FEDERAL COURT OF AUSTRALIA Blow Bar Co Pty Limited v McGann (No 3) [2018] FCA 980 File number: NSD 1896 of 2017 Judge: ROBERTSON J Date of judgment: 2 July 2018 Catchwords: PRACTICE AND PROCEDURE – interlocutory application for summary judgment in respect of the following causes of action: passing off; misleading and deceptive conduct; unconscionable conduct and breach of a confidentiality agreement – in the alternative, interlocutory application to strike out paragraphs of the amended statement of claim on the basis that those paragraphs failed to state the material facts on which the applicants relied Legislation: Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth), s 21 Federal Court of Australia Act 1976 (Cth) s 31A Cases cited: Blow Bar Co Pty Ltd v McGann [2018] FCA 293 Natural Waters of Viti Ltd v Dayals (Fiji) Artesian Waters Ltd [2007] FCA 200; 71 IPR 571 Nutrientwater Pty Ltd v Baco Pty Ltd [2010] FCA 2; 265 ALR 140 O'Brien v Komesaroff [1982] HCA 33; 150 CLR 310 Spencer v Commonwealth of Australia [2010] HCA 28; 241 CLR 118 White Industries Australia Ltd v Commissioner of Taxation [2007] FCA 511; 160 FCR 298 Date of hearing: 25 June 2018 Registry: New South Wales Division: General Division National Practice Area: Intellectual Property Sub-area: Copyright and Industrial Designs Category: Catchwords Number of paragraphs: 23 Counsel for the Applicants: Mr R Notley with Ms T Harris-Roxas Solicitor for the Applicants: Rigby & Klaus Counsel for the Respondents: Ms R White Solicitor for the Respondents: K&L Gates ORDERS NSD 1896 of 2017 BETWEEN: BLOW BAR CO PTY LIMITED First Applicant LEIGH DOLE PTY LIMITED AS TRUSTEE FOR THE DOLE FAMILY TRUST Second Applicant AND: TIMOTHY MCGANN First Respondent TIMOTHY MCGANN AS TRUSTEE FOR THE MCGANN FAMILY TRUST Second Respondent TNCD PTY LIMITED Third Respondent JUDGE: ROBERTSON J DATE OF ORDER: 2 JULY 2018 THE COURT ORDERS THAT: 1. Paragraphs [32]-[37], [66]-[81], [82]-[98], [99]-[107] and [108]-[123] of the Amended Statement of Claim are struck out, with leave to replead. The repleading should incorporate the deletion of [40]-[65] of the Amended Statement of Claim concerning breach of copyright and the addition of the particulars provided at [6]-[12] of the letter from the applicants' solicitors dated 21 June 2018 (Exhibit B). 2. In relation to costs, within 7 days of the date of these orders, the respondents are to file and serve short written submissions, limited to 3 pages, dealing with the costs orders for which they contend in respect of the respondents' interlocutory application filed on 31 May 2018. Within 14 days of the date of these orders, the applicants are to file and serve their corresponding short written submissions, also limited to 3 pages. 3. In the parties' written submissions pursuant to order 2 above, they are to indicate their agreement or otherwise with the following timetabling orders: (i) Within 14 days of the date of these orders, the applicants file and serve a Further Amended Statement of Claim. (ii) Within 14 days of the date of these orders, the applicants join Blow Bar Co Barangaroo Pty Ltd (in liquidation) as a respondent. (iii) Within 28 days of the date of these orders, the respondents file and serve a Defence to the Further Amended Statement of Claim and any Cross-Claim. (iv) Within 35 days of the date of these orders, the applicants file and serve any Reply to the Defence and their Defence to any Cross-Claim. (v) The proceedings be referred to mediation before a Registrar of the Court or before a private mediator, such mediation to take place no later than September 2018. (vi) The matter be listed for a further Case Management Hearing at 9.30 am on 10 October 2018. 4. The respondents' interlocutory application filed on 31 May 2018 otherwise be dismissed. 5. Costs reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT ROBERTSON J: Introduction 1 These reasons deal with the balance of an interlocutory application filed on 31 May 2018, the issue of an uplift in the security for costs having been the subject of orders made, and short reasons given, on 25 June 2018. 2 The interlocutory application was brought by the respondents in the substantive proceedings and relates to the form of the Amended Statement of Claim filed on 19 April 2018. That Amended Statement of Claim followed the judgment in Blow Bar Co Pty Ltd v McGann [2018] FCA 293, striking out certain paragraphs of the Statement of Claim. These reasons should be read with that earlier decision. 3 The balance of the interlocutory application sought orders that the claims in certain paragraphs of the Amended Statement of Claim be summarily dismissed or that the corresponding paragraphs be struck out. 4 Since the filing of the interlocutory application, as stated in the applicants' outline of written submissions dated 22 June 2018, the applicants' claim for breach of copyright is no longer pursued, with the consequence that [40]-[65] of the Amended Statement of Claim are to be deleted. An amended document showing this deletion will need to be filed. Thus paragraph 3 and part of paragraph 8 of the respondents' interlocutory application need not be further considered. 5 In summary, the remaining causes of action the subject of the respondents' interlocutory application, and the paragraphs of the Amended Statement of Claim corresponding to each of those causes of action, are as follows: the passing off claim, paragraphs [66]-[81]; the misleading and deceptive conduct claim, paragraphs [82]-[98]; the unconscionable conduct claim, paragraphs [99]-[107]; and the claim for breach of the Confidentiality Agreement, paragraphs [108]-[123]. The respondents also seek to strike out paragraphs [32]-[37] which concern the fit out of the Bronte Blow Bar and of the Premises, being the shop from which the Barangaroo Blow Bar was to operate, at Barangaroo. 6 The interlocutory application also sought an order that the applicants' claim to rectify the Shareholders Agreement, being an agreement between Blow Bar Co Barangaroo Pty Ltd, Leigh Dole Pty Ltd as trustee for the Dole Family Trust and Timothy McGann as trustee for the McGann Family Trust, be stayed until Blow Bar Co Barangaroo Pty Ltd (in liquidation), a company said to have joint entitlement to the claimed relief, is joined as a party to the proceedings. This issue narrowed on the written submissions filed on behalf of the applicants. The applicants said that they intended to make an application to join Blow Bar Co Barangaroo Pty Ltd (in liquidation) but intended to do so after the respondents had filed a Defence. The applicants submitted that the admissions or denials made by the respondents in respect of the Shareholders Agreement may be relevant to the issue of whether or not Blow Bar Co Barangaroo Pty Ltd (in liquidation) should be joined to these proceedings and, the applicants submitted, it may be that the position of the liquidator, who presently neither consented to nor opposed the company being joined in the proceedings, changed in light of those admissions or denials. Evidence 7 The respondents read two affidavits sworn by Ms Simone Mitchell, the first dated 31 May 2018 and the second 20 June 2018. 8 Counsel for the applicants tendered two documents which were marked as exhibits. There was initial confusion as to the correct identification of an attachment to a letter from the applicants' solicitors dated 21 June 2018 to the solicitors for the respondents (Exhibit B), which attachment did not form part of the tender by counsel for the applicants. It appeared that nobody in the courtroom could say with any certainty which proposed Further Amended Statement of Claim had been attached and that the document handed up by counsel for the respondents was not the correct version. I then handed back the disputed document to counsel. The correct version was supplied after the hearing was adjourned. It then appeared to be accepted that counsel for the respondents had unintentionally handed up the incorrect document. In any event, I was asked to proceed by reference only to the Amended Statement of Claim dated 19 April 2018 and I have done so. The document mistakenly handed up, and returned to counsel, is not in evidence and I do not take it into account. It is the correct version which now forms part of Exhibit B. 9 It is appropriate to reproduce paragraphs 32 to 37 of the Amended Statement of Claim and thereafter the particulars provided by the applicants by the 21 June 2018 letter that is Exhibit B. 32. For the purposes of this pleading, the fit out of Bronte Blow Bar is the combination of the following: a. the type of materials used for the floors, walls, cabinetry, benchtops, fixtures and fittings in the Bronte Blow Bar; b. the colour of the floors, walls, ceiling, cabinetry, benchtops, fixtures and fittings in the Bronte Blow Bar; and c. the type and colour of the furniture and equipment used in the Bronte Blow Bar. 33. For the purposes of this pleading, the fit out of the Premises is the combination of the following: a. the type of materials used for the floors, walls, cabinetry, benchtops, fixtures and fittings in the Premises; b. the colour of the floors, walls, ceiling, cabinetry, benchtops, fixtures and fittings in the Premises; and c. the type and colour of the furniture and equipment used in the Premises. 34. The type of materials used for the floors, walls, cabinetry, benchtops, fixtures and fittings of the Premises are the same as, or substantially the same as, or similar to, the type of materials used for the floors, walls, cabinetry, benchtops, fixtures and fittings of the Bronte Blow Bar. 35. The colour of the floors, walls, ceiling, cabinetry, benchtops, fixtures and fittings of the Premises is the same as, or substantially the same as, or similar to, the colour of the floors, walls, ceiling, cabinetry, benchtops, fixtures and fittings of the Bronte Blow Bar. 36. The type and colour of the furniture and equipment used in the Premises is the same as, or substantially the same as, or similar to, the type and colour of the furniture used in the Bronte Blow Bar. 37. By reason of the matters pleaded at paragraphs 34 to 36 above, the fit out of the Premises is the same as, or substantially the same as, or similar to, the fit out of the Bronte Blow Bar. The particulars were as follows: 6. With respect to paragraph 32(a) of the ASOC, the materials referred to are: a. white subway tiles with black grout; b. concrete; c. marble; d. mirrored splashbacks; e. track lighting; f. iron shelving and fittings; and g. laminate cabinetry. 7. With respect to paragraph 32(b) of the ASOC, the colours referred to are: a. white; b. grey; c. black; and d. brass. 8. With respect to paragraph 32(c) of the ASOC, the type and colour of the furniture and equipment referred to (sic): a. black bar stools; b. black appliances and tools, such as hair dryers and hair brushes; c. black leather pouches to hold tools; d. hair and make-up menu on large black board; e. food and drink menus on white paper attached to small clipboards; and f. mirrored coasters. 9. With respect to paragraph 33(a) of the ASOC, the materials referred to are: a. white subway tiles with black grout; b. concrete; c. marble; d. mirrored splashbacks; e. track lighting; f. iron shelving and fittings; and g. laminate cabinetry. 10. With respect to paragraph 33(b) of the ASOC, the colours referred to are: a. white; b. grey; c. black; and d. brass. 11. With respect to paragraph 33(c) of the ASOC, the type and colour of the furniture and equipment referred to is: a. black bar stools; b. black appliances and tools, such as hair dryers and hair brushes; c. black leather pouches to hold tools; d. hair and make-up menu on large black board; e. food and drink menus on white paper attached to small clipboards; and f. mirrored coasters. 12. With respect to paragraphs 34 to 36 of the ASOC, in both Bronte Blow Bar and the Premises there are: a. white subway tiles with black grout; b. concrete bench tops and marble bench tops; c. black painted ceilings; d. black track lighting; e. black iron shelves and black iron glass racks above the bar; f. mirrored splash backs; g. black tapware; h. black metal fittings; i. black bar stools; j. black appliances and tools, such as hair dryers and hair brushes; k. black leather pouches to hold tools; l. hair and make-up menu on large black board; m. food and drink menus on white paper attached to small clipboards; and n. mirrored coasters. In my opinion, in the circumstances of this case, these are matters of primary fact and should be included in the statement of claim. Consideration Summary dismissal 10 There was no issue as to the applicable principles: s 31A of the Federal Court of Australia Act 1976 (Cth) as explained in Spencer v Commonwealth of Australia [2010] HCA 28; 241 CLR 118. I also accept what was said by Lindgren J in White Industries Australia Ltd v Commissioner of Taxation [2007] FCA 511; 160 FCR 298 at [47], as follows: The central concern of both O 20, r 2(1)(a) and s 31A is different from that of O 11, r 16, which empowers the Court to strike out pleadings. For example, evidence may disclose that a person has or may have a "reasonable cause of action" or "reasonable prospects of success", yet the person's pleading does not disclose this. In such a case O 11, r 16 empowers the Court to strike out the pleading but O 20, r 2(1)(a) would not empower the Court to order a stay or dismissal, and s 31A(2) would not empower the Court to give judgment for the respondent against the applicant. A failure after ample opportunity to plead a reasonable cause of action may suggest that none exists and therefore that the applicant has no reasonable prospects of success, but the existence of a reasonable cause of action and the pleading of a reasonable cause of action remain distinct concepts. 11 I proceed to consider whether any of the causes of action identified in [5] above should be summarily dismissed. 12 As to the passing off claim, paragraphs [66]-[81], and the misleading and deceptive conduct claim, paragraphs [82]-[98], I accept that as the pleadings stand the relevant threshold that needs to be established has not been established, as to which see below, but I do not conclude that it could not be established. Put differently, I accept that there has been opportunity afforded to the applicants to plead a reasonable cause of action but I am not persuaded that the present and persisting failure establishes to the required degree of certainty that neither of these causes of action exist. 13 Similarly, in relation to the unconscionable conduct claim, paragraphs [99]-[107], although I have doubts that the pleaded conduct could be said to be unconscionable, I would not at present conclude to the requisite degree of certainty that, if repleaded, such a cause of action could not be made out. An application for summary judgment is also not, at this stage of the proceedings, the appropriate vehicle for delineating the content of the term "in connection with" in s 21 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth). 14 As to the claim for breach of the Confidentiality Agreement, the complaints made by the respondents were substantially as to the defects or continuing defects in the pleading. At this stage, I am not persuaded that I should give judgment for the respondents in this respect. 15 For these reasons, I do not accede to the respondents' application for summary judgment in respect of these causes of action. Strike out 16 As to paragraphs [32]-[37], bearing in mind the observations in Natural Waters of Viti Ltd v Dayals (Fiji) Artesian Waters Ltd [2007] FCA 200; 71 IPR 571, particularly at [59], and in Nutrientwater Pty Ltd v Baco Pty Ltd [2010] FCA 2; 265 ALR 140, particularly at [92]-[94], these paragraphs remain far too general to support, which they are claimed to do at [70] and at [83], the passing off claim and the misleading and deceptive conduct claim. In [32] and [33] the fit out of the two premises is described in each case as the combination of a number of items and colours, but the paragraphs do not specify what that combination is. In my opinion, the mere presence of an unidentified combination does not suffice, given the importance of these paragraphs to the pleading of the passing off claim and the misleading and deceptive conduct claim. The same lack of specificity affects [34]-[36] and, therefore, the conclusion of sameness or similarity in [37]. While I have not concluded that all the paragraphs are defective, so as to provide the applicants with sufficient scope to recast the pleading of this cause of action, the appropriate course is to strike out paragraphs [32]-[37], with leave to replead. 17 As to the passing off claim, paragraphs [66]-[81], in my opinion, the essential matters rest in mere assertion, that is, without the material facts being pleaded. For example, the material facts necessary to the pleaded conclusion that the type of materials "are recognised by customers as exclusively and distinctively indicating and associated with Blow Bar Co and the business of Blow Bar Co, and no other" need to be set out: see Blow Bar Co Pty Ltd v McGann [2018] FCA 293 at [35]. The same conclusion applies to [67], [68] and [69]. I have already referred to the inadequately pleaded support for [70]: see [16] above. As explained in [16] above, the appropriate course is to strike out paragraphs [66]-[81], with leave to replead. 18 As to the misleading and deceptive conduct claim, paragraphs [82]-[98], I have already referred to the inadequately pleaded support for [83]: see [16] above. Also [96] is not adequately supported by material facts. As explained at [16] above, the appropriate course is to strike out paragraphs [82]-[98], with leave to replead. 19 As to the unconscionable conduct claim, paragraphs [99]-[107], it proceeds by reference to "paragraphs 11 to 27 above" in [99], and then, in [104], by reference to "the matters pleaded at paragraphs 11, 12, 34 to 39 and 99 to 103". In my opinion, in this particular case, this means of pleading by reference, in an undifferentiated way, to other paragraphs of the pleading is not adequate to disclose the basis for the unconscionable conduct claim. It is too general. Also, a key paragraph would appear to be [105], alleging that by reason of the pleaded contraventions of the Australian Consumer Law customers that would have used the services of Barangaroo Blow Bar are instead using the services of Blown Lux. However, material facts are not there pleaded, as they are required to be, but the matter rests in assertion. 20 As explained in [16] above, the appropriate course is to strike out paragraphs [99]-[107], with to replead. It may be that the pleading could be remedied by attention to the paragraphs presently incorporated by reference, that is, as I have set out above, "paragraphs 11 to 27 above" in [99]; in [100] by reference to "the matters pleaded at paragraphs 34 to 39 above"; and in [104], by reference to "the matters pleaded at paragraphs 11, 12, 34 to 39 and 99 to 103 above". 21 As to the claim for breach of the Confidentiality Agreement, paragraphs [108]-[123], in my opinion there remain defects in the pleading of this cause of action. First, the information said to be confidential is not specified with sufficient precision: O'Brien v Komesaroff [1982] HCA 33; 150 CLR 310 at 326-328. Secondly, and fundamentally, the connection between the information and the alleged use of the information is not articulated, but is merely asserted in [115]. Similarly, it is not articulated how the allegation in [112] that Mr McGann has not returned the Confidential Information to Blow Bar Co is of consequence "for the purposes of TNCD operating Blown Lux": see [115]. Thirdly, these flaws also infect the alternative pleadings beginning at [117] and at [120]. As explained in [16] above, the appropriate course is to strike out paragraphs [108]-[123], with leave to replead. Joinder 22 As to the issue set out at [6] above, in my view, the most efficient and economical way through what now appears to concern substantially procedural niceties, is to direct the applicants now to join Blow Bar Co Barangaroo Pty Ltd (in liquidation) as a respondent. On reading the respondents' pleadings, the liquidator will be well placed to decide whether or not he wishes to take an active part in the proceedings. Conclusion and orders 23 The interlocutory application sought an order that the applicants pay the respondents' costs of and incidental to the interlocutory application on an indemnity basis, such costs to be payable forthwith. In submissions, the parties indicated that they wished to be heard in relation to costs. To that end, within 7 days of the date of these orders, the respondents are to file and serve short written submissions, limited to 3 pages, dealing with the costs orders for which they contend. Within 14 days of the date of these orders, the applicants are to file and serve their corresponding short written submissions, also limited to 3 pages. The Court's present intention is to deal with the question of costs on the papers. In their short written submissions the parties are also to indicate their agreement or otherwise with the following timetabling orders: (i) Within 14 days of the date of these orders, the applicants file and serve a Further Amended Statement of Claim. (ii) Within 14 days of the date of these orders, the applicants join Blow Bar Co Barangaroo Pty Ltd (in liquidation) as a respondent. (iii) Within 28 days of the date of these orders, the respondents file and serve a Defence to the Further Amended Statement of Claim and any Cross-Claim. (iv) Within 35 days of the date of these orders, the applicants file and serve any Reply to the Defence and their Defence to any Cross-Claim. (v) The proceedings be referred to mediation before a Registrar of the Court or before a private mediator, such mediation to take place no later than September 2018. (vi) The matter be listed for a further Case Management Hearing at 9.30 am on 10 October 2018. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson. Associate: Dated: 2 July 2018