Mastellone, Frank v Pacific Seven Pty Ltd

I I

! !

IN THE FJ2DEp.X COURT OF AUSTRALIA

)

l	NEW SOUTH WALES DISTRICT REGISTRY	)	No. G 313 of 1983
I
I	)

DIVISION

GENERAL

)

BETWEEN :

F'RANX

MASTELLONE

Applicant

m:	. PACIFIC SZVEN PTY. LIMITED

First Respondent

LUISA AblPAP.0 RUB10

Second Respondent

MINUTE OF ORDE2

JUDGE MAKING	ORDER	: Neaves J.
DATE OF ORDER	: 15 November 1985
WHERE MADE	: Sydney

THE COURT 0RDEP.S THAT:

Paragraphs 5 and 6 of the amended statement

claim filed herein on	4 Septe.nber 1985 be struck
out.

2. The applicant

pay

the costs of

the

first

respondent of and incidental to

the motion,

notice of which was given on 10 October 1985.

3 .

The applicant be

at liberty to file and serve a

further anended statement

of claim within

days from the date

of this order.

-3

4. In the event that the applicant files and serves a further amended statement of claim pursuant to

the liberty hereby granted

L .

(a)

The respondents file and serve defences

the

further

amended

statement

claim on or before

13 December 1985;

(b) The parties file and serve affidavits of discovery of documents on or before

January 1986;

dqcuments discovered take

place at

the offices of the solicitors

for the respective partles on or before	,-
24 January 1986;
' .

(d) If any

party

desires

administer

interrogatories to any ot'ner party such interrogatories be admmistered on or before 14 February 19R6;

, .:

(e)	Verified answers to such mterrogatories be furnished on or before 7 March 1986.

Liberty

reserved

to any party to apply for

further directlons or to seek a variation of the

directions hereby given upon three days' notice

to each other party.

The applicant serve

copy of this order upon

the solicitors

for the second respondenc

on or

before 22 November 1985.

Note:

Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

1 1

NEW SOUTH WALES DISTRICT REGISTRY

)	No. G 313 of 1983

GENERAL

DIVISION

BETWEEN:

FRANK PLGTELLONE

Applicant

Aim :

PACIFIC SEVEN PTY. LIMITED

First -Respondent

LUISA AMP.W.0 RUB10

Second Respondent

CORAM: Neaves J .

U: 15 November 1985

REZSONS FOR JUDGMENT

This is a motion by Pacific Seven PLY. Limited ("the

first respondent") that paragraphs

5 and

of t'ne

amended

stateaent of

claim filed herein on behalf of Frank Mastellone

("the applicant") be struck

out.

The proceeding in which the amended statement of claim

was filed is

a$plication for damages against the first

respondent for, inter alia, alleged breaches of ss.52, 53 and 59 of the Trade Practices Act 1974 (Cth) in relation to t'ne

negotiation of

an agreement between the applicant and the

second respondent

(who was then his wife) on the one hand and

.-.

2 . !

the first respondent on the other whereby, so

it is alleged,

--.

"the first respondent agreed, inter alia,

to franchise t o the

applicant and the second respondent the

'7 - Eleven Image' and

to arrange for .the purchase of merchandise, the institution of

an accounting system, and other matters related to the complete

establishment of

a '7 - Eleven' store

at 23 Slade

Street,

Bexley in the State of New South Wales in consideration of the

payment

certain

sums

the applicant

described

as a

training

fee, an

establishment cost and royalties" (amended

statement of claim, para.3).

Paragraphs

4 , 5

and 6

of the amended statement

claim are in the following terns

"4.

The

applicant and second respondent Entered

into the

agreement and the lease aforesaid as the

result of certain statements and representations

made by the first respondent its servants or agents

and In particular

one

Peter

Mathews,

District

Manager, for New South Wales

of the first respondent

to t'ne applicant and the second respondent or either

of them

at 32 Esplanade Street Manly and elsewhere

between

, April and June,

1982.

Particulars

The Bexley North store would produce a minimum net profit of '8% of gross sales per month and- if monthly wages could be reduced to $500.00 per month a minimum net proflt of 12-14% of gross sales per month ;

The	Besley North Store would generate

mont'nly

sales of not less than

$65,000

per month;

Thzt the pricing levels

of merchandise

to be sold from the Bexley

Xorth store

according

the

pricing

levels

for

3 .

products as established or set

bp the

- first

respondent

were

between

supermarket and local corner shop levels

for that'area;

(iv)

That the merchandise and stock to be Bexley North store would be in good and merchantable condition and that no more

.	than $30 to $40 of such merchandise and stock per month would be in a bad or unmerchantable condition.

5. The said statements andlor representations were false or misleadlng in a material particular andfor

stated as to be likely to mislead

oc deceive persons

in the positions of the applicant and did mislead	or	.,
deceive the applicant.

Particulars

(i) The Bexley North store did

nor; produce

any

Lime

after

the

applicant

commenced operating

the store in June,

1982 a minimum profit

8% on gross

sales per month

at a11 and furLher

when wages were reduced to $500 per month nor did it produce a minimum net

profit of 12-14% of	gross	sales	per
month;

(ii) The said store did nor; generate monthly

sales of not less

t'nan

$45,000.00 but

instead achieved no more than

$16,000

per month;

(iii) Pricing-levels of merchandise and stock

were

many

cases

above

competing

supermarket

and

local

corner

shop

levels;

(ivl

Bad merchandise and out-of-date stock

were supplled to the applicant in excess

of $30 to $40 per month by value.

Further, or

alternatively to paragraph

the

first respondent made the statements in paragraph 4 herein by its servant or agent Mr Matthews without

any or any proper belief thar; its predictions in with reckless indifference concerning

far as

they were predictions would be satisfied or

such forecasts

or predictions.

4. , -

Particulars

(i) The first respondent by its servant or

agent

Matthews

in making

the

statement in paragraph

( 4 ) ( i )

herein

failed to infarm the applicant andfor

failed to take account of the fact that

none of the 7 - Eleven franchise stores

established at April, 1982 in New South

1,,

Wales had generated a net profit

of 8%

on gross sales or

12-14% when wages were

reduced to

$500 per month or at all in

any of

the

months

1982 Including

April as disclosed in the income and

I	sales analyses for the said stores.

(ii) The first

respondent by Its servant or

agent

Matthews in making

the

statement in paragraph

(4)(ii) herein

failed

to inform the applicant andfor

falled to take account of the fact that none of the 7 - Eleven franchise stores established as at April, 1982 in New

South Wales had generated a aonthly sales turn-over of $45,000 per mont'n in any month January to March inclusive in

1982 except the Randwick store on one

occas1on as disclosed in the records of

the first respondent being the income

and

sales

analyses

the

first

respondent.

(iii) The first respondent by its servant and agent Mr Natthews or otherwise falled to

obtain any or any adequate

to date

market

analyses

prior

26.6.1982

andfor prior to April,

1982 showing:

(a) prlce

sensitlvlty

potential

customers of a 7 - Eleven store

the area of Bexley North;

(b)	nature and needs of the market in Bexley .North for goods of the type sold in 7 - Eleven stores;
(c)

the nature and need in the area the type typically provided by a

7 - Eleven store;

(d)

the extent of and the nature

competition in the area;

(

(e)

the likely

gross sales per month

of a standard 7 - Eleven store to'

be established in the area;

(f)

the likely operating expenses per month of a standard 7 - Eleven store in New South Wales;

( g )

the need for

an all hours store

such as a 7 - Eleven store in the light of local competition in the Bexley North area.

(iv) Further, t'ne first

respondent

Its

servant or agent

Mr Matthews made the

said statements or predictions without

having adequately assessed the potential

commercial viability of

7 -

Eleven

store in the Bexley North area operated

according

the

recommendations

and

guidelines of the ficst respondent and

the 7 - Eleven image or

at all.

(v) The first respondent by

its

servant or

agent Mr Matthews or otherwise made the

said statements

predictions without

any	or any adequate assessment of the

operating

expenses

a typical 7 -

Eleven

store

operating

New

South

Wales andlor

wit'nout taking account of

the operating expenses of the two New

South bJales stores t'nen in existence at

April, 1982, namely

Randwick

and

Waterloo.

A s a Full Court

of this Court said in Global Sportsman

Pty. Ltd. v. Mirror Newspapers Ltd. (1984)

-55 A.L.R.. 25 at p.30

it is not

in doubt that a corporation contravenes sUb-s.52(1)

of the Trade Practices Act 1974 (Ct'n) if it makes

a statement

which is misleading or deceptive

likely to mislead or

deceive.

The Full Court went on (pp.30-1):

1 Y

"If

a corporation is alleged to

-have contravened

s.52(1) by making a statement of past

or present ,

fact, the corporation's state of mind is immaterial

unless the statement involved the state of the

corporation's

mind.

Whether

not s .52 (1 )

contravened does not depend upon the corporation's intention o r its belief concerning the accuracy of such statement, but upon whether the statement in

fact contains or conveys a meaning which is false; that is to say whether the statement contains or conveys a misrepresentation. Most commonly, such a

statement will contain or convey

a false meaning if

what is stated concerning the past or present fact is not accurate; but a statement which is literally

true may contain or convey

meanmg which is

false.

statements,

Many

example,

for

promises,

predictions and opinlons, do involve the state of

mind of the maker of the statement

at the time when

the

statement

made.

Precisely

the

same

principles control the operation of

s . 5 2 ( 1 )

with

respect to the making of such statements. B statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or

by implication) that the maker

of the statement had

a particuIar state of mind when the statement was

made and,

commonly at least, that there was basis

for chat state

of mlnd. If the meaning

contamed

in' or conveyed by the statement is false in that or

in any other rzspect,

the making of the statement

will have contravened s.52(1) of the Act.

Compare

Lyons v. Kern Konstructions

(Tomsville) Pty. Ltd.

(1983) 47 B.L.R. 114.

The non-fulfilment of

a promise when the time for

performance arrives does not

itself establish

that the promisor did

nor; intend to perform it when

it was made

or Ycat the promisor's intention lacked

any, or any adequate, foundatlon. Similarly,

t'nat

a prediction proves inaccurate does not of itself

establish that the maker of the prediction did not

believe that it

would eventuate or that the belief

lacked any, or any adequate, foundation. Likewise,

the incorrectness of an opinion (assuming that can

be established) does not of itself establish that

the

opinion

was

not

held

the

person

who

expressed it or

that

lacked

any, or any

adequate, foundation."

I I

...

7. ,

. .

, . m

, I

In Thompson v. MasEertouch T.V.

Service Pty. Ltd.

1 '.

CNo.17 (1977) 29 F.L.R. 270 Franki J. considered whether the

words in

an advertisement "Should earn ,$400 per week minimum"

constituted a false statement concerning the profitability of a

business activity. His Honour said at pp.278-9:

"I consider that the approach adopted -in British Airwavs Board v. Tavlor is applicable to a

consideratron

S . 59..

consider

that

prediction or statement

to the future is not

false within the words of that section

1f it proves

to be incorrect unless it is a false statement as to an existing or past fact whrch may include the state of mind of the person making the statement or

of a person whose state of mind may be imputed to the person making the statement....

Therefore,

In order

t o establish that the words

'Should earn $400 per week minimum' constituted a false statement concerning the proficabillty

of a

busrness activity it is necessary for the informant

to prove that the defendant did not believe that

the forecast

or prediction would be

satisfied or

was recklessly indifferent concerning the forecast

or prediction."

It is, therefore, patently clear that, even if the

applicant succeeded in establrshrng that the statements or

representations alleged in paragcaph

4 of the amended statement

of claim were made by the

first respondent, to establish the

matters set out in the particulars set out in paragraph

5 would

provide

basis

for

concluding

that

the

statements

representations alleged in paragraph 4 were false at che time

they were made.

It follows'that,

opinion,

paragraph

the

amended statement of claim should

be struck out.

I turn now to paragraph 6 of the amended statement

claim.

It may be supposed that the intention of the pleader of paragraph 6 was to address

tw.0 situations -

situation

the

where

first

the

respondent,

making

the

statements

alleged in paragraph

4 to the extent to

which there are

properly characterised

as predictions, was representing chat it had a certain state of mind, namely a

belief

that

the predictions would be

satisfied yet, in truth, the first respondent had no such belief;

the situation

where

first

the

respondent, in making those statements, was representing not only that it had a

ljelief

that

the predictions would be

satisfled

but

also

that

it had an

adequate basis for that belief

yet, in

truth, it had no adequate foundation for

that belief

- in other words that the

flrst

respondent

recklessly

was

indifferent concerning the predictions.

In relation

the

first

of those

situations,

paragraph 6 alleges that the first respondent at the relevant time had no belief that the predictions would be satisfied and,

in the alternative, that it then had no

"proper" belief in that

regard.

One may speculate as

to what constitutes a "proper"

belief in this context but to establish

that the speaker of

words did not have a "proper" belief, whatever that expression

mby be taken to mean, would not establish that the speaker

was,

in terms of the Trade Practices Act

1974 (Cth), engaging

conduct

that was misleading

deceptive

making

representation that was false.

The introduction of the notion

of "proper"

belief

makes

the

paragraph,

a matter

pleading, embarrassing.

The amended statement. of claim does not identify

whether the applicant is relying upon the first or the second

of the two

situations

mentioned

or, as counsel

for

the

applicant indicatsd

in argument, on both in the alternative.

In other

words, it is not made clear to the first respondent

whether it has to meet a

case that at the relevant time

it had

no belief that the predictions would be satisfied or

t'nat,

accepting that it had

such belief, there was

no adequate basis

Lor

that belief and

that it, therefore, acted with reckless

indifference.

The first respondent asserts that the amended

statement of claim is defectlve ln this regard and should more

clearly state the factual basis

of the applicant's case.

The

partlculars given in paragraph

glve rise to

further difficultles. Particulars

(i) and (ii) stat? that the

first respondent failed

inform the applicant

certair!

matters

failed

take

those

matters

into

account.

Partlcular (iii) states that the

flrst respondent failed

obtain certain material while particulars iiv) and

(v) refer to

a	failure to assess or adequately assess certain matters,

. i'

10. t

particular (v) referring to a	failure to assess or adequately
assess the operating expenses	of a "typical" 7 - Eleven store

operating in

New South Wales.

The	particulars are quite inadequate to support the

allegations in paragraph

6 or

give the first respondent

proper notice of the matters upon

which the applicant relies to

establish that the first

resp.ondent either had no relevant

belief	as	to	the predictions or acted with reckless
\

indifference

regard

thereto.

prove

that

the

first

respondent failed to make certain statements to the applicant or failed to take certain matters into account as stated in

particulars

(1) and

(ii)

would not establish the cause of

action relled upon. One may speculate that what the pleader intended to state by particular (iil) was that the absence of market analyses is a matter upon which the applicant relies as

showing that the

first respondent in making the statements

alleged in paragraph 4 was acting with reckless indifference.

This 1 s mere speculation - particular (iii) does not so state.

A similar comment may be made with respect to particulars (1v)

and	( v ) .

It can be said

paragraph

6 , and, indeed, of

paragraph 5,

that the language used lacks that preclslon which

may

reasonably be

expected in a pleading.

This

lack

precision gives rise to its

own

difficulties.

For example,

there is the reference in paragraph

6 to "such forecasts or

11.

predictions"\whereas

there is no prior reference to any

of the

statements alleged in paragraph

amounting to forecasts.

Again,	it	is	not	clear	from	particular	ti) in	paragraph	6	!
i.

whether any of the stores established

April 1982 in

New '

South Wales

are alleged to have been operating

on wages of $500

per month and the words "or at

all" appear to be meaningless.

Nor is

the expression "the months of 1982 including April" a

precise- statement	of what is	. Intended. And there is the	1:
i ' I. .

frequent use throughout the paragraph, and paragraph

5, of the

1.'

expresslon "andlor" of whlch Williams J. said in Fadden v.	! I
i-

Deputy Federal Commlssioner of Taxation (1943) 68 C.L.R.

76 at

p.82

that it was

"an elllptical and embarrassing expresslon

which endangers accuracy for the sake of brsvlty".

l,?*

It is no answer to these criticlsms to

say, as counsel

for the applicant submitted, that by reason of the course

the

proceedings have taken

the

first

respondent

should

well

c ,

aware

of what is being alleged against

it.

rhlhat

the first

respondent is entitled to receive is

a statement of claim

which

sufficiently states facts which, if proved, will establish the

cause of actlon on which

the applicant relies and which does

I I	not	conceal	or	obscure	what	are	the	real	questions	in
!
i

controversy between the parties. The claim should be presented

intelligible form

that the first respondent can

clearly pefceive what

is the case it

has

to meet.

In my

opinion, paragraph

does not meet these criteria.

embarrassing and should be struck out on that ground.

I	s
, .

12.

---

..-

I	have given anxious consideration to the question

whether the applicant should, having regard to the long history

of the matter, be given yet another opportunity to amend. In the result I have concluded that	he should be given one further
opportunity.

For the reasons

I have.given the first respondent is

entitled to	~	the orders sought in the notlce of motion.	K .
I .
1 :

Paragraphs

5 and

of the amended statement of claim

are,

therefore,

struck

out,

the

applicant to

pay

the

first

1.:

respondent's

costs

and

incidental

the

motion.

The

applicant is to have liberty to file and serve

further

amended statement of	claim wit'nin l4 days from the date	of this
order.

The order

made

27 August 1985 giving

further

directions for the conduct of

the matter is vacated and

the

following

directions

are

given

the

footing

that the

applicant does, in fact, file and serve

a further amended

statement of claim pursuant to the liberty granted to

him -

(a)	The respondents file and serve defences

the

further

amended

statement

claim on or before 13 December 1985;

(b)

The parties file and serve affidavits of

discovery of	documents on or before 1 7	p;
January 1986;	l:,	f-

1 .~

I-.,

1 .

.---..------

-_-5

-__I___

I ~ .

_. . .

- - --- . .

. _.

documents discuvered take

place at the offices

of the solicitors

for the respective parties on

or before

i	24 January 1986;

(d) If

any

party

desires

to administer

interrogatories to

any other party such

interrogatories be administered on	05-
before 14 February 1986;

(e)

Verified answers to such interrogatories

be furnished on

or before 7 March 1986;

l ,

Liberty

reserved

any

party

apply

for

further

r 1

directions

or to seek

variation of these directions upon

i	three days' notice to each other party.	I also direct that the
I

applicant serve	a copy of this order upon the solicitors for	0
r

the second respondent on or before 2 2 November 1985.

I certify that this and

the preceding 12 pages are

a true copy of the Reasons	I
for Judgment herein of the Honourable Mr Justice

Neaves

Assoclate

Dated: 15 November 1985

1	I
I
l
i	I
l l

533

, l

IN THE FDEPAL COURT OF AUSTPSJ;IA

)

NEW SOUTH W-ES	DISTRICT REGISTRY	)	NO. G 313 of 1983
)
GENERAL DIVISION	1

B F Z Z E N :

FRh\T

MASTELLOPE

Applicant

. PACIFIC SEVEN PTY. LINITEE

i	First Respondent

l	LUISA AMP.GO RUB10

I	Second Respondent

: , .S

MINUTE OF OIIDG.

,,- I . <y ~

S . .

, z

- - - e & .	. .
v

JUCGE	MAKING	ORDER	:	Neaves J.	*- I .	L	.	;	1
I

L_ -

DATE OF ORDER

15 November 1985

I	bIHE?E VILDE	: Sydney
I

FE COURT 0RDW.S THAT:

Paragraphs 5 and 6 of the amended statement

claim f i l e d herein on 4 Septe.mber 1985 be struck

out.

2. The appllcmt pay

the

costs

che

flrst

respondent

and

lncidental to

the motion,

notlce of whlch was given on 10 October 1985.

The applicant be

ac liberty to flle and serve a

further ainended statement

of clalm wlthln

days from the date of this order.

. .

....

4. In the event that the applicant files and serves

a further amended statement

of claim pursuant to

the libecty hereby granted

The respondents file and serve defences

the

further

amended

statement

claim on

or before 13 December 1985;

The parties file and serve affidavlts

discovery of documents on or before 17

January 1986;

Inspection of dqcuments discovered take

place at

the offices of the solicitors

for the respective parties on or before

24 January 1986;

If any party

desires

administer

interrogatorles to any other party such

interrogatories be adminlstered on

before 14 February 1986;

Verified answers to such interrogatories be furnished on or before 7 March 1986.

Liberty be reserved

to any party to apply for

further direccions

or to seek a variation of the

I	dlrections hereby given upon three days' notice
I	to each other party.
I

l	6 .	The appl;cant	serve	a copy of this order upon
I

the solicitors for the second respondent

on or

i	before 22 November 1985.

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

I '

IN THE FEDEK

!.\L

COlmT O€ AUSTE

) )

NEW SOUTH W E S DISTRICT REGISTRY	)	No. G 313 of l983
1
GENERAL DIVISION	)

BFX'NEFX:

m m K ~ S E L L O N E

Applicant

AND:

PACIFIC SEVEN PTY.

LIMITED

First 'Respondent

LUISA >XPARO RUB10

Second Respondent

CORAM: Neaves

J .

W: 15 November 1985

FEASONS FOR JbDGMENT

This is

a motion by Paclfx

Seven Pty. Limlted ("che

first respondent") that paragraphs

5 and

of the

amended

statenent of

claim filed herem on behalf of Frank Mastellone

( "the applicant") be struck

out.

The proceeding in which

the amended statement of

clam

was flled is

a$plicatlon for damages against the first

respondent for, inter alia, alleged breaches of ss.52, 53 and 59 of the Trade Practices Act 1974 (Cth) in relation to t'ne

negotiation

zn agreement between the applicant and the

second respondent

(who was then his wife) on the one hand and

the fir'st

respondent on the other whereby, so it is alleged,

- --_

"the first respondent agreed, inter alia, to franchise

t o the

I	applicant and the second respondent the	'7 - Eleven Image' and
1

!	to arrange for	-the purchase of merchandise, the institution of
i

an accounting system, and other matters related to the complete

establishment of a

- Eleven' store

23 Slade Street,

Eexley in the State of New South Males in consideration of the

payment

certain sums by

the applicant described as

training

fee, an

establishment cost and royalties" (amended

statemsnt of claim, para.3).

Parsgraphs 3 , 5 and 6 of the amended statement

I	claim are in	ths following terms -
I

"4.

The applicant

and

second

respondent

Entered

into the agreement and the lease aforesaid as the

result of certain statements and representations

made by tine

first respondent its servants

or agents

and in pzrticular

one

Peter

Mathews,

District

Manager, for New South Wales of the first respondent

to tins applicant and the second respondent or eit'ner

of them

at 32 Esplanade Street Manly and elsewhere

between April and June, 1982.

Particulars

i	(i) The Bexley North store would produce

minimum net profit of 0% of gross sales

per month and if monthly waqes could be

reduced to $500.00 per month

a minlmum

net profit of

12-14% of gross sales per

month;

(ii)

The

Bexley North Store would generate

I	monthly sales of not less than	$45,000
I	per month;
!	I

(iii) That

the pricing levels of

merchandise

to be sold

from the Bexley North store

i	according	to	the	pricing	levels	f o r
I
I
I
I

3 .

products

as established or set by the

first . respondent

were

between

supermarket and local corner shop levels

for that area;

(iv)

That

the merchandise and stock to be

supplied by the first respondent to the Bexley North store would be in good and merchantable condition and that no more than $30 to $40 of such merchandise and

stock per month would

in a bad or

unmerchantable condition.

5. The said statements andlor representations wzre

false or misleading in

a inaterial particular andlor

stated as to be likely

t o mislead oc deceive persons

in the positions of the applicant and dld mislead or

deceive tine applicant.

Particulars

The Besley North score did. no;

produce

at any

time

after

the

applicant

commenced operating the store In

June,

1982

a nlninum profit of

on g r o s s

sales per month or at all and furcher

when wages were reduced to $500 per

month nor did it produce a minimum net

profit	of	12-14%	of	gross	sales	per
month;

The said store did not generate nonthly

sales of not

less t'nan

$45,000.00 but

instead achieved no more than $16,000

Fer monch;

Pricing-levels of merchandise and stock

were

many

cases

above

competing

supermarket	and	local	corner	shop
levels;

Bad merchandise and out-of-dats stock

were supplled to the applicant in excess

of $30 to $A0 per month by value.

6. Further, or alternatively to paragrapn 5, the first respondent made

the statements in paragraph

herein by Its servant or agent Mr Matthews without any or any proper belief thac its predictlons in so far as they were predictions would be satisfled or with reckless indifference concerning such forecasts

or predictions.

(i) The first respondent by its servant

agent Mr Matthews

making

the

statement in paragraph

( 4 ) (i)

herein

failed to inform the applicant andlor

failed to take account of the fact

that

none of the 7 - Eleven franchise stores

established at April, 1982 in New South

Wales had generated a net profit of

on gross sales or 12-14% when wages were

. _I

reduced to

$500 per month or at all in

L .

any

the

months

1982 including

April

disclosed in the income and

sale5 analyses for the said stores.

(ii)

The first

respondent by its servant or

agent Mr Matthews

making

the

statement in paragraph

(&)(ii) herein

farled to inform the

appllcant and/or

falled to take account

of the fact that

none of the

7 - Eleven franchise stores

established as

at April,

1982 In New

South

Wales

had

generated

a nonthly

sales turn-over of $45,000 per mont'n in	.- ,
any month January to March inclusive In

1982

except the

Randwick store on one

occasion as disclosed in the records of

the first respondent

bemg the income

and

sales

analyses

the

first

respondent.

(iii) The first

respondent

its

servant

and

agent Mr Hatthews or otherwise

falled

obtain any or any adequate up to date

prlor

analyses

market

26.6.1982

andlor prior to April,

1982 showing:

(a) prlce

sensitlvlty

of potentlal

customers of a 7 - Eleven store

the area of Sexley North;

(b)

nature and needs of the market

Bexley

.North for goods of the

type sold in 7 - Eleven stores;

(c)

the nature and need in the area the type typically provided by i?

7 - Eleven store;

(d)	the extent of and the nature of competition in the area;

. .

, I

(e)	the likely gross sales per month

of a standard 7 - Eleven store to

be established in the area;

(f)

the likely operating expenses per month of a standard 7 - Eleven store in New South males;

(g)

the need for

an all hours store

such as a 7 - Eleven store

in the

light of local competition in the

Bexley North area.

(iv) Further, the first respondent by Its

servant or agent

Mr iktthews made the

said statements or predictions without

having adequately assessed the potential

commercial viability of a 7 - Eleven

store in the Bexley North area operated

according

the

recoinmendations

and.

guidelines of

the first respondent and

the 7 - Eleven Image

or at all.

(v) The first respondent by its servant

o r

agent Mr Hatthews or otinerwise made che

said statements or predictions wlthour;

any	or any adequate assessment of the

operating expenses

of a typical 7 -

Eleven

store

operating

New

South

Wales andlor wit'nout taking account of the operating expenses of t'ne two New South bJales stores then in existence at

April,

1982,

namely

Randwlck

and

Waterloo.

As a Full Court of this Courr; said in Global Sportsman

Ptv. Ltd. v. Mirror NewsoaDers Ltd. (1984) 55 A.L.R. 25 ac p.30 it is not In doubt that a corporetion contrzvenes sub-s.52(1)

of the Trade Practices Act 1974 (Cth) if it makes a statement

which

misleading or deceptive or likely to mislead or

deceive.

The Full Court went on (pp.30-l):

' .

6 .

"If a corporation .is

. alleged to have contravened

s.52(1) by making a .statement of past or present I fact, the corporation's state of mind is immaterial

unless the statement involved the state

the

corporation's

mind.

Whether

or not

s.52(1)

contravened does not depend upon the corporation's

intention or its belief concerning the accuracy of

such statement, but upon whether

the statement in

fact contains or

conveys a meaning which is false;

that is to say whether the statement contains o r conveys a misrepresentation. Most commonly, such a statement will contain or convey a false meaning if

what is stated concerning the past or present fact

is not accurate; but a statement which

is literally

true may contain	or	convey	a	meaning which is
false.

Many

statements,

for

exanple

promises,

predictions and opinions, do involve the state

mind of the maker of the statement at the time

when

the

statement

made.

Precisely

the

same

principles

control the operation

s.52(1) with

respect

the

making

of such statements.

statement which involves the state of

mind of t'ne

maker ordinarily conveys

the meanins (szpressly or

by implication) that the maker of the statement had

a particular

state cf mind when the statement was

made and,

commonly at least, that there was basis

for chat state

of mind.

If ths neanlng contained

in or conveyed by tine statement is false in that or

in any other respect, the making

of the stattment

will have contravened

s . 5 2 ( 1 )

of the Act. Compare

Lvons v. Kern

Konstructions (TosJnsvil.15) Ptv. Ltd.

(1983) 47 B.L.R. 114.

The non-fulfilment

of a promise when the time for

performance zrrives does not of itself establish

that the promisor dld not intend to perform

it when

it was made or t'lat the promisar's intention lacked any, or any adequate, foundatLon. Similarly, that

a prediction proves inaccurate does not of itself

establish t'nat the

maker of the prediction did not

believe that it would eventuate or that the belief lacked any, or any adequate, foundation. Llkewise, the incorrectness of an opinion (assuming that can be establlshedl does not of itself establish that

the

opinion

was

not

held

the

person

who

expressed it or that it

lacked

any,

any

adequate, foundation."

7 .

In Thompson v. Mastertouch T.V.

Service Ptv. Ltd.

CNo.11 (1977) 29 F.L.R. 270 Franki J. considered whether the

words in

an advertisement "Should earn $400 per week minimum"

constituted a false statement concerning the profitability

of a

l	business activity. His Honour said	at pp.278-9:
1	l

"I	consider that the approach adopted in Srltish

Airwa~s Board

v. Taylor is

applicable

to a

I consider that a

consideration of

S. 59..

prediction or statement

as to the future is not

false within the words of that section If it proves

to be incorrect unless it is

a false statenent as

to an

existing or past fact which may include the

state of mind of the

persm making the stacenent or

of a

person whose state of mind may

be in2uced to

the person making the statement..

Therefore,

In order

to establlsh that the woris

'Should earn $400 per week

minimum' constituted a

false statement concernlng the profitability

of a

business activltp It is necessary for the Informant

to prove that the defendant did

Rot

believe that

the forecast

o r prediction would be satisfled or

vas recklessly indifferent concerning the forecast

or prediction.

is, therefore, patently clear that, even

if the

applicant succeeded in establishing that the statements or

representations alleged in paragraph

4 of the amended stateaent

of claim were made by the first respondent, to establish the

matters set out

in the particulars set out in paragraph

5 sjould

provide no basis

for

concluding

that

the

statements

representations alleged in paragraph 4 were false at the tlme

they were made.

follows

that,

in my

opinion,

paragraph

5 of the

amended statement of claim should

be struck out.

I turn now to paragraph

6 of the amended statement of

claim.

It may be supposed that tine

intention of the pieader

of paragraph 6 was to address

tv.0 situations -

(a) the situation

where

the

f lrst

respondent,

making

the

statements

alleged in paragraph 4 to the extent to

which

t'nere are properly characterlsec

as predictions, was representing chat it

had a certain state

of mind, namely

belief that

tine

predictlons vould be

satlsfied

yet,

trut'n,

t'ne

frrst

respondent had no such belief;

(b)

situation

the

where

first

the

respondent, in making those statemencs, was representing not only that iz had a

belief

thlt

the prediccions would be

satisfled but also that It had an adequate basis for that bellef

yet, in

truth, it had no adequate foundatlon for

that	belief - in other words that the

first

respondent

recklessly

was

indifferent concerning the predictions.

In relation

the

€irst

of those

situations,

agraph 6 alleges that the first respondent at tine relevmt

time hzd no belief that the predictions would

be satisfied and,

in the alternative, that it then had

no "proper" belief In that

regard. One may speculate as to what constitutes

a "proper"

belief in

thls context but to establish that the speaker of

words did not have a "proper" bellef, whatever that expression

9 .

mdy be taken to mean.

would not establish that the speaker

was,

in terms

of the Trade Practices Act

1974 (Cth), engaging in

conduct

that

was

misleading

deceptive

making

representation that was false.

The introduction of t'ne notion

of "proper"

belief

makes

the

paragraph,

a matter of

pleading, embarrassing.

The amended statemenr;. of

clam

does not identlf:~

whether the

applicant is relying upon the first or

t h e second

I	of	the	two	situations	mentioned	or,	as	counsel	for	the
1

applicant indicat?d

ir. argument.

on botin 19 the slternative.

In other words, LE is not made clear to

t'ne

first respondent

vhether it has to meet a

case that at the relevant time it had

belief that

the predictions would be satisfled or

t:?at,

accepting that it had such

bellef, thzre was no adequate basls

for that belief and that

it,	therefore, acted vith reckless

indifference.

The ilrst respondent asserts that the amended

statement of clalm

deiectlve in this regard and should moce

!	clearly state the factual	basls of t'ne applicant's case.
I

The particulars given in paragrzph

5ive

rise to

further difflculties. Partlculars

(i) and (ii) state

that <he

first respondent failed

inform the applicant

certair?

matters or failed

take

those

matters

mto

account.

i	Particular	(iii) states that the first respondent failed to
I
!
i
I

obtain certain material while particulars

(iv) and (v) refer to

I	a	failure to assess or adequately assess certain matters,
'I
i
1	I

. .

._ .

. .

1. -

11.

predictions"'whereas there is no prior reference to

any of the

statements alleged

in paragraph 4 amounting to forecasts.

Again, it is not clear from particular (i) In paragraph

whether any of the stores established

at April

1983

in New

South Wales are alleged to have been operatlng

on wages of $500

per month and the words "or at all" appear

to be meaningless.

Nor is the expression "the months of

1982

including April" a

precise statement of what is . intended. And there is -t'ne frequent use t'nroughout the paragraph, and paragraph 5, of the expression "andlor" of which Wllliams J. said in Fadden v.

Deput-7 Fedsral Comaissioner of Taxszion

(1943) 6 9 C.L.E.

i 6 at

p.e2

that it was

"an elliptical and enbarrassing expfesslon

which endancers accuracy for the sake of br?vlty".

It is no answer to these crltlclsms to say, as counsel

for the zpplicant submitted, that by reason

of the ccurse the

proceedings have taken the first respondent should

well

awzre

of vhat

is being alleg2d agalnst

iz.

Wt..zc

the first

respondent is entitled

to receive

is a statement of claim which

sufficiently states facts which, if proved, will establish tine cause of accion on which the applicant relles aEd which does

not

conceal

obscure

what

are

che

real

questions

controversy between the parties. The claim should be presented

in an intelligible form

so that the first

respndent can

clearly perceive

what

is the case it has to meet.

oplnlon, paragraph

does not meet these criteria.

1 s

embarrassing and should

be struck out on that ground.

12.

I have given anxious consideration

to the question

whether the applicant should, having regard

to the long history

of the matter,

be given yet another opportunity to amend.

the result

I have concluded that

he should be given one further

opportunity.

€or the reasons I have.given the first respondent is

entitled

to. the

orders

sought

the

notice

motion.

Paragrilphs 5 and 6 of the amended statement

of claim

are,

therefore,

struck

out,

the

applicant

pay

the

first

respondent's

costs

and

Incidental

the

motion.

The

applicant is

to have

liberty to file and serve

further

mended statement of claim within 14 days from the date	of this
order.

The order made

on 27 August 1985 giving furt'ner

directlons for the conduct of the matter

is vacated and

t'ne

following

directions are given on the

footing

that

the

ilppllcsnt

does, in

fact, file and Serve

a further amended

statement of claim pursuant to the liberty granted

to him -

(a)

The respondents file and serve defences

to the

further

amended

statement

claim on or before l? December 1985;

(b) The parties file and serve affidavits

discovery of documents on or before 17

January 1986;

13.

documents discovered take

. place at the offices

the solicitors

for the respective parties on o r before

24 January 1986;

(d) If any party

desires

administer

mterrogatories to any other party such

interrogatorres be administered on or

before l4 February 1986;

(e)

Verified answers to such Interrogatories

be furnished on or before

7 Narch 1986;

Liberty

reserved

any

party

apply

for

further

directions or to seek

a variation of these directions upon

three days' notice to each other party.

I also direct that the

appllcant serve a copy of

this nrdec upon the solicltors

for

tine second respondent on or before 22 November 1985.

I certify Ynat this and

the precedipg

13- pages are

a true copy of the Reasons

for Judgment herein

of the

Honourable

Mr Justice

Dated:

15 Novemjer 1385

[1985] FCA 583

15 Nov 1985