CDLC Pty Ltd v Capital Estate Developments Pty Ltd (No 3)
[2024] ACTSC 304
•3 October 2024
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | CDLC Pty Ltd v Capital Estate Developments Pty Ltd (No 3) |
Citation: | [2024] ACTSC 304 |
Hearing Date: | 2 August 2024 |
Decision Date: | 3 October 2024 |
Before: | Baker J |
Decision: | See [49] |
Catchwords: | CIVIL LAW – Strike out Application – plaintiffs seek orders striking out various paragraphs of the first defendant’s Amended Defence and Counterclaim – third party seeks the entirety of the Third Party Notice be struck out – r 425(1) of the Court Procedure Rules 2006 (ACT) – first defendant claims the plaintiff engaged in misleading or deceptive conduct – finding of reliance on the part of the aggrieved party not necessary to found a cause of action for misleading and deceptive conduct under the Australian Consumer Law – adverse court order capable of constituting loss or damage under the ACL – novelty of claim not a reason to strike out pleadings – arguable cause of action under the ACL – impugned pleadings not frivolous, scandalous, unnecessary, vexatious or an abuse of process – application dismissed. |
Legislation Cited: | Competition and Consumer Act 2010 (Cth) Sch 2, ss 2, 82 Court Procedure Rules 2006 (ACT), rr 425, 1521 Leases (Commercial and Retail) Act 2001 (ACT), ss 95, 100 |
Cases Cited: | Bolas v Calvary Healthcare Limited [2016] ACTSC 58 CDLC Pty Ltd v Capital Estate Developments Pty Ltd [2023] ACTSC 284 CDLC Pty Ltd v Capital Estate Developments Pty Ltd (No 2) [2023] ACTSC 321 Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 Commissioner for ACT Revenue v Arcidiacono t/as Rose Cleaning Service [2017] ACTSC 379 Findex Group Limited v McKay [2022] ACTSC 192 Galovac Pty Ltd v Australian Capital Territory [2010] ACTSC 132; 19 ACTLR 238 Henville v Walker [2001] HCA 52; 206 CLR 459 Insurance Commission of Western Australia v Antony Leslie John Woodings as Liquidator of the Bell Group Ltd (in liq) [No 2] [2017] WASC 372 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [1992] FCA 649; 37 FCR 526 Jewelsnloo Pty Ltd v Sengos [2016] NSWCA 309 Maragol v Berry Patch Preschool Kellyville Ridge Pty Ltd [2024] NSWSC 1077 Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 McColley v Commonwealth of Australia [2014] ACTCA 21 Medical Device Technologies Pty Ltd v Health Administration Corporation [2024] NSWCA 142 Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338 Seven Network Ltd v News Ltd (No 4) [2005] FCA 244; 214 ALR 686 West v New South Wales [2007] ACTSC 43 |
Texts Cited: | G Clarke, ‘Misleading or deceptive conduct cases in the Supreme Court of Victoria’ (2015) 89(6) ALJ 397 |
Parties: | CDLC Pty Ltd & Anor ( First Plaintiff) Pouring Pty Ltd (Second Plaintiff) Capital Estate Developments Pty Limited as Trustee for Capital Estate Developments Trust & Ors ( Defendant) Arthur Choi ( Third Party) |
Representation: | Counsel B Buckland & R McGilvray (First Plaintiff) B Buckland & R McGilvray (Second Plaintiff) P Walker & J Nottle ( Defendant) B Buckland & R McGilvray ( Third Party) |
| Solicitors McGilvray Law ( First Plaintiff) McGilvray Law ( Second Plaintiff) Trinity Law ( Defendant) McGilvray Law ( Third Party) | |
File Number: | SC 494 of 2022 |
BAKER J:
Outline
1․By applications filed in March 2024, the plaintiffs seek orders pursuant to r 425 of the Court Procedure Rules 2006 (ACT) for various paragraphs of the first defendant’s Amended Defence and Counterclaim to be struck out, and a third party seeks that a Third Party Notice be struck out in its entirety.
2․Each application is dismissed for the reasons outlined below.
Background
The dispute
3․The plaintiffs in the present proceedings were the sublessees of premises owned by Capital Estate Developments Pty Ltd (the first defendant). On these premises, CDLC Pty Ltd (the first plaintiff) carried on the business of a café trading as ‘Morning Dew’, and Pouring Pty Ltd (the second plaintiff) carried on the business of a bar and a restaurant trading as ‘Honeysuckle’.
4․The rent that was payable under the leases was a percentage of each business’ turnover. Sometime between 2020 and 2022 (the date is not agreed), a dispute arose between the plaintiffs and the first defendant concerning the payment of rent for the premises, and, in particular whether the plaintiffs had failed to provide financial information that was required under the leases. Following mediation of that dispute, the parties entered into a Settlement Agreement, which ultimately resulted in a Deed of Settlement (the Deed), which is dated 30 September 2022.
5․The Deed reflected a ‘commercial divorce’ between the parties. Under the Deed, both plaintiffs’ leases were terminated, but further interim leases were entered into so as to enable the plaintiffs to sell their businesses. These interim leases would expire on the earlier of the sale of the businesses, or 15 December 2022.
6․Importantly, the Deed required that the plaintiffs request the first defendant’s consent to the proposed sale of either business. Under the Deed, any such request was taken to be a request for consent to an assignment to the purchaser under s 95 of the Leases (Commercial and Retail) Act 2001 (ACT) (Leases Act). The plaintiffs were required for that purpose to provide certain information to the first defendant when making any request for the proposed sale of either business. The Deed further provided that the first defendant was only permitted to refuse consent to a proposed purchase on the terms set out in s 100 of the Leases Act.
7․The first plaintiff sought consent to sell the Morning Dew Business to NURCAF Pty Ltd. The second plaintiff sought consent to sell the Honeysuckle business to MDPUB Pty Ltd. The plaintiffs sought the first defendant’s consent to those sales.
8․On 13 December 2022, the first defendant advised the plaintiffs that it refused consent to the sale of each plaintiffs’ business to the proposed purchasers, and sought to terminate the leases under the Deed.
The background to the proceedings in this Court
9․The proceedings first came before Associate Justice McWilliam (as her Honour then was) as duty judge on 15 December 2022 (the final day of the court term), when the plaintiffs made an urgent application seeking permission to sell their businesses.
10․Associate Justice McWilliam granted an interim injunction permitting the plaintiffs to remain in the premises, pending the outcome of the final hearing, which was initially listed for 2 March 2023. Her Honour also made orders restraining the first defendant from taking any steps to take possession of the premises, including seeking any warrant for eviction.
11․The proceedings did not proceed to final hearing on 2 March 2023. Rather, in the course of a dispute about the breadth of subpoenas that had been issued by the first defendant, the first plaintiff filed an application in a proceeding seeking an order pursuant to r 1521 of the Court Procedures Rules that the Court determine a separate legal question before the final hearing. That question concerned how the Court should assess the reasonableness of the first defendant’s refusal of consent, in particular, whether “reasonableness” was to be assessed only by reference to what the first defendant knew at the time consent was refused, or more broadly. On 24 February 2023, McWilliam J made orders for separate questions to be determined in advance of the trial of the proceeding.
12․In a judgment delivered on 12 October 2023, McWilliam J answered the separate questions as follows:
(1) Is the reasonableness of the first defendant’s refusal to consent to the sale of businesses pursuant to clause 2.6 of the Deed of Settlement to be determined by reference to:
(i) Only information of which the first defendant was aware when it refused consent?
Answer:
(a) Yes, if the ground relied upon for refusal at the time falls within s 100(2) of the Leases (Commercial and Retail) Act 2001 (Leases Act); and
(b) No, if the ground relied upon for refusal at the time concerns an objective fact or circumstance.(ii) Alternatively, the information in (i) and further information of which the first defendant was not aware when it refused consent, but which existed at that time?
Answer:
(a) No, if the ground relied upon for refusal at the time falls within s 100(2) of the Leases Act; and
(b) Yes, if the ground relied upon for refusal at the time concerns an objective fact or circumstance within s 100(3) of the Leases Act.
(iii) The information in (i) and (ii) and further information of which the first defendant was not aware when it refused consent and that did not exist at that time?
Answer:
No.
See CDLC Pty Ltd v Capital Estate Developments Pty Ltd [2023] ACTSC 284 (CDLC (No 1)).
13․On 7 November 2023, the plaintiffs filed a further urgent interlocutory application permitting them to occupy the premises pending determination of the substantive claim. In a judgment delivered on 9 November 2023, McCallum CJ dismissed those applications: CDLC Pty Ltd v Capital Estate Developments Pty Ltd (No 2) [2023] ACTSC 321 (CDLC (No 2)).
The Amended Pleadings
14․The plaintiffs filed a Further Amended Statement of Claim on 30 January 2024, in which the plaintiffs sought a declaration that the first defendant unreasonably withheld consent to the sales and sought damages for breach of the Deed.
15․On 6 February 2024, the first defendant filed an Amended Defence to the plaintiffs’ Further Amended Statement of Claim, and an Amended Counterclaim. On 22 February 2024, the first defendant filed a Third Party Notice to Mr Arthur Choi (the third party), who is the sole director and shareholder of the first and second plaintiff.
16․In the Defence and Counterclaim, the first defendant denied the plaintiffs’ claims and further contended that, if it did unreasonably refuse consent to the sale of the businesses, that refusal was caused by the unlawful conduct of the plaintiffs, being misleading or deceptive conduct under the Australian Consumer Law (ACL) and/ or a breach of the contractual duty of good faith.
17․In particular, the first defendant contended that the plaintiffs made representations to it to the effect that the proposed purchasers and their director were “fantastic” and that their guiding hand “operated a business successfully, met its obligations and traded profitably”. The first defendant further alleged that the plaintiffs failed to inform it that a company associated with the guarantor of the proposed assignee of the premises had debts owing to its landlord, and information in relation to food licencing, and that by failing to disclose that information, the plaintiff engaged in misleading and deceptive conduct.
18․The Third Party Notice pleaded two causes of action against the third party, namely, that he was involved in the plaintiffs’ misleading and deceptive conduct; and that he breached the terms of the Deed as a consequence of having commenced the present proceedings, having been involved in misleading and deceptive conduct. The first defendant alleged that if the first plaintiff is successful in these proceedings, the Court should award the first defendant damages for misleading and deceptive conduct, which the third party knowingly aided and abetted with.
The present application
19․In the present application, the plaintiffs seek orders striking out paragraphs 155 – 161, 162 – 169 and 170 – 173 of the Defence and Counterclaim (that is, the paragraphs which allege that the plaintiffs engaged in misleading and deceptive conduct by failing to provide certain information in support of the sale). The third party seeks orders for the entirety of the Third Party Notice to be struck out. The plaintiffs argue that these pleadings should be struck out as they disclose no reasonable cause of action. In the alternative, the plaintiffs argue they should be struck out as they are frivolous, scandalous, unnecessary or vexatious, or as abuse of process. The third party seeks that the Third Party Notice also be struck out for the same reasons.
Court’s power to strike out
20․Rule 425(1) of the Court Procedure Rules provides as follows:
425 Pleadings—striking out
(1)The court may, at any stage of a proceeding, order that a pleading or part of a pleading be struck out if the pleading—
(a)discloses no reasonable cause of action or defence appropriate to the nature of the pleading; or
(b)may tend to prejudice, embarrass or delay the fair trial of the proceeding; or
(c)is frivolous, scandalous, unnecessary or vexatious; or
(d)is otherwise an abuse of the process of the court.
Note 1 The registrar may also reject a document that is filed if it does not comply with these rules (see r 6140 (Rejecting documents—noncompliance with rules etc) or if it is an abuse of the court’s process or is frivolous or vexatious (see r 6142 (Rejecting documents—abuse of process etc)).
Note 2 Pt 6.2 (Applications in proceedings) applies to an application for an order under this rule.
Note 3 Rule 6901 (Orders may be made on conditions) provides that the court may make an order under these rules on any conditions it considers appropriate.
21․The principles to be applied to a strike out application were set out by Jagot J in Galovac Pty Ltd v Australian Capital Territory [2010] ACTSC 132; at [5]:
(1) The party seeking summary judgment faces a “very high threshold” (Financial Integrity Group Pty Ltd v Farmer [2009] ACTSC 143 at 12).
(2) The lack of a cause of action must be “clearly demonstrated” (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129).
(3) The procedure calls for “exceptional caution” (General Steel at 129)
(4) The necessity for argument, even extensive argument, is no bar. However, as soon as it appears that there is a “real question” to be determined on which relief depends, the summary judgment procedure is not available (General Steel at 130 citing Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91
(5) Mere implausibility of the claim or improbability of success is insufficient; there must clearly be no real question to be tried in the sense that the claim is bound to fail (Seven Network Ltd v News Ltd (No 4) (2005) 214 ALR 686 ; [2005] FCA 244 at [14] citing Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 (Ch D) at 5; [1991] 4 All ER 961 at 965
(6) The application is to be assessed on the assumption that every fact pleaded by the plaintiff is true (West v New South Wales [2007] ACTSC 43 at [9])
(7) The application must be determined on the substance, not the mere form or expression, of the claim (Financial Integrity Group at [15]).
22․As McWilliam J observed in Findex Group Pty Ltd v McKay [2022] ACTSC 192 at [34], these principles are well-established, and have been reiterated by this Court in numerous decisions, including Commissioner for ACT Revenue v Arcidiacono t/as Rose Cleaning Service [2017] ACTSC 379 at [18] (Murrell CJ); McColley v Commonwealth of Australia [2014] ACTCA 21 at [31] (Murrell CJ, Refshauge and Penfold JJ); and Bolas v Calvary Healthcare Limited [2016] ACTSC 58 at [1] (Mossop AsJ, as his Honour then was).
23․In respect of the present application, it is also to be borne in mind that “the novelty of a claim is not, in and of itself, a basis upon which a pleading will be struck out or summarily dismissed”: Maragol v Berry Patch Preschool Kellyville Ridge Pty Ltd [2024] NSWSC 1077 at [44]. Rather, where a novel claim is made, “particular caution is warranted in the exercise of the power to strike out, so as to ensure that the development of the law is not stifled by prematurely excluding issues from examination”: Insurance Commission of WA v Woodings as Liquidator of Bell Group (No 2) [2017] WASC 372 at [72]. See also McColley v Commonwealth of Australia [2014] ACTCA 21 at [32] (“If the law is not settled but is still developing then it is inappropriate to decide a novel question on hypothetical facts”).
Misleading and deceptive conduct
24․Section 18 of the Australian Consumer Law (ACL) provides:
18Misleading 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.
25․Sections 236 and 237 of the ACL provides:
Division 3—Damages
236Actions for damages
(1) If:
(a)a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b)the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
(2)An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.
Division 4—Compensation orders etc. for injured persons and orders for non‑parties
237 Compensation orders etc. on application by an injured person or the regulator
(1)A court may:
(a)on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because another person has engaged in conduct in contravention of a provision of Chapter 2, 3 or 4; or
(b)on the application of the regulator made on behalf of, and with the consent in writing of, one or more such injured persons;
make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.
Note: The orders that the court may make include all or any of the orders set out in section 243.
(2)The order must be an order that the court considers will:
(a)compensate the injured person, or any such injured persons, in whole or in part for the loss or damage; or
(b)prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person or any such injured persons.
(3)An application under subsection (1) may be made at any time before the end of 6 years from the day on which the cause of action accrued that relates to the conduct referred to in that subsection.
The parties’ submissions
The submissions of the plaintiffs and the third party
26․In written submissions filed on 8 April 2024, the plaintiffs contended that the first defendants’ claim of misleading and deceptive conduct is fatally flawed because the first defendant “did not rely” on the plaintiffs’ conduct (emphasis in original).
27․In support of this contention, the plaintiffs referred to the letter by which the first defendant communicated its refusal to approve the sale to the plaintiffs. The plaintiffs submitted that this letter demonstrated that the first defendant did not believe the representations made by the plaintiffs in relation to the proposed purchases. The plaintiffs submitted that even if the material provided to the defendant was misleading or deceptive (which was denied) the defendant could not have relied on that information, as it refused the plaintiffs consent for the sales of the business. The plaintiffs submitted that it would be a different matter if consent was given, and the incoming lessee had then defaulted on rent, causing the first defendant to suffer loss. The plaintiffs contended that “this is not such a case”.
28․Citing Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338 and Jewelsnloo Pty Ltd v Sengos [2016] NSWCA 309, the plaintiffs submitted that reliance and causation are fundamental components of a claim for damages for misleading and deceptive conduct. The plaintiffs also cited Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 at [48] as authority for the proposition that a “party that is misled suffers no prejudice or disadvantage unless it is shown that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted”.
29․The plaintiffs contended that as the first defendant cannot demonstrate that its reliance on the plaintiffs’ conduct resulted in loss or damage, the first defendant has no cause of action under the ACL, and that the impugned paragraphs of the Defence and Counterclaim must be struck out. Further or in the alternative, the plaintiffs contended that the impugned paragraphs should be struck out as frivolous, scandalous, unnecessary or vexatious pursuant to r 425(1)(c) of the Court Procedure Rules, or struck out as an abuse of the court process pursuant to r 425(1)(d) of the Court Procedure Rules.
30․The third party contended that the Third Party Notice should be struck out for the same reasons.
The first defendant’s submissions
31․The first defendant acknowledged that its pleadings do not represent a common or typical application of the ACL. However, it submitted that its claim is consistent with ss 18, 236 and 237 of the ACL, and cannot be said to be “bound to fail”.
32․The first defendant contended that the plaintiffs, through their director (the third party), “provided circumscribed and entirely misleading and deceptive information in support of their attempt to obtain consent to the sale”. In response to the submissions of the plaintiffs and the third party, the first defendant emphasised that “there is no requirement in section 236 of the ACL that there be reliance on the plaintiffs’ misleading and deceptive conduct before it can cause the first defendant damage” (emphasis in original). Rather, citing the decision of Lockhart J in Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [1992] 37 FCR 526 at 641 [19] (relating to s 82 of the Trade Practices Act 1974 (Cth), which is the predecessor of s 236), the first defendant pointed out that the text of s 236 only requires that the first defendant have suffered loss “because of” conduct that was in breach of the ACL.
33․The first defendant referred to the decision of McWilliam J in CDLC (No 1), and noted that following this decision the plaintiffs now seek to confine the first defendant to the body of evidence that the plaintiffs had provided to it in December 2022, and to prevent the first defendant from using the compulsory procedures of the Court to examine information concerning the true financial state of the purchaser when considering the reasonableness of the first defendant’s refusal of consent. The first defendant continued:
In circumstances where the First Defendant is confined to the misleading and deceptive body of evidence that the Plaintiffs and the Third Party provided, and if the Court finds – restricted to that circumscribed evidence – that consent was unreasonably withheld, the Plaintiffs will have obtained the outcome “because of” their misleading and deceptive conduct. (emphasis in original).
34․The first defendant further submitted that, if damages are awarded against it, it will have sustained loss “because of” the plaintiff’s misleading and deceptive conduct, which would be sufficient to enliven s 236 and/ or s 237 of the ACL.
Determination
35․As counsel for the plaintiffs properly acknowledged, on a strike out application, it is necessary to proceed on the assumption that all of the pleaded facts can be proved. Accordingly, in considering the present applications, it is necessary to proceed on the basis that the first defendant can establish that the representations made by the plaintiffs and/or their failure to disclose information to the first defendant are capable of constituting misleading and deceptive conduct. The question that arises for determination in these applications is whether, assuming that contention is made out, there is a possible cause of action arising under the ACL.
36․It may be accepted that the first defendant did not rely on the plaintiff’s representations when it refused consent. (I did not understand the first defendant to submit otherwise.)
37․However, as the first defendant correctly submitted, it is not necessary for it to demonstrate that it “relied” on the plaintiffs’ representations in order to found a cause of action under the ACL: Medical Devices Technologies Pty Ltd v Health Admin Corp [2024] NSWCA 142 at [389], citing Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at [143] (see also at footnote 59 to [31], “This is not to say that ‘reliance’ is the only mechanism by which causation may be established in relation to loss said to have flowed from misleading and deceptive conduct”). Rather, what is required under the ACL is first, that the first defendant demonstrate that it has suffered (s 236), or is likely to suffer (s 237), “loss or damage”, and second, that this “loss or damage”, is “because of” the conduct of the plaintiffs and/or the third party.
38․Whilst reliance on the part of the aggrieved party is often a convenient way of demonstrating this causal link, there are other ways in which a party may establish that it suffered loss or damage “because of” another party’s conduct. For example, damages may be awarded for misleading and deceptive conduct under the ACL, or its predecessor, s 82 of the TPA, where the plaintiff did not rely on the impugned conduct, but a third party has, resulting in loss or damage to the plaintiff: see for example, Janssen-Glag Pty Ltd v Pfizer (the public, but not the applicant, were misled by the respondent’s advertising campaign to the detriment of the applicant); see also G Clarke, ‘Misleading or deceptive conduct cases in the Supreme Court of Victoria’ (2015) 89(6) ALJ 397 at 411 – 412.
39․An unusual feature of the present case is that the “loss or damage” which the first defendant particularises in its Defence, Counterclaim and Third Party Notice will not crystallise until this Court makes a decision which is adverse to the first defendant in the substantive proceedings. However, there is nothing in the text of the ACL which would preclude a finding that an adverse finding by a court may constitute “loss or damage” within the meaning of ss 236 and 237 of the ACL. Nor would a narrow construction of those words accord with the purpose of the ACL, namely to “enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection”: s 2 of the Competition and Consumer Act 2010 (Cth).
40․Accepting that an adverse order against the first defendant (in the form of damages, even if only nominal damages) is capable of constituting “loss or damage” within the meaning of the ACL, the only remaining issue is whether the first defendant can establish that it suffered that loss or damage “because of” the plaintiffs’ misleading and deceptive conduct.
41․It could be argued on behalf of the plaintiffs that any damages that might ultimately be awarded by the Court against the first defendant would be the result of the first defendant’s unreasonable withholding of consent, rather than as a result of its misleading and deceptive representations.
42․However, this is not the only way in which such an order for damages could be viewed. Specifically, assuming that the plaintiffs had engaged in misleading and deceptive conduct (for example, by impliedly representing that the proposed purchaser was in a solid financial position), it might be said that any damages ordered by the Court for breach of the Deed may properly be characterised as arising “because of” the plaintiffs’ conduct, in that an award of damages might not have been ordered if the plaintiffs had not made the misleading or deceptive representation.
43․In other words, although the first defendant did not rely on the information provided by the plaintiffs, if that information was material in the court’s determination that the first defendant’s conduct was unreasonable, a causal link between the plaintiffs’ representation and the first defendant’s loss or damage might be established. Specifically, if the court awarded damages on the basis that the first defendant had no reasonable grounds to refuse consent on the allegedly misleading information provided by the plaintiffs, then the first defendant may be said to have suffered loss or damage “because of” the plaintiff’s misleading or deceptive conduct.
44․Again, in assessing this contention, it must be borne in mind that the breadth of the text of the ACL, and its protective purpose, “tell against a narrow inflexible” approach when considering whether the requirement that any loss or damage be sustained “because of” the plaintiffs’ representations are satisfied: see similarly Henville v Walker [2001] HCA 52; 206 CLR 459 at [96] (McHugh J) and Janssen-Cilag at 531.
45․For these reasons, the plaintiffs’ contention that a cause of action under the ACL is bound to fail because the first defendant did not rely on the plaintiffs’ representations must be rejected. So too the plaintiffs’ contention that causation cannot be established because the defendant would not have acted differently had the misrepresentation not been made. The observations in cases such as Marks v GIO must be understood against the particular factual matrices there under consideration, which, unlike the present case, did not involve an allegation that loss or damage would arise as a result of the use of a misleading representation by a third party (here, the Court).
46․In its Defence and Counterclaim, the first defendant alleges that the damages it may sustain as a result of the plaintiffs’ misleading and deceptive conduct are of an amount that is equal to the damages that would otherwise be awarded to the plaintiffs on their Further Amended Statement of Claim. The first defendant contends that in those circumstances, all legal equitable or discretionary relief claimed by the plaintiff should be refused, or that, if damages are awarded to the plaintiffs, the Court should award the first defendant damages for misleading and deceptive conduct of an amount that is equal to and-off setting the amount awarded to the plaintiffs.
47․There may be other remedies, including of an equitable nature, which may achieve the same outcome as a claim under the ACL. It will be necessary for the Court to consider any such remedies before considering the first defendant’s claims under the ACL. However, as the first defendant’s senior counsel submitted, there may be differences, in particular, between the state of mind that must be established under any equitable remedy and the state of mind required to establish a cause of action under the ACL.
48․In these circumstances, I accept that the first defendant has an arguable cause of action under the ACL, and that the impugned pleadings are not frivolous, scandalous, unnecessary or vexatious or an abuse of the court process under r 425(1)(d) of the Court Procedure Rules. It may well be the case that a statutory claim relying on the ACL is a novel means of defending (by way of cross-claim and set-off) a leasing dispute about the reasonableness or otherwise of a lessor’s refusal to consent to the transfer of the plaintiffs’ businesses to third parties (and the accompanying leasing rights). However, the novelty here does not equate to a clear abuse and having found that the causation element is arguable, the claim ought proceed to a hearing of that question on its merits.
Orders
49․For the above reasons, the following orders are made:
1.The Application in Proceeding filed on behalf of the first and second plaintiffs on 22 March 2024 seeking orders striking out paragraphs 155 to 161; 162 to 169 and 170 to 173 of the Defence and Counterclaim is dismissed; and
2.The Amended Application in Proceeding filed on behalf of the third party on 22 March 2024 seeking orders striking out the Third Party Claim is dismissed.
| I certify that the preceding forty nine [49] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice Baker Associate: Date: 3 October 2024 |
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