FAI General Insurance Co Ltd & Anor v Workcover Corp of South Australia & Ors monwealth of Australia [1998] FCA 676

[1998] FCA 675

FAI GENERAL INSURANCE COMPANY LTD and FAI WORKERS COMPENSATION (SA) PTY LTD v. WORKCOVER CORPORATION OF SOUTH AUSTRALIA, HIH WINTERTHUR WORKERS COMPENSATION (SA) LTD, MMI WORKERS COMPENSATION (SA) LTD, MERCANTILE MUTUAL INSURANCE (SA WORKERS COMPENSATION) LTD, ROYAL & SUN ALLIANCE WORKERS COMPENSATION (SA) LTD and COMMERCIAL UNION WORKERS COMPENSATION (SA) PTY LTD
No. SG42 of 1998
FED No. 675/98
Number of pages - 12
Practice and Procedure - Trade Practices

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

VON DOUSSA J

Practice and Procedure - Pleading - statement of claim - functions of statement of claim - pleading of material facts - applications to strike out - whether case stated sufficiently in terms that respondents are able to meet - whether pleadings state conclusion without material facts in support.

Trade Practices - Pleading of contraventions of s45 and 46 - essential elements of cause of action - pleading of causal relationship between contravention and loss.

Workers Rehabilitation and Compensation Act 1986 (SA)

Workcover Corporation Act 1994 (SA)

Trade Practices Act 1974 (Cth)

Competition Policy Reform (South Australia) Act 1996

Workcover Corporation of South Australia v Olifent, (unreported, 30 May 1997, Matheson, Olsson and Williams JJ) referred to

Australian Tape Manufacturers Association Limited v The Commonwealth of Australia (1993) 177 CLR 480 referred to

Air Services Australia v Onark Airlines Limited (1998) 152 ALR 656 referred to

Multigroup Distribution Services Pty Limited v TNT Australia Pty Ltd and Others (1996) ATPR 41-552 applied

Mick Skorpos Petrol Discount King Pty Ltd v The Shell Company of Australia Ltd (1997) ATPR 41-556 applied

Natwest Australia Bank Ltd v Boral Gerrard Strappings Systems Pty Ltd (1992) ATPR 41-196 applied

Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 193 applied

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 followed

ADELAIDE, 20 May 1998 (hearing), 12 June 1998 (decision)

#DATE 12:6:1998

Counsel for the Applicant FAI: Mr R J Whitington QC with Mr N Rochow

Solicitor for the Applicant FAI: Fisher Jeffries

Counsel for the Respondent Mr M L Abbott QC with Mr R Baxter

Solicitor for the Respondent: Johnson Winter Slattery

THE COURT ORDERS THAT:

1. Paragraph 37 of the amended statement of claim be struck out with leave to replead that paragraph within 14 days.

2. Paragraphs 2, 3 and 4 of the notice of motion be otherwise dismissed.

3. The remainder of the notice of motion be stood over to a date to be fixed.

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

VON DOUSSA J

By notice of motion dated 1 May 1998 the first respondent, Workcover Corporation of South Australia ("Workcover") sought along with other consequential orders, the following:

1. That paragraphs 32-37 of the Statement of Claim be struck out.

2. That:

2.1 paragraph 43.5.2 of the prayer for relief in the Statement of Claim be struck out;

2.2 paragraph 43.8.1 of the prayer for relief in the Statement of Claim be struck out.

3. That judgment be entered for the Respondents on:

3.1 paragraph 43.7 of the prayer for relief in the Statement of Claim;

3.2 paragraph 43.9 of the prayer for relief in the Statement of Claim.

4. That the issues joined by paragraphs 52-54 of the Defence be heard and determined as a preliminary matter.

The second applicant, FAI Workers Compensation (SA) Pty Ltd ("FAI (SA)") is a wholly owned subsidiary of the first applicant, FAI General Insurance Company Ltd ("FAI General"). At times in the pleadings the two applicants are referred to together simply as "FAI". These reasons adopt the same course.

Workcover is a body corporate established initially by the Workers Rehabilitation and Compensation Act 1986 (SA) ("WRC Act") and continued by the Workcover Corporation Act 1994 (SA) ("WC Act"). It is an instrumentality of the Crown in the right of the State of South Australia. Workcover is an authority in South Australia which carries on, and at all material times has carried on, the business of workers compensation insurance and related services in exercise of the statutory powers and functions conferred on it by the WRC Act and the WC Act. It is pleaded that Workcover carries on a business within the meaning of s2B(1) of the Trade Practices Act 1974 (Cth) ("the TPA") and s8(1) of the Competition Policy Reform (South Australia) Act 1996 ("the Reform Act").

Under the WRC Act and WC Act a scheme of compulsory workers compensation insurance is established in South Australia. All employers in the State of South Australia are required to register with Workcover. Employers, other than exempt employers, are liable to pay a levy to Workcover based upon aggregate remuneration paid to the employer's workers in the particular class of industry in which the employer employs workers. Varying levy rates are fixed by Workcover for different classes of industry, and are subject to adjustments which are not presently relevant. Employers who are exempt employers are also liable to pay a levy fixed on a different basis intended to contribute towards certain costs and liabilities of Workcover. The amounts collected by way of levies are received by Workcover and paid into a fund entitled the "Compensation Fund". From this fund workers compensation and other payments are made in accordance with the compensation scheme established by the legislation.

Before 31 July 1995 Workcover had exclusive responsibility for and carried out the management and determination of claims for compensation under the WRC Act in respect of employers who were not exempt employers. This function is referred to in the pleadings as "Claims Management Services".

By the WC Act, Workcover is expressly empowered to enter into contracts or arrangements conferring power on a private sector body, and to delegate a function or power conferred on Workcover to such a private sector body in connection with Claims Management Services. A private sector body so authorised is referred to in the pleadings as a "Claims Management Agent". Such contracts or arrangements are required by the WC Act to be in terms authorised by regulation.

In about January 1995 FAI General was extended an invitation from Workcover to bid for the right to enter into a contract to provide Claims Management Services to Workcover for a period of three years commencing on 1 July 1995. FAI General made a bid to provide such services as did a number of other companies. In about April or May 1995 following a review and consideration of bids received, Workcover entered into contracts for the provision of Claims Management Services with nine Claims Management Agents, one of which was FAI (SA). FAI General had caused FAI (SA) to be incorporated for the purposes of entering into the agreement for the provision of Claims Management Services. The agreement with FAI (SA) for the three year period commencing on 1 July 1995 is referred to in the pleadings as the "1995 Claims Management Agreement".

Pursuant to the 1995 Claims Management Agreement FAI (SA) provided Claims Management Services to Workcover from 1 August 1995.

By letter from Workcover to FAI (SA) dated 1 December 1997 an invitation was extended to FAI (SA) to make a bid to provide Claims Management Services to Workcover for a further period commencing on 1 July 1998 (in effect from the period after the 1995 Claims Management Agreement, and similar agreements with the other eight companies entered into in 1995, expired).

On 13 February 1998 FAI (SA) delivered to Workcover its bid submission document which included an offer to provide Claims Management Services in the ensuing period. Workcover also received bids from a number of other companies to whom invitations to bid had been extended.

On or about 18 March 1998 Workcover assessed bids which had been received, and on 20 March 1998 made a number of decisions including decisions to enter into agreements for the provision of Claims Management Services to Workcover with five companies for a period of three years commencing on 1 July 1998. FAI (SA) was not one of those companies. The bid of FAI (SA) was rejected.

These proceedings were commenced on 26 March 1998. Initially Workcover was the only respondent named. The application sought wide ranging injunctions to restrain Workcover from putting into effect the decisions made by it on 20 March 1998, including injunctions restraining Workcover from notifying employers to whom FAI (SA) is presently providing Claims Management Services, or the public, about changes planned to occur in consequence of the appointment of the five Claims Management Agents to operate after 1 July 1998. The application also sought an order quashing Workcover's decision not to reappoint FAI (SA) as a provider of Claims Management Services, a declaration that it was entitled to be appointed, and an order that Workcover be directed to rehear and determine the FAI (SA) application according to law. Other declarations were sought in respect of contraventions of provisions of the TPA and the Competition Code, (referred to in the pleadings as the "Schedule version of Part IV"), enacted into the laws of South Australia by the Reform Act.

Interlocutory relief was immediately sought to restrain Workcover from giving effect to its decisions pending trial. Only limited relief was granted on an interim basis. The substantial interlocutory relief sought was refused after an inter parties hearing. In the course of argument over interlocutory relief, questions arose whether the five companies whose bids had been accepted by the decisions of Workcover made on 20 March 1998 should be joined as parties to the proceedings. In the terms in which relief was then claimed in the application, orders were sought which would have had the effect of setting aside Workcover's purported acceptance on 20 March 1998 of the bids received from those five companies.

The applicants then joined the five successful bidders who became the second to sixth respondents in the proceedings. It is unnecessary to record the course of events that followed, except to note that the proceedings against the second to sixth respondents have now been discontinued, and an amended statement of claim has been filed.

The amended statement of claim, the subject of the present notice of motion, broadly speaking, makes the following allegations:

(a) In paragraphs 18 and 19, that during the negotiations leading up to the 1995 Claims Management Agreement, Workcover made statements and representations to FAI which, in effect, justified an expectation on the part of FAI that its engagement as a provider of Claims Management Services would be renewed and extended beyond the expiry of the 1995 Claims Management Agreement, and that in reliance upon that conduct of Workcover, FAI (General) established FAI (SA) and made a substantial investment in setting up offices, engaging employees and establishing its position in South Australia as a provider of Claims Management Services. It is pleaded that by reason of the conduct of Workcover prior to entry into the 1995 Claims Management Agreement, Workcover engaged in misleading and deceptive conduct contrary to the provisions of s56 of the Fair Trading Act 1987 (SA), in respect of which damages are claimed.

(b) In paragraph 42, that by reason of its conduct prior to entering into the 1995 Claims Management Agreement Workcover is estopped and precluded from not approving FAI (SA) as a Claims Management Agent for a further period of three years from 1 July 1998, from not accepting FAI (SA)'s renewal bid, and from not dealing with the bid fairly and on the merits.

(c) In paragraphs 39-41, that the decisions to reject the renewal bid of FAI (SA), and not to enter into a Claims Management Agreement with FAI (SA), were void because (1) Workcover failed to extend procedural fairness to FAI (SA) (paragraph 39), (2) failed to take into account relevant considerations, took into account irrelevant considerations, misapprehended facts and legal principle, and made decisions where there was no evidence justifying them and in accordance with a rule of policy without regard to the merits of FAI (SA)'s bid (paragraph 40), and (3) the decision was unreasonable in the Wednesbury sense. (paragraph 41).

(d) In paragraphs 27-37, anti-competitive conduct contrary to provision of Part IV of the TPA and the Schedule version of Part IV. It is these allegations which enliven the exclusive jurisdiction of the Federal Court of Australia. Paragraph 1 of the notice of motion seeks to strike out central pleadings relating to the applicants' case based on anti-competitive conduct. Further details of the pleading relevant to this aspect of the claim appear below.

Against this background I turn to the orders sought in the notice of motion.

Paragraph 1 of the Notice of Motion:

At an interlocutory hearing on 14 May 1998 the Court was informed by counsel then appearing for Workcover that paragraph 1 of the notice of motion turned on a point of law, namely that Workcover, as an instrumentality of the Crown, was not carrying on a business within the meaning of ss2B and 2C of the TPA, and ss13-15 of the Reform Act. The Court was informed that for this reason it would be argued that neither Part IV of the TPA nor the Schedule version of Part IV could apply. The argument that Workcover was not relevantly carrying on business was based on the assertion that the function of Workcover is to collect taxes. Section 2C(1)(a) of the TPA, and s15(1)(a) of the Reform Act relevantly provide that the imposition or collection of taxes by the Crown in the right of the State does not amount to carrying on a business. In support of this argument Workcover relied on a decision of the Full Court of South Australia in Workcover Corporation of South Australia v Olifent, (unreported, 30 May 1997, Matheson, Olsson and Williams JJ) which held that levy payments due to Workcover under the WRC Act constituted payments of tax for the purposes of s122 of the Bankruptcy Act 1966 (Cth).

However, on the hearing of the notice of motion on 20 May 1998, Mr M L Abbott QC, Senior Counsel for Workcover, said that the above argument was not a primary submission of Workcover, and he advanced a different argument in favour of paragraph 1 of the notice of motion. The above argument was, however, advanced as ancillary one by Mr Baxter who appeared with Mr Abbott. In my opinion the argument does not raise a ground for striking out those parts of the amended statement of claim which are based on the TPA and the Schedule version of a Part IV for two reasons. First, it is, at the least, arguable that this Court should not apply the reasoning of the Full Court of South Australia in Olifent to conclude that levy payments due under the WRC Act and WC Act are "taxes". I consider there is force in the argument of Mr Whitington QC, Senior Counsel for FAI, that the reasoning in Olifent is based on a misapprehension of Australian Tape Manufacturers Association Limited v The Commonwealth of Australia (1993) 177 CLR 480 and, further, that it is inconsistent with the principles of law discussed by the Full Court of the Federal Court in Air Services Australia v Onark Airlines Limited (1998) 152 ALR 656 at 674 to 680. In support of the argument that Olifent does not authoritatively decide the question that levies payable to Workcover are "taxes" is the further submission that a factual question is involved, namely whether the payments due to Workcover are merely a fee for services which would deprive the payments of the character of a tax. This factual question is one to be explored at trial. Secondly, even if levies payable under the WRC Act and the WC Act constitute taxes for the purposes of s2C of the TPA and s15 of the Reform Act, there is an unresolved question of fact whether the business of Workcover is confined to imposing or collecting taxes. The legislation gives Workcover a wide range of functions in addition to imposing or collecting taxes. FAI's reply to Workcover's defence identifies many activities independent of the collection of levies from employers which are said to constitute the carrying on of a business. This factual question is one to be resolved at trial.

The argument advanced by Mr Abbott under paragraph 1 of the notice of motion rested on Federal Court Rules, O 11, r 16. He argued that the impugned pleadings do not disclose a reasonable cause of action, or have the tendency to cause prejudice, embarrassment or delay, and should be struck out accordingly.

In paragraph 27 of the amended statement of claim it is pleaded that Workcover has a statutory monopoly pursuant to the WRC Act and WC Act, and by virtue of that monopoly has substantial market power in respect of the provision of workers compensation insurance in relation to services in South Australia. Paragraph 28 alleges that from on or about 1 July 1995 Workcover has taken advantage of the statutory monopoly to create and control the market in which insurers and their related companies contract with Workcover to provide Claims Management Services to employers, other than exempt employers, under the workers compensation scheme in South Australia. Paragraph 29 pleads two markets in South Australia which are defined as "the South Australian Markets", namely a market for contracts to provide Claims Management Services to Workcover, and a market for the provision of Claims Management Services to employers obliged to insure under the workers' compensation scheme created by the legislation. Paragraph 30 defines other markets referred to as "the other State Markets", namely, markets in New South Wales and Victoria similar to the South Australian markets, and in Western Australia, Tasmania, Northern Territory and the Australian Capital Territory to provide workers compensation insurance and related services to employers. Paragraph 31 defines a market in which nationally operating insurers compete to provide national workers compensation insurance, referred to as "the National Market".

Paragraphs 32 to 37 then purport to plead the anti-competitive conduct alleged. To understand those paragraphs it is necessary also to set out paragraphs 25 and 26 of the amended statement of claim. The relevant paragraphs read:

"25. On or about 18 March 1998 WorkCover took a decision: 25.1 to exclude FAI (SA) from the second stage of the selection process involving interviews with representatives of the bidders; and/or 25.2 to reject the bid of FAI (SA); and/or 25.3 not to enter into a claims management agreement with FAI (SA) for the period of three years commencing on 1 July 1998. 26. On or about 20 March 1998, WorkCover took a decision: 26.1 to enter into claims management agreements with the second to sixth respondents to the exclusion of FAI (SA); and/or 26.2 to reject the bid of FAI (SA); and/or 26.3 not to enter into a claims management agreement with FAI (SA) for the period of three years commencing on 1 July 1998. ... 32. In March 1998 WorkCover, by taking the decisions pleaded at paragraphs 25 and 26, took advantage of its substantial market power in the South Australian Markets with the effect of: 32.1 preventing the re-entry of FAI as a competitor in the South Australian Markets and the National Market between July 1998 and July 2001; 32.2 deterring or preventing FAI from entering or engaging in competitive conduct in the South Australian Markets and the National Market after July 2001; 32.3 substantially damaging FAI as a competitor in the other State Markets. 33. WorkCover engaged in the conduct pleaded at paragraph 32 for the purpose of achieving the effects pleaded therein and thereby contravened the provisions of section 46 of the TPA and the Schedule version of Part IV. 34. Further and in the alternative to paragraphs 27 to 33 inclusive, by making the decisions pleaded at paragraphs 25 and 26 and thereafter entering into contracts with the second to sixth respondents inclusive to the exclusion of FAI (SA), WorkCover has made a contract or arrangement or arrived at an understanding with each of the other respondents which has the purpose, or would have the likely effect of substantially lessening competition in the South Australian markets, the other State Markets and the National Market. 35. WorkCover is proposing to give effect to the contracts pleaded at paragraph 34. 36. By reason of the matters pleaded at paragraph 34, the conduct of WorkCover pleaded at paragraphs 28 to 33 inclusive contravenes the provisions of section 45(2)(a)(ii) and section 45(2)(b)(ii) of the TPA and the Schedule version of Part IV. 37. By virtue of the conduct of WorkCover and the effect thereof, as pleaded in paragraph 32, FAI has suffered and will continue to suffer significant loss and damage."

The principles which should guide the Court in considering an application to strike out a pleading in a case like the present one are discussed in Multigroup Distribution Services Pty Limited v TNT Australia Pty Ltd and Others (1996) ATPR 41-552 and Mick Skorpos Petrol Discount King Pty Ltd v The Shell Company of Australia Ltd (1997) ATPR 41-556. In short, the statement of claim is to be assessed having regard to the dual functions of pleadings namely to ensure a fair trial by putting the opposite party on notice of the case to be met, and to define the issues for decision so that the preparation of the case, and the trial, can be controlled: Skorpos at 43,693-43,694. That objective is to be achieved by the pleading setting out a statement in summary form of the material facts on which the applicant relies: FCR O 11, r 2. If it discloses no reasonable cause of action or has a tendency to cause prejudice, embarrassment or delay, the whole or part of it may be struck out: FCR O 11, r 16.

Mr Abbott contends that paragraphs 32 and 33 fail to plead material facts sufficient to plead a claim under s46 of the TPA; rather they merely repeat the language of s46 and baldly assert contraventions of the provisions of the section. Similar submissions are also made in respect of paragraphs 34, 35 and 36 which purport to plead contraventions of provisions of ss45(2)(a)(ii) and 45(2)(b)(ii) of the TPA.

Further, paragraphs 32 and 33 are criticised because they fail to properly plead a proscribed "purpose" (see s46(1) of the TPA). It is argued that paragraph 32 refers to "taking the decisions" pleaded in paragraphs 25 and 26 with particular effects, and paragraph 33 refers to engaging in conduct. The language used in these paragraphs, so it is argued, fails to plead that Workcover took advantage of its alleged market power for a proscribed purpose. It is argued that paragraph 32 pleads only the making of decisions, not the implementing of decisions, and if there were to be any taking advantage of a market power by Workcover that could happen only if it implemented those decisions.

The material facts which must be pleaded to make out a cause of action under s46 of the TPA were discussed by French J in Natwest Australia Bank Ltd v Boral Gerrard Strappings Systems Pty Ltd (1992) ATPR 41-196 at 40,643. In the present case FAI pleads that Workcover is a corporation which relevantly carries on business. The pleading identifies the markets asserted by FAI. In paragraph 28 it is pleaded that Workcover controls a market in which insurers and related companies contract with Workcover to provide Claims Management Services (that being one of the markets included in the definition of "The South Australian Markets" in paragraph 29). The material facts which would establish "a substantial degree of market power" are thereby pleaded. In paragraph 32 it is pleaded that by taking the decisions referred to in paragraphs 25 and 26 Workcover "took advantage of its substantial market power in the South Australian Markets".

Finally it is pleaded in paragraph 33 that Workcover "engaged in the conduct" pleaded at paragraph 32 for the purpose of achieving the effects pleaded in paragraph 32. The expression used in paragraph 33 is not simply that Workcover "engaged in conduct" for the purpose of achieving the pleaded effects, but that it "engaged in the conduct" referred to in paragraph 32, that is to the taking of the decisions earlier identified. Thus, the material facts asserted to establish the manner in which Workcover took advantage of its substantial market power are pleaded. It is necessary for the applicant in a s46 claim to plead that the respondent took advantage of its substantial degree of market power, that is, used its market power, for a proscribed purpose: Natwest Australia Bank at 40,644. Paragraph 33 purports to do that. It is true that paragraph 33 does not expressly plead that Workcover implemented the impugned decisions, but in my view that is not a fact essential to a cause of action under s46. What is prohibited by s46 is the taking advantage of power for a proscribed purpose. In the context of the cause of action which FAI seeks to plead under s46, the alleged market power is said to have been relevantly used by taking the decisions. The decision pleaded included both the decisions which rejected FAI (SA's) bid and the entry into contracts with the five successful bidders for the three year period from 1 July 1998. It is a clear implication from the pleadings that these facts would have the effects alleged. Subject to what follows in relation to the attack upon the adequacy of the pleading of damage in paragraph 37, I consider the pleading in paragraphs 32 and 33 sufficiently alleges material facts to make out a cause of action under s46.

In relation to paragraphs 34 and 35 which purport to plead a cause of action under ss 45(2)(a)(ii) and 45(2)(b)(ii), it is argued on Workcover's behalf that the pleadings fail to allege, and fail to identify, a "provision" of a contract arrangement of understanding that is alleged to have the purpose, or is likely to have the effect, of substantially lessening competition. It is argued that paragraph 34 is ambiguous in that it does not make clear what it is that is alleged to constitute the impugned contract or arrangement or understanding with each of the companies that were formerly the second to sixth respondents.

Paragraph 35 is also criticised because it pleads only that Workcover is proposing to give effect to the contracts pleaded at paragraph 34, not that has given effect to them, which is said to be a requirement for a cause of action under s 45(2)(b)(ii).

I do not accept these attacks on paragraphs 34 and 35. It is correct that the paragraphs nowhere identify any particular term within a contract, arrangement or understanding between Workcover and each of the five other proposed Claims Management Agents. The material facts alleged are that by making the decisions alleged in paragraphs 25 and 26 and thereafter entering into contracts with the five proposed Claims Management Agents, Workcover "made a contract or arrangement or arrived at an understanding" with each of those five companies. Paragraphs 25 and 26 do not allege any contract, arrangement or understanding with the five companies other than the claims management agreements referred to in paragraph 26.1. When paragraphs 25, 26 and 34 are read together the claims management agreements with each of the five companies are relied on in their entirety as having the proscribed purpose or effect. Read in context, paragraph 35 alleges that Workcover proposes to give effect to each of those five claims management agreements, again in their entirety.

Paragraph 34 refers to the decisions pleaded at paragraphs 25 and 26. This is a reference to all the decisions there pleaded, several of which deal with the rejection of FAI (SA's) bid and Workcover's refusal to enter into a claims management agreement with FAI (SA), as well as with the contracts with the five proposed Claims Management Agents. I construe the incorporation of the other decisions by their reference into paragraph 34 as being material to establish the purpose or likely effect pleaded in that paragraph. The result of reading paragraphs 25, 26 and 34 together is that FAI pleads that by rejecting FAI (SA's) bid, by not entering into a claims management agreement with FAI (SA) for the period of three years commencing on 1 July 1998, and by entering into claims management agreements with the other five companies for that period Workcover has made a contract with each of those five companies which has the proscribed purpose or effect. For the purposes of the application of s45 the proscribed purpose or effect may be proved by the purpose or effect of the five management agreements taken together: s45(4) of the TPA.

Section 45(2)(a)(ii) relevantly provides:

"(2) A corporation shall not -- (a) make a contract or arrangement, or arrive at an understanding, if -- ... (ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition..."

In this context I consider, "a provision of the proposed contract, arrangement or understanding" may include the whole contract, arrangement or understanding if the proscribed purpose or effect arises from the operation of the contract, arrangement or understanding as a whole. In other situations it may well be necessary to identify a particular term or aspect of a contract, arrangement or understanding or several terms or aspects which together have the proscribed purpose or effect, but in the context of this case that is not necessary. The material facts relied on to establish the proscribed purpose or effect are the fact of the five claims management agreements in their entirety, along with the other decisions pleaded in paragraphs 25 and 26.

I do not consider that the pleading in paragraph 35 fails to plead a cause of action under s45(2)(b)(ii). I agree with Mr Whitington that the criticism levelled at paragraph 35 is merely a play on words. The defence admits that Workcover proposes to give effect to the contracts, that is the claims management agreements. That admitted intention is itself part of giving effect to the contracts. Moreover, the interlocutory hearings that have occurred since the proceedings commenced have proceeded on the footing that Workcover not only intends to fully implement the claims management agreements from 1 July 1998, but has already commenced to do so. Again, subject to what follows in relation to the attack upon the adequacy of the pleading of damage in paragraph 37, I consider paragraphs 34 and 35 sufficiently plead a cause of action under s45(2)(b)(ii).

It is necessary that the material facts pleaded to establish causes of action for damages under ss45(2)(a)(ii) and 45(2)(b)(ii) and s46 include an allegation that the alleged contraventions caused loss and damage: Multigroup at 42,680. Paragraph 37 purports to do that, but in the most general terms. It is understandable at the present stage of the proceedings that full particulars of the quantification of loss and damage are not given. That is an omission that could be cured by the provision of particulars in due course. However, I consider the pleading is too general, and is deficient because it fails to indicate whether loss and damage is alleged to have been suffered in all or only one or more of the markets in which an effect is pleaded in paragraphs 32 and 34.

By implication from the balance of the pleadings it is probably clear that as a consequence of FAI (SA's) claims management agreement not being renewed, FAI will suffer loss and damage in the South Australian Markets which are pleaded. However, it is not clear whether loss or damage is alleged in the National Market or in the other State Markets, and, if so, how that loss or damage is alleged to result from the contraventions of the TPA which are pleaded. The pleadings must disclose material facts to establish a relationship of cause and effect between the respondents' conduct and the loss and damage alleged. The basis for asserting the relationship must be made known: Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 193 at 222-224. In my opinion, paragraph 37 requires expansion to include material facts that clarify these questions. I do not treat this a major defect in the amended statement of claim. I order that paragraph 37 be struck out, but grant leave to replead that paragraph.

Mr Abbott made a further general submission in relation to paragraphs 32 to 37. He contended that the pleaded material facts do not support the pleaded conclusion: see the Natwest Australia Bank case at 40,644. He submitted that the pleading discloses no anti-competitive purpose, rather it says (to use his words) "Entering into the contracts with the five former respondents is anti-competitive, but please do the same with us", and that Workcover was merely carrying out a statutory power to outsource the claims management function required by the WC Act.

The WC Act empowers Workcover to engage claims management agents, but it must exercise that power according to law. The critical issue raised by FAI in the pleadings is whether the power was exercised according to law or whether its exercise contravened ss45 or 46. It is possible that the particular exercise of power by Workcover which involved it contracting with the five appointed Claims Management Agents to the exclusion of FAI (SA) constituted a breach of the law in one of the ways pleaded. That depends on all the circumstances of the case. It is the issue that the trial will determine. The colourful advocacy employed by Mr Abbott in making this submission may illustrate a weakness in the merits of FAI's claims, but it does not demonstrate that they are bound to fail.

Paragraph 2 of the Notice of Motion

Workcover contends that the following two prayers for relief should be struck out:

"43.5 [The applicants seek] A declaration that:. 43.5.1 ... 43.5.2 the decisions pleaded at paragraphs 26.2 and 26.3 are void and of no effect; 43.8 An order quashing or setting aside: 43.8.1 the decisions pleaded at paragraphs 26.2 and 26.3".

It is necessary to consider the text of paragraph 26 set out earlier to understand the submission made by Workcover. It is submitted that paragraph 26 pleads that Workcover made one decision only and if the relief were to set aside that decision, that would include setting aside the claims management agreements Workcover entered into with the five former respondents who are no longer parties. If the relief claimed seeks to set aside the agreements with them, they are necessary parties.

In my opinion the submission is based on a misconstruction of paragraph 26. Paragraph 26 pleads a number of decisions, not just one, even though the introductory words say that "Workcover took a decision...". The list which follows in subparagraphs 26.1 to 26.3 is a list of separate decisions which are pleaded as a cumulative list of alternatives - a construction made clear by the unfortunate use of the expression "and/or" between each of the alternatives.

The impugned prayers for relief seek only orders that would affect the decisions to reject FAI (SA's) bid and the decision not to enter into a claims management agreement with FAI (SA).

Paragraph 3 of the Notice of Motion

Workcover seeks summary judgment in its favour dismissing the following two prayers for relief.

"43.7 An order requiring the first respondent to enter into a claims management agreement in the prescribed form with the second applicant for a term of three years commencing on 1 July 1998. 43.9 In the alternative to paragraph 43.7, an order that the first respondent reconsider the proposal in the 1998 bid document of the second applicant on the merits and in accordance with the requirements of natural justice."

Workcover contends these prayers for relief are bound to fail by virtue of s7(2) of the Crown Proceedings Act 1992 (SA) which provides that a mandatory injunction cannot be granted against the Crown. The Crown is defined in s4 to include an instrumentality or agency of the Crown. In a South Australian Act the "Crown" means the Crown in the right of the State of South Australia.

It is submitted on behalf of FAI that insofar as the relief claimed rests on a contravention of ss45 or 46 of the TPA, s7(2) of the Crown Proceedings Act is inconsistent with powers in the TPA which vest this Court with jurisdiction to make a mandatory injunction against an instrumentality of a State, and to that extent s7(2) is invalid: s109 of the Constitution. Insofar as the relief claimed rests on a contravention of the "Schedule version of Part IV" it is contended that the Reform Act, being a later State Act, impliedly repealed s7(2). Counsel for both parties are of opinion that arguments proposed to be advanced by FAI in support of the invalidity of s7(2) of the Crown Proceedings Act require that notice of the cause be given under s78B of the Judiciary Act 1903 (Cth). Moreover, because of the possible implications under the National Competition Policy agenda if s7(2) continues in force, Mr Whitington urged that the Court should not embark on the determination of arguments to be advanced by FAI at an interlocutory hearing.

In my opinion it is sufficient for the purposes of disposing of paragraph 3 of the notice of motion to decide, which I do, that the points of law anticipated by FAI are at the least arguable, and that the issue is not so clear cut in favour of Workcover that summary judgment should be entered in its favour: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. I therefore dismiss paragraph 3 of the notice of motion.

Paragraph 4 of the Notice of Motion

Workcover seeks to have paragraphs 52-54 of the defence heard and determined as a preliminary matter. This paragraph of the notice of motion has been only faintly urged.

In Paragraphs 52 and 53 of the defence the respondents allege that by its conduct and by the term of agreements and other documents FAI have waived any rights which they might otherwise have had to any of the relief claimed, that FAI have elected not to pursue such rights, and that they are estopped from doing so.

In my opinion these pleas are likely to involve questions of facts that are inextricably mixed with facts that will arise on the representation and estoppel claims pleaded by FAI. The matters raised in paragraphs 52 and 53 do not raise issues that are suitable for determination as discrete issues. They should be decided along with other disputed questions of fact and law at a full trial.

Paragraph 54 of the defence pleads s7(2) of the Crown Proceedings Act in answer to paragraphs 47.7 and 43.9 of the amended statement of claim. This issue is discussed above in relation to paragraph 3 of the notice of motion. If s78B notices are given, and if other interests beside the immediate parties to this matter wish to be heard on the operation of s7(2) it might be appropriate at a later stage in the preparation of the case to reconsider whether the issues raised by paragraph 54 should be heard and determined as a preliminary matter. That is a question that can be raised by either party at a directions hearing as part of the orderly case management of the proceedings. There is no need to keep the notice of motion alive for that limited purpose. I propose therefore to dismiss paragraph 4 of the notice of motion.

For these reasons I order:

1. That paragraph 37 of the amended statement of claim be struck out with leave to replead that paragraph within 14 days.

2. That paragraphs 2, 3 and 4 of the notice of motion be otherwise dismissed.

3. That the remainder of the notice of motion be stood over to a date to be fixed.