trading losses; D. Loss of interest on the capital monies injected by the First Group Member to purchase the business and to sustain the ongoing trading losses; E. Loss of the opportunity to trade in a refurbished shopping centre and increase the profitability and value of the business; F. Loss of wages and salary which the operators of the First Group Member could have earned in alternative employment or alternatively loss of profits and goodwill which the First Group Member could have obtained if the business had been relocated; G. Loss and damage occasioned to the First Group Member's business through the tenancy being flooded on 4 occasions with raw sewerage; H. General damages for stress and inconvenience;" It is not apparent from the statement of claim how all or any of the representations caused the McIntyres to suffer the loss and damage which it is said they have incurred. 9 The second group members are Paul Stanley Scrutton and Beverley Maureen Scrutton trading as Photomat Victoria Park. They are said to trade from shops 20 and 20A at the shopping centre under an Assignment of Lease, undated but stamped 22 February 1994 and a subsequent renewal of the lease dated 26 November 1996. Under that renewal their lease was extended for a period of five years commencing 1 October 1996 and terminating on 30 September 2001. They purchased the business from its previous owners for $85,000 and assumption of the liabilities of the previous owners. 10 The Scruttons are said to have been in receipt of representations contained in letters to them of 15 June 1998 and 7 December 1998 from agents of the first and second respondents concerning proposed improvements to the shopping centre. They are also said to have been in receipt of all the common form memoranda relied upon in the McIntyre pleading. The representations are again said to have been false by reason of the failure of Eastern Prosperity Investments to attend to the refurbishment of the shopping centre and the conduct of both Eastern Prosperity Investments and DBF Property Holdings to complete the refurbishment and car park extension and internal renovations as represented and by their conduct in permitting trading conditions at the shopping centre to deteriorate. 11 The conduct is characterised in the pleading as misleading and deceptive in contravention of s 52 and unconscionable conduct in contravention of s 51AC. Again there is a bald assertion that the Scruttons have suffered loss and damage but no explanation of how the loss and damage is said to be connected either to the misleading or deceptive conduct or to the alleged unconscionable conduct. 12 The third group member is Dennis Beaumont as Trustee for the Beaumont Family Trust trading as Innerspin Compact Discs. He is said to have traded originally from shop 12 and then, from 1 December 1999, to have traded from shop 8. He is said to have occupied his premises at the centre under a written Deed of Lease dated April 1996. In November 1999, Eastern Prosperity Investments is said to have purported to terminate Mr Beaumont's lease. Subsequently a Deed of Acknowledgment of Debt dated 21 December 1999 was entered into between Eastern Prosperity Investments and Mr Beaumont in return for the grant of a new lease of alternative premises within the centre. The representations complained of in relation to Mr Beaumont were in the form of correspondence from DBF Property Holdings dated 15 June 1998 and 15 February 1999 together with all the common form memoranda referred to in relation to the other tenants. The same plea of falsity of the representations is made and the same bald assertions as to loss said to flow from the conduct of the respondents. 13 The same form of pleading is followed for each of the group members. In addition there is a general freestanding allegation in each case that since Eastern Prosperity Investments acquired ownership of the shopping centre it has permitted the physical condition of the shopping centre to deteriorate through lack of maintenance. It is also said to have permitted the number of vacancies in the shopping centre to increase markedly and to have failed, refused or neglected to maintain the shopping centre. There is a number of particulars set out of the ways in which Eastern Prosperity Investments is said to have failed to have maintained the centre. This has no apparent relationship to the allegations of misleading or deceptive conduct or unconscionable conduct. Nor does it seem to have any relationship to the claim for damages. 14 Further there is a general plea appearing in particulars of the representations that reliance is placed on s 51A of the Trade Practices Act. It is not specifically alleged that the respondents did not have reasonable grounds for making the various statements attributed to them. 15 There is no point in descending further into the detail of the statement of claim. Enough has been said to indicate that it is fatally flawed in the following ways: 1. Insofar as it alleges misleading or deceptive conduct by way of representations made by or on behalf of the respondents, it does not show, for each of the representations alleged, how it was misleading or deceptive. Mere failure to honour a promise does not make the promise misleading or deceptive. It should be noted that in addition to the promissory statements complained of, there is a number of other representations pleaded, such as the obtaining of planning approval from the Town of Victoria Park, which are not falsified in any way and yet, it seems, are included in the general complaint of misleading or deceptive conduct. 2. The pleading does not show how the conduct complained of is said to be unconscionable. 3. There is a general statement of reliance upon s 51A of the Trade Practices Act unaccompanied by any assertion that the respondents lacked reasonable grounds for making the representations attributed to them. 4. The statement of claim does not allege facts to show how the loss and damage said to have been suffered by the various tenants is connected to the misleading or deceptive conduct or the unconscionable conduct complained of. 5. The complaints of failure to maintain the shopping centre and permitting its deterioration do not seem to be connected to any cause of action but stand as a free-floating complaint about the conduct of the respondents. 16 In addition to these flaws, the statement of claim repeats for the various tenants the allegations of representations contained in memoranda sent to each of them. It also repeats for each tenant the allegations of neglect of the physical condition of the shopping centre. This, no doubt, accounts in substantial part for its excessive length which, as noted, occupies some 221 pages. In my opinion the statement of claim does not disclose a reasonable cause of action as presently pleaded and must be struck out. 17 Mr McIntyre and his wife are bringing these proceedings on their own behalf and as representatives of a number of other tenants. The difficulties with the statement of claim which I have identified may be indicative not only of a difficulty in framing their case. It may also reflect upon whether they have a case at all. In my opinion it is highly questionable whether this proceeding can be viably conducted without the assistance of competent legal advice. It could be unfair both to the applicants, those they purport to represent and to the respondents to allow the action to go on indefinitely with a succession of defective pleadings and increasing costs orders against them. I will therefore allow a further amendment to the statement of claim but if the fundamental difficulties cannot be overcome, I will not be disposed to allow further amendments and the incurring of further unnecessary costs on all sides. 18 For the preceding reasons, the statement of claim will be struck out. There will be leave to the applicants to file a new statement of claim by 31 January 2002. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. Associate: Dated: December 2001 Mr DC McIntyre appeared on his own behalf and on behalf of Patricia McIntyre Counsel for the First Mr J Johnson Respondent: Solicitors for the First Respondent: Ilbery Barblett Counsel for the Second Respondent: Ms D Templeman Solicitor for the Second Respondent: Minter Ellison Date of Hearing: 22 November 2001 Date of Judgment: 6 December 2001