Calmer Pty Ltd v Michela**s Patisse rie (WA) Pty Ltd
[2009] FMCA 42
•2 February 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CALMER PTY LTD & ORS v MICHEL'S PATISSERIE (WA) PTY LTD & ANOR | [2009] FMCA 42 |
| PRACTICE AND PROCEDURE – Consolidation – application to consolidate two applications – mandatory matters for consideration – what constitutes a question of law – other relevant matters for consideration. |
| Federal Magistrates Act 1999 (Cth), ss.3(2)(c) & 21-25 Federal Magistrates Court Rules 2001 (Cth), rr.1.03(2) & (4), 1.05(1) & (2) Federal Court Rules, O.29 r.5 Trade Practices Act 1974 (Cth), s.52 Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) |
| Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Re Ling: Ex Parte Ling v Commonwealth of Australia (1995) 58 FCR 129 |
| First Applicant: | CALMER PTY LTD |
| Second Applicant: | VICKI IRENE MERRITT |
| Third Applicant: | GLENN ALEXANDER CALDWELL |
| First Respondent: | MICHEL'S PATISSERIE (WA) PTY LTD |
| Second Respondent: | GRANT CADDY |
| File Number: | PEG 146 of 2008 |
| Judgment of: | Lucev FM |
| Hearing date: | 15 December 2008 |
| Date of Last Submission: | 15 December 2008 |
| Delivered at: | Perth |
| Delivered on: | 2 February 2009 |
REPRESENTATION
| Counsel for the Applicants: | Mr P.D.C. Robinson |
| Solicitors for the Applicants: | Williams & Hughes |
| Counsel for the Respondents: | Ms K.J. Levy |
| Solicitors for the Respondents: | QBM Lawyers |
ORDERS
The application in a case filed 15 October 2008 by the first and second applicants in PEG 146 of 2008 to consolidate the proceedings in PEG 146 of 2008 and PEG 144 of 2008 be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 146 of 2008
| CALMER PTY LTD |
First Applicant
| VICKI IRENE MERRITT |
Second Applicant
| GLENN ALEXANDER CALDWELL |
Third Applicant
And
| MICHEL'S PATISSERIE (WA) PTY LTD |
First Respondent
| GRANT CADDY |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This is an application by the applicants in proceedings PEG 146 of 2008 commenced in this Court’s trade practices and accrued jurisdiction seeking to consolidate this matter with proceedings PEG 144 of 2008. The respondents oppose the consolidation application.
Legislative framework
The Federal Magistrate Court Rules 2001 (Cth)[1] govern the procedural operation of this Court.[2] Where those rules are insufficient or inappropriate however, the Federal Court Rules may be applied.[3] This is a case where it is appropriate to use the Federal Court Rules as the FMC Rules are insufficient because they do not provide for when and how matters are to be consolidated.
[1] “FMC Rules”.
[2] FMC Rules, r.1.05(1).
[3] FMC Rules, r.1.05(1) & (2).
Order 29, rule 5 of the Federal Court Rules provides that:
Consolidation etc
Where several proceedings are pending in the Court, then, if it appears to the Court:
(a) that some common question of law or fact arises in both or all of them;
(b) that the rights to relief claimed therein are in respect of, or arise out of, the same transaction or series of transactions; or
(c) that for some other reason it is desirable to make an order under this rule;
the Court may order those proceedings to be consolidated or may order them to be tried at the same time or one immediately after another or may order them to be stayed until after the determination of any of them.
The matters for consideration in deciding when actions ought to be consolidated were addressed in Re Ling: Ex Parte Ling v Commonwealth:[4]
Consolidation is provided for in the Federal Court Rules 1979 (Cth) in O 29 r 5. As the terms of the rule make clear, an order for consolidation is not limited to the circumstances expressed in r5(a) and (b). It suffices that it is desirable that an order for consolidation be made. The rule confers upon the Court a broad discretion to make orders for consolidation where it is in the interests of justice so to do. Relevant to the exercise of discretion would be the desirability of avoiding multiple actions, the saving of time and expense and whether the parties would be prejudiced by such a course…There is no reason to interpret the rule so that consolidation is to be confined to cases where there are several actions brought which could have been joined in the one writ….[5]
[4] (1995) 58 FCR 129.
[5] (1995) 58 FCR 129 at 134 per Hill J.
Common questions of fact
The applicants say there are common questions of fact in both proceedings, which include that the applicants in both matters:
a)acquired a Michel’s Patisserie Franchise[6] in the Perth metropolitan area within six months of each other;
b)had meetings with Mr Caddy (the second respondent in both proceedings) and relied on his oral representations in deciding whether to acquire a Franchise. For example, the applicants in both matters say they were told by Mr Caddy that sales of between $12,000 to $15,000 per week could be expected;
c)received and relied on a number of the same critical documents before acquiring a Franchise;
d)were referred to the same solicitors; and
e)submit that both franchises failed for the same reasons, including lack of sales, support and profit.
[6] “Franchise”.
On the basis of these factual similarities, the applicants say that there is a risk of inconsistent findings if the matters are heard separately. The respondents submit that inconsistent findings are unlikely as there are different material facts relevant to each matter.
The respondents say while there are apparently common facts in both applications, there are different “evidentiary fields” in both applications. The respondents, relying on a case dealing with a joinder application, submit that the discrete material in each case will overbear that which is in common in the matters.[7]
[7] Bishop v Bridgelands Securities (1990) 25 FCR 311.
The factual differences in the matters put forward by the respondents include that:
a)the O’Brien store was an existing store, with an established trade history and the Calmer store was new;
b)the stores are in different locations with significantly different demographics;
c)the financial documents given to the applicants were different;
d)the applicants had independent lawyers and accountants to assist them with their purchase;
e)the applicants met with Mr Caddy on different occasions, about six months apart, and the conversations would have been different given the differences between the stores; and
f)the factors for the failure of the franchises are unlikely to be the same because:
i)the store operators had individual strengths and weakness affecting the profit of the stores;
ii)the O’Brien store was not managed by Mrs O’Brien directly but Ms Merritt devoted some time to its operation;
iii)the following were different, or likely to be different:
A. training of the applicants;
B. wages and expenses;
C. purchases and sales of bakery products;
D. expenses;
E. financial arrangements;
F. the factors affecting the chain of causation (if any) from the alleged misrepresentation and breaches; and
G. the alleged loss and damage.
There are differences between the applications. The stores were in different locations. The stores were of different types, one established and one not. Both of those factors may have contributed to the failure of the franchises.
The question of what information was given to the applicants before entering the Franchise agreement in the O’Brien case appears to be in dispute, whereas in the Calmer case there is no such dispute. It therefore appears that the content of any alleged misrepresentation is likely to be factually different between the cases. The content of alleged misrepresentations and if they were misleading will be the main issue at trial. This may justify keeping the matters separate, as there will be a different factual focus in each trial.
The applicants’ claim that there is risk of inconsistent findings does not hold significant weight because if the circumstances of each matter differ (as they appear to), this may justify different findings in relation to each franchise in any event. The applicants do not say that the documents relied on in both matters were exactly the same, but rather say the documents were ‘largely’ the same, which lends support to the position that there may be a justification for different findings based on the information provided to each franchise.
Finally, even if both claims were heard together, different findings could still be made in each matter: there could be misrepresentation shown in one situation but not the other, so the argument about the risk of inconsistent findings does not weigh in favour of consolidation and is really a neutral issue.
Common questions of law
The applicants say that there are common matters of law arising in both matters, which include claims for:
a)breach of s.52 of the Trade Practices Act 1974 (Cth);
b)breach of the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth);
c)breach of contract due to the respondents’ failure to provide adequate training and support; and
d)negligence.
The applicants say that the respondents concede that there are common questions of law.
The respondents argue that the test of whether there are common questions of law is not established by showing that the cause of action is the same. The respondents submit that a question of law only arises from analysing a set of facts. The respondents say that the material facts to support “any conclusion on a question of law will be significantly different” and refer to some of the claimed differences between the cases described above. The respondents argue that because there are different material facts, the conclusions about the questions of law will be different.
A question of law includes, but is not necessarily limited to:
a)whether a particular section of an Act was properly construed and if on that proper construction, whether the decision maker was obliged to take into account certain considerations;[8]
b)whether there was any evidence of a particular fact[9] (where the finding about that fact formed part of the basis for the decision)[10] or in other words, the fact was significant to, or affected, the decision maker’s decision;[11] and
c)whether the decision could not be reasonably inferred from the facts before the decision maker.[12]
[8] Birdseye v Australian Securities and Investment Commission (2003) 76 ALD 321 at 325-326 (“Birdseye”).
[9] Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321.
[10] Birdseye at 327.
[11] Birdseye at 327-328.
[12] Australian Telecommunications Corp v Lambroglou (1990) 12 AAR 515 at 521 (“Lambroglou”).
A question of law is not simply the grounds relied on in support of an order sought.[13]
[13] Lambroglou at 524.
It is thus not sufficient for the applicants to say that because the causes of actions are the same, there are common questions of law. There are many proceedings with the same causes of action, however the legal question or questions a court must address in each instance varies depending on the facts. This is a case where, although similar legal issues arise, the factual issues may be sufficiently different to mean that different questions of law might arise on those facts. This is therefore not a factor which weighs in favour of consolidation.
Is the relief claimed related to the same transaction or series of transactions?
The applicants submit that the claimed right to relief arises out of an identifiable series of transactions involving Michel’s Patisserie’s attempt to establish itself nationally by entering the market in Western Australia.[14] The applicants concede that this is not their strongest argument in favour of consolidation.
[14] R v Oliver (1984) 57 ALR 543.
The respondents say that consolidation is not appropriate when an applicant in one matter has only participated in one transaction which the applicant in the other matter did not participate in.[15] The respondents contend that each series of transactions was peculiar to each applicant as there was no common participation in the meetings, conversations or training. It is submitted that because there were two separate contracts entered into, then those contracts are not part of the same series of transactions.
[15] Payne v Young (1980) 145 CLR 609.
The Court notes, that the transactions were the consequence of negotiations held at different times, with different prospective franchisees, in relation to different stores and types of stores (one existing, one new). However, the contract documentation is largely the same, or at least similar, but the contracts are separate and some months apart. For these reasons the Court considers that the transactions were separate. Therefore, consolidation is not necessarily appropriate.
Other factors
Saving of time and expense
The applicants submit that consolidation will save time and money given that:
a)there be one hearing instead of two;
b)opening and closing argument (particularly in relation to the legal argument) will be abridged; and
c)witnesses (including interstate witnesses) will only have to give evidence once.
The respondents submit that consolidation will not save time and expense because:
a)there are substantially different evidentiary fields covered by the two actions;
b)the principal witness for the respondents is the same, but different witnesses are involved in each alleged conversation and meeting;
c)the applicants were represented by different solicitors and accountants who may be required to give evidence;
d)different financial material was provided to each of the applicants;
e)different expert reports (and likely different experts) will be required;
f)if the actions are kept separate:
i)the issues may be narrowed in one matter enabling that matter to be listed earlier for hearing; or
ii)one matter might be resolved earlier saving substantial time and expense.
Having one hearing instead of two normally saves time and money. However, in this case there is also the possibility that a consolidated hearing would become protracted and confused if there were too many differences between the applications, and the evidence of witnesses, in both cases.
In this case any saving of time is likely to be minimal. A consolidated hearing would probably be listed for 5 days; and, if not consolidated, there are likely to be two 3 day hearings. Witnesses may have to give evidence more than once, although at this stage, other than the second respondent who opposes consolidation, no common witnesses have been identified. Nor have any interstate witnesses, save for the second respondent who opposes consolidation. A video link can be arranged, where appropriate, for any interstate witnesses.[16]
[16] An application for witnesses to appear by video link must be made, and the relevant criteria addressed: see Goodall v Nationwide News Pty Ltd [2007] FMCA 218.
Whilst any costs savings in terms of the time occupied by any hearing might be lost if the proceedings are not consolidated, there will still be savings in relation to the preparation of submissions given that the causes of action are the same and some of the legal and factual issues to be addressed have some similarities.
In the Court’s view any potential saving of time and expense from consolidation will be minimal. It is not a factor which weights significantly in favour of consolidation.
Some, or part, of the savings in time and expense contended for by the applicants may be achieved by having separate but consecutive hearings, a course contemplated by O.29 r.5 of the Federal Court Rules.
Prejudice
The applicants say that proceedings must not be consolidated if “positive injustice” would be caused, which the respondents have failed to show in this case.
The respondents submit that consolidation is prejudicial for the following reasons:
a)each case requires the investigation of a different set of facts;
b)different evidence will need to be adduced regarding the individual and separate chain of causation between the alleged misrepresentation, reliance and loss and damage suffered in each matter;
c)consolidation may impede a negotiated settlement and complicate the mediation process;
d)separate and independent expert reports are required to determine any loss or damage;
e)there is a risk of circumventing the prohibition on similar fact evidence in misleading and deceptive conduct proceedings;
f)there is a risk that the witnesses’ evidence may not be independent; and
g)given the superficial and broad similarities between the matters, there is a risk of confusion on the part of the parties, witnesses and the Court.
The respondents also add that the Court should not exercise its discretion to consolidate the actions because the applicants’ solicitors did not consolidate the action from the outset, in a situation where the Calmer proceeding was commenced 10 days after the O’Brien proceedings. This objection does not carry much weight. Mere separation in terms of date of filing is of itself not a cogent factor for or against consolidation, although arguably the longer the delay the less likely it is that proceedings will be considered. Here the delay is such as to not count against consolidation.
Different facts and evidence
The alleged facts and the evidence required to prove these facts are, in the Court’s view, not sufficiently similar to warrant consolidation. Each case has a different timeframe, different witnesses for the applicants, and different alleged facts giving rise to the relevant misrepresentations and reliance. The facts allegedly causing loss and damage are different. To run these two different cases together runs a risk that evidence will be conflated, or that evidence intended to be relevant to one matter is considered as part of the other matter. There is sufficient in the factual differences and evidentiary requirements to constitute a positive risk of prejudice to the respondents.
Risk to negotiations and settlement
The respondents say that consolidating the actions would complicate negotiations or mediation thereby making a negotiated outcome in one proceeding less likely. There can be provision for mediation to be held separately, but to do so merely highlights why the proceedings should not be consolidated. A mediated settlement of both matters (or parts thereof) is more likely if they are mediated separately, and each party is able to consider its position without that position being clouded by any consideration of the other matter. Given the primacy of dispute resolution under the Federal Magistrates Act 1999 (Cth)[17] the likelihood that consolidation might impede mediation and a negotiated settlement is a factor against consolidation.
[17] “FM Act”, FM Act, ss.3(2)(c) and 21-25 and FMC Rules, r.1.03(2) & (4).
Separate experts’ reports
Separate experts’ reports would not automatically preclude consolidation. However, where, as here, there are significant differences in the alleged factual positions, the fact that separate experts’ reports may be necessary is a factor against consolidation.
Prohibition on similar fact evidence in s.52 TPA claims
The respondents argue that there is a prohibition on similar fact evidence in s.52 Trade Practices Act cases. There is no prohibition on similar fact evidence in cases alleging breach of s.52 of the TP Act. In some cases similar fact evidence has been admitted, in some cases it has been rejected.[18]
[18] R.V. Miller, Miller’s Annotated Trade Practices Act (29th Edn), para.1.86.47.
Risk that witnesses may not be independent
The respondents have not elaborated on why they submit that witnesses in a consolidated hearing may not be independent. In any event, as was submitted by the applicants’ at the consolidation hearing:
a)the respondents can cross-examine on the issue if they believe the witnesses are not independent; and
b)the risk of not having independent witnesses may still occur at two separate hearings.
Potential confusion
This issue has to some extent been addressed above.[19]
[19] See paras.24, 32 and 34 above.
Failure to separately hear the two cases may give rise to injustice because of the potential for confusion, especially as to which case the principal respondents’ witness’ evidence may relate. Unless very carefully examined, and, in particular, cross-examined, there is significant potential for that evidence to be confused and possibly misapplied. Each case will, in the Court’s view, be clearer, more easily defined and more easily decided, if kept separate rather then consolidated.
Conclusions and Orders
A consideration of all of the factors set out above leads the Court, in the exercise of its broad discretion in relation to the application, to the conclusion that consolidation of the proceedings is not desirable and that therefore the application for consolidation must be dismissed.
The Court will hear the parties as to costs.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: Sandra Gough
Date: 2 February 2009