Servcorp Ltd v Nuclei Ltd [2011] FCA 1229 (2 November 2011)

Last Updated: 22 November 2011

FEDERAL COURT OF AUSTRALIA

Servcorp Ltd v Nuclei Ltd [2011] FCA 1229

Citation:		Servcorp Ltd v Nuclei Ltd [2011] FCA 1229
Parties:		SERVCORP LTD ACN 089 222 506, SERVCORP CHIFLEY 29 PTY LTD ACN 102 643 765, SERVCORP MELBOURNE 27 PTY LTD ACN 102 643 738, SERVCORP TOKYO KK, SERVCORP MARUNOUCHI KK and SERVCORP FUKUOKA KK v NUCLEI LTD
File number(s):		NSD 1631 of 2010
Judge:		ROBERTSON J
Date of judgment:		2 November 2011
Catchwords:		PRACTICE AND PROCEDURE – application to amend statement of claim – application for separate hearing of questions of liability and quantum
Legislation:		Federal Court Rules 2011 rr 16.53, 30.01
Cases cited:		Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718; (1999) 217 ALR 495 cited
Date of hearing:	26 October 2011
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	40
Counsel for the Applicants:	Mr JRJ Lockhart SC
Solicitor for the Applicants:	HWL Ebsworth Lawyers
Counsel for the Respondent:	Mr F Gleeson SC with Mr MA Izzo
Solicitor for the Respondent:	Minter Ellison

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1631 of 2010

BETWEEN:	SERVCORP LTD ACN 089 222 506 First Applicant SERVCORP CHIFLEY 29 PTY LTD ACN 102 643 765 Second Applicant SERVCORP MELBOURNE 27 PTY LTD ACN 102 643 738 Third Applicant SERVCORP TOKYO KK Fourth Applicant SERVCORP MARUNOUCHI KK Fifth Applicant SERVCORP FUKUOKA KK Sixth Applicant
AND:	NUCLEI LTD Respondent

JUDGE:	ROBERTSON J
DATE OF ORDER:	2 NOVEMBER 2011
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The applicants file and serve a proposed amended statement of claim by 23 November 2011.
2. The respondent notify the applicants in writing whether it accepts that the proposed amended statement of claim is consistent with these reasons, and if it does not so accept the basis of that position, by 30 November 2011, such document also to be filed.
3. The application that the trial of this proceeding be split on the questions of liability and quantum be dismissed.
4. The matter be listed for directions on 7 December 2011 for the purpose of making orders disposing of the applicants' interlocutory application, fixing a hearing date and making directions to ready the matter for trial.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1631 of 2010

BETWEEN:	SERVCORP LTD ACN 089 222 506 First Applicant SERVCORP CHIFLEY 29 PTY LTD ACN 102 643 765 Second Applicant SERVCORP MELBOURNE 27 PTY LTD ACN 102 643 738 Third Applicant SERVCORP TOKYO KK Fourth Applicant SERVCORP MARUNOUCHI KK Fifth Applicant SERVCORP FUKUOKA KK Sixth Applicant
AND:	NUCLEI LTD Respondent

JUDGE:	ROBERTSON J
DATE:	2 NOVEMBER 2011
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. Servcorp Ltd and the other applicants are providers of real and virtual office space. Nuclei Ltd ("Nuclei") operates or operated websites which allow users to search for real and virtual office space provided by third party suppliers of such office space across 60 countries including Australia.
2. The applicants' claim is that Nuclei has made certain representations each of which is false or misleading or deceptive or likely to mislead or deceive users of the Nuclei Websites; reliance is placed on ss 52, 53(aa) and 55A of the Trade Practices Act 1974 (Cth).
3. These reasons deal with an application for interlocutory orders made by the applicants and filed on 21 October 2011.
4. The orders sought were as follows:
   1. The Applicants be granted leave under rule 16.53 to file and serve a Further Amended Statement of Claim on the Respondent in the form exhibited as EAS-7 to the affidavit of Evan Anthony Stents sworn on 21 October 2011.
      

2. The trial of this proceeding be split on the questions of liability and quantum.

3. The Respondent pay the costs of and incidental to the interlocutory application.
   
4. Such other order as this Honourable Court deems fit.
   

5 Although the proceedings were commenced on 26 November 2010, progress in the matter has been relatively slow. Part of the delay may be attributable to an unsuccessful attempt at mediation.

6. A statement of claim accompanied the application. A defence was filed on 15 March 2011. There has been no discovery of documents, although there has been correspondence between the parties' solicitors about its scope, and no evidence in the substantive proceedings has been filed.

Proposed amendment of the statement of claim

7. As indicated above, this part of the interlocutory application proceeded by reference to exhibit EAS-7 to the affidavit of Evan Anthony Stents sworn on 21 October 2011. However, as the amendment application was developed, it became apparent that the applicants wished to make further amendments to the proposed amended statement of claim or that further amendments to that document were necessary. To some extent therefore I have had to consider the application to amend at an abstract level.
8. The proposed amendments fall into a number of categories.
9. The first is a temporal one. Although paragraph 9 refers to "from a date prior to 2007 to the present" and paragraph 11 states that Nuclei "represents, and has at all material times represented" on the Nuclei Websites certain matters, paragraph 13 in its unamended form merely states that each of the Nuclei Representations "is false, or misleading or deceptive, or likely to mislead or deceive" users of the Nuclei Websites. In these reasons I shall use the single adjective "false" to describe these representations.
10. It is proposed to add "and has from some time no later than 2007" been false and to make consequential temporal changes.
11. In my view these amendments are necessary and appropriate to identify the real issues between the parties. I see no prejudice to the respondent in permitting these amendments. No such prejudice was referred to by the respondent. Indeed I did not understand the respondent separately to oppose this part of the applicants' application to amend. I shall make the usual order as to the costs thrown away by the amendments.
12. The second set of proposed amendments, as amended in the course of argument, was also relatively minor.
13. The applicants allege that Nuclei has been effectively controlled since sometime in 2007 by Regus Plc ("Regus"), a provider of real and virtual office space which owns 49% of the issued share capital of Nuclei. The statement of claim goes on to allege that, and I give only an example, Nuclei has at all material times represented that it is truly independent of any supplier of real and or virtual office space.
14. The applicants seek to amend the particulars of paragraph 13 of the statement of claim where it is alleged that the Nuclei representations are (or were) false. It is proposed to allege that from about 2009 Regus employed a Mr Abrahams in the position of Global Head of Online and during the period in which Mr Abrahams was employed by Regus he was also the Managing Director of Nuclei.
15. In my view these amendments should be permitted. Again I see no real prejudice to the respondent. I agree with the respondent's submission that although these allegations are proposed to be contained in particulars they relate to matters of substance which ought to be pleaded as material facts.
16. I also note that proposed particular (iv), which was especially opposed by the respondent, was abandoned by the applicants in the course of argument.
17. The third set of amendments was the most controversial.
18. I should note first that the proposed amendment to particular (vi) of the alleged false representations, in so far as that particular referred to the alleged listing by Nuclei of office space of other suppliers of office space on its website without their express written consent, which proposed amendment was opposed by the respondent, was abandoned in the course of argument.
19. This leaves for consideration the proposed amendments to bring in the alleged unequal treatment by Nuclei not only of Servcorp but also of "other suppliers of real and/or virtual office space".
20. Proposed particulars (vii) and (viii) were also abandoned in the course of the interlocutory hearing.
21. The applicants submitted that the proposed amendments went to a general practice of not transmitting enquiries to the other suppliers and that the proposed amendment went to the character of the conduct. It was put that if the conduct related to suppliers generally then that was highly relevant to liability. It was put that if the applicants could show preferential treatment generally then that went to the extent and generality of the conduct and thus to liability.
22. The respondents submitted that the case thus far run by the applicants was limited to eight instances. There is some force in this contention. Thus although paragraph 13(c) refers to "all suppliers of real and/or virtual office space"; paragraph 13(d) refers to "users of the Nuclei Websites" and paragraph 13(f) refers to "all suppliers of real and/or virtual office space", at present the particulars to paragraph 13, which are in substance the material facts and should be so pleaded, refer only to the applicants. However I do not regard this consideration as determinative of the application to amend.
23. The respondent also contended that the proposed amendments to bring in the alleged unequal treatment of "other suppliers" had as their apparent purpose to open the gateway to discovery to elicit evidence of enquiries made to Nuclei which were not also transmitted to these "other suppliers". I am not presently asked to consider the Court’s discretion in relation to discovery and it should not be assumed that I would exercise that discretion to order or to refuse such discovery.
24. Subject to the consideration of the proposed amendments in writing, in principle I would grant leave to the applicants to amend to plead as material facts that an online enquiry was, or online enquiries were, made about a specific third-party supplier or specific third-party suppliers of office space and that that enquiry was not, or those enquiries were not, passed on to that third-party supplier or those third-party suppliers. Appropriate particulars should also be provided in the proposed amended statement of claim. Such a document should be filed and served within 21 days.
25. I am not persuaded that more extensive amendments are necessary or appropriate. In my view the way in which the applicants' case has so far been pleaded has been at an abstract level and this has led to general or high-level conclusions being pleaded rather than the material facts pleading the conduct said to found the alleged misrepresentations, as is necessary. If the applicants have a case it is in relation to particular conduct making the representations false.
26. I therefore otherwise refuse the application to amend paragraph 13 in respect of "other suppliers of real and/or virtual office space".
27. The applicants accepted that they should pay the respondent's costs thrown away by the amendments and I will so order.
28. I will also order that the applicants pay 50% of the costs of the respondent of this part of the interlocutory application. In my view this reflects the measure of success on each side, including the applicants' abandonment in the course of argument of some parts of their proposed amendments which were opposed by the respondent.

Proposed separate questions

29. Under r 30.01 of the Federal Court Rules 2011 a party may apply to the Court for an order that a question arising in the proceeding be heard separately from any other question.
30. The basis for the splitting of the hearing on liability and quantum was said by the applicants to be one of efficiency. The volume of evidence expected to be required to demonstrate quantum was expected to be large. Reference was made to the affidavit of Evan Stents sworn 25 October 2011. Further, it was submitted, if the applicants were ultimately unsuccessful on liability, there would be considerable savings by not having to embark upon the preparation of evidence and a hearing in relation to quantum.
31. The respondent opposed the application that the trial should be split. Senior Counsel referred to the warnings given from time to time by the High Court of the dangers of split trials on liability and quantum. He also referred to the decision of Branson J in Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718; (1999) 217 ALR 495 at [12].
32. The respondent submitted that there may be a significant controversy as to whether the applicants have suffered damage at all and a split trial on liability would not assist in resolving that conflict. The case was one where issues of liability and causation of damage were inextricably linked. The respondent also submitted that it seemed that the only real issue remaining was damages since the respondent had removed from its websites all but one of the representations of which the applicants complained and had proffered an undertaking to the Court not to make those representations in the future. It had also, it was submitted, placed on its website corrective advertising which addressed concerns raised by the applicants.
33. Further the respondent submitted that it would not be appropriate for the Court to give consideration to the grant of permanent injunctions or the making of corrective advertising orders without having before it evidence of loss or damage, if any, suffered by the applicants.
34. The applicants' response to this last point was to submit that the split could be done differently, that is without any orders in relation to liability being made at the conclusion of the proposed first hearing.
35. I am not persuaded that it would be "just and convenient" for the order sought by the applicants to be made.
36. I have not been persuaded, by reference to the facts of this case, that there is unlikely to be some relationship, either conceptual or evidentiary, between what has been described as liability on the one hand and quantum on the other.
37. An important consideration in my view is that to split the case, as envisaged by the applicants, that is, leaving discovery and the preparation of evidence in relation to damages until after judgment is given on liability, would add many months to the period during which this controversy would remain unresolved by the Court. I say this leaving to one side any further delay of many months which might be attributable to the resolution of any application for leave to appeal from the interlocutory judgment in relation to liability and the determination of any appeal.
38. I dismiss that part of the interlocutory application, with costs.

Orders

39. At the interlocutory hearing on 26 October 2011 I discussed with counsel the fixing of dates for the trial of the proceeding towards the middle of 2012 and in my view that should be done as soon as possible. Once that is done then a timetable can be set, working backwards from the trial date, dealing with discovery, the filing of affidavits and the like. A hearing time of up to six days was suggested by Senior Counsel for the applicants if, as I have decided, no separate question was to be heard.
40. I direct the applicants to file and serve by 23 November 2011 a proposed amended statement of claim consistent with the leave I have indicated I am willing to grant. I direct the respondent to notify the applicants in writing by 30 November 2011 whether or not it accepts that that proposed amended statement of claim is consistent with these reasons and, if not, why not. That document should also be filed. I dismiss the application that the trial of this proceeding be split on the questions of liability and quantum. I list the matter for directions before me on 7 December 2011 for the purpose of disposing of the applicants’ interlocutory application, fixing a hearing date and making directions, including the matters referred to in the preceding paragraph.
    

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.

Associate:

Dated: 2 November 2011