Braude v Tauman

Federal Court of Australia|2018-09-06|Before: Thawley J

Solicitor for the Applicants: Salerno Law Pty Ltd

Solicitor for the Respondents: Harwood Andrews Lawyers

TARNEIT MEDICAL CENTRE PTY LTD Second Applicant

DIRECT CHEMIST OUTLET PTY LTD Second Respondent

JUDGE: THAWLEY J DATE OF ORDER: 6 SEPTEMBER 2018

The interlocutory application be dismissed.
The respondents pay the applicants' costs of the interlocutory application.
The applicants provide full particulars to paragraph 31 of the amended statement of claim by 20 September 2018.
By 27 September 2018, the respondents serve on the applicants any request for informal production of documents not within the possession, custody or control of the respondents.
The respondents file and serve their defence to the amended statement of claim, and any cross-claim, by 4 October 2018.
Pursuant to s 53A of the Federal Court of Australia Act 1976 (Cth) and r 28.02 of the Federal Court Rules 2011 (Cth), the proceedings be referred to mediation to be conducted by a registrar of the Court, such mediation to be held no later than 18 October 2018.
The applicants file and serve any reply, and any defence to the cross-claim, by 18 October 2018.
Evidence be adduced by way of affidavit, except evidence of oral conversations, the substance of which are to be the subject of outlines of proposed oral evidence. The outlines of proposed oral evidence are not to be tendered at hearing or used in cross-examination.
The applicants file and serve any affidavit, and any outline of proposed oral evidence, by 1 November 2018.
The respondents file and serve any affidavit, and any outline of proposed oral evidence, by 29 November 2018.
The matter be listed for a case management hearing at 9:15 am on 30 November 2018. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THAWLEY J: 1 By an interlocutory application filed on 1 June 2018, the respondents seek: (1) an order for summary judgment under rule 26.01 of the Federal Court Rules 2011 (Cth) in respect of claims identified in the amended statement of claim as arising under the Australian Consumer Law (ACL), as set out in sch 2 to the Competition and Consumer Act 2010 (Cth); (2) alternatively, an order under r 16.21 striking out paragraphs 26 to 31 of the amended statement of claim (being the ACL claims); and (3) an order striking out the proceedings on the basis that this Court lacks, or should not exercise, jurisdiction in respect of a claim which is said to be based solely on breach of contract. 2 The background facts which I set out below are taken in part from the allegations made in the amended statement of claim and in part from the affidavit and documentary material in evidence on the interlocutory application and are not to be taken as final findings of fact. They serve only to identify the facts as the applicants assert them to be for the purposes of their claims for relief in order to determine whether summary judgment should be granted in relation to the ACL claims or whether they should be struck out, and in relation to the question of this Court's jurisdiction.

BACKGROUND 3 The respondents own and operate a pharmacy located in a shopping complex on the corner of Shaws Road and Tarneit Road, Werribee in the State of Victoria. 4 On 1 March 2006, the first respondent, Mr Tauman, entered into a lease of premises known as "Shop 10" from Ziot Pty Ltd. The Shop 10 premises were located next door to the pharmacy. Mr Tauman agreed to sublease the Shop 10 premises to a third party, A & R Kazi Pty Ltd (ARK), for a period of five years. ARK operated a medical centre at the Shop 10 premises for the duration of the sublease. 5 On about 1 March 2011, Mr Tauman approached the first applicant, Dr Braude, and informed him that ARK had been running the medical centre poorly, which was adversely affecting the pharmacy business operated by Mr Tauman, and asked Dr Braude to operate a medical centre at the Shop 10 premises. This appears to have occurred at or around the end of ARK's sublease of Shop 10 from Mr Tauman. However, it is not clear at this stage of the proceedings when that sublease finally came to an end. 6 An email sent by Dr Braude to Mr Tauman on 12 May 2011 suggests that Dr Braude and Mr Tauman may have reached some sort of understanding, or had at least been in discussion, on or before that day concerning their proposed arrangements. The email included (errors in original): hi ian just a brief note to let you know re tarneit clinic. i have dr zaid working full time- a young male doctor, graduated from london. he already sees 40-50 patients per day dr naomi started this week twice a week -will build up very quickly to full time. i think it will take her 1 month at the most. i have a third male dr ,also from -yes you guest it-londan, starting in 1 month. by first of july i am aiming to have 2 male and 1 female doctors working full time. i am very happy with this progress-and i hope so are you. this is my understanding of our verbal arrangment [sic]. form [sic] 1 june I have to start paying rent to landlord for both the medical clinic [Shop 10] and the "nail place" [Shop 9A] nail place is subleased to pathology. we do not have to worry about that. the rent for medical clinic is approximately 32,000+gst+outgoings. let's say outgoings will be 3,000 per year. so overall rent is 35k it is my understanding that you will pay me half of that on monthly basis while i have 1 or 2 doctors working there and full 35k monthly once I have 3 full time doctors working there. we have not discussed what my payment will be past the 2 full time doctors. we will have a further discussion about this later. are we on the same page so far? 7 On 13 May 2011, Mr Tauman replied to this email, stating: My notes of our verbal agreement are slightly different - in essence: The pharmacy will pay half the rent on shop 10 whilst the medical clinic has less than 3 full time general practitioners When the clinic has 3 or more full time general practitioners the pharmacy will pay half the rent on the second tenancy shop 9 You are to provide an invoice for these amounts via a separate entity 8 The applicants claimed that, by the email sent on 13 May 2011, Mr Tauman made representations on behalf of himself and the second respondent, Direct Chemist Outlet Pty Ltd (DCO) that: (a) Tauman and/or DCO would pay half of the rent payable by Braude and/or [Tarneit Medical Centre Pty Ltd (TMC)] on the Shop 10 premises during the period of any lease while Braude and TMC were operating the medical centre on the Shop 10 premises with fewer than three full time general practitioners employed; and (b) If Braude and/or TMC also entered into a lease of adjacent premises known as Shop 9[A], Tauman and/or DM would also pay half of the rent payable by Braude and/or TMC on the Shop 9[A] premises during the period of any lease of those premises by Braude and/or TMC of those premises by Braude and/or TMC while Braude and/or TMC were operating the medical centre with three or more general practitioners employed. 9 A signed 10-year lease between Ziot and Dr Braude's associated company, Tarneit Medical Centre Pty Ltd (TMC), bears the date 13 May 2011 as the execution date. The lease was over the Shop 10 premises and adjacent premises described as "Shop 9A" (together, the Premises). So far as it appears from the lease document, Dr Braude signed as guarantor and also as director of TMC. 10 The applicants pleaded that TMC entered into the lease in reliance on the 13 May 2011 representations made by Mr Tauman on behalf of himself and DCO. A complaint was made about the terms of paragraph 12 of the amended statement of claim in its use of the phrase "entered into". It was clarified that the case brought by the applicants includes the proposition that Dr Braude executed the lease on 13 May 2011. 11 The applicants pleaded at paragraph 13 of the amended statement of claim that they commenced operating a medical centre from the Premises, being Shop 9A and Shop 10, from about 13 May 2011. 12 On 26 May 2011, Dr Braude emailed Mr Tauman in relation to his understanding of the arrangements. The email stated: this is my understanding of our arrangement [sic]. 1.from 1 august you will pay me 50% of the rent of the "medical clinic" [Shop 10] on monthly basis 2.if and when i deliver 3 full time doctor , you will also pay 50% of the rent of the "nail place" [Shop 9A] on monthly basis all future subsidies, if any, are to be discussed at a future date. do we agree? 13 Mr Tauman replied to that email a short time later with the words: "100% correct!!!". 14 The applicants claimed that Mr Tauman and Dr Braude reached an agreement the terms of which were recorded in the four emails referred to above. They pleaded that the express terms of the contract were: (a) Braude and/or TMC would operate a medical centre from the Shop 10 and/or Shop 9A premises; (b) from 1 August 2011 Tauman and/or DCO would pay to Braude and/or TMC 50% of the rent payable on the Shop 10 premises during the period when Braude and/or TMC were operating a medical centre from those premises; (c) from 1 August 2011, Tauman and/or DCO would also pay Braude and/or TMC 50% of the rent on the Shop 9A premises during the period when the medical centre had three or more full time doctors; and (d) the contributions to the rental payments would be made by Tauman and/or DCO monthly. 15 The applicants claimed that it was an implied term of the agreement between the parties that, if Mr Tauman and/or DCO failed to make the required rental contributions, interest would be payable on the amounts outstanding. 16 It is common ground that rental contributions were made each month from August 2011 to March 2012. The monthly amounts paid varied according to the number of full time general practitioners employed at the Premises. DCO made the payments on the basis of invoices issued by "Linbar Australia Pty Ltd" and "Linbar Pty Ltd". 17 No amount of rent has been paid by DCO or Mr Tauman in any month since March 2012. 18 The respondents' evidence is that DCO or Mr Tauman ceased to make payments on the instructions of Dr Barnetson. The respondents' interlocutory application was supported by an affidavit of Mr Anderson, a solicitor, sworn on 1 June 2018, which annexed an email sent by Dr Barnetson to Mr Tauman on 3 April 2012. That email included: Dr Braude was removed as director in both Tarneit and Derrimut clinics last month. I am the sole director in Tarneit and Dr Sisifa and Dr Lumbes have replaced him in Derrimut. … We understand that you have a private rental arrangement with Dr Braude and we no longer wish to receive this money, but we would like to meet with you to explore the possibilities of setting up a pharmacy run and managed by yourself in the clinic at Derrimut road to help you maintain this option. The best point of contact is the manager Leigh Stevenson and we look forward to hearing from you. 19 The "Tarneit" clinic refers to the medical centre that TMC operated from the Premises. The evidence indicates that Dr Braude and Dr Barnetson were co-directors and secretaries of TMC from its incorporation on 25 February 2011 until 24 March 2012, when Dr Braude ceased to be a director. Dr Barnetson was the sole director and secretary of TMC from 24 March 2012 to 25 May 2012. The email extracted above was sent to Mr Tauman during this period, namely on 3 April 2012. Dr Braude was subsequently reappointed as a director and secretary of TMC, and Dr Barnetson ceased to be a director and secretary, on 25 May 2012. Dr Braude has been the sole director and secretary of TMC since that date. 20 On 12 June 2017, the solicitors for the applicants wrote to DCO seeking payment of the rental contributions they say were outstanding since March 2012. On 27 June 2017, the same solicitors wrote a further letter to DCO seeking a response to the letter of 12 June 2017. 21 On 29 June 2017, Mr Tauman wrote to the applicants' solicitors requesting copies of the emails he (Mr Tauman) sent to Dr Braude on 13 May 2011 and 26 May 2011. The solicitors provided the requested emails on 30 June 2017. 22 On 20 July 2017, the applicants' solicitors sent a further follow-up letter suggesting an informal settlement conference. No response was received to that letter or the 12 June 2017 letter so far as the evidence on this application shows. 23 On 23 February 2018, the applicants commenced proceedings in this Court, pleading two causes of action against the respondents: (1) first, the applicants sought damages pursuant to s 236 of the Australian Consumer Law for loss and damage suffered as a consequence of relying on representations made by Mr Tauman on 13 May 2011 and 26 May 2011, which the applicants claimed were misleading or deceptive within the meaning of s 18 of the Australian Consumer Law; (2) secondly, the applicants sought to recover damages for breach of contract in the amount of $481,431.80, being the amount of unpaid rental contributions they say the respondents should have paid since March 2012. They also sought interest. 24 The statement of claim filed on 23 February 2018 described the relevant conduct and representations at paragraphs 10 to 15 and cast the applicants' case under the Australian Consumer Law in the following terms: 26. Further, or in the alternative, Tauman and/or DCO made representations to Braude and/or TMC in writing ("the Representations"). Particulars (a) Email Tauman to Braude, 13 May 2011; (b) Email Tauman to Braude, 26 May 2011. 27. The Representations were made in trade or commerce. 28. The Representations were made by Tauman on his behalf and also on behalf of DCO. 29. The Representations were misleading and deceptive within the meaning of s.18 Australian Consumer Law. Particulars Braude and TMC repeat paragraph 24 above ["Tauman and DCO have failed to make any contributions towards the rent for Shops 10 and 9A since the last payment in March 2012, in breach of the Contract."] 30. Braude and/or TMC relied on the 13 May 2011 Representation in entering into the lease and relied on both Representations in establishing and operating the medical centre. 31. Braude and/or TMC have suffered loss and damage as a consequence of relying upon Representations. Particulars (a) The Applicants repeat paragraph 25 above. ["Braude and/or TMC are entitled to damages for breach of Contract by Tauman and/or DCO."] (b) Further particulars to be provided. 25 The applicants filed an amended statement of claim on 21 May 2018. The ACL claim then took the following form (marked up against original): 26. Further, or in the alternative, Tauman and/or DCO made representations to Braude and/or TMC in writing ("the Representations"). Particulars (a) Email Tauman to Braude, 13 May 2011; (b) Email Tauman to Braude, 26 May 2011. 27. The Representations were made in trade or commerce. 28. The Representations were made by Tauman on his behalf and also on behalf of DCO. 28A. In the representation made on 13 May 2011, Tauman on behalf of himself and DCO represented to Braude that: (a) Tauman and/or DCO would pay half of the rent payable by Braude and/or TMC on the Shop 10 premises during the period of any lease while Braude and TMC were operating the medical centre on the Shop 10 premises with fewer than three full time general practitioners employed; and (b) If Braude and/or TMC also entered into a lease of adjacent premises known as Shop 9, Tauman and/or DM would also pay half of the rent payable by Braude and/or TMC on the Shop 9 premises during the period of any lease of those premises by Braude and/or TMC of those premises by Braude and/or TMC while Braude and/or TMC were operating the medical centre with three or more general practitioners employed. 28B. In the representation made on 26 May 2011, Tauman on behalf of himself and DCO represented to Braude that Tauman and DCO would from 1 August 2011 pay to Braude 50% of the rent of the Shop 10 premises and if Braude and/or TMC employed three or more full time doctors, Tauman and/or DCO would also pay 50% of the rent for the Shop 9A premises. 28C. Both of the Representations were as to future matters within the meaning of s.4 Australian Consumer Law. 28D. Tauman and/or DCO did not have reasonable grounds for making the Representations. 29. The Representations were misleading and deceptive within the meaning of s.18 Australian Consumer Law: Particulars Braude and TMC repeat paragraph 24 above (a) Each of the Representations were as to future matters within the meaning of s.4 Australian Consumer Law; (b) Tauman and/or DCO did not have reasonable grounds for making the Representations; (c) The Representations are taken by s.4 Australian Consumer Law to be misleading; and (d) Tauman and DCO have failed to make any contributions towards the rent for Shops 10 and 9A since the last payment made in March 2012. 29A. Further or in the alternative to paragraphs 28B, 28C and 28D, the effect of the representation made on 26 May 2011 was that Tauman and DCO would be bound from that day by an agreement that Tauman and DCO would from 1 August 2011 pay to Braude 50% of the rent of the Shop 10 premises and if Braude and/or TMC employed three or more full time doctors, Tauman and/or DCO would also pay 50% of the rent for the Shop 9A premises. 29B. Further or in the alternative to paragraph 29, the representation made on 26 May 2011 was misleading and deceptive within the meaning of s.18 Australian Consumer Law: (a) Tauman and DCO have failed to make any contributions towards the rent for Shops 10 and 9A since the last payment made in March 2012: (b) On 12 June 2017 the solicitors for the Applicants wrote to DCO seeking payment of the contributions towards rent which are outstanding after March 2012; (c) On 27 June 2017 the solicitors for the Applicants wrote to DCO seeking a response to the 12 June 2017 letter; (d) On 29 June 2017 Tauman wrote to the solicitors for the Applicants asking for copies of certain email correspondence including the emails particularised in paragraph 26 above; (e) On 30 June 2017 the solicitors for the Applicants supplied the emails as requested; (f) On 20 July 2017 the solicitors for the Applicants wrote to DCO seeking a response to the 12 June 2017 letter and suggesting an informal settlement conference; (g) Tauman and DCO have not responded to that letter or the 12 June 2017 letter; and (h) Contrary to the representation on 26 May 2011. Tauman and DCO have not accepted that they are bound from that day by an agreement that Tauman and DCO would from 1 August 2011 pay to Braude 50% of the rent of the Shop 10 premises and if Braude and/or TMC employed three or more full time doctors, Tauman and/or DCO would also pay 50% of the rent for the Shop 9A premises. 30. Braude and/or TMC relied on the 13 May 2011 Representation in entering into the lease and relied on both Representations in establishing and operating the medical centre. 31. Braude and/or TMC have suffered loss and damage as a consequence of relying upon Representations. Particulars (a) The Applicants repeat the particulars in paragraph 25 above. ["Braude and/or TMC are entitled to damages for breach of Contract by Tauman and/or DCO."] (b) Further particulars to be provided.

The interlocutory application 26 In summary, the respondents' case is that "the ACL claim is manifestly deficient, both on its face and on the evidence that has been filed" and "is colourable and intended simply to clothe the dispute with federal jurisdiction".

Summary judgment 27 Rule 26.01 sets out the circumstances in which a party may apply to the Court for an order for summary judgment: (1) A party may apply to the Court for an order that judgment be given against another party because: (a) the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or (b) the proceeding is frivolous or vexatious; or (c) no reasonable cause of action is disclosed; or (d) the proceeding is an abuse of the process of the Court; or (e) the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding. … (4) If an order is made under subrule (1) dismissing part of the proceeding, the proceeding may be continued for that part of the proceeding not disposed of by the order. 28 The respondents indicated in oral submissions that they seek summary dismissal of the ACL claim under r 26.01(1)(a). The power of this Court to dismiss a proceedings or part of a proceeding under paragraph (a) of r 26.01(1) comes from s 31A of the Federal Court of Australia Act 1976 (Cth) which includes: (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. (4) This section does not limit any powers that the Court has apart from this section. 29 Relevant principles were recently summarised by Markovic J in Tanioria v Commonwealth of Australia (No 2) [2017] FCA 1117 at [26]-[28] by reference to the decisions in Spencer v Commonwealth of Australia (2010) 241 CLR 118 at [25] (French CJ and Gummow J) and [60] (Hayne, Crennan, Kiefel and Bell JJ), and Takemoto v Moody's Investors Service Pty Limited [2014] FCA 1081 at [11]-[15] (Flick J). I gratefully adopt her Honour's summary. 30 The power to dismiss an action summarily is not to be exercised lightly: Spencer at [24] and [60]; Tropical Reef Shipyard Pty Ltd v QBE Insurance (Australia) Ltd [2011] FCAFC 145 at [31] (Edmonds, Jessup and Robertson JJ). This is no less true in cases where summary judgment is sought by an application supported by evidence: Spencer at [24]. As French CJ and Gummow J observed in Spencer at [25]: Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. 31 In an application under r 26.01, there is limited utility in describing the applicants' case as "manifestly deficient" or "untenable". Such terms do little to illuminate the ambit of the Court's power under s 31A. As the plurality observed in Spencer at [59]-[60]: 59. In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like "clearly", "manifestly" or "obviously") as "frivolous", "untenable", "groundless" or "faulty". But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word "reasonable", in the phrase "no reasonable prospect", be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a "frivolous", "untenable", "groundless" or "faulty" claim. 60. Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is "no reasonable prospect" of success. … 32 The critical question under r 26.01(1)(a) is whether "the applicant has no reasonable prospect of successfully prosecuting … part of the proceeding", in this case the ACL claim. 33 The respondents are yet to file a defence to the amended statement of claim. It is, however, clear from the parties' submissions on the interlocutory application that a number of facts relevant to the prospects of the ACL claim are in dispute. In particular, the parties appear to disagree as to: (1) the extent of the applicants' reliance, if any, on the pleaded representations said to arise from Mr Tauman's email of 13 May 2011; (2) whether those representation were made without reasonable grounds; and (3) what loss or damage, if any, was suffered as a result of any reliance on those representations. 34 In relation to issue (1) above, the respondents submitted: The lease said to have been entered into in reliance on the representations commenced on 1 May 2011, well prior to the first of the alleged representations. The fact the lease is dated 13 May 2011 does not change the date the lease commenced. … The first applicant's email to the first respondent sent on 12 May 2011 confirms that the lease was already in place and the medical centre was already operating before the making of the first representation: see Anderson affidavit at p.6. The 12 May email begins by referring to a doctor who is working full-time and says "he already sees 40-50 patients per day". Later: "[F]rom 1 June I have to start paying rent to the landlord". It then says the nail place "is subleased to pathology". 35 The 12 May 2011 email does not expressly say who had subleased the "nail place" (Shop 9A) to pathology. 36 The pleadings and facts as they presently appear are capable of supporting the conclusion that Dr Braude executed the written lease, expressed to commence on 1 May 2011, on 13 May 2011. The respondents contended that Dr Braude could have put on evidence to that effect. It is true that the applicants could have put on evidence in respect of the interlocutory application, however it was not necessary for them to do so. I will return to this in further detail below. 37 It is not clear what Dr Braude would have done if the 13 May 2011 email had not been sent or the claimed representations had not been made. For example, if the representations had not been made, Dr Braude may have refused to execute the lease with whatever consequences might have flowed, or he may have caused TMC to bring it to an early end assuming TMC had entered into possession with the consequence that the lease had commenced, or delayed executing the lease until he had reached some final agreement with Mr Tauman / DCO, or taken some other step or measure which suggested itself to him in the circumstances. The fact is that the evidence in relation to the ACL claim has not yet been filed in light of the fact that all that has happened in these proceedings to date is the filing of the applicants' statement of claim and amended statement of claim. The respondents have not sought particulars of the amended statement of claim, as I understood the submission made at the hearing of the interlocutory application. Certainly, the respondents have not sought particulars of the loss or damage in respect of the ACL claim. 38 The ACL claim does not appear to be limited to damages calculated by reference to a failure to make rent contributions or to pay interest, although that is an aspect of loss particularised at paragraph 31 of the amended statement of claim. Paragraph 31 indicates that further particulars of loss or damage are to be provided. 39 It is true that it could be inferred from the 12 May 2011 email that Dr Braude or TMC was in possession of the Premises. The email can also be read, especially when regard is had to the fact that it was Mr Tauman who had a lease over Shop 10 immediately before TMC's lease, as supporting an inference that the possession of the premises as at that date was related to arrangements (or perhaps representations) which had been reached between the applicants and the respondents which might be related to the pleaded representations made on 13 May 2011. These are mostly matters for evidence at trial, although if there were to be reliance by the applicants on representations made before 13 May 2011, obviously those should be expressly pleaded. In any event, none of this answers the fact that the case is arguable that the lease was executed by Dr Braude (as guarantor and as director of TMC) on 13 May 2011 on the basis of the 13 May 2011 representations. The consequences of that, and what loss or damage flows, are matters for argument after hearing the evidence. 40 The respondents submitted that the Court should not make assumptions in the applicants' favour on matters within their knowledge about which they have chosen to adduce no evidence. In my view, that submission overstates the position. Summary judgment applications should not, at least in the ordinary course, become mini-trials on disputed questions of fact. Often it is appropriate to assume the truth of the allegations in the statement of claim and draw inferences in favour of the non-moving party because the question is whether those allegations, even if proved, cannot succeed as a matter of law - see: Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41 at 43; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129. 41 Of course, that is not invariably the case. In an appropriate case, the respondent bringing the application can seek to adduce evidence which excludes the possibility that facts essential to the success of the claim will be able to be established. As Flick J observed in Takemoto at [13]: [T]he requirement that there be "no reasonable prospects of success" can be satisfied where there is a defect in the pleadings which cannot be cured or, alternatively, by reference to evidence put on in support of an application under s 31A which reasonably excludes the possibility that facts essential to the success of the claim or defence will be able to be established: Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 at [20] per French J (as his Honour then was). 42 Here, whilst the respondents have adduced evidence on the interlocutory application, they did not adduce evidence which, in my view, excludes the possibility that facts essential to the success of the ACL claim will be able to be established. 43 In my view, it is not possible to say that the applicants have no reasonable prospects of prosecuting their claim to have entered into (in the sense of executed) the lease in reliance on the representations contained in Mr Tauman's email of 13 May 2011 and that some loss or damage flows from that. 44 In reaching this conclusion, I have had regard to the possible application of s 7 of the Retail Leases Act 2003 (Vic) upon which the respondents placed reliance. That section provides: For the purposes of this Act, a retail premises lease is entered into or assigned when - (a) under the lease or assignment, the tenant enters into possession of the premises with the consent of the landlord; or (b) under the lease or assignment, the tenant begins to pay rent for the premises; or (c) the lease or assignment has been signed by all of the parties to it - whichever first occurs. 45 The respondents submitted the effect of this provision was that TMC was deemed to have "entered into" the lease (within the meaning of the Retail Leases Act) at some time before 13 May 2011, presumably when they entered into possession (if indeed they did) on 1 May 2011, notwithstanding that the lease may have been executed on or dated 13 May 2011, or both. There are two difficulties with this submission. 46 First, s 7 of the Retail Leases Act defines when a lease is entered into "for the purposes of this Act". It does not alter the fact, which in the circumstances, and for the purposes only, of this application I will assume in Dr Braude's favour, that Dr Braude executed the lease on 13 May 2011. That is a fact relevant for the purposes of the ACL claim and is not assumed away by the Retail Leases Act even though that Act might be relevant to an analysis of the consequences of what occurred or what would have occurred if the representations had not been made by the email from Mr Tauman sent on 13 May 2011. 47 Secondly, the respondents did not grapple with the meaning of the words "under the lease" in paragraph (a) of s 7. There is authority to suggest that paragraph (a) only applies where a person has entered into possession of the relevant premises pursuant to the terms of an agreed lease: Australian Property Buyers Pty Ltd v Kowalski [2006] VCAT 24 at [22]; cf Benaych v Telcanti Pty Ltd (Building and Property) [2016] VCAT 1947 at [27]. 48 As the facts presently stand, it is not possible to say with certainty when the lease was finally agreed and whether TMC's possession before 13 May 2011 (if indeed it was in possession) was "under the lease" for the purposes of s 7. As the evidence currently stands, it is not clear that TMC and Ziot had reached agreement as to the terms of the lease at some point before 13 May 2011, even if the material before the Court permits an inference to be drawn to that effect and even though an inference could be drawn that Dr Braude or TMC were in possession of the Premises before 13 May 2011. It has not been unarguably established that TMC entered into possession of the Premises (assuming that it in fact did) "under the lease" such that s 7 might apply. 49 It follows that the issue of the applicants' reliance, which is central to the ACL claim, is a factual issue capable of being disputed and in fact in dispute between the parties: Spencer at [25]. In my view, the question of reliance is precisely the kind of real, as opposed to fanciful, issue of fact that requires proper determination at trial: Takemoto at [15] (Flick J); Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499 at [37] (Sundberg J). 50 The respondents also asserted that the applicants could not establish loss. This submission relied principally on the email from Dr Barnetson to Mr Tauman on 3 April 2012. This submission also has difficulties. First, Dr Barnetson's email could not affect any "private rental arrangement" with Dr Braude, even if it has relevance to the arrangements between TMC and Mr Tauman and/or DCO. Secondly, the ACL claim does not appear to be confined to questions of rent contribution. As noted earlier, loss and damage have not yet been fully particularised and the claim as currently pleaded includes a claim that, in reliance on the representations made on 13 May 2011 and 26 May 2011, the applicants operated a medical centre. 51 Paragraph 30 of the amended statement pleads that the applicants relied on the 13 May 2011 representations in entering into the lease, and relied on both representations (that is, the 13 May 2011 and 26 May 2011 representations) in establishing and operating the medical centre. That is, as I understand the applicants' case, the continued operation of the medical centres is said to have occurred at least in part in reliance on the 13 May 2011 and 26 May 2011 representations. 52 The respondents also argued that the conduct was not capable of constituting misleading or deceptive conduct, again by reference to the email of 3 April 2012. The submission as I understood it was that rent contributions were made up until TMC indicated through Dr Barnetson that TMC no longer wished the rent contributions to be made. Again, however, even if that is the correct construction and legal effect of the email, that does not deal with the ACL case insofar as it relied on operating the medical centre after the representations were made. 53 In my view, the effect of the 3 April 2012 email is a matter which would need to be pleaded in the respondents' defence and is likely to be a matter which needs to be construed once all the evidence is heard. It seems likely that the email will need to be construed in light of the factual context which existed at around the time that email was written. 54 For those reasons, it is not appropriate to order summary dismissal of the ACL claim.

Strike out application 55 As noted above, the respondents sought, in the alternative, an order under r 16.21 striking out paragraphs 26 to 31 of the amended statement of claim. 56 Flick J summarised the principles applicable to an application under r 16.21 in Takemoto at [17]-[20] (citations omitted): 17. First, the rule is "concerned only with the adequacy of the pleading" and "does not permit or allow consideration of facts or evidence outside the pleadings". 18. Second, a pleading will be embarrassing, "where it is unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him". The term "embarrassment" refers to a pleading that is "susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense". 19. Third, a pleading will only be struck out as failing to disclose a reasonable cause of action or defence "where it is clear that there is no real question to be tried". Where a claim is not so clearly untenable that it cannot possibly succeed, it will not be struck out. 20. Finally, and like the power conferred by s 31A, the power is to be exercised with caution and it is not to be lightly exercised. A "pedantic approach" should not be pursued. 57 The power to strike out pleadings or portions of pleadings must be exercised "sparingly, with caution, and only in a clear case" (Morris v IMF Bentham Limited [2018] FCA 1009 at [67], per Wigney J) "lest one deprive a party of a case which in justice it ought to be able to bring": Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164 at 175 (Jenkinson J). 58 Despite the respondents' description of the applicants' original ACL pleadings as "perfunctory", "terse" and "formulaic", it was not put that the pleading in its original form or as amended was "embarrassing" in the sense described by Flick J at [18], as "susceptible to various meanings" or containing "inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense". To the extent the respondents contended that the allegations contained in paragraphs 13 and 30 of the amended statement of claim were inconsistent, I do not consider there to be any inconsistency between those paragraphs warranting either being struck out. Nor was it suggested that the pleadings failed to disclose a reasonable cause of action on their face, as opposed to by reference to the respondents' position that, as a matter of their perception of the facts, the cause of action was bound to fail. 59 In those circumstances, it is not appropriate to strike out paragraphs 26 to 31 of the applicants' amended statement of claim.

Jurisdiction 60 The respondents sought an order striking out the proceedings on the basis that the Court did not have, or should not exercise, jurisdiction in circumstances where "the ACL claim is colourable and intended simply to clothe the dispute with federal jurisdiction". 61 I understand the contention to be that the ACL claim is one without any real substance asserted only to attract the jurisdiction of this Court. In my view that allegation is not made out. 62 The applicants' case can be put, as it has been, in both contract and under the Australian Consumer Law. The contract claim may not succeed. The defences to it have not yet been articulated. The claim in contract gives rise to liquidated damages calculated by reference to unpaid rental contributions and interest. The damages under the ACL claim may be quite different. Both claims might succeed and the ultimate damages may be shown not to be the same under each. These are all matters for determination after hearing. The pleading of a case such as the present in both contract and under the Australian Consumer Law is not unusual and is an entirely orthodox position to adopt. I do not conclude that the ACL claim has been included as an artifice to attract the jurisdiction of this Court. 63 It is relevant to note that the respondents do not admit that there is (or indeed, was) a contractual relationship between them (or one of them) and the applicants (or one of them). As noted earlier, the respondents have not yet filed a defence to the amended statement of claim.

Conclusion 64 The interlocutory application is dismissed.

Costs 65 The applicants applied for costs of the interlocutory application filed on 1 June 2018 and further applied for an order that those costs be taxed forthwith. In relation to costs, in my view the ordinary rule that the losing party pay the costs should apply and I see no reason, despite the submissions just advanced, to depart from that position. 66 As to whether those costs should be payable forthwith, the Court's power to disengage r 40.13 of the Rules springs from r 1.35. The principles guiding the exercise of the discretion were set out by Perram J in Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 5) [2018] FCA 19 at [7]-[9]. At [7], his Honour noted that: [A]t a high level of generality, Rule 40.13 confers a discretion which 'should be exercised in favour of a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice…' (Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd [1992] FCA 291; (1992) 36 FCR 297 at 312). 67 His Honour also referred at [8] to the principle that "subsequent events in the litigation may generate costs orders going in the opposite direction and in respect of which set-offs may ultimately be available" - see: Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136 at [37]. At [9], his Honour referred to a range of factors which may justify departure from the ordinary rule, including: (1) where the final determination of the proceedings is far away: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 13) [1995] FCA 1459 at [5]; (2) where a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted in handling the proceeding with competence and diligence: Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545; (3) where, following a successful amendment application, a case is essentially a new proceeding: McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 at [19] and [40]; (4) where a discrete issue has been resolved: Australian Flight Test Services v Minister for Industry, Science and Technology [1996] FCA 1425 at [7]; or (5) where there is some reason to think that interlocutory disputation is having the effect of draining the ability of one side to conduct the litigation: Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd [2016] FCA 37 at [12]. 68 With the exception of the factor in paragraph (3) above, none of these factors is present in this case and I do not see any particular reason why the general rule in r 40.13 should be disengaged. In those circumstances, whilst I order the respondents to pay the applicants' costs of the interlocutory application, I do not exercise the discretion to depart from r 40.13. I certify that the preceding sixty-eight (68) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Thawley.

Federal Court Rules 2011(Cth)rr 16.21, 26.01, 40.13

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