Quebani Pty Ltd v McDonald's Australia Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

COMMERCIAL LIST

S ECI 2021 01395

QUEBANI PTY LTD (ACN 007 333 164)	First Plaintiff
and
ROBERT GRAEME VIGORS	Second Plaintiff
v
McDONALD’S AUSTRALIA LTD (ABN 43 008 496 928)	Defendant

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JUDGE:	ATTIWILL J
WHERE HELD:	Melbourne
DATE OF HEARING:	13 September 2021
DATE OF JUDGMENT:	21 October 2021
CASE MAY BE CITED AS:	Quebani Pty Ltd & Anor v McDonald’s Australia Ltd
MEDIUM NEUTRAL CITATION:	[2021] VSC 680

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PRACTICE AND PROCEDURE – Supreme Court (General Civil Procedure) Rules2015 (Vic) r 23.02 – Civil Procedure Act 2010 (Vic) ss 61, 63, 64, 65 – Pleadings – Strike out application by plaintiffs – Summary judgment application by plaintiffs – Applicable principles – Pleadings in the defence may embarrass the fair trial of the proceeding – Strike out applications allowed in part.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J Levine	Matrix Legal
For the Defendant	Ms K Foley	Norton Rose Fulbright Australia

HIS HONOUR:

INTRODUCTION

The plaintiffs applied by amended summons filed 17 August 2021 for the following orders:

(a) paragraphs 5(s), 5(t), 5A–5E, 5H, 9, 10, 28(s), 28(t), 31, 32 and 33 of the defence be struck out pursuant to r 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’);

(b) alternatively, paragraphs 5(s), 5(t), 5A–5E, 5H, 9, 10, 28(s), 28(t), 31, 32 and 33 of the defence be summarily dismissed pursuant to s 62[1] of the Civil Procedure Act 2010 (Vic) (‘Civil Procedure Act’); and

(c) the defendant pay the plaintiffs’ costs of and incidental to the applications.

[1] At the hearing of the application, counsel for the plaintiffs clarified that the application is made

pursuant to s 61 of the Civil Procedure Act: Transcript of Proceeding, Quebani Pty Ltd & Anor v McDonald’s Australia Ltd (Supreme Court of Victoria, S ECI 2021 01395, Attiwill J, 13 September 2021) 2.1–3 (Mr Levine) (‘Transcript of Proceeding’).

The plaintiffs relied upon written submissions filed 18 August 2021 and 30 August 2021 and an affidavit of Mr Mark Stanarevic, solicitor for the plaintiffs, affirmed 9 August 2021.[2] The defendant relied upon written submissions filed 25 August 2021. Counsel for the parties made oral submissions at the hearing of the applications.
[2]The affidavit is inadmissible on the application made pursuant to r 23.02 of the Rules: r 23.04(2).
At the commencement of the hearing, upon questioning by the Court, the plaintiffs made their applications with respect to the following paragraphs of the defence: 5(s), 5(t), 5A–5E and 5H, 8(c), 9 (excluding the denial), 17(a) (insofar as it makes reference to paragraphs 5A–5E and 5H), 28(s), 28(t), 31(c), 32 (excluding the denial), 40(a) (insofar as it makes reference to paragraphs 5A–5E and 5H) and other paragraphs insofar they refer to and repeat these paragraphs.[3] No objection was taken by the defendant to this course.[4]
[3] Paragraph 8 is referred and repeated in paragraphs 11, 13, 19, 22 and 24. Paragraph 9 is referred to and
repeated in paragraphs 10 and 12. Paragraph 31 is referred to and repeated in paragraphs 34, 36, 42, 45
and 47. Paragraph 32 is referred to and repeated in paragraphs 33 and 35.
[4]Transcript of Proceeding (n 1) 12.14–6 (Ms Foley).
For the reasons that follow:

(a) paragraphs 5(s), 5(t), 5H, 17(a) (insofar as it makes reference to paragraphs 5A–5E and 5H), 28(s), 28(t) and 40(a) (insofar as it makes reference to paragraphs 5A–5E and 5H) of the defence will be struck out pursuant to r 23.02 of the Rules;

(b) the defendant will be given leave to file and serve an amended defence in accordance with these reasons; and

(c) the plaintiffs’ applications will otherwise be dismissed.

THE PLEADINGS
The statement of claim

The plaintiffs filed a writ on 3 May 2021 and a statement of claim on 17 June 2021 (‘statement of claim’). The statement of claim commences with introductory matters concerning incorporation, the relationship between the first and second plaintiffs and the defendant’s ownership of premises in Deakin Avenue, Mildura and Fifteenth Street, Mildura.[5]
[5]Statement of claim, [1]–[3]. The defendant admits these matters: defence, [1]–[3].
The statement of claim pleads matters with respect to a McDonald’s restaurant at the premises in Deakin Avenue, Mildura (‘Deakin McDonald’s restaurant’)[6] and then matters with respect to a McDonald’s restaurant at the premises in Fifteenth Street, Mildura (‘Irymple McDonald’s restaurant’)[7] (together, ‘the McDonald’s restaurants’). There is no substantive difference in the matters pleaded in the statement of claim with respect to the Deakin McDonald’s restaurant and the Irymple McDonald’s restaurant. In brief, the plaintiffs allege that:
[6]Statement of claim, [4]–[26].
[7]Ibid [27]–[49].

(a) The first plaintiff and the defendant entered into agreements by which the defendant conferred upon the first plaintiff the right, licence and privilege to adopt and use the McDonald’s system in the McDonald’s restaurants with the obligations of the first plaintiff being guaranteed by the second plaintiff.[8] The plaintiffs refer to these agreements collectively as ‘franchise agreements’ constituted by licence agreements and leases (‘the McDonald’s Franchise Agreements’).[9]
[8]Ibid [4], [27].
[9]Ibid.

(b) On 15 December 2020,[10] the defendant, without any notice in writing or otherwise, took operational control of the McDonald’s restaurants and/or purported to terminate the McDonald’s Franchise Agreements.[11]
[10]The date ’15 December 2020’ is an error and should be a reference to ’15 December 2019’.
[11]Ibid [6], [29].

(c) The defendant breached the terms of the McDonald’s Franchise Agreements by taking operational control of the McDonald’s restaurants and/or purporting to terminate the McDonald’s Franchise Agreements[12] and the first plaintiff suffered loss and damage as a result.[13] The plaintiffs give particulars of the loss and damage as including, among other things:
[12]Ibid [7], [30].
[13]Ibid [8], [31].

(i) the market value of the McDonald’s Franchise Agreements less the sale price of the franchises (which sale price was determined by the defendant);[14] and
[14]Ibid particulars to [8], [31].

(ii) the profits that the first plaintiff would have earnt from the date of the sale of the franchises (which was determined by the defendant) until the date that the first plaintiff would have agreed to sell the franchises.[15]
[15]Ibid.

(d) Further and/or alternatively, on 17 December 2019, the defendant demanded the first plaintiff sell the McDonald’s restaurants to a Mr Leigh Scott Colbert (and/or his nominee) upon the terms determined by the defendant.[16] The defendant breached the McDonald’s Franchise Agreements by making the demand which included a threat to revoke the first plaintiff’s right, licence and privilege to adopt and use the McDonald’s system in the McDonald’s restaurants unless the first plaintiff sold the restaurants to Mr Colbert (and/or his nominee)[17] and the first plaintiff suffered loss and damage as a result.[18]
[16]Ibid [9], [32].
[17]Ibid [10], [33].
[18]Ibid [11], [34]. The particulars of loss and damage repeat the particulars to [8] and [31].

(e) Further and/or alternatively, the defendant repudiated the McDonald’s Franchise Agreements in ‘undertaking the conduct’ alleged in paragraphs 6 and 29 of the statement of claim (which included taking operational control on 15 December 2019) and paragraphs 9 and 32 of the statement of claim (which included demanding on 17 December 2019 that the first plaintiff sell the McDonald’s restaurants)[19] and the first plaintiff suffered loss and damage as a result.[20]
[19]Ibid [12], [35].
[20]Ibid [13], [36]. The particulars of loss and damage repeat the particulars to [8] and [31].

(f) On or about 20 January 2020, the first plaintiff transferred the McDonald’s restaurants to the nominee of Mr Colbert, namely the Weightman Group Pty Ltd.[21] In particulars, the plaintiffs state that the plaintiffs and the defendant signed a ‘Deed of Surrender and Release’ concerning each of the McDonald’s restaurants.[22]
[21]Ibid [14], [37].
[22] Ibid particulars to [14], [37]. The terms of the Deeds of Surrender and Release are pleaded: at [15],
[38].

(g) Further and/or alternatively, the defendant’s conduct was unconscionable[23] and that as a result, the plaintiffs suffered loss and damage and were also subject to detriment that included certain release clauses in the Deeds of Surrender and Release.[24] The impugned conduct includes, among other things, the defendant taking operational control of the McDonald’s restaurants on 15 December 2019.[25]
[23] Ibid [16]–[18], [20]–[22], [39]–[41], [43]–[45]. These paragraphs plead a number of ways in which it is
[24] Ibid [19], [22], [42], [45]. The particulars of the loss and damage include the particulars to [8] and [31].
[25]Ibid [17(a)], [40(a)].

(h) Further and/or alternatively, the defendant placed the plaintiffs under economic duress[26] and as a result, they suffered loss and damage and were also subject to detriment that included certain release clauses in the Deeds of Surrender and Release.[27]

(i) Further and/or alternatively, certain release clauses in the Deeds of Surrender and Release do not release any claims made in the statement of claim.[28]

(j) Further and/or alternatively, certain release clauses in the Deeds of Surrender and Release breach the Franchising Code of Conduct.[29]

[26] Ibid [23], [46].

[27]Ibid [24], [47]. The particulars of loss and damage include the particulars to [8] and [31].

[28]Ibid [25], [48].

[29]Ibid [26], [49].

In their prayer for relief, the plaintiffs claim damages, an order and/or a declaration that the release clauses be set aside, are void and/or unenforceable, interest and costs.[30]
[30]Ibid 21.

The defence

The defendant filed its defence on 19 July 2021. In brief, the defendant alleges that:

(a) The right, licence, and privilege to adopt and use the McDonald’s system was subject to the terms, covenants and conditions contained in the licence agreements (‘McDonald’s Licence Agreements’).[31] It admits and denies various terms of those McDonald’s Licence Agreements and the leases and pleads further terms.[32]
[31]Defence, [4], [27].
[32]Ibid [5], [28].

(b) Clause 6.05 of the McDonald’s Licence Agreements imposed an obligation on the second plaintiff to keep free from conflicting enterprises or any other activities which would be detrimental to or interfere with the business of the McDonald’s restaurants,[33] and a breach of cl 6.05 is a material breach of the McDonald’s Licence Agreements.[34]
[33]Ibid [5(s)], [28(s)].
[34]Ibid [5(t)], [28(t)].

(c) During the period from late 2018 to on or about 13 December 2019, the following events took place:

(iii) from at least late 2018, the second plaintiff had been attempting to sell the McDonald’s restaurants;[35]
[35]Ibid [5A].

(iv) on or about 17 March 2019, a Mr Leigh Colbert made an offer to purchase the McDonald’s restaurants for $17.6 million;[36]
[36]Ibid [5B].

(v) on or about 11 September 2019, the second plaintiff made a counteroffer to Mr Colbert to sell the McDonald’s restaurants for $21 million;[37]
[37]Ibid [5C].

(vi) on or about 11 December 2019, a binding Heads of Agreement was signed by the second plaintiff and Mr Colbert for the sale of the McDonald’s restaurants, with a settlement date of 31 March 2020;[38]
[38]Ibid [5D].

(vii) prior to executing the Heads of Agreement, the second plaintiff and Mr Colbert negotiated the sale price for the Deakin McDonald’s restaurant in the sum of $10,500,000 plus stock and for the Irymple McDonald’s restaurant in the sum of $8,500,000 plus stock;[39]
[39]Ibid [5E].

(collectively, ‘the Sale Events’)

(viii) on or about 13 December 2019, the second plaintiff and his partner Karen Ridge were involved in an incident in Mildura, during which the second plaintiff and Ms Ridge, while standing outside the family home of their neighbours, questioned the Aboriginality of a member of that family (ie a Mr Knight) and Ms Ridge tried to tear down an Aboriginal flag outside the family’s home while the second plaintiff did nothing to stop her and the second plaintiff and Ms Ridge taunted Mr Knight focusing on his Aboriginality (‘Incident’).[40] Video footage of the Incident was posted online and published in mainstream media and widely across social media platforms;[41] and
[40]Ibid [5F].
[41]Ibid [5G].

(ix)the second plaintiff’s actions during the Incident amounted to a breach of cl 6.05 of the McDonald’s Licence Agreements in that his actions were activities which were and would be detrimental to, or would interfere with, the business of the McDonald’s restaurants (‘Incident Breaches’).[42]
[42]Ibid [5H].

(d) On 15 December 2019, the defendant took operational control of the McDonald’s restaurants.[43] The decision to take operational control of the McDonald’s restaurants was mutually agreed between the defendant and the second plaintiff.[44] The defendant alleges that the option of taking operational control was raised by the defendant with the second plaintiff having regard to various matters, including concerns for the safety of crew and customers at the McDonald’s restaurants arising from the Incident and the public response to the Incident; the fact that the Incident was not consistent with the defendant’s values; and the fact that the second plaintiff was already in the process of selling the McDonald’s restaurants.[45] It denies that it took operational control of the McDonald’s restaurants without any notice.[46]
[43]Ibid [6(a)], [29(a)].
[44]Ibid [6(b)], [29(b)].
[45]Ibid [6(c)], [29(c)].
[46]Ibid [6], [29].

(e) From the date the defendant took operational control of the McDonald’s restaurants to 20 January 2020, the second plaintiff continued to receive the McDonald’s restaurants’ cash flow.[47]
[47]Ibid [6A], [29A].

(f) It denies that it breached the McDonald’s Franchise Agreements by taking operational control of the McDonald’s restaurants on 15 December 2019 and that the plaintiffs suffered loss and damage as a result of the alleged breaches.[48] It alleges that the second plaintiff ‘freely negotiated the sale price’ of the McDonald’s restaurants with Mr Colbert prior to the date of the alleged breaches of the agreements.[49]
[48]Ibid [7]–[8], [30]–[31].
[49]Ibid [8(c)], [31(c)].

(g) It denies that on or about 17 December 2019, it demanded that the first plaintiff sell the McDonald’s restaurants to Mr Colbert and/or his nominee upon terms determined by the defendant.[50] As a result, it denies that it breached the McDonald’s Franchise Agreements by making such a demand and that the first plaintiff suffered loss and damage.[51] It alleges that the second plaintiff had, prior to 17 December 2019, ‘decided to sell’ the McDonald’s restaurants to Mr Colbert and had entered into the Heads of Agreement.[52]
[50]Ibid [9], [32].
[51]Ibid [10]–[11], [33]–[34].
[52]Ibid [9], [32].

(h) It denies that it repudiated the McDonald’s Franchise Agreements in ‘undertaking the conduct’ alleged in paragraphs 6 and 29 of the statement of claim (ie taking operational control on 15 December 2019) and paragraphs 9 and 32 of the statement of claim (ie demanding on 17 December 2019 that the first plaintiff sell the McDonald’s restaurants)[53] and that the first plaintiff suffered loss and damage as a result.[54]
[53]Ibid [12], [35].
[54]Ibid [13], [36].

(i) It admits that on or about 20 January 2020, the first plaintiff transferred the McDonald’s restaurants to the nominee of Mr Colbert, namely the Weightman Group Pty Ltd.[55]
[55]Ibid [14], [37].

(j) It admits various terms of the Deeds of Surrender and Release signed by the plaintiffs and the defendant concerning the McDonald’s restaurants and pleads further terms.[56]
[56]Ibid [15], [38].

(k) It denies that it acted unconscionably,[57] or took unconscientious advantage of the plaintiffs,[58] causing the plaintiffs to suffer loss and damage and be subject to a detriment.[59] It says that it took operational control of the McDonald’s restaurants in the circumstances, among others, of the Sale Events, the Incident and the Incident Breaches.[60] It also says that the second plaintiff is an experienced businessperson who has, among other things, been a director of about 17 companies[61] and also that the plaintiffs were represented by lawyers in their dealings with the defendant.[62] It denies that it placed the plaintiffs under economic duress or that this conduct caused the plaintiffs to suffer loss and damage and be subject to a detriment.[63]
[57]Ibid [16]–[17], [20]–[22], [39]–[40], [43]–[45].
[58]Ibid [18], [41].
[59]Ibid [19], [22], [42], [45].
[60]Ibid [17(a)], [40(a)].
[61]Ibid [17(c)], [40(c)].
[62]Ibid [18(c)], [41(c)].
[63]Ibid [23]–[24], [46]–[47].

(l) It denies that certain releases clauses in the Deeds of Surrender and Release do not release any claims made in the statement of claim.[64]

(m) It denies that the release clauses breach the Franchising Code of Conduct and says further that the release clauses are not contained in the franchise agreements.[65]

(n) It alleges that various allegations by the plaintiffs are inadequately pleaded and particularised and liable to be struck out.[66]

[64]Ibid [25], [48].

[65]Ibid [26], [49].

[66]Ibid [18(a)], [21(a)], [23(a)], [25], [41(a)], [44(a)], [46(a)], [48].

APPLICABLE LAW
Striking out a pleading and r 23.02 of the Rules

Rule 23.02 provides:
Where an indorsement of claim on a writ or originating motion or a pleading or any part of an indorsement of claim or pleading—
(a)       does not disclose a cause of action or defence;
(b)       is scandalous, frivolous or vexatious;
(c)may prejudice, embarrass or delay the fair trial of the proceeding; or
(d)      is otherwise an abuse of the process of the Court—
the Court may order that the whole or part of the indorsement or pleading be struck out or amended.
In Meckiff v Simpson[67] the Full Court of this Court said of a previous rule of the Court that authorised the Court to strike out pleadings:
It is important at the outset to stress that the order appealed against was made on an application under O. XIX, r. 27, which authorizes a judge to strike out any matter in any pleading which may tend to prejudice, embarrass or delay the fair trial of the action. As is shown by numerous authorities on this rule, which takes its place in an order dealing with pleadings generally, matter in a pleading will be struck out under this rule only where there is some defect in the pleading attacked, e.g. where the pleading is unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him. The rule is one to ensure compliance with the rules of pleading and nothing else.
[67][1968] VR 69, 70 (Adam J for Winneke CJ, Adam and Gowans JJ).
In Wheelahan & Anor v City of Casey & Ors (No 12)[68] John Dixon J summarised the principles to be applied:
[68] [2013] VSC 316, [25] (‘Wheelahan’) (citations omitted). Wheelahan was referred to with approval by the
Court of Appeal in Uber Australia Pty Ltd v Andrianakis (2020) 61 VR 580, 599–600 [50] (Niall, Hargrave and Emerton JJA) (‘Uber’).
Casey contended that three recent decisions of this court, SMEC Australia Pty Ltd & Anor v McConnell Dowell Constructors (Aust) Pty Ltd & Ors (No 2), Environinvest Ltd v Pescott & Ors; Environinvest Ltd v Blackburne Pty Ltd & Ors, and Clarke & Ors v Great Southern Finance Pty Ltd & Ors identify the relevant principles that govern its application. Frankston took no issue in written or oral submissions with Casey’s contention as to the applicable principles. Relevantly:
(a)Order 13 of the Rules set out the relevant requirements of a sufficient pleading, while r 23.02 provides the grounds on which the sufficiency of a pleading may be impugned;
(b)the function of a pleading in civil proceedings is to alert the other party to the case they need to meet (and hence satisfy basic requirements of procedural fairness) and further, to define the precise issues for determination so that the court may conduct a fair trial;
(c)the cardinal rule is that a pleading must state all the material facts to establish a reasonable cause of action (or defence). The expression ‘material facts’ is not synonymous with providing all the circumstances. Material facts are only those relied on to establish the essential elements of the cause of action;
(d)as a corollary, the pleading must be presented in an intelligible form – it must not be vague or ambiguous or inconsistent. Thus a pleading is ‘embarrassing’ within the meaning of r 23.02 when it places the opposite party in the position of not knowing what is alleged;
(e)the fact that a proceeding arises from a complex factual matrix does not detract from the pleading requirements. To the contrary, the requirements become more poignant;
(f)pleadings, when well-drawn, serve the overarching purpose of the Civil Procedure Act 2010 (Vic);
(g)a pleading which contains unnecessary or irrelevant allegations may be embarrassing – for example, if it contains a body of material by way of background factual matrix which does not lead to the making out of any defined cause of action (or defence), particularly if the offending paragraphs tend to obfuscate the issues to be determined;
(h)it is not sufficient to simply plead a conclusion from unstated facts. In this instance, the pleading is embarrassing;
(i)every pleading must contain in a summary form a statement of all material facts upon which the party relies, but not the evidence by which the facts are to be proved (r 13.02(1)(a));
(j)the effect of any document or purport of any conversation, if material, must be pleaded as briefly as possible, and the precise words of the document or the conversation must not be pleaded unless the words are themselves material (r 13.03);
(k)particulars are not intended to fill gaps in a deficient pleading. Rather, they are intended to meet a separate requirement – namely, to fill in the picture of the plaintiff’s cause of action (or defendant’s defence) with information sufficiently detailed to put the other party on guard as to the case that must be met. An object and function of particulars is to limit the generality of a pleading and thereby limit and define the issues to be tried;
(l)a pleading should not be so prolix that the opposite party is unable to ascertain with precision the causes of action and the material facts that are alleged against it;
(m)extensive cross-referencing of facts in a pleading may render parts of the pleading unintelligible;
(n) in an application under r 23.02, the court will only look at the pleading itself and the documents referred to in the pleading;
(o)the power to strike out a pleading is discretionary. As a rule, the power will be exercised only when there is some substantial objection to the pleading complained of or some real embarrassment is shown; and
(p)if the objectionable part of the pleading is so intertwined with the rest of the pleading so as to make separation difficult, the appropriate course is to strike out the whole of the pleading.

In Babcock & Brown DIF III Global Co-Investment Fund, LP v Babcock & Brown International Pty Ltd (No 2),[69] Hargrave J referred to the principles summarised by John Dixon J in Wheelahan and added the following observation:
To this summary, I would add that the Court should consider the pleading under a challenge as a whole and adopt a practical case management approach to pleading objections, rather than accepting technical objections when the true nature of the case to be met is clear from reading the pleading as a whole and there is no embarrassment to filing a responsive pleading. Such an approach accords with the discretionary nature of the power to strike out and with the overarching purpose under the Civil Procedure Act. However, in cases alleging dishonesty or fraud, precise pleadings with full particulars are required.
[69][2017] VSC 556, [15] (‘Babcock’). Babcock was referred to with approval in Uber (n 68) 600–1 [52]–[53].
In Babcock,[70] Hargrave J also said:
Before considering these issues, it is necessary to stand back and consider the statement of claim and the third party notice as a whole and, in that light, ask:
Does the plaintiffs’ case previously advanced against Ms Talintyre, as adopted and expanded by the RBS defendants in the third party notice, give Ms Talintyre clear notice of the case she needs to meet at trial?
[70]Babcock (n 69) [17].
In CA & CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd,[71] the Court of Appeal said:
[71](2017) 55 VR 62, 71–3 [21]–[28] (Redlich, Tate and Ferguson JJA) (citations omitted).
21Pleadings are important. Primarily, they are used to help the parties define the real issues in dispute. But it is prudent to bear in mind that they are procedural tools only.
22On a strike out application, it is usually assumed that the matters pleaded can be established.
23The Agents relied upon cases such as General Steel Industries Inc v Commissioner for Railways (NSW) as authority for the proposition that there is a high threshold to be overcome if a pleading is to be struck out. In that case, Barwick CJ observed that a plaintiff should not be denied the right to prosecute a claim unless it was clearly demonstrated that there was no cause of action. The Chief Justice referred to various expressions that had been used to describe the test for disposing of a proceeding summarily — phrases such as: ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ‘discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; ‘be manifest that to allow them (the pleadings) to stand would involve useless expense.’
24Care should be exercised in applying such terms now. The case of General Steel and like authorities pre-date the Civil Procedure Act. That legislation introduced a test of ‘no real prospect of success’ for when summary judgment may be given. A pleading that would not survive a summary judgment application will be struck out, for to allow it to go forward would be futile. According to Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd, a prospect which is not ‘real’ is ‘fanciful’; although the ‘no real prospect of success’ test in s 63(1) of the Civil Procedure Act is more liberal than the common law test of ‘hopeless’ or ‘bound to fail’, there may not be much difference between them in practice; and, properly understood, a real question to be tried is one which realistically might result in the Agents to an application for summary judgment succeeding in the proceeding. The correct test to apply in the present case is whether the amendments raise a claim that has no real prospect of success, in the sense of being fanciful.
25It is still the case, however, that the effect of striking out a statement of claim if no right to replead is granted brings the proceeding to a peremptory end. In this regard, the older authorities provide some salutary warnings. As Dixon J said in Dey v Victorian Railways Commissioners:
A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.
26In the same case, Latham CJ took what might be viewed as a slightly more robust approach. His Honour said:
If, as a result of argument, the court reaches a clear decision which could not be altered by any evidence which could be adduced at the trial, then it is proper in the interests of both parties to dismiss the action instead of allowing the parties to incur completely useless expense.
27Picking up on his Honour’s reference to evidence, the effect that it may have at trial cannot be underestimated. Experience tells that evidence at trial can shape the case in ways that have not been anticipated despite the best efforts of litigants and their legal advisers. As Whelan JA observed in Mutton v Baker:
Even if it is said that an issue is purely a question of law, the court should not strike out a claim on this basis if it is conceivable that some factual matter could emerge at trial which might alter the analysis.
28In General Steel Barwick CJ referred to the passage from Dixon J’s judgment in Dey that we have set out above. The Chief Justice then stated:
Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.
Summary judgment and s 61 of the Civil Procedure Act
Section 61 of the Civil Procedure Act provides that a plaintiff may apply to the court for summary judgment in the proceeding on the ground that a defendant’s defence or part of that defence has no real prospect of success. Section 63 of the Civil Procedure Act relevantly provides that, subject to s 64, a court may give summary judgment if satisfied that a defence or part of the defence has no real prospect of success. Section 64 of the Civil Procedure Act provides that:
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because –
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.
Section 65 of the Civil Procedure Act provides that the powers of a court under pt 4.4 (including ss 61, 63 and 64 of the Civil Procedure Act) are in addition to, and do not derogate from, any powers a court has under rules of court in relation to summary disposal of any civil proceeding.
An application by a plaintiff for summary judgment under s 61 of the Civil Procedure Act must be made in accordance with ord 22 pt 2 of the Rules.[72] Rule 22.04(1) sets out the material to be provided by a plaintiff when making the application.
[72]Rules r 22.03.
In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd,[73] the Court of Appeal set out the test to be applied when determining whether to give summary judgment in a civil proceeding pursuant to s 63 of the Civil Procedure Act as follows:[74]
Upon the present state of authority:
(a)the test for summary judgement under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;
(b)the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in General Steel;
(c)it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d)at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
PLAINTIFFS’ APPLICATIONS: SALE PARAGRAPHS
[73](2013) 42 VR 27 (‘Lysaght’).
[74]Lysaght (n 73) 40 [35] (Warren CJ and Nettle JA). Neave JA agreed with the answer given by Warren CJ and Nettle JA at 40 [36] and further stated at 42 [41]: ‘Nevertheless I am concerned that undue emphasis on the caution with which a court must exercise the power of summary dismissal runs the risk of reinforcing the historical approach to summary dismissal and may result in the legislative liberalisation of the test in s 63 having little impact in practice.’
Sale Paragraphs
I will refer to paragraphs 5A–5E, 8(c), 9 (excluding the denial), 17(a) (insofar as it makes reference to paragraphs 5A–5E), 31(c), 32 (excluding the denial) and 40(a) (insofar as it makes reference to paragraphs 5A–5E) collectively as the ‘Sale Paragraphs’. In summary, by the Sale Paragraphs, the defendant:

(a) alleges the Sale Events;[75]
[75]Defence, [5A]–[5E].

(b) alleges that the second plaintiff ‘freely negotiated the sale price’ of the McDonald’s restaurants with Mr Colbert prior to the defendant’s alleged breaches of the agreements, [76] being part of its denial that the plaintiffs suffered loss and damage;[77]

(c) alleges that the second plaintiff had, prior to 17 December 2019, decided to sell the McDonald’s restaurants to Mr Colbert and had entered into the Heads of Agreement, being part of its denial that it demanded that the first plaintiff sell the McDonald’s restaurants to Mr Colbert on the terms ‘determined’ by the defendant;[78] and

(d) admits that it took operational control of the McDonald’s restaurants and did so in the circumstances of, among other things, the Sale Events,[79] being part of its denial that its conduct was unconscionable and that it took unconscientious advantage of the plaintiffs.[80]

[76]Ibid [8(c)], [31(c)].

[77]Ibid [8(b)], [31(b)].

[78]Ibid [9], [32].

[79]Ibid [17(a)], [40(a)].

[80]Ibid [17(b)], [18(d)], [40(b)], [41(d)].

Plaintiffs’ submissions

The plaintiffs submitted that the Sale Paragraphs should be struck out or alternatively summarily dismissed. Mr Levine submitted that the ‘primary submission is in relation to the strike out’[81] and the ‘summary judgment application is taken on the same basis’.[82]
[81]Transcript of Proceeding (n 1) 10.7–8 (Mr Levine).
[82]Ibid 10.16–7 (Mr Levine).
The plaintiffs submitted that it is impossible to know what is alleged by the defendant in the Sale Paragraphs. The plaintiffs also submitted that the allegations in these paragraphs are embarrassing.[83]
[83]Ibid 14.5–10 (Mr Levine).
The plaintiffs submitted that paragraphs 5A–5E (which it also referred to as ‘the HOA allegations’[84]) are not a defence to the plaintiffs’ allegations that the defendant breached the McDonald’s Franchise Agreements and that the defendant forced the plaintiffs to enter into agreements to sell their franchises to Mr Colbert and to enter into the Deeds of Surrender and Release.[85] Mr Levine submitted that there is no basis in law for pleading the Heads of Agreement.[86] Mr Levine submitted that it is irrelevant whether there was an agreement between the second plaintiff and Mr Colbert prior to the alleged breaches of the franchise agreements.[87]
[84]See, eg, plaintiffs’ reply submissions filed 30 August 2021, [1].
[85]Plaintiffs’ submissions filed 18 August 2021, [12].
[86]Transcript of Proceeding (n 1) 33.29–30 (Mr Levine).
[87]Ibid 26.25–8 (Mr Levine).
The plaintiffs submitted that the defendant is seeking to enforce the Heads of Agreement and cannot do so as:

(a) the defendant has no legal or equitable rights or interest therein;

(b) the defendant is not a party to the Heads of Agreement;

(c) there is no consideration moving between the defendant and the first plaintiff; and

(d) the plaintiffs, the defendant and Mr Colbert entered into the Deeds of Surrender and Release, which had the effect of discharging all of the rights of the plaintiffs and Mr Colbert in the Heads of Agreement.[88]

[88]Plaintiffs’ submissions filed 18 August 2021, [13]–[16].

The plaintiffs submitted that the defendant cannot ‘rely’ upon the Heads of Agreement as the defendant is not a party to the Heads of Agreement.[89] The plaintiffs submitted there is no distinction between suing upon the Heads of Agreement or raising it as a defence as, in effect, it is relying upon it.[90]
[89]Plaintiffs’ reply submissions filed 30 August 2021, [2].
[90]Transcript of Proceeding (n 1) 72.24–5, 74.3–6 (Mr Levine).
The plaintiffs submitted that the defendant’s pleas cannot form the basis of declaratory relief as:

(a) the issues have no utility, are redundant, have no real practical use and have no foreseeable or real consequences;

(b) the defendant does not have any legally enforceable rights under the Heads of Agreement and there is no basis to make a declaratory judgment as there is no controversy in relation to the Heads of Agreement being replaced by and thereby impliedly being discharged by the Deeds of Surrender and Release;

(c) they deal with a hypothetical question which will require unnecessary and considerable time and expense, and relate to circumstances which have not occurred and will never happen and which could be regarded as fictitious or academic as opposed to a concrete situation, attached to specific facts. The Heads of Agreement has been discharged and any legal rights flowing from it are irrelevant and there is no controversy between the parties that the Heads of Agreement has been discharged; and

(d) there is no justiciable controversy or legal controversy in relation to the Heads of Agreement and the subject matter of it has become wholly academic so that there is no live controversy between the parties.[91]

[91]Plaintiffs’ submissions filed 18 August 2021, [17(a)]–[17(c)]. See also the plaintiffs’ reply submissions filed 30 August 2021, [2].

The plaintiffs further submitted that paragraphs 5A–5E of the defence:

(a) are not relevant, including in relation to whether the defendant made a demand on 17 December 2019, which is a factual issue unrelated to the Heads of Agreement that predates the demand and relates to the plaintiffs’ dealings with Mr Colbert;[92]

(b) are, at best, evidence upon which the defendant intends to rely and evidence should not be pleaded;[93] and

(c) are not relevant to the alleged loss and damage suffered by the plaintiffs.[94]

[92]Plaintiffs’ reply submissions filed 30 August 2021, [4]–[5].

[93]Ibid [4].

[94]Ibid [7].

The plaintiffs submitted that the defendant has an obligation to plead the material facts as to the manner in which paragraphs 5A–5E are a material fact (or at the least relevant to a material fact) and has not done so.[95] Mr Levine submitted that it is not sufficient if the allegations are ‘relevant’ as they must be ‘material’.[96]
[95]Ibid [1], [3], [6], [8]–[9].
[96]Transcript of Proceeding (n 1) 14.13–9 (Mr Levine).
The plaintiffs also submitted that there is no link between the allegation in paragraph 8 of the defence of a freely negotiated price and the allegation in paragraph 9 of the defence concerning the Heads of Agreement. The plaintiffs submitted that paragraph 8(c) and 9 of the defence must be read together. The plaintiffs submitted that the Heads of Agreement and the subsequent sale agreement cannot be regarded as the same because there were other benefits given to the defendant in conjunction with the sale agreement, such as the Deeds of Surrender and Release.
In relation to paragraph 9 of the defence, the plaintiffs submitted that whether or not a demand was made by the defendant is a factual matter and any pre-existing Heads of Agreement is irrelevant. Mr Levine submitted that the defendant’s plea in paragraph 9 of the defence is seeking to enforce the Heads of Agreement. Mr Levine submitted that the Heads of Agreement is irrelevant to whether the defendant made the alleged demand. Mr Levine also submitted that it is impossible to know what is alleged by paragraph 9 of the defence.
The plaintiffs further submitted that paragraphs 17(a) and 40(a) of the defence do not put them on notice as to the relevance of the Sale Events to the defence of the unconscionability claim and to the defendant taking of operational control of the McDonald’s restaurants.
Mr Levine submitted that the only way the allegations in these paragraphs could be relevant would be if the defendant alleges that it was ‘entitled to enforce the head agreement [sic] and therefore take operational control’.[97]
[97]Ibid 48.28–31 (Mr Levine).
Mr Levine also submitted that the plaintiffs would not oppose the grant of leave to the defendant to replead paragraphs 17(a) and 40(a) and that ‘[i]t’s not a case that I think that there’s no factual matter to go to trial.’[98]
[98]Ibid 80.7–8 (Mr Levine).
Defendant’s submissions
The defendant submitted that the plaintiffs’ submissions proceed based upon a misunderstanding of the defendant’s allegations.[99] The defendant submitted that it is not, by its pleading, attempting to enforce the Heads of Agreement[100] and it is not suing on the Heads of Agreement.[101] It submitted that it does not seek declaratory relief and that there is no counterclaim.[102] The defendant submitted that there can be no question that the proceeding commenced by the plaintiffs gives rise to a justiciable controversy and that the relief sought (if granted) would have foreseeable consequences.[103]
[99]Defendant’s submissions filed 25 August 2021, [6].
[100]Ibid [7]–[8], [13].
[101]Ibid [9].
[102]Ibid [15].
[103]Ibid.
The defendant submitted that the plaintiffs’ concern about its pleading arises from a misapprehension of the scope of the privity of contract doctrine and what the relevant authorities say that parties can and cannot do in relation to that doctrine. The defendant submitted that, effectively, the plaintiffs want to create a ‘zone of factual inquiry that the court is not allowed to go into for any purpose … ’,[104] which is far beyond what the privity of contract doctrine does.
[104]Transcript of Proceeding (n 1) 54.26–7 (Ms Foley).

The defendant submitted that it alleges the existence of the Heads of Agreement as a matter of fact.[105] The defendant submitted that the Heads of Agreement is relevant in two respects.
[105]Defendant’s submissions filed 25 August 2021, [6].
First, it submitted that in paragraphs 8 and 31 of its defence, it relies upon the Heads of Agreement in denying the plaintiffs’ claim in paragraphs 8 and 31 of the statement of claim that the plaintiffs suffered loss and damage as a result of the defendant’s alleged breach of the franchise agreements.[106] The defendant submitted that the particulars to the plaintiffs’ allegations of loss and damage make clear the claim is partly based on the difference between the McDonald’s restaurants’ ‘market value’ and the sale price said to have been determined by the defendant. The defendant submitted that the plaintiffs refer to the date the first plaintiff ‘would have elected to sell’ the McDonald’s restaurants if not for the defendant’s alleged breaches. It submitted that in denying the plaintiffs’ claims for loss and damage in paragraphs 8 and 31 of its defence, the defendant, among other things, says that the second plaintiff freely negotiated the sale price with Mr Colbert prior to the date of the defendant’s alleged breaches.[107] As further explained by Ms Foley:[108]
It will be relevant to the court's assessment of what the [first] plaintiff might be said to have lost because the court will need to understand what the plaintiff says was the market value and then he will presumably say that he was forced or dictated to sell at a price that was less than the market value and the defendant will rely upon as one of the relevant matters going to both market value and of course whether he was in fact subject to a demand to sell at a particular price what had you already agreed and what had you already contemplated and what had you been negotiating.
[106]Ibid [12].
[107]Ibid.
[108]Transcript of Proceeding (n 1) 57.2–12 (Ms Foley).
Secondly, it submitted that it relies on the Heads of Agreement as part of its denial of the plaintiffs’ allegation that the defendant demanded that the first plaintiff sell to Mr Colbert on terms determined by the defendant.[109] The defendant submitted that it denies that such a demand was made and in defending itself against this aspect of the plaintiffs’ case, it will rely upon the Heads of Agreement. It submitted that as a matter of fairness to the plaintiffs (so that they may understand the way the defendant proposes to advance its case), it is appropriate that the defendant refers to the Heads of Agreement in this context.[110] It submitted that in making these allegations, it was not seeking to enforce the Heads of Agreement.[111]
[109]Defendant’s submissions filed 25 August 2021, [10].
[110]Ibid [11].
[111]Ibid [10].
With respect to paragraphs 17(a) and 40(a), the defendant submitted that in defending the allegations of unconscionability, the defendant will ‘draw the court’s attention to all relevant circumstances’.[112] Ms Foley submitted:[113]
when one is looking at unconscionable conduct in the way the courts look at it, that all of the circumstances, you know, need to be considered by a court, and that the court makes its own assessment objectively as to whether or not that conduct might be described as against conscience, or breaching societal norms of acceptable commercial behaviour and the like.
[112]Transcript of Proceeding (n 1) 61.3–4 (Ms Foley).
[113]Ibid 60.12–9 (Ms Foley).
Ms Foley submitted that it would be desirable for the defendant to provide additional particulars of paragraphs 17(a) and 40(a) of the defence.[114] However, Ms Foley also submitted in response to a questioning by the Court as to whether the allegations in these paragraphs could be more clearly set out:[115]
It's a little difficult when dealing with an unconscionable conduct allegation, because the case law says that all of the circumstances need to be had regard to by the court.
…
So, one view we would be needing to list every single circumstance and I've never seen a pleading that does precisely that, particularly given that we're in an early stage of the proceeding. It could be that once we're further down the track and evidence has been put in we could provide particulars of the circumstances that we would say are most relevant, but at this juncture, as I said if the court feels that more articulation is desirable, in my submission the more appropriate way to deal with that would be particulars in relation to that paragraph, and we could make plain the connection between the circumstances we rely upon and the unconscionable conduct pleading. But we could also say further particulars will be provided closer to trial, because as I've said this is something where the court needs to look at circumstances in a holistic sense.
[114]Ibid 63.4–18 (Ms Foley).
[115]Ibid 67.21–4, 67.26–68.11 (Ms Foley).
Ms Foley submitted with respect to paragraphs 17(a) and 40(a) (insofar as they refer to paragraphs 5A–5E):[116]
It could be that in the case where someone hadn't been planning to sell, and wanted to keep control of restaurants, that different decisions might have been made on the defendant's part. But it will be part of our case that, in deciding the actions to take and in raising the prospect of taking operational control with the second plaintiff, one of the matters that was relevant was that he already had a clear indication of wanting to sell, and wanting to sell to Mr Colbert.
[116]Ibid 59.3–11 (Ms Foley).
Ms Foley further submitted:[117]
it's relevant to the court to understand that this was an individual who was already planning to get out.' He was on the path to selling, and was some months away from that sale coming to fruition; and the decision to take operational control might well have been very different if he was a person who, for example, was in his first year in running the business, and had no intention of selling.
[117]Ibid 69.3–10 (Ms Foley).
The defendant submitted that the paragraphs should not be struck out in circumstances in which the plaintiffs requested particulars in relation to other parts of the defence, but not in relation to paragraphs 17(a) or 40(a), and that the issues concerning these paragraphs have only been raised by the Court.
It submitted that the defence complies with the pleadings rules but if the Court considered that more articulation was required, then this should be done by particulars.
Analysis
Paragraphs 5A–5E, 8(c), 9 (excluding the denial), 31(c) and 32 (excluding the denial)
I am not satisfied that paragraphs 5A–5E, 8(c), 9 (excluding the denial), 31(c) and 32 (excluding the denial) should be struck out pursuant to r 23.02.
First, as paragraphs 5A–5E of the defence are not directly responsive to any paragraphs of the statement of claim, the issue of whether these paragraphs should be struck out must be considered in the context of the challenge to the other allegations in the defence which refer to, and/or are based upon, these allegations.[118]
[118]Defence, [8]–[9], [17(a)], [31]–[32], [40(a)].
Secondly, the plaintiffs allege in paragraphs 8 and 31 of the statement of claim that the first plaintiff suffered loss and damage as a result of the defendant’s breaches of the McDonald’s Franchise Agreements and provide particulars, among others, as follows:

(a) the market value of the McDonald’s Franchise Agreements less the sale price ‘which sale price was determined’ by the defendant; and

(b) the profits that the first plaintiff would have earnt from the date of the sale of the McDonald’s franchises, ‘which was determined’ by the defendant, until the date that the first plaintiff would have agreed to sell the McDonald’s franchises.

In paragraphs 8(b) and 31(b) of the defence, the defendant denies that the first plaintiff suffered loss and damage as alleged. In paragraphs 8(c) and 31(c) of the defence, the defendant alleges that the second plaintiff had ‘freely negotiated the sale price’ with Mr Colbert prior to the alleged breaches.[119] This alleged fact is relevant to the defendant’s denial that the plaintiffs suffered loss and damage. The allegation that the second plaintiff had ‘freely negotiated the sale price’ with Mr Colbert prior to the alleged breaches discloses a defence to the plaintiffs’ case:

(a) that the sale price was determined by the defendant (as stated in the particulars to paragraph 8 of the statement of claim); and

(b) that the plaintiffs suffered loss and damage based upon the sale price being a difference between the market value and the sale price (as stated in the particulars to paragraph 8 of the statement of claim).

[119]Ibid [8(c)], [31(c)].

Thirdly, the plaintiffs in paragraphs 9 and 32 of the statement of claim allege that on or about 17 December 2019, the defendant ‘demanded’ the first plaintiff sell the McDonald’s restaurants to Mr Colbert and/or his nominee upon the terms determined by the defendant. In paragraphs 9 and 32 of the defence, the defendant denies the allegations and alleges that the second plaintiff had, prior to 17 December 2019, ‘decided to sell’ the McDonald’s restaurants to Mr Colbert by the date of the alleged demand, and had entered into a binding Heads of Agreement. Those facts are relevant to the defendant’s denials of paragraphs 9 and 32 of the statement of claim. These allegations disclose a defence to the plaintiffs’ case that the defendant ‘demanded’ that the first plaintiff sell the McDonald’s restaurants to Mr Colbert.
Fourthly, I accept that the defendant is not a party to the Heads of Agreement. The defendant did not submit to the contrary. However, I do not accept the plaintiffs’ submissions that the defendant is seeking to ‘enforce’ the Heads of Agreement by its pleas in paragraphs 8(c), 9, 31(c) and 32 of the defence. The defendant’s plea that the second plaintiff ‘freely negotiated the sale price’ (paragraphs 8(c) and 31(c) of the defence) and had ‘decided to sell’ the McDonald’s restaurants and had entered into the Heads of Agreement (paragraphs 9 and 32 of the defence) are pleas of alleged facts. The defendant does not, by those pleas, seek to enforce the Heads of Agreement. The defendant is entitled to plead relevant factual matters in its defence.
Fifthly, the pleas in paragraphs 8(c), 9, 31(c) and 32 are clearly expressed and are not ambiguous or unclear. It is also evident from a reading of the whole of the defence that the defendant’s pleas in paragraphs 8(c), 9, 31(c) and 32 are based upon the Sale Events pleaded in paragraphs 5A–5E of the defence. Paragraphs 5A–5E are clearly expressed and are not ambiguous or unclear. The plaintiffs adopt the substance of paragraphs 5B–5D of the defence in their chronology set out in their written submissions dated 18 August 2021.[120]
[120] See plaintiffs’ submissions filed 18 August 2021, items 3–5 of the chronology, in which they repeat
the substance of [5B]–[5D] of the defence.
Sixthly, even if the pleas in paragraphs 8(c), 9, 31(c) and 32 of the defence are not pleas of material facts, but more in the nature of evidence, and in the case of paragraphs 8(c) and 31(c), pleas to the plaintiffs’ particulars, I am not satisfied that they should be struck out. They put the plaintiffs on notice of the case they will have to meet.
Finally, for the same reasons I have just set out, the paragraphs in the defence which refer to and repeat these paragraphs will not be struck out pursuant to r 23.02 of the Rules.[121]
[121]Except for paragraphs 17(a) and 40(a) of the defence that are addressed in these reasons at [54]–[62].
The plaintiffs did not advance any additional basis, to the matters they raised with respect to their application to strike out the defence, for their application for summary judgment. Further, the affidavit of Mr Stanarevic affirmed 9 August 2021 deposes to matters relevant to the application to strike out the defence but does not address any of the important requirements set out in r 22.04 for the application for summary judgment. I refer to my reasons on the application to strike out.[122] I am satisfied that the defences in paragraphs 5A–5E, 8(c), 9 (excluding the denial), 31(c) and 32 (excluding the denial) have real prospects of success. In the circumstances, I am not satisfied that the plaintiffs are entitled to summary judgment in relation to those paragraphs.
[122]See above [45]–[50].

Paragraphs 17(a) and 40(a) (insofar as they refer to paragraphs 5A–5E)

The plaintiffs allege in paragraphs 17 and 40 of the statement of claim that the defendant’s conduct was unconscionable because of the matters alleged in paragraphs 17(a)–(f) and 40(a)–(f) respectively. The matter alleged in paragraphs 17(a) and 40(a) of the statement of claim is that the defendant ‘took operational control’ of the McDonald’s restaurants.
The defendant alleges in paragraph 17(a) of the defence that it took operational control ‘in the circumstances alleged in paragraphs 5A to 5H and 6A’ and in paragraph 17(b) denies that its conduct was unconscionable. The defendant alleges in paragraph 40(a) of the defence that it took operational control ‘in the circumstances alleged in paragraphs 5A to 5H and 29A’ and in paragraph 40(b) denies that its conduct was unconscionable. The plaintiffs did not seek to impugn these pleas insofar as they referred to paragraphs 5F, 5G, 6A and 29A of the defence. Paragraphs 5F and 5G of the defence plead the Incident.
I am satisfied that paragraphs 17(a) and 40(a) (insofar as they refer to paragraphs 5A–5E) should be struck out. These pleas are ambiguous and too general. It is not clear how the circumstances alleged in paragraphs 5A–5E (ie the Sale Events) are relevant to the circumstances of the defendant taking operational control on 15 December 2019. It is not clear what case the plaintiffs have to meet at trial. The pleas may embarrass a fair trial of the proceeding.
First, I accept that all the circumstances must be taken into account in considering whether particular conduct is unconscionable.[123]
[123]Competition and Consumer Act 2010 (Cth) sch 2 s 21 (‘Australian Consumer Law’).
Secondly, the defendant has elected to plead particular circumstances (ie the Sale Events) as being relevant to the matter of it taking of operational control on 15 December 2019 in the context of its denial that its conduct was unconscionable. It is not clear how the defendant relies upon the Sale Events (ie alleged in paragraphs 5A–5E of the defence) as being relevant to it taking operational control on 15 December 2019 and to its denial of the plaintiffs’ pleas of unconscionability. It is not clear what case the plaintiffs have to meet at trial. It is not clear why the defendant relies upon the following matters:

(a) attempts to sell from late 2018 (paragraph 5A);

(b) negotiations to sell including in March and September 2019 and the details of those negotiations (paragraphs 5B, 5C and 5E); and

(c) the Heads of Agreement (paragraph 5D).

Thirdly, the defendant submitted that the relevant circumstances in paragraphs 5A–5E of the defence include that the second plaintiff wanted to sell the McDonald’s restaurants to Mr Colbert and that the defendant’s actions in relation to taking operational control may well have been very different if the second plaintiff was a person who, for example, had no intention of selling. This case is not pleaded in paragraphs 17(a) and 40(a). It is also unclear why it would make any difference to an assessment of the circumstances of taking operational control of the McDonald’s restaurants for the purposes of unconscionability as to whether the second plaintiff wanted to sell the McDonald’s restaurants or ‘was already in the process of selling’ the McDonald’s restaurants. If such a case is to be made, then the plaintiffs are entitled to know that case with precision.
Fourthly, I do not accept the defendant’s submission that this may be addressed by the provision of particulars of paragraphs 17(a) and 40(a) of the defence. Paragraphs 17(a) and 40(a) do not require particularisation. The defendant must plead with precision the material facts upon which it relies.
Given paragraphs 17(a) and 40(a) (insofar as they refer to paragraphs 5A–5E) will be struck out as they may embarrass the fair trial of the proceeding, it is not necessary for me to determine whether the plaintiffs are entitled to summary judgment with respect to the defence in paragraphs 17(a) and 40(a) (insofar as those paragraphs refer to paragraphs 5A–5E).
Further, I am satisfied that it is appropriate for the defendant to be given leave to file and serve an amended defence. The plaintiffs submitted that they would not oppose the grant of such leave.[124]
[124]Transcript of Proceeding (n 1) 79.27–80.2–8 (Mr Levine).

PLAINTIFFS’ APPLICATIONS: INCIDENT PARAGRAPHS
Incident Paragraphs

I will refer to paragraphs 5(s), 5(t), 5H, 17(a) (insofar as it makes reference to paragraph 5H), 28(s), 28(t) and 40(a) (insofar as it makes reference to paragraph 5H) as the ‘Incident Paragraphs’. In summary, by the Incident Paragraphs, the defendant:

(a) says that the McDonald’s Licence Agreements imposed an obligation on the second plaintiff to keep free from conflicting enterprises or any other activities which would be detrimental to or interfere with the business of the McDonald’s restaurants (cl 6.05 of the McDonald’s Licence Agreements);[125]
[125]Defence, [5(s)], [28(s)].

(b) says further that by cl 13(u), a breach of cl 6.05 is a material breach of the McDonald’s Licence Agreements;[126]

(c) alleges the Incident Breaches;[127] and

(d) admits that it took operational control of the McDonald’s restaurants and did so in the circumstances of, among other things, the Incident Breaches,[128] being part of its denial that its conduct was unconscionable and that it took unconscientious advantage of the plaintiffs.[129]

[126]Ibid [5(t)], [28(t)].

[127]Ibid [5H].

[128]Ibid [17(a)], [40(a)].

[129]Ibid [17(b)], [18(d)], [40(b)], [41(d)].

Plaintiffs’ submissions

The plaintiffs submitted that the defendant has ‘disavowed any intention’ to rely upon the Incident Paragraphs.[130]
[130]Plaintiffs’ reply submissions filed 30 August 2021, [10].
The plaintiffs submitted that the defendant has pleaded a breach of the McDonald’s Franchise Agreements but has failed to plead that this permits the termination of the McDonald’s Franchise Agreements pursuant to the Franchising Code of Conduct.[131] They submitted that the defendant is bound by the Franchising Code of Conduct and that the defendant cannot terminate the McDonald’s Franchise Agreements unless there has been a breach of the Franchising Code of Conduct.[132] The plaintiffs submitted that this has not been pleaded.[133]
[131]Plaintiffs’ submissions filed 18 August 2021, [19].
[132]Ibid [20]–[21]. See also the plaintiffs’ reply submissions filed 30 August 2021, [10].
[133]Plaintiffs’ submissions filed 18 August 2021, [22].
The plaintiffs submitted that the defendant relies upon the Incident Paragraphs to plead that it was ‘entitled’[134] or ‘justified’[135] to take operational control of the McDonald’s restaurants. Mr Levine submitted that the defendant cannot rely upon the Incident Breaches to justify the taking of operational control of the McDonald’s restaurants as the defendant has not pleaded the Franchising Code of Conduct.[136]
[134]Transcript of Proceeding (n 1) 15.13 (Mr Levine).
[135]Ibid 18.5 (Mr Levine).
[136]Ibid 19.22–7 (Mr Levine).
The plaintiffs further submitted that if the defendant does not rely upon the Incident Breaches to justify taking operational control of the McDonald’s restaurants, and since the Incident Paragraphs have not been properly pleaded, then those pleadings are a ‘red herring’.[137]
[137]Ibid 19.29–20.1 (Mr Levine).

The plaintiffs submitted that paragraphs 17(a) and 40(a) do not put the plaintiffs on notice as to the relevance of the Incident Breaches to the defendant taking operational control of the McDonald’s restaurants. Mr Levine submitted that the defendant, by its pleas, is ‘saying that the breach entitled them [the defendant] to take operational control … ’.[138]
[138]Ibid 15.13–4 (Mr Levine).
The plaintiffs relied upon the same submissions for their application for summary judgment. Mr Levine submitted that summary judgment should be given if the Court ‘takes the view that there’s no prospect of success … ’.[139]
[139]Ibid 24.11–2 (Mr Levine).
As a result, the plaintiffs submitted that the Incident Paragraphs should be struck out or alternatively summarily dismissed.
Defendant’s submissions
I refer to the defendant’s submissions concerning paragraphs 17(a) and 40(a) of the defence that I have set out earlier in these reasons.[140]
[140]See above [38]–[39].
The defendant submitted that the Incident Paragraphs are relevant to the Court’s assessment of unconscionable conduct. In this context, Ms Foley submitted:[141]
when we come to the response to the unconscionable conduct allegations, because we refer there also to something that we say is objectively relevant, which is, what is the character of this conduct, the incident that occurred involving the second plaintiff by reference to the contract? And we say it will be relevant to the court's assessment that it amounted to a material breach. We don't rely on it because we say that we terminated because we don't.
We don't rely upon it because we say that we had a legal right arising from that, but we do say that the court in assessing whether or not the defendant's conduct could be understood is unconscionable will have regard to the nature or the severity, for want of another word, of the incident in which the second plaintiff was involved.
[141]Transcript of Proceeding (n 1) 66.23–67.7 (Ms Foley).
Ms Foley further submitted that paragraphs 17(a) and 40(a) (insofar as they concern paragraph 5H) concern ‘something going to the character of the conduct. The seriousness with which the defendant could treat it.’[142]
[142]Ibid 68.18–20 (Ms Foley).
Analysis
I am satisfied that paragraphs 17(a) and 40(a) (insofar as they refer to paragraph 5H) should be struck out. These pleas are ambiguous and too general. It is not clear how the circumstances alleged in paragraph 5H (ie the Incident Breaches) are relevant to the circumstances of the defendant taking operational control on 15 December 2019. It is not clear what case the plaintiffs have to meet at trial. The pleas may embarrass a fair trial of the proceeding.
As a result, paragraph 5H should be struck out as it is only referred to in paragraphs 17(a) and 40(a) of the defence. Paragraphs 5(s), 5(t), 5H, 28(s) and 28(t) should be struck out as they plead terms of the agreements that are only relevant to the Incident Breaches alleged in paragraph 5H.
First, I accept that the defendant has not disavowed any intention to rely upon the Incident Breaches. The defendant did not address the Incident Breaches in its submissions filed 25 August 2021 as the plaintiffs did not address them in their submission filed 18 August 2021.
Secondly, I have already addressed earlier in these reasons the nature of the plaintiffs’ pleadings in paragraphs 17 and 40, and the defendant’s pleas in response, and that I accept that all of the circumstances must be taken into account in considering whether particular conduct is unconscionable.[143]
[143]See above [54]–[55], [57].
Thirdly, the defendant has elected to plead particular circumstances (ie the Incident Breaches) as being relevant to the matter of it taking of operational control on 15 December 2019 in the context of its denial that its conduct was unconscionable. The defendant does not allege that it took, or was entitled to take, operational control pursuant to the McDonald’s Licence Agreements or as a result of the Incident Breaches. The defendant does allege that ‘the decision to take operational control’ of the McDonald’s restaurants was ‘mutually agreed’ by the defendant and the second plaintiff.[144] In those circumstances, it is not clear how the defendant relies upon the Incident Breaches (ie the matters in paragraph 5H of the defence) as being relevant to it taking operational control on 15 December 2019 and its denial of the plaintiffs’ pleas of unconscionability.
[144]Defence, [6(b)].
Fourthly, the defendant submitted that the relevant circumstances arising from paragraph 5H of the defence include the nature or severity of the second plaintiff’s conduct related to the Incident and the seriousness with which the defendant could treat the conduct of the second plaintiff. This case is not pleaded in paragraphs 17(a) and 40(a). If such a case is to be made, then the plaintiffs are entitled to know that case with precision.
Fifthly, I do not accept the defendant’s submission that this may be addressed by the provision of particulars of paragraphs 17(a) and 40(a) of the defence. Paragraphs 17(a) and 40(a) do not require particularisation. The defendant must plead with precision the material facts upon which it relies.

Given paragraphs 17(a) and 40(a) (insofar as they refer to paragraph 5H) will be struck out as they may embarrass the fair trial of the proceeding, it is not necessary for me to determine whether the plaintiffs are entitled to summary judgment with respect to the defence in paragraphs 17(a) and 40(a) (insofar as those paragraphs refer to paragraph 5H).
Further, I am satisfied that it is appropriate for the defendant to be given leave to file and serve an amended defence. As I have set out earlier in these reasons,[145] the plaintiffs submitted that they would not oppose the grant of such leave.[146]
[145]See above [62].
[146]Transcript of Proceeding (n 1) 79.27–80.2–8 (Mr Levine).
CONCLUSIONS AND ORDERS
Paragraphs 5(s), 5(t), 5H, 17(a) (insofar as it makes reference to paragraphs 5A–5E and 5H), 28(s), 28(t) and 40(a) (insofar as it makes reference to paragraphs 5A–5E and 5H) of the defence will be struck out pursuant to r 23.02 of the Rules.
The defendant will be given leave to file and serve an amended defence in accordance with these reasons. The grant of leave is without prejudice to the plaintiffs’ right to object to the amended pleading if they wish to do so.
The plaintiffs’ applications will otherwise be dismissed.
I will hear the parties on the form of orders and on the question of costs.
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alleged that the defendant acted unconscionably.

[2021] VSC 680

21 October 2021