FEDERAL COURT OF AUSTRALIA Jianshe Southern Pty Ltd (ACN 007 031 905) v Turnbull Cooktown Pty Ltd (ACN 069 894 275) [2007] FCA 489 PRACTICE AND PROCEDURE – application for summary judgment – applicant alleges breaches of Trade Practices Act 1974 (Cth) and breach of contract – applicant seeks summary judgment for damages to be assessed on part of claim only – where applicant alleges an oral agreement between applicant and first respondent – where respondents allege oral agreement with different terms – whether relevant part of claim can be determined with certainty without determination of factual issues at trial – where applicant makes alternative claim for declaratory relief – whether declaratory relief should be granted in the circumstances – whether application for summary judgment should be brought pursuant to O 20 r 1 of the Federal Court Rules or s 31A of the Federal Court of Australia Act 1976 (Cth). Held: terms of agreement cannot finally be determined without determination of factual issues at trial – applicant has not established any loss or damage or causation – establishing loss or damage an essential element of the relevant cause of action – not an appropriate case for declaratory relief – real issue of fact will defeat application for summary judgment under either s 31A of the Federal Court of Australia Act or O 20 r 1 of the Federal Court Rules – application dismissed. Federal Court of Australia Act 1976 (Cth) s 31A Trade Practices Act 1974 (Cth) ss 51AD, 51AE, 75B, 82 Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) reg 4 (1) Agar v Hyde (2000) 201 CLR 552 cited Batistatos v Roads and Traffic Authority of New South Wales; Batistatos v Newcastle City Council (2006) 80 ALJR 1100 cited Duncan v Lipscombe Child Care Services Inc [2006] FCA 458cited Garrett v Macks [2006] FCA 601 cited General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 cited General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 considered Hicks v Ruddock [2007] FCA 299 cited Jenkins v NZI Securities Australia Ltd (1994) 52 FCR 572 cited Jewiss v Deputy Commissioner of Taxation [2006] FCA 1688 cited Magman International v Westpac Banking Corporation (1991) 32 FCR 1 cited Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 cited Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 34 ACSR 673 cited JIANSHE SOUTHERN PTY LTD (ACN 007 031 905) v TURNBULL COOKTOWN PTY LTD (ACN 069 894 275) AND GRAEME ELLIS TURNBULL VID 103 OF 2006 BESANKO J 4 APRIL 2007 ADELAIDE (HEARD IN MELBOURNE) IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 103 OF 2006 BETWEEN: JIANSHE SOUTHERN PTY LTD (ACN 007 031 905) Applicant AND: TURNBULL COOKTOWN PTY LTD (ACN 069 894 275) First Respondent GRAEME ELLIS TURNBULL Second Respondent JUDGE: BESANKO J DATE OF ORDER: 4 APRIL 2007 WHERE MADE: ADELAIDE (HEARD IN MELBOURNE) THE COURT ORDERS THAT: 1. The application by the applicant by notice of motion dated 5 March 2007 be dismissed. 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 VID 103 OF 2006 BETWEEN: JIANSHE SOUTHERN PTY LTD (ACN 007 031 905) Applicant AND: TURNBULL COOKTOWN PTY LTD (ACN 069 894 275) First Respondent GRAEME ELLIS TURNBULL Second Respondent JUDGE: BESANKO J DATE: 4 APRIL 2007 PLACE: ADELAIDE (HEARD IN MELBOURNE) REASONS FOR JUDGMENT 1 On 6 February 2006, Jianshe Southern Pty Ltd issued a proceeding in this Court against Turnbull Cooktown Pty Ltd trading as "Jianshe Australia", and Graeme Ellis Turnbull. The applicant claimed various forms of relief related to alleged breaches of contract and contraventions of provisions of the Trade Practices Act 1974 (Cth) ("Trade Practices Act"). 2 The applicant has filed and served an application, a statement of claim and a reply and defence to cross-claim. The respondents have filed a defence and cross-claim and a reply. 3 The proceeding has progressed towards a hearing and procedural directions have been made from time to time. On 15 December 2006 a Judge of this Court made a number of directions, including a direction that the proceeding be set down for trial on all issues on 4 June 2007 with an estimate of three weeks. The respondents assert that the applicant has not complied with a number of the directions which have been made. 4 On 5 March 2007 the applicant issued a notice of motion, seeking summary judgment on part of its claim against the first and second respondents. It is not necessary to set out the orders sought at that time because on 13 March 2007 the applicant applied for, and was granted, leave to amend the notice of motion so that it sought the following orders (relevantly): (1) There be judgement for the Applicant against the First Respondent, on the allegations in paragraphs D1 to D7 of the Applicant's Statement of Claim that the First Respondent has contravened s 51AD of Part IVB of the Trade Practices Act 1974. (2) There be judgement for the Applicant against the Second Respondent, on that part of the Applicant's claim that the Second Respondent has, pursuant to s 75B of the Trade Practices Act 1974, been involved in the contravention of s 51AD of Part IVB of the Trade Practices Act 1974. (3) The assessment of the amount of damages or other relief, be deferred until further order. 5 The applicant purports to bring his application under O 20 r 1 of the Federal Court Rules. At the time the applicant issued the notice of motion, O 20 r 1A and r 1 provided as follows: 1A This Order applies only to proceedings commenced before 1 December 2005. Note See section 31A of the Act in relation to proceedings commenced on or after 1 December 2005. 1(1) Where, in relation to the whole or any part of the applicant's claim for relief, there is evidence of the facts on which the claim or part is based, and: (a) there is evidence given by the applicant or by some responsible person that, in the belief of the person giving the evidence, the respondent has no defence to the claim or part; or (b) the respondent's defence discloses no answer to the applicant's claim or part; the Court may pronounce judgment for the applicant on that claim or part and make such orders as the nature of the case requires. (2) Where the Court pronounces judgment against a party under this rule, and that party claims relief against the party obtaining the judgment, the Court may stay execution on, or other enforcement of, the judgment until determination of the claim by the party against whom the judgment is directed to be entered. (3) The Court in any application under this rule may give such directions, whether for amendment of the pleadings or otherwise, as may be thought fit. 6 On 1 December 2005, s 31A of the Federal Court of Australia 1976 (Cth) ("Federal Court of Australia Act") came into operation. That section provides as follows: (1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is prosecuting the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. (4) This section does not limit any powers that the Court has apart from this section. 7 Order 20 r 1A came into operation on 22 December 2006. This proceeding was not commenced before 1 December 2005. The applicant's notice of motion was issued after 22 December 2006. It would seem then that this application for summary judgment is an application under s 31A of the Federal Court of Australia Act rather than O 20 r 1. The parties made a number of submissions on the basis that the application was governed by O 20 r 1. Had it been necessary to do so, I would have re-listed the matter and invited the parties to make further submissions. However, I have reached the conclusion that on any view the application must fail. 8 Traditionally, the test applied under O 20 r 1 has been that stated by Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 ("General Steel") at 129-130. The nature and scope of the relevant principles have been discussed by the High Court in recent decisions: Agar v Hyde (2000) 201 CLR 552; Batistatos v Roads and Traffic Authority of New South Wales; Batistatos v Newcastle City Council (2006) 80 ALJR 1100. 9 The extent to which s 31A of the Federal Court of Australia Act relaxes the test formulated in General Steel has been the subject of observations in recent decisions of this Court: Duncan v Lipscombe Child Care Services Inc [2006] FCA 458; Garrett v Macks [2006] FCA 601 per Lander J at [21]-[22]; Jewiss v Deputy Commissioner of Taxation [2006] FCA 1688 per Mansfield J at [26]-[29]; Hicks v Ruddock [2007] FCA 299 per Tamberlin J at [12]. 10 I need not enter either field of debate because it is clear from the authorities that summary judgment should not be granted, either under O 20 r 1 or s 31A, if there is a real dispute between the parties as to issues of fact. In this case, I have concluded that there are such issues and summary judgment should not be granted. 11 I turn now to briefly summarise the claims made by the applicant, including the claim of an alleged contravention of s 51AD of the Trade Practices Act. The applicant's claim relates to an oral agreement which it alleges it made with the first respondent in or about September 2004. The applicant alleges that by reason of the agreement the first respondent appointed it to act as its franchisee or distributor for Jianshe motor vehicles in the States of Victoria, Tasmania and South Australia. It alleges that the agreement contained a number of terms which the first respondent has breached. It is not necessary for me to set out the details of the terms and the alleged breaches. The applicant alleges that it has suffered loss and damage as a result of those breaches. The applicant also alleges that on 20 July 2005 the first respondent wrongfully repudiated the agreement. In addition to the alleged breaches of contract, the applicant alleges contraventions of various provisions of the Trade Practices Act. It alleges that during the negotiations which preceded the agreement, the first respondent in trade or commerce engaged in misleading or deceptive conduct contrary to s 52 of the Trade Practices Act. The applicant also alleges that the first respondent acted in contravention of s 53 of the Trade Practices Act. The applicant further alleges that the first respondent was an importer and manufacturer of Jianshe motor vehicles within the provisions of Pt 5 Div 2A of the Trade Practices Act and owed various warranties to the applicant which it has breached. 12 For the purposes of the present application, the important allegations in the statement of claim are those contained in paragraphs D1 to D7. The applicant alleges that the oral agreement between it and the first respondent was a franchise agreement within the provisions of reg 4(1) of the Trade Practices (Industry Codes – Franchising) Regulations 1998 ('the Regulations'). It also alleges that the agreement was a motor vehicle dealership agreement within reg 4(2) and, therefore, taken to be a franchise agreement within the Regulations. 13 Section 51AD of the Trade Practices Act provides as follows: A corporation must not, in trade or commerce, contravene an applicable industry code. 14 Section 51AE provides that regulations may prescribe an industry code and declare it to be a mandatory industry code. That is what the Regulations do in that they make the Franchising Code of Conduct ("the Code") a prescribed industry code and declare it a mandatory industry code. It is not necessary to refer to the provisions of the Code in any detail. The short point is that it requires a franchisor to disclose certain information to a prospective franchisee before the latter enters into a franchise agreement. Annexed to the Code are two disclosure statements, one a long form statement which is relevant where the franchised business has an expected annual turnover of $50,000 or more (Annexure 1) and, the second, a short form statement which is relevant where the franchised business has an expected annual turnover of less than $50,000 (Annexure 2). 15 The applicant alleges that he should have been given a copy of a disclosure statement in the form of Annexure 1 and a copy of the Code. It alleges that if it had been given copies of those documents it would not have entered into the agreement. It alleges that it has suffered loss and damages by reason of entering into the agreement and it seeks to recover that loss and damage under s 82 of the Trade Practices Act. The applicant alleges that the second respondent was a person involved in the contravention within the provisions of s 75B of the Trade Practices Act. 16 The applicant seeks summary judgment on this claim. 17 In their defence, the respondents admit that in or about September 2004 the first respondent and the applicant made an oral distribution agreement in relation to Jianshe motor cycles and other related products, and parts from China. It disputes that the terms were as alleged by the applicant and pleads what it says were the terms of the agreement. The first respondent makes a cross-claim against the applicant in which it alleges that, in breach of the distribution agreement, the applicant failed to pay the first respondent certain moneys owing to the first respondent. 18 The relevant orders in the amended notice of motion seek judgment for damages to be assessed on the cause of action based on the alleged contravention of s 51AD of the Trade Practices Act. In the course of submissions, the applicant sought to reformulate the orders it asked the Court to make. The applicant said that in lieu of the orders in the amended notice of motion, it sought by way of summary judgment a declaration that the first respondent has contravened s 51AD of the Trade Practices Act and a declaration that the second respondent is a person who aided, abetted, counselled or procured or induced or was directly or indirectly knowingly concerned in the contravention of s 51AD by the first respondent. 19 The respondents opposed the applicant's application to further amend its notice of motion in this way. I said that I would rule on the application when determining the applicant's application. 20 For the purposes of its summary judgment application, the applicant confined its case to the assertion that the agreement was a franchise agreement within the Regulations because it was a motor vehicle dealership agreement within reg 4(2). In other words, it did not seek to establish on the summary judgment application its alternative plea that it was a franchise agreement within reg 4(1). 21 Both parties made detailed submissions as to the proper interpretation of the term "motor vehicle dealership agreement". That term is not defined, although the terms "motor vehicle" and "motor vehicle dealership" are defined in cl 3 of the Code. 22 The applicant alleges that the agreement between it and the first respondent was an oral agreement which arose from a series of conversations between representatives of the respective parties. The respondents also allege that there was an oral agreement between the applicant and the first respondent which arose from a series of conversations. Each party pleads the terms of the agreement which it alleges. There appears to be an overlap as to the terms alleged but there is a dispute between the parties as to a number of terms. The question of the agreement and its terms will have to be determined by considering the evidence of the participants as to the conversations. That is not an appropriate issue to be determined on an application for summary judgment. Without making any comment on the merits of the respective submissions, there is force in the applicant's submission that there is a sufficient common factual basis in the pleadings for a determination to be made as to whether the agreement was a motor vehicle dealership agreement. However, I cannot be certain that a determination one way or the other can be made in the absence of clear findings as to the agreement and all of its terms. I accept the respondent's submission that the question of whether there was a motor vehicle dealership agreement should not be determined until the agreement and its terms are determined as a matter of fact. 23 The first respondent identified other issues that raised questions of fact which it submitted meant it was not appropriate to determine the question raised on an application for summary judgment. It submitted that it was not caught by the Code unless it was in the business of granting franchises and whether it was or was not in such a business could only be determined at trial. It submitted that it was open to the Court to find that there was no agreement in September 2004 and, at best, a separate agreement each time goods were actually supplied. It submitted that it was open to the Court to find that any agreement was between the applicant and another party and not between the applicant and the first respondent. In circumstances where I have already identified a real issue of fact it is not necessary or appropriate for me to make any comment on these arguments or whether they are fairly raised on the pleadings. 24 There are additional reasons why summary judgment for damages to be assessed should not be given. As I understand it, it was common ground between the parties that some loss or damage is an essential element of the cause of action under s 82 of the Trade Practices Act. That means that to obtain judgment for damages to be assessed the applicant would need to prove causation and some loss or damage. On the material before me, I am satisfied that there are triable issues of fact in relation to those matters. 25 The alternative claim for declarations avoids the difficulties of proving causation and some loss and damage but raises additional difficulties of its own. The respondents referred to authorities where the Court has said that it is not appropriate to make a declaration of a contravention of a provision of the Trade Practices Act either in the particular circumstances of the case before it, or in the absence of determining if the applicant is entitled to further relief such as damages under s 82 of the Trade Practices Act: Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 per Barwick CJ and Jacobs J at 307; Magman International v Westpac Banking Corporation (1991) 32 FCR 1; General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 at 192-193; Jenkins v NZI Securities Australia Ltd (1994) 52 FCR 572 at 576; Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 34 ACSR 673 per Hely J at 676 [13]-[21]. The cases suggest that one should be cautious about granting no more than declaratory relief on a summary judgment application and a consideration of all the circumstances may suggest that this should not be done. In my opinion it is not appropriate to grant a declaration of a contravention of the provision of the Trade Practices Act on an application for summary judgment unless the case is a particularly clear one and the other circumstances suggest that it is an appropriate case to do so. For the reasons I have given this is not a clear case, and the circumstances outlined in the following paragraph suggest that this is not an appropriate case. 26 Leaving aside the merits of the applicant's claim, there are a number of more general reasons why this is not an appropriate case for summary judgment. The applicant seeks judgment only in relation to one cause of action and then only as to liability. There is no reason to think a determination in the applicant's favour would significantly reduce the length of the trial and in fact the pleadings suggest that the trial will remain a substantial one. In addition to those matters, it is relevant to note that the notice of motion was issued over a year after the proceeding was commenced and only months before the date upon which the trial is due to commence. Conclusions 27 In my opinion, the application by the applicant by notice of motion dated 5 March 2007 should be dismissed. I will hear the parties as to the costs of the application. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate: Dated: 4 April 2007 Counsel for the Applicant: Mr T Hurley Solicitor for the Applicant: Francis V Gallichio Counsel for the Respondents: Mr D H Denton SC with Ms M A Tran Solicitor for the Respondents: MacDonnells Law Date of Hearing: 28 March 2007 Date of Judgment: 4 April 2007