Worchild v The Drink Nightclub (Qld) Pty Ltd [2004] FCA 642

FEDERAL COURT OF AUSTRALIA

Worchild v The Drink Nightclub (Qld) Pty Ltd [2004] FCA 642 Federal Court of Australia Act 1976 (Cth) Trade Practices Act 1974 (Cth) NMFM Property Pty Ltd v Citibank Ltd (No 10) (2000) 186 ALR 442 Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114 Nixon v Philip Morris (Australia) Ltd (1999) 95 FCR 453 Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Henville v Walker (2001) 206 CLR 459 Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 ANDREW WORCHILD v THE DRINK NIGHTCLUB (QLD) PTY LTD AND BILL CROSS Q175 OF 2003 COOPER J BRISBANE 24 MAY 2004

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q175 OF 2003

BETWEEN: ANDREW WORCHILD

APPLICANT

AND: THE DRINK NIGHTCLUB (QLD) PTY LTD

ACN 090 830 854

FIRST RESPONDENT

BILL CROSS

SECOND RESPONDENT

JUDGE: COOPER J

DATE OF ORDER: 24 MAY 2004

WHERE MADE: BRISBANE

THE COURT ORDERS THAT: 1. The application is dismissed pursuant to O 20 r 2 of the Federal Court Rules. 2. The applicant pay the respondents' costs of and incidental to the application, including reserved costs, to be taxed if not agreed. 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 Q175 OF 2003

BETWEEN: ANDREW WORCHILD

APPLICANT

AND: THE DRINK NIGHTCLUB (QLD) PTY LTD

ACN 090 830 854

FIRST RESPONDENT

BILL CROSS

SECOND RESPONDENT

JUDGE: COOPER J

DATE: 24 MAY 2004

PLACE: BRISBANE

REASONS FOR JUDGMENT 1 The applicant is a solicitor acting on his own behalf in these proceedings. On 13 November 2003, he commenced these proceedings by filing an application and an accompanying statement of claim. The proceedings were commenced by the applicant as a representative party under Pt IVA of the Federal Court of Australia Act 1976 (Cth) ('the FCA'). 2 The applicant alleges that the first respondent contravened ss 52, 53(e) and 56 of the Trade Practices Act 1974 (Cth) ('the TPA') by engaging in the conduct pleaded in pars 8, 9 and 10 of the statement of claim. He also alleges that the second respondent, by virtue of the conduct alleged in pars 8, 9 and 10 of the statement of claim was knowingly concerned in and aided and abetted the contraventions of ss 52, 53 and 56 of the TPA. The applicant also alleges that the first and second respondents were negligent and in breach of a duty of care which they owed to the applicant and other group members. 3 The applicant seeks damages pursuant to s 82(1) of the TPA including determinations of aggregate amounts of damages for group members pursuant to ss 33Z(1)(e) and (f) of the FCA, damages for breach of duty including exemplary damages and other relief. 4 The applicant purchased a discount card known as the 'L Card' from the Queensland University of Technology Association of Law Students ('QUTALS') on 27 February 2003 at the Gardens Point Brisbane campus of the Queensland University of Technology. He paid the sum of $10 to QUTALS for the L Card. He pleads that the group members to whom the proceedings relate are approximately 5 000 persons who purchased L Cards in the period 1 January 2003 to 30 March 2003. 5 On 4 December 2003, the first and second respondents sought further and better particulars of the applicant's claim. A reply to that request was filed on 12 December 2003. On 15 January 2004, the first and second respondents sought orders that the proceedings be stayed or dismissed pursuant to O 20 r 2 of the Federal Court Rules, and orders pursuant to s 33M of the FCA that the proceedings shall no longer proceed under Pt 4A of that Act. Alternatively, they sought further and better particulars of the claim and security for costs. 6 On 6 February 2004, I ordered the applicant file and serve an affidavit containing all of the evidence which he presently held to make out each of the allegations pleaded in the statement of claim and produce for inspection any document or documents pleaded in the statement of claim or the further and better particulars filed by him on 12 December 2003. 7 The first respondent conducts a nightclub on the Gold Coast and the second respondent is a director of the first respondent. 8 The applicant, by his statement of claim, alleges as follows: '7. The Respondents (by their servants, agents or persons acting within its authority), by their conduct advertised and published to the Group Members that they were properly eligible and entitle them to the commercial benefits attached to the L Card offer in pamphlets and disseminated information through the L Card website: PARTICULARS A. At all material times: Between 1 January 2003 and on or about 5 March 2003 the First Respondent advertised on the internet website http://www.thelcard.com/: i. Free entry every night (excl. special events). ii. See bar staff for additional deals. B. At all material times: Between 1 January 2003 and on or about 5 March 2003 the First Respondent advertised on the internet site http://www.thelcard.com/gu/index.php: i. Free entry every night (excluding special events); and ii. 50% off drink prices every night (excluding special events); C. At all material times: From or on or about the 5 March 2003 the First Respondent advertised and published on the internet site http://www.thelcard.com/gu/index.php: i. Free entry every night (excluding special events); and ii. 50% off drink prices every night except Saturday night. D. At all material times: Between 1 January 2003 and on or about 5 March 2003 the First Respondent advertised and published a pamphlet which was distributed to prospective purchasers of the L Card at the University of Queensland campuses, and the Queensland University of Technology campuses: i. Free entry every night (excl. special events). ii. See bar staff for additional deals. E. At all material times: Between 1 January 2003 and on or about 5 March 2003 the First Respondent advertised and published a pamphlet which was distributed to prospective purchasers of the L Card at the Griffith University campuses: i. Free entry every night (excluding special events); and ii. 50% off drink prices every night (excluding special events); 8. At all material times from the 1 March 2003 the First Respondent willfully [sic] refused and failed to supply drinks at the advertised rate upon presentation of the L Card. Such conduct constituted bait advertisement, in that the First Respondent advertised drinks at a specified price and willfully [sic] failed to offer such drinks for supply at that price for the specified period. Further, and/or alternatively the said conduct was misleading and deceptive. PARTICULARS The Applicant refers to and repeats the particulars in paragraph 7 above. 9. Further, on or about the 5 March 2003 the First Respondent (by its servants, agents or persons acting within its authority) amended the terms of the offer before the expiry date of March 2004. Such amendments were misleading and deceptive in that they amended the terms of the offer without seeking consent or giving notice to Group Members when the terms of the offer did not include the right to amend or rescind the said offer. PARTICULARS The Applicant refers to and repeats the particulars in paragraph 7 above. 10. Further, from the 21 June 2003 the First Respondent willfully [sic] failed and refused service at the advertised rate on Saturday nights excluding special events upon presentation of the L card. Such conduct constituted bait advertisement, in that the First Respondent advertised entry at a specified price and willfully [sic] failed to offer such service for supply at that price for the specified period. Further, and/or alternatively the said conduct was misleading and deceptive. PARTICULARS The Applicant refers to and repeat the particulars in paragraph 7 herein. 11. The Conduct was by reason of each of the matters alleged in paragraph 8, and the matters alleged in paragraph 9, further or alternatively paragraph 10, the First Respondent contravened: a) Section 52 of the Act further and/or alternatively; b) Section 53(2) of the Act further and/or alternatively; c) Section 56 of the Act. PARTICULARS a) The representations made in paragraph 7 were made by the First Respondent in trade or commerce within the meaning of the Act; b) The First Respondent received and accepted the benefit of the promotional campaign designed to increase patronage of the First Respondent; c) The First Respondent requested and received cover charges in excess of the advertised rate; d) The First Respondent requested and received payment for goods above the advertised rate; e) The First Respondent amended the terms of the offer when the said offer did not provide express or implied rights to amend the terms of the offer; and f) The First Respondent denied that the Group Members were entitled to the benefits at the advertised rate. Damages 12. By reason of contraventions of the Act by each Respondent set out herein, and each of them, the prices charged for entry and drinks was higher then the said price would have been, resulting in loss and damage to the Group Members. PARTICULARS (a) loss of amount of cover charge (entry fee) paid; (b) loss of amount of discount refused on drinks purchased; and (c) interest Negligence 13. The First Respondent entered into a promotional contract with the issuers of the L Card. The Respondents knew that it had entered into a contract and had special knowledge or information about its compliance with the advertising offer communicated to the Applicant and Group Members. 14. Because: (a) the Respondents had special knowledge or information about its compliance with the contract entered into with the issuers of the L card and the contract entered into with the issuers of the L card and purchasers of the L card including the Applicant and Group Members; (b) the Applicant and Group Members were within that section of the public understood by the Respondents to be potential customers during the promotional period ending on March 2004; (c) the Respondents understood that Group Member could well make decisions to receive supply of goods and services from the First Respondent based on the representations made to them when the L card was purchased. (d) the Respondents understood the matters in paragraphs 7, 8, 9 and 10, the Applicants and Group Members were within a category of persons, namely consumers who were vulnerable to the inaccurate information being published about the price of supply of goods and services which that category of persons could not reasonably be expected to consider of their initiative. 15. By reason of the matters pleaded in paragraph 13 and 14 the Respondents owed the Applicants and Group Members a duty of care to avoid the risk of loss by reason of public misinformation with respect to: a) conduct capable of conveying messages about the eligibility and entitlement to certain commercial benefits of Group Members; b) failure to honour the terms of the offer as advertised; c) failure to properly train and supervise servants or agents; d) failure to reply to and deal with complaint about denial of supply of goods or services at the advertised rate; e) failure to correct representations by others capable of conveying messages about the eligibility and entitlement to certain commercial benefits; 16. By reason of the conduct pleaded in paragraphs 7, 8, 9 and 10 the Respondents breached their duty of care. 17. The Respondents' breach caused the Applicants and Group Members to suffer loss and damage. PARTICULARS The Applicant refers to and repeats the particulars in paragraph 12 above. Exemplary Damages 18. The Respondents misleading conduct referred to in paragraphs 8, 9, and 10 amounted to false representations in circumstances where the Respondents understood the risk of loss and damage by persons such as the Applicant and the Group Members who: a) did not know that the Respondents had amended the terms of the offer in relation to the supply of goods or services; b) denied that the Applicant and Group Members were entitled to the commercial benefits attached to the L card; and c) refused to supply goods and services at the advertised rate. 19. By reason of the conduct pleaded in paragraphs 8, 9 and 10 and the conduct pleased in paragraph 13, 14 and 18 the Respondents have acted in knowing and contumelious disregard of the interests of the Applicants and Group Members. PARTICULARS a) the Respondents intentionally and deliberately amended the terms of the contract for supply of goods and services without giving notice and/or seeking consent from the Group Members; and b) the Respondents intentionally an deliberately refused supply of goods and services to Group Members at the advertised rate. 20. By reason of the matters pleaded in paragraph 19 the applicant and Group Members seek exemplary damages." (Original emphasis) 9 The sections of the TPA which the applicant alleges the first and second respondent have contravened, are as follows: '52(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. ... 53 A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services: ... (e) make a false or misleading representation with respect to the price of goods or services; ... 56(1) A corporation shall not, in trade or commerce, advertise for supply at a specified price, goods or services if there are reasonable grounds, of which the corporation is aware or ought reasonably to be aware, for believing that the corporation will not be able to offer for supply those goods or services at that price for a period that is, and in quantities that are, reasonable having regard to the nature of the market in which the corporation carries on business and the nature of the advertisement. (2) A corporation that has, in trade or commerce, advertised goods or services for supply at a specified price shall offer such goods or services for supply at that price for a period that is, and in quantities that are, reasonable having regard to the nature of the market in which the corporation carries on business and the nature of the advertisement.' 10 On 23 February 2004, the applicant filed an affidavit in compliance with the order of 6 February 2004. In it he deposed that he had purchased a copy of the L Card for $10 on 27 February 2003 and exhibited a copy of the card. He alleged that the terms of the L Card were contained in pamphlets provided to prospective purchasers and were 'identical to the terms and conditions published on the L Card website'. No pamphlet or copy pamphlet was exhibited to the affidavit or produced for inspection. Nor was any print-out of the 'Terms and Conditions of the L Card' published on the L Card website exhibited or produced for inspection. What was produced were print-outs from the website said to be the terms and conditions as amended and published between February 2003 and March 2004. 11 The applicant alleged that over a period of twelve months he had not been able to purchase any drinks at the first respondent's nightclub, at the discounted rate he alleged was allowable upon presentation of the card, and asserted that from 21 June 2003 he had been denied entry to the nightclub on Saturday nights and Sunday mornings, notwithstanding presentation of the L Card. 12 He deposes to a conversation with one Candice Jacobs of the Student Law Association at Griffith University, Gold Coast campus ('SLA') on 12 October 2003, wherein it is alleged that she told him that she 'negotiated the contract' with the first respondent which contract was confirmed in writing and a facsimile copy of the writing was received by her. She is alleged to have stated in that conversation about a month after the L Cards had been sold that she was contacted by one Andrew Hutchinson of the first respondent, who requested that the terms of the 'offer be amended to exclude Saturday nights'. The applicant states in his affidavit that the amendment was 'only made to the Griffith University terms and conditions'. 13 The second respondent filed an affidavit in which he deposed that one Nicole Lucas, then the marketing manager of the first respondent, had dealt with the Griffith University Law Society ('GULS') concerning the involvement of the first respondent in the L Card program for 2003. He deposed that he, as director of the first respondent, had agreed to the first respondent making an agreement with the GULS and the SLA that the first respondent could be included as a nightclub venue for the L Card 2003 program. The benefits that were agreed with GULS and SLA to be provided to the holders of the L Card were: (a) entry to the first respondent's nightclub on each night excluding Saturday nights and special events without payment of an entry fee; and (b) a reduction of fifty per cent in the regular drink prices for all basic beer, wine, spirits and soft drinks sold on nights other than Saturday nights and special events. 14 The second respondent denies that he and the first respondent agreed with anyone that the first respondent would provide to the holders of the L Card the benefits pleaded in par 7 of the statement of claim. 15 Beyond his own statement as to the existence and content of the pamphlets and web pages alleged to have been published between 1 January and 5 March 2003, no evidence is supplied by the applicant to support his claim. In particular, he produces nothing from any of the organisations promoting the L Card to support the claims which he makes, and gives no explanation as to the absence of such material. 16 The applicant deposed having electronically filed a subpoena for issue by the registry of this Court, together with a written request in compliance with notice to practitioners number Q2/2001 in order to obtain relevant documentation. He deposed that the subpoena was returned to him unissued on 13 February 2004 because it was said that it was not accompanied by a written request as required by the notice to practitioner. The applicant took no further steps to procure the issue of the subpoena. 17 The failure of the applicant to produce any material from or by the promoters of the L Card is significant. The applicant is a solicitor who lives on the Gold Coast. The subpoena for production which he lodged with the Court was directed to the University of Queensland Law Society ('UQLS'). There is no evidence that the respondents had any dealings whatsoever with the UQLS. There has been no attempt to procure either voluntarily or by Court process from either GULS or SLA, the associations with which the respondents dealt in agreeing to be part of the L Card 2003 program, any of the relevant documentation which the applicant deposed he had been told by Candice Jacobs, the president of the SLA, that she had received. 18 The documentation is important for many reasons. It is the best evidence of any agreement between the first respondent and GULS and SLA as the promoters of the L Card with which the first respondent dealt. Further, it is the best evidence of the existence or otherwise of pamphlets, the contents of those pamphlets, and the identity of the person responsible for the creation and distribution of the pamphlets. 19 The first and second respondents deny any association with the websites http://www.thelcard.com and the pages on that website being http://www.thelcard.com/details.php and http://www.thelcard.com./gu/details. There is nothing in the material produced by the applicant to suggest to the contrary. There is, on the other hand, a total failure to seek to obtain material going to the ownership and control of that website. The material produced and exhibited to the affidavit of the second respondent strongly suggests that the website is controlled by the law students associations promoting the L Card. 20 There is no evidence that the respondents, or either of them, advertised, or advertised and published, advertisements on the internet or by pamphlet as alleged in par 7 of the statement of claim or at all. Nor is there any evidence that any servant, agent or person acting within an authority granted by the first or second respondent advertised or advertised and published advertisements as alleged in par 7 of the statement of claim or at all. 21 It is clear that the applicant makes the allegations which he does in par 7 of the statement of claim solely on the basis of what he says he saw in a pamphlet and on a website during the promotion for sale by four university law student societies of a discount card called the L Card in the period January to March 2003. 22 The applicant, in the further and better particulars provided and in the submissions made, contends that he is not obliged to produce copies of the documentation now or give any further particulars until he has had discovery from the first and second respondents of their relevant documents. 23 The application to have the proceedings stayed or dismissed pursuant to O 20 r 2 of the Federal Court Rules was adjourned when it first came on for hearing in order to enable the applicant to demonstrate by his affidavit that he had a basis upon which to make the allegations which he did in his statement of claim, and also to obtain, by subpoena or otherwise the relevant documentation relating to the matter from the law students societies. 24 The material produced by the applicant does not touch upon the conduct of the first or second respondent in respect of statements made in pamphlets or disseminated material on the four university campuses or on the website in connection with the promotion for sale of the L Card by each of UQLS, QUTALS, GULS and SLA. Such material as has been produced by the applicant demonstrates that there were not less than 81 participating businesses in the 2003 L Card program, of which the business of the first respondent was but one. Further, the dissemination of information from the L Card internet website was, on the material available, done by the controllers of that website. That a statement was made by the promoters of the L Card in the course of the conduct of their business of selling the cards which merely touches upon the business of the first respondent, does not make the statements made by the promoters of the L Card or the controllers of the internet site, statements made ' on behalf of' the first respondent. Nor does it make any statements made by the promoters of the L Card or the controller of the website, statements made 'as representatives of' or 'for' the first respondent. Such conduct of the promoters of the L Card or the controllers of the internet website does not take place in the course of the first respondent's business affairs or activities: see NMFM Property Pty Ltd v Citibank Ltd (No 10) (2000) 186 ALR 442 at [1240] - [1245] and the cases cited there. 25 I am satisfied that the applicant has no evidence and having failed to obtain any from the controllers of the website or the student law societies promoting the L Card, is unlikely to obtain any evidence to make out the allegations contained in par 7 of the statement of claim. The refusal to particularise the cases as pleaded on the basis that it should be deferred until after discovery satisfies me that the applicant is hoping to find in the documents something in order to make out a case. This is fishing. 26 The Courts have steadfastly refused to allow proceedings to continue which are, of their nature, fishing: see Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114 at 129 - 131. 27 As the conduct pleaded in par 7 of the statement of claim is an essential element on the pleading required to be proved up to make out a contravention of s 52, s 53(2) or s 56 of the TPA, the applicant is in no position to make out any contravention of that Act. 28 The common law action in negligence pleaded in pars 13 - 17 inclusive of the statement of claim, is based around 'a promotional contract with the issuers of the L Card' which is not particularised, but appears to be the basis of some alleged duty of care owed to the applicant and the group members generally. The claim as pleaded is meaningless and internally inconsistent. It is impossible to see how the allegations pleaded in pars 7, 8, 9 and 10 of the statement of claim amounted to a breach of a duty of care to protect from loss by reason of public misinformation with respect to the matters pleaded in sub-pars 15(a) - (e) inclusive of the statement of claim, when it includes misinformation with respect to a failure to properly train and supervise servants or agents, or a failure to reply and deal with complaints made by the applicant. 29 There is nothing in the material which would go to the claim for exemplary damages as pleaded, or at all. There is a further problem with the claim for exemplary damages. As pleaded, the conduct in pars 8, 9 and 10 of the statement of claim is conduct which is said to be in contravention of the TPA. If it is sought to obtain exemplary damages for such conduct, then the claim must fail, exemplary damages not being available in respect of conduct said to constitute a contravention of the TPA: Nixon v Philip Morris (Australia) Ltd (1999) 95 FCR 453 at 479, 481; Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 at 501. 30 The problems confronting the applicant with respect to these proceedings and the statement of claim are not limited to a lack of evidence. 31 The cause of action alleged under s 82 of the TPA relies upon contraventions of particular provisions of the Act by the first and second respondents. To succeed, the applicant must prove that he suffered loss or damage 'by' conduct in breach of the TPA. That is, that the contravention was causative of the loss: Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525; Henville v Walker (2001) 206 CLR 459. 32 The conduct alleged by the applicant involves representations said to be misleading and deceptive or likely to mislead and deceive (s 52), false and misleading representations with respect to the price of goods or services (s 53(e)), or bait advertising (s 56). There is no pleading that, in reliance on the representations allegedly made, the applicant purchased an L Card. The damage claimed is having to pay a higher price for entry into the nightclub and the purchase of drinks than he would have had to pay had the first respondent extended to him the benefits advertised by the promoters as attaching to the card. That is, the loss suffered was by a failure by the first respondent to extend the benefits, being the represented entitlements of the card holder. That loss does not flow from the alleged contravention. Ordinarily, where the conduct amounting to a contravention is a representation, the causative link between the loss and the contravention will be reliance upon the representation. In such a case, the most appropriate measure of damage for the loss will be that applicable in the case of tortious actions for deceit: see Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1. 33 In the present case, the applicant seeks expectation damages, as if there existed a promise made by the first and/or second respondent to the applicant to provide him with certain benefits as the holder of the L Card which it has not honoured. Even if the applicant can in some way prove up a case of a promise having been made to him, he does not plead that he did anything in reliance upon that promise. The loss and damage particularised by the applicant on an expectation basis is $400.50. 34 It is not sufficient merely to plead loss and damage as a result of the alleged contravention of the Act. It is necessary to identify the causal connection between the impugned conduct and such loss as is said to have been suffered by the applicant: McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at [25] - [26]. 35 The pleading in the statement of claim is embarrassing and discloses no cause of action. At a minimum, the pleading will be struck out. The question arises as to whether or not the proceedings should be dismissed. 36 The authorities caution against dismissal of proceedings at an early stage other than in a clear case. However the rule is available in an appropriate case, and where an opportunity has been given to bring forward the evidence sought to be relied upon and that evidence, together with the pleading demonstrate the absence of a cause of action capable of being pleaded and proved up in an appropriate and proper way, the Court should in my view, strike out the pleading. The present application is such a case. 37 The Court orders that the proceedings be dismissed pursuant to O 20 r 2 on the basis that they disclose no cause of action, are embarrassing in a pleading sense and there exists no demonstrable basis upon which the applicant may make out on his own behalf, or on behalf of the group members, a cause of action which has a prospect of succeeding at trial. 38 Costs should follow the event. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper.