Bonson Pty Ltd ACN 009 339 735 v Lange Nominees Pty Ltd ACN 008 867 534

[1997] FCA 1066

FEDERAL COURT OF AUSTRALIA

TRADE PRACTICES  - misleading and deceptive conduct - whether particulars of statement of claim revealed conduct which would be likely to mislead or deceive - no factual basis for claim - statement of claim struck out - application dismissed unless substituted statement of claim filed within certain period.

Trade Practices Act 1974 (Cth) s 52, s 82.

BONSON PTY LIMITED ACN 009 339 735 v LANGE NOMINEES PTY LTD
ACN 008 867 534
WG 64 OF 1997

FRENCH J
PERTH
30 SEPTEMBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WG 64  of   1997

BETWEEN:

BONSON PTY LIMITED
ACN 009 339 735

APPLICANT

AND:

LANGE NOMINEES PTY LTD
ACN 008 867 534

RESPONDENT

JUDGE:

FRENCH J

DATE OF ORDER:

30 SEPTEMBER 1997

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1. The statement of claim be struck out.

2. The application be dismissed unless a substituted statement of claim is filed
              and served on or before 6 October 1997.

3. The applicant is to pay forthwith the respondent’s costs of the motion to be
              taxed on a solicitor/client basis.

4. The motion is otherwise adjourned to 15 October 1997 at 9am.

5. The directions hearing is relisted for 15 October 1997 at 9am.

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

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WG 64 of 1997

BETWEEN:

BONSON PTY LTD
ACN 009 339 735

APPLICANT

AND:

LANGE NOMINEES PTY LTD
ACN 008 867 534

RESPONDENT

JUDGE:	FRENCH J
DATE:	30 SEPTEMBER 1997
PLACE:	PERTH

REASONS FOR JUDGMENT

The present proceedings were commenced by application filed on 23 June 1997.  In its statement of claim the applicant makes the following principal allegations:

1.That in June 1995 it commenced negotiations with the respondent for the purchase of a second-hand tyre retailing business then owned and operated by the respondent through its director, Lange;

2.Lange is said to have represented to Dare, on behalf of the applicant, that if the applicant were to purchase the business the respondent “would remain the agent of the Applicant in sourcing and purchasing second-hand tyres for sale”;

3.The agreement to purchase the business was made on 5 July 1995 and settled on 12 July 1995.  It contained a special clause 4 in the following terms:

“The Purchaser hereby appoints the Vendor its agent for the purchase of second hand tyres in the State of Western Australia for the period of five years from the date of settlement and the Vendor by the acceptance of this offer also accepts such appointment.  The tyres to be purchased by the Vendor, the price to be paid for the tyres, the terms of payment and the commission to be received by the Vendor shall be determined from time to time.”

The respondent is said to have commenced business in its own right as Perth Tyres offering second-hand tyres for sale to the applicant and also to other tyre retailers in Perth.  It is not said whether there was any competition between the applicant and the other retailers.  Paragraphs 10 and 11 of the Statement of Claim are in the following terms:

“10.The Respondent acted contrary to s 52 of the Trade Practices Act 1975 (Cth) (sic) in engaging  behaviour that was misleading and deceptive or likely to mislead or deceive the Applicant to induce the Applicant to purchase Rennco Tyres:

Particulars:

10.1The Respondent by its director, Lange, represented to the Applicant that Lange would remain as agent for the Applicant in the purchase of second-hand tyres.

10.2The Applicant relied upon the skill and expertise of Lange in sourcing and purchasing second-hand tyres for the Applicant.

10.3The Applicant relied on the representation by the Respondent that Lange would remain as the Applicant’s agent in purchasing Rennco Tyres.

10.4The Respondent breached that representation by commencing business in its own right.

11.Further and in the alternative the Applicant misrepresented that Lange would remain as agent for the Applicant when it knew that Lange would not and intended that the Applicant would rely on the misrepresentation to purchase Rennco Tyres.

Particulars:

11.1.The Applicant repeats the particulars at paragraph 10 above.”

Paragraph 12 then asserts that as a result of the respondent’s actions the applicant has suffered loss and damage. The observation may be made that neither paragraph 10 nor paragraph 11, which relies on the same particulars as paragraph 10 to support it, discloses the factual base for a claim of misleading or deceptive conduct. What is in essence complained of is the breach of a promise by the respondent to act as the applicant’s agent. That promise is not breached by the respondent commencing business in its own right, and even if it were that does not establish the alleged promise as constituting a misrepresentation or misleading or deceptive conduct at the time it was made. Moreover, there is no factual base exposed for the assertion that the applicant has suffered loss and damage as a result of the conduct alleged against the respondent. Consequential damage is of the essence of the claim under s 82 of the Trade Practices Act 1974. The statement of claim as it stands is totally inadequate.

At a directions hearing on 26 August the respondent sought by motion filed on 22 August, to have the application dismissed under O. 20 r 2(1) of the Federal Court Rules.  The applicant’s representatives accepted that there were difficulties with the statement of claim and the following orders were made on the respondent’s motion:

“1.The respondent’s notice of motion dated 22/8/97 be adjourned to the next directions hearing.

2.The applicant have leave to amend the statement of claim generally and to file and serve an amended statement of claim on or before 15/9/97 together with any answering affidavits to the respondent’s motion.

3.Applicant to apply to the Registrar for an appointment for a mediation conference on or before 15/9/97.

4.The directions hearing and motion be relisted for 30/9/97 at 2.15pm at which time the question of remittance of the action to the District Court of Western Australia will be considered.

5.Costs on respondent’s motion today be reserved.

6.Liberty to apply.”

When the matter was brought on again today, no amended pleading had been filed and no further affidavit lodged beyond an affidavit previously filed by the applicant in support of an application for default judgment.  There was no satisfactory explanation given of the failure to file an amended pleading.  There was already before the Court an affidavit sworn by Mr Lange (Lange) going to evidence in support of the motion seeking to have the application characterised as an abuse of process.  A further affidavit has been sworn and filed by the respondent’s solicitor annexing correspondence sent to the applicant’s solicitor on 3 September and to which there had been no reply. 

The affidavit in support of the motion for default judgment seemed to be setting out a case of breach of contract or breach of fiduciary duty on the part of the applicant.  I summarise paragraphs 5 to 12 of that affidavit.  It is asserted there by Mr Dare (Dare), a director of the applicant, that his company was particularly reliant upon Lange to “source” and select second-hand tyres for sale in the applicant’s business.  The applicant understood that Lange had particular knowledge of suppliers of second-hand tyres and the conduct of such a business, including methods of repair and the appropriate mark-up to be applied to each tyre.

Lange’s knowledge, it was said, was vital to the success of the applicant’s business.  Shortly after settlement, Lange had spoken to Dare about the respondent’s position as agent, and said that for tax purposes it needed to set up its own business but that its sole business would still be the purchase and supply of tyres to the applicant.  According to Dare, he accepted, believing the change in position was purely for appearances and the applicant would continue to rely on Lange’s knowledge.  In the course of the supply of tyres to the applicant, the respondent would render invoices for the tyres purchased and he assumed that that was how the respondent was to calculate payment for Lange’s services as agent.  I interpolate that the contract contemplated that it was the vendor, the respondent, that was to be agent, not  Lange.

In or about June 1996, Dare said he found out that the respondent had been placing what he called excessive mark-ups on tyres being supplied to the applicant to the extent that they would constitute an excessive or secret commission for Lange, a breach of his fiduciary duties and repudiation by the respondent of any agency arrangement.  He had obtained details of records of the respondent and set out in his affidavit three transactions showing mark-ups from $500 to $1600, $550 to $2900 and $1500 to $3770 respectively.  Additionally, he alleged that the respondent had supplied some unserviceable tyres with a value of approximately $9000 for which credit should be given to the applicant.

In June 1996, the applicant disputed amounts it had paid to the respondent.  In July, proceedings were commenced in the Local Court of Western Australia.  It is said here by the applicant, but it appears that those proceedings were in fact commenced by the respondent, that being in Plaint Number 26117 of 1996 between Lange Nominees as plaintiff and Bonson Pty Ltd as defendant.

As a result of what he called the respondent’s excessive mark-up and his refusal to supply tyres or act as agent for the applicant, the applicant is said to have suffered significant loss and has not received what it contracted to purchase.  In or about May 1997 Dare instructed the applicant’s solicitors to issue proceedings against the respondent for misleading and deceptive conduct.

None of this discloses a case of misleading or deceptive conduct on the part of the respondent at the time of the negotiations leading to the entry into the contract.  The terms of special condition 4 appear to contemplate that the respondent was to act not as an agent in the strict sense but in the broader and looser sense of someone higher up the acquisition chain.  Lange says in any event that the respondent has not refused to supply second-hand tyres to the applicant nor has the applicant requested the supply of tyres since July 1996 or complained about the failure to supply them.

It is to be noted that the applicant is being sued by the respondent in the Local Court at Perth in proceedings 26117 of 1996 for the unpaid purchase price of the tyres. 

I have no doubt that the statement of claim should be struck out.  The question is whether the action as a whole should be dismissed.  That is a drastic step to be taken only in the clearest of cases.  The affidavit material before me leaves me in real doubt that the applicant has a viable cause of action of misleading or deceptive conduct.  Nevertheless, and having regard to the general criteria for the striking out of an action, it will be given an opportunity to file a substituted statement of claim within seven days to see whether a properly based claim can be formulated. 

The orders I propose to make are:

1.        The statement of claim be struck out.

2.        The application be dismissed unless a substituted statement of claim is filed
  and served on or before 6 October 1997.

3.        The applicant is to pay forthwith the respondent’s costs of the motion to be
  taxed on a solicitor/client basis.

4.        The motion is otherwise adjourned to 15 October 1997 at 9am.

5.        The directions hearing is relisted for 15 October 1997 at 9am.
.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice French

Associate:

Dated:  

Counsel for the Applicant:	Mr A. Henderson
Solicitor for the Applicant:	A.C. Thorpe
Counsel for the Respondent:	Mr C. Caine
Solicitor for the Respondent:	Corrin Caine
Date of Hearing:	30 September 1997
Date of Judgment:	30 September 1997