FEDERAL COURT OF AUSTRALIA Hornsby Automotive Group Pty Limited v Mitsubishi Motors Australia Limited [2004] FCA 976 Federal Court Rules, O 11 r 16, O 20 r 2 Trade Practices Act 1974 (Cth), ss 4D, 45, 46 HORNSBY AUTOMOTIVE GROUP PTY LIMITED ACN 003 629 543 v MITSUBISHI MOTORS AUSTRALIA LIMITED ACN 007 870 395 N 900 OF 2003 GYLES J 30 JULY 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 900 OF 2003 BETWEEN: HORNSBY AUTOMOTIVE GROUP PTY LIMITED ACN 003 629 543 APPLICANT AND: MITSUBISHI MOTORS AUSTRALIA LIMITED ACN 007 870 395 RESPONDENT JUDGE: GYLES J DATE OF ORDER: 30 JULY 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Paragraphs 25, 26, 33, 38, 40 and 41 of the Second Amended Statement of Claim be struck out. 2. Leave be granted to file a further amended statement of claim in accordance with these reasons. 3. The costs of the motion will be the costs of Mitsubishi Motors Australia Limited in the proceeding. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 900 OF 2003 BETWEEN: HORNSBY AUTOMOTIVE GROUP PTY LIMITED ACN 003 629 543 APPLICANT AND: MITSUBISHI MOTORS AUSTRALIA LIMITED ACN 007 870 395 RESPONDENT JUDGE: GYLES J DATE: 30 JULY 2004 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is a notice of motion by the respondent Mitsubishi Motors Australia Limited (the respondent) pursuant to O 11 r 16 of the Federal Court Rules to strike out a Second Amended Statement of Claim in whole or, alternatively, in part. In framing these reasons I will assume knowledge of the terms of the agreement between the parties, the relevant pleading and the relevant statutory provisions. I do not propose to give elaborate reasons. I bear in mind the well-known authorities dealing with the proper approach to striking out pleadings. The attack on the pleading raises some issues of principle and some issues of detail. 2 One issue of principle concerns the reference to 'some Mitsubishi dealers' in paragraphs 22, 23, 25, 38, 40 and 41. It is submitted on behalf of the respondent that failure to identify the dealers, the date and place of the entering into the alleged arrangement and the lack of detail concerning the consequent actions of the respondent were fatal flaws in the pleading and, amongst other things, demonstrate that the applicant does not have a case. In my opinion, this is not a defect of pleading. A party cannot be obliged to plead particulars of which it is not aware. The applicant is not obliged on an application of this kind to produce the evidence that would justify the pleading. Counsel for the applicant indicated, however, that it was based upon what would be contended to be an admission by the respondent. In my opinion, the basic allegations are clear enough to enable a pleading in response and so are not embarrassing. 3 The next issue of principle relates to a complaint about the allegation of breach of s 45(2)(a)(i) and s 45(2)(b)(i), incorporating s 4D of the Trade Practices Act 1974 (Cth) (the Act). In my opinion, this complaint is well founded. The essence of an exclusionary arrangement within the meaning of s 4D is horizontal – namely, between persons who are competitive with each other. It may be that the involvement of a party who is not competitive with the others would not detract from that situation, but the existence of the horizontal arrangement is fundamental. In my opinion, no relevant horizontal arrangement has been pleaded here. Indeed, it is doubtful whether there is any horizontal agreement pleaded. The suggestion alleged to have been made by 'some Mitsubishi dealers' to the respondent could have been made individually by those dealers. Even if there were a joint opinion and suggestion expressed by some Mitsubishi dealers to the respondent in the form alleged, there is no provision of any such arrangement or understanding that could be held to have the purpose identified in s 4D(1)(b). The material allegation pleaded against the respondent is that it independently decided to give effect to the opinions of some of its dealers by, in effect, forcing the applicant out of its dealership by the use of contractual provisions. Even giving a beneficial construction to the pleading, the most that some of the competitors agreed to do was to suggest to the respondent that it reduce the number of dealers. There was no suggestion that they had any power to interfere with the supply or acquisition of goods and services. There is no pleading that the dealers concerned were party to any arrangement involving the steps alleged in paragraphs 24 or 27. There is no link between the arrangement alleged involving some dealers and the denial of access to rebates, discounts and incentive payments. The utilisation of contractual provisions by the respondent as alleged is not the kind of preventing, restricting or limiting of the supply or acquisition of goods and services that is referred to in s 4D. It is also pointed out by counsel for the respondent that the pleading fails to identify the particular persons or classes of persons in respect of whom the supply or acquisition of goods or services would be prevented, restricted or limited. 4 The next issue of principle is whether breaches of s 45(2)(a)(ii) and s 45(2)(b)(ii) have been properly alleged. In the first place, there is nothing to link any action by the respondent concerning discounts and incentive payments with the dealers. The unilateral decision of the respondent to agree to suggestions from some Mitsubishi dealers is not an apt pleading of an agreement, arrangement or understanding between them. Furthermore, as I pointed out above, it is not at all clear that it is alleged that there was any joint approach by some Mitsubishi dealers to the respondent. Even if there were an arrangement as pleaded in paragraph 22, counsel for the respondent is on sound ground in submitting that there is no pleading of material facts to support the conclusion that any provision of that agreement had the purpose or was likely to have the effect of substantially lessening competition in depleted markets which were markets in metropolitan Sydney for (a) the acquisition of new Mitsubishi vehicles by Mitsubishi dealers and the supply thereof by the respondent and (b) the acquisition of Mitsubishi spare parts by Mitsubishi dealers and the supply thereof by the respondent. There is no retail level market alleged. The structure of the market pleaded in paragraphs 14 to 20 (inclusive) does not naturally lead to the conclusion that reducing the number of dealers would substantially lessen competition for either vehicles or parts from Mitsubishi. It can only be assumed from the pleading that an unspecified number of dealers would remain as purchasers in that market, each with a potentially larger need for vehicles or parts as the available retail market would have been increased by the absence of the excluded dealers. 5 The next issue of principle concerns the allegation of what is described as price control culminating in paragraph 41 and presumably invoking s 45A of the Act. That pleading falls with the failure properly to plead a breach of s 45. Furthermore, there is substance in the argument that there are no material facts pleaded to support the conclusion as to the alleged purpose and effect of the conduct alleged. Indeed, it is difficult to see how limiting discounts and rebates to one dealer amounts to price fixing between the parties to any relevant contract, arrangement or understanding. 6 In my view the attack upon paragraph 39 alleging breach of s 46 of the Act does not succeed. Having in mind the nature of the markets pleaded and the pleaded objective, the conduct alleged could, arguably, be caught by the section. 7 The next issue of principle relates to paragraph 34. Counsel for the respondent refers to some remarks by Mansfield J in Mick Skorpos Petrol Discount King Pty Ltd v The Shell Company of Australia Limited (1997) ATPR41-556 at 43,700;[1997] FCA 53 to the effect that the claim for loss was indiscriminate between several causes of action. In my opinion the same problem does not arise here because only one course of conduct is alleged to have occurred in relation to the applicant and there is nothing inconsistent in having a general allegation of loss or damage arising from that course of conduct notwithstanding that different causes of action might be invoked to seek relief. 8 There is substance to the complaint on behalf of the respondent that the conduct alleged in paragraphs 31 and 32 does not support the allegation of misleading and deceptive conduct in paragraph 39 (sic). However, it is fairly clearly implied from the pleading as a whole that it would be alleged that it was misleading or deceptive to use the contractual provisions for the covert purpose of forcing the applicant to give up the dealership. If a properly formulated amendment along those lines were made, then the defect would be cured. 9 I have considered the complaints made about the balance of the statement of claim. During the course of argument several errors or omissions were accepted by senior counsel for the applicant. It was indicated that the deficiencies would be cured by amendment. The transcript records what took place. I am not persuaded that any of the remaining complaints is of sufficient moment to warrant striking out part of the statement of claim. It follows that the statement of claim as a whole will not be struck out. The following paragraphs are struck out (including headings): 25, 26, 33, 38, 40 and 41. 10 The respondent then calls in aid O 20 r 2 to seek an order that the relief claimed in paragraph 1 of the amended application be dismissed. It is submitted that there is no pleading of a threat to give notice of termination or of a decision to terminate as such and it is submitted that the right to terminate remains hypothetical and should not be dealt with until it occurs (Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73 at 80 F-G per Sheller JA). In my opinion that application is premature. The issue of relief only arises once the hearing has taken place and findings have been made. Relief is best considered at that time and in those circumstances. The existence of the prayer for relief causes no embarrassment in the meantime. If any interlocutory relief were sought then, of course, the substance of the issue would have to be considered. 11 Leave is granted to make the amendments foreshadowed during the hearing or referred to in these reasons. No other amendment is to be made without express leave. 12 The applicant on the motion has had a significant measure of success by disposing of certain causes of action but has failed in the major aim of having the proceedings as a whole struck out or stayed. A number of causes of action have survived. In those circumstances the appropriate order is that the costs of the motion will be the costs of Mitsubishi Motors Australia Limited in the proceeding. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate: Dated: 30 July 2004 Counsel for the Applicant: CA Sweeney QC, WG Hodgekiss Solicitor for the Applicant: Noss & Associates Counsel for the Respondent: AS Martin QC, TP Duggan Solicitor for the Respondent: Thomson Playford Date of Hearing: 18 May 2004 Date of Judgment: 30 July 2004