Mick Skorpos Petrol Discount King Pty Ltd v Shell Company of Australia Ltd
[1997] FCA 348
•9 May 1997
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 96 of 1995
)
GENERAL DIVISION )
BETWEEN:
MICK SKORPOS PETROL
DISCOUNT KING PTY LTD
Applicant
- and -
THE SHELL COMPANY OF
AUSTRALIA LIMITED
Respondent
REASONS FOR DECISION
CORAM: Mansfield J
PLACE: Adelaide
DATE: 9 May 1997
On 12 February 1997, I gave judgment on an application by the applicant to file and serve a fresh amended statement of claim in this matter upon certain terms. It is not now necessary to refer to the detailed history of pleadings in this matter; it is set out in that judgment.
Pursuant to that leave, the applicant filed and served a fresh statement of claim entitled Third Statement of Claim on 18 March 1997. At the directions hearing on 21 March 1997, the respondent objected to several parts of the Third Statement of Claim. Those objections were in part dealt with on that date; they dealt with some expressions carried forward unnecessarily from an earlier version of the then proposed
statement of claim. There were two remaining matters of substance to be dealt with, arising from pars35, 36 and 38.6 of the Third Statement of Claim. I directed that the applicant first consider the objections and if thought fit to notify the respondent of any proposed amendments to those paragraphs, and then the written exchange of submissions as to those paragraphs or proposed paragraphs of the Third Statement of Claim. That process has now been completed.
As a result, there is no longer a claim for exemplary damages and so no issue about pars36 and 38.6 of the Third Statement of Claim. They are not pursued. I strike them out.
There remains the question of whether the Third Statement of Claim, either as presently standing, or as including the proposed additional paragraph 34A, properly pleads the applicant's claim for loss and damage. It is under that general heading that the remaining pleading issue falls.
The Third Statement of Claim complains of breaches of contract, breaches of warranty, and misleading or deceptive conduct contrary to s52 (as explained in respect of future matters by s51A) of the Trade Practices Act 1974 ("the Act"). The causes of action are alleged to arise variously from oral communications between the applicant and the respondent in the period April to July 1990, in December 1990, in late 1991, and in about February 1992, and from certain documents including one entitled "Heads of Agreement" dated 7 December 1990 and two other documents entitled "Sales Agreement Dealer Owned Outlet" including with one of those documents certain written Special Conditions. It also complains that the respondent has engaged in resale price maintenance, contrary to ss48 and 96 of the Act, but as the relief claimed is declaratory only it is not necessary to separately or additionally consider the pleadings in relation to that asserted cause of action further.
The relevant paragraphs of the Third Statement of Claim provide:
"35(a)Building Work
The applicant has suffered a loss in consequence of the Respondent's failure to pay for building work particularized in paragraphs 28 to 30. The loss is detailed as follows:
Loss resulting out of the Respondent's failure to comply wit its obligations in the rebuilding of the Henley Beach site ...".
[There follows a list of entries under the headings "Item" and "Expense"].
(b)Owner Dealer Rebate
The Respondent agreed to pay 1.6 cents per litre owner dealer rebate to the Applicant on all purchases of fuel monthly in arrears from January 1990 and from January 1992 pursuant to the Contract Extension Agreement the Respondent agreed to pay 1.6 cents per litre plus .6 cents per litre on all purchases of fuel from January 1992 until 31 January 1997. Based on 1.6 plus .6 cents per litre on sales volumes of 2.3 million litres per month at the Parkholme site and 405,000 litres per month at the Henley Beach site, increased by five per cent each year in February 1995 and February 1996 the applicant should have received an additional $660,742 in
owner dealer rebate to 30 June 1996. An updated figure therefore to the date of trial will be presented at trial.
(c)Loss Arising from Failure to Pay Profitability Support at Agreed Rate
The Respondent agreed to pay the Applicant profitability support as particularized in paragraphs 9 and 12 herein. Profitability support was paid at the rate of 2.5 cents per litre for a short period in 1991. It was subsequently reduced to 1.9 cents per litre in or about May 1992. In addition to the shortfall based on the reduction in volume, the profitability support should have been paid at a variable rate depending upon sales volumes varying from 2.8 to 4 cents per litre. At the variable rate of 2.8 to 4 cents per litre the total loss to 30 June 1996 is $3,775,069. The loss is increasing. An updated figure therefor to the date of trial will be presented at trial.
(d)Loss of Sales of Additional Product Lines
As a result of the lower sales volumes of fuel sales of additional product lines have been reduced. If sales volumes had been sustained during the period April 1994 to June 1996 the gross profit earned from additional sales would have been $466,510.00. The actual gross profit earned for the period from additional sales was $271,517,00. The Applicant has suffered a loss of gross profit of $194,993.00 to 30 June 1996 which loss if continuing. An updated figure therefor to the date of trial will be presented at trial.
(e)Reduction in Goodwill
The reduction in volume from the Applicant's sites has reduced the value of the business goodwill associated with the business. Based on the Applicant's profit after tax in the order of $240,000.00 per year ended the year 30 June 1992 and $280,000.00 per year for the year ended 30 June 1993, the loss of the Applicant's goodwill is estimated to be from $2.3 million to $4.3 million at 30 June 1996 which loss is continuing as sales volumes decrease. An updated figure therefor to the date of trial will be presented at trial.
(f)Failure to Sell Service Stations at Findon and Seacliff
The Respondent failed to sell service stations at Findon and Seacliff to the Applicant. The Applicant has suffered damages for loss of profits in consequence of this failure from the beginning of 1993 to date and continuing. The loss of profits estimated to 30 June 1996 is in the range $543,000 to $647,000. An updated figure therefor to the date of trial will be presented at trial."
There follows a paragraph claiming additional damages to equate any amount on damages awarded payable by reason of any obligation to pay capital gains tax (par37). There is no complaint about that paragraph. Then, par38 of the Third Statement of Claim seeks various declaratory relief, "damages pursuant to Section 82 of the Trade Practices Act 1974", "damages including compound interest", interest and costs and "such further and other relief as the Court deems just."
The applicant informed the respondent of its desire to add par34A to the Third Statement of Claim in the following terms:
"In consequence of the misleading and deceptive conduct of the Respondent the Applicant has lost the opportunity of negotiating the same or a better deal from another supplier. Hence the applicant says that whether or not the damages under section 82 of the Trade Practices Act were assessed in contract or in tort the same measure of damages should apply."
When responding to the respondent's submission, and perhaps prompted by it, the proposed par34A reads:
"In consequence of the misleading and deceptive conduct of the Respondent the Applicant has lost the opportunity of negotiating the same or better deal from the Respondent or one or other of the other wholesale suppliers of fuel.
Particulars
The Applicant had in the past been offered terms and conditions the same as and better than offered by Shell and having regard to the volume of its sales it has lost the opportunity of entering into arrangements for supply on the same or better terms. Hence the applicant says that whether or not the damages under Section 82 of the Trade Practices Act are assessed akin to damages in contract or in tort the same measure of damages should apply.
The Applicant at the time was the largest independent reseller of fuel in South Australia.
Due to the fact that the Applicants two outlets have had more volume throughput than an aggregated number of separate independently operated owner dealer sites it has at all material times been a particularly attractive customer to the Respondent and to other wholesale suppliers of motor fuel.
The reason for this was associated with the difficulty and burden involved in wholesale suppliers dealing with a number of other individual dealers to make up the volume purchased by the Applicant.
This fact was well known at all material times to the Respondent through its servants or agents Glindeman and Hendrickson.
The Respondent recognised the importance of maintaining market share and the difficulty of finding replacement volume throughput from other sources of retail sale.
The Applicant could have negotiated the same or better deal with the respondent and with other wholesale fuel suppliers for the same commercial considerations.
The Applicant prided itself on its loyalty to the Respondent and hence did not negotiate with other suppliers or pursue other opportunities at that time. The Applicant was content to rely on the promises and assurances given to the Applicant.
The Respondent through its servants or agents Glindeman and Hendrickson well knew that proposals of the kind made to the Applicant were necessary to retain the Applicant as its reseller having regard to market conditions.
10.The Applicant is unable to particularize the extent to which a better deal would have been available elsewhere save as to indicate that having regard to market conditions the prospect was significant.
11.The particulars of the loss and damage which would apply if damages akin to a contractual measure was applied are set out in paragraph 35.
12.The same particulars of loss apply if damages akin to the so called tortious measure are applied."
I gave the respondent the opportunity to make any additional submissions it wished to make on that form of the proposed amendment.
The respondent's submission is that the heads of loss alleged in par35 of the Third Statement of Claim are all contractual in nature, and do not therefore reflect damages claimable under s82 of the Act for any breach of s52 of the Act.
That submission is directed to the cause of action based upon an alleged breach of s52 of the Act. There is not, as I discern it, a complaint that par35 of the Third Statement of Claim might not adequately identify recoverable damages (if the relevant facts are proven) for the contractual or quasi-contractual causes of action relied upon. Thus, par35 of the Third Statement of Claim should stand. The real question is whether it can stand as the factual basis for the claim for damages for breach of s52 of the Act. If not, then the question will arise as to whether the applicant's claim under s52 of the Act should be struck out. The end result of the submission, if successful, and subject to the proposed par34A being allowed, would be that the applicant's claim for breach of s52 of the Act has not been alleged to sound in damages known to the law and should be struck out.
It is correct that, generally speaking, actions based on s52 of that Act are analogous to actions for tort: Gates v The City Mutual Life Assurance Society Ltd (1985-86) 160 CLR 1 per Gibbs CJ at 6-7 and per Mason, Wilson and Dawson JJ at 14; Kizbeau Pty Limited v W G & B Pty Limited (1995) 184 CLR 281 per the Court (Brennan, Deane, Dawson, Gaudron and McHugh JJ) at 290. It is equally correct that, generally speaking, the rules for assessing damages in tort will be the more appropriate guide for assessing damages for breach of s52 of the Act: Gates (above) at 6 and at 14-15; Kizbeau (above) at 290; Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 per Mason CJ, Dawson, Gaudron and McHugh J at 526 and per Brennan J at 534-535; GIO Australia Holdings Ltd v Marks (Full Court, Federal Court of Australia, 21 November 1996, unreported). That there is no absolute and inflexible rule of law as to the basis upon which damages are to be assessed under s52 of the Act is however recognised both by comments in the High Court in Gates (above) at 14 and in Wardley (above) at 526. As the observations of Mason CJ, Dawson, Gaudron and McHugh JJ point out in Wardley (above), the remedy is for damages based upon a statutory cause of action and there is no prescribed legislative rule to limit the basis upon which damages for a breach of s52 of the Act may be awarded. See also the remarks of Fox, Sheppard and Woodward JJ in Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1987) 74 ALR 7 at 12. In certain cases, there has been the application of a measure of damages which is not, or not entirely, tortious: eg Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700; Gurdag v B S Stillwell Ford Pty Ltd (1985) 8 FCR 526; Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) ATPR 41-269; Henjo Investments Pty Ltd v Collins Marrackville Pty Ltd (1989) ATPR 40-968; Frith v Gold Coast Mineral Springs Pty Ltd (1983) 65 FLR 213. There may be in certain circumstances, and depending upon the evidence, occasions when the measure of damages in tort "begins to resemble the expectation element" in the measure of damages in contract (see Gates above, at 13). There may be circumstances where the loss of an opportunity to obtain a commercial advantage or benefit does amount to loss or damage within s82 of the Act: Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, per Mason CJ, Dawson, Toohey and Gaudron JJ at 339-340. In Gates (above), such a claim failed because there was no evidence to support the finding sought, rather than because in the face of a relevant finding on evidence such a claim could not be legally sustained.
The relevant test for the striking out of a pleading, or the disallowance of all or part of a pleading, under O11 r16 of
the Federal Court Rules is that the claim is so untenable that it cannot possibly succeed (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130). In the light of my review of the authorities, I have reached the conclusion that the basis of the claim for damages for breach of s52 of the Act, as expressed, should be allowed to stand. I do not think it is so hopeless as to put the applicant out of court on that issue at this point. If the applicant fails to prove what it alleges, then in the absence of other evidence to support some other pleaded basis for assessing damages, the applicant may well fail to have proved loss, as occurred in Gates (above). However, I do not think that the claim as expressed is manifestly untenable.
There remains the question as to whether the proposed par34A of the Third Statement of Claim should be allowed. The respondent's objections are twofold: firstly, that the claimed loss of opportunity is not capable of sounding in damages under ss52 and 82 of the Act; and secondly, that the claimed loss of opportunity is not properly particularised, or is otherwise embarrassing as it contains allegations which are inconsistent with other pleadings or are irrelevant or are untenable.
The proposed par34A reflects a pleading to invoke the tortious measure of damages for the breach of s52 of the Act. It does not do so in the classical sense of assertion of the value of its arrangement with the respondent compared to the amount paid for that arrangement so as to claim the difference and any particularised consequential losses. It does, however, claim a past loss, reflected in the alleged loss of opportunity, rather than a prospective loss: Sellars (above) at 348-355 and compare Wardley (above). I do note the point that the alleged loss is of the opportunity "of negotiating" an alternative arrangement, rather than of entering into an alternative arrangement, however, I think it is clear enough that the applicant seeks to assert and establish at trial that, but for the misleading conduct alleged, some alternative arrangement would or might have been entered into so as to lead the Court to assess such prospects: cf. Malec v J C Hutton Pty Ltd (1990) 169 CLR 638. Accordingly, I reject that submission.
The object of pleadings includes defining issues so as to inform the parties in advance of the case they have to meet: Dare v Pulham (1982) 148 CLR 658, and to set the boundaries within which the trial, including rulings as to the admissibility of evidence, is conducted. In my view the proposed par34A is capable of meeting those criteria, but not entirely so in its present form. There are parts of it which, as the respondent submits, call out for further and better particulars. I deal with them below. It would also probably be unfair to the respondent if the applicant were to be permitted to lead evidence at the trial going to establish, except in a general way, reflective of the proposed pleading, that it could and would have negotiated successfully some other arrangement either with the respondent or with some other wholesale fuel supplier. I refer in particular to clauses 7 and 10 of the particulars provided. No specific wholesale fuel supplier is identified, nor any specific opportunity, nor is there any identification of the market conditions said to be relevant except as otherwise already stated in those particulars. Nor is there any attempt made to assert facts upon which any precise quantification of the asserted lost opportunity is sought to be made out. In my view, those paragraphs will go to limit what evidence the applicant should, or should not, be permitted to lead at trial on that question. The level of generality does not, of itself, mean that the pleading is inadequate but it does identify the basis of the applicant's claim, and therefore the nature of the evidence it may adduce in support of it. Obviously, if its case at trial is intended to be more specific, its particulars are inadequate. That is a matter for the applicant.
It is important to bring the pleading process to finality. Accordingly, as in certain respects I have concluded that the proposed par34A should be allowed, I now rule with respect to that paragraph
(1)that, subject to the applicant properly identifying the 'wholesale suppliers' of fuel referred to, the applicant have leave to further amend the Third Statement of Claim in the detailed form proposed by it in its reply to the respondent's submission, but subject to the further directions in (2)-(6) hereof
(2)that, with respect to each of the offers referred to in par1 of the particulars, the applicant specify
(a)when the offer was made
(b)by whom the offer was made
(c)the nature of the offer, that is whether it was in writing or oral and properly identifying the documents or occasions (including participants)
(d)the terms of the offer which were better than the terms offered by the respondent
and if those particulars cannot be provided then par1 of the particulars is disallowed
(3)that, with respect to par4 of the particulars, the applicant specify the "difficulty and burden" involved in wholesale suppliers dealing with a number of other individual dealers to make up the volume of fuel purchased by the applicant, and if those particulars cannot be provided then pars3 and 4 of the particulars are disallowed
(4)that, with respect to par7 of the particulars, the applicant specify
(a)the other wholesale fuel suppliers referred to, and
(b)the terms of the better deal referred to, that is what the applicant seeks to contend that it could have negotiated with the respondent or with some one or more of the wholesale fuel suppliers referred to, to the extent that such terms would differ from the terms of the existing arrangement between the applicant and the respondent as alleged
and if those particulars cannot be provided then par7 of the particulars is disallowed
(5)that, with respect to par8 of the particulars, the applicant specify by reference to numbered paragraphs of the Third Statement of Claim the promises and assurances referred to,
and if those particulars cannot be provided then par8 of the particulars is disallowed,
(6)that, with respect to pars9 and 10 of the particulars, specify the market conditions referred to,
and if those particulars cannot be provided then pars 9 and 10 of the particulars are disallowed.
For the reasons given, I therefore give leave to the applicant to amend the Third Statement of Claim by adding the proposed par34A in the terms set out above, and I reject the application of the respondent that par35 of the Third Statement of Claim should be struck out, or should not be allowed to stand in relation to the cause of action based upon a breach of s52 of the Act. I direct that the applicant do file and serve the amended Statement of Claim incorporating the proposed par34A but reflecting my orders and directions above within ten days of the date of publication of these reasons.
In the circumstances, I think that each party should bear its own costs of the challenge to the Third Statement of Claim and of the amendment sought. As other matters were dealt with at the directions hearing on 21 March 1997, the costs of that attendance should be costs in the cause. If the respondent needs to amend its defence in consequence of the leave to amend by adding par34A to the Third Statement of Claim, then it has leave to do so within fourteen days of the date of service on it of the amendment and is entitled to the costs of so doing. If it is simply a matter of a denial, that may be attended to at the next directions hearing.
I certify that this and the preceding pages are a true copy of the Reasons for Decision of the Honourable Justice Mansfield.
Associate:
Dated:
Counsel for the Applicant : Mr A Cameron
with Mr R Townsend
Solicitors for the Applicant : Townsends
Counsel for the Respondent : Mr P Jopling QC
with Mr S Wisking
Solicitors for the Respondent : Finlaysons
Hearing Date : 21 March 1997
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