Fernandez v Glev Pty Ltd [2000] FCA 1859 (20 December 2000)

Last Updated: 21 December 2000

FEDERAL COURT OF AUSTRALIA

Fernandez v Glev Pty Ltd [2000] FCA 1859

PRACTICE AND PROCEDURE - motion to strike out Statement of Claim - whether contract claim was within the accrued jurisdiction of the Federal Court - inappropriateness of determining correctness of assertion of fiduciary relationship on strike out application - where pleading alleges that various representations were inaccurate without stipulating why or in what way the inaccuracy arises - where insufficient particulars supplied - where pleading did not make any connection between representations and loss or damaged alleged to have been sustained - where representation as to a future matter not pleaded as such - where pleading was confusing and lacked specificity and clarity - whether Statement of Claim may be struck out where applicant has failed to show that the cause of action arose within the limitation period - where allegation of accessorial liability unsubstantiated by particulars - where particulars supporting allegation of unconscionable conduct identified the conduct as having occurred prior to the commencement of s51AC Trade Practices Act 1974 (Cth)

Federal Court Rules O 11 r 16

Trade Practices Act 1974 (Cth) ss 52, 51AC, 75B, 82(3)

Saunders v Glev Franchises Pty Ltd (1995) 33 IPR 349 distinguished

Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR ¶40-853 referred to

Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27 cited

Ronex Properties Ltd v John Laing Constructions Ltd [1983] 1 QB 398 cited

HECTOR FERNANDEZ & ANOR v GLEV PTY LTD & ORS

N 1108 OF 2000

HELY J

20 DECEMBER 2000

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1108 OF 2000

BETWEEN:	HECTOR FERNANDEZ FIRST APPLICANT HECROZ PTY LTD SECOND APPLICANT
AND:	GLEV PTY LTD FIRST RESPONDENT EVANGELOS CHRISTOU SECOND RESPONDENT VASSOS CHRISTOU THIRD RESPONDENT GABRIEL CHRISTOU FOURTH RESPONDENT LOUIS CHRISTOU FIFTH RESPONDENT
JUDGE:	HELY J
DATE OF ORDER:	20 DECEMBER 2000
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. Leave be granted to the applicants to amend the proceedings by substituting Glev Franchises Pty Ltd as first respondent.

2. Paragraphs 18-24, 25, 26 and 27 of the Statement of Claim be struck out, with leave to replead.

3. The applicants be granted leave to file an Amended Statement of Claim by 5 February 2001.

4. If the respondents wish to contend that the Amended Statement of Claim, or any particular paragraphs in it, should be struck out, then an outline of its submissions in that respect is to be served on the applicants, and lodged with the associate prior to 16 February 2001.

5. The matter be listed for further directions at 10.15 am on 20 February 2001, at which time consideration will be given to the future conduct of the proceedings, including expedition and the place of trial.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1108 OF 2000

BETWEEN:	HECTOR FERNANDEZ FIRST APPLICANT HECROZ PTY LTD SECOND APPLICANT
AND:	GLEV PTY LTD FIRST RESPONDENT EVANGELOS CHRISTOU SECOND RESPONDENT VASSOS CHRISTOU THIRD RESPONDENT GABRIEL CHRISTOU FOURTH RESPONDENT LOUIS CHRISTOU FIFTH RESPONDENT

JUDGE:	HELY J
DATE:	20 DECEMBER 2000
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 I have before me a Notice of Motion which seeks an order that the application (filed on 18 October 2000) and the Statement of Claim be struck out. The motion is based upon Order 11 rule 16 of the Federal Court Rules ("FCR"). There is an issue between the parties as to whether Order 11 rule 16 of FCR allows for the striking out of an application, as opposed to a Statement of Claim, but in view of the conclusion which I have reached, it is not necessary for this issue to be pursued.

The contract claim

2 Paragraphs 1-16 of the Statement of Claim ("SC") plead a claim for damages for breach of the exclusivity provisions of a franchise agreement allegedly made between one or more of the applicants and the first respondent on 5 December 1991, for a term of ten years from 30 March 1992. A breach of the franchise agreement is said to arise because on or about 1 January 1997, the first respondent licensed Ampol Ltd to operate a pizza retailing business called "Pizza Haven to Go" from the Ampol garage in Cambridge Park, which is said to be within the territory of the Penrith franchise. The licensing of this outlet is said to have resulted in a loss of income to the applicants and a loss of value of their business [SC pars 10 and 11].

3 Other breaches of the franchise agreement are alleged. They are (and I rearrange them into chronological order) that:

- in early January 1998 the first respondent directed the Ampol garage at Cambridge Park not to obtain any further supplies of pizza from the applicants [SC par 13];

- on about 12 January 1998 the first respondent directed the Ampol garage at Glenbrook not to obtain any further supplies of pizza from the applicants [SC par 12];

- in January 1998 the first respondent commenced selling Pizza Haven garlic bread to the Ampol service station outlets at Cambridge Park, Hazelbrook and Glenbrook [SC par 15];

- in June 1999 the first respondent directed the Ampol garage at Hazelbrook not to obtain any further supplies from the applicants [SC par 14].

Each of these breaches is said to have resulted in a loss of income to the applicants and a diminution in the value of their business.

4 Whether this Court has jurisdiction to determine the contract claim depends upon whether that claim is within the accrued jurisdiction of the Court. For reasons which will later emerge, it is convenient to defer consideration of that question. The applicants now accept that Glev Franchises Pty Ltd, rather than the first respondent, is the franchisor, and that Glev Franchises Pty Ltd should be substituted for Glev Pty Ltd as first respondent. The respondents now accept that their contention that the dispute between the parties has been resolved by agreement does not provide a ground for striking out the Statement of Claim. If this contention is to be pursued, it should be raised as a ground of defence.

5 At this stage, I decline to strike out pars 1-16 of the Statement of Claim.

Breach of Fiduciary Duty

6 SC par 17 pleads that, by reason of the matters alleged in pars 1-16, a fiduciary relationship exists between the applicants and the first respondent. The respondents contend that these matters do not provide the foundation for a fiduciary relationship. There is no utility in determining the correctness or otherwise of this contention on a strike out application, and it is not appropriate that I should do so.

Misleading and deceptive conduct

7 SC pars 18 to 24 allege that the applicants suffered the same damage as is the subject of the contract claim in consequence of representations made by the first respondent which were misleading or deceptive. I treat those paragraphs as at least notionally amended in the manner indicated in the applicants' "Schedule of Amendments to the Statement of Claim".

8 This section of the pleading is framed in an embarrassing manner, and, if only for that reason, should be struck out. The following is not necessarily an exhaustive list of the deficiencies in the claim as pleaded, but it is sufficient to indicate why this section of the pleading, in its current form, is unacceptable.

9 The representations in pars 18(a), (b) and (c) are not specifically referred to in par 21, which addresses the "erroneous" nature of the par 18 representations. But par 21(f) alleges that each representation was inaccurate, without saying why or in what way. This deficiency is not merely a matter of particulars, and in any event, no such particulars have been supplied. There is no pleaded or apparent connection between the pars 18(a), (b) and (c) (mis)representations, and any loss or damage sustained by the applicants (see par 24) as alleged in par 16.

10 The par 18(h) representation is not listed in par 19(b) as being a representation as to a future matter. Clearly it is a prediction as to the future, unless the pleader intended to allege a false representation as to the respondents' then state of mind. That is not the allegation which is made. Considered as a representation as to the future, the issue is whether there were reasonable grounds for making the prediction; not, as alleged in par 21(e), whether there was in fact a failure (presumably by the applicants rather than the first respondent) to achieve the profits as represented.

11 Paragraphs 18(i), (j) and (k): These representations, and the alleged breaches of them, are entirely unparticularised and it is not clear how these breaches (unless they are simply another way of expressing the complaints as to "Pizza to Go") could result in the par 16 loss. For example, how could a failure to provide a proper account of moneys paid, lead to that consequence?

12 Paragraph 19(c): The respondents are entitled to know what the misleading and deceptive conduct is alleged to be, when it was engaged in and what consequences it is alleged to have had in terms of reliance and damage. This is not stated with any specificity or clarity. For example, the applicant cannot have entered into the 1991 agreement in reliance on the 1995 representation. But the "rolled up" form of pleading includes an assertion to this effect. Nor is it clear whether the applicant is asserting that there were misrepresentations made outside the limitation period which first caused it loss within that period, or whether it is alleging that the misleading and deceptive conduct occurred after 18 October 1997. If the applicant wishes to rely on:

- misleading and deceptive conduct which occurred in 1991 which caused loss after October 1997, and/or

- misleading and deceptive conduct which occurred in 1995 which caused loss after October 1997; and/or

- misleading and deceptive conduct which occurred on specified occasions thereafter which caused loss after October 1997;

then these are different cases, which should be pleaded as such.

13 Paragraphs 22(a) - (c): It is unclear when the first respondent is alleged to have formed the intentions referred to in these paragraphs, which is critical to the question of whether failure to disclose those intentions is capable of being misleading and deceptive conduct, and if so, when that conduct occurred.

14 Paragraphs 22(d) - (e): These allegations are framed at an unacceptable level of generality and are unparticularised.

15 Unlike Saunders v Glev Franchises Pty Ltd (1995) 33 IPR 349, it is not common ground in the present case that the loss was suffered as soon as the franchise agreement was entered into. It is only in a very clear case that a limitation question should be decided in an interlocutory context. If it were clear that the applicants could not formulate a case other than one which was barred by s 82(2) Trade Practices Act 1974 (Cth) ("TPA"), then it might be appropriate simply to strike out the offending paragraphs and refuse leave to replead.

16 In Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR ¶40-853 at p 49,195 Pincus J said:

"... in the ordinary case, where an applicant claiming relief on the basis of misleading conduct inducing him to enter into obligations under a contract points to a series of losses of various kinds flowing from the transaction, there are not as many causes of action as distinct losses. I think the cause of action accrues by the time the applicant has entered into the relevant transaction ..."

Nonetheless, when loss or damage is sustained is a question of fact, to be determined in all the circumstances of the case.

17 The proper course is to afford the applicant an opportunity of repleading so as to formulate the case which it seeks to make in a precise, particularised manner. Whilst it may be that a statement of claim may not be made the subject of an objection in point of law by reason of its failure to show that the cause of action arose within the limitation period (Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1VR 27, 75), in a very clear case the claim may be struck out on the ground that it is frivolous, vexatious and an abuse of the process of the Court (Ronex Properties Ltd v John Laing Construction Ltd [1983] 1 QB 398). Whether this is such a case should await the reformulation of the pleading.

Accessorial liability

18 Paragraph 25 simply alleges that the second to fifth respondents "have been involved in the said contraventions contrary to s 75B of the TPA". Leaving aside the infelicitous reference to s 75B (which is definitional, rather than the source of a liability) the pleading is deficient. The facts necessary to sustain a conclusion that the individuals were involved in the contravention of s 52 should be pleaded. That includes whatever involvement in, or knowledge of, the making of the representations is relied upon and knowledge of the falsity of the representations in question.

Unconscionable conduct

19 Paragraph 26 alleges that the respondents' conduct "after entering into the Agreement" of 1991 was unconscionable in accordance with the provisions of s 51AC of TPA. That section commenced on 1 July 1998.

20 The conduct alleged in pars 10, 12, 13 and 15, if it occurred on the date pleaded, occurred prior to s 51AC achieving the force of law. Yet such particulars as have been given of the par 26 allegation, indicate an intention to rely upon it that conduct as unconscionable in terms of TPA.

21 In the course of his submissions, counsel for the applicants, Mr P King, described the point as to whether conduct occurred before or after a section dealing with conduct of that type came into force, as a "niggardly" point which "is not going to assist the case". I do not agree. In my view, it is important that the applicants' case be properly thought out and expressed at the point of preparing the Statement of Claim. Otherwise a great deal of time and money will simply be wasted. The role of pleadings and particulars was summarised by the High Court in Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658, 664 as follows (omitting citations):

"Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court."

22 I propose to make the following orders:

- that leave be granted to the applicants to amend the proceedings by substituting Glev Franchises Pty Ltd as first respondent;

- that pars 18-24, 25, 26 and 27 of the Statement of Claim be struck out, with leave to replead;

- that the applicants have leave to file an Amended Statement of Claim by 5 February 2001;

- that, if the respondents wish to contend that the Amended Statement of Claim, or any particular paragraphs in it, should be struck out, then an outline of its submissions in that respect is to be served on the applicants, and lodged with my associate prior to 16 February 2001;

- that the matter be listed for further directions at 10.15 am on 20 February 2001, at which time consideration will be given to the future conduct of the proceedings, including expedition and the place of trial.

Costs

23 I will reserve all questions of costs until 20 February 2001. I prefer to deal with costs issues in the light of the pleading in its final form.

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

Associate:

Dated: 20 December 2000

Counsel for the Applicant:	Mr P King
Solicitor for the Applicant:	Business Law Office
Counsel for the Respondent:	Mr C Golvan
Solicitor for the Respondent:	Middletons Moore & Bevins
Date of Hearing:	13 December 2000
Date of Judgment:	20 December 2000