Bryer Merchandisers Pty Ltd v Nike Australia Pty Ltd

REASONS FOR JUDGMENT 1 This is an application for leave to amend a statement of claim. The proceeding was commenced on 2 December 1999. The current statement of claim was filed on 30 April 2001 pursuant to an order made by consent on 27 April 2001. 2 The four applicants are retailers in the Sydney metropolitan area of goods described as sports shoes, sports clothes and sports merchandise. Each of them claims relief against the respondent in respect of its refusal to supply them with goods of that kind which are distributed by the respondent and bear the name or mark 'Nike' and the so-called 'swoosh' logo. The applicants rely on a series of separate causes of action in contract, in negligence and under the Trade Practices Act 1974 ('the Act'). They do not claim a joint entitlement to relief. However, alleged transactions with the respondent by Paul Dwyer, who is a director of each applicant, are central to their claims. 3 The first causes of action pleaded are damages claims for repudiation of separate contracts between each applicant and the respondent relating to the supply of the goods in question. The contracts are alleged to have been made on different dates, varying between the earliest in 1991 for the first applicant and the latest in August 1997 for the fourth applicant, but each contract is alleged to have been repudiated at the same time in March 1999. Morever, each contract is alleged to include the same terms, save for three implied terms relating to discounts in the case of the first applicant. The proposed amendment to the contract counts slightly varies the terms of the alleged discounts and alleges that these terms were also included in the third applicant's contract. 4 The current pleading next sets out each applicant's claim for damages in respect of unconscionable conduct 'in equity' and for contravention of ss 51AA and 51AC of the Act. The same facts, which are stated in the particulars under paragraph 20, are alleged to have put each applicant in a position of 'special disadvantage' in dealing with the respondent. The proposed amendment adds three paragraphs to these particulars so as to allege a 'demand by consumers' for the goods distributed by the respondent, the need for 'all but a few' sporting goods retailers to stock such goods and the high popularity of newly released products. 5 Each applicant also alleges that identical conduct on the part of the respondent was unconscionable. These allegations are repeated verbatim in paragraphs 58, 62, 66 and 70. They vary only in their reference to the allegedly applicable contract. The only time-specific allegation is the respondent's refusal to deliver goods covered by each contract in the six-month period prior to March 1999. The current pleading also states in subparagraph (d) of each of those paragraphs circumstances in which the respondent's insistence on strict compliance with contractual obligations are alleged to involve unconscientious exploitation of the respective applicant's position of 'special disadvantage'. The proposed amendment adds to or varies these circumstances. (It also deletes one set of circumstances in paragraph 62, though this may be inadvertent.) The variation is not significant. A new allegation that the respondent restricted the 'quantity' of its goods made available to each applicant, as well as the 'range' of such goods, looks innocuous enough. But the new allegations about the respondent's insistence that 'Statement Products' not be advertised or sold below specified prices prompted the respondent to seek particulars of these matters. (The 'Statement Products' were defined in an unnumbered paragraph at the beginning of the proposed fresh statement of claim as those of the respondent's goods in question that were 'premium items', including specifically the Air Max Tailwind, Air Jordan and Cortez shoe products.) 6 The applicants furnished particulars in respect of the new unconscionable conduct allegations as to (a) quantity, (b) advertised price, and (c) sale price as follows: (a) 'The applicants were not offered by the respondent the "International", "Custom" and "SMU" range of Nike products. From about January 1998 the respondent did not deliver the quantities of Nike merchandise sought in the written orders supplied by the applicants to the respondent. From about January 1998, as regards to the popular ranges of Nike Footwear such as the Nike Tailwinds, quantities made available to the applicants were restricted. Further on or about October 1998, James Darling of the respondent and Paul Dwyer, George Zakhia, Lisa Lewis from the applicants met at a Nike footware [sic] range showing at the Nike premises in Petersham, where the respondent refused to supply popular footwear range such as Air Cortezs and Air Humaras to the first applicant, third applicant and fourth applicant (Paul's Warehouse), but supplied these shoes to the second applicant (Cobra stores).' (b) 'i. On or about 1992 Greg Thomson of the respondent informed Paul Dwyer not to advertise Nike products below recommend [sic] retail prices. ii. On or about 2 March 1994, at the Melbourne head office of Nike, David Carney informed Paul Dwyer, in the presence of Charlene Dwyer, not to advertise Nike products that were core models or current ranges at prices below the recommended retail prices. iii. On or about April 1994, Mark Scott from Nike told Paul Dwyer not to advertise Statement Products or Current ranges at prices below the recommended retail prices. iv. On or about November 1998, at a meeting with Chris O'Sullivan and Mel Sutton, at Ed's Cafe, it was understood by Paul Dwyer that the respondent did not want Nike Statement Products advertised below the recommended retail prices.' (c) 'i. On or about May 1997, at the Nike premises in Petersham, in the meeting between Paul Dwyer and George Zakhia of the applicants and Chris O'Sullivan of the respondent. ii. On or about late 1997, at an Italian restaurant in Leichhardt, in the meeting between Paul Dwyer and George Zakhia of the applicants and Steve McPherson of the respondent. iii. On or about early 1998 at the Paul's Warehouse store in Homebush, in the meeting between James Darling of the respondent and George Zakhia of the applicants.' 7 Each applicant's position of 'special disadvantage' and the 'business relationship' commencing with the relevant contract are next alleged to give rise to a duty of care on the part of the respondent towards each applicant. This duty of care is alleged to have obliged the respondent to ensure that the applicant could perform its contractual obligations to the respondent and that the applicant would not be placed by reason of the respondent's conduct at a disadvantage with other Sydney-based retailers who sold the goods in question distributed by the respondent. The proposed amendment adds to the particulars of the alleged breach of such duty in the several actions for negligence against the respondent the restricted 'quantity' of goods made available and the insistence on the sale of Statement Products at a specified price. The applicants subsequently furnished the same particulars in respect of these proposed additions to the pleading as are set out in (a) and (c) reproduced in [6] above. 8 A heading 'Part II' then appears in the statement of claim, followed by the sub-heading 'Misuse of Market Power'. This heralds the pleading of the alleged contraventions of s 46(1)(a) and s 46(1)(c) of the Act. The relevant markets are presently alleged in paragraphs 89, 90 and 91. Slight amendments are proposed to these paragraphs. It is also proposed to add new paragraphs 91A and 91B to allege additional markets in distinct geographic areas for the wholesale and retail supply of goods described as 'branded sports shoes'. (The proposed paragraph 91B is, however, not grammatically complete.) In proposed paragraph 92A the same kind of conduct is alleged against the respondent to establish its degree of power in the new markets as is already alleged in respect of the markets presently pleaded. Further specific allegations in respect of market share are also proposed in new paragraphs 92AA and 92B in respect of the new markets. The proposed amendment then addresses in paragraphs 93 and 93A the consequent allegations of a substantial degree of power in those markets. 9 The allegation that the respondent took advantage of its power is made in paragraph 94. The proposed amendments add to the matters there set out a new subparagraph (f1) again alleging the restricted 'quantity' of goods made available by the respondent to the applicants and the following new subparagraphs: '(m) failing to supply the applicants with Statement Products and current ranges at the same time that other retailers, such as The Athletes Foot, were supplied with Statement Products and current ranges; (n) requiring the applicants not to sell sports shoes bearing the name or mark "Nike" or the "swoosh" logo below the selling price of "Rebel" sports store; (o) requiring the applicants not to advertise any sports shoes, sports clothes or sports merchandise bearing the name or mark "Nike" or the "swoosh" logo in "buy one get one free promotions"; (p) requiring the applicants not to advertise any Statement Products and current ranges of Nike sports shoes bearing the name or mark "Nike" or the "swoosh" logo with a price.' 10 The applicants subsequently furnished particulars of these allegations by repeating in respect of the new subparagraph (f1) those reproduced in (a) at [6] above, in respect of the new subparagraphs (m) and (p) those reproduced there in (b) and in respect of new subparagraph (n) those reproduced there in (c). In respect of the new subparagraph (o) the following particulars were provided: 'i. On or about July 1997, the applicants were informed by Lois McLachlan, the chief financial officer of the respondent, not to include Nike products with a "Buy One Get One Free" promotion. ii. On or about early 1998 at the Paul's Warehouse store in Homebush, George Zakhia of the applicants was told by James Darling of the respondent not to include Nike sports shoes in a "Buy One Get One Free" promotion.' 11 The proposed amendment adds to the allegation in paragraph 95 that the respondent engaged in conduct for a purpose referred to in ss 46(1)(a) and (c) an alternative allegation that that was its substantial purpose. A new paragraph 95A superfluously repeats the allegation in respect of s 46(1)(c). 12 The final causes of action pleaded rely on contraventions of s 48 of the Act. The current pleading alleges that in March 1999 the respondent withheld the supply of goods to each of the applicants and engaged in resale price maintenance by doing an act referred to in s 96(3)(d) of the Act. This pleading is of critical importance for the purposes of the present application, and it is necessary to set out large slabs of it. 13 Each of the applicants relies on the evidentiary provision in s 100 of the Act to establish that the reason for withholding supply of the goods was that that applicant had sold, or was likely to sell, them at a price less than that specified by the respondent. The pleading of each applicant's causes of action in respect of the withholding of supply begins with an allegation to the effect that that applicant had an arrangement with the respondent for the supply of the goods whereby it would not sell them at a price less than that specified by the respondent. After next pleading the withholding of supply, each applicant alleges the proscribed reason in s 96(3)(d)(ii) of the Act and provides particulars. These particulars are critical. 14 Those stated by the first applicant in paragraph 100 are as follows: '(i) On 2 March 1994, David Carney on behalf of the respondent told Paul Dwyer and Charlene Dwyer on behalf of the first applicant that the first applicant had been advertising the respondent's products at discounted prices and that the first applicant's account with the respondent would be closed unless the first applicant advertised the respondent's products at the prices specified by the respondent; (ii) In the 2 March 1994 conversation, Paul Dwyer on behalf of the first applicant gave his word to Mr Carney that that [sic] he would not cause the first applicant to advertise current lines of the respondent's sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or featuring the "swoosh" logo at discounted prices. (iii) On or about 13 October 1998, Mr Dwyer told Mel Sutton and Chris O'Sullivan on behalf of the respondent that he was no longer bound by the personal commitment that he had given to Mr Carney regarding the sale of the current lines of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or featuring the "swoosh" logo below the prices specified by the respondent in its advertisements; (iv) On or about 17 January 1999, the first applicant, the second applicant, the third applicant and the fourth applicant caused a two page advertisement to appear in The Sunday Telegraph, which advertisement advertised for the sale to retail customers discounted sports clothes, sports shoes and sports merchandise; (v) On or about late January 1999, Mr O'Sullivan on behalf of the respondent inquired whether Mr Dwyer on behalf of the applicants was going to continue to promote the business of the first applicant, third applicant and fourth applicant together with the business of the second applicant; (vi) On or about early March 1999, the first applicant, the second applicant, the third applicant and the fourth applicant caused a television advertising campaign to be run, which campaign advertised for sale to retail customers discounted sports clothes, sports shoes and sports merchandise; (vii) By letter dated 11 March 1999, the respondent evinced an intention no longer to supply the applicants with sports clothes, sports shoes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo.' 15 In paragraph 104 the second applicant states: '(i) On or about July 1996, Paul Dwyer on behalf of the second applicant told Fraser Mexted on behalf of the respondent that there would be no discounting of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or featuring the "swoosh" logo from the second applicant's Cobra store; (ii) In the July 1996 conversation, Mr Mexted asked whether there would be definitely no discounting of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or featuring the "swoosh" logo from the second applicant's Cobra store, and Mr Dwyer told Mr Mexted that there would be definitely no discounting by the second applicant of sports shoes, sports clothes, sports merchandise bearing the name or mark "Nike" or the "swoosh" logo; (iii) On or about April 1997 Mr Mexted told Mr Dwyer that the respondent regarded value vouchers that had been issued by the second applicant to retail customers in respect of sports shoes, sports clothes, sports merchandise bearing the name or mark "Nike" or the "swoosh" logo as a form of discounting; (iv) In [the] April 1997 conversation Mr Mexted told Mr Dwyer that the respondent did not approve of the second applicant issuing value vouchers to retail customers in respect of sports shoes, sports clothes, sports merchandise bearing the name or mark "Nike" or the "swoosh" logo;' It then repeats the allegations in subparagraphs (iii)-(vii) reproduced at [14] above. 16 The third applicant states its particulars in paragraph 109. It begins with the allegations in subparagraphs (i) and (ii) reproduced at [14] above. The third applicant continues: '(iii) On or about June 1994, the third applicant began to carry on its business from the Homebush Premises. (iv) At all times, Mr Dwyer, a director of the third applicant, caused the third applicant to conduct its business on the basis that it was bound by the personal understanding reached between Mr Dwyer and Mr Carney referred to in the particulars (i), (ii) and (iii) of this paragraph above;' It also then repeats the allegations in subparagraphs (iii)-(vii) reproduced at [14] above. 17 The fourth applicant repeats in paragraph 114 the allegations made by the third applicant, save for that in subparagraph (iii) where it instead states: '(iii) On or about August 1997, the fourth applicant began to carry on its business from the Campbelltown Premises;' 18 The proposed amendment adds a term to the alleged arrangement initially entered into between each applicant and the respondent so as to rely on s 96(7)(a) of the Act. It then seeks to supplement the particulars so as to deal with the advertising of the goods, first, by adding at the beginning of paragraphs 100, 104, 109 and 114 the following particulars: '(i) On or about 1991 Greg Thompson had a conversation with Paul Dwyer of the first applicant, the substance of which conversation was that "Nike" did not like their products advertised at a discount price; the prices at which sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or featuring the "swoosh" logo were advertised should be increased to the prices appearing in "Nike's" catalogue and/or price lists; (ii) In 1993 the first applicant advertised sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or featuring the "swoosh" logo below the prices appearing in the respondent's catalogues and/or price lists. (iii) From about January 1994 the respondent stopped supplying the first applicant with sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or featuring the "swoosh" logo.' Next, the proposed amendment adds at an appropriate chronological point in each of those paragraphs the following particulars: '(vi) On or about April 1994, Paul Dwyer, on behalf of the first applicant, agreed with Mark Scott from Nike to obtain the prior approval of Mark Scott prior to the publication of any advertisement for the first applicant. (vii) On or about May 1994, Paul Dwyer, on behalf of the first applicant agreed with Mark Scott from Nike not to advertise Statement Products and current merchandise with a price. (vii) On or about June 1997, the respondent demanded that the applicants discontinue advertisements of Nike products with "buy one get one free promotions". (ix) On or about July 1997, the applicants discontinued Nike products in "buy one get one free promotions" until on or about 10 March 1999. (x) On 23 August 1998, applicants published an advertisement in the Sunday Telegraph advertising at 25% off all Nike footwear.' Otherwise the proposed amendment to these paragraphs makes minor amendments, one of which is to alter the month of the conversation alleged in subparagraph (iii) reproduced at [14] above from October 1998 to November 1998. 19 The allegations of resale price maintenance are expanded in the proposed amendment to include acts referred in pars (a), (b) and (f) of s 96(3) of the Act. They are identical for each applicant, but I shall set out the new allegations in respect of the first applicant. Those relating to s 96(3)(a) and (f) are: '101A Further or in the alternative, by reason of: (a) the respondent at all material times providing the first applicant with catalogues and/or price lists from time to time which specified for retailers the selling price of items of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo; … (c) Chris O'Sullivan of the respondent telling Paul Dwyer and George Zakhia on or about May 1997 that Statement Products and current ranges of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo were not to be sold by the applicants to consumers at prices below which the retailer Rebel Sports sold sports shoes bearing the name or mark "Nike" or the "swoosh" logo to consumers; (d) Steve McPherson of the respondent telling Paul Dwyer and George Zakhia on or about September 1997 that Statement Products and current ranges of sports shoes bearing the name or mark "Nike" or the "swoosh" logo were not to be sold by the applicants to consumers at prices below which the retailer Rebel Sports sold sports shoes bearing the name or mark "Nike" or the "swoosh" logo to consumers; (e) Fraser Mexted of the respondent telling Paul Dwyer on or about October 1997 that the applicants' promotion and sale of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo under the value voucher system was a form of discounting the price at which sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo were sold to consumers; (f) James Darling of the respondent telling George Zhakia in early 1998, in a conversation that took place at the Homebush Premises, that the applicants could not sell the respondent's "Air Max" sports shoes below the price at which the retailer Rebel Sports sold "Air Max" shoes to consumers; The respondent made statements in relation to the sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo supplied by the respondent to the first applicant, or that may be supplied, to the first applicant, which statements were likely to be understood by the first applicant as statements of the price below which the goods supplied by the respondent to the first applicant were not to be sold. 101B The respondent maintained and did not resile from the statements made by the respondent referred to in paragraph 101A of this statement of claim at any time prior to 16 April 1999.' The new allegations relating to s 96(3)(b) are: '101E By reason of: (a) Each of the matters referred to in paragraph 101A above; (b) Lois McLachlan of the respondent, in or about June 1997, informing Mr Dwyer that supply by the respondent would be discontinued if the first applicant employed again its "buy one get one free" marketing campaign; (c) Steve McPherson of the respondent telling Paul Dwyer in about August 1997 that the second applicant would receive merchandising support from the respondent to assist with the sale of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo but that the first applicant, the third applicant and the fourth applicant would not receive the said merchandising support because each of these applicants sold sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo below the prices appearing in the respondent's catalogues and/or prices lists provided to the applicants from time to time and which catalogues and/or price lists specified for retailers the selling price of items of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo; (d) Steve McPherson of the respondent telling Paul Dwyer in about late April or early May 1998 that the second applicant would receive better ranges of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo than the first applicant, third applicant and fourth applicant since the second applicant was not discounting below the prices the respondent specified in the catalogues and/or price lists provided to the applicants from time to time and which catalogues and/or price lists specified for retailers the selling price of items of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo. The respondent induced, and further or in the alternative attempted to induce, the first applicant not to sell items of sports shoes, sports clothes and sports merchandise bearing the name or mark "Nike" or the "swoosh" logo supplied by the respondent to the first applicant at a price less than the price specified by the respondent in the respondent's catalogue and/or price lists. 101F The respondent maintained and did not resile from the conduct of the respondent referred to in paragraph 101E of this statement of claim at any time prior to 16 April 1999. (The significance of 16 April 1999 is that that is the date on which it is alleged that the respondent confirmed its refusal to supply goods to the applicants.) 20 The applicants sent the respondent a copy of its proposed fresh statement of claim on 14 November 2002. The respondent had filed its defence to the applicants' current pleading on 18 June 2001. In the defence the respondent pleaded statutes of limitation in respect of the unconscionable conduct, negligence and s 46 claims. It did not plead any period of limitation in respect of the resale price maintenance claims, although it denied the reason alleged for its withholding of supply and the applicants' entitlement to rely on s 100 of the Act. 21 The respondent does not oppose all the amendments. However, it opposes those amendments which would add new substantive claims under the rubric of unconscionable conduct, misuse of market power and resale price maintenance. (No particular objection was taken to the amendments affecting the negligence counts. It may be that they are not a matter of serious concern or are, in any event, covered by the limitation period already pleaded in the defence.) Counsel for the respondent focussed his attack on the new allegations of resale price maintenance. 22 I do not understand the applicants to dispute the proposition that the period of limitation applicable to the new claims under the Act was three years when the proceeding commenced and that that period must have expired by 14 November 2002. That is, in any event, plainly the case. Counsel for the applicants accepted that the Court could only grant the leave sought where a new claim 'arises out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief.' That expression was explained in Rodgers v Commissioner of Taxation (1998) 88 FCR 61 at 68-69. 23 Here the current pleading makes an allegation in respect of an arrangement constituted on 2 March 1994. That is the stale act of the respondent upon which the applicants rely for the purposes of s 100. Counsel for the respondent submits that this is, therefore, pleading evidence. Be that as it may, it is clear that the current pleading then springs forward to the six-month period prior to the withholding of supply in March 1999. Such a pleading does not require any facts between those times to be gone over. The proposed amendment raises new facts antedating 2 March 1994 and occurring after that date. In particular, the alleged conduct is said to involve the doing of acts referred to in s 96(3) which are distinctly different to those alleged in the current pleading. The freshness of the facts may be perceived even more starkly in the breadth of the new allegations of unconscionable conduct under Pt IVA of the Act. The determination of the issues joined on the current pleadings does not call for consideration of any of these matters. Accordingly the power of the Court to permit such amendments is not enlivened. 24 It is, however, plainly just that certain of the other amendments be permitted. In particular, to the extent that the different formulation for the markets affords a new foundation in law for the existing claims, those amendments should be allowed. 25 The proposed fresh statement of claim is not well drafted. I do not propose to take a blue pencil to it, but to indicate by reference to its terms the amendments that may be made to the current pleading. The persons preparing the new statement of claim should attend to the requirement that every matter alleged be indicated in a numbered paragraph. There is plainly scope for greater attention to be paid to the definition of the relevant goods. In particular, the pleading could be briefer. Where facts are simply repeated, there is no vice in saying so. 26 The applicants must pay the respondent's costs of the present motion and its costs thrown away by reason of amendments to be made to the statement of claim. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam.