FEDERAL COURT OF AUSTRALIA PFD Food Services Pty Ltd v NAFDA Pty Ltd [2003] FCA 682 PFD FOOD SERVICES PTY LTD (ACN 006 972 381) & ORS v NAFDA PTY LTD (ACN 002 953 942) V 763 of 2002 RYAN J 7 JULY 2003 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 763 of 2002 BETWEEN: PFD FOOD SERVICES PTY LTD (ACN 006 972 381) & ORS (in accordance with annexed Schedule) Applicants AND: NAFDA PTY LTD (ACN 002 953 942) Respondent JUDGE: RYAN J DATE OF ORDER: 7 JULY 2003 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The applicants have leave by 21 July 2003 to amend their statement of claim in such manner as they may be advised in light of the reasons for judgment published this day. 2. The amended motion on notice dated 28 March 2003 be adjourned to 6 August 2003. 3. The costs of all parties of the hearing on 31 March 2003 be reserved. 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 V 763 of 2002 BETWEEN: PFD FOOD SERVICES PTY LTD (ACN 006 972 381) & ORS (in accordance with annexed Schedule) Applicants AND: NAFDA PTY LTD (ACN 002 953 942) Respondent JUDGE: RYAN J DATE: 7 JULY 2003 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 This application concerns an alleged co-operative arrangement for the wholesale purchasing of food products on behalf of various entities carrying on business as wholesalers of frozen food. The applicants contend that this arrangement was purposefully structured using a cooperative company so as to claim certain taxation benefits, to negotiate favourable terms with suppliers on behalf of its member businesses and to generate profits for its members in various other ways. The difficulty that gives rise to the respondent's present application that this Court should dismiss or strike out the proceedings arises from the corporate structure chosen to implement the alleged co-operative arrangements. The company within the corporate structure that ultimately negotiated discounts and obtained favourable taxation treatment is NAFDA Pty Ltd ("NAFDA"), and the only members of that company are NAFDA (NSW) Pty Ltd ("NAFDA (NSW)") and NAFDA (VIC) Pty Ltd ("NAFDA (VIC)"). The applicants in the present case are several of the business entities that came together to form the alleged co-operative, and each was a member only of NAFDA (NSW) or NAFDA (VIC), which companies are effectively interposed between the applicants and NAFDA, the respondent. The essence of the applicants' case is that NAFDA existed to distribute its profits to the members of NAFDA (NSW) and NAFDA (VIC), and did so except in the financial year 2001, when, it claims, NAFDA retained $569,074 which should have been distributed as an "extraordinary income dividend" to the members of NAFDA (NSW) and NAFDA (VIC), as the applicants were at that time. The respondent's motion to strike out 2 The respondent's notice of motion seeks, under O 20 r 2, that the proceedings be dismissed or struck out. The only part of the rule presently applicable is rule 2(a). The rule, so far as is relevant, provides; 'Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding – (a) no reasonable cause of action is disclosed; … the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim for relief in the proceeding. The authorities make it clear that this is a power which should not be used unless there is no real question to be tried; Douglas v Tickner (1994) 49 FCR 507 at 519 per Carr J, and the cases there cited. Before exercising it, the Court should be satisfied that there is a clear and obvious case that the claim is unarguable; Murex Diagnostics Australia Pty Ltd v Chiron Corp (1995) 55 FCR 194 at 203 per Burchett J. The latter case concerned O 29 r 2 but the authorities referred to by his Honour were clearly applicable to an application such as that presently before the Court. 3 The respondent contends that the proceedings as brought are fatally flawed because the applicants have no legal relationship with NAFDA, are not its members, and cannot "jump over" the shareholder structure to obtain what they claim are wrongfully retained profits. The respondent puts this principal submission in two ways: that the applicants are seeking to claim damages, in circumstances where, if there is any loss, it has been sustained only by non-parties to the litigation, NAFDA (NSW) and NAFDA (VIC); and that a claim for damages resulting from a mere loss of an expectation cannot be pursued under the Trade Practices Act. The respondent relies on the proposition that a shareholder in a company cannot recover from a third party a diminution in the value of the company because of a loss suffered by the company (here, in effect, NAFDA's failure to make a distribution to the interposed member companies), as the shareholder's loss is merely derivative and will not usually give the shareholder standing to proceed against the third party. The other argument advanced by the respondent is that nothing has been pleaded to warrant the imposition on the respondent of fiduciary duties owed to the applicants. 4 The respondent further submits that the applicants' statement of claim is fatally deficient because it fails to allege reliance upon the misleading and deceptive statements attributed to the respondent or to plead any causal link between those statements and the loss alleged. As well, it is argued, the applicants have not pleaded acts (and losses incurred) which tend to establish that they relied to their detriment on the respondent's representation so as to make out their claim founded on estoppel. In my view, the conduct pleaded in paragraph 17 of the statement of claim could, if proved, arguably constitute reliance by the applicants to their detriment. Accordingly, any defect in pleading the cause of action in estoppel could be remedied by leave to amend by making reference to the facts already pleaded in that paragraph. Fiduciary duties 5 The respondent's argument as to the corporate structure interposed between the respondent and the applicants is, on its face, a strong one. If the applicants had pleaded their case solely by invoking principles of corporations law they would face substantial obstacles: see eg Prudential Assurance Co Ltd v Newman Industries Ltd [No 2] [1982] Ch 204. However, as I apprehend the statement of claim, their case is put on the basis of fiduciary obligations and the Trade Practices Act. It is these causes of action which must be shown to be untenable if the respondent's motion is to succeed. I shall first consider the allegations of fiduciary duties. 6 The statement of claim clearly alleges in paragraph 12 that in 1989 the shareholding in NAFDA was altered with the intention that the respondent would collect and distribute "earned distributor allowances" (effectively supplier rebates) directly to "state" members like the applicants. It is not pleaded that the interposed entities of NAFDA (NSW) and NAFDA (VIC) had any role in this rebate distribution. If it can be shown that the respondent was restructured with the intention that it would collect certain moneys for the benefit of the applicants, and regularly distributed those moneys to them otherwise than as dividends on their shares in the interposed entities of NAFDA (NSW) and NAFDA (VIC), it would be arguable that the respondent became an express or constructive trustee of those funds as they were ascertained. I shall turn to that argument presently. 7 In an application like the present, the applicants' case stands to be considered on its pleadings alone: Dey v Victorian Railways Commission (1949) 78 CLR 62 at 109. It is true that the categories of fiduciary relationships are not closed, (see, for example, Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 68 per Gibbs CJ and 96 per Mason J), and that a fiduciary relationship can, potentially, arise "whenever the plaintiff entrusts the defendant with a job to be performed": Reading v The King [1949] 2 KB 232 at 236 per Asquith LJ. 8 Several analogous cases involving financial dealings with third parties and motions to strike out pleadings concern duties said to have been owed by Aboriginal land councils. In Northern Land Council v The Commonwealth (1987) 75 ALR 210 ("Northern Land Council Case"), seven Justices of the High Court declined to answer a stated case including the question "Do the facts alleged in the amended statement of claim … disclose an action for breach of fiduciary duty against the first defendant?" for the reason indicated at 215 that (before the decision in Mabo v State of Queensland (No 2) (1992) 175 CLR 1); 'Whether the nature of the relationship at common law between an identified group of Aboriginal people and the unalienated Crown lands which they have used and occupied historically and still use and occupy is such as to found a fiduciary relationship or a trust of some kind is a question of fundamental importance which has not been argued on the present stated case. Likewise, the question whether other allegations in the amended statement of claim might give rise to a fiduciary relationship should not be determined in the abstract but should be determined in the light of the facts found at the trial.' In Public Trustee (as Executor of the Estate of the Late Pareroultja) v Central Land Council [2000] NTSC 90 ("Central Land Council Case"), Angel J in an unreported judgment, treated the passage just quoted as binding him to hold that whether allegations made in an amended statement of claim might give rise to a fiduciary relationship should not be resolved in the abstract but should be determined in the light of the facts found at trial. If there is such a principle, I do not consider that the High Court intended it to apply beyond cases, like those raised by native title claims, where the available findings of fact are potentially complex. In the Central Land Council Case his Honour held it was not unarguable that a land council may owe to a group of traditional owners fiduciary duties arising out of its financial dealings with mining companies, and there might have been a case that, as a result, the land council held royalties from its dealings with the mining companies on constructive trust for the traditional owners, even where the mining companies were not parties to the action. It is, however, to be observed that the source of the obligations from which fiduciary duties were said to arise was specified in far greater detail in that case than was done in the present applicants' statement of claim. 9 In Dimitrijevic v Mercantile Mutual Life Insurance Co Ltd and Others, (unreported, Supreme Court of Western Australia, Sanderson M, 18 December 1997) it was argued that an employer incurred fiduciary obligations to an employee by deducting premium instalments from the employee's wages and paying them to an insurer. The plaintiff employee pleaded that the employer "owned" the contract of insurance made in the employee's favour and thereby became a constructive trustee. This argument was rejected on the grounds that it was apparent that the plaintiff had standing under the contract of insurance to have the policy paid out, and that there was nothing in the contract (express or implied) which obliged the employer to take action on the plaintiff's behalf. It was important to the striking out of the claim in that case that the plaintiff was unable to identify how the alleged fiduciary has undertaken or agreed to act in the plaintiff's interests. By contrast, in both the Central Land Council Case and the Northern Land Council Case the applicants were able to identify a representation or statutory obligation by which it was said that the respondents had undertaken to act on behalf of, and in the interests of, the applicants. Here, the alleged source of the obligations is not precisely identified, but instead, at paragraph 24, the pleader has used the formula "by reasons of the matters aforesaid". That degree of generality is not warranted by Mason J's formulation of the obligation in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, where his Honour said, at 96; 'The critical feature of these [fiduciary] relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.' (Emphasis added) It appears to me that, at the very least, the pleadings must identify how the alleged fiduciary has undertaken, agreed or incurred an obligation to act in the applicants' interests. One obvious example might be that, quite apart from any corporate structure, the respondent had entered a joint venture with persons who happened to be shareholders of its member companies to effectively exploit the combined market power of those persons and derive profit in the respondent's name as a result. Joint venturers obviously owe mutual fiduciary duties to each other. If the claim is put on some such basis as that, the express or implied agreement from which it is said to arise should be pleaded specifically with appropriate particulars. 10 Despite the unspecific form of the present pleading, it is not unarguable that a fiduciary relationship may be shown to exist between the parties in this case. If, regardless of interposed corporate entities, the respondent is properly to be characterised as a vehicle for the conduct of and co-operative or joint venture, then fiduciary obligations might be owed by it directly to the members or joint venturers and between them inter se. It is not unarguable that there may be a fiduciary relationship between A and B, where A trades on terms favourable to B on an undertaking that the profit derived thereby by B will be applied indirectly in A's interests through a payment to C. The same facts might also found a claim in unconscientious dealing or unconscionable conduct, if B had undertaken in circumstances to pay money to C and the money was never paid, though that analysis seems to be invoked in the present case to support the cause of action in estoppel. 11 I do not think that reference to Division 9 of the Income Tax Assessment Act 1936 ("the Assessment Act") can, at this interlocutory stage, greatly assist the applicants, other than as one indication that NAFDA was intended to be a vehicle for the conduct of a co-operative. Nothing in Division 9 requires an entity to be unalterably, from one financial year to the next, a co-operative. It can lose its beneficial taxation treatment if, for example, its total trade with its members drops below 90% of the total value of the trade it conducts in a given year: s 118. Indeed, if the applicants' allegation that rebates were reimbursed directly to the applicants and not through the interposed entities is correct, it is difficult to see how a beneficial taxation treatment was obtained. Section 120(1)(a) and (b) of the Assessment Act provides that so much of the assessable income of a co-operative company as is distributed among its shareholders as rebates (or bonuses based on business done by shareholders with the company), or so much of its income as is distributed among its shareholders as interest or dividends on shares, shall be an allowable deduction – and here it is apparent that the applicants are not the shareholders of NAFDA. It may be that the pleadings have been drawn in an effort to overcome this apparent difficulty. However, as I have said, I do not think the precise operation of Division 9 of the Assessment Act is crucial to the disclosure of an arguable case. 12 The applicants' case on fiduciary duties does not appear to me, in theory, unarguable. However, as already indicated, the present pleadings do not adequately disclose how the respondent undertook or agreed to act on behalf of, or for the benefit of, the applicants. I consider that the formula used in of the applicants' pleadings, "by reason of the matters aforesaid", lacks the precision necessary to make clear how the relationship is said to have arisen. The closest the pleadings come to identifying the assumption of an obligation towards the applicants is the contention in paragraph 12(d)(iii) that: "In 1989 the shareholding of NAFDA was altered with the intention: … that NAFDA would otherwise seek to derive income for the benefit of 'State' members". The factual basis for this apparent intention that NAFDA would represent the applicants' interests is not pleaded. In my opinion, the material facts giving rise to the alleged fiduciary relationship should be fully and specifically alleged. 13 In the circumstances I am disposed to grant leave to amend the statement of claim, rather than strike it out. There would be no utility in requiring the applicants to file a new application after they have overcome the deficiencies indicated above in their pleading of a case founded on breach of fiduciary duty. The Trade Practices Act claim: reliance and causation 14 In respect of the claim made under s 52 of the Trade Practices Act 1974, the respondent complains that the applicants have not specified how they were misled or deceived by the Board resolutions on which they rely. Nor is it pleaded how the resolutions were communicated to the applicants, if, in fact, they were. These defects do not go to the existence of a cause of action. They can be overcome by the giving of appropriate further and better particulars. 15 The respondent's principal contention under this head appears to be that a claim for damages resulting from a mere loss of an expectation cannot be pursued under the Trade Practices Act. Reliance is placed, in this context, on Gates v City Mutual Life Assurance Society Ltd (1996) 160 CLR 1 at 14-15, Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 502 (Gaudron J), 514 (McHugh, Hayne and Callinan JJ) and 532-533 (Gummow J) and Murphy v Overton Pty Ltd (2001) 112 FCR 182 at 191-192. In considering the respondent's motion to strike out on this basis, I am mindful of what was said by Lockhart J in Australian Competition and Consumer Commission v Golden West Network Pty Ltd [1997] FCA 792 (unreported): 'Today, courts are playing an increasingly active role in case management. Motions to strike out pleadings are matters of practice and procedure. In its role of case management, courts devise various procedures to overcome deficiencies in pleadings other than by simply ordering that the offending paragraphs be struck out. Sometimes it is appropriate to strike them out, sometimes not. On some occasions it is better for the court to direct the applicant, whose statement of claim is under challenge, to furnish particulars or to file and serve affidavits to show that there really are facts which can be proved and which, if proved, would support the general statements made in the statement of claim. This was the course which I took in Trade Practices Commission v Australian Iron and Steel Pty Ltd (1990) 22 FCR 305, a practice which other judges adopt from time to time. This is not, of course, intended to be a substitute for a defective pleading in every case because, as is well known, pleadings must assert basic or constitutive facts, not the evidence by which they are to be proved. But case management is a sensible and flexible thing. It must not be unduly circumscribed.' 16 It becomes necessary at this point to set out at some length extracts from the applicants' statement of claim. By way of context it should be observed that paragraph 13 of the statement of claim describes in some detail the complex arrangements by which NAFDA derived income and distributed profits. The core contention, however, is that profit was distributed at the end of the financial year in accordance with a formula to members of NAFDA (NSW) and NAFDA (VIC) who had been members for the entire financial year. By paragraph 15 it is alleged that, on 18 February 2000, NAFDA's board resolved that "surplus income and/or profit" achieved in the 2000 financial year would be distributed on that basis and that the Board's resolution "would be implemented until further notice" ("the extraordinary profit resolution"). Despite specific reference in paragraph 15 to the 2000 financial year, the allegation makes little sense unless understood as meaning "would be implemented in the same manner in respect of profit in future financial years until further notice". In this context, the applicants formulate its claim under s 52 of the Trade Practices Act as follows: Misrepresentation By NAFDA 17. At all material times in the period from 18 February 2000 until the applicants and each of them ceased to be members of VIC and NSW on or after 30 September 2001 each of the applicants: (a) purchased goods from suppliers with whom NAFDA had negotiated rebates to which EDA's were applicable; (b) purchased goods from NAFDA trading; and (c) promoted sales of goods based on the "Best of the Best" marketing campaign; (i) in reliance upon extraordinary profit resolution and upon the fact it was given effect to by NAFDA for the year ended 30 June 2000 and upon the fact that it was not revoked or varied ("the extraordinary profit conduct"); (ii) in reliance upon the ongoing trading basis representation and in the absence of any notice to the applicants that NAFDA proposed to conduct its affairs in 2000 -2001: (x) other than as a co-operative for income tax purposes; and (y) other than it had done in each of the financial years ended 1998, 1999 and 2000 ("the ongoing trading basis"). 18. After the applicants ceased to be members of VIC and NSW on or about 30 September 2001 NAFDA, having achieved surplus income in the order of $1 m., contrary to the representations and conduct referred to in paragraphs 15 to 17 above: (a) refused and failed to distribute such income by way of "extraordinary dividend" to members of VIC and NSW or otherwise to such persons; (b) resolved to record a profit for the year ended 30 June 2001 which profit was not and has not been distributed to the members of VIC and NSW. PARTICULARS As at 30 August 2001 management accounts of NAFDA disclosed a net profit return (estimated) to members of $17,924,381.00 including net profit from [the] Best of the Best of $1,491,000 and from Up Up and Away of $762,150.00. A copy of the Budget Proposal for the year 2002 may be inspected at the office of the applicants' solicitors. For the year ended 30 June 2001 NAFDA's accounts record that it earned a profit of $842,219 which after providing for income tax of $273,145 which was not payable if it had continued to conduct its business as a co-operative, disclosed a net profit attributable to members of the company of $569,074. The applicants refer to the special purpose financial report for the year ended 30 June 2001 filed by NAFDA with ASIC. The applicants will provide details of the actual profit after full and proper discovery. (b)[sic] contrary to the ongoing trading basis, NAFDA did not account for its affairs in the 2001 financial year: (i) as a co-operative for income tax purposes; and (ii) accounted for its affairs contrary to the way it had done in each of the years ended 1998, 1999 and 2000 retaining within NAFDA after the applicants had ceased to be members of VIC and NSW what would otherwise have been distributed to members as an "extraordinary dividend" and payable to them as loans redeemed upon ceasing to be members. 19. The extraordinary profit conduct and/or the ongoing trading representation referred to in paragraph 17 constituted conduct engaged in by NAFDA: (a) in trade or commerce; (b) which conduct was misleading and deceptive or likely to mislead and deceive contrary to S.52 of the Trade Practices Act 1974 (Cth) ("the Act"). 20. The said conduct: (a) constituted representations as to future matters; (b) is deemed pursuant to s51A of the Act to be made in the absence of reasonable grounds therefore; and (c) in the circumstances, constitutes conduct which is misleading and deceptive contrary to 8.52 of the Act. 21. By reason of the said misleading and deceptive conduct the applicants have suffered loss and damage. PARTICULARS The applicants loss and damage is to be measured their true share of profit of NAFDA for 2000-2001, particulars of which sums the applicants will provide after discovery.' 17 Superficially, this seems an adequate pleading. The requirement that damage be pleaded is met. Causation, at least in part, is pleaded by the applicants' stipulating in paragraph 18(b)(ii) the mechanism by which they would have had a claim over profits. That is done by alleging that the respondent retained "after the applicants had ceased to be members of VIC and NSW what would otherwise have been distributed to members as an "extraordinary dividend" and payable to them as loans redeemed upon ceasing to be members" had not the respondent departed from its practice over the previous three financial years by changing the basis on which it "accounted for its affairs". 18 However, the respondent is entitled to be told how any nexus is said to have arisen between it and the applicants. The actual formulation of the applicants' claim for damages is "By reason of the said misleading and deceptive conduct the applicants have suffered loss and damage." This formula was found inadequate by Branson J in a case cited by the respondent, Kirela Pty Limited v Westfield Holdings Limited [2002] FCA 1223. That was a case in which the applicants, owners of a certain property, alleged that related Westfield companies had engaged in an "overt" campaign of lobbying communities and government to prevent the commercial development of the applicants' site, while also commissioning public relations consultants to conduct "covert" lobbying. In the event, a decision by the relevant Minister in the New South Wales Government resulted in the land being re-zoned in a way less favourable to the applicants than that ordained by an earlier local government decision. It was alleged that the "covert" lobbying had been misleading and deceptive and that "had the respondents not, in effect, conducted the covert campaign the Government would have given effect to the earlier local government decision" (Branson J at [4]). The difficulty her Honour identified in that case, at paragraph 15, was that the applicant did not; '… plead any connection between the conduct of the covert campaign, which allegedly misled and deceived the public but is not pleaded to have misled or deceived the Minister, and the conduct of the Minister which led to the alleged loss and damage.' 19 Similarly, the applicants in this matter have not sufficiently drawn the threads of their case together. I have already indicated that the material facts alleged in the present statement of claim do not establish a fiduciary relationship (as a result of the alleged co-operative arrangement or otherwise). Nor have the applicants claimed that they stood in a contractual relationship with the respondent, or were parties to a joint venture with it or for which it was the corporate vehicle. There is also a logical difficulty in claiming an entitlement to a proportion of the retained profits under the Trade Practices Act, discussed further below. 20 In this case the respondent argues that the applicants have failed to plead what they would have done, or refrained from doing, had they not acted in reliance on the representations and how, as a result, they suffered loss or damage. The Court, where a breach of s 52 is made out, s 87 notwithstanding, will seldom hold a respondent to its representation as if it were a specifically enforceable contract. It is not an adequate statement of causation to plead in a case like this: "the respondent misled us about whether it would pay profits over to members of NAFDA (NSW) and NAFDA (VIC), and, if that misrepresentation had not been made, we would have received those profits." That does not follow as a matter of logic. The highest I think it can be put, on the present pleadings, is that, if NAFDA had not engaged in the alleged misleading conduct, the applicants would have had notice of its change in accounting policy and its policy on the payment of extraordinary dividends and would have had an opportunity to make alternative business arrangements. The loss which they would allege on that formulation would be the loss of the opportunity to enter better bargains or financial arrangements. That would require proof, either that there was some business arrangement available that would have delivered the same benefits which would have been achieved if NAFDA had continued trading according to the extraordinary profit resolution, or that a more profitable arrangement had been passed up due to NAFDA's representations. The only real alternative is for the applicants to establish, in effect, that the alleged misleading statements were made by way of a collateral contract: Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 at 510 per McHugh, Hayne and Callinan JJ quoting Gates v City Mutual Life Assurance Society (1986) 160 CLR 1 at 14 per Mason, Wilson and Dawson JJ. Section 52 cannot simply be pleaded in order to create contractual relations between the parties where none ever came into existence or to allow a party to enforce the bargain which it thought it had made. 21 In my view, the present statement of claim does not disclose a set of facts, which, if proved, would found an entitlement to damages on the measure applicable to a breach of contract. Nor have the applicants pleaded a loss by way of some opportunity passed up to obtain either a bargain that would have delivered what it alleges was represented by NAFDA, or some better bargain. The use of a formulary like "by reason of the said conduct" may, in a case like BWK Elders (Australia) Pty Ltd v Westgate Wool Company Pty Ltd[2002] FCA 87 be sufficient to indicate the basis on which damage has been suffered on the measure pleaded. In that case the parties were purchaser and vendor of a fungible product (wool), where as a matter of custom and practice in the industry representations as to quality were frequently made and commonly understood and the loss of a better bargain (the ability to buy other, better, wool) could readily be inferred. Mansfield J observed in that case, at [16]; 'I … consider that the Statement of Claim adequately pleads that the applicant has suffered loss or damage by conduct done in contravention of ss 52 ... In relation to each of the six transactions, it is specifically pleaded that the applicant relied upon the alleged representations, and was induced by them, to enter into the several contracts to purchase wool from the first respondent. Particulars of those contracts are given. Moreover, par 89 of the Statement of Claim commences in the following terms: "B. By reason of the representations and the conduct of the respondent set out herein, [the applicant] has suffered and will continue to suffer loss and damage." Standing alone, an expression such as "By reason of the foregoing …" may be deficient. But in the immediately preceding paragraphs of the Statement of Claim, there are allegations that the first respondent contravened ss 52, 53 and 58 of the TPA. The representations and conduct referred to in par 89 clearly are those which gave rise to those alleged contraventions of the TPA. In my view, the respondents know perfectly clearly the case which they are required to meet…' 22 In the same case, his Honour at [3], made the these general observations with which I respectfully agree about the function of pleadings; 'The purpose of pleadings is to define the issues so that the parties may know in advance of the hearing the case they have to meet. That enables them to prepare fairly and efficiently for the trial. It also enables the trial to be conducted sensibly and efficiently and to be properly controlled: see generally Dare v Pulham (1982) 148 CLR 658 at 664; Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd (1998) 157 ALR 135. The pleadings must disclose a reasonable cause of action by alleging material facts which, if established at the trial, will enable the applicant to make out all elements of the cause or causes of action. They must also contain sufficient particularity to inform the opposing party of the case which is to be met.' 23 As far as I can see, the present respondent is not at present on clear notice of the alleged contravention of s 52 of the Trade Practices Act which it has to meet or how that caused the applicants to suffer damage measured in some generally accepted way. Like Branson J in Kirela v Westfield I regard these as defects which may be curable by an amendment pleading additional material facts. I shall therefore order that the applicants have leave to amend their statement of claim, and stand over the respondent's notice of motion until after that has been done to allow the respondent an opportunity to consider whether such of its objections as I have upheld have been overcome. As indicated during the course of argument, I shall, at the resumed hearing of the motion, hear submissions on the respondent's motion for the transfer of these proceedings to the New South Wales Registry of the Court. The costs of all parties of the hearing on 31 March 2003 will be reserved. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan. Associate: Dated: 7 July 2003 Counsel for the Applicants: Mr P J Booth Solicitor for the Applicants: Aitken Walker & Strachan Counsel for the Respondent: Mr P W Collinson Solicitor for the Respondent: Hall & Wilcox Date of Hearing: 31 March 2003 Date of Judgment: 7 July 2003 SCHEDULE OF APPLICANTS Chippys Food Distributors Pty Ltd 2 Lilian Fowler Place Marrickville NSW 2204 Sealanes (1985) Pty Ltd 178 Marine Terrace South Fremantle WA 6162 Epic Wright Heaton Pty Ltd 119 Vanessa Street Kingsgrove NSW 1480 PB Foods Pty Ltd 22 Geddes Street Balcatta WA 6025 Trans Territory Foods Pty Ltd 38 Bishop Street Winnellie NT 0821 Red Funnel Fisheries (Newcastle) Pty Ltd 8 Seale Street Kotara Fair NSW 2289 Kailis Bros Pty Ltd 23 Catalano Road Canning Vale WA 6155 Foodcorp (Vic) Pty Ltd 31-41 Sandown Road Springvale Vic 3171 Goulas Nominees Pty Ltd 11 - 17 Wingfield Street Footscray Vic 3011