Myriam Cauvin v Philip Morris Limited

LEGISLATION CITED : Trade Practices Act 1974 (Cth)

Australian Wool Innovation Ltd v Newkirk [2005] FCA 290 CASES CITED : Cauvin v Philip Morris [2003] NSWSC 631 Cauvin v Philip Morris [2005] NSWSC 640 Travel Compensation Fund v Tambree T/as R Tambree and Associates [2005] HCA 69

Myriam Cauvin (Plaintiff) Philip Morris Limited (ACN 004 694 428) (1st Defendant) Philip Morris (Australia) Limited (ACN 004 316 901) (2nd Defendant) PARTIES : British American Tobacco Australia Services Limited (ACN 004 069 649) (3rd Defendant) W.D. & H.O. Wills Holdings Limited (ACN 003 763 291) (4th Defendant) British American Tobacco Australasia Limited (ACN 002 717 160) (5th Defendant) British American Tobaco Australia Limited (ACN 000 151 100) (6th Defendant)

N. Francey (Plaintiff) COUNSEL : J.R. Sackar QC / S. O'Meara (1st and 2nd Defendants) D. Beach SC / M. Wheelahan SC (3rd and 4th Defendants) I. Jackman / S.A. Goodman (5th and 6th Defendants)

Maurice May & Co (Plaintiff) SOLICITORS : Allens Arthur Robinson (1st and 2nd Defendant) Corrs Chambers Westgarth (3rd and 4th Defendants) Baker & McKenzie (5th and 6th Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

11301/02 Myriam Cauvin v Philip Morris Limited (ACN 004 694 428) & Ors

JUDGMENT 1 BELL J: I gave the plaintiff leave to file and serve a second amended statement of claim within four weeks on 26 August 2005: Cauvin v Philip Morris [2005] NSWSC 640 (the leave judgment). 2 By amended notice of motion filed on 15 December 2005 the plaintiff sought an extension of time in which to serve her second amended statement of claim (2ASC) and, in the alternative, leave to file and serve a third amended statement of claim (3ASC). A copy of the proposed 2ASC was annexed to the affidavit of her solicitor, John Albert Franklin (JAF1). It appears that following the leave judgment the plaintiff served an earlier version of the 2ASC on the solicitors acting for the defendants on or about 21 September 2005. There followed correspondence from the solicitors acting for the defendants in which it was contended that the 2ASC did not conform to the grant of leave. The plaintiff withdrew this earlier version of the 2ASC and sought an extension of time in which to file the version, annexed to JAF1. 3 A timetable was fixed for the filing of submissions prior to the hearing of the plaintiff's motion. The plaintiff was required to file and serve submissions on or before 16 December 2005 and the defendants were required to file and serve submissions on or before 16 January 2006.

4 Written submissions were filed on behalf of the first and second defendants (the Philip Morris defendants) and on behalf of the third and fourth defendants (the Wills defendants) on 16 January 2006 opposing the grant of leave and identifying a number of deficiencies in the 2ASC. 5 The fifth and sixth defendants (the Rothmans defendants) did not file written submissions. On the hearing of the motion Mr Francey submitted that the Rothmans defendants' omission to file and serve submissions gave rise to an inference that they were satisfied with the result of the exchange of correspondence that followed the service of the earlier version of the 2ASC in September 2005 and, hence, that they were to be taken as accepting the sufficiency of the 2ASC (T 3.50). 6 The solicitors acting for the Rothmans defendants notified Mr Franklin by letter dated 7 February 2006 of their intention to rely on the submissions filed on behalf of the other defendants (Exhibit 1- 5&6D). I do not draw the inference that their failure to file submissions should be taken to signify their consent to the grant of the leave that is sought.

7 A number of criticisms of the 2ASC were common to the written submissions that were filed on behalf of the defendants. On the hearing of the motion Mr Francey conceded the force of them. He acknowledged the absence of the pleading of material facts to support the claim of unconscionability under the Trade Practices Act 1974 (Cth) (the TPA) and did not seek to maintain it. He did not seek to support the invocation of the agency provisions under s 84(2) of the TPA or of accessorial liability pursuant to s 75B(a), (b) and (c) of the TPA.

8 A central focus of the written and oral submissions made by the defendants was the adequacy of the pleading of what was described as the plaintiff's "personal claim". 9 The 2ASC pleads (i) that the defendants have contravened the provisions of s 52 of the TPA by engaging in conduct that is misleading or deceptive (or likely to mislead or deceive) in that they have conspired to promote the benefits and pleasures of smoking and to deny, dispute or minimise the risks associated with smoking for the purpose of inducing consumers to smoke cigarettes (the general claim), and (ii) the defendants' contravening conduct had the effect of causing or contributing to the plaintiff commencing and/or continuing to smoke cigarettes and as a consequence she has suffered, or is likely to suffer, loss and damage particularised as including that she has contracted emphysema necessitating lung replacement surgery (the personal claim). 10 In respect of the general claim the plaintiff seeks wide-ranging injunctive relief under s 80(1) and in respect of the personal claim she seeks compensation for her loss or damage under s 87(1) of the TPA. The latter claim is pleaded in paragraph 3.5 of the 2ASC as follows: Such other order or orders under s 87(1) of the TPA as the Court thinks appropriate to compensate the plaintiff, in whole or in part for any loss or damage that has been suffered by her and/or will prevent or reduce any loss or damage that is likely to be suffered by her by the contravening conduct. 11 The defendants submitted that the 2ASC fails to adequately articulate the plaintiff's personal claim. They point to the pleading in paragraph 2.12 that they have engaged in "conduct" in the period from 1 January 1975 promoting the benefits and pleasures of smoking and denying, disputing or minimising the risks associated with smoking, for the purpose of inducing and/or encouraging consumers, including the plaintiff, to commence, continue, recommence and/or not cease or quit to smoke (the defendants' conduct). This conduct is pleaded as comprising elements that are set out in paragraph 2.12(A) to (D), each element of conduct is pleaded in broad terms and includes the advertising, marketing and promotion of the cigarettes, the making of public statements denying or disputing the existence of reliable evidence causally linking cigarette smoking to any risk to health and the intentional concealment of knowledge of the effect of nicotine and of the causal connection between smoking and smoking related disease. 12 In paragraph 2.13 of the 2ASC the plaintiff pleads that she was influenced by the "defendants' conduct", an assertion that she was influenced by the entirety of the conduct, even though she only saw and/or heard "certain" of it.

13 In paragraph 2.17 of the 2ASC the plaintiff pleads that "the contravening conduct" had the effect by reason of the influence of the defendants' conduct (as pleaded in paragraph 2.13) of causing and/or contributing to the plaintiff commencing to smoke the cigarettes and/or continuing to smoke the cigarettes, and/or recommencing to smoke the cigarettes, and/or not ceasing or quitting to smoke the cigarettes. In paragraph 2.18 she pleads that in addition to the effect of the defendants' conduct pleaded in paragraph 2.17, the contravening conduct had the effect, by reason of the influence of the defendants' conduct that she had an inaccurate or distorted belief, impression or understanding of matters, including the relationship between smoking and disease and between smoking and addiction.

14 Mr Francey acknowledged that the pleading of paragraph 2.13 was not supportable. His answer was to delete it. The defendants' submitted that this does not address the complaint that they make. The plaintiff does not plead material facts of the conduct that is causative of her loss or damage (or likelihood of loss or damage). They drew attention to the judgment of Hely J in Australian Wool Innovation Ltd v Newkirk [2005] FCA 290 at [24] with respect to the limits on the generality of pleading a claim such as this one.

15 In written submissions Mr Francey responded to the defendants' complaint as to the adequacy of the pleading of the personal claim in this way: As explained above, the plaintiff's personal claim is derivative of a broader, more general claim based on the defendants' conduct over the past thirty years. Essentially, the first six defendants (the seventh defendant being in a different position) have denied or disputed that smoking causes smoking-related disease and denied that smoking is addictive, at least until recent times. That conduct, in itself, is misleading or deceptive and unconscionable and susceptible to the relief sought in the proposed further amended statement of claim. The plaintiff was influenced by the defendants' conduct at a general level in that had the defendants conceded, as they now do, that smoking causes smoking-related disease and is addictive, from the 1970's onwards, the plaintiff may not have smoked, or may not have smoked as much and her attempts to quit may have been more successful. It is submitted that it is not necessary to descend into the degree of particularity for which the Philip Morris defendants contend.

16 On the hearing Mr Francey referred to the decision of the High Court in Travel Compensation Fund v Tambree T/as R Tambree and Associates [2005] HCA 69 in support of the contention that it was open to plead the personal claim as derivative of the general claim. He contended: The High Court examined what's involved in the connection between contravening conduct and loss or damage and reinstated Austin J's conclusion developing on the March v Stramare concept of a common sense approach to the connection between the two. We say a case like that assists us in pleading terms in that we don't have to descend into the degree of particularity that the first and second defendants in particular are insisting on. That was a pleading matter. As long as we say that certain of the contravening conduct had an effect on the plaintiff, that's sufficient in the context of a pleading that pleads at one level the general case, and then a case on behalf of the individual, the derivative of it. We would be contending that paragraph 2.17 and 2.18 makes the necessary causal connection to lead to the relief sought in paragraph 3.5 (T 42 34-50).

17 In the course of the hearing, Mr Francey abandoned his application for an extension of time in which to file the 2ASC. He sought leave to file a third amended statement of claim (3ASC). He maintained that the pleading of the personal claim was adequate in light of the reasoning in Tambree. I reserved my decision giving the plaintiff had seven days in which to file the draft of the proposed 3ASC incorporating the changes that Mr Francey had foreshadowed and allowing the defendants leave to file supplementary submissions addressing Mr Francey's submissions with respect to the decision in Tambree. 18 The draft of the 3ASC, which was filed in accordance with the directions given at the hearing, incorporates the amendments foreshadowed by Mr Francey including the deletion of paragraph 2.13. Consequential amendments are made to paragraphs 2.17 and 2.18 of the 2ASC (now paragraphs 2.15 and 2.16 of the 3ASC). These delete reference to "the influence of the defendants' conduct". The effect of omitting paragraph 2.13 and the consequential amendments to paragraphs 2.15 and 2.16 does not serve to make the pleading of the plaintiff's personal claim any clearer. She pleads that "the contravening conduct" had the effect of causing and/or contributing to her commencing, continuing, recommencing and/or not ceasing to smoke the cigarettes. The "contravening conduct" is pleaded as having had the effect on the plaintiff of giving her an inaccurate or distorted belief, impression or understanding of matters, including the relationship between smoking and disease and the relationship between smoking and addiction. The 3ASC persists in pleading the whole of the contravening conduct - which must include conduct of which the plaintiff had no knowledge - as causative of her loss. 19 In his supplementary submissions, Mr Francey referred to paragraph [32] in the judgment of Gleeson CJ in Tambree. Mr Francey said this: Whilst the facts in Tambree differ significantly from the facts in the present case, the general principles of causation are equally apposite. In particular, in the context of the risks involved from the harmful effects of smoking, where a "public position" is adopted by the Defendants disputing that smoking is harmful and denying that it is addictive and "a person (in the position of the plaintiff) acts or fails to act," in relation to their smoking "the loss or damage may flow directly from the act or omission, and only indirectly from" the conduct of the defendants.

20 The reliance that the plaintiff placed on paragraph [32] in the judgment of Gleeson CJ in Tambree in support of the proposition articulated above, is, to my mind, misplaced. In Tambree, the appellant Fund relied on the financial statements, which were misleading or deceptive in that they contained false information, in allowing the travel agency to participate in the scheme. The Court held that the fiduciary obligations of the trustees of the Fund included meeting claims upon it in respect of unlicensed trading. The characterisation of the conduct of the operator of the travel agency as illegal, in trading after the loss of her license, did not take the conduct outside the scope of the risk from which the Fund had sought to protect itself by its reliance on the financial statements (at [34]). Tambree does not deal with the requirements of a TPA (or Fair Trading Act) pleading. It is not support for the contention that it is open to the plaintiff to plead her personal claim as derivative of a broad claim based on the defendants' conduct over the past thirty years without identifying the respects in which she contends the conduct of the defendants to have been causative of her loss or damage (or likelihood of loss or damage). Section 87(1) requires that the court be satisfied that a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct engaged in by another person in contravention of the TPA. The defendants are entitled to be informed of the conduct for which they are said to be responsible that is causative of the plaintiff's loss or damage (or likelihood of loss or damage). As the Philip Morris defendants observe in their written submissions, these are matters within the plaintiff's knowledge alone and are central to any personal claim that she makes for compensation. 21 In their written submissions the Philip Morris defendants referred to paragraph 87 of the leave judgment and submitted that the Court considered that the plaintiff should be afforded a further opportunity to articulate her personal claim (WS para 7). The leave was not so limited; it extended to the plaintiff's general claim by which she seeks to make a case that the defendants have contravened the statutory norm provided by s 52 of the TPA. 22 In supplementary written submissions Mr Francey contended: Further, the issue of causation is relevant only to the Plaintiff's personal claim. It is not a necessary ingredient of the general claim. Accordingly, leave should be granted for the Plaintiff to pursue remedies in relation to the general claim in any event. If that is to occur, it makes sense to leave the Plaintiff's individual claim in place to be evaluated on the evidence adduced at any hearing (WS 16 February 2006 at [4])). 23 I have decided that notwithstanding the deficiency in pleading her personal claim I should not refuse the plaintiff leave to proceed on her 3ASC. As Mr Francey submitted, the general claim pleaded in the 2ASC (and now the 3ASC) is consistent with the rulings earlier made in the proceedings. The personal claim is necessarily in a more confined compass than the general claim. I do not accept that it is open to the plaintiff to have her personal claim left as it stands to be evaluated on the evidence that may be adduced at the hearing. The defendants are entitled to know what conduct is alleged against them as having caused the plaintiff's loss and damage or given rise to the likelihood of loss and damage. I consider that this can be achieved by the requirement that the plaintiff provide particulars of her personal claim. In light of the scope of the general claim, I do not consider that approaching the personal claim in this way will occasion prejudice to the defendants. The complaint that the Philip Morris defendants make in their written submissions that the plaintiff pleads she has smoked "the cigarettes" (paragraph 2.9) and the respects in which she seeks to make a case that she "may" smoke "the cigarettes" is one that can be addressed by particulars. This applies also to the complaint as to paragraph 2.20 of the 2ASC (paragraph 2.18 of the 3ASC). 24 The Philip Morris defendants raised a number of other criticisms of the pleading in their written submissions, which were not further addressed on the hearing of the motion. They complain of the pleading in paragraphs 2.12(C)(e) and (f) (and their counterparts in paragraph 2.15(C)) on the basis that the conduct described in these sub-paragraphs is not within the scope of the defendants' conduct as defined. These sub-paragraphs were numbered paragraph 2.16(C)(e) and (f) in the amended statement of claim (ASC) and were the subject of challenge on the defendants' earlier motions that were dealt with in the pleading judgment: Cauvin v Philip Morris [2003] NSWSC 631. I declined to strike out them out on that occasion (at [79]).

25 In the appendix to their submissions the Philip Morris defendants complain that the Note (e) paragraph (i), which provides that a reference to "the Philip Morris companies" is a reference to the first and second defendants, or one or other or both of them, is embarrassing in that the precise allegations made against each of them throughout the pleading are not clear. The 3ASC retains the definition, but does not employ the expression "the Philip Morris companies" in the body of the pleading. The inclusion of Note (e)(i) appears to be superfluous (as do Notes (e) (ii) and (iii)) as the pleading now stands, however, it does not occasion embarrassment to the Philip Morris defendants.

26 The Philip Morris defendants also complain that the use of the expression and/or in paragraph 2.1 is embarrassing in that they do not know the precise allegation made against each of them. The plaintiff pleads in this paragraph that during the relevant period the defendants carried on business in Australia as the manufacturers and/or distributors of cigarettes and/or as the holding company of such a manufacturer and/or distributor. In the context of the claim that the plaintiff brings against each of the first and second defendants whether as manufacturers, distributors or the holding company of a manufacturer or distributor, I do not consider that the use of the expression and/or in paragraph 2.1 to be embarrassing. 27 The Philip Morris defendants complain of the use of the expression "one or more of them" in paragraph 2.3 as embarrassing in that the precise allegations made against each of them is not made clear. In this paragraph the plaintiff pleads that the defendants, or one or more of them, manufactured and or distributed the cigarettes. In particular (a) to paragraph 2.3 the plaintiff identifies the brand names of the cigarettes that the Philip Morris defendants are said to have manufactured and/or distributed by reference to Schedules A (1) and B (1). She undertakes to provide further particulars after discovery. The Philip Morris defendants know which of the first and second defendants manufactured and/or distributed the brands of cigarettes named. I do not consider that the failure to identify whether the first or the second defendant is alleged to have manufactured or distributed the cigarettes named in Schedules A (1) and B (1) to be embarrassing. 28 The definition of the effect of nicotine in paragraph 2.6 is criticised for the lack of precision in the expressions, "need in cigarette smokers to continue smoking", "capacity of cigarette smokers", and "addictive capacity of nicotine". This is said to be exacerbated by the use of other expressions in paragraph 3.4, namely, "addictive nature of nicotine", "addictive properties of nicotine" and "dependent smokers". The same definition of "the effect of nicotine" was pleaded in paragraph 2.10 of the ASC. The present objection was not raised at that time. To my mind the expressions employed in defining the term "the effect of nicotine" do not lack precision. Paragraph 3.4 contains the plaintiff's wide-ranging claims for injunctive relief. It may have been preferable to use the expression "the effect of nicotine" in subparagraphs 3.4 (c), (d) and (e), however, the references to "the addictive nature of nicotine" and "nicotine addiction" in these subparagraphs and the reference to the expression "dependent smoker" in subparagraph (h) do not seem to me to occasion difficulty. 29 In particular (a) of paragraph 2.7 the plaintiff identifies the defendants' knowledge of studies in the public domain disclosing the effect of nicotine (as defined) "including those listed in schedule D and schedule E hereto". The defendants object to the inclusion of the word "including" as embarrassing. They submit that paragraph 2.8(a) repeats the allegations made in paragraph 2.7 and is therefore redundant. Paragraph 2.7 pleads that during the relevant period the defendants knew of the matters referred to in paragraphs 2.4 - 2.6 (which includes that smoking the cigarettes caused or could be a cause of diseases defined as smoking related disease). Paragraph 2.8(a) pleads that during the relevant period the defendants knew that smoking the cigarettes caused and/or could cause and/or could be a cause of smoking related disease. Paragraph 2.8(a) is redundant and the leave to proceed on the 3ASC does extend to the inclusion of it. The particulars to paragraph 2.8 remain as particulars of the pleading in subparagraph (b). I do not consider the use of the word "including" in particular (a) to paragraph 2.7 or particular (a) to paragraph 2.8 to be embarrassing. 30 In paragraph 2.12 the plaintiff pleads that during the relevant period the defendants engaged in conduct that is defined therein as "the defendants' conduct". In 2.14 the plaintiff pleads: The defendants, or one or more of them, engaged in the defendants' conduct referred to in paragraph 2.12 above in trade or commerce.

The defendants submit that the inclusion of the words "or one or more of them" in paragraph 2.14 is embarrassing. I accept that is so. The words "or one or more of them" are not the subject of the leave to proceed on the 3ASC. 31 The defendants noted that in paragraph 2.15(D) of the 2ASC (paragraph 2.14(D) in the 3ASC) the plaintiff pleads that they were under a "duty or obligation to disclose" the knowledge referred to in paragraphs 2.7 and 2.8, which refers to the contents of studies in the public domain. In the defendants' submission the pleading of a duty or obligation to disclose matters in the public domain is absurd. The material particularised comprises reports of the United States' Surgeon General, the Royal College of Physicians, publications of the National Health and Medical Research Council and a number of articles on the topic of smoking and addiction published in various professional journals. The submission was not further developed. I have concluded that I should not refuse to allow the pleading of the duty or obligation to disclose the knowledge on the basis that it is in the public domain as being so manifestly faulty that it does not admit of argument. 32 The Wills defendants submitted that the inclusion of the allegation in paragraphs 2.12 and 2.12(C) that the defendants engaged in conduct disputing the risks associated with smoking in the former and disputing the existence of reliable evidence causally linking smoking to any health risk did not conform to the leave judgment. The allegation of disputing is new. No other complaint is made concerning the pleading of this allegation. I consider that it should be allowed in the amended pleading.

33 The defendants submitted that in the event leave was granted to the plaintiff to file her 3ASC she should be ordered to pay their costs. This was because on the hearing of the motion a substantial area of contention raised by them in correspondence with the plaintiff's solicitors was conceded: the claim of unconscionability, the reliance on the extended agency provisions of s 84(2), and on accessorial liability under s 75B(1) (a), (b) and (c). The plaintiff submitted that the order for costs should be costs in the cause. 34 It is the case that a number of deficiencies in the pleading that were identified in correspondence by the defendants' solicitors with the plaintiff were not addressed by the 2ASC, but were effectively conceded when the matter came on for hearing. The criticism of the pleading of the personal claim raised matters of substance that the plaintiff has been unwilling to confront. For the reasons that I have given I do not consider that the deficiencies in the pleading in this respect should lead to a refusal of leave to proceed on the 3ASC, but the supply of further particulars is required to address the deficiencies that the defendants identified in their written submissions and on the hearing. Although the plaintiff has succeeded in obtaining the relief that she seeks I consider that she should pay the defendants' costs of the motion. ORDERS 1. The plaintiff has leave to file her third amended statement of claim subject to the deletion of paragraph 2.8(a) and the words "or one or more of them" in paragraph 2.14. 2. The plaintiff is to provide particulars of her personal claim within six weeks. 3. The plaintiff is to pay the defendants' costs of the motion.

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