MAXTON and MAXTON Australia Pty Ltd v Port Village Accommodation Pty Ltd - [2012] FMCA 143

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MAXTON & MAXTON AUSTRALIA PTY LTD v PORT VILLAGE ACCOMMODATION PTY LTD

[2012] FMCA 143

COMPETITION AND CONSUMER LAW – Alleged misleading and deceptive conduct – respondent applies to summarily dismiss such claim – legal principles – claim summarily determined leaving contractual claim extant – whether appropriate to deal with remnant contractual claim in the accrued jurisdiction.

Federal Magistrates Act1999, s.17A
Federal Magistrates Court Rules 2001, r.13.10
Federal Court of Australia Act 1976, s.31A
Competition and Consumer Act 2010, s.131
Australian Consumer Law, ss.4, 18, 236 & 237
Trade Practices Act Amendment (Act) (Number 2) 2010, s.6
Trade Practices Act 1974, ss.52, 82 & 87
Commonwealth Constitution, ss.71 & 79

Ladakh Pty Ltd v Quick FashionPty Ltd & Anor [2010] FMCA 919
Spencer v Commonwealth of Australia [2010] HCA 28
Henville v Walker (2001) 206 CR 459
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 17
Farrow Mortgages Pty Ltd (In liq) v Edgar (1993) 114 ALR 1 at 6 – 7
Campbell v Back Office Investments Pty Ltd [2009] HCA 25
Matheson v Findex Australia Pty Ltd [2011] FMCA 135
Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457
Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564
R v Bevan; Ex parte Elias (1942) 66 CLR 452
WG & B Manufacturing Pty Ltd v Telsa Farad Pty Ltd & Ors [1999] FCA 1776
Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FAC 1645
Fencott v Muller (1983) 152 CLR 570.
Wakim, Re; Ex parte v McNally (1999) 198 CLR 511 at 585

Miller’s Annotated Australian Competition and Consumer Law 33^rd Edition 2011

Applicant:

MAXTON & MAXTON AUSTRALIA PTY LTD

Respondent:

PORT VILLAGE ACCOMMODATION PTY LTD

File Number:

PEG 172 of 2011

Judgment of:

Lindsay FM

Hearing dates:

7 & 16 February 2012

Date of Last Submission:

16 February 2012

Delivered at:

Perth

Delivered on:

21 February 2012

REPRESENTATION

Counsel for the Applicant:

Mr Rumsley

Solicitors for the Applicant:

Alan Rumsley

Counsel for the Respondent:

Mr Healy

Solicitors for the Respondent:

Corrs Chambers Westgarth Lawyers

UPON NOTING that the Court was proposing in light of Order 1 hereof to make an order dismissing the non-federal aspects of the Statement of Claim and the Counterclaim for want of jurisdiction but upon being informed by counsel that the parties respectively sought to discontinue those claims, no order is made

AND UPON FURTHER NOTING that the Notice of Discontinuances will be filed within twenty-four [24] hours.

ORDERS

Pursuant to Rule 13.10(b) of the Federal Magistrates Court Rules 2001 the application for relief sought in paragraphs 23 and 24 of the Amended Statement of Claim filed on 2 August 2011 is summarily dismissed.

The applicant pay the respondent’s costs of these proceedings being such sum as may be agreed between the parties within seven [7] days and in the event of failure to agree such sum, the respondent is to file and serve within fourteen [14] days a brief schedule of the costs sought and an outline of the argument in relation to those matters that ground orders for costs.
The applicant file and serve any response within a further seven [7] days.
The matter be listed for determination on the question of costs and any additional submissions to 1 May 2012 at 9.30am.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT PERTH

PEG 172 of 2011

MAXTON & MAXTON AUSTRALIA PTY LTD

Applicant

And

PORT VILLAGE ACCOMMODATION PTY LTD

Respondent

REASONS FOR JUDGMENT

This is an application for two species of relief. The application is explicated in an Amended Statement of Claim that was filed on

2 August 2011. It is comprised of a claim for loss and damage arising on account of alleged breaches of the Competition and Consumer Act 2010 (“the Act”), and secondly, of a claim for moneys due under a form of building contract.
The proceedings also involve a counterclaim which relates to claims under the contractual arrangements extant between the parties with respect to the construction of certain buildings. However, the matter before me and about which I heard submissions is an interlocutory application by the respondent for summary determination of the claim as it relates to the claim under the Act.
The Court’s power to summarily determine claims such as these and in these circumstances is grounded by s17A of the Federal Magistrates Act1999, which provides in subsection (2) that the Federal Magistrates Court may give judgment for one party against another in relation to the whole or any part of a proceeding if, vide subsection (b), the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. And that legislative provision finds its way into the Rules of Court and, in particular, into rule 13.10, which provides:
The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:
(a)the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim.
I did not understand the application to encompass subparagraphs (b) and (c) of that rule, and so it is an application that behoves me to address whether or not the applicant has a reasonable prospect of successfully prosecuting the claim. Section 17A mirrors the relevant provision in the Federal Court of Australia Act 1976 (s.31A), and both of those sections formerly spoke in terms of the state of satisfaction having to be that which characterises the proceedings as “hopeless or bound to fail” and, as I have just noted, the expression now is “no reasonable prospect of success”. There does not seem to be any doubt, just having regard to the language choice, that the hurdle under the current formulation of the test is not as high as under the former, and that proposition, that understanding of the change in the language of the section and of the rule, is something that is clear from a consideration of the authorities (see s.17A(3)).
The authorities in relation to the utilisation of the section and the rule are set out helpfully in the decision of Riley FM of Ladakh Pty Ltd v Quick FashionPty Ltd & Anor [2010] FMCA 919 commencing at [5] under the heading of “The test for summary dismissal” and going through to the end of [10]. I do not propose to set out in detail the propositions arising from each of those cases.
Summarily determination in the Federal Court was the subject of recent consideration by the High Court in Spencer v Commonwealth of Australia [2010] HCA 28 and the High Court there set aside an order of the Federal Court summarily determining an application. That order in itself had been left undisturbed on appeal to the Full Court of the Federal Court, and the case provides an occasion for a very careful analysis of the power to summarily terminate proceedings and the occasions on which the power should and should not be exercised.
At [24], the Chief Justice and Gummow J have this to say about the exercise of their power:
The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies with such a disposition as sought in the summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Limited said:
The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.
Their Honours go on:
More recently in Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27 the court repeated a statement by the court in Agar v Hide, which included the following:
Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.
Their Honours go on:
There would seem to be little distinction between those approaches and the requirement of a real as distinct from fanciful prospect of success contemplated by s.31A. That proposition, however, is not inconsistent with the proposition that the criterion of section 31A may be satisfied upon grounds wider than those contained in pre-existing rules of court authorising summary dispositions.
And then, at [25]:
Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.
This claim is one made under the Australian Consumer Law. Section 131(1) of the Act provides that Schedule 2 to the Act applies as a law of the Commonwealth to the conduct of corporations. Schedule 2 is where the Australian Consumer Law is to be found. Schedule 2 contains within it a provision, section 18, which provides as follows under the heading:
Misleading or Deceptive Conduct
(1) [Misleading and deceptive conduct prohibited] A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 236 of the Australian Consumer Law provides in subsection (1):
If
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
Section 237 provides for compensation orders:
A court may:
(a) on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person –
And then it goes on to say:
…make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.
The Amended Statement of Claim itself in paragraph 24 refers to the loss and damage being for the purposes of ss.82 and 87 of the Competition and Consumer Act 2010, rather than the Australian Consumer Law itself. But with one important exception, which I will deal with hereunder, the provisions are identical. I should also note at the outset that s.6 of the Trade Practices Act Amendment (Act) (Number 2) 2010 has the effect of providing that alleged misleading or deceptive conduct that occurred in the period up to 31 December 2010 remains to be dealt with under the Trade Practices Act 1974.
Part of the summary dismissal claim by the respondent was formulated upon the basis of there being some interchangeability in the Amended Statement of Claim as to whether the action was brought under the Trade Practices Act or the Australian Consumer Law. True it is that there are aspects of the conduct alleged which occurred before

31 December 2010, namely on 1 December 2010, and there are aspects which allegedly occurred after that date, 25 January 2011. It may be that in a formal sense, the Amended Statement of Claim has not picked up with precision the relevant reference to the alternative legislation provisions.
But in the context of an application of this nature, I do not propose to be troubled by what might I think fairly be regarded as technical issues of that kind, technical issues that, to the extent that they do cause any confusion or difficulty, are easily cured by amendment.
Perhaps it is as well to note now too that my general approach to this matter in determining the summary dismissal claim is to make an assumption that the applicant will make out at trial his factual contentions. I am not suggesting that summary dismissal applications are necessarily limited to applications of that nature, essentially demurrer applications. As the High Court passage from Spencer v Commonwealth (supra) itself noted, there are occasions in which the power can be exercised in the context of a summary adjudication of factual matters, but unless I indicate specifically to the contrary, the general approach I take is to proceed to deal with the application on the assumption that the contentions of the applicant will be made out.
As to where I find the contentions, I find them in the affidavits upon which the applicant proposed to rely at trial. I also find the propositions set forth in summaries of argument. It may be that there are matters I take into account that have not, in a formal sense, found their way into the affidavit material. An example of that is the contention in the applicant’s summary of argument filed on 7 February 2012 that there was a history of trading between these two companies; commerce between these two companies in the period July to November 2010, which is said to ground or colour the nature of the negotiations which took place in December 2010. Again, even if, in a formal sense, that contention is absent from the document that takes the place of a pleading in this Court (“Points of Claim”), that is not going to be a matter that particularly troubles me.
I should also make reference to s.4 of the Australian Consumer Law, which provides, under the heading:
Misleading representations with respect to future matters
Subsection (1): If
(a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b) the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.
Subsection (2):
For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a) a party to the proceeding; or
(b) any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
Subsection (3) goes on to say:
To avoid doubt, subsection (2) does not:
(a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or
(b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.
I will return in due course to a more detailed consideration of that provision.
In terms of a summary of the chronology which provides the factual background against which this application is brought, the parties entered into a construction contract on 1 December 2010. There had been earlier commercial relations between them starting in about the middle of 2010, which, it is alleged, gave rise to difficulties in relation to payment by the respondent. So the principal contract, what is later to receive the nomenclature of the “building contract”, is entered into on 1 December. On 8 December – and this is referred to in paragraph 10 of the Amended Statement of Claim – there is a conversation between respective representatives of the parties in which the applicant is advised that “no building licence had been issued or would be issued, as pleaded in paragraph 9.2.1 above”.
The applicant contends that, prior to the execution of the contract on 1 December, there had been a series of representations, and I will come to those in a moment, but for present purposes, in terms of identifying the relevant chronology, on 8 December there is a modification to the arrangements extant between the parties arising from this information that is provided that, whereas there was to be a building licence application made in relation to a range of constructions or buildings, in fact the application would only be made in relation to a café/restaurant. During the course of argument, the applicant, through his counsel, indicated an intention to apply to amend that paragraph so as it read as follows:
On or about 8 December 2010 by way of a conversation with Dan Caddy for the Respondent and Antje Weisheit of the Town of Port Hedland, Pasturelle was informed that no building licence had been issues or would be issued, save as to a café/restaurant building, as pleaded in paragraph 9.2.1 above.
I would propose to allow that amendment and will deal with the summary dismissal application upon the assumption that it has been made.
Paragraph 11 then indicates that, on 10 December, the arrangement splits into two separate contracts: one for refurbishment and the original contract made on 1 December in relation to the construction of the café/restaurant.
Next in terms of chronology is 25 January 2011. This is referred to in paragraph 15A of the Amended Statement of Claim. It is said that, on that day, at a meeting between representatives of the parties, a representative of the respondent said words to the effect of, “The building licence will be granted on 27 January 2011 so you can start the construction work.” It is said that the person who made that representation, one Cornish, well knew that the building licence that was to be issued on 27 January did not include the buildings other than the café/restaurant, and it goes on to contend that Cornish did not inform the representatives of the respondent of that fact.
On 27 January, a building licence for the construction of the café/ restaurant was issued by the Town of Port Hedland. On 4 March 2011, the applicant finds out through its officers that the representation that that was made on 25 January was false and that there had only ever been an application for a café/restaurant licence and that was the only building licence that ever issued.
12 March 2011 is the earliest of the invoices that are rendered by the applicant to the respondent in respect of work done which remains unpaid. 19 March is when the applicant issues or serves a certificate of completion of the building works.
That is a brief summary of the relevant factual history, although I will deal in a moment with the explication of the conduct that arises during those periods that is said to give rise to the claim. To look at the form of the Amended Statement of Claim filed on 2 August, paragraphs 23 and 24 contain the claim for relief under the Competition and Consumer Act. Paragraph 23 says that:
In the circumstances pleaded above, the conduct of the Respondent pleaded in paragraphs 3 to 6 above, was misleading or deceptive.
And then that:
It was a cause of the loss or damage.
But the conduct identified in the Amended Statement of Claim is to be found in paragraphs other than simply those three paragraphs. Paragraph 8A contains the allegation that at the time the respondent made the representations, it did not have sufficient financial resources to pay invoices issued by the applicant each week. Paragraph 10, which is the representation as to the modification of the expectations as to the number of buildings to which the contract related, is another paragraph which is relied upon. Paragraph 15A is a paragraph that contains the representations relating to the building contract on

25 January. That, presumably, is also one of the parts of the Amended Statement of Claim said to ground the claim for relief, and paragraph 18, importantly, sets out the quantification of the loss and damage. The loss and damage is equivalent to the amounts outstanding in respect of invoices that were raised between 19 March 2011 and 11 April 2011.

The written submission of the applicant filed on 7 February 2012, paragraphs 2 to 37, explain in more detail the conduct said to give rise to the claim for relief or, as expressed in some of the cases, the “relevant circumstances” said to give rise to the claim for relief. Essentially, these are matters that are extracted from the affidavit material that have been filed, save for the contention in paragraph 35, which relates to a claim that:
From about July 2010 the Applicant carried out work for the Respondent and made progress payments claims in relation to that work in respect of which the Respondents were late in making payments.
That is a contention that finds its way into the affidavits but not into the Amended Statement of Claim itself.
Paragraph 27, this is prior to the 1 December contract:
Mr Cornish, for the Respondent said words to the effect that, “PVA will pay all weekly invoices issued for the work when they are due.”
Paragraph 28:
Mr Pasturelle’s evidence is that Mr Cornish said words to the effect that – presumably at the same time, that is, antecedent to 1 December – “On any new work the PVA will pay the invoices as they are due.”
Paragraph 29:
Mr Boni’s evidence is that Mr Cornish said words to the effect that “Port Village will pay weekly progress claims for the work when they are due and would pay a security bond.”
Again, I take that to be prior to 1 December. And then paragraph 30:

Prior to the agreements, Mr Cornish also said that the work was for construction of buildings other than the café/restaurant and on 25 January 2011, that work could start on the buildings on 27 January 2011.

Paragraph 31 repeats what is set out in the Amended Statement of Claim in relation to Mr Cornish not informing the applicant that the working licence was only for the café/restaurant, not any other buildings.
Paragraph 32 notes that the applicant required payment of a significant security bond in the amount of $231,000. Then:
[33] Written contracts were entered into within days of the conduct.
[34] The contracts provided for progress claims to be made weekly, which were payable within 14 days.
Paragraph 37 contains the assertion that Mr Cornish informed the applicants that they could carry out the works. It is important to note that – and this is a matter that was essentially agreed between the parties – an important aspect of the chronology is that no construction work was carried out by the applicants until 25 January 2011, but up until that date, from 1 December 2010, the work that had been performed was only in the nature of refurbishment work. So the claim under the Australian Consumer Law is really this: that there has been conduct constituted by two different kinds of representation: firstly, representations about a licence to build all of the buildings and not simply the café/restaurant; and secondly, representations about an intention to pay moneys as they fell due, coupled with – I say “coupled” – perhaps it is a separate representation, coupled with representations about the respondent having the resources or ability to make such payments.
In respect of the first species of representation said to ground the conduct giving rise to the claim, as I have noted, the contention is that the representation was made prior to 1 December 2010, but we know that by 10 December 2010 the representation had been modified so as it was made clear at that stage that the building work only related to the café/restaurant. As far as I can identify from the pleadings and affidavits, no construction work was done during that period. All payments for that period have been paid. All payments have been made in respect of all aspects of the building work to 12 March 2011.
There are two species of representations: the building representations and the payment representations. But then there are also two separate (or so it seems to me on the pleadings) building representations. The first is prior to 1 December. But in respect of that representation I am unable to identify any loss that is said to flow from it, and I will come back in a moment to the significance of that inference that I say can safely be drawn from the pleadings. The second construction representation is that made on 25 January 2011. It subsists from that date until 4 March 2011, subsists in the sense that the representation was only capable of misleading the respondents for the duration of that period. The representation is not capable of misleading the respondent after that period, and it is only after that period that work of any kind – that is, unpaid work of any kind – was performed.
So the difficulty the applicant has with respect to the construction representation is that on the pleadings and on the affidavits there does not appear to have been any loss that flowed from it. That is the irresistible inference that has to be drawn from all of the material that is before me. If there is no evidence of loss, does that mean, in the language of s.17A and of the Rule, that there must be no reasonable chance of success? Well, it would depend upon the nature of the claim for damages. But here, the claim for damages set out in paragraph 24 is said to be one of two things: either “the balance outstanding on the invoices pleaded in paragraph 18 above”, and secondly, “further particulars will be provided prior to trial.”
So the only claim for damage is in relation to that liquidated form of the damage which appears at paragraph 18 of the Amended Statement of Claim. There is no claim, for example, for declaratory relief and no claim for damages in the nature of nominal damages. The only claim is for the payment of the aggregate sum of the invoices owing. In those circumstances, it seems to me, then, that the state of the evidence being that no loss can be said to have arisen in respect of the making of the building representations, the claim, as it relates to those representations, can be fairly characterised, and I do characterise it, as having no reasonable chance of success.
That difficulty with respect to the identification of loss relating to the building representation on account of it only having been, as it were, alive and capable of inducing the applicant to do anything, was really acknowledged by Mr Rumsley in his oral submissions. But he says that the construction representations can still have a relevance, because of the circumstance that but for those representations having been made prior to 1 December 2010, the applicant would not have entered into contractual relations with the respondent at all, and that all of the sequelae of the matter, including the sequelae that relates to the performance of work in the period March and April 2011, can be said to have arisen on account of those construction representations.
His submission in relation to this aspect of the matter is, perhaps, most clearly articulated at paragraph 7 of his summary of submissions filed on 16 February 2012, where he says this:
The Applicant’s case is that it would not have entered into the contracts had the conduct not been engaged in. Had that been so the Applicant would not have outstanding invoices of over $430,000 that have been due and payable since April 2011. Additionally, the conduct resulted in the deposit of $231,000 being used to pay outstanding invoices, but not replenished, in consequence, the Applicant was not even protected to the extent of the deposit.
It is also a matter that was articulated in oral submissions on

7 February of this year, page 12 of the transcript of that day. Mr Rumsley says this when there is difficulty relating to loss relating to the construction representations as pointed out to him:
I suppose I’m looking at a genesis point, if you will, on a transaction that followed that has gone pear shaped, to put it generally. If you don’t hop onto that train because the representation is never made, you never rely on it, you don’t end up dealing with the fact that your payments haven’t been made, and you’ve now got other claims running against you. So the position is that you are disadvantaged by having ever got on there in the first place. So that’s effectively your Henville v Walker approach to the transactional “but for”. Here we say it’s the same thing and the damage that flows from that is any damage that flows in that continuing transaction, and here we’ve identified it as these amounts are still outstanding.
Henville v Walker (2001) 206 CR 459 was, of course, a decision of the High Court and I do not propose to recite the facts of the case, but it was plain in that case that the evidence before the trial court had established that the architect applicant’s loss had arisen partly because of the false representations made by the respondent as to the price that could be obtained if units were built. It was partly the reason for the loss that arose from the subsequent construction and subsequent sale of the properties. The other aspect of the matter that accounted for the loss had nothing to do with the agent, but related to the architect’s own feasibility study which substantially underestimated the cost of the project. So there was an issue as to the interrelationship between s.82 of the Trade Practices Act 1974, which constitutes the claim for damages, and s.52, which was the equivalent provision to s.18 of the Australian Consumer Law provision, which we are dealing with.
Ultimately, the High Court found that the architect was entitled to the damages that he had been awarded by the trial judge. He had calculated the damages as only the difference between what he obtained on sale and what he would have obtained had the agent’s representations been truthful or accurate, and, on appeal before the High Court, did not seek to obtain damages greater than that amount. It is clear, at least, from the judgments of McHugh, Hayne and Gummow JJ that they would have awarded him all of the losses that flowed from his reliance on the agent’s representations and not just what was awarded by the trial judge. Each of the judges address different aspects of the question of causation, but perhaps, for the purposes of the application with which I am dealing, the particularly helpful passages are to be found in the judgment of McHugh J, starting at [92] under the heading of ‘Section 82 and Causation’, and going through to [109]. At [100] his Honour says this:
In some situations, the legal framework may require a finding that, despite a causal connection in a physical sense between the breach and damage, no causal connection exists for legal purposes. In other situations, the legal framework may require a finding that a causal connection exists even though no more appears than that the damage followed after breach of a legal norm.
He then discusses that first class of case. But in relation to the second class of case he has this to say at [103]:
In the second class of case, the damage will not have occurred because of the laws of nature but because a person has acted to his or her detriment by reason of or following some conduct of the defendant. The conduct may be an act, an omission, a statement or a suggestion. But it will not be regarded as causally connected with the detriment if it provides no more than the reason why the person acted to his or her detriment. If the defendant intended the person suffering a detriment to act in the general way that he or she did, the common law will invariably hold that a causal connection existed between the conduct and the detriment. But if the conduct merely provides the reason why the person acted, it will not be sufficient to establish a causal connection unless the purpose of the legal norm that the defendant has breached is to prevent persons suffering detriment in circumstances of the kind that occurred.
And his Honour goes on:
If a broker negligently advises a client to retain shares because they are a good investment, the broker will be liable for the loss sustained in retaining those shares. But if, having received that advice, the client decides to buy more shares, the broker will not be liable for the further losses unless the terms of the original retainer imposed a duty on the broker to advise in respect of further purchases.
The learned authors of Miller’s Annotated Australian Competition and Consumer Law 33^rd Edition 2011 at p1871-2 summarise the cases relating to the question of causation under s.82. Perhaps it is worth noting something that the authors note at the outset of that discussion, that s.82 and the section with which I am dealing, s.236 of the Australian Consumer Law, are different in this respect, that the s.82 used the word “by” but s.236 uses the expression “because of” i.e:
Damage was suffered because of conduct in breach of the Australian Consumer Law.
The learned authors say at p1872
The use of a different phrase would not seem to make a practical difference. The section should be understood as taking up the common law practical or common-sense concept of causation and remoteness.
Reference is made at p1872 to a decision of the Federal Court in Ricochet Pty Ltd & Equity Trustees Executor & Agency Co Ltd (1993) 41 FCR 229. And the passage set out is as follows:
Ultimately, the “causative threshold” beyond which liability attaches to a misrepresentation which is one of a number of factors inducing a decision that produces loss, will be a question of judgment … But the mere possibility that a misrepresentation might have induced a course of action by the representee can never of itself attach liability under s. 82 to the making of it.
Further down the page:
Precisely what test should be used to determine sufficient causal connection has been said to be the subject of some difficulty. In McCarthy & McIntyre [1999] FCA 784 a Full Court said:
Perhaps there is no simple test capable of formulation. It is necessary that the issue of causation be approached in what the High Court in Wardley called a "practical or commonsense" way. In many areas, the courts have applied a "but for" test of causation. As McHugh, Hayne and Callinan JJ pointed out in Marks v GIO Australia Holdings Ltd at 346, the idea that a "but for" test is the exclusive test of causation has been found wanting in some contexts and it may yet be found to be wanting in the context of –
There the authors interpose the ACL –
Whether this be the case or not, the "but for" test, applied in a common sense and not a pedantic way, provides still a useful approach to the issue of causation.
In relation to the circumstances of this particular case, it is important to note that the first construction representation was only operative, in any event, in the period 1 December to 8 December. I say that on account of what is set out at paragraph 11 of the Amended Statement of Claim. As I have already indicated, there was no construction work done in reliance upon the representation.
With respect to the second construction representation, it is operative in the period 25 January to 4 March 2011. The applicant continued to do refurbishment works after it new the true state of affairs. In those circumstances it seems to me very difficult to come to the conclusion that the representation induced the conduct, and I say that, especially because it is the only period to which the loss relates. In other words, the period during which the damage or loss was sustained is co-extensive with the period when the applicant knew the construction representation to be false.
It will be seen in this discussion that I am already dealing with questions of reliance. But questions of reliance and causation are often intimately bound up. But the circumstance that the applicant was not labouring under any error at the time the damage was said to arise seems to me to be conclusive. On that basis, and against that factual background, the contention that the construction representation caused the loss fails the “but for” test and does so even if it is the broader or more liberal view that is taken in relation to the application of the test.
I will deal in a moment with the issue of causation and reliance in more detail but perhaps I should note at this point the decision of Deane and Fitzgerald JJ when Deane J was a member of the Federal Court, Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177. It is from the joint judgment of their Honours that I extracted that expression of the need for there to be evidence that the applicant was labouring under error at the time the damage was said to arise. At [200]:
In truth, of course, no conduct can mislead or deceive unless the representee labours under some erroneous assumption.
So if the case of the applicant were confined to the construction representations I would, on account of the failure to demonstrate any loss and on account of ordinary causation principles, in my view, be bound to find that the application had no reasonable prospect of success.
But as I have indicated, the claim that relates to conduct is not confined to the building representations. The other species of representation is the payment representation, and that is to be found at paragraphs 5.3, 6, 7 and 8 of the Amended Statement of Claim. Paragraph 13 is also relevant in that it is contended that the applicant would not have acted as he did in paragraphs 9, 11 and 12 if the representations and the implied representations had not been made.
As I read the pleadings, and again harkening back to what I said earlier that in terms of whether matters are in a strict and formal sense before me or whereby necessary implication I should regard them as being before me, the view I take in relation to the Amended Statement of Claim is that there is a contention that the payment representation is said to be relevant both to the loss that flows from the entry into the original construction contract on 1 December 2010 and also from the entry into the refurbishment contract entered into on 8 December 2010.
I have already noted in that regard too the important evidentiary matter that the history of bad payment or defalcation in payment immediately preceding the entry into the contract on 1 December, is not a matter that has made its way into the Amended Statement of Claim, although it is a matter that arises in the affidavits. It is, relative to this aspect of the matter, an important aspect of the evidence. It is summarised at paragraphs 35 and 36 of the written submissions of 7 February 2012:
From or about 8 July 2010 the Applicant carried out work for the Respondent and made progress payment claims in relation to that work in respect of which the Respondents were late in making payments.
The contract was terminated for non payment of invoice between or about 22 October or 31 October 2010.
The first question I have to ask myself is: is the representation including the implicit representation as to capacity capable of inducing error? Before that I should note the specific difficulties that are said to arise in respect of the contention as to the implied representation and they are to be found in the written submissions of the respondent of 25 January 2012 at paragraph 5, where I think it is fairly observed that, in paragraph 5.1:
The applicant appears to plead that the representations in paragraph 5 gave rise to the implied representation in paragraph 6. However, there is no link between the alleged representation in paragraph 5 and the implied representation in paragraph 6. All that is said is that the Representations “included an implied representation”. There is no explanation as to how this alleged implied representation arose from the alleged representations by Mr Cornish as at the 1 December 2010 meeting.
And then paragraph 5.2 it said that:
In order to plead an implied representation it is necessary for the applicant to plead the context, not just the alleged implied representation in isolation. It is necessary to plead the circumstances so that the alleged misleading or deceptive conduct can be assessed whether the implied pre-contractual representation is consistent with the terms of the contract amd its performance.

Reference is made to Farrow Mortgages Pty Ltd (In liq) v Edgar (1993) 114 ALR 1 at pages 6 - 7. I think those observations are a fair criticism of the way in which the implied representation as to capacity to pay are formulated in the Amended Statement of Claim.
So, further issues that arise in respect of the payment representation are as follows: (again, I note that this is both as to the 1 December and

8 December representations) was the representation as to payment merely an unfulfilled promise? Was it a representation as to a future matter? (I note that the contractual promise itself was not pleaded as a future matter.) If it was a future matter, were there reasonable grounds for it being made that are capable of being adduced?
If that issue is to assume significance in the matter, (that is, the adduction of evidence as to reasonable grounds for the making of the representation) it must be thought unlikely that this matter would be suitable for a summary dismissal assessment. It is a matter that would cause real difficulty. There are matters in the pleadings and in the affidavits to which my attention is drawn which would seem to provide reasonable grounds for the making of representation in respect of payment. For example, the payment of the deposit, which was, as the applicant’s counsel himself observed significant, and the payment of amounts due up until the certificate of completion were issued by the applicant. They are matters that might be thought on the evidence to go to the question as to whether there were reasonable grounds for the making of the representation.
But when I spoke earlier of making assumptions as to the applicant making out his case in respect of all relevant contentions, I was not to be taken as saying that that included me making assumptions as to the respondent’s inability to satisfy any particular evidential onus. I remind myself that it is an evidential onus only that s.4 gives rise to. If the case were to turn upon my evaluation at this stage of the proceedings, as to whether there was evidence capable of being adduced which provided reasonable grounds for the making of the representation, it would cause me significant unease in the context of a summary dismissal assessment, particularly when I bear in mind the specific passages of the High Court decision of Spencer & Commonwealth (supra) to which I referred earlier. However, for the reasons set out hereunder, I do not think this issue is one of significance.
Another question is: was the representation capable of inducing error, and if so did it in fact induce the error? That gives rise again to the question of causation. In asking the question whether the representation was capable of inducing error, I am really framing in different words the question: was the representation relied upon?

In respect of this important issue of reliance it seems to me the following observations can be made on the state of the evidence.
As I apprehend the respective positions of the parties, the applicant would have known and must be taken to have known that the representation as to payment upon which they rely would make its way into the written contract in any event. They would regard the representation as set out in the Amended Statement of Claim as embodying a fundamental aspect of their decision to enter into commercial relations with the respondent. There are no circumstances, it seems to me, in which a corporation would enter into a commercial arrangement if these conditions were not met. Therefore, it seems to me to be, in the circumstances, an inevitable assumption that the respondent would make and in the circumstance of it being an inevitable assumption, it seems to me that the representation itself is rendered otiose.
Another way of expressing it is to posit this question: could the representation ever, by reliance upon it, induce error? That both of the representations, (that is, both of the payment representations) ended up being embodied in the written contract, of course, is not a matter that in itself is the cause of any difficulty in relation to the applicant’s case. That circumstance is the subject of an observation by Mr Rumsley in his submission of 16 February 2012 paragraph 8, where he sets out the passage of the Chief Justice of the High Court in Campbell v Back Office Investments Pty Ltd [2009] HCA 25. That is readily accepted, but the fact that these fundamental terms as to payment make their way into the contract, ultimately is an important factual consideration.
I consider that the conclusion has to be drawn that it is the contractual promise upon which the party actually relies, not any assurance which anteceded the contractual promise as to payment, or as to capacity to payment. In other words, it is surely the position that the applicant would never have entered into the contract, but for the inclusion in it of terms as to payment. They would not enter into a contract, even if the representations contended for had been made, unless the contract itself included those terms. Another way of expressing that is to say that it is not the conduct constituted by the alleged representations that has caused the loss, but rather the non-payment by the respondent of the sums due under the contract.
It was inevitable, in my view, given the factual matters that I have extracted from the documents as identified, that there would be a term in the contract as to payment. That is what the parties always intended each of them to rely upon. In other words, the representations as to payment were not capable of inducing error, because the applicant would already have made the assumption as to payment and capacity to make payment before entering in to the contractual relations.

So whether we are looking at the matter on a causation basis, or from the narrower perspective of reliance, it seems to me that there is a considerable difficulty that attends the applicant making out its case in relation to the payment representations.
In a very real sense, it seems to me that the contention is as flawed as any corresponding hypothetical contention on the part of the respondents would be that – in proceedings brought by them – they entered into the contractual arrangements, and they suffered loss on account of the applicant specifically representing he would actually do the work, or, implicitly, that he had the capacity to do the work. Both of those evaluations on the part of parties anteceded the making of the representations, and gave birth to the very existence of commercial relationships between them, which commercial relationships they each knew would be embodied in contractual terms and not regulated or vivified by the making of separate representations as to the fundamental obligation of payment.
In those circumstances, it seems to me that whether we are relying upon the construction representations or the payment representations, there is no reasonable prospect of the claim for relief set out in paragraphs 23 and 24 of the Amended Statement of Claim being granted.
I propose, in a moment, to make an order pursuant to Rule 13.10 summarily dismissing, pursuant to rule 13.10(b), the claim under the Australian Consumer Law. That aspect of the Amended Statement of Claim is embodied in paragraphs 23 and 24 of that document. That being my intention, I now have to consider what happens to the claim that is made in the statement of claim pursuant to the contracts that existed between the parties.
The contractual claim was said to be part of the federal matter constituted by the entirety of the proceedings that are before the Court. Some of the observations that I now make are trite, but it is important to make them. This Court is a Federal Court of course, created under the power given to the Commonwealth Parliament by ss.71 and 79 of the Commonwealth Constitution.
The Court has federal jurisdiction under both the Trade Practices Act 1974 and the Competition and Consumer Act 2010. It has been clear from authority since at least the early 1980s that when a Federal Court has jurisdiction to determine a federal matter, jurisdiction is also conferred on the Court to determine the entire controversy even if that includes non-federal claims. The jurisdiction is not limited only to the narrow matter which attracted federal jurisdiction, but extends to the resolution of the entire matter provided that matter can be said to involve a single justiciable controversy.
Authorities in relation to that proposition are set out in the footnote to paragraph 13(c) of the decision of Lucev FM of Matheson v Findex Australia Pty Ltd [2011] FMCA 135. In addition to those, reference should be made to Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457. Jurisdiction is conferred on this Court to determine applications under the Competition Consumer Act, not only in relation to claims brought specifically under that Act, but claims brought under aspects of other Acts which form part of the one justiciable controversy. (See also Wakim, Re; Ex parte v McNally (1999) 198 CLR 511 at 585 per Gummow and Hayne JJ.)
Importantly though, and authorities in relation to this proposition are referred to in paragraph 13(d) of the decision of Lucev FM in Matheson v Findex Australia Pty Ltd (supra), the Court retains jurisdiction even if the matter which attracted jurisdiction is dismissed, lost, struck out, found unnecessary to be decided, cannot be substantiated, or is displaced by some countervailing claim or assertion
It seems to me appropriate to set out at some length, the passage from the decision of French J as he then was, in Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564 at 597, in relation to that proposition:
Jurisdiction conferred on a Federal Court in respect of a matter authorises the Court to determine all the claims, federal and non-federal, which are involved in the controversy. That the federal claim is determined adversely to the applicant does not thereby deprive the Court of jurisdiction to deal with the non-federal claims. They are all part of the federal jurisdiction conferred upon the Court. Nor does it matter to the scope of that jurisdiction whether the federal claim is defeated on a question of law or fact. That proposition is supported by a long line of authority. In R v Bevan; Ex parte Elias (1942) 66 CLR 452, the High Court assumed federal jurisdiction on a question, which it raised, involving the interpretation of the Constitution, decided it adversely to the applicants as a matter of law, but proceeded then to deal with applications for habeus corpus and prohibition in respect of which it would otherwise have had no jurisdiction.
In Dorotea Pty Ltd v Vancleve Pty Ltd (1987) 75 ALR 269 the Full Court observed that the adverse determination of a limitation point, defeating a federal claim, would not cause the Court to lose authority of their claims in the accrued jurisdiction.
Over the page, his Honour notes:
A like approach was adopted by the Full Court in Burgandy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212.
There then is a citation of the passage from [219] of that decision –
But it does not follow that the Court ever lacked jurisdiction to deal with such claims. Nor does it follow that the Court now loses its jurisdiction to deal with the attached common law claims … In principle, the position is no different than it would have been if the claims under the Act had proceeded to trial and had been dismissed on the merits. In that situation, it could not seriously be suggested that the dismissal of the claims under the Act had the effect of depriving the Court of jurisdiction to deal with any attached non-federal claim.
So that is the starting point for any consideration of what is to happen to what is left of this application after the order that I have adumbrated making in respect of the federal aspect of the matter. What really happens in these situations, it seems to me, is in the context of an application for strike-out having been successful, we return to a consideration as to whether there was a real or valid attraction of the accrued jurisdiction in the first instance to the proceedings. It is not a matter of the reconsideration of the accrued aspect of the claim being entailed by the dismissal of the federal claim. But manifestly, it provides an occasion for a reconsideration as to whether or not the accrued jurisdiction was properly attracted in the first instance. That is certainly how I understand another passage in the decision of Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (supra) to which I had referred. His Honour says at [84]:
The judgment to be made in assessing the scope of the accrued jurisdiction extends to the relationship between the federal and non-federal claims said to fall within it. Further, the federal claim must be a substantial aspect of the controversy if that controversy is to attack federal judicial power. As the majority said in Fencott v Muller (1983) 152 CLR 570:
A federal claim which is a trivial or insubstantial aspect of the controversy must, of course, itself be resolved in federal jurisdiction, but it would be neither appropriate nor convenient in such a case to translate to federal jurisdiction the determination of the substantial aspects of the controversy from the jurisdiction to which they are subject in order to determine the trivial or insubstantial federal aspect. Again, impression and practical judgment must determine whether it is appropriate and convenient that the whole controversy be determined by the exercise of federal judicial power.
And his Honour goes on to note this:
It is to be noted that the characterisation “trivial or insubstantial” is not an absolute attribute of the federal claim or a description of its strength or weakness but rather a description of its relationship to the controversy in respect of which jurisdiction is invoked.
An example of the kind of reconsideration that the dismissal of the federal aspect of the claim gives rise to is to be found in the decision to which I was referred by counsel; the decision of WG & B Manufacturing Pty Ltd v Telsa Farad Pty Ltd & Ors [1999] FCA 1776, where there was a striking out of the federal aspects of the claim under the Trade Practices Act. Finkelstein J had this to say at [11]:
This -
that is the dismissal of the federal aspects –
then requires me to determine whether the non-federal claims are justiciable in the Federal Court. The relevant cases show that if a federal claim which is said to enliven the accrued jurisdiction of the court to dispose of non-federal claims is trivial or insubstantial, that will not be sufficient to attract that jurisdiction.
Reference is then made to the decision of Merkel J in Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FAC 1645. But his Honour notes at [12]:
However, it is not only when a federal claim is colourable that the Federal Court would lack jurisdiction to deal with non-federal matters.
and then there is reference made to the decision in Fencott v Muller (1983) 152 CLR 570.
Finkelstein J goes on at [13] to say:
In the present case, on balance, I am not prepared to conclude that the asserted federal claims are not genuine in the sense they are colourable and only brought for the purpose of fabricating jurisdiction, but what does seem plain to me is that the cause of action under s.52 of the Trade Practices Act is “trivial or insubstantial” in the sense explained by the High Court in Fencott v Muller.
Similarly, in this case, I am not prepared to make a finding that the federal claims were colourable. We are a significant way short of being able to characterise the attempt to grasp the federal jurisdiction as having not been genuine or bona fide. I proceed upon the basis that the federal arguments which were twinned in the Amended Statement of Claim, as it were, with the claims under the contract itself, were genuinely advanced by the applicant. But it seems to me that in truth, the claim was always in reality a claim under contracts for the moneys due.
The conduct by representation aspect of the matter added little or nothing to the essential nature of that claim. That is why the payment provisions, for example, inevitably made their way into the contract itself on which the contractual claim is grounded. The construction representations could not be linked with the actual claim for moneys. As has already been noted, the contract claim will not attract the accrued jurisdiction if the federal controversy to which it was ostensibly attached at least, was trivial or insubstantial.
In the circumstances described herein, I do consider that the proposed federal aspects of the proceedings which I am about to summarily dismiss can be fairly characterised as trivial or insubstantial. The accrued jurisdiction ought not to be exercised in relation to the contractual claims. They fail for want of jurisdiction.
I would have addressed, too, the issue of the jurisdiction to deal with the contractual claims to be found in the respondent’s counterclaim but for having been informed it was to be discontinued.

I certify that the preceding ninety-one (91) paragraphs are a true copy of the reasons for judgment of Lindsay FM

Date: 29 February 2012