Instyle Contract Textiles Pty Limited v Good Environmental Choice Services Pty Ltd

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AND: GOOD ENVIRONMENTAL CHOICE SERVICES PTY LTD (ACN 118 767 043)

GOOD ENVIRONMENTAL CHOICE - AUSTRALIA LIMITED (ACN 118 766 153)

introduction 1 By amended notice of motion filed on 11 October 2010 the applicant (Instyle) seeks leave to file a second amended application and a third further amended statement of claim, each in the form annexed to the amended notice of motion. 2 The respondents do not oppose leave being granted to file the second amended application in its annexed form. In the absence of objection I propose to grant the leave that is sought. Objection is taken, however, by all respondents to the filing of the third further amended statement of claim in its annexed form. Although a large number of amendments have been proposed, the respondents' objections are relatively confined and relate to paragraphs 42A, 49B, 59, 65A and 81A of the proposed pleading. Although separate submissions were made by the first and second respondents, and by the third respondent, each respondent also adopted the submissions of the other or others. 3 I now turn to consider each paragraph of the proposed pleading to which objection is taken.

Paragraph 42A 4 Paragraph 42A pleads that the first respondent (GECS) and the third respondent (GECA) made certain representations to "the general public", including certain identified suppliers, and "other suppliers of furniture and fittings, architects, interior designers, and customers [of Instyle]". 5 GECS and GECA submitted that the allegation that representations had been made to "the general public" and "other suppliers of furniture and fittings" is extraneous to the proposed pleading and is thus irrelevant, because no relief is sought in the proposed second amended application in respect of the making of such representations to those persons. In that connection, GECS and GECA also pointed to paragraph 49 of the proposed pleading (to which I will make further reference) which alleges that Instyle suffered loss or damage, by reason of the making of the representations, because the identified suppliers, and "architects, interior designers and customers" will not specify, or are less likely to specify, or will less commonly specify, Instyle's fabrics for upholstered furniture and fittings. GECS and GECA draw attention to the fact that, in paragraph 49, Instyle does not allege that "the general public" or "other suppliers of furniture and fittings" will not specify, or are less likely to specify, or will less commonly specify, Instyle's fabrics for upholstered furniture and fittings. 6 Instyle submitted that this objection is based on a misconception: the allegation in paragraph 42A is only to the fact that a representation was made to "the general public" including "other suppliers of furniture and fittings", as well as the other persons; it is not an allegation that "the general public" and "other suppliers of furniture and fittings" were misled or deceived or that Instyle suffered loss or damage because of anything that those persons will not, or are less likely or will less commonly, do. Whilst that observation, within the limits it imposes, is correct, I do not see how it answers the substance of the objection advanced by GECS and GECA. 7 In its present form paragraph 42A, if allowed, would open up an area of inquiry, both legal and factual, that is truly extraneous to any relief that Instyle claims. In this connection, paragraph 44 pleads that GECS and GECA have each contravened s 52 of the Trade Practices Act 1974 (Cth) (the Trade Practices Act) and s 42 of the Fair Trading Act 1987 (NSW) (the Fair Trading Act) by reason of various matters, including the making of the representations pleaded in paragraph 42A. Thus the pleading of paragraph 42A in its present form, combined with paragraph 44, exposes, as an apparent issue, the question whether the making of the alleged representations to "the general public" and "other suppliers of furniture and fittings" (whoever they may be) constitutes conduct that is misleading or deceptive in contravention of s 52 of the Trade Practices Act and s 42 of the Fair Trading Act, in circumstances where no relief is claimed in respect of any such conduct should it be found to exist. On its face, therefore, paragraph 42A raises barren issues. Seen in this way, the reference in paragraph 42A to the alleged representations having been made to "the general public" and "other suppliers of furniture and fittings" is an aberration that will have a tendency to cause prejudice, embarrassment or delay, or would otherwise be an abuse of the Court's process. 8 I would not, therefore, grant leave to file an amended pleading containing paragraph 42A in its present form.

Paragraph 49(b) 9 As I have indicated, paragraph 49 pleads an allegation of loss or damage. GECS and GECA object to paragraph 49(b) because of the generality of the expression "architects, interior designers and customers". No particulars are provided to identify the "architects, interior designers and customers" who will not specify, or are less likely to specify, or will less commonly specify, Instyle's fabrics for upholstered furniture and fittings. GECS and GECA submitted that, without greater specificity as to the identity of these "architects, interior designers and customers", they have insufficient knowledge of the case to be brought against them. I should add that paragraph 82 of the proposed pleading makes the general allegation that, by reason of "the matters pleaded", Instyle "has suffered and will continue to suffer substantial loss and damage, or alternatively is likely to suffer substantial loss or damage", without any particulars being given of that loss or damage or how it was caused. 10 Instyle submitted that this objection is not well-founded because what GECS and GECA really seek is the evidence by which Instyle would endeavour to prove the allegation made in paragraph 49(b). 11 Instyle did not seek, for the purposes of its present application, to articulate its case on damages. As I have noted in an earlier judgment in this proceeding (Instyle Contract Textiles Pty Limited v Good Environmental Choice Services Pty Ltd (No 3) [2010] FCA 466 at [33]-[34]), in a claim for damages under s 82 of the Trade Practices Act (the same holds true for s 68 of the Fair Trading Act) damage is the gist of the action. In a case of this kind for damages, issues of reliance and causation loom large. I accept that, in the proper conduct of their defences, GECS and GECA would wish to test these issues and prepare their cases accordingly. However, they can only do this if they know who (it is said) will not specify, or is less likely to specify, or will less commonly specify, Instyle's fabrics because of the alleged conduct. It is not sufficient for Instyle to merely point to a generic class of persons, leaving GECS and GECA to speculate who, out of that class, might have acted in a way that might have caused loss or damage of the kind that Instyle alleges. As one is reminded by the observations of Mason CJ and Gaudron J in Banque Commerciale SA en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286: The function of pleadings is to state with sufficient clarity the case that must be met… In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. See also in this regard the observations of Perram J in Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 78 ACSR 118; [2010] FCA 472 at [117]. 12 In my view GECS and GECA are entitled to know now the case that Instyle proposes to bring against them in relation to the claim for damages arising from the making of the alleged representations which paragraph 49(b) seeks to engage. Paragraph 49(b), in its present form, is substantially uninformative. It would not afford GECS and GECA a proper opportunity to defend the claim brought against them in this regard. That would be a wholly unsatisfactory state of affairs. In this connection the pleading of paragraph 49(b) stands in stark contrast to the pleading of paragraph 49(a), which identifies the suppliers who, it is alleged, will not use, or are less likely to use or will less commonly use, Instyle's fabrics. 13 For these reasons I would not grant leave to Instyle to file an amended pleading containing paragraph 49(b) in its present generalised form.

Paragraph 59 14 Paragraph 59 pleads that each of the respondents has given advice to "applicants and intending applicants for certification of their upholstered furniture". The advice, in each case, is then identified in sub-paragraphs (a) to (d) of paragraph 59, each sub-paragraph being particularised by identifying the person or persons to whom each advice was allegedly given. 15 The respondents submitted that, on a proper reading of paragraph 59, there is an apparent disconformity between the chapeau to the paragraph and each sub-paragraph in that, by referring to "applicants and intending applicants for certification of their upholstered furniture", the chapeau signifies a larger group of persons to whom the various pieces of advice were allegedly given rather than the person or persons specifically identified in each sub-paragraph. Put another way, the respondents submitted that, in its present form, paragraph 59 suggests that each sub-paragraph provides no more than an example of the persons to whom it will be alleged that each advice was given. The respondents called in aid what seems to be the portentous use in the particulars to each sub-paragraph of the words "further particulars may be supplied following discovery". 16 Instyle submitted, however, that on a proper reading, paragraph 59 does not bear the construction for which the respondents contend. It submitted that the pleading in paragraph 59 was limited to the allegation that each advice was given to the particular person or persons specifically identified in each sub-paragraph and not some larger group of "applicants and intending applicants". I should record that the respondents said that they raised no objection to the pleading of allegations confined in that manner. 17 In my view paragraph 59 can be read in the manner for which Instyle contends. However the reference in the particulars, in each case, to the possibility that "further particulars may be supplied following discovery" does create ambiguity by suggesting, in association with the words in the chapeau, that the pleaded allegations concern the giving of advice to a larger group of persons than those specifically identified. Because of that ambiguity, the pleading of paragraph 59 will have a tendency to cause prejudice, embarrassment or delay. I would not, therefore, grant leave to Instyle to file an amended pleading containing paragraph 59 in its present form. It seems to me that that ambiguity can be readily removed so as to align the paragraph more specifically to the respective allegations that Instyle, in accordance with its own submissions, seeks to plead. 18 A second objection was raised by GECA to the effect that proposed paragraph 59 does not provide a sufficient basis for the allegation that advice alleged to have been given by employees of GECS was also given on behalf of GECA. I dealt with a similar objection in an earlier application for leave to amend: see Instyle Contract Textiles Pty Limited v Good Environmental Choice Services Pty Ltd (No 2) [2010] FCA 38 at [48]-[54]. GECA sought to distinguish my ruling on that occasion. In my view, however, the thrust of the reasons I gave in the earlier judgment for allowing the amendment apply equally to paragraph 59: the allegation is clear and the basis on which it is made is clear. I am satisfied that an arguable basis for the allegation exists. Whether the allegation is correct will be a matter for trial. It is also to be remembered that the present question is not whether the pleaded facts are alone sufficient to give rise to a cause of action. The question is whether it would be open to Instyle upon the proposed third amended statement of claim to prove facts at the trial which would constitute a cause of action: Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLR 628 at 631; Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405 at 414. I do not see this objection as a reason for refusing leave to amend in terms of paragraph 59.

Paragraph 65A 19 Paragraph 65A is an allegation concerning the suffering of loss or damage by Instyle because "applicants and intending applicants" will not use, or are less likely to use or will less commonly use Instyle's fabrics by reason of the giving of the respective advices pleaded in paragraph 59. The objection taken by the respondents is that the reference to "applicants and intending applicants" in paragraph 65A is general and not specific to the person or persons identified in the sub-paragraphs of paragraph 59. This objection is governed by my ruling with respect to paragraph 59. I would not grant leave to Instyle to file an amended pleading containing paragraph 65A in its present form.

Paragraph 81A 20 Paragraph 81A is another allegation concerning the suffering of loss or damage by Instyle arising from the giving of certain advice. Two objections are raised by the respondents. 21 The first objection relates to the use of the words "gained credibility in the market place" where used in the chapeau to paragraph 81A as follows: "By reason of the ISO 14024 advice and the Trade Mark advice, GECA, GECS, the GECA Ecolabel Trade Marks and GECA's environmental labelling program gained credibility in the market place, and as a consequence …" (emphasis added). The respondents submitted that these words are unclear and result in the pleading of an "amorphous" allegation. On the other hand, Instyle submitted that the words are unnecessary to the allegation that is made and, if anything, only add to, but do not detract from, what is otherwise pleaded. Instyle submitted that the words have been included in order to assist the respondents in understanding the allegation that is made. 22 In my view the words are unclear and have a tendency to cause prejudice, embarrassment or delay. If the words are surplusage, they should not be pleaded in this instance. I would not, therefore, grant leave to Instyle to file an amended pleading containing paragraph 81A in its present form. 23 The respondents' second objection concerns the allegation in paragraph 81A(a) that "[a]rchitects, interior designers and customers who specify or buy furniture and fittings and textiles" will not specify, or are less likely to specify, or will less commonly specify, Instyle's fabrics because of the giving of the pleaded advice (namely, the ISO 14024 advice and the Trade Mark advice). The respondents' objection, once again, concerns the generality of the expression "architects, interior designers and customers who specify or buy furniture and fittings and textiles". The respondents submitted that, without greater specificity as to the identity of these "architects, interior designers and customers", they have insufficient knowledge of the case to be brought against them. In this respect the objection mirrors the objection that GECS and GECA made with respect to the pleading of paragraph 49(b). My ruling in relation to paragraph 49(b) applies equally to paragraph 81A(a). Accordingly, I would not grant leave to Instyle to file an amended pleading containing paragraph 81A(a) in its present generalised form.

Disposition 24 Leave will be granted to Instyle to file a second amended application in the form annexed to the amended notice of motion. However, for the reasons I have given, leave will not be granted to Instyle to file a third further amended statement of claim in the form annexed to the amended notice of motion. To that extent the amended notice of motion should be dismissed. 25 It was necessary for Instyle to seek leave to file its proposed second amended application and third further amended statement of claim. The respondents only objected to leave being granted to file the proposed third further amended statement of claim. The respondents have been successful in their opposition to the leave that was sought. For that reason my provisional view is that Instyle should pay the respondents' costs of and incidental to the motion. I will, however, hear the parties on the question of costs. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.