Third party reliance
81 The plaintiff's claim based on the alleged representations in proposed paragraph 24E and the issue of causation purportedly pleaded in proposed paragraph 24EA is an unorthodox one. That, of course, is not intended as suggesting that third party reliance cannot be established if there are material facts capable of establishing it.
82 Relevant case law has examined the question of third party reliance. In Janssen-Cilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526, Lockhart J observed at 529:-
"What emerges from an analysis of the cases (and there are many of them) is that they do not impose some general requirement that damage can be recovered only where the applicant himself relies upon the conduct of the respondent constituting the contravention of the relevant provision.
Also, a perusal of the provisions of Pts IV and V, the contravention of which gives rise to an entitlement to an applicant for compensation for loss or damage, points to the conclusion that applicants may claim compensation where the contravener's conduct caused other persons to act in a way that led to loss or damage to the applicant."
83 Lockhart J observed in that case (at 530) that the use of the preposition "by" in s.82(1) is important. His Honour there noted:-
"… It indicates the requirement that there be a sufficient cause or link between the respondent's conduct and the recoverable loss or damage …"
84 His Honour also there added:-
"… Loss or damage must directly result from or be caused by the respondent's conduct. The respondent's conduct must be the real or direct or effective cause of the applicant's loss; it must have been 'brought about by virtue of' the conduct which is in contravention of s.52 …"
85 See also further observations in that case at 530, 531 and 532.
86 In McCarthy v McIntyre [1999] FCA 784, the Full Court of the Federal Court (Hill, Sackville and Katz JJ) in the reasons for judgment of the Court at [48] expressed agreement with the observations of Lockhart J in Janssen-Cilag (supra) to the effect that s.82 of the TPA (or s.87 or their State equivalents) did not require that a person who alleges damage must rely upon the misrepresentation. The passage from the judgment of Lockhart J in Janssen-Cilag (supra) was cited with approval by Gummow J in Marks v GIO Australia Holdings Limited [1998] HCA 98; (1998) 158 ALR 333 at 359.
87 In McCarthy (supra), their Honours observed at [48]:-
"All that is necessary, in our opinion, is that there be a sufficient and direct link (ie, causation) between the loss or damage alleged to have been suffered by the claimant and the misleading or deceptive conduct."
88 In the same case, their Honours observed at [50]:-
"Where a claimant is able to show that, but for the misleading or deceptive conduct, he or she would not have entered into a transaction, then such loss as flows directly to the claimant from the transaction will satisfy the requirement of causation. This is so where the claimant relies upon the misleading or deceptive conduct (the usual case). It is also so where a third party whose action was a sina qua non of the entry by the claimant into the transaction (the present case as alleged) relies upon the misleading or deceptive conduct."
89 More recently, the question of third party reliance and the issue of causation was considered by the Full Court of the Federal Court (Kiefel, Sundberg and Edmonds JJ) in Finishing Services Pty Limited v Lactos Fresh Pty Limited [2006] FCA FC 177. In that case, the appellant, Finishing Services, was the lessor of premises to the first respondent, Lactos Fresh. The appeal concerned the notification by Finishing Services of a new and higher rent purportedly pursuant to a rent review clause in the lease agreement. An alternative case brought by Lactos Fresh was against the second respondent (Colliers Victoria) who had advised Finishing Services as to an appropriate rental market.
90 In dealing with the claim by Lactos Fresh in the cross-appeal, it was observed that it was not that Lactos Fresh had been misled but rather Finishing Services had been. The submission at first instance had been that it was sufficient for Lactos Fresh to demonstrate that Finishing Services had relied upon its agent's advices and that Lactos Fresh had suffered loss and damage by reason of that reliance.
91 The Court in that case discussed the tests to be used to judge what constitutes a sufficient cause or connection between the misleading conduct and the outcome. Following reference to authority, including Janssen-Cilag (supra) and McCarthy (supra), the Court observed:-
"… However the authorities require there to be a 'sufficient and direct link' or a 'requisite element of proximity' in order for the section to be satisfied."
92 The judge at first instance had identified as an "insurmountable hurdle" in relation to causation the fact that Lactos Fresh had failed to object to the notice and that such failure would constitute a break in the chain of causation. At [33], the Court on appeal observed that, whilst negligence on the part of a "victim" of the contravention was not a defence to a claim for damages under s.82 of the TPA, "this did not apply where the victim's conduct operates so as to destroy the causal connection between the contravention and the loss …". The trial judge, accordingly, had concluded that, had the notice been valid, Colliers Victoria would not, by its conduct, have caused Lactos Fresh's loss.
93 The Court also observed (at [35]) that the cases did not deny that the "but for" test for causation may have some use but that it cannot operate exclusively for the reason that it is not a comprehensive test. Reference was made in that respect to dicta of Gummow J in Chappel v Hart (1998) 195 CLR 232 at [62]. If that test is not satisfied, then it is unlikely that there is the necessary causal connection.
94 Accordingly, as the Full Court observed in Finishing Services (supra), something more is required than the application of the "but for" test. Authority indicates that an application of the commonsense approach to causation has been mandated. Applying the appropriate test, it must be shown that the misrepresentation in the present case caused in a direct way or materially contributed to the plaintiff entering into the Deed of Release.
95 There are, in my opinion, two difficulties in permitting, by way of amendment, the pleading of the misrepresentations in paragraph 24E in association with the purported formulation of causation in paragraph 24EA.
96 The first difficulty is that paragraphs 24E and 24EA do not identify the material facts that are said to establish the necessary causal link. It is clear that such material facts must be pleaded: Bond Corporation Pty Limited v Thiess Contractors Pty Limited (1987) 14 FCR 215 per French J (as his Honour then was) at 222.
97 In relation to proposed paragraph 24E(a), the material facts concerning the "misrepresentations" are not identified. There is a general reference to "advice" given by the plaintiff to ETC in or about September 2003 (said to have been given three months before the Deed of Release was signed) without stating specifically what the advice was or how the alleged misrepresentations about the "advice" was received by others or what influence or operation it is claimed they had upon them in the making and/or the implementation of any such decisions.
98 This situation is compounded by the failure to specify what were the "prior occasions" upon which representations were made or what were the material facts as to what was said by the plaintiff on such "occasions" concerning the subject of outsourcing and what effect they may have had on a particular individual.
99 Further, there is no reference to material facts concerning the content of any particular communication or statement allegedly made by the fourth and fifth defendants as agents for the first and second defendants about the plaintiff's "advice" or the material facts as to how any statements or communications about the plaintiff's advice were said to be related to the execution of the Deed of Release.
100 In summary, proposed paragraph 24E does not state or otherwise identify the material facts capable of giving rise to a probable inference that the statements or communications by the fourth and fifth defendants on behalf of the first and second defendants operated on others, in particular, on those who negotiated on behalf of the first and second defendants, such, for example, that they engaged in any conduct by allegedly making a "demand" to the plaintiff that, as a term of negotiated settlement, he was required to enter into the Deed of Release and that it was in consequence of that demand, that he entered into it.
101 The proper pleading of material facts is essential to the issue of causation as an essential element in a cause of action under the FTA.
102 In this regard, in Bond Corporation (supra), French J, as his Honour then was, observed at 222:-
"The material facts establishing the necessary causal link should be pleaded. In cases of contravention of s.52 said to be constituted by misrepresentation this will generally require more than appears in the opening words of par 50: 'by reason of such conduct …'
Some guidance to the proper approach may be derived from the ordinary rule of pleading applicable in cases of fraud of which Lord Watson said in Dow Hager Lawrance v Lord Norreys [1890] 15 App Cas 210 at 221:-
'… the ordinary rule of pleading applicable to cases of fraud, … was thus expressed by Earl Selborne in Wallingford v Mutual Society …: 'general allegations, however strong may be the words in which they are stated, are insufficient to amount to an averment of fraud of which any court ought to take notice.' It is not a sufficient compliance with the rule to state facts and circumstances which merely imply that the defendant, or someone for whose action he is responsible, did commit a fraud of some kind. There must be a probable, if not necessary, connection between the fraud averred and the injurious consequences which the plaintiff attributes to it; and if that connection is not sufficiently apparent from the particulars stated, it cannot be supplied by general averments .' Facts and circumstances must in that case be set forth, and in every genuine claim are capable of being stated, leading to a reasonable inference that the fraud and the injuries complained of stood to each other in the relation of cause and effect.'
..."
103 French J in Bond Corporation (supra) stated that relevant precedents in Bullen, Leake and Jacob, Precedents of Pleadings in the Queen's Bench Division of the High Court of Justice (12th ed, 1975) at pp.702 to 707, supported the view that "the approach enunciated by Lord Watson is equally applicable to actions for negligent misrepresentation" (p.222).
104 His Honour also referred to dicta of Toohey J in James v ANZ Banking Group Limited (1985) ATPR 40-504 at 46,034 as follows:-
"While the Bank is not required to plead specifically to particulars of damages, it is entitled to know with some certainty what is being claimed and the basis of the claim."
105 French J concluded (at 222):-
"In my opinion, the statement of claim in par 50 does not plead the necessary material facts to establish the causal relationship between contravention and loss which is necessary to the cause of action …"
106 In summary, I do not consider that the matters pleaded in the proposed paragraphs 24E and 24EA reveal the material facts concerning the alleged representations or that are necessary to establish the requisite causation inherent in the phrase "… loss or damage by conduct of another person" within the meaning of s.72(1) of the FTA. Relief available under s.72(5) of the FTA is contingent on a proper pleading and proof of third party reliance or a causal connection being established.
107 In particular, proposed paragraph 24EA which purports to establish causation by the use of the phrases "as a consequence of …" and the words "… whereby the Second and/or Third Defendant demanded that the Plaintiff sign the Deed of Release …" is not sufficient to comply with the principles of pleading referred to by French J in Bond Corporation (supra). Such phraseology is similar to that was rejected by his Honour in that case ("by reason of such conduct").
108 Finally, proposed paragraph 24E(c) does not meet the causative tests required or meet the principles which require the pleading of material facts. The observations made above in relation to proposed paragraph 24EA also apply to that proposed sub-clause.
109 I have earlier referred to the conclusion reached by Malpass AsJ and Johnson J in which their Honours rejected submissions to the effect that the alleged representations were made "in trade or commerce" applying the narrow construction referred to by the High Court in Concrete Constructions (supra). The conclusion reached by their Honours, in my opinion, has equal application to the proposed amendments in respect of paragraphs 24EA and 24EC. Whilst Mr King emphasised that the alleged representations arose out of and concerned the question of outsourcing such as to amount to statements made in trade and commerce and not as a mere internal communication, the essential facts out of which the dispute between the plaintiff and his former employer arose support the conclusions reached by Malpass AsJ and Johnson J on this question. The outsourcing of staff occurred, as I have earlier stated and as asserted in the proposed pleading, in 2001, at which time the plaintiff agreed to enter the employment of the second defendant although, of course, he also alleges that he did so on the basis and understanding to which he refers in the facts as pleaded.
110 In proposed paragraph 24E, he states that the "misrepresentations" were made "in 2003". The particulars suggest, as earlier noted, the relevant period was in September and October 2003. The documents forming part of Exhibit A to which Mr King sought to draw attention including, in particular, an email dated 10 September 2003 confirms that this was the relevant period. Mr King, in that respect, drew attention to a letter written by the plaintiff on 4 September 2003.
111 Accordingly, it is clear that, at about that time (September/October 2003), a dispute arose between the plaintiff and others as to the advantages and disadvantages claimed concerning the outsourcing that had commenced on and after 1 July 2001. It is clear that the "misrepresentations" sought to be relied upon by the plaintiff in the proceedings did not occur at the time of the outsourcing negotiations and decisions made in 2001 or during a negotiation for alternative employment, or in any renegotiations of a contract such as, for example, were discussed in Orison (supra) or in Barto v GPR Managements Services Pty Limited (1991) 33 FCR 389 or in the course of a company structure involving the transfer of a long-term employee to another company as occurred in McCormick (supra). See also Stoelwinder v Southern Health Care Network (2000) 177 ALR 501 and Walker v Salomon Smith Barney Australia Securities Pty Limited [2003] FCA 1099.
112 As the High Court emphasised in Concrete Constructions (supra), the provisions proscribing misleading or deceptive conduct is concerned with the conduct of a corporation towards others with whom it "… has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character …" (at p.604).
113 In this case, the expanded definition of trade and commerce in s.4 of the FTA is to be borne in mind. However, as Johnson J observed at [37], the requirement that the conduct must itself bear a trading or commercial character applies equally in the context of the FTA, notwithstanding that expanded definition.
114 The dispute that arose in 2003 in the present matter occurred in the course of the plaintiff's employment with the second defendant and did not involve misrepresentations being made in the context of pre-contract negotiations or in the context of commercial dealings of the nature referred to by the High Court in Concrete Constructions (supra). In other words, the context in which the plaintiff alleges that the misrepresentations were made was in the course of the plaintiff's employment. That context was not one of a commercial character in the sense explained in Concrete Constructions (supra). That, of course, does not mean that the fact that a person is employed precludes the possibility of conduct falling within s.42 of the FTA. It is sufficient, in relation to the application of the principles in the employment context, to refer to the observations made in Orison (supra) at 157 to 158, in Barto (supra) at 393, in McCormick (supra) at [28] to [30] and to the decision of the Full Court of the Federal Court in Village Building Company Limited v Canberra International Airport Pty Limited (2004) 139 FCR 330 at [50] to [55].