Arms v WSA Online Ltd

Claims made under the Trade Practices Act 1974 ("the Act") 3 The claims made against the second respondent under the Act are brought pursuant s 75B(a) and s 75B(c) which allow this Court to grant relief for a contravention of Part V of the Act against a persons who; '(a) has aided, abetted, counselled or procured the contravention;[or] (b) … (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; …' The first respondent is alleged to have contravened s 52 and s 53 of the Act. Section 52(1) provides: 'A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.' Section 53 so far as is relevant provides: 'A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services: (a) falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; (b) … (c) represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have; …' 4 The relevant part of the pleadings is set out below, sub-pars 7(g) and (h) being no longer pressed against the second respondent; 'THE REPRESENTATIONS 7. In order to induce the Applicant to enter the Agreement and to continue making payments pursuant to the Agreement the Second and Third Respondents or one or other of them on behalf of the First Respondent stated to the Applicant and thereby represented and warranted: (a) that the First Respondent had had extensive experience and success in the design and construction of high quality interactive websites designed to securely process and manage business to consumer transactions across the internet for use in applications such as contemplated by the Applicant; (b) that the First Respondent had the experience know how and capability to design and construct a high quality interactive website for the Applicant capable of receiving orders from visitors to the Applicant's website ("the Visitors") and processing such orders to the wineries which were the Applicant's customers ("the Wineries") and receiving and making payments from the Visitors directly to the Wineries by all major credit cards; (c) that the transaction fees which would be payable by the Applicant in respect of each sale by the Wineries to the Visitors conducted via the website would be between 2 and 2.5% of the sale price and that as the Applicant had negotiated with Wineries a commission of 5% of the sale price of all sales conducted via the Applicant's website the Applicants business if transacted via the web site to be designed and constructed by the First Respondent would be viable; (d) that the first Respondent had sourced a financial transactions product being the ANZeGateway product from the ANZ Bank ("ANZ eGateway") which would securely process and manage all the orders and payments from the Visitors to the Wineries across the internet via the Applicants web site in accordance with the Applicants requirements set out in 7(a), (b) and (c) above; (e) that the ANZeGateway product was perfect for the Applicants requirements set out in paragraphs 7(a), (b), (c) and (d) above; (f) that the Applicants website would be ready to launch and fully operational using the ANZeGateway by 1 July 2000 and would be able to perform the Applicants requirements set out in paragraphs 7(a), (b) (c) and (d) above on that date; (g) … (h) …; and (i) that using the website designed and constructed by the First Respondent for the Applicant, the Applicant would be able to earn additional revenue from designing web sites for the Wineries. THE REPRESENTATIONS 8. Further, the Second and Third Respondents, by making the Representations on behalf of the First Respondent thereby represented that they and it had reasonable grounds for making the Representations within the meaning of s51A of the Act. 9. The Representations were made in trade and commerce … MISLEADING & DECEPTIVE CONDUCT 12. The Representations were false and misleading and untrue. PARTICULARS (a) the First Respondent had not had extensive experience and success in the design and construction of high quality interactive websites designed to securely process and manage business to consumer transactions across the internet for use in applications such as contemplated by the Applicants; (b) the First Respondent did not have the experience, know how and capability to design and construct a high quality interactive website for the Applicant capable of receiving and processing orders from Visitors and processing orders to Wineries and receiving and making payments from the Visitors directly to the Wineries by all major credit cards; (c) the transaction fees payable by the Applicant in respect of sales by Wineries conducted via the Applicant's website through Diners Club and American Express credit cards would be significantly higher than 2 to 2.5% of the sale price by reason of the fact that the Applicant would have to be the ANZ Merchant for the purpose of transacting the sales by the Wineries to the Visitors and the Applicant would have to pay the credit card companies the merchant fees on each sale and therefore the Applicant's business could not be transacted viably via the website designed and constructed by the First Respondent using the ANZeGateway product; (d) the ANZeGateway product was not suitable to securely process and manage the orders and payments from the Visitors to the Wineries across the internet via the Applicants website; (e) the ANZeGateway product was not perfect for the Applicants requirements set out in paragraphs 7(a), (b), (c) and (d) above; (f) the First Respondent could not and did not have the Applicants website ready to launch and fully operational using the ANZeGateway product and able to perform the Applicants requirements set out in paragraphs 7(a), (b), (c) and (d) above by 1 July 2000; (g) the Applicants' web site was not fully operational using the ANZeGateway product and able to perform the Applicants requirements set out in paragraphs 7(a), (b), (c) and (d) as at 29 June 2000; (h) as at 29 June 2000 it was not appropriate and necessary to book and proceed with the planned advertising and promotion of the Applicants web site as the site did not perform to the Applicants requirements set out in paragraphs 7(a), (b), (c) and (d) above; and (i) the Applicant was not able to use the website designed and constructed by the First Respondent to design web sites for the Wineries as the websites designed by the Applicant always referred the Wineries' website visitors back to the Applicant's website. 13. By reason of the matters in paragraphs 7 to 12 hereof in making the Representations and delivering up the Applicant's web site in the condition described and with the performance characteristics described the First Respondent engaged in conduct in trade and commerce which: (a) was misleading and deceptive or which was likely to be so in contravention of s52 of the Act; and (b) falsely represented that the Applicant's web site designed and constructed by the First Respondent was of a standard or quality or composition which it was not in contravention of s53(a) of the Act; (c) falsely represented that the Applicant's website designed and constructed by the First Respondent had performance characteristics that it did not in contravention of s53(c) of the Act. 14. Further the Second and Third Respondents engaged in the conduct referred to in paragraphs 7 to 12 hereof on behalf of the First Respondent and in consequence have thereby: (a) aided, abetted, counselled, or procured the contraventions of ss 52, 53(a) and (c) of the Act; (b) being [scil. been] directly or indirectly knowingly concerning [scil. concerned] in or party to the contraventions of ss 52, 53(a) and (c) of the Act. 15. By reason of the Respondents' conduct in contravention of the Act the Applicant has suffered and continues to suffer loss and damage. …'

Have the allegations of implication in contraventions of the Act been properly pleaded against the second respondent? 5 A preliminary question arises as to whether the alleged breaches of s 52 have been properly pleaded. If the pleadings disclose no arguable cause of action against WSA, it follows that accessorial liability cannot attach to the second respondent by reason of "knowing involvement" in contraventions by WSA. The first issue is thus whether the pleading adequately alleges the falsity of each of the alleged representations by WSA that the applicant claims were misleading or deceptive or false. The representations in pars 7(a), 7(b) and 7(e) are mirrored and negatived in the particulars at pars 12(a), 12(b) and 12(e). There is nothing objectionable in this. Paragraph 7(c) appears to contain two alleged representations, the first being "that the transaction fees which would be payable by the Applicant in respect of each sale by the Wineries to the Visitors conducted via the website would be between 2 and 2.5% of the sale price … ." The "second representation" is "… that as the Applicant had negotiated with Wineries a commission of 5% of the sale price of all sales conducted via the Applicant's website the Applicant's business if transacted via the web site to be designed and constructed by the First Respondent would be viable". Despite the use of "would", this does not appear to be pleaded as a representation as to the future events, presumably because the ANZ product already existed and the terms of its operation were able to be known. The particulars in sub-par (c) of the particulars appended to par 12 do not demonstrate the falsity of the second representation in sub-par 7(c). Sub-paragraph (d) of the particulars to par 12 does not, in terms, clearly falsify the representation pleaded in sub-par 7(d). The representations alleged in sub-par 7(f) and (i) seem to be as future matters, although sub-par 7(i) does not make clear whether the representation is as to future revenue, or the applicant's business having the capacity (by some unspecified future date) to earn such revenue. Their falsity does not appear to be adequately demonstrated by sub-pars (f) and (i) of the particulars appended to par 12. As French J observed in Revian v Dasford Holdings Pty Ltd [2002] FCA 676 at [19]: 'Representations of a promissory or predictive nature are not falsified by the failure of the promise to be honoured or the prediction to come true.' The alleged representations here as to the day on which the site would be ready and the potential for future income streams are comparable with the alleged representation made to lessees in Revian that a pharmacist would relocate to a new shopping centre: 'The asserted representation that a chemist would relocate to the shopping centre is not relevantly falsified by the statement that no chemist had ever relocated to the shopping centre. There must be some implied representation such as a representation that there were reasonable grounds for making the statement which is falsified by the absence of such grounds. The proof thereof may be aided by the application of s 51A.' (ibid at [17]) In my view, the observations of French J apply with equal force to the present pleadings. At present pars 7(f) and (i) coupled with pars 12(f) and (i) only allege that promised or predicted events did not, in the result, come to pass. Allegations in this form do not found an action under s 52. 6 The central contention advanced on behalf of the second respondent is that the applicant has not adequately set out in his pleadings facts which, if made out, would disclose the cause of action alleged under s 75B which is discussed at [3] above. Keifel J, in Batten v CTMS Ltd [1999] FCA 1576 at [29], indicated as follows what is required to establish "knowing involvement"; 'That leaves the question whether the Minister could be said to have been "knowingly concerned" in the contraventions as alleged. It must be recalled that this refers, again, to involvement in a contravention. The applicants' case goes so far as to allege some knowledge and an interest in an overall plan, but not all aspects of how it was secured. Mere knowledge of the prospect that a contravention will, or has, occurred will not suffice. It must be shown that the respondent in question had knowledge of the facts which establish the contravention and that they acted in some positive way in connection with it: Bell v Australasian Recyclers (WA) Pty Ltd (1986) ATPR 40-644; 47, 222; Sent & Petres & Collier v Jet Corporation of Australia Pty Ltd (1984) 2 FCR 201; R v Tannous (1987) 10 NSWLR 303, 307-8.' (emphasis added) 7 The only particulars given as to what, allegedly, was known or actively done by the second respondent are contained in the applicant's further and better particulars dated 16 August 2002 which are in these terms: 'The Second Respondent's (Mr Houghton's) representation was partly in writing and partly oral. In late January 2000 and early February 2000, the Applicant (Arms) had at least 2 meetings with James Student and James Houghton which began at the offices of WSA Online, and which were then conducted at the Fringe Cafe on the corner of Shakespeare Grove and Acland Street in St Kilda (the Cafe). The first of these meetings was held in the last week of January 2000. During the course of the meetings between Arms, Mr Student and Mr Houghton, Arms discussed with Mr Houghton the nature of Arm's business and Mr Houghton said, in substance, to Arms as follows: (a) He was aware of a financial transactions product called ANZeGate, which would be "perfect" for the Arms Business. (b) The ANZeGate product would enable the secure processing and management of orders from visitors to the Business' website direct to the winery and the payment from the visitor direct to the winery via the Business' website. (c) The visitor to the Website would make a purchase, the transaction would be cleared and the order placed with the winery that delivers direct to the customer. Mr Houghton explained to Arms that the payment would be automatically deposited into the wineries' accounts with a maximum of 2.5% having been already deducted for transaction fees. (d) The ANZeGate would facilitate payment by visitors to the Business' website to the wineries by all major credit cards. (e) The transaction fees payable in respect of the use of credit cards by visitors to the Business' website would be paid by the wineries, and that the transaction fees payable by the wineries would be between 2 and 2.5%. At a further meeting, which Arms attended at the Cafe in approximately mid-February 2000 with James Houghton and James Student, Arms advised both Mr Houghton and Mr Student that the on-line transaction facilitation was crucial to his business and Arms needed to know how this would work so that Arms could advise the wineries about this. At this meeting, Mr Houghton gave Arms a document, which he said summarised how the ANZeGate product would operate. This document may be inspected at the offices of the Applicant's solicitors. Mr Houghton said, in substance, in reference to this document/memo that: (f) ANZeGate would allow e-commerce purchases to be cleared directly into the bank account of the relevant winery; (g) each of the member wineries would be individual merchants for the purposes of credit card transactions; (h) each of the wineries could go online to review their transactions at any time and all transaction reports will flow via WSA; (i) wineries could be added to the system by simply filling in a form and paying a small set-up fee; (j) all transactions would be cleared directly into the wineries' business' bank account without the set-up costs associated with setting up single client accounts; and (k) WSA would control the transactions, which were conducted via Arms' website. At a meeting between Arms, James Houghton and James Student in approximately mid-February 2000 at the Cafe, Mr Houghton and Mr Student gave Arms a further document titled "Auscellardoor". This document may be inspected at the offices of the Applicant's solicitors. They said that this document was an outline of the benefits for Arms to discuss with wineries for them entering agreements with Arms in relation to his business. Arms discussed this document with Mr Houghton and Mr Student, and they both told Arms that: (l) the wineries would not be required to process credit card transactions as all orders would already be cleared before the wineries received the money; and (m) the money for each sale would be deposited straight into the wineries' bank account. In approximately mid-March 2000, Arms had a meeting with James Student and James Houghton at the Cafe at which they gave Arms a document. This document may be inspected at the offices of the Applicant's solicitors. Arms made notes on the reverse of the last page of matters, which were discussed at the meeting. Mr Houghton said to Arms that: (n) he was confident by 2003 Auscellardoor could be turning over $4 million per annum; (o) using the website constructed by WSA, Arms would be able to set up a separate and unique website for wineries which would link into Arms' website for transactions only and that Arms would be able to attract a set-up fee of around $250 with additional monthly charges between $25 and $50 for the services provided; (p) through operating the website designed by WSA, Arms would have a competitive advantage over retail sites; (q) the website developed by WSA for the Business would develop an email list to provide regular communication about the Business, wineries, new offers, and could be the basis of a future loyalty rewards program; and (r) the website would be operational by mid-May 2000. Mr Houghton went through the flow diagrams on page 5 of the document and in that context explained to Arms that the visitor to the website would make a purchase, the transaction would be cleared and the order placed with the winery who delivers direct to the customer. Mr Houghton explained to Arms that the payment would be automatically deposited into the wineries' accounts with a maximum of 2.5% having been already deducted for transaction fees. In March 2000, Arms met with James Student and James Houghton at the Cafe. At this meeting, Mr Student and Mr Houghton gave Arms the Trade Presentation Kit which represented the completion of Phase 1 of the services to be provided by WSA and which was to be used by Arms in promoting his business and his website to wineries. The Trade Presentation Kit included a form for the wineries to complete their bank details for the purpose of depositing money from sales into their accounts, as well as a brochure and a mock up of the website. The brochure may be inspected at the offices of the Applicant's solicitors. In addition, Arms had created some standard form 'agreement' documents, which were to [scil. be] the basis of his relationship with each of the wineries Arms signed up to the Business. This document may be inspected at the offices of the Applicant's solicitors. Arms showed this document to James Student and James Houghton and asked them both if there were any further details Arms would require from the wineries in order to effectively run his Business and operate his website. Mr. Houghton told Arms there was not.' 8 These particulars go most, if not all, of the way to answering the second respondent's criticism that the pleadings do not identify with sufficient certainty which representations are alleged to have been made by him and which by the third respondent. This uncertainty is said to arise from the imprecise language of par 7 of the statement of claim that "the Second and Third Respondents or one or other of them on behalf of the First Respondent stated …". The applicant has made plain in oral submissions that it is pressing against the second respondent all allegations under par 7, with the exception of sub-pars 7(g) and (h). He has set out the substance of conversations said to have constituted those representations. Accordingly, it no longer seems open to the second respondent to claim that he does not know the case he has to answer in this respect. 9 However, the question has also been raised whether the further and better particulars given are capable of sustaining each of the representations alleged in par 7 of the statement of claim: · it is apparent that nothing in these further and better particulars goes to the allegation in sub-par 7(a) that it was represented that the first respondent had "extensive experience" in the field. That allegation therefore cannot be maintained on the present state of the pleadings; · the allegation in sub-par 7(b) appears to be made out by sub-pars (b) and (d) of the further and better particulars based on the first meeting in the last week of January 2000; · the allegation in sub-par 7(c) appears to be made out by sub-pars (c) and (e) of the further and better particulars except for the second discrete allegation in 7(c) that the business would be viable, which would appear to be substantiated, at least partially, by the further and better particulars at sub-pars (n) and (p); · the allegation in sub-par 7(e) appears to be made out by the further and better particulars in general and at sub-par (a) in particular; · the allegation as to representations regarding a 1 July 2000 "launch date" and the functionality of the applicant's website given at sub-par 7(f), does not appear to correlate with the allegation at (r) of the further and better particulars that the second respondent represented that the site would be operational by "mid-May 2000". However, that representation, if proved, would, I consider, sustain the allegation in sub-par 7(f) of the statement of claim; · the allegation at sub-par 7(i) is not clearly substantiated by sub-par (o) of the further and better particulars, which appears to be referable to the establishment of subsidiary business websites for individual wineries, which I take to be different from the provision of "design" services which seems to be the subject of the representation pleaded at sub-par 7(i) of the statement of claim. When account is taken of the concerns expressed at [5] above regarding representations as to future events and my reservations about the correspondence between certain sub-paragraphs of par 7 and the relevant items of the further and better particulars, it will be clear that sub-pars 7(a), 7(g) and 7(i) of the statement of claim in their present form cannot stand. 10 Whether the remaining pleadings disclose an arguable case against the second respondent or are liable to be struck out is another question. However, it would appear that the applicant has either abandoned the claim of "knowing concern" under s 75B(c) or effectively concedes it is not at present properly pleaded. In the further and better particulars dated 16 August 2002, referred to above, the applicant stated; 'Paragraph 14 does not allege that the Second Respondent knew: (i) that the representations were false; or (ii) the first respondent had no reasonable grounds for making the representations.' That concession alone would appear to dispose, in terms, of the basis for liability provided by s 75B(c). I cannot understand how an applicant could be knowingly involved in the making of false or misleading representations without knowing that the representations were false or there were no reasonable grounds for making them. 11 The issue remaining is what the applicant must allege the second respondent did in order to properly plead that he "aided, abetted, counselled or procured" the breaches of the Act. If the applicant must plead knowledge of falsity or absence of reasonable grounds on the part of the second respondent, then, in light of the concession discussed above, liability under s 75B has not been imputed to that respondent. That result, I consider, is dictated by the observations of the High Court in Yorke v Lucas (1985) 158 CLR 661 where, at pp 666-8, Mason ACJ, Wilson, Deane and Dawson JJ said of s 75B; 'Turning first to par.(a), the appellants immediately encounter the difficulty that the words used, "aided, abetted, counselled or procured", are taken from the criminal law where they are used to designate participation in a crime as a principal in the second degree or as an accessory before the fact. Both in the case of felonies where the principal offender and the secondary participant commit separate offences, and in the case of misdemeanours where no distinction is drawn between the two, a person will be guilty of the offences of aiding and abetting or counselling and procuring the commission of an offence only if he intentionally participates in it. To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime. So much was affirmed recently in Giorgianni v. The Queen (1985) 59 ALJR 461; 58 ALR 641 where the relevant authorities were examined. That was a case in which the appellant had been convicted of culpable driving under s.52A of the Crimes Act 1900 (N.S.W.) in reliance upon s.351 of that Act. The latter section provides that a person who aids, abets, counsels or procures the commission of any misdemeanour may be proceeded against as a principal offender and was held to be declaratory of the position at common law. The offence of culpable driving under s.52A is an offence of strict liability which … requires no proof by the prosecutor of any mental state on the part of the accused. Nevertheless it was held that to have aided and abetted or counselled and procured the offence of culpable driving the appellant must have intentionally participated in that offence and to have done so must have had knowledge of the essential matters which went to make up the offence … Those matters included the defective condition of the brakes upon the vehicle being driven, because the culpable driving alleged consisted of the driving of that vehicle with defective brakes. Proof of such knowledge on the part of the principal offender was, however, not part of the prosecution case because the principal offence was one of strict liability. If par.(a) of s.75B imports the requirements of the criminal law, it is clear in the light of Giorgianni v. The Queen that Lucas [the natural person respondent] could only be brought within that paragraph if he intentionally aided, abetted, counselled or procured a contravention by the Lucas company of s.52 of the Trade Practices Act. Upon the findings of the trial judge, however, Lucas lacked the knowledge necessary to form the required intent. A contravention of s.52 involves conduct which is misleading or deceptive or likely to mislead or deceive and the conduct relied upon in this case consisted of the making of false representations. Whilst Lucas was aware of the representations - indeed they were made by him - he had no knowledge of their falsity and could not for that reason be said to have intentionally participated in the contravention. The appellants sought to meet this difficulty by submitting that s.75B(a) should not be construed in accordance with the requirements of the criminal law and that no intent was necessary in order to constitute a person an aider, abettor, counsellor or procurer within the meaning of that paragraph. A contravention of s.52, it was said, requires no intent and it follows that there is no reason why intent should play any part in secondary participation in a contravention of that section. The nature of the prohibition imposed by s.52 is, however, governed by the terms in which it is created and the context in which it is found. Section 75B, on the other hand, in speaking of aiding, abetting, counselling or procuring, makes use of an existing concept drawn from the criminal law and unless the context requires otherwise, there is every reason to suppose that it was intended to carry with it the settled meaning which it already bore. Cf. Barker v. The Queen (1983) 153 CLR 338. Nor is there any reason to suppose that because the application of s.75B may occur in conjunction with a provision such as s.52, which requires no intent, it must also be construed so as to dispense with intent as an element of aiding, abetting, counselling or procuring. In Giorgianni v. The Queen it was held that secondary participation required intent based upon knowledge, notwithstanding that the statutory provision creating the principal offence imposed strict liability.' 12 Yorke v Lucas, quite properly, continues to be applied by this Court when examining knowledge as an element of liability under s 75B: see, for example, Australian Competition & Consumer Commission v Bio Enviro Plan Pty Ltd [2003] FCA 232 at [26]-[29] per RD Nicholson J; Leisure Boating Club (Roseville) Incorporated v Q-Corp Marine Pty Limited [2003] FCA 199. Given this clear authority, the concessions described at [10] above are entirely fatal to the applicant's case as pleaded under the Act. If the applicant lacked knowledge that the alleged representations were false or without reasonable foundation, he cannot be fixed with liability under s 75B and is not properly joined as a respondent on the current state of the pleadings.

Should the applicant be granted leave to amend? 13 The applicant has sought leave to file an amended statement of claim that does little more than add allegations under the Fair Trading Act 1999 (Victoria) against each of the respondents. If leave is granted, the relevant proposed amendments to the pleadings would be as follows (changes emphasised); '8. Further, the Second and Third Respondents, by making the Representations, on behalf of the First Respondent thereby represented that they and it had reasonable grounds for making the Representations within the meaning of s 51A of the Act and/or s.4 Fair Trading Act 1999. … 13. By reason of the matters in paragraphs 7 to 12 hereof in making the Representations and delivering up the Applicant's website in the condition described and with the performance characteristics described the FirstRespondents engaged in conduct in trade and commerce which: (a) was misleading and deceptive or which was likely to be so in contravention of s52 of the Act and/or s.9 Fair Trading Act 1999; and (b) falsely represented that the Applicant's website designed and constructed by the First Respondent was of a standard or quality or composition which it was not in contravention of s53(a) of the Act and/or s.12(a) Fair Trading Act 1999; [and] (c) falsely represented that the Applicant's website designed and constructed by the First Respondent had performance characteristics that it did not in contravention of s53(c) of the Act and/or s.12(e) Fair Trading Act 1999. … 15. By reason of the Respondents' conduct in contravention of the Act and the Fair Trading Act 1999 the Applicant has suffered and continues to suffer loss and damage.' Curiously, given the concessions made in respect of the knowledge of the second respondent, the proposed amended statement of claim does not contain any emendation of par 14. 14 The second respondent contends that the applicant should not be allowed to make the amendments for which leave has been sought, arguing, in essence, that if the applicant has not, after more than two years, contrived properly to impute to him knowledge of the falsity of the alleged representations, there is no reason to believe that he will be capable of doing so now. In so far as the second respondent's knowledge may be a critical issue, the applicant submitted in reply that it is enough to allege that the representations were made, that they were false, and that the second respondent made them. The inference is open, it is contended, that the second respondent knew of their falsity, and the ultimate resolution of this issue will turn on what is elicited from him in cross-examination. Presumably, if the second respondent is not called to give evidence, the applicant will seek to support that inference by reference to Jones v Dunkel (1959) 101 CLR 298. For the second respondent, however, it is claimed that an applicant is usually required to point in the pleadings to some circumstance from which knowledge on the part of a respondent can be inferred. This proposition accords with my own view. The applicant's contention that it may merely plead surrounding circumstances without furnishing particulars of the matters said to give rise to the inference that a respondent knew of the falsity of the representations does not appear to be consonant with the principles identified at [2] above. 15 That said, if leave to amend were granted, it is not apparent to me that the second respondent's state of mind would be at all relevant to a claim under the Fair Trading Act 1999, although it may be claimed, by way of defence, that he had acted as a mere conduit of information given to him by his employer. If the second respondent is alleged, by his actions, to have breached the Fair Trading Act and he is not alleged to be liable as an accessory under the Trade Practices Act (as has effectively been conceded), his state of mind is no longer a relevant matter which the applicant must plead. 16 Delay is the only substantial reason which was pressed for refusing the applicant leave to amend. It is a regrettable fact that some proceedings before this Court, for a variety of reasons, take a number of years to come to hearing. I am not aware of any case where the lapse of time from the filing of originating process alone has been held to be sufficient to deny leave to amend. Nor has any been cited to me in argument. Even after more than one attempt has been made to disclose a cause of action, this Court has granted further leave to amend provided that the other side can be suitably compensated in costs; see, eg Elliott v Seymour (No 2) [2000] FCA 694 and the observations of Weinberg J in McKellar (supra) at [119] and [120]. 17 I consider that, in the present case, the applicant should be given leave to amend his pleading, but not merely to conform with the amended statement of claim currently proposed. Any amended statement of claim should also remove all attempts to charge the second respondent with liability under the Act unless it includes a clear indication of the basis on which knowledge of the falsity of particular representations is imputed to him. In particular, all references to the second respondent in par 14 should be removed in light of concessions contained in the further and better particulars. If the same concession is to be made in respect of the state of knowledge of the third respondent, as I suspect it must be, then that paragraph should be removed entirely. The further and better particulars should, in respect of the second and third respondents at least, be incorporated into the body of the pleadings. As well, some of the alleged representations may need to be reformulated in light of the concession by Counsel for the applicant that some sub-paragraphs presently contain multiple or "rolled up" allegations of representations. For example, sub-par 7(c) is clearly appropriate to be split into separate allegations of the two representations there pleaded.

Other allegations: breach of warranty, breach of agreement and negligent misstatement 18 The second respondent also complains that nothing has been pleaded which is sufficient to establish a case against him for breach of warranty. On my reading, the pleadings do not charge the second respondent with any liability whatever under this head, although it incorporates by reference acts done by all of the respondents and alleges that those acts resulted in certain breaches of warranties. Obviously warranties by the first respondent are capable of breach by the acts or omissions of the first respondent's employees, including the second respondent. However, the warranties are only pleaded as having been made to the applicant by or on behalf of the first respondent. It is therefore unnecessary further to canvass this issue. It is common ground between the parties that the claim for breach of agreement is pursued only against the first respondent. 19 I am able, therefore, to confine this part of these reasons to the claim of negligent misstatement. The applicant asserts that allegedly negligent misstatements by the second respondent were made in the course of business discussions between the applicant and the second and third respondents. The facts as alleged would appear, prima facie, to fall within these observations of Barwick CJ in Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556 at pp 572-3: 'It seems to me, therefore, that whenever a person gives information or advice to another, whether that information is actively sought or merely accepted by that other upon a serious matter, and particularly a matter of business, and the relationship of the parties arising out of the circumstances is such that on the one hand the speaker realizes or ought to realize that he is being trusted, particularly if he is thought by the other to have, or to have particular access to, information or to have a capacity or opportunity to exercise judgment or both as to the matter in hand, to give the best of his information or advice as a basis for action on the part of the other party and it is reasonable in the circumstances for the other party to seek or accept and in either case to act upon that information and advice the speaker, choosing to give the information or advice in such circumstances, comes under a duty of care both to utilize with reasonable care the information and sources of information at his disposal and to employ with reasonable care what capacity he has for judgment in relation to the matter and to exercise reasonable care in the expression of what he is prepared to convey by way of information or advice.' Insofar as an actionable misstatement may be made honestly but carelessly, the issue of the second respondent's actual state of knowledge as to the facts represented does not directly arise under this ground: Hedley Byrne & Co Ld v Heller Partners Ltd [1964] AC 465. It is also clearly settled that the duty may arise in relation to statements which have been volunteered and not merely those made following a request: San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340. However, an applicant pleading negligent misstatement must either allege an intention on the respondent's part to induce reliance (in which case evidence of knowledge, in the sense of subjective intent, will plainly be necessary), or facts tending to establish that the applicant's reliance was reasonable. 20 Two representations in the present case are, when considered as allegedly negligent misstatements, in a different category from the others. The second representation in 7(c) and the representation in 7(i) go to the future viability and profitability of the business. On the face of the pleading, no foundation has been laid for establishing reliance on statements by the second respondent as a mere employee going to the future viability or profitability of the website. No fact has been pleaded to suggest that the second respondent had particular skills or experience in conducting internet-based businesses, as opposed to designing and constructing websites. The claim of reliance on a website designer's representations as to the future profitability of an internet business raises echoes of Norris v Sibberas (1990) VR 161 where the plaintiff claimed to have relied on optimistic statements made by a real estate agent about the future prospects of a business which she had been engaged to sell. In that case, the appellant agent did not possess, or purport to possess, the expertise in business planning of an accountant, although she did have experience of the motel market and motel management. It was from the latter, narrower, perspective alone, it was held, that reasonableness of reliance on her representations as to financial viability had to be assessed. Here it has not been alleged that the second respondent professed any relevant experience in businesses that trade over the internet, as opposed to construction of a site to facilitate the conduct of such a business. The distinction is neither subtle, nor artificial, and it appears to me that it is crucial to the applicant's case in negligent misstatement against the second respondent. Insofar as it is sought to erect that case on par 7(i) and what I have referred to as the second representation in 7(c), that part of the claim against the second respondent should be struck out unless additional facts with appropriate particulars can be pleaded to provide a foundation for claiming that the applicant reasonably relied on those statements as made by the second respondent. The remaining alleged representations at pars 7(a), (b) (c), (d), (e) and (f) would appear to be matters presumptively within the expertise of a website designer specifically engaged to design and construct the applicant's site and, prima facie, they are representations, upon which, if proved, the applicant could reasonably have relied. It appears to me that the applicant's case based on negligent misstatement is, at least in part, arguable.

Conclusion 21 It will be apparent from the examination undertaken above that the statement of claim is defective in several respects. However, it may be possible to overcome all or some of those defects by removing certain allegations against the second respondent, by pleading additional material facts and by adding a claim under the Fair Trading Act which should cause the respondents no material prejudice which cannot be compensated by costs. I shall therefore order that the applicant have leave to amend his statement of claim. The second respondent's notice of motion will be stood over until after that has been done to allow that respondent an opportunity to consider whether those of his objections which I have upheld have been overcome. In accordance with the usual rule, the applicant would have to pay the respondent's costs thrown away as a result of the amendment for which I shall grant leave. However, to afford an opportunity for full argument, I shall reserve those costs and the costs of the applicant and the second respondent of the hearing on 16 May 2003. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.

Counsel for the Applicant: Mr P Riordan

Dates of Hearing: 23 April and 16 May 2003

Date of Judgment: 8 August 2003