Australian Competition and Consumer Commission v Craftmatic Australia Pty Ltd

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website.

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: CRAFTMATIC AUSTRALIA PTY LTD ACN 108 312 983

REASONS FOR JUDGMENT 1 The Australian Competition and Consumer Commission (ACCC) has instituted proceedings for declaratory, injunctive and ancillary relief against the First Respondent, Craftmatic Australia Pty Ltd ACN 108 312 983 (Craftmatic) in respect of alleged unconscionable conduct and misleading or deceptive conduct in connection with the supply or possible supply in trade or commerce of adjustable beds in contravention of s 51AB(1) and s 52 of the Trade Practices Act 1974 (Cth) (TPA). The Second Respondent, Mr Ashley Francis Day, is alleged to have been knowingly concerned in or party to, and aided, abetted, counselled or procured Craftmatic's alleged contraventions. The Third Respondent, Mr Wayne Lugg, is alleged to have been knowingly concerned in or party to certain of Craftmatic's alleged contraventions. 2 As between the ACCC and Mr Day, the proceedings have reached the stage where the ACCC has filed and served a statement of claim and Mr Day has filed served an amended defence. These parties are now at odds in relation to issues of practice and procedure arising from the pleadings. The ACCC alleges that Mr Day's amended defence does not comply with the letter and spirit of the rules with respect to the pleading of the same in the Federal Court Rules. It seeks an order that an amended defence filed on 5 August 2009 be struck out and that Mr Day have no further opportunity to replead. Mr Day alleges that the ACCC has not, upon request, furnished adequate particulars of the statement of claim. 3 The parties have endeavoured, without success, to resolve their differences via exchanges of correspondence between their respective solicitors. My experience of differences such as these is that it is not uncommon for pride and pedantry, as well as professionalism and proper practice, to intrude in such exchanges to the detriment of their informal resolution. Further, especially for those most intimately involved, what to one is insistence on adherence to proper practice is to the other misplaced pride and pedantry and the reverse also applies. I mean no disrespect to the practitioners concerned in observing that I discerned glimpses of each of these features in the course of my review of the exchanges of correspondence between their respective solicitors. 4 That review also disclosed a prospect, though not, as yet the actuality, of what was memorably described in an earlier edition of Bullen & Leake & Jacob's Precedents of Pleadings (12th Ed, 1975, Sweet & Maxwell at 113-114) as "the particulars game", i.e. where parties deliberately engage in mutual brinkmanship as to the concealing and revealing of their respective cases, see, further, Wide Bay Conservation Council Inc v Burnett Water Pty Ltd (No 2) [2009] FCA 237 at [7] and [8]. 5 Be this as it may, the ACCC and Mr Day have each filed notices of motion which require determination of the applications they respectively make in respect of these issues of practice and procedure. The issues raised are not unrelated but I shall nonetheless consider each in turn.

The Amended Defence 6 Whether any of the many complaints made by the ACCC in respect of the adequacy of the amended defence are warranted requires a consideration of the whole of that pleading in the context of the response it makes to the statement of claim. That makes it desirable to set out in full each of these pleadings. It would detract from continuity and ready comprehensibility of reasoning so to do in the main body of this judgement. I therefore annex the pleadings to it. 7 The ACCC's complaints with respect to the amended defence fall into two broad categories: (a) those based on Mr Day's assertion that the imprecision in the use of the phrase "at all material times" in the statement of claim prevents any more precise response than that given in the amended defence to allegations which employ this phrase; and (b) other paragraphs in the amended defence which are said to be non-responsive, vague, evasive or which otherwise fail to identify the point of substance or matter truly in issue. 8 When employed in pleading, the phrase "at all material times" is used to the end of complying with the requirement to plead material facts. That requirement is a feature of the system of pleading provided for in the rules of court which were made following the enactment in the United Kingdom in the late nineteenth century of the Judicature Acts 1873-1875 (UK) and its local analogues. 9 In respect of this Court, that heritage remains evident in O 11 r 2 of the Federal Court Rules: 2 Facts not evidence Subject to these Rules: (a) a pleading of a party shall contain, and contain only, a statement in a summary form of the material facts on which the party relies, but not the evidence by which those facts are to be proved; and (b) paragraph (a) has effect subject to this Order and to Order 4 (which relates to commencement of proceedings) and to Order 12 (which relates to particulars). 10 The general obligation of a party responding to a pleading, for example by a defence, is as stated in O 11 r 13: 13 Admissions and traverse (1) Subject to subrule (3) and to Order 43, rule 7 (which deals with persons under disability), an allegation of fact made by a party in his pleading is deemed to be admitted by the opposite party unless it is traversed by that party in his pleading or a joinder of issue under rule 14 operates as a denial of it. (2) A traverse may be made either by a specific denial or by a statement of specific non-admission. (3) Subject to subrule (4), every allegation of fact made in a statement of claim or counterclaim which the party on whom it is served does not intend to admit must be specifically traversed by him in his defence or defence to counterclaim, as the case may be; and a general denial of such allegations, or a general statement on non-admission of them is not a sufficient traverse of them. (4) Any allegation that a party has suffered damage and any allegations as to the amount of damages is deemed to be traversed unless specifically admitted. 11 The terms of O 11 r 17 and 18 ought also to be noted with respect to such subsequent pleadings. 17 General issue A party shall not plead the general issue. 18 Denial to be substantial answer When a party in any pleading denies an allegation of fact in the previous pleading of the opposite party, he must not do so evasively or generally, but must answer the point of substance, in accordance with rule 13 of this Order. 12 The general practice of this Court with respect to pleadings does not reflect the changes made to practice in England and Wales by the Civil Procedure Rules 1998 (Eng & Wales). Those rules introduced statements of case which are exchanged in conjunction with witness statements. It is nonetheless possible to discern the influence of these changes in some aspects of practice in this Court; see Practice Note No 30, Fast Track Directions and the provision in Pt 4 thereof for "Fast Track Statements, Responses and Cross-claims" and, in relation to taxation appeals, the provision for "appeal statements" in O 52B r 5, as read in conjunction with the Tax List Directions of 4 April 2008. None of these are applicable to this case. 13 The following statement by Murphy, Wilson, Brennan, Deane and Dawson JJ in Dare v Pulham (1982) 148 CLR 658 at 654 remains pertinent to the role of pleadings and particulars as provided for by O 11 and O 12 of the Federal Court Rules: Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it (Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In liq.) (1916) 22 CLR 490, at p 517 ; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial (Miller v. Cameron (1936) 54 CLR 572, at pp 576-577 ; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings (Gould and Birbeck and Bacon (1916) 22 CLR, at pp 517, 518 ; Sri Mahant Govind Rao v. Sita Ram Kesho (1898) LR 25 Ind App 195, at p 207 ). But where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the evidence in a trial has closed (Mummery v. Irvings Pty. Ltd. (1956) 96 CLR 99, at pp 111, 112, 127 ), though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon the facts actually established by the evidence (Leotta v. Public Transport Commission (N.S.W.) (1976) 9 ALR 437, at p 446; 50 ALJR 666, at p 668 ). 14 In Australian Competition and Consumer Commission v Pauls Ltd [1999] FCA 1750 at [10], with reference to sentiments to that effect then recently expressed by Wilcox J in Coshott v Kam Tou Mak [1998] FCA 147, O'Loughlin J observed that there was a contemporary tendency against the taking of a pedantic approach to a pleading. A decade later that remains the case. Further, a pleading must be read as a whole. The countervailing consideration is whether, accepting it must be so read, the pleading fairly puts the other party on notice as to the case to be met. A pleading is but a means to the achievement of procedural fairness and of the efficient use of judicial resources and those of the parties by the identification of what is truly at issue. 15 The phrase "at all material times" can be a convenient form of legal shorthand. When employed in the pleading of a statement of claim the phrase embraces those times which are relevant to the cause or causes of action pleaded or at least to an allegation of a material fact which constitutes all or part of an element of such a cause of action. To have that effect the phrase must have a reference point to allow the reader to ascertain the day or period on or during which it is alleged that fact prevailed materially in the sense of being relevant. 16 Convenience is not necessarily to be equated with precision. This statement of claim exemplifies that proposition. 17 It was submitted on behalf of the ACCC that it was, for example, evident from the allegations in paras 5, 8, 11 and 13, what was the commencement of material times and para 3 and para 10 as to their conclusion in respect of Mr Day. The submission on behalf of Mr Day was that the phrase "is intermittently used in the statement of claim with either no date specified or different dates referred to. In a few instances a start date and end date can be deduced." Subject to substituting the words "indiscriminately" and "uncritically" for "intermittently", I regard the latter as an accurate summary of the way in which the phrase "at all material times" is employed in this statement of claim. 18 In para 2 of the statement of claim, the phrase "at all material times" is employed without an internal reference point. That, in itself, is not a vice if the times concerned are fairly and reasonably ascertainable reading the pleading as a whole. In, for example, a routine running down case in which the alleged tort was committed on a particular date and that date and event are elsewhere alleged in the pleading, it would be idle to suggest that the absence of any internal reference point in a paragraph such as para 2 of the statement of claim was of any moment so far as the pleading of a defence which, in terms of O 11 r 18, "answered the point of substance" was concerned. The time that was alleged to be material would be readily comprehensible as the date of the alleged tort. 19 In this statement of claim though the phrase "at all material times" engages with a number of other paragraphs in the statement of claim which also employ that phrase and do so in a variety of ways. They do so either without an internal reference point (e.g. para 5), with an end point but no start point (e.g. para 6 and para 8), or with an end point but no start point (e.g. paragraph 10 and, especially notably, para 34). This method of pleading truly does leave the reader to speculate as to what is the extent of the period concerned for the allegation made in it. To which other temporal point is the allegation to be regarded as "material" if there are different such points also in part at least defined by "at all material times"? Overall, the pleading seems to refer to conduct that occurred between August 2005 and June 2008 although not all of the conduct alleged occurred over the whole of that period. Such an understanding of the statement of claim, so far as Mr Day is concerned, is consistent with the declaratory relief sought in respect of him in para 3 of the application. 20 If, for example, on the available evidence, the ACCC's case were that particular conduct occurred over the whole of such a period and that Mr Day was knowingly concerned in the same, the following allegations might be made, without any need additionally to allege "at all material times": (a) "During the whole of the period between August 2005 and June 2008 Craftmatic [engaged in the following particular conduct]"; (b) Mr Day was knowingly concerned in the conduct alleged in para (a). Where it was alleged that different types of corporate conduct had occurred over different periods, para (a) would doubtless be expanded into discrete paragraphs referring to such conduct. Paragraph (b) might then permissibly enumerate each of these paragraphs as the conduct in which it was alleged that Mr Day was knowingly concerned. So pleaded, a complaint of the kind presently made on behalf of Mr Day would not be open. 21 Order 11, rule 18 was relied upon by the ACCC. In that regard, my attention was helpfully drawn to the reference to that rule by French J (as his Honour then was) in Smith v Barron (2004) 139 FCR 566 at 575-576 as part of his Honour's rationale for striking out a defence which consisted mostly of bare denials including a bare denial in respect of a particular paragraph of a statement of claim which made detailed factual allegations as to events in a particular period by reference to which it was alleged that there were reasonable grounds for suspecting that a company was either insolvent or would become insolvent by reason of incurring those debts. His Honour contrasted these bare denials with an affidavit read before him in which, on information and belief sourced from the company's directors, it was attested that they had reasonable grounds to expect and did expect that the company would be able to pay its debts at these times and with the requirement, found in the certificate in Form 15B which must accompany a pleading and derived from O 11 r 1B, that, inter alia, a legal practitioner certify that there existed a reasonable basis for the denial of allegations. His Honour also drew attention to particular matters alleged in the statement of claim that had not really been disputed by the director concerned in his public examination. Against this background, it becomes apparent why his Honour reached the conclusion that the defence filed was really just a "holding defence" rather than an attempt in good faith to plead to the statement of claim. This case is different. 22 In its prescription that a defence ought not to be pleaded in an evasive way, O 11 r 18 emphasises a principle of pleading practice which is a subset of the more general requirements, found in O 11 r 16(b) and r 16(c) respectively, that a pleading must not have a tendency to cause prejudice, embarrassment or delay to a proceeding or constitute an abuse of process. In the face of a statement of claim noteworthy for its temporal imprecision, it is not, for example, evasive, to admit, as this defence does (para 3.1), that "for a period of time prior to June 2008 [Mr Day] was a managing director of [Craftmatic]". Nor is it necessarily evasive to admit that one was but "a", rather than "the" managing director. One of the rules with respect to corporations, replaceable by virtue of s 135 of the Corporations Act 2001 (Cth), is that found in s 201J of that Act, which provides, "The directors of a company may appoint 1 or more of themselves to the office of managing director of the company for the period, and on the terms (including as to remuneration), as the directors see fit" (emphasis added). Further, even if Craftmatic did have but one managing director at any given time, the difficulty with this statement of claim is in ascertaining what is that given time. Mr Day's obligation is to respond to the allegation made, not to speculate by making an admission as to a period of office-holding which may be irrelevant to the contraventions alleged. 23 There is no doubt that O 11 r 18 is directed to the end of requiring a party responding to a pleading to identify what truly are the issues of fact which remain controversial in the proceeding. Other rules directed to that end are, in their application to a defence, O 11 r 1B and r 16, already mentioned, and O 11 r 13 and r 17. 24 I do not regard the first category of complaint with respect to the amended defence as made out. 25 As to the complaints in respect of the non-admission of the existence of the ACCC as alleged in the statement of claim, Mr Day is not obliged to admit that the ACCC exists. Whether it does is a question of law. It is true that, were the non-admission based on a constitutional question, the bare denial would have an evasive quality, but it would be evasive as to a matter of law, not fact. Further, and as the ACCC itself acknowledges in its submissions, the raising of such an argument would require the giving of notices under s 78B of the Judiciary Act 1903 (Cth). Were such a point to be raised in a way which necessitated an adjournment so as to allow for a reasonable time to elapse after the giving of notice, the price of so doing may be an order for costs, perhaps on an indemnity basis, in respect of costs thrown away. That same consequence might attend the belated raising of any other point of law in relation to the existence of the ACCC. Order 11, rule 9 permits a party to raise a point of law in a pleading, Mr Day has not done so in relation to the existence of the ACCC, save insofar as the non-admission 26 Yet further and in any event, especially before the days when a ready search of a national corporations' database could be made, it was not unknown for the allegation in a pleading as to the incorporation of a party not to be admitted. That raised a mixed question of fact and law. Did the statute concerned, assuming it was particularised in the allegation provide for incorporation, which, if that was an Australian statute was only a question of law, and, if so, was it proved that the mechanism for incorporation for which the statute provided had occurred, which was a question of fact? The latter was usually and readily proved by the tender of a certificate of incorporation. Often, in practice, the informal provision of a company search to the opposite party by the party alleging incorporation resulted in the amending of the non-admission as to incorporation to an admission. If not, then the cost of obtaining the certificate of incorporation formed part of the alleging party's costs in the event it succeeded in the action. 27 Given that the TPA directly provides for the incorporation of a body corporate termed the ACCC, as opposed to providing for incorporation upon registration, it does, with respect, seem odd, perhaps even churlish, for there to be a non-admission of para 1 of the statement of claim. I doubt though that this stance will occasion anyone any prejudice, delay or embarrassment in the proceedings. I had the impression that the ACCC drew attention to this aspect of the amended defence as a supposed exemplar of a more pervasive vice of that character in the amended defence. For reasons already given in relation to the difficulty presented by the way in which "at all material times" is used in the statement of claim, that supposition is misplaced. 28 Paragraph 3.4 of the amended defence denies the allegation in para 3.3 of the statement of claim that Mr Day, "with respect to his conduct pleaded in this statement of claim, acted within the scope of his actual or apparent authority as managing director of Craftmatic". This paragraph of the defence is criticised for not making it clear as to whether it is the alleged conduct which is denied or whether what is denied is that the conduct concerned, though it admittedly occurred, was within the scope of his actual or apparent authority. It was thus submitted, "presumably [Mr Day] seeks only to deny his engagement in the conduct pleaded, not that actions as found by him to be taken were within the scope of his actual apparent authority" [sic]. On behalf of Mr Day, that such a criticism might be made was, not unreasonably it seemed to me, conceded. That done, the submission made was that, read in context, the denial went only to the factual element of para 3.3 of the statement of claim, not to the issue of law with which an allegation of actual or apparent authority was pregnant. The further submission made was that, "it is not entirely clear what specific conduct the [ACCC] is referring to". That, it was submitted, was a subject for the ordering of particulars. 29 The latter of Mr Day's submissions exposes the true pleading vice. Paragraph 3.3 of the statement of claim contains "rolled up" allegations, i.e. multiple allegations rolled up into a single paragraph. That is contrary to O11 r 1(b), which requires that each matter in a pleading, as far as convenient, be put in a separate paragraph. To violate that rule in this manner is to author a pleading which has a tendency to embarrass in the technical way in which that word is used in O 11 r 16(b). For these reasons, the ACCC is the author of its own claimed complaint in respect of para 3.4 of the amended defence. 30 Complaint is also made on behalf of the ACCC that para 6 of the amended defence is inconsistent with para 7 in that, in para 6 of the amended defence "the allegation in para 5.2 [of the statement of claim] that telemarketer representatives of Craftmatic made telephone calls to potential customers [is not admitted] yet, as appears from para 7 of the defence, [Mr Day] makes this very admission". There is no such inconsistency. As is evident from its preamble, para 5 of the statement of claim, to which para 6 of the amended defence responds, is directed to the subject of Craftmatic's sales method. That it adopted that method is expressly not admitted in the amended defence on the expressed basis of absence of knowledge on the part of Mr Day of that alleged method. Paragraph 6 of the statement of claim makes a series of positive allegations as to the actual occurrence in a particular alleged way of one component of that method, the "initial telephone call" as defined in para 5 of the statement of claim. Responding to that in para 7 of the amended defence, Mr Day admits that Craftmatic's "telemarketer" representatives made telephone calls to potential customers but, consistently with the non-admission of method in para 6 of the amended defence, does not admit, on the basis of an asserted absence of knowledge, that an "initial telephone call" occurred as alleged. 31 Order 11 rule 13(2) expressly authorises a traverse by a "statement of specific non-admission". Paragraphs 6 and 7 of the amended defence each comply with that authorisation. In so doing on the basis of an alleged absence of knowledge on the part of Mr Day, they also each exemplify the observation made in Lindgren KE and Branson CM, Federal Civil Litigation Precedents (Butterworths, 1998 at [24,210]) that, "denial is usually employed where the alleged fact is in a party's knowledge and a non-admission where it is not". I respectfully agree with that observation. The practical effect of an express non-admission is the same as that of an express denial (Warner v Sampson [1959] 1 QB 297 at 319 per Hodson LJ) in that the opposing party is thereby put to proof of the issue but the difference between the two lies in the occasion for their employment as a matter of pleading practice. 32 Paragraph 8 of the amended defence responds to para 7 of the statement of claim. In the way in which it is cast, para 7 of the statement of claim also makes "rolled up" allegations in that it conjoins allegations in respect of the separate matters of the provision of a script and the giving of instructions for the use of that script. Mr Day admits that a script was available but otherwise expressly does not admit the allegations in para 7 of the statement of claim on the basis of absence of knowledge. This he is entitled to do. 33 On behalf of the ACCC criticism is further made of the way in which Mr Day's amended defence responds to the allegations as to his knowledge of pleaded facts. Allegations as to his knowledge are to be found in para 10, 15, 24 and 34 of the statement of claim with the responses to these allegations being found in para 10, 13, 27 and 37 of the amended defence. The responses take the form of express non-admissions on the basis of absence of knowledge. A noteworthy feature of these paragraphs of the amended defence is their engagement with para 3.5 of that document. In para 3.5, in some detail, Mr Day makes positive allegations as to the management and control of Craftmatic and as to the nature and extent of his involvement in that management and control. It is submitted on behalf of the ACCC, with reference to the responsive paragraphs of the amended defence, as read with para 3.5, that, "These paragraphs are in substance and effect pleadings of circumstances by which it might be that [Mr Day] does not know particular things but are vague and evasive and do not address the pleaded issue of whether he knows those particular things (underlining in written submission)". Thus, it is submitted, para 3.5 does not amount to an allegation of material facts, contrary to O 11 r 2. A more detailed critique, which I have taken into account, of para 3.5 follows to the end of seeking to demonstrate that para 3.5 is evasive. 34 Mr Day's response to this inter-related assault on para 3.5, 10, 13, 27 and 37 of the amended defence recognises, as the ACCC does not, perhaps surprisingly in view of the apparent appreciation of the substance of para 3.5 evident in the passage from its submission quoted, that the allegations in para 3.5 form a basis upon which the ACCC's case of Mr Day's being knowingly concerned in Craftmatic's corporate conduct might fail at trial. Mr Day submits he has made permissible non-admissions as to the allegations of knowledge made against him. 35 Paragraph 3.5 is pleaded in further response to the allegations made in para 3 of the statement of claim as to Mr Day's corporate office-holding and shareholding, responsibilities and authority. These allegations are expressly admitted or traversed in para 3.1, 3.2, 3.3 and 3.4 of the amended defence. Were Mr Day to have confined his amended defence with respect to allegations of knowledge on his part merely to an absence of knowledge, he may well have been met with an objection at trial to his leading evidence in relation to the subjects which are detailed in para 3.5 of the amended defence. When permissibly employed, a non-admission in a defence puts an opponent to proof in respect of an allegation but does not constitute an expressly alleged positive factual case to the contrary. In para 3.5 of the amended defence Mr Day is giving notice to the ACCC that he will mount a positive case in respect of the facts there alleged. 36 That is not to say, especially taking into account the more detailed critique which the ACCC makes of para 3.5, that there is no scope for the provision on request of particulars in respect of some of the allegations made in that paragraph. That is not though the nature of the application made by the ACCC. Paragraph 3.5 is not evasive. It may though be wanting in particularity in respect of the positive allegations there made. The ACCC's submission confuses what constitutes an evasive response to an allegation in a statement of claim with what may constitute a positive allegation in a defence which warrants better particularisation if that is sought. 37 Read with para 3.5, para 10, 13, 27 and 37 of the amended defence provide an adequate, comprehensible and permissible response to the allegations of knowledge made against Mr Day. 38 For these reasons, I do not regard the amended defence as a "holding defence". I dismiss the application that it be struck out. It necessarily follows that I also dismiss the ACCC's alternative application that no further time be allowed for its amendment. Insofar as the same is necessary, I grant leave to Mr Day to file the amended defence on 5 August 2009. 39 Mr Day should have his costs of and incidental to the application made by the ACCC.

The request for particulars of the statement of claim 40 I have already adverted to authority touching on the function of particulars. 41 Under cover of a letter from his solicitors dated 16 July 2009 to the ACCC's solicitors, Mr Day has made a detailed request for the furnishing of particulars of the statement of claim. Whether that request might be better described as prolix and unnecessary in whole or in part remains to be decided. As to that, it is only fair to record that, contrary to Mr Day's submission; the particulars request is not of a kind that is familiar, or at least presently familiar, in Queensland. That may perhaps be due to improvements in pleading (including particulars) practice and attitudes to the need for early identification of the real issues in a case which have occurred over the last decade under the influence of the introduction in State jurisdiction of the Uniform Civil Procedure Rules 1999 (Qld). In any event, what the request most called to mind were the discursive interrogatories of a bygone age. 42 Mr Day had already filed a defence. Order 12 rule 5, which envisages that an order for the furnishing of particulars ought not, without cause, be made before the taking of that pleading step is not therefore strictly applicable. Nonetheless, in deciding to grant leave to him to file the amended defence, I have expressly considered whether or not it would have been preferable first to determine the merits of the request for particulars and to defer the question of leave to amend until an amended defence could be formulated, taking into account the response to such order for particulars of the statement of claim as I was disposed to make. Having regard to the joint expression by the ACCC and Mr Day of a preference that the merits of the ACCC's application first be dealt with, to the basis for that application and its opposition as revealed in submissions, to the nature of the amendments which were made or at least sought to be made to the original defence and to Mr Day's evident desire for leave to file a defence incorporating those amendments, I considered it desirable first to determine the ACCC's application (and so much of Mr Day's as sought leave to file the amended defence). 43 It is evident from the ACCC's submission in reply [at para 29] that a particular motivation for the absence as yet of a detailed response by the ACCC to the existing request for particulars of the statement of claim was its perception of the adequacy of the amended defence that Mr Day plainly felt able to make even in the absence of further and better particulars. The ACCC's submission does not signify a refusal to respond to the particulars request made. Mr Day also now has the benefit, thanks to the candour of the ACCC's submission in reply, of being appraised of bases upon which the ACCC takes issue with some aspects of the particulars request of 16 July 2009. In these circumstances, there is a hypothetical quality with respect to whether and to what extent particulars ought to be ordered. It is therefore better at this stage not to determine the application for an order for particulars. Instead, I shall stand over so much of Mr Day's application as seeks such an order, grant liberty to apply to relist that application either in respect of the request of 16 July or such further or modified request as he may make and reserve costs. Having regard to the observations which I have made in respect of the amended defence, I would also entertain at that time any application for ordering of particulars of the amended defence that may be necessary. 44 I shall hear from the parties as to the directions which ought to be made for the further conduct of this proceeding in light of the disposition of their interlocutory applications. I certify that the preceding forty-four (44) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.

Solicitor for the Applicant: Australian Government Solicitor

DISTRICT REGISTRY Australian Competition and Consumer Commission Applicant Craftmatic Australia Pty Ltd ACN 108 312 983 First Respondent Ashley Francis Day Second Respondent Wayne Lugg Third Respondent

Parties

1. The applicant is a body corporate established pursuant to section 6A of the Trade Practices Act 1974 ("the Act") and is entitled to sue in its corporate name.
2. The first respondent, Craftmatic: 2.1. is and was at all material times a company incorporated in Australia; 2.2. is and was at all material times a corporation within the meaning of section 4 of the Act; 2.3. at all material times has carried on the business of selling adjustable beds, under the "Craftmatic" brand name ("Craftmatic beds"), in trade or commerce to customers in Australia.
3. The second respondent, Day: 3.1. at all material times until June 2008 was managing director of and a shareholder in Craftmatic; 3.2. at all material times until June 2008 was responsible for and oversaw the day to day operations of Craftmatic; 3.3. with respect to his conduct pleaded in this statement of claim, acted within the scope of his actual or apparent authority as managing director of Craftmatic.
4. The third respondent, Lugg: 4.1. between April 2006 and May 2007 held the position of sales representative for Craftmatic; 4.2. with respect to his conduct pleaded in this statement of claim, acted within the scope of his actual or apparent authority as sales representative of Craftmatic.

Craftmatic sales method 5. At all material times, Craftmatic has sold Craftmatic beds to customers in Australia by the following sales method: 5.1. Craftmatic identifies potential customers, being persons over approximately 55 years of age, by: 5.1.1. obtaining records of persons to whom seniors cards are issued; 5.1.2. distributing market survey forms in association with shopping mall presentations of its products and reviewing the responses; 5.1.3. obtaining contact details from data service providers; 5.2. telemarketer representatives of Craftmatic make telephone calls to the identified potential customers, for the purpose of arranging an in-home presentation ("the initial telephone call"); 5.3. telemarketer representatives of Craftmatic make telephone calls to the potential customers confirming the appointment ("the confirmation telephone call"); 5.4. a sales representative of Craftmatic attends an interview at the potential customer's home ("the in-home presentation"); 5.5. if the potential customer agrees to purchase a Craftmatic bed, the bed is subsequently delivered to their home.

Initial Telephone call representations 6. At all material times from August 2005, in the course of the initial telephone call, telemarketer representatives of Craftmatic represented to potential customers: 6.1. that they were not calling to sell the potential customer anything; 6.2. that they were calling only to offer the potential customer the chance to win a free Craftmatic bed; 6.3. that they would arrange for the potential customer to have a free preview of a video about the features of a Craftmatic bed, with a local consultant who would provide information about the Craftmatic bed; 6.4. that the appointment would take in the order of one hour. 7. The above representations were made to potential customers in accordance with a script which was provided by Craftmatic to its telemarketer representatives, and which they were instructed to use.

Particulars A copy of the script is available for inspection by appointment at the offices of the applicant's solicitor. 8. At all material times from August 2005 it was in fact the case that: 8.1. the purpose of the initial telephone call was to obtain an appointment with a Craftmatic sales representative in the potential customer's home, in the course of which the sales representative would endeavour to sell the potential customer a Craftmatic bed; and 8.2. the appointment was for an in-home presentation which was designed to and would take, on average, between two and three hours. 9. In the circumstances, by engaging in the conduct set out in paragraph 6 above, Craftmatic has in trade or commerce engaged in conduct that is misleading or deceptive or likely to mislead or deceive, in contravention of section 52 of the Act. 10. At all material times until June 2008, Day: 10.1. was aware of each of the matters in paragraphs 6, 7 and 8 above; and 10.2. caused, authorised and directed the conduct referred to in paragraphs 6 and 7 above; 10.3. was thereby knowingly concerned in or party to, and aided, abetted, counselled or procured, the contraventions of section 52 by Craftmatic referred to in paragraph 9 above.

Confirmation Telephone call representations 11. At all material times from August 2005, in the course of the confirmation telephone call, telemarketer representatives of Craftmatic: 11.1. confirmed the time and date of the in-home presentation; and 11.2. represented to potential customers that the in-home presentation would take in the order of one hour. 12. The above representation was made to potential customers in accordance with a script which was provided by Craftmatic to its telemarketer representatives, and which they were instructed to use.

Particulars A copy of the script is available for inspection by appointment at the offices of the applicant's solicitor. 13. At all material times from August 2005, it was in fact the case that the in-home presentation was designed to and would take, on average, between two and three hours. 14. In the circumstances, by engaging in the conduct set out in paragraph 11.2 above, Craftmatic has in trade or commerce engaged in conduct that is misleading or deceptive or likely to mislead or deceive, in contravention of section 52 of the Act. 15. At all material times until June 2008, Day: 15.1. was aware of each of the matters in paragraphs 11, 12 and 13 above; and 15.2. caused, authorised and directed the conduct referred to in paragraphs 11 and 12 above; 15.3. was thereby knowingly concerned in or party to, and aided, abetted, counselled or procured, the contraventions of section 52 by Craftmatic referred to in paragraph 14 above.

In-home presentation representations 16. At all material times from August 2005, the Craftmatic representatives who conducted the in-home presentations: 16.1. were sales representatives remunerated on a commission-only basis, which commission was contingent on their making a sale at the in-home presentation, and was proportional to the price at which they sold the Craftmatic bed; 16.2. were provided with scripts by Craftmatic and taught and instructed by Craftmatic in regular training sessions to make representations to the same effect in each in-home presentation; 16.3. were directed and required by Craftmatic to follow the same series of steps in each in-home presentation; 16.4. acted as directed in accordance with the instructions and training from Craftmatic in the conduct of in-home presentations; 16.5. in the course of the in-home presentations: 16.5.1. conducted a survey of the potential customer in accordance with a form provided by Craftmatic; 16.5.2. showed the potential customer a video presentation provided by Craftmatic in relation to Craftmatic beds; 16.5.3. entered the potential customer's bedroom, made measurements of the available bed space, and simulated the operation of a Craftmatic bed for the potential customer using pillows; 16.5.4. used a hand-held massage device on the potential customer's hand, back or leg to simulate the massaging operation of the Craftmatic bed; 16.5.5. recommended a particular model of Craftmatic bed to the potential customer; 16.5.6. negotiated with the potential customer in relation to the purchase price of the Craftmatic bed, in accordance with training and scripts provided by Craftmatic; 16.5.7. made one or more telephone calls to Craftmatic's offices in accordance with training and scripts provided by Craftmatic; 16.6. were instructed and trained by Craftmatic to, and in the usual course did, use a series of sales pitches referred to as "Craftmatic Classic Closes" to achieve a sale.

Particulars A copy of the scripts, video presentation and the document entitled "Craftmatic Classic Closes" are available for inspection by appointment at the offices of the applicant's solicitor. 17. The sales representative who conducted the in-home sales presentation worked in conjunction with another sales person at the office of Craftmatic, who was brought into the sales process by telephone in the manner pleaded at paragraphs 19 and 20 below, by the in-home sales representative if that sales representative had been unable to achieve a sale by that stage of the in-home presentation. 18. At all material times from August 2005, in the course of the in-home presentations by Craftmatic representatives referred to in the previous paragraph, Craftmatic represented to potential customers:

Survey representations 18.1. that the representative was conducting a survey of the potential customer to obtain health information to enable the representative to select the most suitable product for the customer; 18.2. that the questions in the survey were designed to assist in the correct choice of bed and equipment for the customer; 18.3. that the representative was trained or qualified to make an assessment as to the particular health needs of the customer;

Video representations 18.4. that the representative would assess the individual's needs and recommend the Craftmatic bed most suited to those needs;

Particular model representation 18.5. that the "Model 1" Craftmatic bed was the model of bed selected by the Craftmatic representative, on the basis of the information provided by the potential customer, as being best-suited to the health needs of the particular potential customer;

Price representations 18.6. that the prices at which the various sizes of "Model 1" Craftmatic beds were usually sold by Craftmatic were: 18.6.1. King Single: $7130 18.6.2. Standard Double: $8440 18.6.3. Standard Queen: $8760 18.6.4. Dual Queen: $13,120 18.6.5. Dual King: $13,370 18.6.6. Super Extra Wide King: $16,260 18.7. that the customer needed to sign a contract to purchase a Craftmatic bed during the in-home presentation in order to receive a discount from the normal purchase price which was described by the representative as "your price today".

First telephone call representations 19. Further, if the customer had not by that stage of the in-home presentation agreed to purchase a Craftmatic bed, Craftmatic by its sales representative: 19.1. represented to the potential customer that the in-home presentation was over but that the representative needed to make a telephone call to Craftmatic to let them know this; 19.2. made a telephone call to Craftmatic's office ("the first telephone call"); 19.3. represented to the customer that they were calling someone in the executive management of Craftmatic; 19.4. in the course of that telephone call, followed a script provided by Craftmatic, and spoke to a telephone sales representative of Craftmatic who was also following a script provided by Craftmatic; 19.5. in accordance with instructions from Craftmatic, informed the telephone sales representative of the potential customer's health conditions as disclosed in their response to the survey referred to above; 19.6. in following the scripted conversation with the Craftmatic telephone sales representative, stated that the potential customer wanted and needed a Craftmatic bed, and that the price was the only reason the sale could not proceed, regardless of whether the customer had in fact stated that they either wanted or needed a Craftmatic bed; 19.7. signalled to the telephone sales representative the level of discount from the standard price of a Craftmatic bed that they considered would be necessary to persuade the potential customer to purchase a bed, by stating to the telephone sales representative "it's the dollars" to indicate a smaller discount was needed, and "it's the dollars and cents", to indicate a larger discount was needed; 19.8. received a message from the telephone sales representative, in accordance with a set script, to offer the customer a Craftmatic "Model 1" bed at a particular price in return for the customer agreeing to participate in a promotional program referred to as "the Lifestyle Program"; 19.9. offered the customer a Craftmatic bed at the price notified by the telephone sales representative, and represented to the customer that the discounted price had been authorised by an executive sales manager of Craftmatic in view of the particular customer's individual circumstances, and was only available if the customer agreed to participate in Craftmatic's "Lifestyle program" and provide testimonials for the Craftmatic product; 19.10. represented to the customer that, in return for the customer's participation in Craftmatic's "Lifestyle program" and provision of testimonials for the Craftmatic product, Craftmatic would subsidise the customer's investment in the bed; 19.11. was instructed by Craftmatic to persist for at least 20 minutes with the revised price; and 19.12. represented to the customer that the discounted price was only available if the customer signed a contract to purchase the bed at the time of the in-home presentation.

Second telephone call representations 20. Further, if the customer did not agree to purchase a Craftmatic bed in response to the offer of the "Lifestyle program" discount: 20.1. Craftmatic by its sales representative represented to the customer that the representative needed to make a further telephone call to Craftmatic to let them know that the customer would not be purchasing a bed; 20.2. Craftmatic by its sales representative represented to the customer that they were calling an executive manager of Craftmatic, who would speak to the customer to thank them for their time and ensure they were happy with the way the sales representative had conducted themselves in the course of the in-home presentation; 20.3. the Craftmatic representative made a second telephone call to Craftmatic ("the second telephone call"), and passed the telephone to the potential customer; 20.4. Craftmatic by its telephone sales representative represented to the customer: 20.4.1. that the representative was an executive sales manager of Craftmatic with the authority to make autonomous decisions as to the discounts that could be offered to the customer for Craftmatic beds; 20.4.2. that the customer's particular individual circumstances, including their health conditions which had been relayed to the telephone sales representative by the in-home sales representative as pleaded in paragraph 19.5 above, demonstrated their need for a Craftmatic bed; 20.4.3. that in view of these particular individual circumstances the executive sales manager would offer a special further discount from the normal purchase price for a Craftmatic bed to the customer; 20.4.4. that the customer was being offered a further discounted price which was not normally offered to individuals or was a "bulk order" or "wholesale" price; 20.4.5. that the discounted price was only available if the customer signed a contract to purchase the bed at the time of the in-home presentation; 20.5. in the course of in-home sales presentations conducted until approximately December 2007, Craftmatic by its telephone sales representative further represented to the customer: 20.5.1. that Craftmatic supplied beds to nursing homes; 20.5.2. that the further discounted price which was being offered to the customer was the price at which Craftmatic supplied beds to nursing homes; 20.5.3. that the discounted price was only available if the customer signed a contract to purchase the bed at the time of the in-home presentation. 21. At all material times, it was in fact the case that: 21.1. the product to be recommended by the Craftmatic representative to a particular customer, and which was so recommended, was not selected in response to health information given by the potential customer in the course of the survey of the potential customer conducted by the representative, but was the standard "Model 1" model of bed supplied by Craftmatic; 21.2. the questions in the survey were to be, and were, used only for the purpose of eliciting personal information to assist the representative in achieving a sale to the customer; 21.3. the Craftmatic representatives had no medical training or medical basis for asserting that a Craftmatic bed would address particular health issues of a potential customer; 21.4. the product to be recommended by the Craftmatic representative to a particular customer, and which was so recommended, was not selected as a result of the sales representative assessing the individual's needs and recommending the model of bed most suited to those needs, but was the standard "Model 1" model of bed supplied by Craftmatic; 21.5. the "Model 1" Craftmatic bed was the only model of bed actively marketed and supplied by Craftmatic; 21.6. the usual prices at which Craftmatic sold the various sizes of "Model 1" Craftmatic bed selected by the potential customer were not the prices specified by the representative, but were considerably lower prices; 21.7. the "your price today" offered price was not subject to a time limitation but was the standard price offered by Craftmatic; 21.8. the in-home presentation was not over when the representative made the first telephone call, and the first telephone call was a continuation of the scripted sales process; 21.9. in making the first telephone call, the representative was not calling someone in the executive management of Craftmatic, but a further sales representative of Craftmatic; 21.10. following the first telephone call, the representative was not offering the discounted price in return for participation in the "Lifestyle program", in response to the customer's particular individual circumstances demonstrating their need for a Craftmatic bed, but in accordance with the predetermined script; 21.11. the discount offered in return for participation in the "Lifestyle program" did not involve Craftmatic subsidising the customer's purchase of a Craftmatic bed, other than to the extent it was accepting a lower sales price for the bed; 21.12. the second telephone call was not made in order for the representative to inform Craftmatic that the potential customer would not be purchasing a bed, or to enable an executive manager of Craftmatic to thank the customer and ensure they were happy with the sales representative's conduct, but to continue the sales process in accordance with pre-determined scripts; 21.13. the telephone sales manager who spoke to the customer in the course of the second telephone call was not an executive sales manager with the authority to make autonomous decisions as to the discounts that could be offered to the customer for Craftmatic beds, but a further sales representative who was following a predetermined script as to the discounted price to be offered to the customer; 21.14. the discount offered to the customer in the course of the second telephone call was not in response to the particular individual circumstances of the customer which demonstrated their need for the bed, but in accordance with a predetermined script; 21.15. the further discounted price offered to the customer was not based on an actual "bulk order" or "wholesale" discounted price, and was a price routinely offered to individuals in accordance with predetermined scripts if a customer had not agreed to purchase a Craftmatic bed at that stage of the sales process; 21.16. Craftmatic had not supplied and did not supply beds to nursing homes; 21.17. the discount offered to the customer by Craftmatic was not based on an actual nursing home discounted price, and the Craftmatic representative was merely following a predetermined script in offering the discount. 22. To the extent each of the representations set out in paragraphs 18, 19.1, 19.3, 19.9, 19.10, 19.12, 20.1, 20.2, 20.4 and 20.5 above was a representation as to a future matter, Craftmatic did not have reasonable grounds for making the representation, and the applicant relies upon section 51A of the Act. 23. In the circumstances, by engaging in the conduct set out in paragraphs 18, 19 and 20 above, Craftmatic has in trade or commerce engaged in conduct that is misleading or deceptive or likely to mislead or deceive, in contravention of section 52 of the Act. 24. At all material times until June 2008, Day: 24.1. was aware of each of the matters in paragraphs 16 and 18 to 21; 24.2. further, to the extent each of the representations set out in paragraphs 18, 19.1, 19.3, 19.9, 19.10, 19.12, 20.1, 20.2, 20.4 and 20.5 above was a representation as to a future matter, was aware that Craftmatic did not have reasonable grounds for making the representation; 24.3. caused, authorised and directed the conduct referred to in paragraphs 16 and 18, 19 and 20; 24.4. was thereby knowingly concerned in or party to, and aided, abetted, counselled or procured, the contraventions of section 52 by Craftmatic referred to in paragraph 23 above.

Wayne Lugg conduct 25. Further, between April 2006 and May 2007 Craftmatic, through its representative Lugg, in the course of in-home presentations by Lugg, in addition to making the representations in accordance with the scripts set out in paragraph 18 above, represented to potential customers: 25.1. that Craftmatic was offering the customer a discounted price for the Craftmatic bed because Craftmatic received government subsidies for its products; 25.2. that the government subsidies were available for a limited period of time, which meant that the customer needed to sign a contract as a matter of urgency in order to obtain the discounted price; 25.3. that Craftmatic beds received the government subsidies because they had approval from the Therapeutic Goods Administration, which no other brands of adjustable bed had; 25.4. that Lugg did not receive a commission for sales of the Craftmatic bed; 25.5. that Lugg had undergone specific medical training; and 25.6. that Lugg was using that medical training in making his assessment as to the particular model of Craftmatic bed that best suited the health needs of the customer. 26. At all times between April 2006 and May 2007 it was in fact the case that: 26.1. Craftmatic did not receive, and accordingly did not pass on to customers the benefit of, government subsidies for its products; 26.2. Lugg did receive a commission for sales of the Craftmatic bed, which commission was directly linked to the sales price achieved; 26.3. Lugg did not have any specific medical training. 27. In the circumstances, by engaging in the conduct set out in paragraph 25 above between April 2006 and May 2007, Craftmatic has in trade or commerce engaged in conduct that is misleading or deceptive or likely to mislead or deceive, in contravention of section 52 of the Act. 28. At all material times between April 2006 and May 2007, Lugg: 28.1. was aware of each of the matters in paragraph 26 above; 28.2. by reason of the matters in paragraphs 25, 26 and 28.1 above, was thereby knowingly concerned in or party to, and aided, abetted, counselled or procured, the contraventions of section 52 by Craftmatic referred to in paragraph 27 above.

Unconscionable conduct 29. At all material times, the Craftmatic beds promoted and supplied by Craftmatic were goods of a kind ordinarily acquired for personal, domestic or household use. 30. At all material times, Craftmatic knew or believed that the class of persons to whom its conduct was targeted, being persons over approximately 55 years of age, included persons who could reasonably be expected to be particularly vulnerable to its sales methods due to illness, infirmity, isolation or other disability associated with their age. 31. At all material times, Craftmatic in the marketing and sales of its products intentionally engaged in the following conduct: 31.1. through its representatives, undertaking a series of specified steps as described in paragraphs 5, 6, 7, 11, 12, 16, 17, 18, 19 and 20 above; 31.2. tricking potential customers into agreeing to an appointment with a Craftmatic sales representative in their own home, by means of the representations set out in paragraphs 6 and 11.2 above, in the circumstances set out in paragraphs 8 and 13 above; 31.3. tricking potential customers into confirming their appointment with a Craftmatic sales representative, by deliberately misleading the potential customer to believe the in-home presentation would last for approximately one hour, whereas it was in fact likely to be of between two and three hours duration; 31.4. making the representations set out in paragraph 18, 19 and 20 above, in the circumstances set out in paragraph 21 above; 31.5. conveying to the potential customer the false impression that a particular model of Craftmatic bed was identified as particularly suited to address the individual health needs of that customer; 31.6. conveying to the potential customer the false impression that the Craftmatic representative was trained in, or capable of, making a valid assessment of the potential customer's particular health needs; 31.7. conveying to the potential customer the false impression that the Craftmatic representative was acting in the interests of the potential customer's particular health needs; 31.8. conveying to the potential customer, by offering discounts falsely represented to be available only that day, the false impression that there was a need for urgency in their decision to purchase a Craftmatic bed; 31.9. conveying to the potential customer, by offering discounts falsely represented to be available only that day, and only for particular reasons, the false impression that the price offered to the customer for the Craftmatic bed was a special bargain price; 31.10. instructing representatives to remain in the potential customer's home for an unexpected and unreasonable length of time; 31.11. encouraging the potential customer not to consult with family members or other persons before signing a contract to purchase a Craftmatic bed, and discouraging them from such consultation if they proposed to do so; 31.12. not disclosing, or not fully disclosing, to potential customers their entitlement to a cooling-off period, or the conditions of the cooling-off period, including by enclosing disclosure documents in an envelope before handing them to the customer; 31.13. having the representative pretend to have spontaneous communications with a senior sales executive by telephone, as set out in paragraphs 19 and 20 above, whereas in fact the parties to the conversation were following a pre-determined script intended to pressure the potential customer to sign a contract to purchase a Craftmatic bed; 31.14. unfairly pressuring the potential customer by, in the course of the representative's telephone communications purportedly with a senior sales executive of Craftmatic, stating that the potential customer needed and wanted a Craftmatic bed, and that the price was the only reason the sale could not proceed, regardless of whether the customer had in fact stated that they either wanted or needed a Craftmatic bed; 31.15. having the Craftmatic bed delivered typically within approximately 24 hours of the in-home presentation and on some occasions removing the customer's previous bed at that time and disposing of it, thereby leaving the customer without a bed if he or she chose to set aside the contract. 32. At all material times from August 2005, the sales method by which Craftmatic marketed and sold Craftmatic beds to customers in Australia: 32.1. consisted of steps designed, scripted and conducted so as to unduly influence or pressure potential customers, to create and take advantage of an unequal bargaining position, to engage in unfair tactics, and to unfairly fail to disclose relevant information to potential customers; 32.2. was intended to take advantage of the perceived politeness, commercial inexperience, health concerns, and susceptibility to high pressure and misleading sales tactics, of older persons in their homes; 32.3. was designed to ensure that a maximum number of such potential customers signed contracts to purchase Craftmatic beds at the in-home presentations without opportunity to consult with other persons, enquire as to the availability, features or pricing of alternative products, or fully consider the represented facts or check their accuracy. 33. In the circumstances, by engaging in the conduct set out in paragraphs 6, 11, 16, 18, 19, 20 and 31 above, Craftmatic has, in trade or commerce, in connection with the supply or possible supply of goods to potential customers, engaged in conduct that is, in all the circumstances, unconscionable, in contravention of section 51AB of the Act. 34. At all material times until June 2008, Day: 34.1. was aware of each of the matters in paragraphs 6, 7, 8, 11, 12, 13, 16, 18 to 21, 31 and 32 above; 34.2. caused, authorised and directed the conduct referred to in paragraphs 6, 7, 11, 12, 16, 18 to 20, 31 and 32 above; 34.3. was thereby knowingly concerned in or party to, and aided, abetted, counselled or procured, the contraventions of section 51AB by Craftmatic referred to in paragraph 33 above. The Applicant claims the relief specified in the application. Date: 6 April 2009 ............................................................. A solicitor employed by Australian Government Solicitor Solicitor for the Applicant This pleading was prepared by Katrina Close and Glenn Owbridge, solicitors, and Peter Toy, general counsel.

certificate of legal practitioner I, Glenn Owbridge, certify to the Court that, in relation to the pleading dated April 2009 filed on behalf of the Applicant, the factual and legal material available to me at present provides a proper basis for each allegation in the pleading. Date: ............................................................. Legal Practitioner representing the Applicant

ANNEXURE TO THE JUDGMENT IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY General Division NO QUD 99 OF2009 AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant Pursuant to the Order of Logan J Dated 24 July 2009 CRAFTMATIC AUSTRALIA PTY LTD ACN 108 312 983 First Respondent ASHLEY FRANCIS DAY Second Respondent WAYNE LUGG Third Respondent AMENDED DEFENCE

1. The Second Respondent does not admit paragraph 1 of the Statement of Claim ("the SOC").
2. As to paragraph 2 of the Statement of Claim SOC: 2.1. the Second Respondent (i) admits that the First Respondent was a Company incorporated in Australia; (ii) admits that the First Respondent was a corporation within the meaning of Section 4 of the Trade Practices Act 1974 ("the Act"); (iii) admits that the Second Respondent carried on the business of selling adjustable beds under the "Craftmatic" brand name ("Craftmatic Beds").

2.2. save as pleaded above does not admit the other allegations of fact as pleaded therein know and is unable to admit the allegations of fact pleaded in paragraphs 2.1, 2.2 and 2.3 of the ("SOC") as the Second Respondent does not know the dates the Applicant intends to refer to by use of the expression "all material times" in the said paragraphs. 3. As to paragraph 3 of the Statement of Claim ("SOC") the Second Respondent: 3.1. admits that for a period of time prior to June 2008 he was a managing director of the First Respondent; 3.2. admits that prior to June 2008 he was a shareholder of the First Respondent; 3.3. save as pleaded in paragraphs 3.1 and 3.2 denies the allegations of fact pleaded therein does not know and is unable to admit the allegations of fact pleaded in paragraphs 3.1 and 3.2 of the SOC as the Second Respondent does not know the dates the Applicant intends to refer to by use of the expression "all material times" in the said paragraphs; 3.4. denies the allegations of fact in paragraph 3.3 of the SOC; and 3.5. further, and in response, pleads as follows: (i) from the date of incorporation the head office of the First Respondent was situate in Adelaide (the Adelaide Head Office) and the day to day business affairs of the First Respondent were predominantly managed and administered from the Adelaide Head Office during the period when the Second Respondent was involved with the business activities of the First Respondent; (ii) between April 2004 and June 2008 the Second Respondent: (a) continually resided in Queensland; (b) periodically attended at the head office of the Second Respondent in Adelaide; (c) traveled extensively overseas; (d) whilst not in attendance at the Adelaide Head Office, the business affairs of the First Respondent were managed and directed by other servants or agents of the First respondent and the Second Respondent had no actual knowledge of the conduct of the day to day business sales and administration activities by those persons. (iii) at all times during which the Second Respondent was in Australia and was involved in the affairs of the First Respondent; (a) the day to day directing and managing of the business operations of the First Respondent were predominantly conducted by Staff Section Managers based in South Australia at the Adelaide Head Office with direct responsibility for all facets of day to day staff management, including telemarketing via the Adelaide based telemarketing center, mail room operations, the training of sales representatives and the training and monitoring of marketing consultants and managers ("the Managers"); (b) the Managers (or any of them) were trained by specialist consultants who had been trained by Craftmatic in the UK; (c) other than a number of initial attendances during approximately April and May 2004 the Second Respondent had no direct involvement in telephone contact or the dealings through sales representatives or any other servants or agents of the First Respondent with either potential or actual customers of the First Respondent. (iv) the Second Respondent relied upon the expertise of the Managers for all purposes associated with the training and monitoring of staff and sales representatives; (iv a) the Second Respondent had no actual knowledge of the day to day business conduct of the other servants or agents of the First Respondent, including the Managers; (v) further, the Second Respondent says that all materials used by the First Respondent in its business activities, including the scripts referred to in the SOC during the period when he was involved with the business activities of the First Respondent: (a) were provided by Craftmatic USA; (b) were vetted and approved at the First Respondent's request under instructions from the Second Respondent by solicitors specially retained by the Second Respondent to advise the First Respondent regarding its business activities including ensuring compliance with the requirements of the Act and the legislation of each State and Territory of Australia in which the First Respondent operated; (vi) the Therapeutic Goods Association had approved description of the beds sold by the First Respondent as "medical devices"; (vii) the Medical Industry Association of Australia ("MIAA") provided regular advice regarding advertising by the First Respondent of the medical benefits of Craftmatic Beds, including the giving of advice through the Second Respondent that the First Respondent was able to advertise/market the beds using the wording (or similar) that beds may provide relief to various pain syndromes; (viii) commercial television advertising of the First Respondent was also vetted and approved by the Commonwealth Advertising Division (CAD) and the media governing body and in each state, which approval was communicated. 4. As to paragraph 3.2 does not know and cannot admit the allegations of fact as pleaded therein. 5. As to paragraph 4 of the SOC the Second Respondent: does not know and cannot admit the allegations of fact contained in paragraph 4.1 and 4.2 of the SOC. 5.1. admits that the Third Respondent (Lugg) was one of the sale representatives of the First Respondent; 5.2. further says that he terminated the First Respondent's contract with Lugg in 2007 for breach on account of Lugg acting outside the scope of his authority as a sales representative of the First Respondent; 5.3. does not know and cannot admit the dates he worked as sales representative for the First Respondent; and 5.4. otherwise denies the allegations of fact in paragraph 4.2 that Lugg acted within the scope of his natural or apparent authority as a sales representative in respect of his conduct as pleaded in the SOC. 6. As to paragraph 5 of the SOC the Second Respondent: 6.1. admits that Craftmatic has sold Craftmatic beds to customers in Australia; 6.2. does not know and is unable to admit the allegations of fact pleaded in the paragraph 5 of SOC as the Respondent does not know the dates the Applicant intends to refer to by use of the expression "all material times" in the said paragraph; 6.3. otherwise does not know and cannot admit does not know and cannot admit the allegations of fact contained in paragraphs 5.1 - 5.5 of the SOC pertaining to the asserted sales method. 7. As to paragraph 6 of the SOC the Second Respondent: 7.1. admits that the First Respondent's telemarketer representatives made telephone calls to potential customers; 7.2. otherwise does not know and cannot admit the allegations of fact pleaded in paragraphs 6.1 - 6.4 of the SOC. 8. As to paragraph 7 and 8 of the SOC, the Second Respondent: 8.1. admits that a script was available for use by staff of the First Respondent; 8.2. otherwise does not know and cannot admit that the representations referred to in paragraph 7 of SOC : (a) were made to potential customers (b) were made by the telemarketer representatives in accordance with a script; (c) whether, if the representations were made, ( which is not admitted), the telemarketer representatives were instructed to make representations in accordance with a script or otherwise at the material times referred to. 8.3 - 8A As to paragraph 8 of the SOC, the Second Respondent otherwise 8A.1 does not know and cannot admit the allegations of fact referred to therein in paragraphs 8.1 and 8.2 of the SOC; 8A.2 refers to and repeats his pleadings at paragraphs 3.5(i) to 3.5(v)(b) herein. 9. As to paragraph 9 of the SOC the Second Respondent: 9.1. refers to and repeats his pleadings herein in response to paragraphs 1 to 5 8.2 of the SOC; and 9.2. does not plead to the allegations of law contained therein. 10. As to paragraph 10 of the SOC the Second Respondent: 10.1. refers to and repeats his pleadings herein in response to paragraphs 3.5(i) to 3.5(v)(b), 5, 6, 7 and 8 of the SOC; 10.2. otherwise does not admit the allegations of fact pleaded in sub-paragraph 10.1 or any of them; 10.3. save as pleaded in paragraph 10.1, joins issue with the allegations of fact pleaded in paragraphs 10.2 and 10.3 of the SOC therein; 10.4 does not plead to the Allegations of law in para 10.3 of the SOC; 10.4. further, as to paragraph 10.3 (a) refers to and repeats his pleadings at paragraphs 3.1 - 3.4 each inclusive herein in response thereto; (b) does not plead to the allegations of law therein. 11. As to paragraphs 11 to 13 each inclusive of the SOC, the Second Respondent: 11.1. does not know and cannot admit the allegations of fact pleaded therein; 11.2. refers to and repeats his pleadings at paragraphs 3.5(i) to 3.5(v)(b) herein. 12. As to paragraph 14 of the SOC the Second Respondent: 12.1. refers to and repeats his pleading herein in response to paragraph 11.2 of the SOC; 12.2. does not plead to the conclusions of law pleaded therein. 13. As to paragraph 15 of the SOC the Second Respondent: 13.1 refers to and repeats his pleadings herein in response to paragraphs 11, 12 and 13 of the SOC; 13.1A refers to and repeats his pleadings at paragraphs 3.5(i) to 3.5(v)(b) herein; 13.2 otherwise joins issue with allegations of fact pleaded in paragraph 15.2 and 15.3 of the SOC; 13.3 further, and as to paragraphs 15.2 and 15.3 of the SOC does not plead to the allegations of law pleaded therein. 14. As to paragraph 16.1 of the SOC the Second Respondent: 14.1 admits that sales representatives of the First Respondent were remunerated on a commission only basis during the period commencing August 2005 until June 2008; 14.2 save as pleaded in 14.1 herein, does not know and cannot admit whether the commission was proportionate to the price at which they sold the craftmatic bed allegations of fact pleaded therein; 14.3 further refers to and repeats his pleadings at paragraphs 3.5(i) to 3.5(v)(b) each inclusive herein. 15. As to paragraph 16.2 of the SOC the Second Respondent: 15.1 does not know and cannot admit the allegations of fact pleaded in paragraph 16.2; 15.2 refers to and repeats his pleading at paragraphs 3.4 3.5(i) to 3.5(v)(b) each inclusive herein. 16. As to paragraph 16.3 of the SOC the Second Respondent: 16.1 does not know and cannot admit the allegation of fact pleaded in paragraph 16.3 of the SOC; 16.2 refers to and repeats his pleading at 3.4(i) - 3.4(iv) paragraphs 3.5(i) to 3.5(v)(b) each inclusive herein. 17. As to paragraph 16.4 of the SOC the Second Respondent: 17.1 does not know and cannot admit the allegations of fact pleaded in paragraph 16.4 of SOC; 17.2 refers to and repeats his pleadings at 3.4(i) - 3.4(iv) paragraphs 3.5(i) to 3.5(v)(b) each inclusive herein. 18. As to paragraph 16.5 to 16.5.7 of the SOC, the Second Respondent: 18.1 does not know and cannot admit the allegations of fact pleaded in paragraph 16.5 of SOC therein; 18.2 refers to and repeats his pleadings at 3.4(i) - 3.4(iv) paragraphs 3.5(i) to 3.5(v)(b) each inclusive herein. 19. As to paragraph 16.6 of the SOC the Second Respondent: 19.1. does not know and cannot admit the allegations of fact pleaded in paragraph 16.6 of the SOC; 19.2. refers to and repeats his pleadings at paragraphs 3.5(i) to 3.5(v)(b) and 3.4(i) 3.4(viii) each inclusive herein. 20. As to paragraph 17 of the SOC, the Second Respondent: 20.1. does not know and cannot admit the allegations of fact referred to therein; 20.2. refers to and repeats his pleadings at 3.4(i) - 3.4(iv) paragraphs 3.5(i) to 3.5(v)(b) each inclusive herein; 20.3. says there were three different models of beds offered and sold by the First Respondent to its potential and actual customers during the period which the Second Respondent was involved with the trading activities of the First Respondent. 21. As to paragraphs 18.1 to 18.7 of the SOC the Second Respondent: 21.1. does not know and cannot admit the allegations of fact referred to therein; 21.2. refers to and repeats his pleadings at 3.4(i) - 3.4(iv) paragraphs 3.5(i) to 3.5(v)(b) each inclusive herein; 21.3. refers to and repeats his pleading a paragraph 20.3 herein. 22. As to paragraphs 19.1 to 19.12 of the SOC the Second Respondent: 22.1. does not know and cannot admit the allegations of fact referred to therein; 22.2. refers to and repeats his pleadings at 3.4(i) - 3.4(iv) paragraphs 3.5(i) to 3.5(v)(b) each inclusive herein. 23. As to paragraph 20 - 20.5.3 of the SOC the Second Respondent: 23.1. does not know and cannot admit the allegations of fact pleaded in paragraphs 20.1 to 20.5.3 of the SOC; 23.2. refers to and repeats his pleadings at 3.4(i) paragraph 3.5(i) to 3.5(v)(b) 3.4(iv) each inclusive herein. 24. As to paragraph 21 of the SOC the Second Respondent: 24.1. does not know and cannot admit the allegations of fact pleaded in paragraphs 21.1 to 21.17 of the SOC; 24.2. refers to and repeats his pleadings at 3.4(i) - 3.4(iv) paragraph 3.5(i) to 3.5(v)(b) each inclusive herein; 24.2.1. further says that at all times during his involvement with the trading activities of the First Respondent: (a) there were a number different models of beds offered and sold by the First Respondent to its potential and actual customers; (b) medical and related advertising advice was sought from Australian Authorised Bodies, MIAA and CAD; (c) the beds sold by the First Respondent were classified by Therapeutic Goods Association as medical devices; and (d) if, which is denied, any medical advice was given, then such advice: (i) was not authorised by the First Respondent to the Second Respondent's knowledge; (ii) the person giving the advice was representatives acting outside the authority bestowed on them him/her by virtue of their his/her relationship with the First Respondent. 25. As to paragraph 22 of the SOC the Second Respondent: 25.1. does not know and cannot admit the allegations contained therein; 25.2. refers to and repeats his pleadings in response to paragraphs 18, 19.1, 19.3, 19.9, 19.10, 19.12, 20.1, 20.2, 20.4 and 20.5 of the SOC; 25.3. does not plead to the allegations of law referred to herein. 26. As to paragraph 23 of the SOC the Second Respondent: 26.1. refers to and repeats its pleading in response to paragraphs 18, 19 and 20 of the SOC; 26.2. does not plead to the allegations of law pleaded referred to therein: 27. As to paragraph 24.1 of the SOC the Second Respondent: 27.1. does not admit the allegations of fact pleaded in paragraph 24.1 or any of them; 27.2. joins issue with the allegations of fact pleaded in paragraphs 24.2 and 24.3 therein and 24.4 of the SOC; 27.3. refers to and repeats his pleadings at paragraphs 3.5(i) to 3.5(v)(b) of the SOC; and 27.4. further, and as to paragraph 24.4, does not plead to the allegations of law pleaded in paragraph 24.4 of the SOC therein. 28. As to paragraph 25 of the SOC the Second Respondent does not know and cannot admit the allegations of fact pleaded in paragraphs 25.1 to 25.6 of the SOC. 29. As to paragraph 26 of the SOC the Second Respondent: 29.1. admits that during April 2006 to May 2007 that the First Respondent did not receive any government subsidies for its products and does not know and cannot admit the allegations of fact pleaded in paragraphs 26.1 to 26.3; 29.2. admits Lugg did receive commissions for beds sold from the First Respondent during the time he was a sales representative for the First Respondent. 30. As to paragraph 27 of the SOC the Second Respondent: 30.1. refers to and repeats his pleadings in response to paragraph 25 of the SOC; 30.2. refers to and repeats his pleadings at paragraphs 5.2 to 5.4 herein; 30.3. does not plead to the allegations of law pleaded therein; 30.4. further says that if Lugg engaged in the conduct as pleaded by the Applicant in the SOC, (which is not admitted) then Lugg acted outside the scope of the actual and /or apparent authority given to him by the First Respondent. 31. As to paragraph 28 of the SOC the Second Respondent: 31.1. does not plead to allegations of fact contained in paragraphs 28.1 or any of them and 28.2 of the SOC; 31.2. further, as to paragraph 28.2, does not plead to the allegations of law pleaded therein. 32. As to paragraph 29 of the SOC the Second Respondent does not know and cannot admit the allegations of fact pleaded therein as the Second Respondent does not know the dates the Applicant intends to refer to by use of the words "at all material times". 33. As to paragraph 30 of the SOC the Second Respondent: 33.1. does not know and cannot admit the allegations of fact contained in that paragraph as the Second Respondent does not know the dates the Applicant intends to refer to by use of the words "at all material times"; 33.2. denies the allegation of fact pleaded therein in so far as they relate to the period during which the Second Respondent was involved with the business activity of the First Respondent. 34. As to paragraph 31 of the SOC the Second Respondent: 34.1. does not know and cannot admit the allegations of fact pleaded in paragraphs 31.1 to 31.15 as the Second Respondent does not know the dates the Applicant intends to refer to by use of the words "at all material times"; 34.2. refers to and repeats its pleadings herein in response to paragraphs 5, 6, 7, 11, 12, 16, 17, 18, 19 and 20 of the SOC; and 34.3. otherwise does not know and cannot admit the allegations of fact pleaded therein in so far as they relate to the period during which the Second Respondent was involved with the business activities of the First Respondent. 35. As to paragraph 32 of the SOC the Second Respondent: 35.1. does not know and cannot admit the allegations of fact pleaded in paragraphs 32.1 to 32.3 as the Second Respondent does not know the end date the Applicant intends to refer to by use of the words "at all material times"; 35.2. otherwise does not know and cannot admit the allegations of fact pleaded therein in so far as they relate to the period during which the Second Respondent was involved with the business activities of the First Respondent.

36. As to paragraph 33 of the SOC the Second Respondent: 36.1. refers to and repeats his pleadings in response to paragraphs 6, 11, 16, 18, 19, 20 and 31 of the SOC; and 36.2. does not plead to the allegations of law pleaded therein.
37. As to paragraph 34.1 of the SOC the Second Respondent: 37.1. refers to and repeats his pleadings at in response to paragraphs 6, 7, 8, 11,12, 13 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24 and 34, 31 and 32 of the SOC each inclusive; 37.2. otherwise does not admit the allegations of fact pleaded in paragraph 34.1 of the SOC.
38. As to paragraph 34.2 of the SOC the Second Respondent: 38.1. refers to and repeats his pleadings at paragraphs 7, 8, 11, 14, 15, 16, 17, 18, 19, 21, 22, 23, 24 and 34 in response to paragraphs 6, 7, 11, 12, 16, 18 to 20, 31 and 32 of the SOC each inclusive; 38.2. otherwise does not admit the allegations of fact pleaded in paragraph 34.2 of the SOC.
39. As to paragraph 34.3 of the SOC the Second Respondent: 39.1. denies the allegations of fact referred to therein; 39.2. refers to and repeats his pleadings at paragraphs 3.5(i) to 3.5(v)(b); 39.3. does not plead to the allegations of law pleaded therein.

Date ------------------------------------ Solicitor for the Second Respondent

Certificate of Legal Representative (Order 11, rule 1B)

I, Abby Hamdan, certify to the Court that in relation to this pleading dated 5 August 2009 filed on behalf of the Second Respondent, the factual and legal material available to me at present provides a proper basis for: 1 each allegation in the pleading; 2 each denial in the pleading; and 3 each non-admission in the pleading

Date ------------------------------------ Solicitor for the Second Respondent