Practice and procedure - Application to strike out statement of claim - Claim by employee of misleading and deceptive conduct by employer - Introduction by employer of policies relating to harassment and bullying in workplace - Representations by employer as to the policies - Whether conduct in trade or commerce under Trade Practices Act 1974 (WA) - Turns on own facts

Trade Practices Act 1974 (Cth), s 4, s 51AC(1)(b), s 52

Barto v GPR Management Services Pty Ltd [1991] FCA 659; (1991) 33 FCR 389

Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594

Martin v Tasmania Development and Resources [1999] FCA 593; (1999) 163 ALR 79

Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2001] FCA 1056

Mulcahy v Hydro-Electric Commission (1998) 85 FCR 170

Stoelwinder v Southern Health Care Network [2000] FCA 444; (2000) 177 ALR 501

Village Building Co Ltd v Canberra International Airport Pty Ltd [2004] FCAFC 240

Walker v Salomon Smith Barney Securities Pty Ltd (2003) FCA 1099

Adamson v West Perth Football Club Inc [1979] FCA 81; (1979) 27 ALR 475

Alvito Pty Ltd v Bank of Western Australia Ltd [2003] WASC 64

Dalgety Australia v Rubin, unreported; SCt of WA; Library No 5485; 24 August 1984

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Kimberley Downs Pty Ltd v Western Australia, unreported; SCt of WA; Library No 6414; 25 August 1986

Niven v Grant (1903) 29 VLR 102

1 MASTER NEWNES: This is an application by the defendants to strike out the statement of claim as disclosing no reasonable cause of action and for an order dismissing the action.

2 At the conclusion of argument, counsel for the defendants sought an opportunity to consider whether the defendants wished to make submissions on whether the defendants were listed public companies for the purposes of the Trade Practices Act 1974 (Cth). On 4 November 2004, I was informed that the defendants did not wish to pursue that matter.

3 In the statement of claim, the plaintiff pleads that he has been employed by the second defendant for 28 years and is currently employed as its chief pilot. The plaintiff's duties are to fly journalists and camera crew to various locations to gather and report news. He says he was and is required to deal in a close professional relationship with journalists, camera crew and other staff of the second defendant involved in its news department.

4 The plaintiff pleads that, as from 1 July 2003, the first defendant, on behalf of "Seven Network Ltd" introduced an occupational health and safety system involving the adoption, implementation and maintenance of various policies and procedures affecting, among others, employees of the second defendant. It is alleged that, in implementing the policies, the second defendant made certain representations in writing to employees of the second defendant to the effect that the second defendant was committed to providing a safe workplace for employees and to ensuring that the second defendant's occupational health and safety system achieved above average results.

5 As part of an equal employment opportunity policy implemented by the first defendant, pursuant to the occupational health and safety system, the first defendant represented to employees of the second defendant, including the plaintiff, that "Seven Network Ltd" was committed to providing a workplace free of discrimination and harassment and to ensuring that no harassment occurred in the workplace. It represented that the responsibility for implementing equal employment opportunity within the company lay with every manager. It is alleged that the plaintiff's position was equivalent to that of a manager.

6 As part of the occupational health and safety policy, the first defendant implemented and applied to employees of the second defendant, a "workplace harassment" policy and made certain representations in writing to employees of the second defendant, including the plaintiff, regarding the nature, implementation and procedures of that policy.

7 It is alleged that the first defendant represented, in substance, that it was against company policy and a breach of the law to harass an employee and that harassment would not be tolerated. Complaints of harassment would be taken seriously and any complaint would be investigated in a sympathetic, fair and confidential manner. It represented that it was the role of managers and supervisors to ensure that harassment did not occur and that when managers observed harassment happening, they must take steps to stop it and to warn the person involved of the consequences if it continued. Managers and supervisors were responsible for making staff aware that harassment was not permitted and that complaints would be dealt with in accordance with the company's grievance handling policy.

8 It is alleged the first defendant was responsible for implementing a grievance handling policy in respect of employees of the second defendant, including the plaintiff. The first defendant thereby represented that any complaint made by an employee would be investigated in a fair and impartial manner and no judgments or assumptions would be made, and no action would be taken, until the investigation was complete. If a complaint was made against a person, their rights would be protected and they would be given an opportunity to tell their side of the story.

9 The plaintiff pleads that the representations by the first defendant were made for and on behalf of the second defendant and constituted conduct of the defendants in trade and commerce within the meaning of the Trade Practices Act 1974 (Cth).

10 The plaintiff alleges that, by the policies, the defendants represented to the plaintiff that in his ongoing employment with the second defendant he was obliged and encouraged to take positive steps to identify and reduce bullying and harassment of employees within the workplace, that disputes between fellow employees would be dealt with in accordance with the grievance handling policy, that pursuant to that policy the plaintiff would have a fair opportunity to know any complaint made against him to enable him to respond to it, that any grievance would be resolved in a fair manner and that an adverse warning detrimental to the plaintiff's ongoing employment would only be made after the policies, and in particular the grievance handling policy, had been properly and fairly implemented.

11 It is pleaded that, in January 2004, the plaintiff became aware of bullying and harassment by two employees of the second defendant of other employees. In March 2004, one of the second defendant's employees engaged in severe harassment and bullying of three other employees. The plaintiff says that the following day, in accordance with the harassment policy and in discharge of his duties as a manager, he had a discussion with an employee of the second defendant about the possibility of obtaining evidence of the bullying and harassment by secretly tape-recording it. He says that the employee to whom he spoke subsequently accused him of having some other, unspecified "agenda".

12 According to the plaintiff, on 3 April 2004 locks were placed on the helicopter hanger and the security guards employed to guard it, the helicopter was flown off site by another pilot, although the plaintiff was the designated pilot for the day, the plaintiff was suspended from duties without notice or reasons being given and the plaintiff was directed not to have contact with any other employee of the second defendant.

13 The plaintiff alleges that on 8 April 2004, in an interview with a general manager of the first defendant, he was informed that he had been suspended because the employee to whom he had spoken about the tape recording had made a complaint of harassment against him and the suspension was part of an enquiry pursuant to the grievance handling policy. The plaintiff says the general manager refused to disclose the nature of the complaint that had been made.

14 It is pleaded that in a letter dated 16 April 2004 ("the 16 April letter") the first defendant, on its own behalf or on behalf of the second defendant, gave formal notice to the plaintiff of warnings in respect of his ongoing employment with the second defendant, to the effect that his conduct in seeking to have tape recordings made was in breach of his duty of good faith to the second defendant and his attempt to persuade the employee to carry out the tape recording was intimidatory and amounted to harassment. The 16 April letter also stated that the plaintiff's conduct had led to concerns that he may be unfit to fly and required him to produce a medical certificate from a specialist, who was to be briefed by the first defendant, stating that he was fit to fly. In the 16 April letter the first defendant also gave the plaintiff a formal warning for failing to comply with the instruction not to initiate contact with any other employee of the second defendant.

15 The plaintiff alleges that the representations made by the defendants in respect of the policies were false in that the plaintiff's attempts to identify and eliminate bullying and harassment of fellow employees resulted in the plaintiff being victimised, the plaintiff was not given a fair or reasonable opportunity to defend himself against the complaint made against him, and that by the letter the plaintiff's ongoing employment with the second defendant had been adversely affected as a result of a process not conducted in accordance with the defendants' stated policies.

16 It is pleaded, further and in the alternative, that the 16 April letter constituted representations by the second defendant that the complaint against the plaintiff was properly made, was properly investigated and determined in accordance with the policies, and was appropriate and a matter that could be relied upon in the future by the second defendant in determining whether or not to continue the plaintiff's employment. It is alleged that those representations were made by the second defendant for and on behalf of the first defendant and constituted conduct of the defendants in trade or commerce. The plaintiff pleads that the representations were false.

17 The plaintiff also pleads claims under s 51AC(1)(b) of the Trade Practices Act 1974, alleging unconscionable conduct.

18 It is pleaded in par 31 of the statement of claim that, insofar as the plaintiff was employed by the second defendant, the plaintiff's services as chief helicopter pilot were acquired by the first defendant in trade or commerce, and the first defendant had engaged in conduct that was unconscionable and contrary to s 51AC(1)(b). The conduct complained of, in substance, is that in the interview with a general manager of the first defendant on 8 April 2004 the plaintiff was informed that the reason for his suspension was a complaint of harassment made against him and that his suspension was part of the implementation of an inquiry pursuant to the grievance handling policy, but the general manager refused to disclose the nature of the complaint against him. The plaintiff also relies on the 16 April letter, and the assertions contained in it, as constituting unconscionable conduct by the first defendant, including the assertion that he may not be fit to fly and the requirement that he obtain a medical certificate from a specialist, and the formal warning contained in it for failing to comply with instructions not to initiated contact with any other employee of the second defendant.

19 It is pleaded in par 31A, in the alternative, that if (which is denied) the plaintiff was employed by the first defendant, the plaintiff's services as chief helicopter pilot were acquired by the second defendant in trade or commerce and that certain conduct of the second defendant was unconscionable and contrary to s 51AC(1)(b) of the Trade Practices Act 1974. The conduct complained of relates to the contents of telephone conversations in which, it is alleged, an officer of the second defendant acted in "an aggressive and inappropriate manner" although the plaintiff had a medical certificate stating that he was unfit to work; a letter of 5 May 2004, by which, it is alleged, the second defendant gave notice to the plaintiff of a further investigation and that his telephone calls were being monitored; by the conduct of the second defendant in writing to the plaintiff's personal doctor questioning the legitimacy of a certificate certifying the plaintiff was unfit to attend work; causing the plaintiff and his family to be placed under covert surveillance; requiring the plaintiff to return a mobile telephone and a computer; and by writing various letters to medical practitioners in relation to the plaintiff.

20 I will turn first to the defendants' application to strike out the plaintiff's claim under s 52 of the Trade Practices Act 1974.

21 The defendants' primary contention was that the policies pleaded in the statement of claim were no more than internal communications between an employer and employee, and there was no trading or commercial dealing between the plaintiff and the defendants which could constitute conduct in trade or commerce within the meaning of s 52 of the Trade Practices Act 1974. It was submitted that, in light of the decision of the High Court in Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594, internal employment policies could not constitute conduct in trade or commerce within the meaning of s 52.

22 The defendants' counsel acknowledged that conduct in the course of negotiating an employment contract between an employer and a prospective employee may arguably amount to conduct in trade or commerce, although he submitted that the law on that is not settled. However, the conduct complained of in the statement of claim did not involve contract negotiations, but fell squarely within the type of internal affairs that it had been held in Concrete Constructions (NSW) Pty Ltd v Nelson could not constitute conduct in trade or commerce. Similarly, it was submitted that the claim in respect of the letter of 16 April 2004 related to an internal communication that could not constitute conduct in trade or commerce.

23 It was argued on behalf of the plaintiff that the policies were more than simply "internal communications". They modified or varied the contract of employment and were either representations going to the terms of employment or variations to the contract of employment. It was submitted that cases since Concrete Constructions (NSW) Pty Ltd v Nelson have recognised that statements made in the course of negotiating contracts of employment or the variation of contracts of employment are capable of constitution conduct in trade or commerce. The plaintiff relied, in particular, on the decision of the Federal Court of Australia in Barto v GPR Management Services Pty Ltd [1991] FCA 659; (1991) 33 FCR 389.

24 It was submitted, in relation to the letter of 16 April 2004, that the letter constituted conduct which falsified the representations made by the defendants in respect of the policies and, to overcome one objection by the defendants, the plaintiff's counsel foreshadowed an amendment to the plea to allege expressly that the letter was conduct in trade or commerce.

25 It was submitted on behalf of the plaintiff that if the conduct of a company in entering into a contact of employment with an employee can be conduct in trade or commerce, a fortiori conduct terminating a contract of employment is also capable of being conduct in trade or commerce. Similarly, if a variation of a contract of employment is arguably conduct in trade or commerce, a process of "warning" - a step which is necessary to establish the right of an employer to terminate - attracts the same characterisation.

26 In Concrete Constructions (NSW) Pty Ltd v Nelson (supra), the respondent alleged that, while he was employed by the appellant, a foreman of the appellant instructed him to remove the grates from the entry points of certain air-conditioning shafts and told him that each grate was secured by certain bolts. It was alleged that the statement was wrong and that while the respondent was removing one of the grates it gave way and caused him to fall to the bottom of the shaft, resulting in the respondent suffering serious injuries. The respondent claimed against the appellant on the basis that the foreman's statement concerning the bolts was conduct of the appellant that was misleading or deceptive contrary to s 52 of the Trade Practices Act 1974.

27 It was held that the alleged facts did not give rise to a cause of action. At 602 - 603, Mason CJ, Deane, Dawson and Gaudron JJ said:

"The phrase 'in trade or commerce' in s 52 has a restrictive operation. It qualifies the prohibition against engaging in conduct of the specified kind. As a matter of language, a prohibition against engaging in conduct 'in trade or commerce' can be construed as encompassing conduct in the course of the myriad of activities which are not, of their nature, of a trading or commercial character but which are undertaken in the course of, or as incidental to, the carrying on of an overall trading or commercial business. If the words 'in trade or commerce' in s 52 are construed in that sense, the provisions of the section would extend, for example, to a case where the misleading or deceptive conduct was a failure by a driver to give the correct handsignal when driving a truck in the course of a corporation's haulage business. It would also extend to a case, such as the present, where the alleged misleading or deceptive conduct consisted of the giving of inaccurate information by one employee to another in the course of carrying on the building activities of a commercial builder. Alternatively, the reference to conduct 'in trade or commerce' in s 52 can be construed as referring only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. So construed, to borrow and adapt words used by Dixon J in a different context in Bank of NSW v Commonwealth [1948] HCA 7; (1948) 76 CLR 1 at 381, the words 'in trade or commerce' refer to 'the central conception' of trade or commerce and not to the 'immense field of activities' in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business.

...

It is plain that s 52 was not intended to extend to all conduct, regardless of its nature, in which a corporation might engage in the course of, or for the purposes of, its overall trading or commercial business. Put differently, the section was not intended to impose, by a side-wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities. What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character."

28 In Barto v GPR Management (supra), the appellant had been employed in July 1989 by the respondent as its chief project manager. The appellant alleged that in early November 1990, following renegotiation of his employment contract, there was a further agreement that he should become general manager from 1 December 1990 with an increased salary and further responsibilities. He alleged that he was not paid the increased salary and in February 1991 his employment was terminated without reasonable cause or notice. The appellant alleged that a representation by the respondent in the course of the renegotiations that the respondent desired the appellant to remain with it "for many years to come" was untrue, inaccurate and incomplete and made without any intention or reasonable expectation that it would be carried into effect and contrary to s 52 of the Trade Practices Act.

29 The respondent contended that, as the alleged representations were by or on behalf of an employer to an employee concerning the term of the employee's employment, they were not in trade or commerce.

" ... it seems appropriate to start with the proposition that, notwithstanding Concrete Constructions, it is still good law that the range of conduct to which s 52 has potential application is not limited to the activities by virtue of which the corporation directly earns its income. Subject to one qualification, the only question is whether the conduct is part of the corporation's total activities in trade or commerce. The range of relevant activities in a broad one and it includes activities by virtue of which the corporation equips itself to earn income.

The one qualification to which I refer is that imposed by the decision in Concrete Constructions: the relevant particular conduct must be conduct which itself has 'a trading or commercial character'. Even conduct directly related to the earning of revenue may fall outside s 52 if it lacks a trading or commercial character; for example the manner of driving a truck delivering goods to a customer. Conversely, conduct which is trading or commercial in character will fall within s 52 if it is encompassed within the corporation's total activities; even though that particular conduct does not directly yield income.

If the above analysis is correct, it seems to me correct to hold that the conduct of a corporation in the course of negotiations for the employment of senior staff is conduct potentially falling within s 52. It is true that an employment contract does not directly produce income, but the making of such a contract is part of the total activities in trade or commerce of the corporation. Critically, it is intrinsically commercial conduct. It is directed to the creation of a contractual relationship.

In the present case the relevant negotiation was conducted with someone who was already an employee of the company. In that sense, the transaction was 'internal'. But I do not think this matters. Negotiations for an initial employment contract, with a person who is not presently an employee, and negotiations for a variation of that contract, with a person who is an employee, do not differ in their intrinsic character. In each case the negotiation is commercial in nature and undertaken for the purpose of the company's overall trading activities. As I have pointed out, the Concrete Constructions majority recognised that conduct may be 'in trade or commerce' notwithstanding that it occurs in a transaction with an employee."

31 A different conclusion, however, was reached by Heerey J in two subsequent decisions. In Mulcahy v Hydro-Electric Commission (1998) 85 FCR 170, Heerey J held that representations alleged to have been made by an employer to certain employees in respect of the employees' entitlement to join a retirements benefit scheme did not constitute conduct in trade or commerce. His Honour said (at 57) "the relationship between the [employer] and each of the applicants was that of employer and employee. There were no trade or commercial dealings between them in the relevant sense."

32 In Martin v Tasmania Development and Resources [1999] FCA 593; (1999) 163 ALR 79, the applicant was employed under a fixed term contract by the respondent. The contract provided that the respondent could terminate the contract on grounds based on the operational requirements of the respondent by giving one month's notice. The applicant's employment was terminated by a letter dated 21 October 1998 on the grounds of the operational requirements of the respondent. The applicant claimed, among other things, that the respondent had contravened s 52 of the Trade Practices Act 1974 in that that there were no "operational requirements" as claimed. He also contended that the contract promised procedural fairness in the event of a termination, and fair and equal access to employment, which the respondent had no intention of affording. In the course of his judgment, Heerey J referred to Barto v GPR Management and expressly disagreed with the conclusion reached in that case. Heerey J continued, at 98:

"The majority [in Concrete Constructions] clearly rejected the wider construction of 'in trade or commerce', which would extend to virtually any activity of a corporation. It is true that a building company could not earn income unless it had workers who received instructions from foremen. But that was not enough to bring the alleged misrepresentation within the concept of 'trade or commerce'. Similarly, TDR could not carry out its activities of promoting Tasmanian trade and development (which activities themselves I assume for present purposes to be in trade or commerce) unless it engaged staff. Nevertheless such engagements and the necessary associated incidental negotiations, however necessary, are not in themselves of a trading or commercial nature. They are internal affairs of TDR."

33 In Stoelwinder v Southern Health Care Network [2000] FCA 444; (2000) 177 ALR 501, the respondent brought an application to strike out the statement of claim which alleged that the respondent had engaged in false and misleading conduct while negotiating the terms of a new contract of employment for the applicant as chief executive officer. Finkelstein J, having referred to Barto and to Martin v Tasmanian Development and Resources and Mulcahy v Hydro-Electric Commission, said:

"For my own part, I would not regard negotiations for a contract of employment as an 'internal' matter in the sense discussed by the High Court in Concrete Constructions. Before a contract of employment is made the prospective employee is not part of the corporate enterprise and communications between the corporation and the prospective employee are not an aspect of the internal affairs of the corporation. Nor would I regard in any different way discussions concerning the variation of a contract of employment. Negotiations for the variation of a contract are not properly characterised as communications with an employee in the course of his or her employment. I would regard all such communications, that is communications relating to the making or variation of a contract of employment, to be prima facie 'in trade or commerce' because in most cases a contract of employment 'is itself an aspect or element of activities or transaction which, of their nature, bear a trading or commercial character', to adopt the language of the High Court."

34 In Walker v Salomon Smith Barney Securities Pty Ltd (2003) FCA 1099 Kenny J, having reviewed the authorities, concluded that misleading and deceptive conduct in the course of negotiations for employment may support a cause of action for misleading or deceptive conduct.

35 While it is clear that the cases are not consistent on the question of the application of s 52 to contracts of employment, what does emerge from a review of the authorities is that the cases in which it has been held that s 52 does apply, or is capable of applying, have been concerned with the creation or alteration of contractual rights and obligations between the employer and employee. It is that element which has given the conduct its "trading or commercial character". Thus, in Barto, Wilcox J, in concluding that the conduct of a corporation in the course of negotiations for the employment of senior staff was conduct potentially falling within s 52, said "Critically, it is intrinsically commercial conduct. It is directed to the creation of a contractual relationship." In Stoelwinder v Southern Health Care Network, the conduct that Finkelstein J considered prima facie to be conduct in trade or commerce consisted of communications relating to the making or variation of a contract of employment.

36 It is significant, in my view, that in the present case it is not pleaded that the implementation of the policies referred to constituted a variation of the plaintiff's contract of employment. It was submitted by the plaintiff's counsel that whether or not they effected an alteration to the plaintiff's terms of employment is a matter of evidence. I do not agree.

37 It is plain that policies may be implemented, or directions given, by an employer as to how employees are to conduct themselves in the discharge their duties under an existing contract of employment without constituting any variation of the contract of employment. Policies of that nature may range from the relatively prosaic, such as dress standards, through to matters, such as in the present case, of proscribing conduct that is unacceptable in the workplace and setting up procedures to deal with it, and beyond. It can therefore readily be accepted that the implementation of policies designed to eliminate intrinsically unacceptable behaviour, such as bullying or harassment of fellow employees, and of procedures to deal with complaints of bullying and harassment, will not necessarily effect a variation in the contract of employment of any of the affected employees.

38 The fact that the policies in question may be in the interests of the defendants' business activities does not establish that their implementation is conduct in trade or commerce. As the Full Court of the Federal Court observed in Village Building Co Ltd v Canberra International Airport Pty Ltd [2004] FCAFC 240 at [52]:

"But, as Concrete Constructions decides, the fact that the foreman's instructions are in the interests of a corporation, or even essential to its operations, does not necessarily mean that the transaction or dealing is in trade or commerce. The conduct must have occurred in the course of a trading or commercial relationship or otherwise bear a trading or commercial character. ... Conduct by a corporation which does not otherwise bear a trading or commercial character is not brought within s 52 simply because it may be though in some way to benefit the corporation's business ..."

39 In the absence of a plea that the policies in question effected an alteration in the terms or conditions of the plaintiff's contract of employment there is, in my view, no reason to assume that the introduction of the policies did effect any alteration in the plaintiff's contract of employment. If it is the plaintiff's case that the policies did effect such an alteration, then that, in my view, must be expressly pleaded.

40 As the policies in the present case are not alleged to have effected any variation of the plaintiff's contract of employment, on the face of the pleading they appear to be simply in the nature of internal matters dealing with the day-to-day conduct of employees of the second defendant, including the plaintiff, in the workplace in their dealings with their co-workers. When so regarded, the defendants' alleged conduct in connection with the policies is not, in my view, capable of being regarded as having a "trading or commercial character". I would therefore strike out the claim.

41 The second claim is made under s 51AC(1)(b) of the Trade Practices Act 1974. That section relevantly provides:

"A corporation must not, in trade or commerce, in connection with:

...

(b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company);

engage in conduct that is, in all the circumstances, unconscionable."

42 It is clear, as submitted by the defendants' counsel, that the services of the plaintiff under a contract of service are not services within the meaning of s 51AC. Section 4 of the Act expressly excludes from the definition of services "the performance of work under a contract of service".

43 It appears the plaintiff has sought to finesse that difficulty by structuring his claim rather differently. He pleads in par 31 that, to the extent the plaintiff was employed by the second defendant, then his services had been acquired by the first defendant in trade or commerce and the first defendant had engaged in conduct that was unconscionable as against the plaintiff. The conduct alleged relates to the interview with a general manager of the first defendant of 8 April 2004 and the first defendant's letter of 16 April 2004.

44 The plaintiff pleads, in the alternative, in par 31A that if the plaintiff was employed by the first defendant, then his services had been acquired by the second defendant and the second defendant had engaged in conduct that was unconscionable as against the plaintiff. The conduct relied upon consists of the alleged telephone calls from an officer of the second defendant on 19 April 2004 and the second defendant's letter of 5 May 2004.

45 In short, what is pleaded is that one defendant acquired the plaintiff's services from the other defendant (the plaintiff's employer) and the acquirer subsequently engaged in unconscionable conduct toward the plaintiff.

46 It was submitted by counsel for the defendants, and I did not understand it to be seriously contested, that this was a pleading artifice designed to avoid the effect of the exclusion of contracts of service from the application of s 51AC. The question, however, is whether it is a successful artifice.

47 The defendants' counsel submitted that it was not successful and argued, in effect, that in a contractual arrangement of the sort pleaded only the acquirer would be able to resort to s 51AC. Counsel for the defendants referred to Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2001] FCA 1056, where Lindgren J said, at [254]:

"First, subs 51AC(3) contemplates that the only parties to be considered are a 'supplier' and a 'business consumer' and that the matters to which the Court may have regard for the purpose of determining whether the supplier has engaged in unconscionable conduct in connection with the supply will all be matters operating as between it and a business consumer."

48 His Honour noted, first, that the list was not intended to be exhaustive and, secondly, that the "purpose or object underlying" the provision is to protect the "business consumer" or "small business supplier" and that that appeared from the terms of s 51AC and from its legislative background. His Honour went on at [259]:

"Clearly, the purpose or object of s 51AC was to protect small businesses in their dealings with 'big business'."

"Both the context internal to s 51AC and the legislative history to which I have referred, teach that the expression 'in connection with' in s 51AC requires that the conduct impugned 'accompany', 'go with' or 'be involved in' the supply of the goods or services, and that it is not sufficient that, as alleged in the present case, such a supply be the occasion of unconscionable conduct of the supplier directed to an unrelated third party with which the supplier has no dealings at all."

49 It was submitted on behalf of the defendants that the conduct alleged in relation to the plaintiff does not 'accompany', 'go with' or 'be involved in' the supply of his services as a pilot. The conduct was effectively disciplinary or guidance behaviour in relation to the performance of his duties generally, duties which he owes to one defendant and which are discharged for that defendant in relation to work undertaken on behalf of the other defendant.

50 It was submitted on behalf of the defendants that it would be to subvert the legislative policy of s 51AC if unconscionable conduct could not occur where a third party is interfering unconscionably in the provision of services or the acquisition of services, although there was no direct contractual relationship between the parties. It was submitted that it was not to the point that one defendant acquired the services from the other, but attention must be focused on the conduct concerned.

51 I must say, with respect to the pleader (who I should say was not Dr Edelman), that I have great difficulty in following the plaintiff's claims under s 51AC. A good deal of the difficulty, it seems to me, arises because of the generality of the pleas that one defendant "acquired" the plaintiff's services from the other defendant who was the plaintiff's employer. In the first place the plea in par 31A, albeit in the alternative and expressly denied to be the case, that the first defendant was the plaintiff's employer is inconsistent with par 2 and the balance of the statement of claim which pleads that the plaintiff was at all material times employed by the second defendant. Secondly, in respect of both pars 31 and 31A, the capacity of the acquiring company to act adversely to the plaintiff in the manner alleged is not clear, given that it was never the plaintiff's employer and the basis upon which it allegedly acquired the plaintiff's services is not pleaded.

52 Thus, for instance, it is alleged in par 31 that the first defendant acquired the plaintiff's services from his employer, the second defendant, and the first defendant acted unconscionably toward the plaintiff in the respects pleaded in pars 25 to 27.

53 When one turns to the conduct of the first defendant that is alleged to be unconscionable, par 25 pleads that a general manager of the first defendant informed the plaintiff that the reason he had been suspended (that is, apparently, suspended by the second defendant) was that a complaint of harassment had been made against him, but refused to disclose to the plaintiff the nature of the complaint.

54 Paragraphs 26 and 27 deal with the alleged unconscionable conduct of the first defendant constituted by the letter of 16 April 2004. It is pleaded in par 26 that by that letter the first defendant "either acting on its own behalf or as agent for the second defendant" gave the plaintiff notice of warnings "in respect of his ongoing employment with the second defendant" that his conduct was in breach of his duty of good faith as an employee of the second defendant. It is then pleaded in par 27 that by that same letter the first defendant (apparently in this respect acting on its own behalf) acted in a manner calculated to insult and distress the plaintiff and purported to require him to obtain a medical certificate that he was fit to fly from a medical specialist briefed by the first defendant as to the first defendant's concerns as to his fitness to fly. It is also pleaded that by the letter the first defendant gave a formal warning to the plaintiff for failing to comply with the second defendant's instruction not to initiate any contact with any other employees of the second defendant.

55 It is therefore not clear whether, or to what extent, in respect of the letter of 16 April the first defendant acted on its own behalf or as agent for the second defendant and, to the extent it acted on its own behalf, on what basis the first defendant so acted in relation to the plaintiff's contract of employment with the second defendant.

56 The difficulties are compounded by the pleas in pars 29 and 29A. It is pleaded at par 29 that the 16 April letter (which, as I have said, is alleged to have been sent by the first defendant) constituted certain representations by the second defendant, including a representation that the complaint of harassment could be relied upon in the future by the second defendant in determining whether to continue the plaintiff's employment.

57 In par 29A it is pleaded that the second defendant made the representations in the 16 April letter on behalf of the first defendant.

58 That is, it seems that a letter apparently sent by the first defendant, "either acting on its own behalf or as agent for the second defendant", constituted representations by the second defendant (par 29), acting on behalf of the first defendant (par 29A), in relation to the plaintiff's employment by the second defendant.

59 The alternative plea in par 31A is that the second defendant acquired the plaintiff's services from his employer, the first defendant, and the second defendant acted unconscionably toward the plaintiff in the respects pleaded in pars 33 to 35. Paragraphs 33 to 35 refer to the alleged "aggressive and inappropriate" telephone calls to the plaintiff by an officer of the second defendant and to the letter of 5 May 2004 from the second defendant.

60 In the first place, as I have said, the plea that the plaintiff was employed by the first defendant is inconsistent with the balance of the pleading. It is, of course, pleaded in the alternative, but it nevertheless stands as a bald plea which is irreconcilable with everything else pleaded by the plaintiff. Secondly, in the absence of a plea as to the basis of the second defendant's acquisition of the plaintiff's services from the plaintiff's employer (the first defendant) so as to identify the nature of the relationship between the plaintiff and the second defendant, it is, in my view, difficult to understand the basis of the characterisation of the matters pleaded in pars 33 to 35 as "unconscionable conduct" by the second defendant toward the plaintiff.

61 In my view, whether or not the claims the plaintiff seeks to advance under s 51AC disclose an arguable cause of action cannot properly be determined until the pleading is put in order. There is, I think, some force in the submission of counsel for the defendants that the fundamental problem lies in the overall structure of this part of the pleading. In any event, it seems to me that, as it stands, the claim in relation to s 51AC is confusing and therefore embarrassing and I would strike out the relevant parts of the pleading on that basis.

62 I therefore follows that I would strike out the amended statement of claim as it is currently pleaded. I would not, however, dismiss the action at this stage. I do not consider that for the moment it is sufficiently clear the case is unable to be pleaded in a way that would give rise to an arguable cause of action, or arguable causes of action, and I would therefore allow the plaintiff liberty to replead. I will hear counsel on the time within which that is to be done.