Steelfab Engineering Pty Ltd v Acme Group Pty Ltd - [2000] WASC 198

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: STEELFAB ENGINEERING PTY LTD -v- ACME GROUP PTY LTD & ANOR [2000] WASC 198

CORAM: MASTER SANDERSON

HEARD: 27 JULY 2000

DELIVERED : 3 AUGUST 2000

FILE NO/S: CIV 1219 of 1999
CIV 1874 of 1999
(Consolidated by Order dated 29 September 1999)

BETWEEN: STEELFAB ENGINEERING PTY LTD (ACN 069 749 015)
Plaintiff
AND
ACME GROUP PTY LTD (ACN 008 984 772)
First Defendant
BTR AUTOMOTIVE AUSTRALIA LTD (ACN 004 176 032)
Second Defendant
(BY ORIGINAL ACTION)
ACME GROUP PTY LTD (ACN 008 984 772)
Plaintiff
AND
STEELFAB ENGINEERING PTY LTD (ACN 069 749 015)
Defendant
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Application to strike out defence and amend statement of claim

Legislation:

Trade Practices Act, s 51A and s 52

Result:

Both applications granted

Representation:

Original Action

Counsel:

Plaintiff:     No appearance
First Defendant             :     Mr C D Raymond
Second Defendant         :     Mr M J H Hawkins

Solicitors:

Plaintiff:     No appearance
First Defendant             :     KPMG Legal
Second Defendant         :     Pynt Healy

Counterclaim

Counsel:

Plaintiff: Mr C D Raymond
Defendant: No appearance

Solicitors:

Plaintiff: KPMG Legal
Defendant: No appearance

Case(s) referred to in judgment(s):

Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431
Jacques v Cut Price Deli Pty Ltd (1993) ATPR (Digest) 46‑102
Miba Pty Ltd v Nescor Industries Group Pty Ltd (1996) 141 ALR 525
Morgan v Banning (1999) 20 WAR 474
Sykes v Reserve Bank of Australia (1998) 158 ALR 710
Ting v Blanche (1993) 118 ALR 543

Case(s) also cited:

Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233

MASTER SANDERSON: This is the return of two chamber summonses issued by the first defendant. The orders sought by the first defendant are, first, for leave to amend its statement of claim in the indemnity proceedings. Secondly, the first defendant seeks an order striking out parts of par 6 of the second defendant's defence to the first defendant's claim for indemnity. The strike out application was out of time and the summons sought an extension of time within which to bring the application. The second defendant did not oppose the extension of time being granted and I made orders accordingly.
Neither of the two applications depends to any significant extent upon the facts of the case. It is sufficient, for present purposes, to say that the second defendant is, or was at all material times, the manufacturer and supplier of a product described in the first defendant's minute of proposed amended statement of claim ("the minute") (par 2) as "synthetic geomembranes". These membranes are used as protective coatings in tanks. Although it is not entirely clear from the pleading, it appears that the use of the membranes is to prevent the tanks leaking. For present purposes, par 3, par 4 and par 5 of the minute are relevant. They read as follows:
"3.During or about October 1996 Mr K Purnell, the First Defendant's factory manager, and Mr T Vallow, the First Defendant's sales manager, met with Mr B Miller, the Second Defendant's sales manager for Western Australia, at the Second Defendant's stall at the Kalgoorlie Mining Exposition, during which meeting:
(a)Messrs Purnell and Vallow explained to Mr Miller that the First Defendant was interested in the Second Defendant's Millenium [sic] Geomembrane and in particular whether it was suitable for use in liners for water storage tanks and whether it was available in 0.50 mm gauge;
(b)the Second Defendant, by Mr Miller, represented that the Millenium [sic] Geomembrane was suitable for the manufacture of liners for water storage tanks ('the Oral Representation') and further stated that it was readily available in 0.50 mm gauge;
(c)Mr Miller further pointed out the Second Defendant's display at the stall which featured a large water filled pond lined with the Millenium [sic] Geomembrane and provided Messrs Purnell and Vallow with a brochure, (the details of which the First Defendant is not able to particularise other than to state that it conveyed information consistent with the Oral Representation but that it was not the glossy Millenium [sic] Geomembrane brochure referred to in sub‑paragraph 4(a) below) and by necessary inference therefrom represented that the Millenium [sic] Geomembrane was suitable for the manufacture of tank liners for the storage of water ('the Conduct').
4.During or about October 1996, but subsequent to the meeting between the First and Second Defendant's representatives referred to in paragraph 3 above, the First Defendant was furnished with two documents by the Plaintiff, being:
(a)the Second Defendant's glossy brochure titled 'Millenium [sic] Geomembranes - Nylex the Geomembrane for the next Millenium [sic]' ('the Millennium [sic] Brochure'); and
(b)the Second Defendant's specification sheet titled 'Millenium [sic] Geomembranes - Specification Sheet' ('the Millenium [sic] Specification').
5.The Second Defendant made the following representation in the Millenium [sic] Brochure:
(a)the Millenium [sic] Geomembrane was manufactured from a unique grade of flexible polypropylene alloy, which had been specifically developed to provide the world's best performance characteristics for applications requiring flexible liners;
(b)the Millenium [sic] Geomembrane was suitable for the manufacture of tank liners for storing potable water in prefabricated storage tanks;
(c)the life of a Millenium [sic] Geomembrane was measured in decades rather than years;
(d)the grafted polymer structure had been optimised for geomembrane applications and possessed a unique combination of mechanical toughness, flexibility, barrier properties and environmental resistance;
(e)the Millenium [sic] Geomembrane had the unique ability to elongate when subjected to out‑of‑plane stresses;
(f)only the Millenium [sic] Geomembrane had the ability to take up substantial bi‑axial strains without risk of failure;
(g)the Millenium [sic] Geomembrane had excellent resistance to tear initiation and tear propogation;
(h)the Millenium [sic] Geomembrane retained its flexibility and impact resistance at temperatures as low as minus 40^o Celsius and this property prevented damage when the Millenium [sic] Geomembrane was handled or installed during winter weather conditions or at high altitude;
(i)the Millenium [sic] Geomembrane maximised ease and reliability of installation;
(j)the 0.50 mm gauge Millenium [sic] Geomembrane was a potable grade material and that potable material had application inter alia in use as water tank liners ('the Millenium [sic] Brochure Representations')."
The second defendant, in its defence, pleas to these three paragraphs as follows:
"2.The second defendant:
a)admits that Mr B Miller, its sales manager for Western Australia, met Mr T Vallow, the first defendant's sales manager, at the second defendant's stall at an exposition in Kalgoorlie in or about October 1996;
b)admits that Mr B Miller and Mr T Vallow generally discussed the Millennium Geomembrane at the meeting;
c)says that BTR Engineering had a pond lined with PVC at the exposition in Kalgoorlie to display pump applications for mining use;
d)otherwise denies each and every allegation contained in paragraph 3 of the first defendant's statement of claim.
3.The second defendant does not admit each and every allegation contained in paragraph 4 of the first defendant's statement of claim.
4.The second defendant:
a)admits the Millennium Brochure and the Millennium Specification referred to by the first defendant in paragraph 6 of its statement of claim ('Millennium Specification') contained certain representations ('Representations'). The second defendant will refer to the Millennium Brochure and the Millennium Specification at trial for the terms of the Representations and their true effect;
b)says that the Millennium Specification was not the Millennium specification for the 0.50 mm gauge Millennium Geomembrane which was supplied by the second defendant to the first defendant;
c)otherwise denies each and every allegation contained in paragraphs 5 and 6 of the first defendant's statement of claim.
5.The Millennium geomembrane was manufactured by the second defendant from a flexible polypropylene created and supplied to the second defendant by Montell, a joint venture of the Royal Dutch/Shell group of companies and Montedison S.p.A ('Polypropylene').
6.The second defendant:
a)says the Representations were true;
b)believed the Representations were true;
c)says it had reasonable grounds for making the Representations pleaded in paragraph 5(a), (c), (d), (e), (f), (g), (h) and (i) in that this is what Montell advised it about the properties of Polypropylene in a brochure entitled 'Montell polyolefins' which was supplied by Montell to the second defendant prior to the publication of the Millennium Brochure;
d)says it had reasonable grounds for making the Representations pleaded in paragraph 5(e) and (f) as the second defendant arranged for tests to be carried out on the Millennium Geomembrane by R K Frobel & Associates and the test results as set out in R K Frobel & Associates' report to the second defendant dated 9 August 1996 supported these Representations;
e)says it had reasonable grounds for making the Representations pleaded in paragraph 5(b) and 6 on the basis of its experience over a substantial number of years in supplying PVC membranes for manufacture of liners for use in water storage tanks."
The strike out application arises in this way. The first defendant says that nothing pleaded in its statement of claim against the second defendant involves representations as to future matters. In other words, the claim made by the first defendant against the second defendant is based on s 52 of the Trades Practices Act and not on s 51A. That being the case, so the first defendant submits, no defence is open to the second defendant that, when making the representations pleaded in par 5 of the statement of claim, it did so on reasonable grounds. The first defendant says that the pleading in par 6 of the defence raises a false issue and should be struck out.
Pleading summonses often involve arcane issues dealing with technical points which the parties would be best advised to resolve at trial. In such cases striking out the offending pleading is of little consequence in the overall management of the case because it will result in little saving of either time or cost. But this is not such a case. The first defendant submits that its action is a straightforward claim under s 52 of the Trade Practices Act. It says that the second defendant made certain representations, it relied upon those representations and purchased product being marketed by the second defendant. The product has failed and it has suffered loss and damage. While each of the elements of its cause of action must be proved, very little in the way of technical evidence will be necessary. It is the fact of the failure of the product that must be established for the claim to succeed. On the other hand, if the representations the first defendant says were made by the second defendant are characterised as representations as to future matters, then it is open to the second defendant to establish that the representations were reasonably made. Were the second defendant able to establish this was the case, then the first defendant's claim would fail. As the onus is on the second defendant to establish that the representations were reasonably made, it would necessarily have to call expert evidence as to the state of knowledge of its officers when the representations were made. It is not difficult to see that the first defendant, confronted with such evidence, will need to produce technical evidence of its own to join issue with the second defendant. The scope of the inquiry at trial is likely to be far greater if s 51A is involved, rather than if the claim is brought under s 52 of the Trade Practices Act.
It is not always easy to determine whether a particular representation is a representation of present fact or whether it is a representation as to a future matter. Section 51A of the Trade Practices Act is in the following terms:
"(1)  For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2)  For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.
(3)  Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead."
The section itself does not give any indication of what is a representation of "any future matter". The difficulty in determining whether or not a representation is as to present facts or as to a future matter is well illustrated by the decision of Sykes v Reserve Bank of Australia (1998) 158 ALR 710. The facts of the case, as taken from the headnote, were as follows:
"The appellants engaged in the commercial development, promotion, manufacture and production of devices to handle and dispense polymer banknotes. In 1990 the respondent bank provided the appellants with funding to develop the devices further and appointed the first appellant a consultant to the bank. During 1990 the appellants had several meetings and communications with the bank in which bank officers made statements about the timing of the issue of the polymer notes in Australia. In November 1990 the bank issued a press release, a copy of which was given to the appellants, stating that the polymer notes would begin issue 'after Easter next year'. In December 1990 a bank officer corrected a draft magazine editorial written by the first appellant by changing a statement to the effect that the polymer notes 'will be introduced from next April' to 'are expected to be introduced ... from sometime after Easter 1991'. In fact the banknotes were not issued until late 1992."
The appellants commenced proceedings, claiming certain damages for contravention of s 52 and in relation to future matters s 51A. The bank argued that the representations were statements of present belief and not statements as to future events within s 51A.
Emmett J quoted at 721 parts of the amended statement of claim where the following allegations were made:
"  7.  On or about 10 August 1990, at a meeting at [the bank's] head office in Martin Place in Sydney, Mr John Taylor on behalf of [the bank]:
(a)that the $5 polymer bank note would be released shortly after made the following oral representations to [Mr Sykes]: Easter 1991; and
(b)that after the release of the new $5 polymer bank note, new polymer bank notes for the other bank notes in the series would be released sequentially at approximately six monthly intervals.
8.  Further, on several occasions between late November 1990 and March 1991, Mr Peter Carlin on the [bank's] behalf orally represented to [Mr Sykes] that once the new polymer $5 bank note was released shortly after Easter 1991, new polymer bank notes for the other bank notes would be released sequentially at approximately six monthly intervals.
9.  Further, in or about November 1990 Mr Peter Carlin on the [bank's] behalf represented to [Mr Sykes] that the new polymer $5 bank note would be released shortly after Easter in 1991.
Particulars
Mr Carlin handed to [Mr Sykes] a copy of the [bank's] press release dated 6 November 1990.
10.  Further, in or about late November 1990 in Sydney and early December 1990 in Melbourne, Peter Carlin, on the [bank's] behalf made oral representations at several meetings and in the presence of [Mr Sykes] that the new $5 polymer bank note was to be released shortly after Easter 1991 and that thereafter new polymere banknotes for the remaining bank notes in the series would be released sequentially at approximately six monthly intervals.
11.  Further, on or about 7 December 1990 Mr Peter Carlin on the [bank's] behalf represented to [Mr Sykes] that:
(a)the new polymer $5 bank note would be released sometime after Easter 1991; and
(b)the release of the new $5 polymer bank note would be followed by the sequential release, at approximately six monthly intervals, of the new plastic polymer bank notes for the remaining bank notes in the series."
It was the appellant's contention that the representations fell within s 51A(1) and that the bank did not have reasonable grounds for making the representations. The bank disputed both contentions and said that even if it made a representation with respect to future matters and did not have reasonable grounds for making the representations, the nature of the representations were such that it was not reasonable for the appellants to act in reliance on the statements. The trial Judge found that the representations were as to future matters within the meaning of s 51A but that the bank had reasonable grounds for making the representations and therefore they were not misleading and deceptive. From that decision the appellants appealed.
Heerey and Sundberg JJ, who formed the majority, determined that the representations were as to future matters and that the bank did not have reasonable grounds for making those representations. Emmett J, who dissented, found that the representations were not as to future matters and further found that the bank's conduct was not misleading or deceptive. Emmett J characterised the representations as being representations as to the then state of mind of the bank. Each of their Honours dealt with the question of when a representation was a representation as to a future matter. All of their Honours cited, with approval, at 712 ‑ 713 what was said by Hill J in Ting v Blanche (1993) 118 ALR 543 at 552 ‑ 553:
"It will be readily apparent that a representation as to future conduct or a future event will generally imply (and sometimes explicitly state) that the maker of the representation was of a particular state of mind as to the future conduct or event as at the time the representation was made. A representation that a particular occupancy rate for a hotel might in the future be achieved, or, as alleged here, that a particular rent for nominated premises could be achieved in a future letting, impliedly involves a representation that the maker of the representation believed that the occupancy rate or rental could be achieved. It would be no less a representation as to the future by virtue of this implication. If the actual term of the representation is that the maker of the representation is of the view at the time that the occupancy rate or rental nominated could be achieved in the future, does that express statement turn a representation as to the future into a representation as to existing fact?
...
Whatever may be the case where there is an express representation as to the maker's state of mind concerning a future matter, it is not, in my opinion, correct to treat a representation as to an event or conduct in the future, be that in the form of a prediction or otherwise, as not being a representation with respect to a future matter merely because it implies a representation as to the maker's state of mind. ...
A representation as to future rental, for example, will be a representation with respect to a future matter even if also, impliedly, a representation as to the existing state of mind of the maker."

Sundberg J, during the course of his judgment, at 717 referred to the earlier decision in Jacques v Cut Price Deli Pty Ltd (1993) ATPR (Digest) 46‑102. His Honour summarised the facts of the case as follows:
" ... the statement of claim alleged two representations about the turnover of a shop in a shopping centre. The first was that the shop would trade with the turnover of at least $10,000 per week. The second was that the representors believed that the shop when managed by the applicants, would trade with a turnover of at least $10,000 per week. Spender J said (at 53,436) that the first was a representation as to a future matter, namely, the future turnover, and the second representation of present fact, namely the representors' present belief as to the trading potential of the shop. Comparable allegations were made about the profitability of the shop - the shop could trade with gross profits between 38% and 42% of the weekly trading figures, and the representors believed that the premises would so trade. His Honour said that the former was within s 51A and the latter, as a representation about the representors' present state of mind, was not. The contrast drawn by the pleadings compelled that conclusion. The first turnover and the first profitability pleas were plainly directed to future turnover and future profits, and the second turnover and profitability pleas were, as a matter of construction, directed to the representors' belief about these matters."
Both Heerey and Sundberg JJ referred further to the decision of Miba Pty Ltd v Nescor Industries Group Pty Ltd (1996) 141 ALR 525. Although, interestingly enough, this case was not referred to by Emmett J in his dissent. Sundberg J quotes, at 719, the following passage from the judgment of Merkel J in Miba Pty Ltd, with approval:
" ... s 51A cannot be rendered nugatory by merely stating a belief or understanding with respect to a future matter. For the reasons pointed out by Hill J [in Ting] in my view such a statement, without more, is and remains one with respect to a future matter."
All Justices agreed that the context in which the representations were made is of importance in determining whether or not the representations were representations as to a future matter. Emmett J put the position as follows (at 732):
"Different considerations may apply according to whether a statement about a future event is being made by a person who will be responsible for the occurrence or non‑occurrence of the relevant event. If the maker of the statement is not responsible, the statement could not be construed as carrying with it a statement about the present intention of the maker of the statement. However, it might carry with it a statement about the belief of the maker. On the other hand, if the maker is responsible, a question arises as to whether the statement is in truth a statement with respect to a future matter or whether it is, fairly construed, nothing more than a statement by the maker of present intention or belief."
The present case is, of course, the mirror image of the appellants' argument in Sykes. To succeed in Sykes it was necessary for the appellants to establish that the representations were as to future matters. The onus then shifted to the bank to establish that the representations were reasonably made. In this case the first defendant eschews any reliance upon s 51A. To succeed in this application it is necessary for the first defendant to establish that the representations were not as to future matters, but were representations as to existing facts on the date when the representations were made.
In my view, each of the representations pleaded in par 5 of the first defendant's statement of claim is a representation as to present facts. It may be that, differently pleaded, some, perhaps even all, of the representations could be representations as to future matters. For instance, the representation pleaded in par 5(b) is to the effect that the millennium geomembrane was suitable for the manufacture of tank liners for storing potable water in prefabricated storage tanks. There is an element of the future about that representation. It is represented that storage tanks built in the future could be treated with the millennium geomembrane and then would be suitable for the storage of water. But that is not the way in which the representation is couched. It is pleaded that the representations were made at a specific time to specific individuals and represented the state of mind of the representor at the time the representations were made. The way in which the statement of claim is pleaded makes it clear that no reliance is placed upon s 51A and on that basis par 6 of the defence cannot stand. In my view it ought be struck out.
That is not to say that there should not be leave to replead par 6 of the defence. As Emmett J said, it may be that the representations made carried with them the further implied representations that the expectation was reasonably held. It may be possible to couch the defence in such a way as to raise as an issue whether or not the underlying assumptions were reasonably held so as to draw in s 51A. But if that is what is to be done a complete recasting of par 6 must be repleaded.
The first defendant sought only to strike out par 6(c), (d) and (e). However, it seems to me that the whole of par 6 ought be struck out. In its present form it is not a proper plea.
The further application of the first defendant concerned the insertion of par 5(j) in the statement of claim. The second defendant objected to the paragraph being inserted on the basis that the time limited for commencing an action under the Trade Practices Act had now passed and what the first defendant proposed to plead was in fact a further cause of action. For its part, the first defendant sought leave to amend pursuant to O 21 r 5(2) of the Rules of the Supreme Court. That rule is in the following terms:
"Where an application to the court for leave to make the amendment mentioned in paragraph (3), (4) or (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks just to do so."
In this instance, sub‑par (5) is relevant. That sub‑paragraph reads as follows:
"An amendment may be allowed under par (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment."
It can readily be seen from the context in which the amendment appears that if the amendment raises a new cause of action it arises "out of the same facts or substantially the same facts as the cause of action in respect of which relief has already been claim". On that basis, it seems to me that the amendment falls within the principles as outlined by the Full Court in Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431. During the course of argument it emerged that the second defendant's main concern was the prospect that the amendment would vitiate the right of the second defendant to plead a limitation defence with respect to the amendment. In my view Morgan v Banning (1999) 20 WAR 474 per Wheeler J at 481 ‑ 482 makes it plain that any amendment cannot override a limitation defence. Clearly, the second defendant should have the right to amend its defence and, if it wishes to do so, raise a limitation defence, consequent on the first defendant's amendment to par 5 of the statement of claim.
I will hear the parties as to the precise form of order and as to costs.