Mick Skorpos Petrol Discount King Pty Ltd (ACN 008 160 996) vTthe Shell Company of Australia Ltd (ACN 004 400 220) [1997] FCA 53 (12 February 1997)

CATCHWORDS

PRACTICE AND PROCEDURE - pleading - statement of claim - motion for leave to file further amended statement of claim - pleadings stating conclusions only without material facts supporting the conclusions - pleadings too general - pleadings of facts which do not lead to conclusions - proposed pleadings asserting contravention of ss 45, 46 and 47 Trade Practices Act 1974 struck out - leave to file further statement of claim to limited extent.

Trade Practices Act ss 46 and 47

Federal Court Rules O 11, O 13 and O 20

Banque Commerciale S.A., en Liquidation v Akhil Holdings Limited [1990] HCA 11; (1990) 169 CLR 279

Trade Practices Commission v David Jones (Australia) Pty Ltd [1985] FCA 228; (1985) 7 FCR 109

Trade Practices Commission v Australian Iron & Steel Pty Ltd (1990) 92 ALR 395

Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413

Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522 at 42,679

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Ogle v Strickland (1986) 11 FCR 462

Reed International Books Australia Pty Ltd v King & Prior Pty Ltd (1993) 11 ACSR 560

No SG 96 of 1995

MICK SKORPOS PETROL DISCOUNT KING PTY LTD (ACN 008 160 996) v THE SHELL COMPANY OF AUSTRALIA LIMITED (ACN 004 400 220)

Mansfield J

Adelaide

12 February 1997

IN THE FEDERAL COURT OF AUSTRALIA )

)

SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 96 of 1995

)

GENERAL DIVISION )

BETWEEN:

MICK SKORPOS PETROL

DISCOUNT KING PTY LTD

(ACN 008 160 996)

Applicant

- and -

THE SHELL COMPANY OF

AUSTRALIA LIMITED

(ACN 004 400 220)

Respondent

MINUTES OF ORDER

CORAM: Mansfield J

PLACE: Adelaide

DATE: 12 February 1997

THE COURT ORDERS THAT:

1. The applicant have leave to file and serve its Third Statement of Claim in the form of its proposed amended statement of claim and being the document entitled "Third Amended Statement of Claim" filed on 12 December 1996 but with the following deletions or alterations:

(a) paragraphs 28-37 are disallowed

(b) paragraphs 38-42 are disallowed

(c) paragraph 43 is disallowed

(d) paragraph 47(vii) is disallowed

(e) paragraphs 51(b)-(e) are disallowed

(f) paragraphs 52-54 are disallowed

(g) paragraphs 57.2-57.5, 57.8 and 57.13 are disallowed

(h) paragraph 57.9 is allowed only to the extent of referring to s48 of the Act

(i) paragraphs 51(g) and (h) are disallowed in their present form but the applicant is to include in the statement of claim the material facts relating to its alleged losses from its several complaints in the statement of claim.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )

)

SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 96 of 1995

)

GENERAL DIVISION )

BETWEEN:

MICK SKORPOS PETROL

DISCOUNT KING PTY LTD

(ACN 008 160 996)

Applicant

- and -

THE SHELL COMPANY OF

AUSTRALIA LIMITED

(ACN 004 400 220)

Respondent

REASONS FOR DECISION

CORAM: Mansfield J

PLACE: Adelaide

DATE: 12 February 1997

Motion for leave to file further amended statement of claim.

This matter commenced by application made on 14 December 1995 accompanied by a statement of claim. The applicant's initial statement of claim was very broad in its scope, making allegations not only said to comprise misleading or deceptive conduct contrary to s52 of the Trade Practices Act 1974 ("the Act") and breaches of contractual promises on the part of the respondent but also said to involve breaches by the respondent of ss46, 47, 48 and 96 of the Act. Pursuant to directions given on 9 February 1996, the respondent gave detailed notice to the applicant of its complaints as to the adequacy of the statement of claim, and as a result the applicant filed and served a second statement of claim. The respondent again took the view that it was inadequate, and again pursuant to directions given by Branson J on 21 May 1996 it notified the applicant in detail of its complaints on that score and subsequently pursuant to those directions counsel and solicitors for the parties conferred with a view to resolving the pleading difficulties so that the action could proceed. That process was unsuccessful.

Consequently, the respondent by notice of motion sought to have the second statement of claim struck out. After hearing argument, Branson J on 17 July 1996 gave judgment on that motion; she struck it out as it exhibited a "number of fundamental faults", and gave the applicant leave to file and serve a fresh statement of claim by 28 August 1996 and adjourned the directions hearing to 28 October 1996. As no such document was filed within that period, on 21 October 1996 the respondent by notice of motion applied to dismiss the application. The applicant's response was to file and serve on 23 October 1996, outside the permitted time, a document purporting to be the third statement of claim. In an endeavour to have any issues as to the adequacy of that document resolved, directions were given on 28 October 1996 setting a timetable for the respondent to notify the applicant in detail of its objections to that document, and for the applicant to respond. By the time the matter next came on for directions on 4 December 1996, the applicant had further altered its proposed third statement of claim and on that occasion it indicated a desire to yet further alter that document. On that occasion I directed the applicant to file and serve the final version of its proposed statement of claim by 12 December 1996 and indicated that on 17 December 1996 I would entertain the applicant's request for leave to file and serve an amended statement of claim in that form.

On 12 December 1996 the applicant accordingly filed and served a document entitled Third Statement of Claim, which is in fact its fifth version of a proposed statement of claim. On 17 December 1996 I heard submissions from counsel for the parties as to whether I should grant to the applicant leave to have that document stand as its statement of claim in the action. At the completion of submissions, I gave the opportunity to the applicant by 17 January 1997 to indicate to the Court if it did not wish to pursue its claims based on ss45-48 of the Act and to present any proposed revision of the allegations in paragraphs 28-37 of the proposed statement of claim. The latter opportunity was because those paragraphs seeking to invoke s45 of the Act had only emerged in any form in the proposed statement of claim. On 20 January 1997 the applicant presented a further version of its proposed statement of claim reflecting further revisions or additions to paragraphs 28-37 purportedly pursuant to that leave. I have considered the document as presented, and the respondent's written submissions on those further proposed paragraphs. At present, following the order of Branson J of 17 July 1996 there is no statement of claim in the action. Quite properly, it was accepted by counsel for the respondent that it was appropriate to consider the application for leave to file a fresh statement of claim in relation to the document filed and served on 12 December 1996 with the additions or alterations to paragraphs 28-37 notified by the document provided on 20 January 1997, and that if, or to the extent that, it was in proper form the Court should give leave accordingly so that the application may proceed. I shall hereafter call that composite document "the proposed statement of claim". He did however submit that, in a number of significant respects, the proposed statement of claim was defective.

I have set out the history of this matter in some detail because, in my view, the time has come for the applicant to be committed to a document recording its complaints and that no further leave at large to amend the proposed statement of claim should be given. Over a period of almost a year it has had a number of opportunities to properly plead its claim, and has had the advantage of extensive communications with solicitors and on one occasion counsel for the respondent pointing out the respondent's criticisms of the adequacy of its pleading or proposed pleading. In fairness to the respondent, which is entitled to have the matter proceed, I do not think it would be fair simply to rule upon the present objections to the proposed statement of claim without injecting some form of finality into the applicant's claim. Of course, it is not appropriate presently to say that in no circumstances and in no respects should the proposed statement of claim, if allowed to stand in any form, be permitted further amendment later. But at present, I am minded to treat the proposed statement of claim as embodying as best it can the applicant's detailed allegations so that it should stand or fall on its present content. It will therefore require more than a reformulation of content, and probably an acceptable explanation as to why any new or more detailed factual allegations have not presently been brought forward, if later the allegations of the applicant are sought to be expanded beyond the proposed statement of claim to the extent to which this judgment allows it to stand.

The proposed statement of claim

As is now common, the proposed statement of claim is divided by headings, but it is unnecessary to refer to them all. Its broad allegations are as follows.

The applicant is a petrol and diesel reseller to the public, operating from two suburban Adelaide sites, although in April 1995 one site moved from the southern to the northern side of a main suburban road. It purchases its petrol and diesel exclusively from the respondent, which operates across the spectrum of refining, wholesaling, and retailing of petroleum products as well as leasing and franchising service stations.

During April to July 1990 and in December 1990 the applicant and the respondent conducted negotiations with a view to entering into a five year exclusive supply agreement for the supply of petroleum and associated products to the applicant. As a result, an agreement dated 7 December 1990 was entered into, in terms which are partly written, partly oral and partly implied to cover the period 1 February 1991 to 31 January 1996. That agreement was, as a result of further negotiations which took place in February 1992, orally extended for one year to 31 January 1997. In the course of those various negotiations, certain representations were made by the respondent and relied upon by the applicant, which constituted misleading and deceptive conduct or breaches of contract or warranty causing the applicant loss. It is unnecessary to refer to all those allegations in detail, as the respondent (whilst not accepting that they are in all respects adequate) has made only limited submissions concerning them. It is convenient to identify these aspects of the applicant's proposed statement of claim together as "the promissory breaches".

The proposed statement of claim then purports to deal with a range of matters said to give rise to breaches of Part IV of the Act, all of which other than those relating to resale price maintenance are objected to by the respondent. The headings, and paragraph numbers, in the proposed statement of claim which encompass Part IV of the Act are:

"Resale Price Maintenance" (paragraphs 23-27)

"Anti-Competitive Refinery Exchange Agreement"

(paragraphs 28-37)

"Misuse of Market Power" (paragraphs 38-42), and

"Exclusive Dealing" (paragraph 43).

There is also an asserted claim based on unjust enrichment (paragraphs 52-54), to which the respondent objects.

The proposed statement of claim then asserts that the applicant suffered loss, but indiscriminately as between the several causes of action, and then only by reference to an affidavit of Michael Skorpos filed in this matter on 25 October 1996 which exhibited a report of Don M Shammall, Partner, KPMG and only in the most general terms. It also claims exemplary damages, capital gains tax indemnity, interest, and various declaratory orders.

The principles

In Banque Commerciale S.A., en Liquidation v Akhil Holdings Limited [1990] HCA 11; (1990) 169 CLR 279 at 286 Mason CJ and Gaudron J said:

"The function of pleadings is to state with sufficient clarity the case that must be met ... In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision."

That dual function of pleadings, namely to ensure a fair trial by putting the opposite party on notice of the case to be met, and to define the issues for decision so that it can be discerned that the facts alleged give rise to an arguable cause of action and so that the course of the trial can be controlled, are the measures against which I propose to assess the proposed statement of claim. If it meets those tests, in general, I think it should be allowed to stand.

There are of course many judicial statements concerning the purpose of pleadings and referring to factors as measures of adequacy or appropriateness, and discriminating between the role of pleadings and particulars under Order 11 of the Federal Court Rules ("the Rules") as to the need to plead material facts in support of a general conclusion, and as to the need to avoid vagueness and ambiguity: see generally Trade Practices Commission v David Jones (Australia) Pty Ltd [1985] FCA 228; (1985) 7 FCR 109; Trade Practices Commission v Australian Iron & Steel Pty Ltd (1990) 92 ALR 395; Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413. Burchett J has drawn the threads of those statements together in Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522 at 42,679. I have been guided by those principles in assessing the proposed statement of claim.

Although there is a difference between an application to amend, or substitute, a pleading under O13 of the Rules on the one hand and an application to strike out part of an action under O20 on the other hand, in the present circumstances it would obviously not be proper to allow the amendment or addition of the proposed statement of claim if it, or parts of it, were likely to be struck out for inadequacies under O11 r16 or to be followed by an application under O20. A further trip on the roundabout of pleadings would help neither party. Furthermore, the applicant's position presently is that there is no statement of claim to be amended, and unless and until there is a statement of claim in proper form it is vulnerable to the application itself being dismissed. Accordingly, I propose to approach the present application guided firstly by the criteria to determine the adequacy of pleadings generally, and secondly by the criteria to determine whether any reasonable cause of action is disclosed: cf. O20 r2(1)(a) of the Rules. In the latter regard, I am mindful that it is only in the clearest of cases that a claim is dismissed on that ground: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125; Ogle v Strickland (1986) 11 FCR 462. Those principles are applied in relation to applications under O11 r16: see e.g. Reed International Books Australia Pty Ltd v King & Prior Pty Ltd (1993) 11 ACSR 560.

For the purposes of assessing the proposed statement of claim, it is appropriate to assume that the facts alleged in the proposed statement of claim will be able to be proved at trial. I will not embark, nor was I asked to embark, upon any assessment of the likelihood or otherwise of the applicant being able to prove at trial the facts it asserts.

The promissory breaches

Under the heading 'Failure to honour the building arrangements', the applicant refers explicitly to certain written clauses of the agreement dated 7 December 1990 and then complains that the respondent breached those obligations by failing to make payments or wrongly charging and deducting certain payments including those relating to a Shell price sign and to the installation of ingress signs and support posts (paragraphs 46(2)(e) and 46(2)(i)(ii) respectively). In effect, the allegation is that the respondent was to pay the excess over $270000 incurred in relation to the refurbishment of the applicant's service station site at 10 Henley Beach Road, other than for renovation of the building itself, and has failed to pay for the two items specified. The respondent's complaint is that the applicant has failed to particularise a clause of the agreement to support the complaint, as the clause specified does not carry the meaning contended for. The applicant made it plain in submissions that it relies only on clause 6(i) of the written clauses, as it is specifically pleaded. I do not think I should disallow the allegations to be maintained. It is, on the submissions, a matter of construction of the identified clause of the agreement. It is not immediately apparent to me that the construction contended for by the applicant is sustainable, but that is not the relevant test. In an application to dismiss a claim under O20 of the Rules, the authorities are plain that the Court should act only in the clearest of cases. As the applicant has identified the clause of the agreement relied on, and the facts said to constitute the breach of that clause, in my view the proper purposes of the pleading have been satisfied, and I think the argument is not so untenable as to warrant that part of the claim being struck out. I allow it to stand.

The other objection to the promissory breaches is to paragraph 47(vii) of the proposed statement of claim. It pleads that, contrary to the representations in paragraphs 9, 14 to 18, and 20 of the proposed statement of claim the respondent "otherwise breached its obligations as detailed above", thereby engaging in misleading or deceptive conduct or breaching its agreement. I disallow that paragraph of the proposed statement of claim. Paragraphs 9, 14 to 18 and 20 all contain assertions of representations or promises or of facts relating to them; they do not allege facts which show the representations were untrue or that the promises were not kept. That is the province of paragraph 47, and subparagraphs 47(i)-(vi) allege specific failures which may show that the representations were untrue or that the promises were not kept. Paragraph 47(vii) does not identify to the respondent what the respondent did or did not do in breach of its promises or in what way the representations made were "otherwise" untrue. It does not therefore properly serve the purpose of the pleading. I do not allow it to stand.

Anti-competitive Refinery Exchange Agreement

It is alleged that the respondent, together with Mobil Oil Australia Limited, Australian Petroleum Limited and BP Australia Limited (together defined as "the majors") operate oil refineries within several Australian states, and they produce within Australia almost all of the motor spirit and distillate (called "petroleum products").

The selling of petroleum products to each other is defined as "the refining market", and said to be an Australian wide market. There are also alleged to be a wholesale market being the sale by wholesale of bulk quantities of petroleum products and a retail market being the sale by retail of petroleum products, both operating in the Adelaide metropolitan area. I note elsewhere the problems caused by the applicant in other parts of the proposed statement of claim in defining and using those terms somewhat differently. There are no further material facts alleged in relation to the retail market as defined.

The wholesale market is said to involve the sale in bulk of petroleum products firstly by the majors to distributors, who are both 'branded' and independent or 'unbranded' distributors, and to retailers operating service stations and to commercial end users and secondly by both branded and unbranded distributors to 'branded retailers' and to independent retailers and to commercial end users. There are no facts alleged as to the number or size or relative positions of any of those groups in the geographical area defined. What does emerge from the allegations as they stand is that the respondent as a refiner in, for example, Victoria will sell its refinery output to its refinery competitors who do not operate a refinery in Victoria and, as it does not have a refinery in South Australia, can buy from Mobile Oil Australia Ltd petroleum products from its Port Stanvac refinery in South Australia. It then alleges that the respondent (whether using petroleum products refined by it interstate or using petroleum products bought by it from Mobil Oil Australia Ltd) then will sell petroleum products to its exclusive 'branded' distributors (unspecified in number) or to independent distributors (unspecified in number) - who may on sell those petroleum products - or directly to retailers which operate service stations identified as selling its brand (again unspecified in number) or to commercial end users (again unspecified in number).

The majors as defined including the respondent are alleged to have agreed in terms of what is called the "Refinery Exchange Agreement", which is said to comprise a series usually of six- monthly bilateral agreements which have been regularly renewed over at least the past twenty years and which contain "terms to the effect alleged by paragraphs 31(a), (b) and (c)". Paragraph 31 of the proposed statement of claim asserts that the Refinery Exchange Agreement was that:

"(a) in those States where one or more of them operated a refinery ("the home refiner" or "home refiners") the requirements for supply of petroleum products of all of the majors would be met by the home refiner or home refiners;

(b) the provision of supply in each State by the home refiner would be offset against supply taken by it in those States where it did not operate a refinery, so as to ensure that each of the majors exchanged an equivalent volume of petroleum products from their refineries within Australia;

(c) during the term of the arrangement, the volume of petroleum products exchanged between any two of the majors from their home refineries would be brought into balance, or, in the event of an imbalance, the shortfall would be accounted for by petroleum products exchanged during the term of the next arrangement, or alternatively balanced by a payment;

(d) access to the Refinery Exchange Agreement would be limited to the majors; and

(e) petroleum product exchange would take place only between the majors."

The source of the terms alleged in paragraphs 31(d) and (e) is said to be a contract arrangement or understanding between the majors in existence over a period of at least twenty years limiting access to the Refinery Exchange Agreement, or at least the written component of it - the referencing by number in the proposed statement of claim is somewhat circular - only to the majors as defined "as referred to in subparagraph 31(d), and restricting product exchange pursuant to the agreements to the majors as referred to in subparagraph 31(e) hereof". There are no material facts alleged as to the nature of that alleged agreement, that is whether it is in writing or otherwise or as to how it arose or as to its terms more generally. Perhaps equally as significantly, those terms refer to product "exchange" and to "access to the Refinery Exchange Agreement" whereas the markets alleged, whether the refinery market or the wholesale or retail markets, all concern the sale of petroleum products. The proposed statement of claim does not assert any facts to enable the respondent to understand how the applicant seeks to relate those two types of transaction, except in paragraph 31A which asserts:

"As a result of the refinery exchange agreement none of the majors including the Respondent will supply petroleum products from the refineries referred to in paragraph 28 to any other person or entity who is not one of the majors."

However, the terms of the Refinery Exchange Agreement which are alleged, assuming their source to have been properly specified in each instance, do not themselves support that conclusion. The respondent is therefore left guessing as to what material facts underlie that assertion. It does not appear to be the Refinery Exchange Agreement pleaded. Moreover, and expressly contrary to paragraph 31A, each of the majors as defined sells its petroleum products in bulk to its 'branded' and to independent distributors as well as directly to retailers and to commercial end users: cf. O11 r8 of the Rules. This is not an instance of an alternative pleading. It is also noteworthy that, on the facts alleged, the respondent has no refinery in South Australia; there are no facts alleged to indicate how, or whether, in those circumstances, its alleged preparedness to sell petroleum products from its refineries interstate either to the other majors as defined or to distributors or retailers of commercial end users is reflected in or sits conformably with the alleged agreement.

The proposed statement of claim then, in a conclusionary way, invokes both s45(2)(a)(i) of the Act by reason of the exclusionary provision in the policy of restricting access to the Refinery Exchange Agreement and to product exchange to the majors, and s45(2)(a)(ii) in relation to the refining market, and to the wholesale market and the retail market each as defined in this section of the proposed statement of claim by reason of the same alleged exclusionary provision. There are definitions of the wholesale and retail product markets in another part of the proposed statement of claim which are not consistent with the definitions adopted by the applicant in this section of the allegations. The product market is differently described, but it is hard to know if that has significance. The wholesale market is quite differently described. It is an embarrassing pleading which the respondent should not be called upon to face, although that is not the gravest of issues arising from the proposed statement of claim.

The respondent is confronted with a conclusionary allegation invoking ss4D and 45(2)(a)(i) of the Act, but no material facts to support it. The allegations, so far as they go on the basis of properly described material facts, relate to an agreement between the majors as defined to exchange produce, to the practical position that only refiners are in a position to agree to participate in an exchange arrangement, and that refiners sell petroleum products to a range of entities participating in the distribution by wholesale of petroleum products. There are no material facts alleged to support a conclusion that the respondent has agreed with, for example, Mobil Oil Australia Ltd (as the South Australian refinery operator) preventing or restricting the supply of petroleum products by it to particular persons or classes of persons. If that is sought to be made out, in my view, material facts to support such a conclusion are not presently asserted in the proposed statement of claim.

Further, in relation to the claim based on s45(2)(a)(ii) of the Act it is alleged that there is a substantial lessening of competition in the refining market and in the markets in which refinery products were sold by the agreement preventing the majors as defined from obtaining supplies of petroleum products from other than each other. There is no clause of the Refinery Exchange Agreement which is said to preclude any of the four refining companies from acquiring petroleum products from overseas or restricting their sources of petroleum products at all. It is inevitable, if there is product exchange between refinery operators, that it can be only between refinery operators. The agreement alleged concerns product exchange only, and not product acquisition generally. There is no allegation of any clause of an agreement which either compels a refinery operator to acquire its petroleum products in a State where it has no refinery from one or more of the refinery operators in that particular state. The primary material facts therefore, as distinct from the conclusional assertions, would establish no more than an agreement or agreements between refinery operators to sell or exchange petroleum products to other refinery operators which do not have a refinery in a particular State or Territory. There is not, in my view, a set of material facts alleged in that context which could attract the operation of s45(2)(a) of the Act. For the same reasons, the material facts alleged do not include facts which would enable the conclusion to be reached that the respondent, or other refinery operators, are precluded from acquiring petroleum products from others (assuming other sources of supply are available - as to which there is no fact alleged) within Australia or from overseas. There are, in any event, no alleged facts upon which it could be concluded that there is a substantial lessening of competition in the refinery market within Australia by reason of the Refinery Exchange Agreement.

The conclusion in respect of the wholesale and retail markets is that the provision of the Refinery Exchange Agreement namely the agreement

"... limiting access to the agreements referred to in subparagraph 32(a) hereof [the series bilateral written Refinery Exchange Agreements] only to majors themselves as referred to in subparagraph 31(d) [access to the Refinery Exchange Agreement would be limited to the majors], and restricting product exchange pursuant to the agreements to the majors as referred to in subparagraph 31(e) hereof [petroleum product exchange would take place only between the majors]"

had the purpose or had or was likely to have the effect of substantially lessening competition in each of those markets by

"(A) depriving or limiting the ability of actual or prospective independent wholesalers and resellers including the Applicant to obtain supply of petroleum products in order to compete with the majors in those markets;

(B) protecting and entrenching the market share of the majors in those markets; and

(c) restricting the ability of actual and prospective independent wholesalers and resellers including the Applicant to obtain efficiencies arising from economies of scale and vertical integration"

in contravention of s45(2)(a)(ii) of the Act.

I have already remarked upon the unsatisfactory nature of that pleading. It is noteworthy, in this context, to observe that the clause singled out complains in part of limiting access to an agreement rather than to a market, that there are no facts alleged which establish that any other entity has any capacity to participate in the transactions contemplated by the agreement in any event, and that the clause complains then of product exchange rather than of product sale. If such a term, assuming it were to be allowed to stand as a pleading, were to have the effect complained of, it is clearly necessary that the material facts to make out the conclusion should be pleaded. There are no material facts identified which describe the state of competition in those markets or how that provision adversely affects competition within either of them. In particular, there are no facts alleged to identify how the applicant and other potential wholesale acquirers or independent wholesalers are deprived of the ability, or limited and if so to what extent of the ability, to obtain petroleum products to sell in either of those markets. There are no facts identified which identify the share of the respondent, or the other refinery operators, in either of those markets or which explain how that share is protected or entrenched by that clause of the Refinery Exchange Agreement. Nor are there any facts which identify who or how many are the independent wholesalers in either of those markets, what efficiencies might exist but for that clause of the Refinery Exchange Agreement, and how that clause might have the effect contended for. It is also obvious that no facts as to the state of mind of the respondent are alleged relevant to it having the purpose ascribed to it.

The proposed statement of claim does assert that the applicant and other potential wholesale acquirers of petroleum products are excluded from obtaining supplies direct from the refining market. As referred to above, that is not borne out by any properly pleaded term of an agreement and is inconsistent with the description of the wholesale market. If the applicant cannot acquire petroleum products from the Mobil refinery at Port Stanvac, there are no facts alleged which attribute its inability to do so to the Refinery Exchange Agreement; it may be a consequence of its contractual arrangements with the respondent. There are no facts alleged which make its inability to do so (if it be the case) such as to substantially lessen competition in the markets identified. There are no facts alleged which support the conclusions as to price consequences, expressed in the most general of ways, thereafter in the proposed statement of claim.

Thus, in my view, paragraphs 28-37 of the proposed statement of claim should not be allowed as presently formulated. I have not found it necessary, in this context, to advert to what in my view are inadequacies of the claim as expressed for the loss allegedly flowing from the alleged breaches of s45 of the Act. Nor have I found it necessary to deal separately with the allegation that there is alternatively an arrangement or understanding (if not a contract or an agreement) to the same effect. The same flaws exist if those alternatives are addressed.

Misuse of Market Power

It is accepted that the proposed statement of claim must properly allege material facts which, if proven, will show that the respondent has a substantial degree of power in a particular market or markets, that it has taken advantage of its power in that market or markets, and that its purpose in doing so is to eliminate or substantially damage a competitor or to prevent or deter competitive conduct in that market or in some other market.

The identified markets are the wholesale and retail markets for the supply of petrol and diesel all within the Adelaide metropolitan area, that is the same markets (other than the Australia wide refining market) as those in relation to which the proposed allegations arising under s45(2)(a)(ii) of the Act relate. In the wholesale market, the respondent is said to compete only with the other three refiners, and in the retail market it is said to compete with those other refiners and resellers supplied by it and resellers supplied by the other refiners. In my view, those allegations sufficiently identify the four markets upon which the applicant seeks to rely for the purpose of these allegations.

It is alleged, somewhat curiously, that in the Adelaide metropolitan area the respondent "has limited prospects of competing with new entrants to the wholesale market" by reason of seven alleged barriers to entry by "prospective competitors". I assume it is intended to assert that the wholesale market is such that it is difficult for new participants to gain access to it.

Then there are a series of matters which are said collectively to establish that the respondent has a substantial degree of power in the wholesale and retail markets in the Adelaide metropolitan area for the supply of petrol and diesel products.

The respondent complains that these allegations are confusing and inadequate to the extent that they should not be allowed to stand. Those facts include the general scope of the respondent's business, its overall annual revenue and profit, and its parent company (paragraphs 3 and 4 of the proposed statement of claim). Those matters, in my view, do not and could not support the conclusion contended for; they are not included for the purpose of any comparative role. If they were, the comparative facts would also have to be alleged to fairly put the respondent on notice of the claim it has to meet. I strike out the reference to paragraphs 3 and 4 in paragraph 40 of the proposed statement of claim. The more detailed allegations of the existence of substantial power in the two markets referred to are in paragraph 39 of the proposed statement of claim. After identifying that the respondent was one of the four refinery operators and one of the four wholesale suppliers of petrol and diesel products, it is alleged in subparagraph (c) in the following terms that there are significant barriers to entry into that market by reason of the following:

"(i) lack of access to refineries with the capacity to service the wholesale and retail markets for the supply of petrol and diesel;

(ii) tied arrangements between the existing majors and retailers tied to the majors by way of common form supply agreements one of the terms of which is that each of the majors supplies its resellers with all their fuel requirements and the resellers will purchase all of their fuel requirements from their particular supplier;

(iii) the significant capital required to enter the wholesale market for the sale of petrol and diesel;

(iv) the lack of access to retail sites arising from environmental concerns, resulting in prohibition on reselling petrol and diesel at otherwise suitable locations;

(v) the lack of access to retailers of petrol and diesel to suitable retail sites for the sale of petrol and diesel, arising from the conversion of sites by oil companies before sale, thus protecting established tied service station sites from new entrants to the wholesale and retail market;

(vi) the absence of appropriate facilities for the independent importation of petrol and diesel;

(vii) the absence of independent networks of sufficient size to justify the costs associated with importation of petrol and diesel".

In my view, those matters are not properly allegations of material facts so as fairly to put the respondent on notice of the case it has to meet. It is always difficult to draw the line where a conclusion emerges from a material fact or facts or where a material fact emerges from a particular or particulars, and fairly to have regard to the ability of one party to allege specifically facts which are more in the province of the knowledge of some other party. But, by way of illustration only, it seems to me that it is unclear what is meant by the alleged lack of access to refineries, why exclusivity arrangements between some unspecified existing retailers (presumably resellers) and existing wholesalers preclude entry to the wholesale market especially without any indication of the terms of such arrangements, why environmental concerns (unspecified) prevent "access" to retail sites and what are "otherwise suitable" locations, what facilities are necessary to import petrol and diesel and what "independent networks" are referred to. It may well be that the applicant could have specified those, or some of those, conclusions or assertions with a more precise factual foundation but it has not done so. The points I have made about that part of the pleading are not exhaustive. Those sorts of deficiencies permeate that part of the allegation. I do not think it should be allowed to stand, so paragraph 39(c) of the proposed statement of claim should be refused.

Paragraph 39 generally, including subparagraphs (d)-(y), are said to support the conclusion that the respondent has a substantial degree of power in each of the wholesale and retail markets referred to. The allegations do not all readily disclose why or how the conclusion follows, either in respect of the wholesale market or in respect of the retail market, or in respect of the petrol product market or the diesel product market (for this part of the proposed statement of claim they are separately defined). They include conclusions without factual foundations. They include allegations which are too general. They include facts which do not appear to lead to the conclusion contended for. They do not separately identify any matters relevant to the petrol market as distinct from the diesel market, or vice versa. They include assertions (for example) that the respondent owns a tanker fleet, owns an unspecified number of retail outlets, promotes the Shell brand name, and supplies a number of independent retailers, which leave the respondent guessing as to their significance even assuming those allegations are sufficiently precise. Overall, in my judgment, the content of the allegations does not with the necessary degree of precision and clarity identify for the respondent the case it has to meet to enable those subparagraphs to stand as a pleading of the material facts to support the conclusion that the respondent has a substantial degree of control in the wholesale and retail markets for the supply of petrol and in the wholesale and retail markets for the supply of diesel. The flaws are so pervasive that I think the whole of paragraph 39(d)-(y) should be disallowed.

There remain the allegations in paragraph 39(a) that the respondent was one of four refinery operators in Australia, and in paragraph 39(b) that it is one of four identified competitors in the wholesale markets for the supply of petrol and diesel in the metropolitan Adelaide area. Are those facts available and sufficient to be capable of supporting the conclusion that the respondent had a substantial degree of power in the four markets referred to? In my view, they are not of themselves capable of supporting that conclusion; more would have to be proved at least as to the respective shares of the four identified wholesalers. I have ruled that subclause (d) does not adequately serve that function, because of its generality. Accordingly, I consider that the proposed statement of claim does not properly or adequately plead material facts upon which it could be found that the respondent has a substantial degree of power in each of the markets, or in any one particular market, identified.

The conduct alleged to infringe s46(1)(a) and s46(1)(c) of the Act by the respondent taking advantage of its alleged substantial degree of power on the wider refining market and in the more geographically limited wholesale and retail markets is set out in paragraph 41 of the proposed statement of claim as follows:

"41. Since about mid 1992 the Respondent has:

(a) failed to pay profitability support to the Applicant as described in paragraphs 9.6, 9.8 and 9.9 above;

(b) refused to sell to the Applicant additional service stations at Findon and Seacliff which the Respondent had agreed would be sold to the Applicant if they were not converted to Circle K sites;

(c) refuses to allow the Applicant to take part in the "Fly Buys" promotion whilst the Respondent allows service stations supplied by the Respondent in competition with the Applicant, to take part in the "Fly Buys" promotion;

(d) failed to pay the additional payment of 0.6 cents per litre of fuel sold;

(e) withheld the supply of petrol to the Applicant on the following dates [29 dates between October 1995 and December 1996];

(f) failed to honour the building arrangements referred to in paragraph 46 herein."

That conduct is alleged to have been engaged upon by the respondent to eliminate the applicant from or substantially damage the applicant in the retail market, or to deter or prevent the applicant from engaging in competitive conduct in the retail market. Again, the claim is for loss which is indiscriminate as between the several causes of action alleged and is identified only by reference to an exhibit to an affidavit, and for declaratory relief in only general terms.

Each of subparagraphs 41(a)-(f) encompass matters which are also the basis of claims made in the promissory breaches section of the proposed statement of claim. It is unclear why the applicant seeks to make use of s46 in support of those claims, as it was accepted by its counsel in the course of submissions that the applicant would have to prove the material to support those alleged promissory breaches in any event, and then additionally have to prove the complex facts to support the cause of action based on s46. More importantly, for present purposes, there is no material fact alleged which ties the conduct complained of to the exercise of the alleged substantial power in any of the (now five) identified markets and specifically to the exercise of the alleged substantial power in a particular one of those markets, except perhaps for the withholding of supply of petrol on the dates specified. If I were otherwise minded to allow the proposed statement of claim to stand in respect of the allegations based on s46 of the Act, I would allow paragraph 41(e) to remain and restrict the general allegations to those concerning the exercise of power in the market for the wholesale supply of petrol.

However, for reasons given, I do not propose to allow paragraphs 38-42 of the proposed statement of claim to stand. It is not, in those circumstances, necessary to consider how that document deals with the issue of loss and damages on that score.

Exclusive Dealing

The respondent takes no point that certain material facts are included under the heading 'Particulars of Exclusive Dealing'; cf. Trade Practices Commission v David Jones (Australia) Pty Ltd [1985] FCA 228; (1985) 7 FCR 109.

The claim is that the supply and acquisition agreement between the applicant and the respondent, which was negotiated on the basis that the applicant would purchase all its requirements for "petroleum fuels" at "prevailing lessee prices" amounts to exclusive dealing, contrary to s47 of the Act. The supply of "petroleum" upon that exclusivity term is alleged to have the purpose, or to have or be likely to have, the effect of substantially lessening competition within the four Adelaide metropolitan markets for the supply of petrol to retailers (the wholesale market) and to consumers (the retail market) and for the supply of diesel to the wholesale and retail markets, by:

"(i) depriving the Applicant of the ability to obtain supply of petroleum products in order to enable the Applicant to compete with the majors in the geographic market described in paragraph 38;

(ii) depriving the Applicant of the ability to obtain supply of petroleum products in order to enable the Applicant to compete with the resellers supplied by the majors in the geographic market described in paragraph 38;

(iii) protecting and entrenching the market share of the Respondent in those markets; and

(iv) preventing the Applicant from obtaining efficiencies arising from economies of scale and vertical integration, by preventing it from carrying on business in a competitive fashion as a retailer and as a wholesaler of petroleum."

I do not think that those allegations amount to allegations of material facts as to how, in respect of each of or of any of the markets identified, there is a substantial lessening of competition. There are no facts alleged describing the composition of the participants in those markets or any of them from which such a conclusion might be drawn arising from the agreement. There are no facts alleged to enable the respondent to be able to address what consequences to any of those markets flow from the agreement, so as to identify a potentially substantial effect in any of those markets, including why the fact that the applicant acquires its "petroleum products" from the respondent should or might significantly affect any of those markets, nor why in a relevant sense that follows from the respondent by "protecting and entrenching" its share of each of those markets, nor what are the efficiencies or economies of scale or vertical integration referred to or why they might have that consequence. Those allegations are clearly, in my view, in the category of conclusions without the necessary factual foundation being pleaded so as to properly serve the purpose of pleadings. I have not needed to focus separately on the several markets referred to, or the adequacy of the pleading in relation to each. Nor have I needed to refer to the inadequacy in the pleading of the loss and damages aspects of this cause of action.

I do not allow the applicant to include paragraph 43 in its proposed statement of claim. I note that, so far as the applicant's claim generally is concerned, it will be able to pursue its claim for the losses allegedly resulting under the promissory breaches part of its action in any event.

Unjust enrichment

This claim is expressed laconically as follows:

"52. By its conduct particularized in paragraph 51 the Respondent has been enriched.

53. The enrichment of the Respondent was obtained at the expense of the Applicant.

54. It is unjust for the Respondent to receive or retain the benefit of its enrichment."

Paragraph 51 referred to alleges in general terms only that the respondent's conduct in breach of the agreement alleged and of ss45, 46, 47, 48 and 52 of the Act has caused the applicant to suffer loss, and prevented it from engaging in (unspecified) competitive conduct. It relies on Pavey & Matthews Proprietary Limited v Paul [1987] HCA 5; (1986-1987) 162 CLR 221 especially per Deane J at 256-258. I do not think that case supports the contention, but it is unnecessary to finally decide that question. The pleadings do not give any material facts as to how or to what extent the respondent has been enriched. They are directed only to the alleged wrongfulness of the respondent's conduct and its consequences to the applicant. I do not think that the proposed statement of claim fulfils satisfactorily the purpose of putting the respondent on notice as to the case it has to meet. Of course, as I do not propose to allow much of the proposed statement of claim, the applicant's claim is largely to be based on the promissory breaches and the breach of s48 of the Act. I would also, if necessary, conclude that the claim for unjust enrichment as formulated in respect of those two causes of action is not as a matter of law capable of being sustained.

I accordingly do not allow paragraphs 52-54 of the proposed statement of claim.

Relief

On the basis of the rulings above, the applicant's claim will be able to go forward in reliance on the promissory breaches and the claim for relief for breach of ss48 and 96 of the Act. Paragraph 50 of the proposed statement of claim alleges that as a result the applicant has suffered loss and damage, and paragraph 51(a), (e) and (f) purport to set out the material facts relating to that loss by incorporating an exhibit to an affidavit.

In relation to the claim for relief based upon breach of ss48 and 96 of the Act, counsel for the applicant in submissions indicated that declaratory relief only was sought. I therefore do not allow paragraph 51(e) of the proposed statement of claim. The claim for declaratory relief is in paragraph 57.6. That also will avoid the need, which would otherwise exist, for the applicant to separately allege the facts material to losses flowing from this cause of action.

The damages flowing from the promissory breaches are, it is accepted, not fully pleaded in the proposed statement of claim. I think that the expert report of Don M Shammall, Partner, KPMG presently annexed to the affidavit of Michael Skorpos filed in this matter on 25 October 1996 does provide adequate particulars of those losses, and I see no benefit to either party in directing that to be recited verbatim or in summary form in the proposed statement of claim. However, I think the applicant should spell out in the proposed statement of claim the material facts, as distinct from the particulars, which are the foundation of its claim for past and ongoing damages. That should not be a difficult task to undertake, and I direct that it be done. I suspect that different consequences are alleged to flow from the several promissory breaches alleged, and if so then the material facts should isolate those consequences. The additional pleading should be relatively brief.

Accordingly I propose to allow the applicant to file and serve as its statement of claim a document in the form of the proposed statement of claim but with the following deletions or alterations:

(a) paragraphs 28-37 are disallowed

(b) paragraphs 38-42 are disallowed

(c) paragraph 43 is disallowed

(d) paragraph 47(vii) is disallowed

(e) paragraphs 51(b)-(e) are disallowed

(f) paragraphs 52-54 are disallowed

(g) paragraphs 57.2-57.5, 57.8 and 57.13 are disallowed

(h) paragraph 57.9 is allowed only to the extent of referring to s48 of the Act

(i) paragraphs 51(g) and (h) are disallowed in their present form but the applicant is to include in the statement of claim the material facts relating to its alleged losses from its several complaints in the statement of claim in accordance with these reasons.

As it is accepted by the applicant that, at present, there is no statement of claim, it is not intended by this leave to enable any cause of action not originally invoked by the application and the statement of claim then filed with it to be treated as if it were invoked at a time prior to the time when the cause of action was first invoked. The new statement of claim is to be entitled the Third Statement of Claim, as the versions presented after 28 August 1996 did not properly have that status.

I will give directions with a view to this matter then proceeding to trial.

I certify that this and the preceding pages are a true copy of the Reasons for Decision of the Honourable Justice Mansfield.

Associate:

Dated:

Counsel for the Applicant : Mr R A Cameron

Solicitors for the Applicant : Townsends

Counsel for the Respondent : Mr P Jopling QC

with him

Mr S Wisking

Solicitors for the Respondent : Finlaysons

Hearing Date : 28 October 1996