ACCC v Multigroup Distribution

REASONS FOR JUDGMENT 1 This is a notice of motion filed by the third respondent, Malcolm Roberts, in proceedings brought by the Australian Competition and Consumer Commission against Multigroup Distribution Services Pty Ltd, John O'Neile and Mr Roberts. The notice of motion seeks an order that the amended statement of claim be struck out as against the third respondent (Mr Roberts) as disclosing no reasonable cause of action or, alternatively, as having a tendency to cause prejudice or embarrassment in the proceedings. Alternative relief is sought that particular paragraphs be struck out as against the third respondent as having a tendency to cause prejudice or embarrassment in the proceeding. In the further alternative, the notice of motion seeks an order that the applicant provide further and better particulars in response to requests made by the third respondent's solicitors to the applicant by facsimile of 23 November 2001. 2 The difficulty about the amended statement of claim is that it fails in any understandable way to draw a distinction between the case that may be made against the first, second and third respondents respectively. And on its face, notwithstanding the crucial factual differences in the case against each of the three respondents, it seeks to make essentially the same case against all three. 3 A summary of the factual circumstances that one can glean from the statement of claim and the amended statement of claim is that Multigroup Distribution Services Pty Ltd (Multigroup) is a company which supplies transport services and which trades in Townsville under the name Discount Freight Services. The second respondent, Mr O'Neile, was at relevant times the Townsville manager of Discount Freight Services, and the third respondent, Mr Roberts, was the Queensland manager of Multigroup. Parker Freight Express Proprietary Limited (Parker Freight) was incorporated on 13 April 1999, and Mr Wayne Parker is the sole shareholder and one of the directors of Parker Freight. The essence of the claim which the ACCC brings is that Multigroup, through O'Neile, represented from 19 January 1999 onwards that if Parker acquired the use of two trucks and was in a position to carry freight between Townsville and Mount Isa, Multigroup would supply Parker, or a company that Parker was going to have an interest in, with regular and ongoing contracts for the haulage of freight between Townsville and Mount Isa. 4 It is alleged that on 26 May 1999 O'Neile represented that, subject to O'Neile getting approval from Multigroup head office, Multigroup would provide work to Parker in the nature of contracts for the haulage of freight on behalf of Multigroup between Townsville and Mount Isa. It appears from the statement of claim that, following a representation by O'Neile to head office that Multigroup supply contract work to Parker, it was decided by Multigroup that Multigroup would not supply work to Parker but would remain with its current carrier. 5 It is further alleged that, notwithstanding the communication of this decision to O'Neile on 17 August 1999, O'Neile again represented that Multigroup would commence providing Parker with contracts as soon as he had acquired the use of the trucks, and that Head Office had approved the awarding of contracts to Parker. There were representations to a similar effect in September 1999 by O'Neile. 6 So far as Mr Roberts is concerned, the allegation of his involvement appears in paragraph 23 of the statement of claim, which in its amended form reads: "23. In or about mid-November 1999 Multigroup represented to Parker that Multigroup would award contracts to Parker for the carriage of freight between Townsville and Mount Isa. PARTICULARS (i) The representation was verbal; (ii) It was made at the DFS Premises by Roberts on behalf of Multigroup to Parker; (iii) The words used by Roberts were similar to or to the effect of 'it will be good to get you on board'." It is pleaded in the statement of claim that: "24. The representation was misleading or deceptive or likely to mislead or deceive on the following grounds: (a) Roberts knew that Parker had expressed interest in obtaining contracts for the carriage of freight between Townsville and Mount Isa. PARTICULARS Roberts had received a copy of an internal memorandum dated 21 May 1999 from O'Neile. (b) Roberts knew that a Decision had been made by Multigroup in late May 1999. PARTICULARS Roberts had seen a copy of the internal memorandum dated 27 May 1999 from Pritchard to O'Neile. (c) at no time did Multigroup intend to discontinue its contractual arrangements with Followmount Transport Pty Ltd; (d) at no time did Multigroup intend to enter into any arrangement, contractual or otherwise, with Parker or Parker Freight Express Pty Ltd for the provision of work to Parker Freight Express Pty Ltd; (e) at no time post 27 May 1999 did O'Neile have any reasonable grounds for representing to Parker, Williams or Sheather that Multigroup intended to enter into any arrangement, contractual or otherwise, with Parker or Parker Freight Express Pty Ltd for the provision of work to Parker Freight Express Pty Ltd; (f) at no time post 27 May 1999 did Roberts have any reasonable grounds for representing to Parker that Multigroup intended to enter into any arrangement, contractual or otherwise, with Parker or Parker Freight Express Pty Ltd for the provision of work to Parker Freight Express Pty Ltd. 7 That paragraph is directed to the representation of Multigroup which is pleaded in paragraph 23. 8 The central question is whether the words alleged to have been used by Roberts, namely "it will be good to get you on board", can amount to a representation that Multigroup would award contracts to Parker or Parker Freight for the carriage of freight between Townsville and Mount Isa. 9 In relation to a strike out application, it is plain that the pleading is to be struck out only in clear cases. The principal authorities are collected in the judgment of McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at paragraphs 12 to 19. The well-established principles require that a pleading will only be struck out when it is clear that the case must fail. I am satisfied that this is such a clear case. In my opinion, the representation made by Roberts in November 1999, being a reference to the misrepresentation pleaded in paragraph 23 of the statement of claim, is not made out by the particulars which have been provided and cannot be made out by those particulars. It should be noted that the ACCC acknowledged in correspondence with the solicitors for Mr Roberts that all material facts sought to be relied on in the proceedings against Mr Roberts had been pleaded. 10 The second objection to the statement of claim concerns the pleading of causation. Paragraph 34 pleads that, by reason of the representations made by O'Neile and the representation made by Roberts in November 1999, Roberts was knowingly concerned in or party to the contravention of the first respondent. Paragraphs 35, 36, 37 and 38 are relevant to the question of causation and I will set them out in full: "35. As a consequence of Parker's reliance upon the representations referred to in paragraphs 12, 14, 20 and 21 Parker: (a) entered into a written Loan Agreement on 28 September 1999 (a copy of which will be provided on discovery) with the Aboriginal and Torres Strait Islander Commission; (b) purchased a company - Parker Freight Express Pty Ltd; (c) entered into a lease agreement (a copy of which will be provided on discovery) on or about 17 October 1999 with Sargent Truck Lease Pty Ltd for 2 trucks at a rate for each truck of $655 per week plus 18c per km in excess of 1000km per week; (d) made application in writing (a copy of which will be provided on discovery) to the Commonwealth Department of Employment, Workplace Relations and Small Business for and received funding from the Aboriginal Employment Development Fund in the sum of $54,000 ('AED Funding') for the provision of wages subsidy for 9 indigenous employees; (e) engaged employees; and (f) purchased goods and services to enable the conduct of the transport (freight) service undertaken by Parker Freight Express Pty Ltd. 36. As a consequence of Parker's reliance upon the representation referred to in paragraph 23 Parker: (a) Continued operating the business of Parker Freight Express Pty Ltd until January 2001; (b) Continued incurring debts in the name of Parker Freight Express Pty Ltd until January 2001; (c) Refrained from ceasing the business of Parker Freight Express Pty Ltd until January 2001; (d) Was unable to generate sufficient income to repay the loan to ATSIC. 37. As a further consequence of Parker's reliance upon the representations referred to in paragraphs 12, 14, 20, 21 and 23, Parker has or will suffer loss or damage, particulars whereof are as follows: (a) Liability to repay the Aboriginal and Torres Strait Islander Commission Business Development Program loan in the amount of $50,000; (b) payment of accrued interest on the loan amount of $50,000 calculated at 6.55% per annum; and (c) payment to the Aboriginal and Torres Strait Islander Commission of legal costs incurred by Aboriginal and Torres Strait Islander Commission in establishing the loan. 38. As a further consequence of Parker's reliance upon the representations referred to in paragraphs 12, 14, 20, 21 and 23, Parker Freight Express Pty Ltd has or will suffer loss or damage, particulars of which are as follows: (a) Australian Taxation Office - PAYE tax: $23,610.62 (b) Accrued wages to 1 February 2000: 15,293.17 (c) Sunsuper: 3,943.97 (d) WorkCover: 4,493.96 (e) Tropic Distributors: 18,251.79 (f) Optus Mobile telephone charge: 355.00 (g) Sargent's Truck Rental: 9,378.92 (h) AED Funding: 54,000.00* * plus interest to be particularised prior to hearing 11 It is plain that paragraph 35 alleges that the entry into the written loan agreement on 28 September 1999; the purchase of the company; the entry into the lease agreement on 17 October 1999; the application for AED funding in the sum of $54,000 for wages subsidy for nine indigenous employees; the engagement of employees; and the purchase of goods and services to enable the conduct of the freight service undertaken by Parker Freight were all as a consequence of, and in reliance on, the representations made by O'Neile. 12 Paragraph 36 is directed specifically at the representation made by Roberts, and it is said that, as a consequence of that representation, Parker continued operating the business of Parker Freight; incurred debts in the name of Parker Freight; refrained from ceasing the business of Parker Freight until January 2001 (which should be 2000); and was unable to generate sufficient income to repay the loan to ATSIC. 13 This unhappily expressed paragraph can be viewed as an allegation that, because of the promise of work by Multigroup to Parker or to Parker Freight made by Roberts in November 1999, the company continued to operate and incur debts until January 2000. However, those debts are not identified or particularised in either paragraph 37 or 38. The allegations in paragraph 37 are, in my opinion, unsustainable, at least insofar as they allege that loss or damage suffered or incurred prior to the making of the Roberts representation was loss or damage sustained as a consequence of that representation. I ask rhetorically, how can it be that Roberts' misrepresentation in November 1999 was a cause of the liability of the loan which, by paragraph 35 of the statement of claim, is said to have been entered into on 28 September 1999. 14 It appears that paragraphs 38(g) and (h) attempt to pick up liabilities which, on the face of the pleading in paragraph 35, pre-date Roberts' November representation. Counsel for the ACCC has indicated that it may be possible to allege an alternative case that Roberts is liable for the entirety of what is said to be the loss or damage suffered by Parker or by Parker Freight or, alternatively, Roberts is liable for any loss or damage which was incurred or suffered after the making of the representation in mid-November 1999. That is not what the pleading currently pleads. 15 The pleadings in paragraphs 36, 37 and 38 are deficient in my opinion. They fail to identify any causal connection between the impugned conduct and the loss or detriment pleaded. It is, of course, necessary to identify a causal connection between the impugned conduct and such loss as is said to have been suffered by the applicants. I have been referred to McKellar v Container Terminal Management Services Ltd (1999) 156 ALR 409 at 419, par 26; Bond Corporation v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222; and Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522, particularly at 42,679 and 42,684. 16 This is not a case such as in Henville v Walker (2001) 75 ALJR at 1410. There, prior to the suffering of any loss, a real estate agent had given a wrong estimate as to the likely selling price of home units which the appellants were considering developing. Hayne J said at page 1436, par 155, of the ALJR report: "It is now not disputed that, by giving a wrong estimate of the likely selling price of the home units which the appellants were considering building, the respondents misled or deceived the appellants in contravention of Pt V of the Trade Practices Act 1974 (Cth) (the Act). (As the reasons of other members of the Court reveal, it is not necessary to distinguish between the corporate and the individual parties.) It is equally clear that, by making a wrong estimate of the likely costs of the development, the appellants miscalculated the probable financial outcome of their proceeding with it. Both of these events, the wrong estimate of price and the wrong estimate of costs, form part of, and played a role in, the history that lies behind the fact that the appellants lost more than $300,000 on the project. The question is to what extent, if any, did the appellants suffer loss 'by' (that is, caused by) the respondents' misleading conduct?" That question is answered by Hayne J at page 1436, par 159 where he said: "In the present case, the respondent's contravention of the Act can be seen to have caused the appellants' damage because the appellants relied on the respondents' misleading or deceptive conduct in deciding to proceed with the project. The amount of the loss ultimately suffered by the appellants was, however, brought about by the combination of circumstances of which the respondents' misleading and deceptive conduct was only one factor. …" 17 His Honour concluded that the appellants were entitled to recover the total amount lost. Here the question of causation is whether loss and damage suffered prior to the making of Roberts' representations can be attributed to Mr Roberts. In my opinion, that is not possible. It may be that if a person makes a misrepresentation which has the effect of causing damage or incurring loss after that representation, for example, by continuing to operate an unprofitable business or by incurring further debts in the operation of that business, that loss or damage may be said to be conduct caused by the misrepresentation. 18 However, this is not the situation, in my opinion, in respect of loss or damage in this case that pre-dates the relevant conduct. Consequently, the statement of claim is deficient. Further, the pleading fails to plead material facts which establish any causal connection between Roberts' misrepresentation and any loss or damage suffered by Parker or any loss or damage suffered by Parker Freight. 19 It seems to me that, in the circumstances, the appropriate order to make is simply to strike out the amended statement of claim as against the third respondent as alleging no statement of claim. The respondent on the motion is to pay the costs of the applicant on the motion, to be taxed if not agreed.