FEDERAL COURT OF AUSTRALIA McCracken v Stocklands Developments Pty Ltd (ACN 000 064 835) [2010] FCA 271 Citation: McCracken v Stocklands Developments Pty Ltd (ACN 000 064 835) [2010] FCA 271 Parties: DAVID MCCRACKEN v STOCKLANDS DEVELOPMENTS PTY LTD (ACN 000 064 835) File number(s): NSD 1333 of 2009 Judge: JACOBSON J Date of judgment: 10 March 2010 Catchwords: PRACTICE AND PROCEDURE – Application to strike out statement of claim – Requirement to plead material facts which give rise to the contravention of the Trade Practices Act 1974 (Cth) Legislation: Trade Practices Act 1974 (Cth) Cases cited: Bond Corporation Pty Limited v Thiess Contractors Pty Ltd (1987) 14 FCR 214 followed Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189 followed Bowler v Hilda Pty Ltd 80 FCR 191 at 205 cited Truth About Motorways Pty Limited v Macquarie Infrastructure (1998) 42 IPR 1 at 6 cited O'Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 distinguished Liberty USA Pty Ltd v Telstra Corp Ltd BC 9405964 followed Date of hearing: 10 March 2010 Date of last submissions: 10 March 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 18 Counsel for the Applicant: Mr T Saunders Solicitor for the Applicant: Harmers Workplace Lawyers Counsel for the Respondent: Mr J. L. Trew QC Solicitor for the Respondent: Toomey Pegg Drevikovsky IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1333 of 2009 BETWEEN: DAVID MCCRACKEN Applicant AND: STOCKLANDS DEVELOPMENTS PTY LTD (ACN 000 064 835) Respondent JUDGE: JACOBSON J DATE OF ORDER: 10 MARCH 2010 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Paragraphs 3 to 5 and 27 to 39 inclusive of the Applicant's statement of claim filed 23 November 2009 be struck out pursuant to Order 11, rule 16 of the Federal Court Rules. 2. The Applicant have leave to file an amended statement of claim within 14 days. 3. The Applicant pay the Respondent's costs of and incidental to the notice of motion heard 10 March 2010. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1333 of 2009 BETWEEN: DAVID MCCRACKEN Applicant AND: STOCKLANDS DEVELOPMENTS PTY LTD (ACN 000 064 835) Respondent JUDGE: JACOBSON J DATE: 10 MARCH 2010 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The respondent moves on a notice of motion to strike out portions of the applicant's statement of claim. An application of this sort is one which should not ordinarily arise in the individual docket system, because the court has effective case management powers to avoid any difficulties arising from shortcomings in the pleadings. However, in the present case, it seems to me that the respondent's complaints are, for the most part, well founded and cannot be overcome by measures short of striking out the offending portions of the statement of claim. 2 The applicant relies on two separate causes of action. The first is a claim for damages under section 82 of the Trade Practices Act 1974 (Cth) ("Trade Practices Act") for misleading and deceptive conduct; the second is a claim for breach of contract. The representations on which the applicant relies are set out in paragraphs 3 to 5 of the statement of claim. I will not repeat them, but three separate types of representations are pleaded. The representations are said to have been made to Mr McCracken to induce him to leave his present employment in Malaysia. They are said to be representations as to the respondent's commitment to establish a design group, to provide him with support and also that his employment with the respondent would be secure and long-term. 3 The statement of claim must be read as a whole, and the representations are to be read in light of the pleading in paragraph 2 which indicates, when read with paragraphs 3 and following, that when the representations were made, Mr McCracken was the Chief Executive Officer of a company in Malaysia. 4 Paragraph 6 pleads that Mr McCracken relied on the three representations and was induced by them to enter into a contract of employment with the respondent. The terms of the employment contract with the respondent are then pleaded in paragraph 8 and following, including the terms upon which Mr McCracken could be dismissed and the payments to which he would become entitled in the event of termination. A number of implied terms are also pleaded, but there is no need to mention those in the course of the present application. 5 Mr McCracken is said to have been wrongfully dismissed from his employment with the respondent and to be entitled to damages, not merely for breach of contract but also, as I have said, under section 82 of the Trade Practices Act. 6 What is in issue in the present application to strike out the pleading is the content (or absence of it) in the section of the statement of claim commencing at paragraph 27, of the material facts said to give rise to a contravention of the Trade Practices Act. Mr Trew QC, who appears for the respondent, submits that the essential vice in the statement of claim is revealed in paragraph 30, paragraph 34, paragraph 38 and paragraph 39. These paragraphs plead that "in the premises" the three groups of representations were misleading, and, in paragraph 39, that "by reason of the respondent's contravention" of sections 52 and/or 53B of the Trade Practices Act, the applicant has suffered loss and damage. 7 The authorities make it clear that loss or damage as a consequence of the contravention of the provision of the Trade Practices Act is an element of the cause of action. To make good the pleading of the claim for damages under section 82, it is necessary to plead facts and circumstances which demonstrate a reasonable inference of the claim that the loss or damage was caused by the conduct: see Bond Corporation Pty Limited v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222 (per French J) ("Bond Corporation"). 8 In my opinion, the conduct pleaded in paragraphs 3 to 5 and paragraph 30(d) and (e), paragraph 34(d) and (e) and paragraph 39 of the statement of claim does not make sufficiently apparent the connection between the conduct complained of and the loss which the applicant seeks to recover in the sense referred to by French J (as his Honour then was) in the Bond Corporation case. It may be that the applicant can overcome this difficulty. 9 Counsel for the applicant, Mr Saunders, submitted that the representations and the conduct pleaded in the statement of claim have to be considered as a whole. So much may be accepted. He pointed to the allegations in paragraph 2 of the statement of claim of the applicant's employment in Malaysia and the implications that flow from this as referred to in certain of the particulars to paragraph 3. He also pointed to the allegations in paragraphs 30(e), 34(e) and 38(e) of the failure of support on the part of members of the respondent's management team. 10 As I understand his case, Mr Saunders contends that the representations pleaded in paragraphs 3 to 5 were misleading because they ought to have been qualified in the manner stated in the relevant subparagraphs of paragraphs 30, 34 and 38. Mr Saunders goes on to say that but for those misrepresentations the applicant would not have left his secure employment in Malaysia, so that his loss is not limited to the contractual entitlements payable on termination by the respondent, assuming that Mr McCracken was wrongly dismissed from his employment. 11 But the difficulty with these submissions is that they fail to take account of what was said by Lee J in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189 at 201. His Honour's observations draw attention to the need for the statement of claim to plead the material facts necessary to support the claim that the representations were misleading by reason of the failure to qualify the statements or disclose the risk of non-fulfilment: see also Bowler v Hilda Pty Ltd 80 FCR 191 at 205; Truth About Motorways Pty Limited v Macquarie Infrastructure (1998) 42 IPR 1 at 6. 12 In my view, the statement of claim is entirely silent as to the material facts necessary to support this allegation. I do not consider that the broad allegations in paragraphs 30(e), 34(e) and 38(c) meet the requirements of the Federal Court Rules 1979 (Cth). I reject Mr Saunders' submission that the case which he outlined sufficiently appears from a fair reading of the whole of the pleading. These are not mere minor omissions. The respondent is entitled to be provided with a pleading that states with sufficient clarity the case which it is required to meet. 13 The observations of the Full Court in O'Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 at paragraphs 23 and 29 do not answer this objection. Their Honours' observations were directed to the pleading in that case, which was sufficiently different from the present pleading that their Honours' remarks are not applicable. 14 The same difficulty to which I have referred is to be found in paragraph 39 of the statement of claim but, as with the other paragraphs, it may be capable of being cured in the manner explained by Mr Saunders. 15 Mr Trew made two further objections to the pleading. The first was as to the generality of the pleading of the representations. I think there is force in this, particularly where the pleading relies on future representations. As Branson J said in Liberty USA Pty Ltd v Telstra Corp Ltd BC9405964 at 7: Where an applicant seeks to rely on section 51A it is incumbent on it to plead explicitly the alleged representation with respect to the future matter. The respondent should not be required to guess as to the precise representation alleged against it. 16 The importance of this is that section 51A of course provides for an effective reversal of the onus so that the respondent is required to establish that it had reasonable grounds for making the representation. It is essential that the respondent know exactly what it bears the onus of establishing. The pleading should put the respondent on fair notice of this. 17 A second objection is as to the particulars of the implied representations in paragraphs 3 and 5. This aspect of the claim may have been stated with more precision. Nevertheless, I think the effect of it is that the representation is partly express as stated in the particulars, but it is also to be implied in all the circumstances from what is referred to in the particulars in paragraph 3(C) and paragraph 5(A), that is to say, the applicant was being headhunted from his former employment. I will leave it to the applicant as to the course it follows in pleading this part of its case in the amended pleading. 18 For these reasons, I think I ought to make an order substantially to the effect of that sought in paragraph 1 of the notice of motion. However, the notice of motion seeks to strike out, in addition to the paragraphs that I have mentioned, paragraph 2 of the present statement of claim. I do not see any difficulty with that paragraph and I would therefore amend the terms of paragraph 1 to provide for paragraphs 3 to 5 and 27 to 39 to be struck out. I certify that the preceding seventeen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. Associate: Dated: 23 March 2010