Tempo Services v State of NSW

[2000] NSWSC 8

CITATION:	Tempo Services v State of NSW [2000] NSWSC 8
CURRENT JURISDICTION:	Civil
FILE NUMBER(S):	SC 50101/99
HEARING DATE(S):	17/12/99
JUDGMENT DATE:	3 February 2000
PARTIES :	Tempo Services Limited - Plaintiff State of New South Wales - First Defendant William Butler - Second Defendant
JUDGMENT OF:	Rolfe J

COUNSEL :	Mr N.A. Cotman - Plaintiff Mr P.D. McClellan QC and Mr D.J. Hammerschlag - Defendants
SOLICITORS:	Church & Grace Corrs Chambers Westgarth
CATCHWORDS:	Application to strike out Summons as failing to disclose a cause of action granted.
LEGISLATION CITED:	Fair Trading Act
CASES CITED:	Kolbach Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 Quinn v Jack Chia (Australia) Limited [1992] 1 VR 567 Thorpe v South Australian National Football League (1974) 10 SASR 36 Network Ten Limited v Fullwood (Young J - 4 December 1995 - unreported)
DECISION:	I order that the plaintiff's Amended Summons filed in Court on 29 October 1999 be struck out and that the plaintiff pay the defendants' costs of the Notice of Motion.

I N D E X

Page

Introduction 1

An Analysis Of The Amended Summons 2

The Plaintiff’s Contentions 4

Conclusions 26

Orders 26

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

ROLFE J

THURSDAY, 3 FEBRUARY 2000

50101/1999 - TEMPO SERVICES LIMITED v STATE OF NEW SOUTH WALES & ANOR

JUDGMENT

HIS HONOUR:

Introduction

1    By a Notice of Motion filed on 23 November 1999 the defendants, the State of New South Wales and Mr William Butler, for which and whom Mr P.D. McClellan of Queen’s Counsel and Mr D.J. Hammerschlag of Counsel appeared, sought orders that the Amended Summons of the plaintiff, for which Mr N.A. Cotman of Senior Counsel appeared, be struck out and for costs. No evidence was tendered by either party, the motion proceeding on the bases that the Amended Summons failed to disclose any cause of action; that the defendants must accept the truth of the facts pleaded for the purposes of such an application; and that they must also meet the General Steels’ test.

An Analysis Of The Amended Summons

2    Under the heading “Nature of Dispute” the plaintiff asserts that the dispute arises in connection with two contracts entered into between it and the first defendant for the supply of cleaning services by it to the first defendant in respect of government sites, including schools, each such contract being for a term of three years with an obligation on the first defendant to extend the term for a further period of two years subject to the plaintiff’s satisfactory performance of its obligations. It is asserted that during the second year of the contracts the first defendant sought to vary them by increasing the number of tasks to be performed by the plaintiff, and by requiring the plaintiff to expend certain minimum hours in performing them being stated to be “effectively those hours it had tendered for the third year of the contracts plus the hours expended in performing the increased tasks”. The pleading continues that as a result of the latter requirement the plaintiff was precluded from reducing staff levels through natural attrition and other means; that the plaintiff and the first defendant agreed on the increased tasks and the price to be paid for their performance; that the plaintiff, up to the end of the third year of the contracts complied with the requirement to expend the minimum hours; and at the end of the third year of the contracts the first defendant extended them for a further two year period “by reason of the satisfactory performance of the plaintiff”.

3    It is nextly asserted that at the time of the extension the first defendant again sought to impose conditions requiring the plaintiff to expend on the school sites the minimum hours in the fourth and fifth years, with the result that in performing the work in that manner the plaintiff was required to employ staff in excess of its needs for the performance of the contracts and was unable to make costs savings, which would have been otherwise available to it “through, for example, natural attrition in staff”.

4    It is stated that the plaintiff sought, as compensation for the variation of the terms of the contracts in relation to minimum hours, the cancellation of a fee known as the Additional Supply Fee, which was payable by the plaintiff to the first defendant in accordance with Supply Fee Deeds executed at the same time as the contracts, and that:-

“The first defendant, by its agents including the second defendant, promised to favourably consider the cancellation of the Additional Supply Fee and on this basis the plaintiff continued to perform the contracts at the minimum hours as required by the first defendant.”

5    It is stated that the first defendant did not disclose that it was not prepared to pay any additional fee and that after twelve months it ultimately refused to cancel the Additional Supply Fee in consequence of which the plaintiff suffered loss and damage for which it should be compensated by the defendants.

6    Under the heading “Issues Likely To Arise” it is stated:-

“1. Whether the first defendant requested the plaintiff to perform additional work or perform the work in a particular way as to minimum hours worked by staff;
2. Whether the first defendant is obliged to pay the costs of or otherwise compensate the plaintiff for conforming to any instruction or direction as to the conduct of the work as to hours worked;
3. Whether the first defendant is estopped from denying that there was an agreement to compensate the plaintiff for additional cost in performing work in the manner directed as to hours;
4. Whether the plaintiff was induced to incur additional cost in the conduct of work by maintaining hours worked by reason of misleading conduct by the first defendant;
5. Whether the plaintiff suffered loss by reason of maintaining minimum hours of work;
6. Whether and to what extent the first defendant should compensate the plaintiff for any additional cost.”

The Plaintiff’s Contentions

7    On 8 December 1983 the plaintiff entered into two Cleaning Contracts, one for Zone 1 and one for Zone 5, and two Supply Fee Deeds, being one for each zone, following the first defendant’s putting out for tender the cleaning services previously conducted by the Government Cleaning Service. The plaintiff was the successful tenderer for those zones and, as part of its tender, offered to pay the “Additional Supply Fee” of $2m per zone on the condition that it was the successful tenderer for both zones, such Additional Supply Fee being payable by quarterly instalments in the third, fourth and fifth years of the contracts if they were extended for those latter years. The Additional Supply Fee was explained in submissions as being a discount given by the plaintiff to the first defendant on the price for the services to be rendered.

8    The contracts provided for the cleaning of government sites such as schools and police stations within the zones and were each for a term of three years commencing on 28 January 1994. They provided for extensions for a further period of two years subject to the plaintiff’s complying and continuing to comply with all their terms and conditions. The contract prices were substantial amounting in each zone to some $28m in Year 1, $25m to $26m in Year 2 and $23m to $24m in Year 3, and the contracts provided a mechanism for determining the price for the provision of services if the terms were extended.

9    The contracts were entered into when the Liberal Government was in office. In March 1995 the Labor Government was elected and, in June 1995, the first defendant commissioned Mr Michael Easson to conduct a review of, inter alia, the contracts. He delivered a report on or about 25 August 1995, in which the principal recommendations were that the specifications under the contracts be varied and additional specifications be provided to enable a higher standard of cleaning in schools; contractors provide fresh undertakings concerning hours in the light of the proposed new specifications; and contract variations be brokered with the contractors. In August 1995 the first defendant accepted and adopted as government policy these recommendations.

10    The contracts described the results the plaintiff was required to achieve, but not how that was to occur and:-

“17. In particular, the number, type and quality of man-power deployed, the system of work employed, and the equipment employed in performance of the work were for the determination of the plaintiff, subject to an initial obligation to employ the ex-employees of the GCS” (Government Cleaning Service) “and that there would be no redundancies.”

11    It is pleaded that in relation to Years 3, 4 and 5 the plaintiff was not by the terms of the tender or the contracts obliged to employ any particular number or any minimum number of people, or to devote any particular number or any minimum number of hours in the performance of cleaning work on a particular site or all sites in a zone.

12    From and after 17 August 1995, the first defendant sought to obtain agreement that the plaintiff or, failing agreement, to require or induce it to utilise its staff so as to perform a minimum number of hours work in the performance of the contracts. In short, the allegation was that the first defendant was seeking to bring about a situation whereby the plaintiff would be precluded from carrying out the contracts in the most efficient way, so far as its staffing levels and the number of hours in carrying out the work were concerned, apparently for the purpose of maintaining a certain amount of work to be performed over a certain number of hours for the benefit of the employees. This, I gather, was consistent with the recommendations in the Easson Report. In paragraph 20 it is pleaded:-

“20. The requirement to maintain hours worked at Year 3 levels in successive years, with no increase in the scope of the cleaning work to be performed (other than extra work to be performed as a result of adopting the recommendation of the Easson Report) would, to the knowledge of the first defendant, prevent the plaintiff from either effecting economies of work practice, employee configuration and efficiency, or obtaining the benefits of such steps if implemented, by reducing the hours worked by staff but with the same cleaning outcome.”

13    By letter dated 17 August 1995, the first defendant invited the plaintiff to quote for additional cleaning specifications, being those referred to in the Easson Report, and sought an undertaking from the plaintiff that the hours allocated to the contracts for Years 2 and 3 be supplied as a minimum at all times. By letter from the plaintiff to the first defendant, dated 25 August 1995, the plaintiff submitted a number of proposals in response to the letter of 17 August 1995.

14    In paragraph 23 it is pleaded that by a letter dated 31 August 1995, the first defendant required that the plaintiff give a written undertaking regarding hours:-

“.. namely that the plaintiff would input no less hours than those tendered for Year 3 of the Contracts or if the plaintiff were currently operating at any location at less than that level due to improved productivity then that number of hours would be the minimum, plus no less than the hours quoted for the Additional Cleaning Specifications increase.”

15    Paragraph 24 continues:-

“By the Board’s two letters each dated 24 January 1996, the first defendant sought to formalise the Additional Cleaning Specifications for cleaning schools in Zones 1 and 5 and sought the plaintiff’s agreement to change the contract prices by the addition thereto of amounts of $2,771,629.30 in respect of Zone 1 and $2,761,118.58 in respect of Zone 5. Such amounts represented the Plaintiff’s prices for undertaking the Additional Cleaning Specifications.”

16    On 1 February 1996, the plaintiff confirmed its acceptances of the terms for performing the Additional Cleaning Specifications. It did not give the written undertaking as to the hours sought in the letter of 31 August 1995, although it did maintain those hours during the term of the contracts to the end of Year 3.

17    To this point Mr McClellan submitted that the Plaintiff’s Contentions pleaded the relationship which arose between the parties following the tender process and the agreement for the payment of the Additional Supply Fee and the Additional Cleaning Specifications. It was not in issue that there was a slowing in the rate of improving efficiency, which led to a re-consideration of the terms on which the contracts were entered into.

18    In paragraph 27 it is pleaded that the contracts provide for a formal procedure for their variation and, in paragraph 28, that by letter dated 23 December 1996 the first defendant, in connection with the extension of the contracts for Years 4 and 5, informed the plaintiff that it had generally complied with the terms and conditions of the contracts and required it to confirm that it would continue to do so and provide an undertaking to satisfactorily address the matters outlined in the attachments to the letter.

19    One of the attachments required the plaintiff’s agreement that the contracts be amended by the inclusion of three further clauses, one of which, being proposed Clause 26A, was a warranty by the plaintiff for Years 4 and 5 that employees engaged in cleaning school sites would expend the same number of hours in cleaning work as specified by the plaintiff in its tender for Year 3 of the contracts. This requirement was referred to in the pleading as the “Featherbedding Arrangement”.

20    It is pleaded in paragraph 31 that by the terms of the letter of 23 December 1996, the first defendant expressly or impliedly threatened, without lawful justification or excuse, to refuse the extension of the contracts for a further two years unless the plaintiff submitted to the contract amendments required by it. In consequence it is asserted that the first defendant threatened an unlawful act, namely the breach of the contracts by refusing to renew them without proper cause, and, in paragraph 33, that by that letter, the first defendant represented, contrary to the fact, that it was entitled to impose the requirement as to amendment in relation to the Featherbedding Arrangement as a pre-condition to extension of the contracts; and, in paragraph 34, that by that letter the first defendant represented that it would not extend the contracts unless the plaintiff undertook to conduct itself in its work and to agree to amend the contracts to work the same hours in Years 4 and 5 as it had in Year 3.

21    To this point the plaintiff is alleging that the defendants were seeking to impose additional contractual obligations on it, and representing that unless the plaintiff agreed it would not extend the contracts.

22    The representations pleaded in paragraph 34 are elaborated on in paragraph 35:-

“The representations were misleading or deceptive conduct in trade or commerce in contravention of s.42 of the Fair Trading Act.
PARTICULARS
The representations were misleading in that they conveyed the false impression that the first defendant was entitled to require acceptance of amendments of the Contracts in the terms nominated as a precondition to extension of the terms of the Contracts.”

23 Reliance on the Fair Trading Act 1987 requires, in so far as the first defendant is concerned, establishing that the Act binds the Crown. Section 3(1) provides:-

“This Act binds the Crown in right of the State, in so far as the Crown in right of the State carries on a business, whether directly or by an authority of the State.”

24 It was submitted by the defendants that by entering into contracts to have services provided to it the first defendant was not carrying on a business. Prima facie it would seem that by entering into contracts to have services provided of the type here in question, the first defendant is not carrying on a business. Mr Cotman did not seek to assert that by taking those steps the first defendant was. His submission was that “effectively” the State went into the business “of selling contracts or the opportunities to have commercial dealings with the State”. There is no pleading that the first defendant engaged in that business, nor that tendering for the provision of cleaning services, even on the basis that the successful tenderer would offer a discount, amounted to the carrying on of a business by the first defendant. The pleading is, in my opinion, defective, in so far as it seeks to rely on the Fair Trading Act in so far as it fails to identify the business the first defendant was allegedly carrying on.

25    In paragraph 36 it is pleaded that under the terms of the contracts there was no prohibition on the plaintiff reducing the numbers of staff or the numbers of hours of staff time in providing the cleaning services, where that was possible by natural attrition, employment of more competent staff, better training, other efficiencies, or changes in work practices.

26 The defendants’ submissions on this part of the pleading were, firstly, that the terms on which the plaintiff was entitled to an extension of the contracts were fixed by them; that in so far as there was alleged to be a threatened breach of contract by the matters pleaded in paragraphs 31 and 32, which did not come to fruition, that did not, at least in the circumstances of this case, give rise to a cause of action for damages; that a demand to vary a contract, as alleged in paragraph 33, is internally inconsistent with an assertion of an entitlement to do so, as alleged in paragraph 34; and that the allegation in paragraph 35 is incapable of being construed as one that the representation in paragraph 34 was misleading, as there was no allegation that the first defendant would extend even if the plaintiff did not give the undertaking. Accordingly, it was submitted that in so far as the first defendant may have made any representations as to its contractual rights or entitlements, and assuming for the moment that it was bound by s.42 of the Fair Trading Act, such representations could only be misleading and deceptive if the first defendant intended to extend the contracts even if the plaintiff did not agree to the further requirements. Unless that is alleged the position remains as one in which the first defendant was demanding certain further terms and conditions. As a matter of contract if it was not entitled to them the first defendant’s refusal to extend the contracts because of the failure by the plaintiff to agree to them would have amounted to a breach of contract, which would have sounded in damages. The elements of deceptive and misleading conduct, in these circumstances, would only arise if the additional terms were being put forward on the basis that if the plaintiff did not agree to them, the contracts would, none-the-less, have been extended.

27    It seems to me that to this point the pleading does not disclose any cause of action. The plaintiff has alleged, and as I have said these allegations must be accepted by the defendants as correct for present purposes, that it was entitled to a renewal of the contracts provided it complied with and would continue to comply with all their terms and conditions, and that it had done so. The plaintiff alleges nextly that the defendants sought to impose additional requirements on renewal to which they were not entitled and, thereby, made threats as pleaded. It is not to this point alleged that those threats were carried out, although, I think, the more potent answer is that the making of the threats is internally inconsistent with the assertion of an entitlement to vary the contract as pleaded in paragraph 27. Finally, it seems to me that the representation pleaded can only be supported if it be pleaded, which it is not, that if the plaintiff did not comply with the threats, the defendants would, none-the-less, have renewed the contracts. In other words it would only be misleading and deceptive to say that the contracts would not be renewed unless certain additional terms were agreed if, notwithstanding those representations, the defendants intended to renew the contracts even if there was no such agreement.

28    Finally, and in my view importantly, the plaintiff has not pleaded the business in which it alleges that the first defendant was engaged. Whilst I have set forth my note of Mr Cotman’s submission in this regard, it seems to me that it is essential that the method in which it is alleged the first defendant was engaging in business should be pleaded and, further, that the way in which Mr Cotman submitted that the first defendant was engaging in business is not a way which, on a fair reading of those words in the Act, can constitute such commercial conduct. The proposition can be tested in a number of ways, but, for present purposes, it is necessary to say no more than that the mere letting of a contract to clean premises in which the State carries on an activity cannot amount to its carrying on the business of selling contracts or the opportunities to have commercial dealings with it.

29    In paragraph 38 it is pleaded that the request and “requirement” by the first defendant that the plaintiff so conduct the cleaning work had certain consequences, and that it was an implied term “of the requirement” that the first defendant would pay the plaintiff a reasonable sum for the additional cost incurred or profit foregone by reason of compliance with the direction.

30    The first defendant’s submission was that there is no notion of a “requirement” known to this branch of the law, any requirement, in the circumstances of the contracts into which the parties had entered, being determined by the contractual obligations. Put simply, the submission was that one had to look to the contract to determine the rights and obligations between the parties and that any extra contractual request or requirement to which the plaintiff did not agree, such that it became a term and condition of the contract, gave rise to no rights or obligations at law. Certain circumstances may arise, in consequence of the making of such requests or requirements and the way in which the parties conducted themselves thereafter, which could have that effect, but those are not the matters pleaded in the present pleading, at least to this point.

31    Thus far there was no allegation of a breach of contract nor of any legal consequences flowing from the alleged threatened breach of it or the misrepresentations.

32    In paragraph 40, which Mr Cotman stated constituted the gravamen of the case pleaded, it is stated:-

“40. Pursuant to, and as a result of, the request, and the representations and by reason of the threat to wrongfully not extend the Contracts, the Plaintiff did maintain the number of hours in the conduct of the work at the level used in Year 3 in Years 4 and 5.”

This pleading seeks to assert, as I understand it, that the “request” and the representations allegedly flowing from it, caused the plaintiff to act in a way in which it would not have acted but for the request and the representation. In these circumstances it is sought to be alleged that the contract was varied in an improper way. However, it seems to me that so far as the allegation in relation to the “request” is concerned, the plaintiff could only establish a cause of action if it pleaded that not only was the request made, but the first defendant acted in breach of the contract in consequence of the request’s not being carried out or of the plaintiff’s stating that it would not meet the request. The highest the case on the request is pleaded, at least to this point, is that it was made and the plaintiff conformed to it. That, in my opinion, does not disclose a cause of action.

33 The further allegations in relation to the representations must fail, leaving aside for the moment the question whether the Fair Trading Act applies to the first defendant, because it has not been pleaded that they were misleading or deceptive in that the impression they conveyed was contrary to the true position in the way to which I have referred.

34    In paragraph 41 it is pleaded that the adoption of the work practices requested and directed by the first defendant, including the “featherbedding” of staff hours, precluded the plaintiff from making costs savings in the various ways to which reference is made in the performance of the contract in Years 4 and 5 and, in paragraph 42, that by reason of those matters and by implementing the Featherbedding Arrangement the plaintiff suffered loss and damage by incurring costs it would not otherwise have incurred and forewent profits it ought to have earned.

35    It is pleaded that the first defendant well knew that the plaintiff would incur additional costs “as a result of complying with the request or direction aforesaid”. This may well be so, but it does not provide, at least in itself, a cause of action and it is necessary for the plaintiff to plead, which in my opinion it has not, that any loss it suffered was a consequence of wrongful conduct on the part of the defendants.

36    The pleading continued that on 10 January 1997 there was a meeting between representatives of the parties, at which the first defendant was represented by the second defendant, and that the first defendant proposed that the prices for providing the cleaning services should be the same in Years 4 and 5 as at the end of Year 3, and required that for Years 4 and 5 the plaintiff maintain hours worked in performing the cleaning services at school sites at the same levels as at Year 3. At that meeting the plaintiff sought the cancellation of the Additional Supply Fee for Years 4 and 5 as compensation or remuneration for the first defendant’s requirement that staff levels and hours worked be maintained at the Year 3 level and, in doing so, informed the first defendant that it expected to be compensated for the additional costs that would be incurred in maintaining minimum hours as requested by it. The second defendant said that he understood the detriment to the plaintiff arising from the contract amendments and requested it to submit a written proposal for the cancellation of the Additional Supply Fee for consideration by the first defendant, which request was referred to in the pleading as the “Statement” and which Statement was pleaded as conduct in trade or commerce with the intention of inducing the plaintiff to implement and continue to give effect to the Featherbedding Arrangement. In paragraph 50 it was pleaded that by the Statement the first defendant represented that it would recompense the plaintiff by remuneration or relief from expense for the additional costs incurred or profits foregone in the event that the plaintiff undertook to “featherbed” hours by conducting its business so as to not reduce the hours worked by employees in Years 4 and 5 below Year 3 levels.

37    Even making the necessary favourable assumption to the plaintiff in relation to the facts pleaded, they do not rise above a request to the plaintiff to make a submission for consideration by the first defendant and, in my opinion, there is nothing to link the statement that the first defendant would give consideration to the assertion that that constituted a representation that it would recompense the plaintiff. At most this would lead to the conclusion that the first defendant would consider the representations made by the plaintiff.

38    It was submitted on behalf of the defendants that paragraphs 47 and 50 are inconsistent with which I agree.

39    The pleading continued that acting in reliance on the alleged representation the plaintiff, by letter dated 14 January 1997:-

“.. signified to the first defendant that it essentially agreed with the Contract Amendments, subject to its proposal that the Additional Supply Fee be deleted from the Contracts.”

40    As I understand it this means that the plaintiff was prepared to vary the contract provided the discount given by the Additional Supply Fee was not required. It is pleaded that by that letter the plaintiff “again” put the first defendant on notice that it required to be compensated for the additional costs, and that on receipt of the letter and thereafter over the next twelve months the first defendant did not disclose to the plaintiff that it was willing to compensate it for such additional costs and called on the plaintiff to provide particulars of the additional cost or foregone profit, which the plaintiff did from time to time.

41    Paragraph 55 states:-

“55. By the representation in the Statement, the calling for particulars and the silence of the first defendant after receipt of the 14 January 1997 letter from the plaintiff, the first defendant engaged in conduct by which it represented to the plaintiff that:
(a) the first defendant would compensate the plaintiff for the additional cost or foregone profit by either payment to the plaintiff or relieving the plaintiff of another expense, the additional supply fee, in whole or in part;
(b) the first defendant required time to consider the amount of compensation appropriate to the circumstances;
(c) the first defendant would bona fide address the issue of the amount of compensation reasonably required by the “featherbedding arrangement”;
(d) the plaintiff in the meantime could implement the featherbedding arrangement and not take steps to avoid costs by reducing hours worked because it would be reasonably compensated in due course.”

42    There are a number of difficulties with this paragraph. Firstly, sub-paragraph (a) provides for varying methods of “compensation”, although it has already been pleaded that what the plaintiff required was the deletion of the Additional Supply Fee. Further, that alleged representation is inconsistent with those appearing in sub-paragraphs (b) and (c), which allegations do not support the representations pleaded. Notwithstanding the way in which the matter is pleaded in paragraph 55, paragraph 56 asserts that “by reason of the Statement, its silence as to its unpreparedness to pay” and various other matters:-

“.. the first defendant represented that it was willing to pay a reasonable sum as compensation for the costs or foregone profits incurred by the plaintiff in maintaining Year 3 working hours for its staff.”

43    It must be remembered that all of this is predicated on the “Statement” as pleaded in paragraph 47 and subsequent silence on the part of the first defendant. The most the pleadings will support is that the first defendant would give consideration to the matter and, in some way and in some amount may recompense the plaintiff. There is no allegation, even assuming that the representation alleged in paragraph 56 flows from what is already pleaded, as to how it is alleged that that representation was misleading and/or deceptive.

44    The pleading continues that the plaintiff acted in reliance on the representations in paragraph 56 in carrying out the contracts in circumstances where the first defendant well knew that the plaintiff had in fact adapted its work practices to maintain the hours worked at Year 3 levels and was not attempting to take advantage of the economies in hours by more efficient use of its labour, and that notwithstanding that knowledge and the receipt by the first defendant of the letter of 14 January 1997 the first defendant took no step to warn the plaintiff that it did not propose to compensate it for the additional costs incurred. It is not clear that any separate allegation is made by virtue of the allegation of failure to warn, the pleading being that the first defendant, through the second defendant, had only requested the submission of a written proposal for the cancellation of the Additional Supply Fee: paragraph 47.

45 In paragraph 60 it is pleaded that there were a substantial number of meetings and correspondence on the form and amount of the compensation during the course of the twelve months after January 1997, it not being clear whether this was confined to a submission for the cancellation of the Additional Supply Fee, during which negotiations the plaintiff continued to perform the contracts as required by the first defendant. It is pleaded that the consequence of those matters and the continuing failure to warn “to the contrary” constituted a representation by the first defendant that it was willing to pay or otherwise make compensation and that, acting in reliance on the representation, the plaintiff continued to maintain working hours at Year 3 levels. By a letter of 10 December 1997 the first defendant refused to agree to the deletion of the Additional Supply Fee and to make any compensation and, in paragraph 65 it is asserted that the representations referred to in paragraphs 50, 55, 56 and 61 were conduct that was false or misleading in contravention of the Fair Trading Act in that the first defendant did not in fact consider itself obliged to pay or otherwise make any compensation to the plaintiff by reason of the work hours adopted. The representation pleaded in paragraph 50 relies on the Statement, which could not give rise to the representation said to flow. Similarly the representations pleaded in paragraphs 55 and 56 rely at least as the starting point on the Statement. Once again I do not see how, even accepting the facts as pleaded, that can give rise to any representation which is misleading or deceptive. Paragraph 61 is dependent upon meetings, correspondence and the continuing failure to warn to the contrary. The issue is not whether the first defendant considered itself obliged, if that is intended to mean “contractually obliged”, to make compensation, but whether, having considered any representations made by the plaintiff it would do so. If paragraph 65 is intended to convey anything more then it does not allege how the representations pleaded were misleading or deceptive. Mr Cotman conceded this and I consider it a basic flaw in this part of the pleading.

46    The pleading continues that by reason of the representation that the first defendant would pay or otherwise make compensation in due course, it represented to the plaintiff that there were in existence contractual or other legal relationships between them whereby the plaintiff was entitled to be compensated if it implemented the Featherbedding Arrangement. There are a number of problems with paragraph 68. It assumes a representation that the first defendant would pay or otherwise make compensation in due course, notwithstanding the essential pleading in paragraph 47 that consideration would be given to a written proposal for the cancellation of the Additional Supply Fee. Secondly, there is no identification of the contractual relationships pleaded as being in existence and, thirdly, the pleading of the existence of “other legal relationships” does not disclose what is intended, particularly in the light of the allegation of contractual relationships. Each of these assertions is, in my opinion, embarrassing as failing to disclose the case sought to be made.

47    The pleading continues that the representation was made to induce the plaintiff to act as it did and to its detriment to the knowledge of the first defendant and that the first defendant is estopped from denying:-

“.. that there is a subsisting legal obligation to pay or otherwise make reasonable compensation to the plaintiff for the costs incurred in maintaining working hours at the Year 3 level and not implementing economies in the work hours in the performance of the work required.”


Any such representation must be clear and, in my opinion, it is not possible to allege any such representation in circumstances where there is reliance upon the statement requested in paragraph 47 and the continuing negotiations between the parties to seek to reach a resolution in terms where there was no definition pleaded as to any particular resolution.

Conclusions

48 In my opinion the Amended Summons should be dismissed. In so far as it relies on the Fair Trading Act, and substantial parts of it do, I am of the view that in the circumstances as pleaded it has not been established that the first defendant was carrying on business so as to be bound by the Act. Mr Cotman made no separate submissions in respect of the second defendant. In the absence of the pleadings based on the Fair Trading Act it is obvious that the Amended Summons will have to undergo substantial re-amendment. However, I am also of the opinion, for the reasons I have stated, that a number of the other allegations are internally inconsistent and do not give rise to causes of action in or justify the type of relief for which the plaintiff contends. I have sought to set forth my conclusions in these various regards in dealing with the pleadings and I find it unnecessary to repeat them.

Orders

49    I order that the plaintiff’s Amended Summons filed in Court on 29 October 1999 be struck out and that the plaintiff pay the defendants’ costs of the Notice of Motion.

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Last Modified: 09/25/2000