Nagy, G.M v Masters Dairy Ltd
[1995] FCA 482
•10 JULY 1995
CATCHWORDS
PRACTICE AND PROCEDURE - pleadings - whether embarrassing - pleadings in contract - pleadings relating to alleged misleading and deceptive conduct - whether particulars would remedy - whether summary judgment appropriate in respect of contract action
Rules of the Federal Court O11 r16, O20 r2
Turner v Kinian P/L (French J, 19 August 1992, unreported)
TPC v Pioneer Concrete (Qld) Pty Ltd (1994) 124 ALR 685
Dalgety Australia Ltd v Rubin (FCt, SCt of WA, 1984, library no. 5485; unreported)
Kimberley Downs Pty Ltd v Western Australia (Master Staples, SCt of WA, 1986, library no. 6414; unreported)
Summerland v NZI Australia Ltd (Foster J, 28 October 1991, unreported).
Schwartz v South Australia Public Service Savings and Loans Society Ltd and ors (Branson J, 16 September 1994, unreported).
Beach Petroleum ML v Johnson (1991) 105 ALR 456
H1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181
Bruce v Odhams Press Ltd [1936] 1 KB 697
Murray v Macquarie Bank & anor (Spender J, 4 March 1992, unreported)
Day v William Hill (Park Lane) LD [1949] 1 KB 632
Gibson v Manchester City Council [1979] 1 WLR 294
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
Financings Ltd v Stimson [1962] 1 WLR 1184
Webster v Lampard (1993) 177 CLR 598
Demagogue Pty Ltd v Rameski (1992) 39 FCR 31
Warner v Elders Rural Finance Ltd (1993) 41 FCR 399
Payne v Cave (1789) 3 Term Rep 148 (100 ER 502); [1775-1802] ALL ER 492
Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674
GABOR MARTIN NAGY and PATRICIA DOROTHY NAGY v MASTERS DAIRY LIMITED
NO WAG 27 OF 1995
R D NICHOLSON J
PERTH
10 JULY 1995
IN THE FEDERAL COURT OF AUSTRALIA )
WESTERN AUSTRALIA DISTRICT REGISTRY )
GENERAL DIVISION ) NO WAG 27 OF 1995
B E T W E E N: GABOR MARTIN NAGY
First Applicant
and
PATRICIA DOROTHY NAGY
Second Applicant
and
MASTERS DAIRY LIMITED
(ACN: 008 671 761)
Respondent
MINUTE OF ORDER
JUDGE MAKING ORDER: R D NICHOLSON J
DATE OF ORDER: 10 JULY 1995
WHERE MADE: PERTH
THE COURT ORDERS THAT:
Paragraphs 3, 5, 10, 11, 12 and 13 of the applicant's statement of claim be struck out.
The applicants pay the respondent's costs.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
WESTERN AUSTRALIA DISTRICT REGISTRY )
GENERAL DIVISION ) NO WAG 27 OF 1995
B E T W E E N GABOR MARTIN NAGY
First Applicant
and
PATRICIA DOROTHY NAGY
Second Applicant
and
MASTERS DAIRY LIMITED
(ACN: 008 671 761)
Respondent
CORAM:R D NICHOLSON J
DATE:10 JULY 1995
PLACE:PERTH
REASONS FOR JUDGMENT
R D NICHOLSON J
Application is made on behalf of the respondent that certain paragraphs of the applicants' amended statement of claim be struck out pursuant to O11 r16 of the Federal Court Rules ("FCR") and that summary judgment be entered pursuant to O20 r2 of the FCR. The pleadings fall conveniently into the categories of matters arising under the law of contract and matters arising pursuant to s52 of the Trade Practices Act.
The principles upon which the Court should proceed in considering the respondent's motion are not in dispute between the parties. It is not in dispute that the principles regulating the power of the Court to strike out a pleading should be exercised sparingly and only where there is manifestly an untenable case: Turner v Kinian P/L (French J, 19 August 1992, unreported). The Court has to err on the side of caution lest it deprive a party of a case which it ought to be able to bring: TPC v Pioneer Concrete (Qld) Pty Ltd (1994) 124 ALR 685 at 695 per Sheppard J. It is only in cases in which it can be seen from the outset that, however the facts be found, there is no basis for the legal conclusion contended for by the plaintiff that the pleading should be struck out: Dalgety Australia Ltd v Rubin (FCt, SCt of WA, 1984, library no. 5485; unreported). The principles to be applied were considered in Kimberley Downs Pty Ltd v Western Australia (SCt of WA, 1986, library no. 6414; unreported) and are set out in Seaman, Civil Procedure Western Australia, vol1 at 5568, par20.19.6.
A point of difference between the parties arises in relation to the role which the provision of particulars may play in filling material gaps in a pleading. For the applicants it is said that rather than striking out a pleading the Court may direct that particulars be given: Summerland v NZI Australia Ltd (Foster J, 28 October 1991, unreported). Furthermore, requiring particulars to be given may be the price of saving the pleading from being struck out: Schwartz v South Australia Public Service Savings and Loans Society Ltd & ors (Branson J, 16 September 1994, unreported). The applicants also point to what was said by von Doussa J in Beach Petroleum ML v Johnson (1991) 105 ALR 456 at 466 where he said: "a strict distinction between material facts and particulars has tended to become more obscured as the years have gone by... technical objections raised to pleadings on the ground of alleged [want of form] will be received with less enthusiasm today than in the past"; and at 467, "The mere description of those statements [ie material facts] as "particulars" should not be decisive". It is to be observed that at 466 von Doussa J also stated: "Nevertheless the pleadings, including particulars stated therein, must be adequate to disclose the case which the opposing party must meet at trial, and to disclose a reasonable cause of action". In that case his Honour was prepared to accept a pleading of "particulars" as if they were statements of material fact so that the mere description of those statements as "particulars" was not regarded by him as decisive. However, see the maintenance of the distinction in H1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181 and Bruce v Odhams Press Ltd [1936] 1 KB 697. Here the applicants seek to have the opportunity of providing particulars where appropriate to avoid having the pleadings struck out.
Contract pleadings
So far as the application relates to matters pertaining to contract, it is supported by reference to both FCR O11 r16 and O20 r2.
Six paragraphs of the amended statement of claim are in issue. For the purpose of the application of FCR O11 r16 it is to be assumed that the allegation of facts made in the statement of claim could be made out at trial. However, the question is to be concluded by examination of the pleading itself and extraneous material is not admissible: Murray v Macquarie Bank & anor (Spender J, 4 March 1992, unreported).
In the case of the pleading of a document, the assumption that the facts pleaded will be made out is subject to the capacity of the Court to refer to the document concerned: Day v William Hill (Park Lane) LD [1949] 1 KB 632 at 639; Seaman (supra) par20.19.6.
Paragraph three pleads that in or about April 1994 the respondent entered negotiations with the applicants with a view to determining the terms of an agreement between them in respect of the respondent acting as the wholesaler of its milk and milk products to the applicants and the applicants selling and distributing the respondent's milk and milk products to the applicants' customers in a specified zone. This paragraph does not set out a material fact relevant to a cause of action in contract. It cannot be supported simply as background to
the contract or as illustrating a distinction between an invitation to treat and an offer.
Paragraph four commences by pleading:
"By letter dated 1 August 1994 (the "letter") the respondent made an offer to the applicants (the "offer") to enter into a distribution agreement in respect of the applicants selling and distributing the respondent's milk and milk products to the applicants' customers in the zone (the "distribution agreement") for award on certain terms and conditions which are then set out."
There are apparent textual difficulties with this pleading. The use of the words "to enter" are awkward but I do not consider that, read in the context of that part of the pleading as a whole, they negate the intention to plead an offer.
The more fundamental matter raised by this paragraph is whether in fact the letter is capable of being pleaded as an offer. The Court received a copy of the letter. It is written on the letterhead of the respondent and commences by stating that the respondent would like to take the opportunity to provide the recipient "with an update on the De-Regulation process and also a number of initiatives and benefits Masters Dairy will be providing to all MDL Contractors". It then advises that, as the recipients will be aware, the initial contract period was for twelve months but the respondents had decided to extend that to a three year period in the belief that it will provide a greater degree of security to all concerned. It continues:
"The revised contracts are now ready to sign in line with Master Dairy's contract guidelines, representatives from the Company will be phoning to arrange a suitable time for the signing of the contracts, alternatively you could ring either of the following... to arrange an appointment to complete the contract arrangements".
The letter then advises that the respondent had negotiated a number of benefits for all contracted Vendors and then specifies these and states "details of these will be passed on when the contracts are signed and in place with Contractors". After advising that the respondent would have a package to release to Contractors at a function in October by way of reward to Contractors, the letter provides that if the recipient had any queries on the above or De-Regulation in general, contact could be made with any of the members of a relevant committee.
It is apparent from the terms of that letter that it assumes prior communication with the respondent. The references to "the initial contract period", to "revised contracts" and to "contracts guidelines" support that inference as they would otherwise be incomprehensible to the recipient of the letter. In my opinion, the document could only be understood as one of successive communications from which a contract is said to have arisen: Gibson v Manchester City Council [1979] 1 WLR 294 at 297. The character of the letter is therefore such as to caution the Court that it may only be properly understood when the applicants have had the opportunity to have their case heard and to adduce relevant evidence.
For the respondent it is contended that the letter is incapable of being construed as an offer for the purposes of the law of contract and that no degree of liberty to direct that particulars be given could cure that position. The submission is that the letter is no more than an invitation to treat (Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 at 268 per Bowen LJ) and offers nothing lending itself to acceptance so as to constitute a binding contract at law. In Carlill (supra) at 268, Bowen LJ said:
"It is not like cases in which you offer to negotiate, or you issue advertisements that you have got a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract. Such advertisements are offers to negotiate - offers to receive offers - offers to chaffer...".
The distinction between an invitation to treat and an offer "is often hard to draw as it depends on the elusive criterion of intention": Treitel, The Law of Contract (8th ed) at 11. The question of whether a statement is an offer or an invitation to treat depends primarily on the intention with which it was made: ibid. Where a statement in its terms negatives the makers intention to be bound on acceptance by, for example, expressly providing that the maker is not to be bound by the other parties notification of assent but only when the maker has signed the document in which the statement is contained, it will not be an offer: Financings Ltd v Stimson [1962] 1 WLR 1184. For there to be an offer there must be a definite promise to be bound provided that certain specified terms are accepted. The offeror must be prepared to implement the promise if such is the wish of the other party: Cheshire and Fifoot's Law of Contract 6th ed (Aus) at 55 par111.
The first thing to be observed about the letter is that it does not contain a statement negativing the respondent's intention to be bound on acceptance.
Furthermore, there are features of the letter which are open to argument as constituting a definite promise to be bound by specified terms and as showing that the respondent was prepared to implement the promise if it was accepted by the applicants. That arguably emerges from the paragraph in which it is stated that "revised contracts are now ready to sign"; that these are "in line with Masters Dairy's contracts guidelines" and that the respondent will be phoning the recipient "to arrange a suitable time for the signing of contracts". Those statements are open to the argument that the letter constitutes a promise by the respondent to enter into a contract in the terms of the revised contracts.
In the Carbolic Smoke Ball case (supra), Lindley LJ at 261-2 considered that the statement there in issue was not "mere puff" because of the reference to the statement that "1000L is deposited with the Alliance Bank, showing our sincerity in the matter" He found that statement to be supportive of the making of a promise. In these proceedings there is reference in the letter to the fact that the respondent has negotiated a number of benefits "for all contracted Vendors" and the nature of the benefits are spelt out. It is further said that details of those benefits would be passed on "when the contracts are signed and in place with Contractors". In my opinion it is open to argument that this statement stands to be considered in the same light as that referred to in the Carbolic Smoke Ball case (supra) and likewise could illustrate the respondent's "sincerity in the matter".
It follows in my view that it cannot now be concluded, so as to foreclose all argument, that by the letter the respondent was merely initiating negotiations or that, however the facts be found, there is no basis for the legal conclusion contended for by the applicants. Depending on how the facts are found, the matter may be arguable. Paragraph 4 cannot therefore be struck out on the basis contended for.
Paragraph 5 pleads that a person acting on behalf of the respondent "confirmed the offer and invited the applicants to sign the distribution agreement". This is not a pleading of a material fact relevant to a cause of action based on contract.
Paragraph 6 pleads that on a certain date the first named applicant accepted the offer. Particulars are given that the acceptance was by way of oral statement to persons on behalf of the respondent. For the respondent it is said that paragraph 6 is embarrassing because it is unclear which offer and on what terms the offer was accepted. The "offer" is
defined in paragraph 4 and clearly is the offer which it is pleaded the respondent made to the applicants by the letter to enter into a distribution agreement in the terms pleaded. Paragraph 6 pleads an acceptance of that offer. In my view the respondent's argument in relationship to this paragraph is not made out.
Paragraph 6A pleads that by reason of the matters pleaded in paragraphs 3 to 6, an agreement was concluded between the applicants and the respondent "that, in consideration of each party undertaking to abide by the terms of the distribution agreement, the respondent would continue to supply the applicants with the respondent's milk and milk products for a further three years for the applicants to distribute and sell to the applicant's customers in accordance with the terms of that agreement". The paragraph is said to be embarrassing in that it does not make certain the basis upon which the applicants allege an agreement was concluded and gives insufficient specification of the terms of the alleged agreement. In my opinion, a reading of paragraphs 4 and 6 together with paragraph 6A shows that the contention for the respondent is not made out in respect of this paragraph.
It follows from the conclusions which I have previously reached in relation to the application of FCR O11 r16 that I do not consider it is the case that there is no reasonable cause of action disclosed so that, independently of the evidence which may be taken into account in relation to the summary judgment application under FCR O20 r2 (see Webster v Lampard (1993) 177 CLR 598) there would be no basis for summary judgment on the cause of action in contract.
For these reasons I consider the respondent's motion in relation to the pleadings concerning the cause of action in contract results only in paragraphs 3 and 5 being struck out.
Trade Practices pleadings
It is then necessary to turn to the matters arising in relation to Trade Practices. Paragraph 10 pleads that the circumstances referred to in paragraphs 4 and 5 gave rise to, and the applicants held, a reasonable expectation that the respondent would give the applicants notice of its intention to withdraw the offer and provide the applicants with an opportunity to accept the offer prior to its withdrawal. The matter must be considered on the basis paragraph 5 has been struck out and that, if paragraph 4 is made out, an offer will have been made. Paragraph 11 pleads that the respondent did not inform the applicants that it had withdrawn the offer. Paragraph 12 pleads that by reason of the respondent's conduct referred to in paragraphs 4, 5, 10 and 11, the respondent engaged in conduct which was misleading and deceptive and a contravention of s52 of the Trade Practices Act.
It is unnecessary to decide whether the "particulars" pleaded in paragraph 10 are to be taken as pleadings of material fact: it is enough for present purposes to read them with the pleadings to test whether at best a cause of action open at law is made out. The particulars plead the following: the respondent well knew that the system of wholesale and retail milk vending and licensing was being restructured; in or about April 1994 it was proposed that legislation implementing the re-structure would take effect from 1 July 1994; it in fact took effect on 19 February 1995; during the period from 1 July 1994 to 19 February 1995 the applicants were not certain what the terms of the legislation would be; they were therefore uncertain whether to accept the only practical alternative to entering into a distribution agreement. This was to make application to the Dairy Industry Authority of Western Australia ("DIAWA") pursuant to the Distribution Adjustment Assistance Scheme ("DAAS"). The effect of this would have been to make available financial assistance to them if they did not enter into a distribution agreement with the respondent. The terms of DAAS were not available until 19 February 1995 when the legislation took effect. The applicants were therefore in a position where they could not make an informed decision in respect of the only alternative until 19 February 1995. It is pleaded that these matters were well known to the respondent. It is elsewhere pleaded, in paragraph 8(a), that on 13 February 1995 Archibald, acting on behalf of the respondent, rejected the applicants' acceptance of the offer on the ground that the respondent had signed a distribution agreement with a third party in respect of the applicants' customers in the zone.
The submission for the applicants is that the pleading is not only that the mere silence of the respondent was misleading and deceptive but rather that the combination of the making of the offer, the "confirmation" of it, the particulars pleaded in paragraph 10 and the failure of the respondent to inform the applicants of the withdrawal or intended withdrawal of the offer constitutes misleading and deceptive conduct.
It is not in dispute between the parties that where a party has failed to disclose a relevant fact the failure may be misleading or deceptive if the circumstances are such as to give rise to the reasonable expectation that, if the fact existed, it would be disclosed: Demagogue Pty Ltd v Rameski (1992) 39 FCR 31 at 32 and 41; Warner v Elders Rural Finance Ltd (1993) 41 FCR 399 at 401-2. It is, however, unnecessary to further traverse the law relating to the circumstances in which silence can constitute misleading and deceptive conduct pursuant to s52 of the Trade Practices Act.
It has been established since Payne v Cave (1789) 3 Term Rep 148 (100 ER 502); [1775-1802] All ER Rep 492, that revocation is possible and effective at any time before acceptance: up to this moment no legal obligation exists nor, as the law stands, is it relevant that the offeror has promised to keep the offer open for a given period: Cheshire and Fifoot's Law of Contracts (supra) at 88, par147, and Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674 at 678 per Griffiths CJ.
Once it is appreciated that the heart of the conduct to which the pleading relates involves the exercise of a right at law for which no notice is required, the assertion that the exercise of that right without notice is misleading and deceptive lacks its principal foundation. I am therefore unable to see how the matters pleaded could give rise to a reasonable expectation that the respondent would not exercise its legal right to withdraw the offer at any time without notice of intention to the applicants. In order for any such expectation to be "reasonable" there would have to be facts pleaded which negated the effect of the law to which I have referred which entitles an offeror to withdraw an offer at any time. Because of that legal entitlement of an offeror, the only expectation which could be reasonable would be that which bound an offeror to keep an offer open - namely an option. It is patent that the facts pleaded come nowhere near supporting such a proposition.
The difficulty which I therefore have with the applicants' submission, apart from the terms of the particular pleadings to which it is not necessary to go in detail, is that, as it cannot be in dispute there is a legal right on an offeror to withdraw an offer at any time even in the face of a promise to keep it open, the exercise of that right, which is at the core of the conduct intended to be pleaded, could not be misleading and deceptive as it has the character of the exercise of a right at law.
In my opinion the pleadings relating to misleading and deceptive conduct pursuant to s52 of the Trade Practices Act are wholly embarrassing and should be struck out.
For these reasons I would allow the respondent's motion to the extent of striking out pars3 and 5, and also pars10, 11, 12 and 13.
I certify that this and the preceding 11 pages are a true copy of the Reasons for Judgment of his Honour Justice R D Nicholson.
Associate:
Date:
APPEARANCES
Counsel for the Applicant: Mr G Chitty
Solicitors for the Applicant: Grant Chitty
Counsel for the Respondent: Mr S K Dharmananda
Solicitors for the Respondent: Corrs Chambers Westgarth
Date of Hearing: 23 June 1995
Date of Judgment: 10 July 1995
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