Australian Competition & Consumer Commission v IMB Group Pty Ltd [1999] FCA 819 (17 June 1999)

Last Updated: 19 July 1999

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v IMB Group Pty Ltd

[1999] FCA 819

PRACTICE AND PROCEDURE - leave to amend statement of claim requested late in hearing of trial to expressly rely on s 51A Trade Practices Act 1974 (Cth) - need to plead reliance on s 51A - what is sufficient to do that - leave to amend refused

Trade Practices Act 1974 (Cth) ss 51A and 52

Federal Court Rules O 11 r 2, O 11 r 5, O 11 r 10(b), O 12 r 1

Cummings v Lewis (1993) 113 ALR 285 considered

Western Australia v Bond Corporation Holdings Ltd (1991) 13 ATPR 41-081 considered

Ting v Blanche [1993] FCA 524; (1993) 118 ALR 543 considered

State of Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) FCA 499 cited

Bailey v Federal Commissioner of Taxation [1977] HCA 11; (1977) 136 CLR 214 cited

The King v Nat Bell Liquors Ltd [1922] 2 AC 128 cited

Cato v Costello; Ex parte Costello [1939] St R Qd 318 cited

R v O'Brien (1964) 50 DLR (2^nd) 92 cited

Phoenix Court v Melbourne Central Pty Ltd (Goldberg J, unreported, 22 October 1997) cited

Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (1998) ATPR 41-633 cited

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v THE IMB GROUP PTY LTD & ORS

QG 175 OF 1993

DRUMMOND J

17 JUNE 1999

BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 175 OF 1993

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant

AND:

THE IMB GROUP PTY LTD (ACN 050 411 946) (IN LIQUIDATION) First Respondent LOGAN LIONS LIMITED (ACN 060 338 758) (IN LIQUIDATION) Third Respondent SAMSON NEIL BACKO Fourth Respondent DAVID JOHN IVERS Fifth Respondent LUKE VINCENT IVERS Sixth Respondent JOHN LINDSAY IVERS Seventh Respondent LANCE THOMAS STONE Eighth Respondent MICHAEL JOHN MacLEAN Ninth Respondent WILLIAM ANTHONY MUSGRAVE Tenth Respondent ROBERT COWLEY Eleventh Respondent GLEN JAMES IVERS Twelfth Respondent

JUDGE:	DRUMMOND J
DATE OF ORDER:	17 JUNE 1999
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The applicant have leave to deliver the proposed amended statement of claim produced in Court on 10 March last, save that the applicant will not have leave to include in that pleading the particular in par 30: "The applicant relies upon s 51A of the Act".

THE COURT DECLARES THAT:

2. The applicant bears the persuasive burden of proving the absence on the part of the fourth to tenth and the twelfth respondents of reasonable grounds for making the representations as to future matters the subject of complaint by the applicant in the statement of claim referred to in Order 1.

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 175 OF 1993

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant

AND:

THE IMB GROUP PTY LTD (ACN 050 411 946) (IN LIQUIDATION) First Respondent LOGAN LIONS LIMITED (ACN 060 338 758) (IN LIQUIDATION) Third Respondent SAMSON NEIL BACKO Fourth Respondent DAVID JOHN IVERS Fifth Respondent LUKE VINCENT IVERS Sixth Respondent JOHN LINDSAY IVERS Seventh Respondent LANCE THOMAS STONE Eighth Respondent MICHAEL JOHN MacLEAN Ninth Respondent WILLIAM ANTHONY MUSGRAVE Tenth Respondent ROBERT COWLEY Eleventh Respondent GLEN JAMES IVERS Twelfth Respondent

JUDGE:	DRUMMOND J
DATE:	17 JUNE 1999
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1 The Commission applies, long after it has closed its case and after over seventy witnesses have been called by the respondents, to amend its pleading by which it alleges, among other things, that the respondents contravened s 52 the Trade Practices Act 1974 (Cth) by being involved in the making of certain representations in connection with the Logan Lions Football Club project which the respondents were attempting to establish in the period 1991 to 1993.

2 The amendment has been produced in compliance with a direction of the Court, recently given, that the Commission identify the issues in respect of which it now seeks a determination. The proposed statement of claim is a much simpler document than the existing consolidated one. For example, the proposed pleading focuses on core conduct said to involve conduct contravening the Trade Practices Act whereas the existing pleading promiscuously fastens on every statement, oral as well as written, that might possibly be said to have been made on behalf of the respondents over a long period of time at very many sales seminars and which might be capable of constituting a representation contravening s 52. It appears from the proposed pleading that the Commission intends to maintain allegations that the respondents were involved in conduct that contravened s 52 in respect of representations made:

(a) that the shares proposed to be issued in the project would be likely to increase in value over time;

(b) that the Council had approved the respondents' proposal for the construction of the project on certain Council land;

(c) that the Council was likely to agree to grant a lease of that land to the respondents;

(d) that project construction would commence and be completed by particular dates;

(e) that insurance policies available to persons interested in taking shares in the project when those shares were ultimately issued would generate, over a period of years, sufficient moneys to enable those persons to pay for those shares;

(f) as to the overall value of the project on completion;

(g) that finance had been approved for the development.

3 Some of the representations are as to future matters. In its earlier pleadings, the Commission did not expressly state that it relied upon s 51A the Trade Practices Act in support of its case that those particular representations were misleading. The Commission now proposes to amend its pleading to rely expressly on s 51A in support of the allegation that each of the representations referred to in pars 21 to 29 of the new pleading which involves a representation with respect to a future matter was misleading or deceptive.

4 The fourth to tenth and the twelfth respondents object to this particular amendment being made so late in the day. They say they have prepared and run the case to this quite late stage on the assumption that the Commission had assumed responsibility from the outset to prove, in relation to those representations said to contravene s 52 which were as to future matters, that there were no reasonable grounds for the respondents to make them.

5 The Commission contends that prior to the recent delivery of the proposed new pleading, it long ago made it clear that it was relying on s 51A. The Commission relies upon the comments of Sheppard and Neaves JJ in Cummings v Lewis (1993) 113 ALR 285 in support of the submission that it is in any event unnecessary for a party wishing to rely upon s 51A to indicate in its pleading that it intends to do that. If that submission is not accepted, the Commission relies upon the comments of French J in Western Australia v Bond Corporation Holdings Ltd (1991) 13 ATPR 41-081 at 52,279 for saying that the words used in pars 20 and 35 of its earlier consolidated pleading are sufficient to entitle it to rely now on that particular provision, ie, that the proposed new pleading in this respect only makes explicit what was necessarily implicit in the earlier pleading.

6 At two places in its existing pleading the Commission, in relation to all the representations as to future matters then relied on, made these allegations:

"20. Each of the representations referred to in sub-paragraphs 18(a), (h) to (ad) inclusive, was in the circumstances misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the Act.
PARTICULARS
(a) There existed no reasonable grounds for making the representations as to the future matters referred to in sub-paragraphs 18(a), (h) to (ad) inclusive;
(b) ... etc"

7 In a similarly worded par 35, the Commission made reference to other representations as to future matters. It is common ground that the representations referred to in pars 20 and 35 of the Commission's current pleading include all those representations as to future matters which the Commission still intends to pursue.

8 I accept that the respondents have not, in fact, realised, until the present amendment application was foreshadowed, that the Commission contends it is they who have the burden of proving the reasonableness of these representations rather than its being for the Commission to prove the absence of reasonable grounds.

9 The respondents, although represented until recently at the trial itself by senior and junior counsel on a pro bono basis, have had to attend, over the past five years, to much of the preparation for this complicated trial themselves. They have had to make, some time ago, many of the decisions as to the witnesses they would seek to call and otherwise as to the evidence they would present to the Court. They say they have not attempted to evaluate just what is the full range of evidence they may be able to rely on to prove, in relation to representations as to future matters, that they have reasonable grounds for making those representations. They say that their belief that the Commission intended to run its case on the basis that it would prove the absence of reasonable grounds in relation to these representations was engendered by the allegations in the pleadings which conveyed no hint to them of any intention by the Commission not to assume the burden of proving those allegations which it raised. They also say this belief of theirs was produced, in part, by what counsel for the Commission had to say long ago about the Commission's intention to adduce evidence to show that projections produced by the respondents' financial and architectural consultants in relation to the project had no reasonable foundation, as well as by the fact that the Commission, in accordance with pre-trial directions, long ago filed evidence showing that and then called that evidence in its case in the early part of the trial last year. They further say that while they now hope to obtain additional evidence from the consultants on whom they relied originally to assist them in showing that certain of the representations in question were well-founded, they will be dependent on whether legal aid is provided now to effectively further proof those witnesses and, in any event, they will be raising with those witnesses, at a late stage, matters which must now be quite stale. The respondents say that, in consequence, they will be prejudiced if they are told now that it is they, rather than the Commission, who have the full persuasive burden of proving that the representations as to future matters now relied on by the Commission were soundly based.

10 I accept that the respondents may suffer prejudice if, at this late stage, they have to discharge the persuasive burden of proving the existence of reasonable grounds for the making of the representations in question. I do not think the comment made at a directions hearing back in December 1996 by counsel for the Commission as to how he understood its then current statement of claim is of any assistance to the Commission in showing that the respondents should have realised what they would have to do to meet the allegations that certain of the representations made by them were made without reasonable grounds: it was but one comment in the course of a significant directions hearing and the respondents were not legally represented at it. The respondents, in the various defences they have filed, have dealt with these allegations with simple denials. If pars 20 and 35 of the Commission's existing pleading is sufficient to invoke s 51A in its favour, the respondents' defences, in the form of bare denials, contravened O 11 r 10(b) the Federal Court Rules, since the respondents have long made clear their intention to call some evidence on the issue of the reasonableness of their predictive representations. The Commission has made no complaint about any such pleading contravention; nor has it sought the particulars it would have been entitled to have, to identify the range of factual matter upon which the respondents planned to rely, if, as the Commission contends, they do bear the persuasive burden of proof here. If the Commission had taken such action, it may well have disabused the respondents of what I accept has been their long-held belief that it was for it to prove the absence of a reasonable basis for their predictions, not for them to prove the existence of reasonable grounds.

11 Section 51A provides:

"(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation."

12 In Ting v Blanche [1993] FCA 524; (1993) 118 ALR 543, a decision that did not turn upon pleading issues in respect of this provision, Hill J, at 552, said of s 51A:

"The section [ie s 51A] is but an interpretation section; it does not of itself create a cause of action, nor define a norm of conduct. The relevant cause of action is to be found in s 82(1) of the Act by reference to the norm of conduct laid down in s 52 of the Act. What s 51A does, in a practical sense, in cases where it applies, is to cast the burden of proof upon the respondent corporation who has made a representation about a future matter to show that in making that representation it had reasonable grounds for so doing. In the language of Sheppard and Neaves JJ in Cummings v Lewis (1993) 113 ALR 285 ... s 51A is `designed to facilitate proof' ...
Representations as to future facts may, of course, constitute conduct which is misleading or deceptive or likely to mislead or deceive within s 52 of the Act, irrespective of the operation of s 51A. However, without the intervention of s 51A the burden would remain upon the applicant to show that the representation, in whatever form it took, was misleading or deceptive or likely to mislead or deceive. In the ordinary case where a representation as to future conduct or events is alleged to have been made, that means that the burden would be upon the applicant to show not merely that the conduct or event has not come to pass, but also that at the time the representation was made the respondent did not believe that the conduct or event would come to pass or that there was no basis for a belief that the conduct or event would come to pass ..."

13 Section 51A(1) does not deal with the incidence of the burden of proof, rather does it incorporate in proceedings under the Act the common law rule as to when a representation as to a future matter will amount to a misrepresentation. It is s 51A(2) that deals with the burden of proof. As Hill J points out, if invoked, that sub-section reverses the incidence of the persuasive burden.

14 In Cummings v Lewis (1993) 113 ALR 285 at 293 - 294, Sheppard and Neaves JJ said, obiter:

"The discussion into which we have entered has saved us the need to express a view in relation to the question whether s 41 of the Fair Trading Act (or s 51A of the Trade Practices Act) needs to be specifically pleaded or raised in order for it to be relied upon. In Western Australia v Bond Corp Holdings Ltd [1990] FCA 522; (1990) 99 ALR 125 ... French J said ... that a party invoking s 51A should make it clear that it is doing so. In that way a respondent will know that, if the representation was made, it will have the burden of showing and must plead, that it had reasonable grounds for making it. His Honour said that the duty of an applicant to make it clear that s 51A was invoked was discharged if it pleaded that the respondent did not have reasonable grounds for making the representation and that it was thereby misleading or deceptive. We would wish to leave open, until the question more directly arises, the correctness of these views. Our provisional view is that s 51A of the Trade Practices Act and its counterparts such as s 41 of the Fair Trading Act, are evidentiary provisions, not directed at what a party must plead. The rules of the court in relation to pleading require the pleading to contain, and only contain, a statement in a summary form with the material facts on which a party relies; see O 11, r 2. The cause of action which is relied upon is a cause of action for breach of s 52 (or s 42). Sections such as s 51A are designed to facilitate proof. They affect the onus of proof but they are not part of the law which provides for the cause of action for which sections such as s 52 provide. We think there is a real question whether there is any requirement that there needs to be specific reference to the section in a pleading or the adoption of words which it uses. However, the matter does not in our opinion arise for consideration here and we express no concluded view about it."

15 While a pleading should be limited to the material facts, ie, those which the applicant needs to prove to make out its cause of action and its entitlement to the relief claimed, particulars serve different functions. An important one is to prevent the opposing party being surprised at the trial: I referred to some of the authorities for this proposition in State of Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) FCA 499 at par [12]. In Bailey v Federal Commissioner of Taxation [1977] HCA 11; (1977) 136 CLR 214 at 219 and at 221, Jacobs J said:

"[B]ut rules or practices as to particulars must be sufficiently flexible to allow all parties to an action or matter to meet with necessary evidence and without delay to court processes questions which may be raised at the hearing. Their purpose is to concentrate and define the issues of fact and to prevent surprise and consequent delay.
At the same time, it must be borne in mind that particulars do not constitute a pleading and do not ordinarily define issues of law. They must tend to advance the clear and speedy determination of all the questions which fall to be determined. ..."

16 So important is the anti-surprise function of particulars that, as Bailey shows, a party can even be ordered in an appropriate case to give particulars of an allegation in respect of which it does not bear the burden of proof.

17 Statutory provisions reversing the persuasive burden of proving issues can have a profound impact on the course of evidence at the trial and thus what needs to be done by the parties in order to prepare for the trial. It is common to find in statutes creating criminal offences provisions that cast onto the defence the burden of proving a matter which would, in the absence of the provision, fall on the prosecution. There is authority to the effect that where the prosecution so conducts its case as to indicate to the defence that it intends to voluntarily assume the burden of proving a matter the subject of a statutory reversal of the onus of proof, it may be disentitled later on from changing position to invoke the statutory provision. See, eg, The King v Nat Bell Liquors Ltd [1922] 2 AC 128 at 140; Cato v Costello; Ex parte Costello [1939] St R Qd 318 at 322 - 323 and R v O'Brien (1964) 50 DLR (2^nd) 92 at 94. As appears from the two lastmentioned decisions, the foundation for this rule is to ensure that the defendant will not be taken by surprise in conducting his case, ie, the same objective intended to be served by particulars in civil cases.

18 This case shows how an allegation like that relied on by the Commission, if read at face value, can mislead a respondent in the preparation and presentation of its case.

19 In my opinion, even if it be the position that an applicant is not required by O 11 r 2 to plead reliance on s 51A, as was suggested in Cummings v Lewis, that does not free it of the obligation to indicate, by way of particulars given in accordance with O 12 r 1, its intention to rely on that provision. Notwithstanding what was said in Cummings v Lewis, a number of judges of this Court have been of the opinion that where a party wishes to rely upon s 51A, it must give a clear indication of that to its opponent. See Bond Corporation per French J, Phoenix Court v Melbourne Central Pty Ltd (unreported, 22 October 1997) per Goldberg J and Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (1998) ATPR 41-633 per Foster J. I agree with this approach.

20 The next question is whether the Commission in pars 20 and 35 of its consolidated pleading sufficiently alerted the respondents of its intention to rely upon this section. While I agree with French J, in the Bond Corporation case, that a party who invokes s 51A should make it clear to the other party that it is doing so, I respectfully disagree that the duty of the applicant to make clear that it invokes s 51A is discharged "if it pleads that the respondent did not have reasonable grounds for making the representation and that it was thereby misleading or deceptive". In my opinion, while an experienced lawyer might read more into it, that in terms does nothing more than invoke sub-section (1) of the section, which is declaratory of the common law and which, if alone relied on, leaves the burden of proof of the absence of reasonable grounds on the applicant who alleges it. See Ting v Blanche at 552 and Phipson on Evidence, 14^th ed, par 4-05, particularly at note 28. It is true, as Goldberg J observed in Phoenix Court, that, by force of O 11 r 5, a party need not plead a fact if the burden of disproving the fact lies on the other party. But, as a matter of construction, s 51A cannot, in my opinion, be read as establishing that the only way of showing a predictive representation is not misleading is for the representor to prove that it had reasonable grounds for the prediction: a representee can, if it chooses, accept the full burden of proving the absence of reasonable grounds for such a representation. It will, in my opinion, do that if it pleads no more than that representation as to a future matter was made without reasonable grounds and was therefore misleading.

21 It is s 51A(2) which must be invoked if an applicant wishes to reverse the burden of proof. However, I agree with French J that this can be sufficiently done by an express reference to reliance upon s 51A. As his Honour observes, this approach is probably logically more consistent with the structure of the section.

22 An applicant who properly invokes s 51A can, if it chooses, rely only on that provision in support of a case that representations as to future matters are misleading. But such a party must also be free, if it wishes, to adduce evidence as to the absence of reasonable grounds for such representations: it must be able, whether in anticipation or by way of rebuttal of evidence adduced by the respondent in such a case as to the reasonableness of its predictions, to show, by evidence of its own, that the respondent's material should not be accepted as probative of the issue. But, for the reasons given, there is no reason why an applicant should not be entitled to present a case based on representations as to future matters which it is content to prove in reliance on evidence assembled by it and without relying at all on s 51A. It may then be open to the respondent, as I think it is here, to say that the applicant has shown an intention to confine its case to the evidence it has relied on to date in relation to the reasonableness of the future matters. In such a case, if an applicant at a late stage of the trial then decides to bolster its case by calling in aid s 51A, it may properly be denied an entitlement to do that, if the respondent can legitimately say that it was mislead, to its prejudice, into thinking that the applicant did not intend to rely on s 51A, that it was therefore unnecessary for the respondent to assemble full proof of its own as to the reasonableness of its future representations, but could confine itself to destroying the positive evidence relied on by the applicant to establish that issue.

23 I will therefore give the Commission leave to deliver the proposed amended statement of claim produced in Court on 10 March last, save that the Commission will not have leave to include in that pleading the particular in par 30: "The applicant relies upon s 51A of the Act".

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond.

Associate:

Dated: 17 June 1999

Counsel for the Applicant:	Mr Thompson SC
Solicitor for the Applicant:	Australian Government Solicitor
The fourth to tenth respondents were represented by the twelfth respondent.
Date of Hearing:	16 June 1999
Date of Judgment:	17 June 1999