Ballymoss Pty Ltd v Kollaras and Co Pty Ltd (No 2)

[2021] VCC 1620

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

 Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-20-02138

BALLYMOSS PTY LTD (ABN 16 006 923 717) trading as Monacellars	Plaintiff
v
KOLLARAS & CO PTY LTD (ABN 85 001 919 884) trading as Kollaras Trading Company	Defendant
and
VP BRANDS INTERNATIONAL PTY LTD (ACN 614 813 384) trading as All Stars Liquor	Third Party

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JUDGE:	HIS HONOUR JUDGE COSGRAVE
WHERE HELD:	Melbourne
DATE OF HEARING:	13 October 2021
DATE OF RULING:	25 October 2021
CASE MAY BE CITED AS:	Ballymoss Pty Ltd v Kollaras & Co Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2021] VCC 1620

RULING
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Subject:PLEADINGS - AMENDMENT

Catchwords: Amended defence – amended counterclaim – Australian Consumer Law

Legislation Cited:      Civil Procedure Act 2010 (Vic); Competition and Consumer Act 2010 (Cth); Customs Act1901 (Cth)

Cases Cited:JC Decaux Australia Pty Ltd v Adshel Street Furniture Pty Ltd (2000) 178 ALR 339; McKellar v Container Terminal Management Services (1999) 165 ALR 409

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	G L Meehan with M D Dean	Rennick & Gaynor
For the Defendant For the Third Party	D B Bongiorno M LaPirow	Holding Redlich Davies Moloney

HIS HONOUR:

Introduction

1This is an application by the defendant (“Kollaras”) for leave to file and serve an amended defence and amended counterclaim. 

Background

2In June this year I heard an application by Kollaras to file and serve a proposed defence and counterclaim.  The plaintiff (“Ballymoss”) objected to the amended counterclaim on the grounds that it had no real prospects of success. 

3On 1 September 2021, I handed down reasons refusing Kollaras leave to amend.  The proposed counterclaim had three components:

(a)   a breach of warranty claim;

(b)   a misleading and deceptive conduct claim; and

(c)   a debt claim.

4I found that the warranty claim and the debt claim were sufficiently arguable to be permitted.  But I rejected the claim for misleading and deceptive conduct.  In reaching this view, I said:

“In the context of the ACL, a party should allege in its pleading the damage it has sustained as a result of the conduct which allegedly contravenes the ACL. This entails some identification of how the party is worse off due to the contravening conduct. Given that Kollaras says it has sold the goods to overseas customers, I do not readily see how merely accepting the goods from Ballymoss creates a loss. Whether or not any applicable duties or taxes have been paid on the goods could affect the price which Kollaras was willing to pay for the goods or the price at which it might sell the goods to customers. Kollaras’s profits on the resale of the goods could have been affected. But it seems to me that, as presently framed, the claim would allow Kollaras to buy the goods from Ballymoss, resell them to overseas customers (presumably at a profit as there was no allegation to the contrary) and then, in addition, recover the value of the goods. This could not be an accurate statement of Kollaras’s loss. Such a claim for loss and damage would have no real prospect of success.”

5On 14 September 2021, the Court made orders, inter alia, setting the case down for trial in June next year.  The Court also ordered Kollaras to provide by 16 September 2021, both to Ballymoss and to the third party, VP Brands International Pty Ltd trading as All Stars Liquor, a draft amended defence and counterclaim.  Ballymoss was to advise by 30 September whether or not it consented to the proposed pleading.  If Ballymoss opposed the filing of the new pleading, then Kollaras was to make an application to the Court for leave. 

The proposed amended counterclaim

6The relevant part of the proposed counterclaim put forward by Kollaras is in the following terms:

“10.In delivering the goods to Kollaras, Monacellars represented that:

(a)customs duties had been paid on the goods in full; or

(b)further and alternatively, to its knowledge, customs duties had been paid on the goods in full.

Particulars

The representation was implied from the following:

A.the words in the bottom left hand corner of each purchase order issued by Kollaras prior to Monacellars’ delivery of the goods;

B.the purchase orders, issued by Kollaras prior to Monacellars’ delivery of the goods, specified delivery was to “NON-BONDED” premises (being premises not subject to customs control for goods on which customs duty has already been paid);

C.the goods were delivered, in accordance with those Delivery Orders, to nonbonded premises; and

D.the price for the goods were understood by Monacellars and Kollaras to be “duty inclusive,” meaning that they included a price component in respect of the payment of customs duties upon the import of the goods into Australia, and the goods were not sold on a “duty exclusive,” “duty free” or “underbond” basis.

11.Notwithstanding the representations in paragraph 10 above:

(a)customs duties had not been paid on the goods in full; and

(b)Monacellars knew this.

Particulars

As to paragraph 11(a), Kollaras refers to the particulars to paragraph 5.

As to paragraph 11(b), Monacellars knowledge is to be inferred from its dealings with All Stars, including the false descriptions in those invoices issued by All Stars to Monacellars. This is more fully described in paragraph 10 of Monacellars’ statement of claim on its third party notice dated 30 July 2020. As to Monacellars’ knowledge of that falsity, Kollaras refers to:

A.its possession of invoices describing the goods from All Stars; and

B.its possession of the goods which did not conform with those invoices.

12.By reason of paragraph 11 above, Monacellars’ representation in paragraph 10 above was:

(a)conduct that is misleading or deceptive or is likely to mislead or deceive; and

(b)contrary to s 18 of the Australian Consumer Law, being Sch 2 to Competition and Consumer Act 2010 (Cth).

13.In reliance on the conduct in paragraph 12 above, Kollaras:

(a)accepted the goods;

(b)incurred a debt to Monacellars referrable to those goods;

(c)paid for the goods; and

(d)exported and resold the goods overseas at a price reflecting duty having been paid on the goods (but without recouping any refund drawback pursuant to s 168 of the Customs Act 1901 (Cth));

thereby suffering loss and damage, being its loss on the goods (in purchasing the goods from Monacellars and reselling the goods overseas).

Particulars

With respect to paragraph 13(a) to 13(c), those goods:

A.accepted but not paid for (and for which a debt remains outstanding) are as set out and highlighted in yellow in Annexure A; and

B.accepted and paid for, as otherwise set out in Annexure A.

With respect to paragraph 13(d), Kollaras otherwise repeats particulars E to G to paragraph 5 above.

If the conduct in paragraph 12 had not occurred, Kollaras would:

A. not have bought the products or, alternatively, would not have exported them and would only have sold them on the domestic market; and

B.not have suffered a loss on the goods.”

7From the perspective of Kollaras, the critical change is the introduction of paragraph 13(d).  While the balance of the pleading is basically identical to that which I dealt with in my earlier judgment, this sub-paragraph is new and, according to Kollaras, resolves the criticism of the previous form of pleading. 

8The particulars referred to in paragraph 13 (d), namely those referred to in sub-paragraphs E – G appended to paragraph 5 are in the following terms:

“E.Between October 2019 and December 2019, Kollaras sold the goods to various overseas buyers. The particulars of each sale (including the invoice numbers, dates, price and goods) are particularised in Annexure A hereto.

F.Between October 2019 and December 2019, Kollaras applied to the Australian Border Force (ABF), pursuant to s 168 of the Customs Act 1901 (Cth), for a refund drawback of the customs duties in respect of the goods in a sum of approximately $7,963,047.92 (Drawback Claims). The Drawback Claims (including the export declaration number, drawback claim date, drawback number and the sum claimed) are particularised in Annexure A hereto.

G.As expressed by its letter dated 23 December 2019 to Kollaras, the ABF has declined to process and approve, or alternatively has indicated that it would refuse, the Drawback Claims on the basis that:

1.Kollaras had not submitted documents and information sufficient to establish that import duty was paid in respect of the goods; and

2.the ABF had not been able to identify any records sufficient to establish that import duty was paid in respect of the goods, including via ABF’s own Integrated Cargo System.

Kollaras refers to ABF’s letter dated 23 December 2019 to its solicitors.”

Submissions of Kollaras

9Kollaras contended that the proposed change to paragraph 13 of the counterclaim rectified the problem which existed with the misleading and deceptive conduct claim. 

10Counsel argued that the proposed claim was clear and intelligible.  Paragraph 10 set out the representation made by Ballymoss, namely that certain duties had been paid in full on the goods which Ballymoss supplied to Kollaras. 

11Paragraph 11 alleged that customs duties had not been paid in full and Ballymoss was aware of this.  By way of example, counsel took me to an invoice from All Stars Liquor which showed that it supplied beer to Ballymoss.  The equivalent invoice which Ballymoss held was for Jack Daniels Black (imported).  Thus, Kollaras alleged that Ballymoss received tax invoices containing false descriptions of goods and knew that not all applicable duties were paid.  In the above example, this knowledge derived from the fact that beer attracted a lesser duty than whiskey or bourbon.  Further, counsel pointed out that Ballymoss had made a third party claim against All Stars Liquor for rendering invoices which incorrectly described the products supplied.

12Paragraph 12 of the counterclaim alleged that such conduct by Ballymoss was misleading or deceptive. 

13Paragraph 13 contained the allegation of loss and damage. This was said to arise from Kollaras exporting or reselling the goods at a price which assumed the duty had been paid on the goods (in circumstances where Kollaras did not get the refund drawback of customs duties provided for in section 168 of the Customs Act1901 (Cth)). Kollaras said that it mistakenly sold the goods at a duty inclusive price. Kollaras contended that if it had known the duty was not paid on the relevant products, either it would have not purchased them at all or, if it did buy them from Ballymoss, it would not have sold them overseas. Because Kollaras failed to obtain the drawback, it suffered damage or loss by selling the goods overseas at a price which assumed the applicable duty was paid. As yet, Kollaras has not identified with any precision the amount of the loss claimed.

Submissions of Ballymoss

14Ballymoss raised a number of objections to the proposed amended counterclaim.

15Ballymoss argued that the addition of paragraph 13 (d) added nothing to the pleading because sub-paragraphs 13 (a) – (c) had already been dealt with in the prior ruling.  Sub-paragraph (d), insofar as it referred to exporting the goods and reselling them at a price which assumed duty had been paid, repeated points made and disposed of in the earlier ruling. 

16Ballymoss also argued that Kollaras failed to identify how it was worse off due to the conduct of Ballymoss which allegedly contravened the Australian Consumer Law (“ACL”). As part of this, there was no allegation that Kollaras sold overseas the goods supplied by Ballymoss at a price lower than Kollaras paid, or was liable to pay, Ballymoss.

17Ballymoss also contended that there was no proper plea of causation.  It contended that the pleading failed to allege any cause of the loss.  Ballymoss relied on the judgment of Weinberg J in McKellar v Container Terminal Management Services[1], where his Honour said:

“When a claim is made under s82 of the Act the gist of the cause of action being damage, the statement of claim must allege the damage suffered, and that it was suffered by reason of the contravention of the Act. Material facts must be pleaded which show the required causal link between any alleged contravention of the Act, and any damage to the applicant. A deficient pleading, namely one that does not plead relevant material facts, cannot be saved by particulars. It is not sufficient simply to allege loss and damage as a result of alleged contraventions of the Act; it is necessary to identify a causal connection between the impugned conduct and such loss as is said to have been suffered by the applicants: Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222; 71 ALR 125 per French J, cited with approval by Burchett J in Multigroup Distribution Services Pty Ltd and by Goldberg J in Mitanis.”

[1] (1999) 165 ALR 409, [26].

18Ballymoss also submitted that the proposed paragraph 13 alleged two inconsistent counterfactuals in relation to the claim for loss – namely, Kollaras would not have bought the goods from Ballymoss or Kollaras would not have exported the goods but sold them only on the domestic market.  Ballymoss argued that Kollaras must plead and prove what it would have done but for the misleading and deceptive conduct of Ballymoss.  This is essential in order for the Court to find that Kollaras is worse off as a result of the conduct of Ballymoss.  It is embarrassing to allege inconsistent alternatives one of which must be, to the knowledge of Kollaras, false. 

19Finally, Ballymoss contended that the claim did not identify how the loss under either counterfactual had been suffered or how it was calculated. This posed a significant issue because, in order to obtain damages under the ACL, a party must establish loss and damage as an essential element of the cause of action. Accordingly, Kollaras needed to establish its actual loss and damage in order to have a valid claim for the Court to consider. If there were no alleged loss in connection with the goods purchased from Ballymoss, there was no claim under the ACL against Ballymoss.

Analysis

20Generally speaking, the Court should not allow a pleading amendment if the proposed amendment has no real prospects of success.  The amendment might be futile or fanciful or simply has no realistic chance of improving a party’s prospects of obtaining relief. 

21This case commenced in May 2020.  In the 17 months since inception, Kollaras appears not to have yet worked out precisely the counterclaim it wishes to propound against Ballymoss. 

22In circumstances where:

(a)   there are discrepancies between the pleading and the acknowledged facts;

(b)   the claim is uncertain because Kollaras is not clear about how it would otherwise have acted but for the alleged misrepresentation;

(c)   there is no clear articulation of the loss claimed; and

(d)   the causation plea is vaguer than it should be

I am not satisfied that the proposed amendment submitted by Kollaras has sufficient prospects of success to go forward.

23Paragraph 13(d) of the counterclaim pleads that Kollaras exported and resold the goods overseas at a price reflecting duty having been paid on the goods. However, Annexure A to the counterclaim is inconsistent with the allegation that all stock purchased from Ballymoss was sold overseas. There are examples where the quantity of stock Ballymoss sold to Kollaras is less than the quantity sold overseas. On occasion the quantities shown in the drawback claim, which Kollaras ultimately withdrew, are different again. Moreover, in a letter from its solicitors dated 27 September 2021, Kollaras acknowledged that, on occasion, not all the goods purchased from Ballymoss were exported. Legal practitioners acting for a party are now required to file a proper basis certification which complies with section 42 of the Civil Procedure Act. Under section 42(1A), a practitioner making a proper basis certification must certify that, on the factual and legal material available, each allegation of fact has a proper basis. In my view, there is a problem when a party such as Kollaras is aware that a factual allegation in the proposed pleading is untrue.

24In some respects, a similar issue arises with the different counterfactuals which the counterclaim puts forward.  To conduct its case at trial, Kollaras will need to give evidence explaining how, if it had not been misled, it would have acted, or refrained from acting in a way which would have been of greater benefit, or less detriment, than the course of action it in fact pursued.  When addressing this matter, Kollaras cannot simultaneously say that it would not have bought the goods from Ballymoss and that it would have sold them locally and not exported them.  Only one option can be true and Kollaras should know by now which alternative it will pursue.[2]

[2]        See JC Decaux Australia Pty Ltd v Adshel Street Furniture Pty Ltd (2000) 178 ALR 339 at [21].

25In July 2020, this matter was set down for trial in April this year.  In April 2021, the trial was vacated and the counterclaim struck out.  Since then, there has been a flurry of activity, primarily relating to Kollaras and its amended pleadings.  I would have expected that by this stage of the proceeding, Kollaras would have known and articulated the damages claim it wished to make against Ballymoss.  While I accept that expert evidence can be required sometimes to assist with damages claims, Kollaras did not say at the hearing that it was awaiting the report of an expert or needed one to explain the quantum claim. In circumstances where I expect that Kollaras was aware of the difference between the duty inclusive price and the duty exclusive price of goods it bought from Ballymoss, this would be unsurprising. Kollaras said that it intended to provide more details of loss before the trial but that the current absence of such detail was no reason to disallow the amendment  

26Due to the time which has expired since the issue of the writ and the filing of the initial defence, I am reluctant to allow a party at this point to file an amended pleading which is incomplete and will  inevitably provoke a request for particulars.  This is especially so when the mediation is scheduled to take place in about 5‑6 weeks.  If there are to be meaningful negotiations at the mediation, it is important that Kollaras produces a counterclaim which satisfies the Rules.

27The claim for loss and damage is not as clear as it could be.  During the argument, I asked counsel for Kollaras whether the claim was that, due to the extra cost Kollaras incurred by paying Ballymoss a duty inclusive price for the goods, Kollaras made less profit than it otherwise expected.  Counsel advised the Court that such a statement of the position was inaccurate.  The claim being made by Kollaras was that, in selling the goods bought from Ballymoss overseas, it made a loss on the transaction.  If the case propounded by Kollaras is that:

(a)   because it bought the goods from Ballymoss at what it mistakenly believed was a duty inclusive price;

(b)   that belief affected the price at which Kollaras agreed to sell the goods to buyers overseas; and

(c)   due to Kollaras’s acquisition cost of the goods being higher than anticipated, the export price was too low to make a profit

it should be able to state its case more clearly. The pleading does not reveal the sequence of events by which the alleged misleading conduct led to the consequent loss: when Kollaras contracted to purchase the goods from Ballymoss; when Kollaras contracted to sell the goods to third parties; when Kollaras applied for the drawback. I would infer from paragraph 13 of the proposed counterclaim that it was only after Kollaras bought the goods from Ballymoss that it sold them to third parties overseas. By this time Kollaras would have known the purchase price from Ballymoss. At around this time, I assume that Kollaras applied for the drawback. This application failed or was withdrawn. This was significant because of its financial impact upon Kollaras and the profitability of selling the goods overseas. Given the comments of Weinberg J above,[3] I consider that Ballymoss is entitled to have the material facts set out explaining how the loss came about. As noted earlier, in the present context of a proceeding which began in May 2020, the trial being vacated once, multiple attempts by Kollaras to plead a counterclaim and an approaching mediation, I do not consider it appropriate to permit Kollaras to advance a counterclaim which is not properly pleaded and particularised.

[3]        See paragraph 17 above.

28Kollaras should already have in its possession the pricing information needed to set out Kollaras’s acquisition costs of the goods from Ballymoss, Kollaras’s sale price of the goods to third parties and other incidental costs which it incurred in relation to the transaction. From this, Kollaras should be able to detail its alleged loss.

29The parties made further submissions about issues such as conditional leave to amend or the provision of security by Kollaras.  In circumstances where I refuse leave to amend in the proposed form, I make no comment about these other matters.

Conclusion

30I propose to make orders as follows:

(a)   The application by Kollaras to file an amended counterclaim be dismissed.

(b)   Kollaras pay Ballymoss’s costs of and incidental to the application, such costs to be taxed on a standard basis in default of agreement.

31If either Ballymoss or Kollaras has any objection to the proposed orders, they should file written submissions by 4:00pm on 28 October 2021. The submissions are not to exceed four A4 pages, a minimum 12 point typeface, and 40mm margins on either side of the page. Unless I regard it as necessary or a party persuades me otherwise, I intend to determine the final orders and costs without a further hearing.