Australian Battery Distributors Pty Ltd v Robert Bosch (Australia) Pty Ltd
[2016] FCA 389
•18 April 2016
FEDERAL COURT OF AUSTRALIA
Australian Battery Distributors Pty Ltd v Robert Bosch (Australia) Pty Ltd [2016] FCA 389
File number(s): QUD 719 of 2015 Judge(s): GREENWOOD J Date of judgment: 18 April 2016 Catchwords: CONSUMER LAW – consideration of an application to strike out a statement of claim on the ground that the pleading fails to properly plead causes of action in reliance upon ss 18 and 21 of The Australian Consumer Law, Schedule 2 to the Competition and Consumer Act 2010 (Cth) Legislation: Competition and Consumer Act 2010 (Cth), ss 4, 18, 21 and 22 Date of hearing: 12 April 2016 Date of last submissions: 12 April 2016 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 86 Counsel for the Applicant: Mr M Cooke Solicitor for the Applicant: M Winn, Thynne + Macartney Counsel for the Respondent: Mr J Richardson Solicitor for the Respondent: K & L Gates ORDERS
QUD 719 of 2015 BETWEEN: AUSTRALIAN BATTERY DISTRIBUTORS PTY LTD
ABN 67 071 122 462Applicant
AND: ROBERT BOSCH (AUSTRALIA) PTY LTD
ABN 48 004 315 628Respondent
JUDGE:
GREENWOOD J
DATE OF ORDER:
18 APRIL 2016
THE COURT ORDERS THAT:
1.The amended statement of claim filed on 20 October 2015 is struck out as to those parts of the amended statement of claim going to the formulation of the cause of action based upon a contended contravention of s 21 of The Australian Consumer Law set out at Schedule 2 to the Competition and Consumer Act 2010 (Cth).
2.The applicant is given leave to re‑plead the statement of claim by filing a further amended statement of claim by 4.00pm on Thursday, 21 April 2016 and generally given leave to make the necessary changes to the pleading consistent with the reasons for judgment published today.
3.The applicant is directed to provide such further particulars as it may be capable of providing of the contended representation at para 11c of the amended statement of claim filed on 20 October 2015.
4.The applicant is directed to provide a short synopsis of the calculation of its reliance loss and damage identifying the link between conduct said to contravene s 18 of The Australian Consumer Law and its contended reliance loss.
5.The costs of and incidental to the application are reserved for later determination.
6.Pursuant to ss 23 and 37P of the Federal Court of Australia Act 1976 (Cth) and rr 1.32 and 1.36 of the Federal Court Rules 2011, these orders are made and published from Chambers and the reasons for judgment in support of the orders are published from Chambers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GREENWOOD J:
These proceedings are concerned with an interlocutory application made by the respondent in the principal proceeding Robert Bosch (Australia) Pty Ltd (“Bosch”) for an order that the amended statement of claim of the applicant, Australian Battery Distributors Pty Ltd (“ABD”) filed 20 October 2015, be struck out. The application also seeks the immediate dismissal of the proceeding. However, the application, as argued, was confined to an order for the striking out of the amended statement of claim.
On 26 February 2016, Dowsett J made orders that the applicant file and serve all just particulars of its claim as sought by the respondent by its request for further and better particulars dated 5 February 2016, by 29 February 2016 and that any application by Bosch challenging the adequacy of the particulars be filed and served by 1 March 2016.
Particulars were given on: 15 February 2016, 19 February 2016, 25 February 2016, further particulars on 25 February 2016, additional particulars on 25 February 2016 and on 29 February 2016. At the directions hearing before Dowsett J on 26 February 2016, the applicant undertook to provide a final version of its further and better particulars by 29 February 2016.
At the outset of the hearing of the interlocutory application, a question arose about the function of the final version of the particulars of 29 February 2016. There seemed to be some confusion about whether what was contemplated at the directions hearing was a consolidation of all of the particulars in one document or whether the final particulars were intended to consolidate all previous versions and, additionally, provide further particulars about aspects of the earlier request. In any event, the hearing proceeded on the footing that the latter approach was the one adopted by ABD in formulating the particulars of 29 February 2016.
Between the filing of the amended statement of claim on 20 October 2015 and the provision of the request for particulars on 5 February 2016, an application for security for costs was made by Bosch. Security was ordered. It was provided. Now, Bosch seeks to deal with the amended pleading in the context of the particulars given.
Bosch says that a pleading may be struck out if it is unintelligible, ambiguous or so vague that it fails to identify the material factual allegations to the extent that the other party is unable to discern the real substance of the claim. The whole of the pleading ought to be struck out if it is confusing. If the statement of claim is embarrassing, in the sense that it conveys various meanings or inconsistent allegations, it ought to be struck out. If the pleading contains irrelevant allegations or alternative positions which are confusingly intermingled, the pleading ought to be struck out. Although the pleading of a conclusion may properly constitute the pleading of a material fact, a pleading which simply asserts a conclusion not drawn from other facts pleaded is embarrassing.
As to the question of the pleading of a cause of action, a pleading will be struck out if it does not disclose a reasonable cause of action in the sense that, on the facts pleaded, the contended cause of action is so untenable that it cannot possibly succeed. To succeed on this ground, Bosch must show that the claims made against it are hopeless and would have no chance of success if the action were to proceed to a hearing. A cause of action will have no real prospect of success where the pleading reveals a fanciful rather than a realistic prospect of success.
It is important to remember that a pleading is to be confined to the pleading of material facts. A respondent will then either admit the fact or join issue on the fact thus framing the controversy for the trial of the action. The pleading of a cause of action will be proper so long as it enables an applicant to prove the cause of action by adducing evidence that makes good the proof of the matters in controversy. That is why an applicant does not plead matters of evidence. It is neither necessary nor proper to do so. Particulars may well be required of pleaded matters of fact. Almost universally, the provision of particulars will not be likely to cure a “fundamental” problem with the pleading.
ABD says that the amended statement of claim taken together with the consolidated particulars plus the additional matters in the particulars of 29 February 2016 taken together with the evidence which has been put on made up of seven affidavits, puts Bosch on notice fairly and properly of the case it has to meet. The affidavits are these: affidavit of Mark Winn filed 12 April 2016; affidavit of Mark Winn filed 26 February 2016; affidavit of Geoff Thomas filed 23 October 2015; affidavit of Adam Thomas filed 23 October 2015; affidavit of Narelle Thomas filed 23 October 2015; affidavit of Mark Winn filed 28 August 2015.
Bosch, however, says that ABD has amended its claim and has now provided six sets of particulars to support it. Two causes of action are advanced by the amended pleading in reliance upon ss 18 and 21 of The Australian Consumer Law (“ACL”) which is Schedule 2 to the Competition and Consumer Act 2010 (Cth).
As to the relevant statutory provisions of the ACL, they are in these terms:
4 Misleading representations with respect to future matters
(1) If:
(a)a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b)the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.
(2)For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a) a party to the proceeding; or
(b) any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
(3) To avoid doubt, subsection (2) does not:
(a)have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or
(b)have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.
(4)Subsection (1) does not limit by implication the meaning of a reference in this Schedule to:
(a) a misleading representation; or
(b) a representation that is misleading in a material particular; or
(c) conduct that is misleading or is likely or liable to mislead;
and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.
18 Misleading or deceptive conduct
(1)A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2)Nothing in Part 3‑1 (which is about unfair practices) limits by implication subsection (1).
Note: For rules relating to representations as to the country of origin of goods, see Part 5‑3.
21 Unconscionable conduct in connection with goods or services
(1) A person must not, in trade or commerce, in connection with:
(a)the supply or possible supply of goods or services to a person (other than a listed public company); or
(b)the acquisition or possible acquisition of goods or services from a person (other than a listed public company);
engage in conduct that is, in all the circumstances, unconscionable.
(2)This section does not apply to conduct that is engaged in only because the person engaging in the conduct:
(a)institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
(b)refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.
(3)For the purpose of determining whether a person has contravened subsection (1):
(a)the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and
(b)the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.
(4) It is the intention of the Parliament that:
(a)this section is not limited by the unwritten law relating to unconscionable conduct; and
(b)this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and
(c)in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of:
(i) the terms of the contract; and
(ii)the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract.
22 Matters the court may have regard to for the purposes of section 21
(1)Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to:
(a)the relative strengths of the bargaining positions of the supplier and the customer; and
(b)whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and
(c)whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and
(d)whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and
(e)the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and
(f)the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; and
(g) the requirements of any applicable industry code; and
(h)the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and
(i)the extent to which the supplier unreasonably failed to disclose to the customer:
(i)any intended conduct of the supplier that might affect the interests of the customer; and
(ii)any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and
(j)if there is a contract between the supplier and the customer for the supply of the goods or services:
(i)the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and
(ii) the terms and conditions of the contract; and
(iii)the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and
(iv)any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and
(k)without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and
(l)the extent to which the supplier and the customer acted in good faith.
…
In circumstances where the contention is that a person, in trade or commerce, in connection with the acquisition or possible acquisition of goods or services has engaged in conduct that is, in all the circumstances unconscionable, s 22(2) recites the same considerations to be taken into account as those set out in s 22(1) modified, of course, to the circumstances of the acquisition or possible acquisition.
As to the s 18 claim, Bosch says that, as framed, it is predicated upon misrepresentations, as to future matters, made without reasonable grounds, upon which ABD relied and which did not come to pass, and which caused the loss and damage pleaded.
Bosch says that there is a disconnection between the matters the subject of the representations and the facts relied upon as to the falsity of the representations. Bosch says that in the one case where there is a pleaded connection between the alleged representations and the facts going to falsity of those representations (paras 11c and 20a of the amended statement of claim), the representation is incapable of amounting to a representation upon which a claim under s 18 could be maintained.
Further, there is said to be no logical causal connection to the damage alleged to have been suffered. Bosch says that what is said to have been done in reliance on the representations was to enter into a Warehousing Agreement on 26 February 2015 and, inferentially, ABD then began performing the terms of the agreement. Bosch says that there is no assertion that the agreement did not contain particular terms relevant to the case pleaded.
As to loss and damage, Bosch says that the following expenditures are sought to be made the subject of that claim: debts for goods received and on sold; and loss of business valued at $1,144,536 based upon a multiple derived from the 2014/2015 financial year. Bosch says that there is no pleaded connection between entry into the Warehousing Agreement and the loss and damage pleaded and thus, the s 18 claim has no real prospect of success.
As to the s 21 claim based on the statutory prohibition upon a person engaging in unconscionable conduct in connection with the supply or possible supply or acquisition or possible acquisition of goods or services, Bosch says that s 21 requires conduct that is contrary to good conscience and that s 21 is not directed to engaging in conduct generally but is directed to conduct related to a particular transaction. Bosch says that it is impossible to discern from the pleading what conduct the applicant seeks to impugn or what is pleaded by way of circumstances alleged to render the conduct relied upon, unconscionable. Finally, Bosch says that the loss must be “caused” by the conduct and here the applicant has failed to identify the requisite causal connection between conduct and loss and damage: that is, the causal connection between the indebtedness and the 2014/2015 reduction in profit and loss.
The amended statement of claim
It is now necessary to turn to the pleading.
Leaving aside preliminary matters, ABD says that from 16 October 2009 it was the exclusive distributor of Bosch batteries and other products of Bosch, in Queensland, pursuant to a written distribution agreement: 4a. From 27 June 2012, pursuant to a written agreement with Bosch, ABD was the non‑exclusive distributor in New South Wales (“NSW”) of Bosch products: 4b.
Bosch’s knowledge
From no later than about February 2012, Bosch, by Mr Clarke, was aware of seven particular facts.
First, that ABD had “rapidly expanded and continued to grow its business as a distributor of Bosch products”: 5a.
As to that, ABD says by the particulars of 29 February 2016 that from 2009 onwards the volume of batteries ordered pursuant to the distribution agreement of 27 June 2012 increased on a month to month basis. ABD attaches a document called Annexure A which sets out a sequence of Bosch invoices commencing on 31 May 2012 and running through to 21 August 2015. All of the invoices at Annexure A post‑date February 2012.
However, the particulars (1b of 29 February 2016) say that from 2009 to February 2012, Mr Clarke visited ABD’s premises at least once a quarter to market Bosch products and give ABD updates on new Bosch products and to “mention” the activities of other battery companies in the market. Annexure B to the particulars sets out some aspects of engagement between Mr Clarke and Mr Adam Thomas and also with Ms Narelle Thomas in January, November and December 2014.
Further particulars of 5a are given to this effect. The applicant engaged more staff than it previously had in 2009; the applicant purchased “more and larger trucks”; in or around July 2012 the applicant entered into a commercial arrangement to store batteries at Beerwah and Virginia in Queensland and, in that context, Mr Clarke was notified shortly thereafter in a telephone conversation with Mr Adam Thomas in which Mr Thomas told Mr Clarke that ABD now had sheds in Beerwah and Virginia. In the particulars of 19 February 2016, particulars of 5a are given at 1a, b, c, d, e, f, g, h, i and j of the particulars. In those particulars, ABD says that on and from February 2012 it embarked upon a program of expansion by appointing extra staff for sales and warehousing management. It increased its warehouse storage capacity. It incurred additional expenses in expanding in Queensland and into NSW. Through Mr Adam Thomas, ABD had monthly exchanges with Mr Clarke about orders of stock and projections of Bosch batteries. They discussed the financial burden of the expansion. They discussed the trading account debt. They discussed growth rates and forward projections, among other things.
Second, ABD was “being required [by Mr Clarke] to constantly increase its stock holding the Bosch products in order to service new accounts”: 5b.
As to that matter, ABD provides by way of particulars a document called Annexure C which sets out the date of particular conversations, the participants and the content of the conversations. Annexure C also contains four emails, a remittance advice of 15 March 2013 and a bank payment request of that date for $57,543.18. As to the schedule of conversations, the exchanges range from 15 March 2013 to 18 December 2014 (10 in all). In the particulars of 19 February 2016, ABD at 2a says, in effect, that from, if not before, February 2012 to early 2015, Mr Adam Thomas would have at least one monthly telephone call with Mr Clarke about the growth of the sales of Bosch batteries within the ABD business. At 2b, c, d, e, f, g and h, the content of particular conversations are set out.
Third, ABD was experiencing “erratic lead times for the supply by [Bosch] of [Bosch products] which delays had been caused by inconsistent internal processes adopted by [Bosch] in the supply of those products”: 5c. No request was made for particulars of 5c.
Fourth, Bosch had adopted “inconsistent practices in respect of the manner in which it billed [ABD] for the supply of [Bosch products]”: 5d.
Fifth, the “expansion and continuing growth of [ABD’s business], the delays and inconsistent billing practices had placed, and was placing, [ABD] under significant financial strain to the point where it was experiencing ongoing difficulties paying its accounts with [Bosch]”: 5e.
Sixth, ABD’s business “depended upon credit being provided by [Bosch], which credit enabled [ABD] to purchase the necessary stock from [Bosch] to fulfil orders placed by its customers”: 5f.
Seventh, Mr Clarke had been on almost a monthly basis “making oral representations to Mr Adam Thomas”, ABD’s General Manager, in person and over the telephone to the effect that “Mr Clarke would obtain longer trading terms and higher credit limits for [ABD] so long as [ABD] continued to place, and increase, its orders for [Bosch products]”: 5g.
Three emails are given as particulars dated 7 February 2012, 8 February 2012 and 10 February 2012. Annexure C is also referred to as a document in support of that contention: particulars 29 February 2016; see also 3a, b, c, d, e and f of the particulars of 19 February 2016.
Mr Clarke’s commission remuneration
ABD pleads that Mr Clarke earned commission, remuneration or benefits from Bosch calculated by reference to, among other things, the volume of the Bosch products ordered by ABD: 6.
5b and 5g leads to a greater debt to Bosch
In reliance upon the “matters” referred to at 5b and 5g, ABD continued to order Bosch products from about February 2015, from Bosch and continually increased its indebtedness to Bosch: 7.
As a result of continuing to order Bosch products in reliance upon the 5b and 5g matters, ABD’s Credit Trading Account with Bosch by May 2014 had risen to more than $2 million: 8.
Bosch wants reductions in the debt
In “early 2014” Bosch began to require ABD to reduce the “size of the Credit Trading Account”: 9.
The 9 January 2014 meeting
On 9 January 2014, Bosch, by Mr Clarke and Mr Wallis, met with ABD by Mr Geoff Thomas, Mr Adam Thomas and Ms Narelle Thomas, to discuss, among other things, the prospect of Bosch and ABD entering into a warehousing agreement: 10.
During the 9 January 2014 meeting, Mr Clarke made a number of representations.
Mr Clarke “orally represented” that the warehousing agreement “would involve” ABD agreeing to hold Bosch’s stock of Bosch products in ABD’s warehouses at levels which exceeded the requirements of ABD’s business: 11a.
Mr Clarke orally represented that Bosch “would pay a fee” to ABD “for the sale of products to Bosch customers”: 11b.
In the particulars of 29 February 2016 at 4a, ABD says that Mr Clarke said particular words including “you will get a fee for sale and delivery of Bosch product”. ABD says that it is to be inferred from the words used at 4a of the particulars that the phrase “fee for sale” was to be a commercial fee for storage and delivery of batteries the subject of the warehousing agreement then under discussion. At 4c of the particulars, ABD refers to a telephone conversation between Mr Clarke and Mr Adam Thomas in the “second quarter” of 2014 about what it would cost to store and send a battery from ABD’s warehouses. ABD says that a week later Mr Clarke postulated the costs as: $10 per battery for storage; $10 per battery for freight within Brisbane or Sydney; and $3 per battery to re‑brand the battery.
Mr Clarke orally represented that the warehousing agreement “would benefit” ABD “greatly and help [ABD’s] cash flow”: 11c.
Having pleaded these oral representations of 9 January 2014 at 11, ABD refers to an email of 13 January 2014. ABD says that by an email from Mr Clarke to Mrs Narelle Thomas of 13 January 2014, Bosch “confirmed the improved cash flow, increased turnover and the resultant reduction in [ABD’s] account total being [ABD’s] debt to [Bosch] during the coming year as a result of the introduction of the Warehousing Agreement into [ABD’s] business”: 12.
Presumably, the reference to the 13 January 2014 email is a reference to a statement that ABD would enjoy or expect increased turnover by reason of the provision of warehousing services by ABD to Bosch and the acquisition by Bosch of warehousing services from ABD the subject of the contended representations at 11, coupled with a statement of the likely reduction in ABD’s account with Bosch which would flow from the increased turnover due in part from the fee paid to ABD for the provision of warehousing services.
Bosch says that it simply cannot understand what 12 is talking about.
The June/July 2014 representations
ABD says that about six months after the oral representations of 9 January 2014, Mr Clarke made further oral representations to Mr Geoff Thomas, Mr Adam Thomas and Ms Narelle Thomas in June and July 2014 to the effect that the warehousing agreement: “would provide a buffer of stock to help reduce delays in the availability of [Bosch products]”: 13a; “would facilitate rapid growth but at the same time significantly reduce the amount of the Credit Trading Account”: 13b; “would result in increased sales by [ABD] of [Bosch products]”: 13c. Particulars of these three representations are given by Annexure D to the particulars of 29 February 2016. The words used by Mr Clarke are quoted.
The 18 December 2014 email
ABD says that about six months later on 18 December 2014 Mr Clarke “encouraged” Mr Adam Thomas to do two things. First, “match [ABD’s] monthly payment due to [Bosch] with further orders for a like amount”. Second, order $250,000 worth of Bosch products “for that month on the basis that, if such an order was placed, [Bosch] would ensure that [ABD’s] trading terms were increased from 60 days to 90 days”: 14.
The credit limit representation
On 29 December 2014, Mr Clarke represented to Mr Adam Thomas that ABD’s credit limit for the 2015 financial year would be $1,175,000: 15. In the particulars of 29 February 2016 at 6, particulars are given of the conversation and the method of calculation of the amount.
The Warehousing Agreement
On 26 February 2015, ABD and Bosch entered into a “Warehousing Agreement”: 16.
ABD says that in entering into the Warehousing Agreement it relied upon the matters described at 11b (the fee payment), 11c (the agreement would benefit ABD and help its cash flow), 12 (the projection), 13a (stock buffer), 13b (reductions to the Credit Trading Account), 13c (increased sales by ABD) and 15 (an increased credit limit for the 2015 financial year): 17.
ABD then pleads circumstances in which the Warehousing Agreement was signed. ABD says that: Mr Clarke rang Mr Geoff Thomas on the day of signing and sought his signature on the document “on an urgent basis”; Mr Clarke “insisted” that Mr Thomas should “not cross anything out of the agreement saying ‘if there was anything bad in it I would tell you’”: 18.
Five other steps in reliance
ABD says that it took five further steps in reliance upon the matters described at 11b, 11c, 12, 13a, 13b, 13c and 15. ABD pleads that it: increased its insurance coverage to cover Bosch’s stock: 19a; it created a designated area for the exclusive storage of Bosch’s stock within its warehouses: 19b; it undertook and implemented regular audits and stock‑takes of Bosch’s stock: 19c; it upgraded its pallet racking in its warehouses to Bosch’s requirements: 19d; and, it continued to order Bosch products at levels required by Bosch and “thereby increased its indebtedness to [Bosch] under the Credit Trading Account”: 19e.
As to 19a, ABD gives particulars of the increased insurance coverage and the cost, at 7 of the 29 February 2016 particulars. As to 19d, ABD sets out, at 8 of those particulars, the provisions of the “Distribution Agreement” and the “Warehousing Agreement” relating to pallet racking requirements for stock. As to 19e, ABD sets out, at 9 of those particulars, the notion that “indebtedness” refers to the “Final Amount” said to be owed by ABD to Bosch under the Credit Trading Account which was made up of “a running account that commenced in or around 2009 and ended in early 2015”. Those particulars are cross‑referenced to “Annexure A” (the collection of invoices). The particulars describe the composition of the “Final Amount” by reference to six “invoice or order numbers” totalling $892,160.54 across the period 21 January 2015 to 15 June 2015.
ABD says that the arrangements contemplated by the Warehousing Agreement were implemented: 20.
Implementation of the Warehousing Agreement reveals things
ABD says that following the implementation, as a “matter of fact”, “the representations” made as described at 11c (the agreement would benefit ABD and help its cash flow), 12 (the projection) and 13 (that is, 13a (stock buffer), 13b (reductions to the Credit Trading Account) and 13c (increased sales by ABD)) “proved false”: 20.
ABD says that those representations proved false because the Warehousing Agreement did not, as a matter of fact: benefit ABD greatly and help ABD’s cash flow (the 11c matter): 20a; improve ABD’s cash flow (the 11c matter): 20b; increase ABD’s turnover (the 13c matter): 20c; result in a reduction in ABD’s account total, being the debt due to Bosch (the 13c matter): 20d.
A “number of issues”
Having pleaded those matters at 20, ABD then describes at 20 “a number of issues” it says it “encountered”. ABD says that when it required batteries, it was required to inform Bosch that it required a “full pallet of batteries” notwithstanding that ABD only required a “small portion of batteries from the pallet” (Mr Port is said to concede that matter in an affidavit affirmed on 1 October 2015 in the proceedings). ABD says that “instability” in the flow of stock from month to month occurred with significant shortages followed by over‑supply.
Steps taken by Bosch
ABD says that on 23 February 2015, Bosch “unilaterally reduced [ABD’s] credit limit from $1.2 million to $750,000”: 21.
In or around “late February or March 2015”, Bosch unilaterally reduced ABD’s credit limit “from $750,000 to zero”: 22.
In or around 6 April 2015, Bosch unilaterally reduced the time period within which ABD was required to pay invoices from Bosch such that ABD was required to pay immediately on receipt of any of the Bosch products: 23.
On 13 May 2015, Bosch, by Mr Mayne, advised ABD, by Mr Geoff Thomas, by email, that it had decided to house its stock of Bosch products at another warehouse: 24.
On or about 22 May 2015, Bosch removed all of its stock from ABD’s warehouses: 25.
ABD says that the “conduct” referred to at 20 (the falsity of the 11c, 12 and 13 representations in the four respects mentioned: no benefit to cash flow; no improvement in cash flow; no increase in turnover; and no reduction in total debt) and the “conduct” at 21, 22, 23 and 24 had two features. First, it “meant” that ABD was “effectively unable to continue to conduct its business”. Second, it “enabled” Bosch to facilitate the takeover of the conduct of the business undertaking formerly conducted by ABD, by Alco Batteries, by no later than June 2015: 26.
ABD says that each of the representations described at 11b, 11c, 12, 13a, 13b, 13c and 15 were representations as to future matters. They were made without reasonable grounds: 29.
ABD says that Bosch, by making the representations as to future matters at 11b, 11c, 12, 13a, 13b, 13c and 15, without reasonable grounds, engaged in misleading or deceptive conduct in contravention of s 18 of the ACL: 29 and 30.
ABD says that as a result of the conduct pleaded at 5a to 5g, 6, 9 to 15, 18 and 20 to 25, Bosch engaged in unconscionable conduct in contravention of s 21 of the ACL: 31.
Loss and damage
ABD says that by reason of either or both of those contraventions, ABD has suffered loss and damage comprising, among other things, “the amount of its indebtedness [to Bosch] under the Credit Trading Account and the loss of its business”: 32.
In the particulars of 29 February 2016 at 14, ABD says as to the “indebtedness” that this head of loss is the amount owed by ABD to Bosch under the terms of the Credit Trading Account for Bosch goods purchased (and presumably sold by ABD) which is particularised as the “Final Amount” at 9b of those particulars as $892,160.54. As to the “loss of business”, ABD says that it incurred trading losses that eroded its “Equity” in the balance sheet for the financial year ending 30 June 2015 as a result of Bosch’s “breaches and contraventions” pleaded at 30 (the s 18 conduct) and 31 (the s 21 conduct) and the conduct pleaded at 20 to 24 and 26. Also, as a consequence of the matters pleaded at 8b(ii) (which must be an incorrect reference and seems related to 26a of the pleading which in turn is reliant upon 20 to 24) ABD stopped “trading its business”. The net trading loss before tax is said to be $569,413: see Annexure F. As to the loss of the business itself, the business is said to have had a value of $1,144,536 based on a multiple of three times the adjusted profit of $376,423: Annexure G.
ABD says that to compensate it for the loss and damage suffered as described at 32, it seeks an order preventing Bosch from enforcing any provision of the Distribution Agreement of 16 October 2009, the Distribution Agreement of 27 June 2012; the Warehousing Agreement of 26 February 2015; and any “term” associated with the operation of the Credit Trading Account: 33a.
The s 18 claim is framed in this way:
(1)Bosch makes the representations on 9 January 2014; 13 January 2014; June/July 2014; and 29 December 2014, at 11b (payment of the warehousing “fee”), at 11c (the Warehousing Agreement to benefit ABD and greatly help cash flow), at 12 (the confirmation statement), at 13a (the stock buffer), at 13b (facilitate growth), at 13c (increased sales), and at 15 (a credit limit of $1,175,000).
(2)All of those representations concern future matters.
(3)They were all made without reasonable grounds.
(4)They are all representations “taken” to be misleading and thus in contravention of s 18(1).
(5)Bosch is “taken” not to have had reasonable grounds unless it adduces some evidence in the proceeding to the contrary.
(6)Assuming some evidence is adduced by Bosch to the contrary and the result contemplated by s 4(2) is not then engaged, ABD must prove that Bosch did not have reasonable grounds for making the representations (which, for present purposes, are taken to have been made), as to those future matters.
(7)ABD relied on those representations in entering into the Warehousing Agreement.
(8)As things transpired, after implementation of the Warehousing Agreement, the subject matter of some representations relied upon by ABD (11c, 12, 13b and 13c but not 11b, 13a or 15) proved not to be so as the represented “benefit” (11c), “great help” to ABD’s cash flow (11c), improvements to its cash flow (12), increased turnover (13c) and reductions in the debt to Bosch (13b) did not, in fact, occur.
(9)The “reliance loss” so arising is said to be that ABD has a debt to Bosch on the Credit Trading Account of $892,160.54 (or perhaps some other amount although particular 9b of 29 February 2016 suggests that amount) which presumably ABD says it would not have incurred or “suffered” but for reliance upon the representations in contravention of s 18 as framed. ABD says it also suffered a net trading loss in the financial year 2015 of $569,413 as part of the reliance loss. However, each of those items of reliance loss are also said to be losses attributable to “conduct” at 20 (the 11c, 12, 13b and 13c reliance matters proving to be false), 21 (reducing the credit limit to $750,000), 22 (reducing the credit limit to zero), 23 (the requirement to pay for goods on delivery), 24 (ceasing to house stock with ABD) and 26 (the combination of factors at 20 to 24 rendering ABD unable to conduct its business and Alco Batteries taking over the business).
There are some difficulties with that formulation.
First, ABD does not plead a “no transaction” case in the sense that it is not said that but for Bosch engaging in the misleading conduct as framed, ABD would not have entered into the Warehousing Agreement at all. Had that been the contention, things flowing from decisions taken by Bosch under the agreement said to cause loss to ABD would more obviously be in the nature of a reliance loss. Rather, ABD says it acted in reliance on the representations which proved to be misrepresentations in entering into the Warehousing Agreement.
The relationship between the representations as to the future matters and the provisions of the Warehousing Agreement governing those matters or the functioning of the future relationship from 26 February 2015 is not clear. The Credit Trading Account seems to have been established under the earlier Distribution Agreements and by May 2014, about three months after the critical 9 January 2014 meeting and representations, it was already at $2 million.
Second, but related to the first, the reliance loss is said to include the balance of the Credit Trading Account. It is not clear how that account is either in the “Final Amount” at all by reason of the relevant conduct or is, alternatively, higher by an identifiable margin than it would have been but for the misleading conduct. On both these fronts of the role of the terms of the Warehousing Agreement and the causal link to reliance loss, raises questions.
There is also a question of the extent of the contribution to ABD’s claimed reliance loss of the conduct at 21, 22, 23, 24 and 26. It is not clear whether ABD says it suffered a reliance loss flowing from conduct at those paragraphs by reason of the representations not proving to be correct or whether it suffered a loss contributed to by conduct described at those paragraphs that would not have been possible but for entry into the Warehousing Agreement in reliance upon the misleading conduct.
However, ABD pleads a reliance loss flowing from reliance upon the representations as earlier explained. If the Warehousing Agreement and things attributable to it rather than the pleaded conduct proves to be a complete answer to the claim as pleaded, so be it.
As to the representation that the Warehousing Agreement “would benefit [ABD] greatly” (11c), it is not clear to me what that representation means. Perhaps, as Bosch suggests, it is mere “puffery” or does not even reach the level of “puffery”. Perhaps it has some content contextually having regard to 11a and 11b and what was said at 12.
I propose to make a direction that ABD provide such further particulars as it may be able to provide of the content of the representation that the Warehousing Agreement “would benefit [ABD] greatly”. I propose to also direct ABD to provide a short synopsis of the calculation of its loss and damage identifying the link between the conduct said to contravene s 18 and the reliance loss.
As to the s 21 unconscionable conduct claim, ABD must plead conduct on the part of Bosch which is, in all the circumstances, unconscionable: contrary to good conscience. Without limitation as to any other matters, the “matters” the Court may have regard to (and thus matters upon which ABD might rely) in determining whether conduct in contravention of s 21 has occurred, includes one or more of the 12 matters at s 22.
The s 21 claim is framed this way:
(1)Bosch engaged in conduct. The conduct is said to be as follows:
(2)Knowing from no later than February 2012 the “facts” at 5a, 5b, 5c, 5d, 5e, 5f and 5g.
(3)Mr Clarke derived remuneration by way of commission on the volume of Bosch products ordered by ABD: 6.
(4)Bosch, in early 2014, required ABD to reduce the size of its Credit Trading Account (which by May 2014 was $2 million): 9.
(5)The representations made at the 9 January 2014 meeting (10 and 11); the sending of the email on 13 January 2014 (12); the June/July representations (13); the sending of the email on 18 December 2014 by Mr Clarke (14); and representing that ABD’s credit limit would be $1,175,000 for the financial year ending 30 June 2015 (15).
(6)Mr Clarke was the party engaging in the conduct for Bosch.
(7)The behaviour of Mr Clarke in connection with the signing of the Warehousing Agreement (sign urgently; don’t change anything): 18.
(8)The 11c, 12, 13b and 13c matters proving to be false.
(9)Engaging in the 21, 22, 23, 24 and 25 conduct as earlier described. The conduct at these paragraphs including 20 is said to have had the consequence that ABD could not continue to trade and Bosch was enabled in facilitating Alco Batteries taking over the conduct of the ABD business.
(10)ABD suffered loss and damage flowing from the unconscionable conduct. That loss and damage is said to be the same loss and damage which was caused by the s 18 conduct or alternatively contributed to by the s 18 conduct.
The matters at (2), (3), (4), (5) and (6) seem to be circumstances in which the conduct at (7), (8) and (9) above is impugned as conduct in contravention of s 21 of the Act. Some aspects of (2) to (6) above might be said to also be the expression of unconscionable conduct itself. The matters at 26 are said to flow from the unconscionable conduct (as pleaded) at 20 to 24. The primary conduct complaint at the hearing of the interlocutory application seemed to be that Bosch made the ABD business unworkable in a number of pleaded respects but, in particular, Bosch made ABD order an entire pallet load of batteries from time to time when all ABD wished to do was order two types of batteries. Particulars 12a, b and c of the particulars of 29 February 2016 are relevant to that matter.
It seems to me that there is some force in the submissions of Bosch that the pleading of the s 21 contravention on the ground of engaging in unconscionable conduct does not identify those matters which are the relevant circumstances within which conduct is said to have occurred which is said to be the unconscionable conduct, on the one hand, and the conduct itself, on the other hand. In other words, there is some confusion in the pleading as it stands about the impugned conduct (the steps taken) and the circumstance within which conduct is to be characterised as unconscionable conduct.
However, the pleading in that regard can no doubt be amended to reflect the relevant circumstances and then the conduct said to go beyond good conscience.
Although there is some confusion in the pleading about these matters, I do not accept, generally, that there is such a fundamental failure in the pleading that Bosch is not capable of understanding the essential case made against it, whether a good or bad case on the merits. The essence of the matter is apparent. Bosch has already pleaded to the amended statement of claim. The case sought to be made, although suffering from some pleading deficiencies, is discernible. The pleading, however, must be put on a proper footing for trial. I am conscious that much time, effort and money has already been spent particularising the existing pleading. No doubt that work and material can be used. I am satisfied that the proper course is to strike out the pleading and give leave to re‑plead the cause of action so as to plead the unconscionable conduct case in a sequential disciplined way identifying the relevant circumstances within which, ultimately, conduct on the part of Bosch is said to have occurred.
I am anxious to avoid money being wasted on interlocutory applications and at the trial.
Accordingly, I will order that the statement of claim be struck out as to those parts of the amended statement of claim going to formulation of the unconscionable conduct claim. It may be more efficient to reframe the amended statement of claim in its entirety but that is a matter for ABD. Leave is generally given to make the necessary changes to the pleading consistent with these reasons. The amended statement of claim is to be further amended and filed by 4.00pm on Thursday, 21 April 2016. The further amended statement of claim is to be served upon Bosch by 11.00am on 22 April 2016.
I certify that the preceding eighty‑six (86) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate:
Dated: 18 April 2016
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