Commissioner for Fair Trading v Bowes Street Developments Pty Ltd
[2021] ACTSC 282
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Commissioner for Fair Trading v Bowes Street Developments Pty Ltd |
Citation: | [2021] ACTSC 282 |
Hearing Date: | 20 July 2021 |
Submissions last received: | 30 July 2021 |
DecisionDate: | 29 October 2021 |
Before: | McWilliam AJ |
Decision: | See [130] |
Catchwords: | TRADE PRACTICES – MISLEADING AND DECEPTIVE CONDUCT – Application to join a defendant and to further amend pleadings – alleged breaches of the Australian Consumer Law made in the course of advertising an apartment development in Woden – where defendants are part of a complex corporate structure – where proceedings not significantly advanced and no date set for trial – where joinder of defendant necessary to determine all issues in dispute – amendments have utility and no significant prejudice demonstrated – leave granted |
Legislation Cited: | Competition and Consumer Act 2010 (Cth) s 139B, sch 2 (ss 4, 18, 23, 24, 29, 89, 89A, 239, 224, 240) Federal Court Rules 1979 (Cth) O 6 r 8 (now repealed) |
Cases Cited: | ACCC v Dataline Imports Pty Ltd [2015] FCAFC 114 |
Parties: | Commissioner for Fair Trading ( Plaintiff) Bowes Street Developments Pty Ltd (ACN 612 564 833) (First Defendant) Geocon Bowes Street JV Pty Limited (ACN 623 471 287) (Second Defendant) Zapari Property Bowes Street Pty Limited (ACN 612 564 879) (Third Defendant) GZ Developments Pty Limited (ACN 623 532 810) (Fourth Defendant) |
Representation: | Counsel D Tynan ( Plaintiff) Dr R Higgins SC with R J Pietriche ( Defendants) |
| Solicitors ACT Government Solicitor ( Plaintiff) Meyer Vandenberg ( Defendants) | |
File Number: | SC 415 of 2019 |
McWilliam AJ
The Commissioner for Fair Trading (Commissioner) has brought regulatory action against a number of corporate entities associated with two Canberra-based property developers. The conduct alleged concerns a series of false, misleading or deceptive representations made in the course of advertising an apartment development in Woden known as “Grand Central Towers”. At the time of the representations, the development was under construction and sales were off the plan. The said development consists of 430 units, with a combined retail value of $172,486,378.00.
One of the developers is described as the Zapari Group, which includes the first and third defendants in the present proceeding, respectively Bowes Street Developments Pty Ltd (BSD) and Zapari Property Bowes Street Pty Limited (Zapari).
The other developer is the Geocon Group, which includes the second defendant in this proceeding, Geocon Bowes Street JV Pty Limited (GB JV).
The fourth defendant, GZ Developments Pty Limited (GZ Developments), straddles the two developer groups, being jointly owned by the first and second defendants.
The Commissioner alleges the conduct of the defendants constitutes a number of contraventions of the Australian Consumer Law (ACL), contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth). The ACL applies in the Territory through the Fair Trading (Australian Consumer Law) Act 1992 (Fair Trading Act), s 7 of which provides that when applied, it is referred to as the “Australian Consumer Law (ACT)”. However, references throughout this judgment are to the ACL, for ease of reading.
The interlocutory application
By application in proceedings filed 27 April 2021, the Commissioner seeks to amend the originating claim and to file a further amended statement of claim (FASC). The amendments include the joinder of a fifth defendant to the proceeding, namely GRE Sales Pty Ltd ACN 167 184 661 (GRE Sales). GRE Sales was on notice of the present application and served with the relevant affidavits and documents. It did not separately seek to be heard.
Not all of the proposed amendments are opposed. The defendants have consented to a number of amendments, summarised as follows:
(a)A change in the wording of the alleged misrepresentation concerning the Canberra Metro Light Rail being “extended to” Woden town centre (at [1(a)] and [74(f)], [76(a)] of the FASC);
(b)The addition of certain marketing materials which form part of the defendants’ advertising campaign, namely “promotional emails” (at [1], [48(d)], [62A]-[62C], [74(d)] of the FASC);
(c)A delineation between the content of the two versions of a “promotional video”, the original having been changed on 22 August 2019, a matter which only came to light after this litigation commenced by way of originating claim filed on the very same day (at [61]-[62] of the FASC); and
(d)The removal of any allegations of breach of s 30 of the ACL with respect to the light rail misrepresentation (at [1], [82(c)] and [83(c)] of the FASC).
The issues
The defendants oppose the balance of the amendments sought. They form the issues for determination. The amendments the Commissioner seeks fall into four categories:
(a)Joinder of GRE Sales to the proceedings on the basis that it was involved in the subject advertising campaign, as agent of one or more of the defendants (Issue 1);
(b)Amendments alleging further misrepresentations contained in advertising on real estate websites (Issue 2);
(c)An amendment in respect of presently pleaded misrepresentations as to expected rental yield, to allege that such conduct also constitutes a contravention of certain paragraphs in s 29 of the ACL (Issue 3); and
(d)The inclusion of additional relief by way of non-party consumer redress under s 239 of the ACL (Issue 4).
As will be apparent from the reasons that follow, leave will be granted to the Commissioner to amend the pleadings to include each of those four categories of amendments.
The procedural rules applicable to applications to amend pleadings
A defence to the Amended Statement of Claim was filed on 28 January 2020 (Defence). As the pleadings have closed, the Commissioner requires the leave of the Court to amend pleadings: r 507 of the Court Procedures Rules 2006 (ACT) (Rules).
Rule 501 of the Rules sets out circumstances where amendments to pleadings must be made:
501Amendment—when must be made
All necessary amendments of a document must be made for the purpose of—
(a) deciding the real issues in the proceeding; or
(b) correcting any defect or error in the proceeding; or
(c) avoiding multiple proceedings.
For an amendment to be regarded as a “real issue”, and therefore necessary, the issue must exist at the time of the application. If the amendment raises an entirely new issue, then it falls to be considered under the Court’s general discretion: AON Risk Services Australia v Australian National University (2009) 239 CLR 175 (AON v ANU) at [71] per Gummow, Hayne, Crennan, Kiefel and Bell JJ.
The Court’s general discretion is contained in r 502(1), which relevantly provides:
(1) At any stage of a proceeding, the court may give leave for a party to amend, … an originating process, … a pleading, … or any other document filed in the court in a proceeding in the way it considers appropriate.
Although it does not arise here, leave may be granted even if the effect of the amendment would be to include a cause of action arising after the proceeding was started: r 502(3) of the Rules.
The exercise of the discretion is guided by what is in the interests of justice. It is informed by the case management objectives in s 5A of the Court Procedures Act 2004 (ACT). They include facilitating the just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible.
Relevant factors for consideration include the nature of the amendments, any delay in seeking to amend the claim, the reason for the delay, and any prejudice that might arise, along with efficient case management objectives and regard to court resources. Considerations of this kind were all discussed in AON v ANU, in particular at [24] and [91]-[103]. The weight to be given to each factor in the Court’s exercise of discretion will vary on the facts and circumstances of the particular case.
These case management principles were summarised by Mossop J in Mannall v Howard [2019] ACTSC 112 at [9]-[11], drawing upon the judgment of J Forrest J in Tinworth v WV Management Pty Ltd [2009] VSC 552.
The Court may also consider whether the claim is sufficiently arguable to warrant the granting of leave, as seen in a late application to amend pleadings considered in Kaye v Woods [2014] ACTSC 25 (Kaye) at [38]; endorsed on appeal in Kaye v Woods [2014] ACTSC 84 at [25] per Murrell CJ. In Kaye, Master Mossop (as his Honour then was) there-stated:
38On an application such as this, I accept that it is generally incumbent upon the plaintiff to provide an explanation for the making of the amendments, particularly where the amendments are made many years after the commencement of proceedings. Further, it is incumbent upon the plaintiff to provide some evidence that the claim it seeks to advance in the amended pleadings is one which has utility, in the sense of being a reasonably arguable claim on the merits. Where a pleading is amended many years after the commencement of proceedings, the prejudice assumed to arise out of the granting of the further indulgence and the further delay in the final disposition of the matter means that it is incumbent upon the plaintiff to provide some evidentiary support for the arguability of the claims. The extent of evidentiary support will be very much dependent upon the nature of the case and its procedural history. The strength or otherwise of the case demonstrated will be relevant to the exercise of discretion to permit the amendment.
It has been said that some explanation for delay is critical to the favourable exercise of the Court’s discretion: AONv ANU at [114] per Gummow, Hayne, Crennan, Kiefel and Bell JJ. Such explanation is to be weighed in the balance against other factors when the Court exercises its discretion. At [103], the plurality stated as follows:
103… Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court’s attention, so that they may be weighed against the effects of any delay and the objectives of the Rules …
However, and of significance to the present application, AON v ANU is “not a one size fits all case”, as observed by the Full Court of the Federal Court in Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101; 187 FCR 261 at [51].
Issue 1 – should the Court permit the joinder of GRE Sales?
In respect of the proposed amendment to join GRE Sales as a fifth defendant, r 220 of the Rules provides (emphasis added):
220Court may include party if appropriate or necessary
(1)The court may order that a person be included as a party to a proceeding if—
(a)the person ought to have been included as a party; or
(b)including the person as a party is necessary to enable the court to adjudicate effectively and completely on all issues in dispute in the proceeding.
(2)The court may make an order under this rule—
(a)at any stage of the proceeding; and
(b)on application by the person or a party to the proceeding or on its own initiative; and
(c)whether the person to be included should be a plaintiff or defendant.
Rule 220 is in substantially the same terms as O 6 r 8 of the former Federal Court Rules 1979 (Cth). It was held in News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 at 524 that such a provision reflects an intention to avoid, where reasonably practicable, multiple proceedings.
In order to properly consider the arguments of the parties in relation to joinder, some appreciation of the pleadings as they currently stand is required.
The substantive claim
The Amended Statement of Claim filed 18 December 2019 (Amended Claim) pleads four kinds of contraventions of the ACL:
(a)Representations by the second and third defendants that the light rail would be extended to Woden town centre and would stop at, adjacent or proximate to, the development (Light Rail Location Representations). The Commissioner alleges these were false and contravened ss 18 and 29(1)(g) of the ACL.
(b)Representations by the first, second and third defendants that the travel time from the development to Canberra City on the light rail would be 10 minutes, and that there would be a service every five minutes. These are also alleged to have been false and in contravention of ss 18 and 29(1)(g) of the ACL.
(c)Representations by the first second and third defendants that a unit in the development could achieve a gross rental yield of 7 per cent on the private market (Rental Yield Representations). The Commissioner alleges these were false and in contravention of s 18 of the ACL.
(d)In relation to the contract of sale used by the defendants (Sale Contract), clause 75.2 prevents the consumer from relying on any prior agreement, representation, advice, material statement or warranty other than the terms in the contract in any subsequent cause of action against the defendants. The Commissioner alleges that is an unfair contract term, as that term is defined in s 24 of the ACL, and therefore void pursuant to s 23 of the ACL (Unfair Term claim).
The pleaded representations are alleged to have been published in various forms of media, including on billboards at the development site, in brochures, in an online promotional video, and in promotional emails (Promotional Material).
Relevant to the reason for seeking to join GRE Sales as party to the proceedings, the Commissioner pleads that BSD, GB JV and GZ Developments entered into a joint venture agreement to carry out the development (JV Agreement). GZ Developments, as nominee of BSD and GB JV, then entered into an agreement with Zapari to develop the land (Development Agreement).
Under those two agreements, the Commissioner alleges that GZ Developments was required to engage GRE Sales to market the units for sale and did so through an exclusive agency agreement with GRE Sales.
The Commissioner pleads that the consequences of the said agreements was that in publishing the Promotional Material, GRE Sales was acting on behalf of GZ Developments.
Separately, GZ Developments engaged GB JV to manage the day-to-day operations of the development. This included coordinating and managing the sales agents and facilitating the preparation and exchange of contracts of sale.
By reason of the JV Agreement and the Development Agreement, the Commissioner alleges that GZ Developments was acting on behalf of the other three defendants.
That leads the Commissioner to the allege that by delegating the publication of the Promotional Material to GRE Sales, GRE Sales was also acting on behalf of BSD, GB JV and Zapari.
In respect of the Unfair Term claim, Zapari and GZ Developments are alleged to have presented the Sale Contract to prospective purchasers of the units. In doing so, GZ Developments is said to have acted as agent for BSD and GB JV.
In the alternative, the Commissioner alleges that GRE Sales presented the Sale Contract on behalf of GZ Developments, and the same chain of liability as that pleaded in respect of the Promotional Material is pleaded to allege that GRE Sales was acting on behalf of the other three defendants.
The Defence
The current defendants admit that GRE Sales was responsible for the publication of the Promotional Material, and that GRE Sales engaged in this conduct at the direction of, or with the consent and agreement of, GZ Developments.
However, the defendants deny:
(a)any agency relationship between GZ Developments and the remaining entities; and
(b)that GRE Sales was otherwise the agent of either BSD, GB JV or Zapari.
In relation to the Unfair Term claim, the defendants plead that GRE Sales, and not Zapari and GZ Developments, was responsible for presenting the Sale Contract to prospective purchasers. Again, the defendants deny any agency relationship between GRE Sales and the remaining entities, save for GZ Developments.
The procedural history
It is convenient to record in summary form certain procedural steps, which feature in the parties’ arguments below in different ways.
Pursuant to s 52 of the Fair Trading Act, the Commissioner had issued, and received responses to, a number of notices seeking information before the proceeding was commenced on 22 August 2019. It suffices to describe them as “section 52 notices”.
After the proceeding commenced, there was a protracted discovery process, which was completed in tranches. As part of that process, over 200,000 documents were reviewed by the Commissioner. Collectively, approximately 80,000 pages of material were then discovered by the parties prior to a mediation occurring, with a second tranche of discovery withheld until the outcome of the mediation was known.
The mediation ultimately occurred on 15 December 2020. It was unsuccessful but it appears the parties pursued settlement negotiations until March 2021. They apparently agreed between themselves in the meantime to ‘pause’ compliance with the Court’s timetable, which was amended by consent on several occasions. Orders made by consent on 13 November 2020 anticipated the mediation in December 2020 occurring. They also provided for what was to occur if that mediation was unsuccessful, namely the finalisation of the discovery process and the filing of evidence on liability, with a separate hearing to occur on penalty.
On 22 March 2021, somewhat unsatisfactorily given that the parties had already fallen into default on the previously agreed timetable, the parties wrote to the Court. They sought to adjourn a listing hearing that was to occur on 8 April 2021 because of non-compliance with the previous orders. At that stage, the present application to amend pleadings was foreshadowed to the Court. Accordingly, the listing hearing was adjourned.
After further delay on the part of the Commissioner, the present application was eventually filed on 27 April 2021.
The result is that discovery is yet to be completed through the second tranche of discovered documents, no affidavit or expert evidence has yet been filed in the substantive proceeding, and the matter has not yet been listed for hearing.
The parties’ arguments on joinder
The Commissioner now seeks to join GRE Sales as a principal contravener and fifth defendant because the defendants have disputed whether GRE Sales acted as agent for the first to third defendants.
The Commissioner argues joinder is necessary here to properly decide all the issues between the parties.
The proposed amendments will serve to put the alternative case by the Commissioner. Namely, that if GRE Sales is not the agent of the first, second and/or third defendants, then it is liable for publishing the representations as a principal contravener.
The Commissioner’s explanation for why joinder was not sought shortly after the Defence was filed in January 2020 refers back to what was occurring procedurally. Substantial discovery took place throughout 2020. It included dealing with voluminous documents from across three ACT Government directorates. The Commissioner reconsidered the case after the review of the defendants’ discovery and in preparation for the mediation. It refrained from incurring the expense of amending its pleading in the meantime.
As to why GRE Sales was not joined initially, the Commissioner submits that the claim was based on the statutory responses provided by the defendants pursuant to s 52 of the Fair Trading Act. Those responses indicated to the Commissioner a complex corporate structure between the defendants and GRE Sales. From that material alone, it appeared to the Commissioner as though GRE Sales acted only in its capacity as agent for the defendants.
Although the Defence then pleaded otherwise, the contents of the documents provided in the statutory responses was said to be “opaque” and somewhat inconsistent with the material that was otherwise before the Commissioner.
Through the first tranche of discovery, the Commissioner was provided with a number of emails and minutes, which included Project Control Group minutes. Those documents demonstrated that first, it was GRE Sales that published the relevant representations. Secondly, it was the sales team of GRE Sales who distributed the Promotional Material to the potential purchasers.
Accordingly, while the Commissioner still presses it agency arguments as the primary factual position, the Commissioner submits the discovery material has raised the possibility that GRE Sales may be liable, in its own right, for the alleged conduct.
The Commissioner further argues that there was no prejudice arising from the joinder. In particular, the delay has not affected the defendants’ ability to understand or investigate the case against them, nor to provide evidence (given that the proceedings are not yet at the stage where evidence is to be filed). The discovery process itself included all the relevant documents concerning GRE Sales, so that it was not anticipated that any further discovery would be required.
The defendants resist the argument that the quality of their responses to the s 52 notices contributed to the forensic choices made by the Commissioner.
They argue there is no adequate explanation for delay because there was sufficient material in those responses to attribute liability on GRE Sales as a principal contravener. The very fact the Commissioner was able to plead GRE Sales’ involvement in the relevant conduct from the information provided in response to the section 52 notices showed that any subsequent documentary discovery was not required to join GRE Sales.
Even if the Court were to accept that the documents provided during discovery changed the Commissioner’s understanding of the factual substratum of the case, the defendants submit that they had, in any event, admitted GRE Sales’ involvement from the start.
The defendants contend that the attempt to provide a “forensic fallback target”, in the event that the Commissioner’s main targets (namely BSD, Zapari, GB JV and GZ Developments) are found not to be liable should not be permitted in circumstances where the opportunity to remedy the initial choice not to include GRE Sales as a principal contravener has been available to the Commissioner for some time.
The defendants further submit that it was not necessary to join GRE Sales to finalise all issues in dispute between the parties. In the event that the Commissioner was successful in establishing the contraventions, the only issue which might remain unresolved would be whether the Commissioner could succeed in imposing a penalty. The defendants submit again that the Commissioner made a forensic decision not to advance liability against GRE Sales.
As to prejudice in terms of the case progressing, the defendants argue that allowing the amendment would delay proceedings that are already moving slowly, because GRE Sales and its legal representatives would need time to review the voluminous material and to file a separate defence.
Findings
Contrary to the submissions of the defendants, I consider that joinder of GRE Sales is necessary for the Court to properly adjudicate on all issues in dispute, and that those issues include the question of what entity may be responsible for any penalty imposed.
There is no doubt that the alternative claim sought to be made against GRE Sales arises out of the same factual substratum as that pleaded against the existing defendants. The amendment proposed is an alternate legal consequence of whatever corporate structure and chain of responsibility is ultimately proven. The joinder is necessary to ensure that disputes arising from the same facts are disposed of in the one proceeding. The Commissioner would be entitled to separately commence proceedings against GRE Sales and have those proceedings either joined to, or heard concurrently with, the present litigation. To refuse joinder in those circumstances would defeat case management objectives of avoiding a multiplicity of proceedings.
The argument as to any asserted forensic decision initially made by the Commissioner is also misconceived. Whatever view one takes of the content of the statutory responses by the defendants, there is no statutory requirement or legal principle to the effect that the Commissioner is bound by any decision about how to plead a case on the basis of material obtained pursuant to those compulsory statutory processes, noting that the information was obtained prior to any proceeding commencing.
In any event, I accept that the involvement of GRE Sales is somewhat complex, with the parties each taking different views of the legal consequences, in terms of agency, that may follow from the terms of contractual documents and the actual conduct that occurred. Arguments about agency may be informed by the surrounding circumstances, such as how business was done for a particular development, as seen from the discussion in Ackers v Austcorp International Pld [2009] FCA 432 at [147]-[155] per Rares J. As his Honour observed at [154], two entities can engage in misleading and deceptive conduct simultaneously.
The Commissioner was entitled to know what the defendants’ position was on the primary case that had been pleaded, and to review the further documents produced on discovery to see whether that attitude was supported, before determining how to respond to what the defendants had alleged in their Defence.
To the extent that there was delay after the Defence had been filed, it was a delay to which the defendants actively consented, in full knowledge of the protracted discovery processes taking place, with such delay in turn partly due to a pending and delayed mediation and then subsequent negotiations.
As to any prejudice as a consequence of allowing joinder, the defendants raised issues of further delay in the progress of the litigation. However, I am not satisfied that any further delay arising from the necessity for GRE Sales to become properly appraised of the proceeding prior to the filing of a defence is of such magnitude as to weigh against joinder, particularly where substantive affidavit evidence is yet to be filed. The legal issue giving rise to the need for joinder is of narrow compass, discovery in relation to the conduct of GRE Sales has already substantially occurred notwithstanding that it was not directly a party, and this is not a case where the late joinder of a party would necessitate the vacation of a hearing date.
Accordingly, an order will be made granting leave to the Commissioner to join GRE Sales as fifth defendant.
Issue 2 – Should leave be granted to permit advertising on real estate websites to be included as part of the representations pleaded?
By this amendment, the Commissioner seeks to include further allegations that the misrepresentations currently pleaded were, and are continuing to be, published on additional media, namely on the real estate websites allhomes.com.au and domain.com.au.
The reason for the amendment is to enable all instances of the representations in Promotional Material to be captured, so that any relief granted in the proceeding (which includes injunctions as presently pleaded) attaches to the totality of the defendants’ conduct.
The defendants argue that there is no explanation why the advertisements on the websites now sought to be included were not pleaded in the Commissioner’s claim from the outset. It bespeaks of deficiencies in the Commissioner’s investigation and interrogation of the facts underlying the claims.
The defendants separately argue that, to the extent the amendments dealt with continuing contraventions as opposed to earlier instances of advertising, those amendments are futile in the sense that they are not sufficiently arguable (as to which see [18] above of these reasons and the authority there-cited). They rely on affidavit evidence to submit that the “public commentary with respect to Stage 2 of the Light Rail has, for a considerable period of time, validated the suggestion that Light Rail will be constructed to Woden”.
The defendants argue that this supports the representations made about future matters, defeating the Commissioner’s primary allegation that the defendants had no reasonable basis to make the Light Rail Location Representations: see s 4 of the ACL.
Findings
Dealing with the more significant point first, I do not accept the amendments would be futile. Specifically, the evidence led by the defendants is insufficient to establish that any claim based on the continued advertising of the development on the said websites is certain, or almost certain, to be defeated.
In order to explain why I have formed that view, it is necessary to understand the Commissioner’s allegation and the nature of the legal issue that will arise, before examining the contents of the evidence led by the defendants on this application.
The Amended Claim presently pleads that from July 2019, the ACT Government announced that Stage 2 of the light rail project would be divided into two stages:
(a)Stage 2A linking the Canberra Metro Light Rail from Canberra City to Commonwealth Park; and
(b)Stage 2B linking Commonwealth Park to Woden Town Centre, past the Parliamentary Zone.
That fact is admitted by the defendants.
The Commissioner seeks to plead that the advertising on the specified real estate websites:
(a)Represented as a fact that the light rail network would extend to Woden Town Centre and that it would stop at or near the subject development; and
(b)Failed to refer to the fact that the proposal for Stage 2 of the Light Rail network is subject to approval by the ACT Government and Commonwealth entities, that the route and location of the stops are indicative only and have not been finalised or approved, and that the Stage 2 proposal has not yet been approved by either the ACT Government or the Commonwealth entities.
As stated above, this aspect of the case relies on a representation about a future matter. Under s 4 of the ACL, such representations will be deemed to be misleading or deceptive if the defendants did not have reasonable grounds for making them.
Whether a representation about a future matter has, or had, reasonable grounds is a question of fact. The issue involves considering what the representor knew and then assessing whether those circumstances were objectively reasonable: ACCC v Dataline Imports Pty Ltd [2015] FCAFC 114 at [99].
In that regard, there is no formula for what might constitute objectively reasonable grounds for a particular representation pleaded. Much will turn on the circumstances of each case. The question involves a court considering not only intention, but the ability to perform. It has been said that – at least where the future matter relates to the conduct of the representor – “the best of intentions do not provide reasonable grounds if there is no ability to perform”: Awad v Twin Creek Properties Pty Ltd [2011] NSWSC 923 at [29] per Brereton J. Although the decision was later overturned on appeal (see Awad v Twin Creek Properties Pty Ltd [2012] NSWCA 200) the appeal turned on inferences to be drawn from the evidence and the way the case was conducted, rather than any issue with how the principle was explained by Brereton J.
Evidence of objectively reasonable grounds may be established by persons other than those who are alleged to have made the representations: Cummings v Lewis (1993) 41 FCR 559 at 566. However, depending on the circumstances, it may not suffice to simply point to the fact that a third party made a statement which the representor then adopted. There are many matters that may affect whether a representation had objectively reasonable grounds. Without in any way limiting the arguments the parties might ultimately make at trial, they could include who made the statement, the context in which the statement was made, the steps taken to investigate the statement to ensure it had an objectively reasonable basis before adopting it, or whether there was reason to doubt the statement.
It remains then to consider the evidence relied upon by the defendants to assert the amendments lack utility, or alternatively whether the amendments were so weak, insofar as they dealt with continuing misrepresentations, that the Court should refuse them. The evidence consists of a number of press releases and articles, published on an ACT Government website in May 2020, July 2020 and February 2021, concerning Stage 2 of the light rail project.
The substance of that material is that there was, and remains, an intention by the ACT Government to extend the light rail network to Woden. However, the material relied upon by the defendants reports that, as at February 2021, only stage 2A of the light rail project had received environmental approval from the Federal Government.
The contents of the material relied upon by the defendants includes statements that the ACT Government “continues its work on the design of Stage 2 of light rail to Woden”. For the stage 2B extension to Woden, which is the critical stage for the present proceeding, it is acknowledged that “an extensive EIS process would be required”. The reference to “EIS” is a reference to an environment impact statement.
So far as the ability to bring about the intention of the ACT Government is concerned, it will be a question of fact at trial whether reference to public commentary and rhetoric, in the absence of a specific approval or likely approval, constitute objectively reasonable grounds for the representation pleaded. It is one thing for a government to foreshadow, even strongly, an intention to build something. It is quite another for that intention to be realised, having regard to approvals that may be required from other entities outside the ACT Government, let alone matters such as timing and funding. In my view, what the material relied upon by the defendants establishes is that there is a genuine question to be tried with regard to the allegations sought to be included by the Commissioner of ongoing representations on websites.
As to the defendants’ other complaint concerning the failure to include the reference to the websites earlier, the Commissioner candidly submits that the failure to include the real estate websites in the pleadings earlier was due to an “oversight” and that a “change of guard” in instructing solicitors during the lead up to mediation resulted in the website material being noticed after the close of pleadings. However, the Commissioner submits there is no specific prejudice to the defendants, as these additional representations are of the same kind as the existing pleaded misrepresentations and arise out of the same factual matrix. Including them in the claim does not require further discovery, nor does it change the substance of the alleged contraventions of the ACL.
It may be accepted that whether a person has, or had, reasonable grounds is to be judged at the time the representation is made: Sykes v Reserve Bank of Australia [1998] FCA 1405; 88 FCR 511 at 513. I therefore accept the defendants’ submission that the inclusion of the websites, by virtue of the allegations being directed to more recent advertising of what is the same representation, will expand the case. However, the fact that an amendment results in additional issues going to trial is not of itself determinative of whether to permit the amendment to go forward.
As part of the considerations to be weighed, it is relevant that the Commissioner is a regulator, litigating in the public interest. In Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 2) [2020] FCA 863, which concerned an application to amend pleadings by the regulator made at a much later stage, namely during the trial, Stewart J stated at [11]:
11I also take into account that the ACCC is litigating, in effect, in the public interest. If it be the case that the respondents, or any of them, acted unconscionably such as to prejudice the public interest, then it is important that that public interest be vindicated. It should not be prejudiced by infelicity of pleading, provided of course that the respondents are not unduly prejudiced. There is a substantial corresponding public interest in ensuring that those who are accused of wrongdoing by regulators such as the ACCC enjoy the protection of a fair process which includes being clearly told of the case that they have to meet. Justice will be best done between the parties by ensuring that the real issues are illuminated by the pleadings.
I consider that the above observation has some resonance to the circumstances of the present case. If the Commissioner were ultimately to succeed in the case on the representations constituting contravening conduct, it would not be in the interests of justice for the Commissioner to only obtain relief that dealt with part of the media where the representations were published. For example, the potential consequence would be that a declaration that a particular statement was misleading conduct might be made, but then injunctive relief to prevent any such representations on websites from continuing to be made to the public would be refused, because those websites were not initially referred to when the matter was first pleaded. From a regulatory perspective, such result would be unsatisfactory.
When that matter is combined with the parties not yet filing any evidence on any of the issues and the matter being far from taking a hearing date, the exercise of the Court’s discretion falls firmly in favour of granting leave to amend. While cases such as AON v ANU demonstrate that there will be occasions to limit amendments to pleadings, even meritorious ones, the circumstances of the present proceeding and the amendments proposed do not fall into a category where it would be just to refuse the further opportunity to plead the case in the manner sought by the Commissioner.
Issue 3 – Should leave be granted to permit additional contraventions of s 29 of the ACL in respect of the Rental Yield Representations?
The proposed amendments (at [3], [89] and [89A] of the FASC) seek to add allegations that the defendants contravened ss 29(1)(b) and 29(1)(g) of the ACL in respect of the Rental Yield Representations. The amendments are in addition to the presently alleged contravention of s 18 of the ACL for the same conduct.
The Commissioner seeks leave to allege that the Rental Yield Representations were representations that the services being provided by the defendants, namely the conferral of interest in the units to purchasers, would have a certain “value” (in the case of s 29(1)(b)), or “benefit” or “performance characteristic” (in the case of s 29(1)(g)).
Arguments of the parties
The Commissioner submits that this amendment was one of legal consequence, in that it was directed more to the characterisation of conduct already pleaded as an additional contravention of the ACL. As such, the amendments do not give rise to the need to adduce additional evidence. Any additional legal argument is likely to be limited to the kind of service being provided, and the meaning of “value”, “benefit” or “performance characteristic” in the ACL.
The defendants accept the limited scope of the amendments but emphasised the significance for the relief that may follow. If the Commissioner establishes that the Rental Yield Representations contravened s 18 of the ACL, only declaratory and non-pecuniary relief may be awarded. However, if the Commissioner establishes that such conduct contravened s 29 of the ACL, under s 224(1)(a)(ii) of the ACL, the Court may impose a pecuniary penalty. Thus, the amendment would expand the potential suite of remedies available in a very significant way.
Findings
I accept the defendants’ submission that there was no real reason advanced by the Commissioner as to why this relief was not sought initially. In circumstances where s 29 was pleaded in respect of other representations, it is indeed curious that s 29 was not pleaded from the outset in relation to the Rental Yield Representations.
As I understood counsel for the Commissioner’s argument, if there was an explanation, it would have been given. While the candour of the acknowledgement is welcome, the position remains somewhat unsatisfactory. If the absence of a reference to s 29 of the ACL in the pleading with regard to Rental Yield Representations was deliberate, or otherwise based on a view of those representing the Commissioner which evolved from one focussed on declarations and injunctive relief to whether pecuniary penalties were appropriate, that was an explanation capable of being the subject of affidavit evidence by the legal representatives. Equally, if the omission was more one of oversight in light of the fact that it is included with regard to the other representations pleaded, that should have been made plain. The Court is left without any real understanding or explanation at all from the affidavit evidence of the Commissioner’s legal representatives.
However, as submitted by counsel for the Commissioner, the lack of an explanation should not be elevated into a threshold requirement before the Court would grant leave to amend. I am mindful that while significant attention was devoted to the importance of an explanation being given in AON v ANU, the explanation the High Court required in that case was “why the matter had been allowed to proceed to trial in its existing form”: AON v ANU at [106]. That is not the position here, where the Commissioner is seeking to remedy a perceived omission in terms of pleading the totality of contraventions founding additional remedies well before trial.
Weighing those matters against each other, and taking into account case management considerations and similar lack of prejudice – matters to which I have earlier referred when dealing with the other categories of amendment – it is appropriate to grant leave in order to give the Commissioner a proper opportunity to plead the case. That includes pleading the particular statutory contraventions necessary to capture the totality of the relief sought.
Issue 4 – Should leave be granted to include relief under s 239 of the ACL?
The Commissioner seeks to plead an additional remedy pursuant to s 239 of the ACL. The section was described in Swishette Pty Ltd v Australian Competition and Consumer Commission [2017] FCAFC 45; 249 FCR 483 at [1] as follows:
1… Section 239 is a remedial provision that is enlivened when a person has engaged in conduct in contravention of consumer protection provisions in the Australian Consumer Law and the section empowers the Court, on the application of the … regulator …, to make orders against the person who engaged in the contravening conduct, or a person involved in that conduct, to redress the loss or damage suffered, by affected consumers who are not parties to the proceeding, without the need for those persons to be joined as parties (the “non-party consumers”).
The section enables a regulator to obtain an order of the court for appropriate “non-party consumer redress” on behalf of a class of non-party consumers who suffered, or are likely to have suffered, loss or damage caused by the contravening conduct.
Relevant to the present case, s 239 applies where a person has engaged in conduct in contravention of Chapter 2 of the ACL and:
(a)the contravening conduct either caused or is likely to cause a class of persons to suffer loss or damage; and
(b)the class includes persons who are non-party consumers in relation to the contravening conduct.
Under s 239(1) of the ACL, on the application of the regulator, a court may make such order as the court thinks appropriate, other than an award of damages.
Section 239(3) relevantly provides:
(3)The order must be an order that the court considers will:
(a)redress, in whole or in part, the loss or damage suffered by the non-party consumers in relation to the contravening conduct …; or
(b)prevent or reduce the loss or damage suffered, or likely to be suffered, by the non-party consumers in relation to the contravening conduct …
An application may be made at any time within six years after the day on which the cause of action that relates to the contravening conduct accrued: s 239(4) of the ACL.
Arguments of the parties
The Commissioner submits that s 239 avoids the need for individual consumers to commence their own proceedings, which requires individual proof of loss against large corporate defendants, and that s 239 is designed to operate in precisely the circumstances that are the subject of the present allegations.
The Commissioner relies on the nature of the development, consisting of 430 units, with a combined retail value of over $170 million, and on the uncontroversial circumstances that the units have been sold to consumers across Australia and overseas, including in China and Hong Kong. The Commissioner contends that a significant number of these consumers may have been affected by the representations, particularly those consumers who reside outside the Territory and consequently may not have any familiarity with the local market or planning rules.
The defendants accept that this is a discrete amendment, but again argued that the Court should not grant leave because there was no explanation for delay in bringing the amendment. In that regard, the same reasoning and conclusion applies as that set out in relation to Issue 3 above.
However, the defendants raise a further issue, namely whether the amendment has utility, in the sense of being sufficiently arguable. The defendants argue that the fact some consumers “may have been affected” does not evidence “loss”, which is what is required under s 239.
The defendants point to a lack of evidence on the present application of any complaints or grievances by purchasers of the units, or any other evidence showing there has been any appreciable loss by virtue of having overpaid for the units in reliance upon the representations alleged. They submit that an equally available possibility is that the prices of the units were determined by other market-based factors.
Although the issue could be more fully ventilated at a hearing on penalties after any contravention has been established, the defendants submit that the Commissioner at least has to show there is a sufficient factual foundation to justify granting leave to plead the additional relief at this stage of the proceedings.
In support of their argument, the defendants rely on the judgment of Colvin J in Australian Competition and Consumer Commission v Geowash Pty Ltd (No 4) [2020] FCA 23; 376 ALR 70 (Geowash). At [185], his Honour explained that a s 239 order may be made “without identifying the persons who are the non-party consumers, or the nature of the loss”, so long as the Court is satisfied there has been loss or damage caused to the relevant class of persons. At [187], his Honour went on to say:
187Of course, it will be necessary to consider whether the nature and extent of the loss has been established with sufficient certainty to make the orders appropriate in all the circumstances …
This, the defendants submit, means that the Commissioner must demonstrate there is a sufficient factual foundation (beyond that a number of people have bought units and may have been influenced by the representations) to the nature and extent of the “loss” suffered by the non-party consumers.
The Commissioner submits in response to that argument that evidence to establish such loss or damage was not necessary on the present application. The defendants’ reliance on Geowash was misplaced, as it was a decision specifically addressing relief, with liability having already been established in preceding decisions. The dicta of Colvin J concerning the need to establish loss ought not be applied at an earlier stage in proceedings where the concern is whether amendments to pleadings ought be permitted prior to the filing of evidence. The decision of Geowash does not establish any evidentiary hurdle that needs to be overcome in order to justify granting leave to amend pleadings.
Findings
On an application to amend a pleading, the party seeking the amendment must satisfy the Court that there is a reasonably arguable claim on the merits: Kaye at [38]. However, I agree with the Commissioner’s submission that Geowash does not establish a requirement to demonstrate a sufficient factual foundation of “loss” suffered by non-party consumers before the Court will grant leave to amend pleadings to include s 239 relief.
In assessing whether the Commissioner has established an arguable basis for pleading relief under s 239 of the ACL, it is important to keep in mind the purpose of s 239 and how it operates.
Section 239 of the ACL expressly includes redress for a class of persons who are likely to suffer loss and permits the Court to make such orders as it thinks are appropriate. The relief that may be ordered may be of a kind that prevents loss likely to be suffered by a particular class.
The purpose and function of s 239 is further illuminated by the statutory context, including surrounding provisions. Section 240(3) of the ACL provides that in determining whether to make an order for non-party consumer redress under s 239(1), the Court need not make a finding about which persons are the non-party consumers. Nor is it necessary to make a finding about the nature of the loss or damage suffered, or likely to be suffered, by such persons.
Colvin J’s remarks in Geowash, set out above, were made in the context of determining the appropriate relief following a decision as to liability. His Honour’s remarks should not be extrapolated to require the Commissioner to provide evidence of an arguable case of actual loss or damage caused to a class of non-party consumers at a significantly earlier stage in the litigation, particularly when the legislation itself does not contain such a requirement. If anything, the provisions suggest that the nature of the loss is not required to be established with precision by the Court.
On the present Amended Claim, the defendants admit the allegation that there was an advertising campaign to sell the units. It is also not in contest that units in the development have been sold. The defendants admit that among the Promotional Material was a brochure, and that among it contained the words, “1 minute to Woden bus terminal & Future Light Rail Terminal”, and “Stage 2 of the $900 million Light Rail Network will also link residents directly to Capital Hill, the Canberra CBD and beyond”.
The defendants further admit that the said brochure made no reference to the fact that the Stage 2 Proposal was subject to approval by the ACT Government and Commonwealth entities; and that the route and location of the stops for the Stage 2 Proposal were indicative only and had not been finalised or approved.
The basic facts that are admitted include apartments being advertised for sale and statements being made as part of Promotional Material that are capable of founding the representations alleged. Whether the representations are both proven and found to amount to contraventions will involve questions of fact and of law, having regard to the circumstances at particular points in time. However, it cannot be said that the contraventions alleged are entirely without foundation. In circumstances where a number of units were bought by persons across Australia and overseas, those purchasers may form part of a class of non-party consumers.
In my view, if the representations alleged are found to have contravened the ACL, there are already sufficient facts alleged and admitted in the pleading to support a reasonably arguable case for s 239 relief. Such relief would be crafted in light of the conduct that is ultimately proven at hearing or, if settlement is reached in the meantime, agreed through a statement of agreed facts.
Should the matter proceed to the penalty phase, I accept counsel for the defendants’ oral submission that there may be significant amounts of evidence (both lay and expert) led to prove the causal nexus between the contraventions and the loss likely to be suffered by non-parties. However, that is one of the reasons why the penalty phase of the proceedings has been split, and why when determining whether to permit s 239 relief, there is a low threshold for evidence required for a causal link.
The argument really amounts to no more than a complaint that the defendants will have to deal with s 239 in due course if that additional relief is permitted to be advanced and the alleged contraventions are established. It does not establish any particular prejudice or other reason that would warrant the refusal of the discrete amendment sought.
Accordingly, leave should be granted to the Commissioner to include a claim for s 239 relief.
Costs
The Commissioner has been successful on the application. However, the Commissioner only sought an order that the costs of the application be costs in the cause, presumably in recognition of the fact that some of the amendments were in part required as a result of oversight, or at least a change in approach.
Historically, a party granted an indulgence by the Court will usually be required to pay the costs consequentially occasioned to its opponent: see Stewart v North Metropolitan Tramways Co (1886) 16 QBD 556 at 558. Relevant to the present application, amending an originating process and statement of claim after the close of pleadings is an indulgence. Accordingly, the party seeking the amendments should expect to pay the costs of the application to amend and the costs thrown away as a consequence of the amendment. That position is reflected in r 513 of the Rules, which provides that unless the Court otherwise orders, the costs of an amendment under that part of the Rules, together with any costs thrown away, are payable by the party who applied to make the amendment.
The discretion to award costs nevertheless remains unfettered, and the Court now must place emphasis on the obligation on parties to conduct cases efficiently and with a view to resolving the real issues in civil proceedings, including the efficient use of the judicial resources available. In Canberra Hire Pty Ltd v Koppers Wood Products Pty Ltd [2008] ACTSC 92 (Canberra Hire), Rares J ordered effectively that the costs of a successful application to amend follow the event. Such costs were then to be offset by any costs thrown away by the amendment: Canberra Hire at [26].
Rares J was there dealing with an amendment that was essentially a legal argument, and one for which no relevant prejudice was demonstrated: Canberra Hire at [24]. His Honour went on to state (at [25]) that the “efficient conduct of this litigation would have been assisted by progressing it quickly to trial”.
The nature of the amendments here is more expansive. They go to factual issues, for example, the amendments affecting the Light Rail Location Representations (Issue 2). They also go to legal consequences and further relief. Although parties should be mindful not to unreasonably oppose procedural steps, the concerns raised by the defendants about the lack of a proper explanation for some of the amendments did have some foundation, as discussed above in these reasons. In all the circumstances, I consider the appropriate course is to simply apply the ordinary rule.
Conclusion and Orders
The orders of the Court are as follows:
1. Leave is granted to the plaintiff to join GRE Sales Pty Ltd (ACN 167 184 661) as the Fifth Defendant to these proceedings.
2. Leave is granted to the plaintiff to file and serve an Amended Originating Claim and Further Amended Statement of Claim substantially in the form of the documents annexed to the affidavit of Sarah Kate Arthur affirmed 27 April 2021 and marked SKA-1 and SKA-2 respectively.
3. The plaintiff is to pay the costs of the application and any costs thrown away by the amendments.
| I certify that the preceding one hundred and thirty [130] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Acting Justice McWilliam. Associate: Dominic Page Date: 29 October 2021 |
2