TRADE PRACTICES - Misleading and deceptive conduct - franchise agreements.

CONTRACT - Whether duty of good faith an implied term of the contract.

TORT - Whether negligent misrepresentations - whether reliance on misrepresentations pleaded.

Fair Trading Act 1987 (WA), ss.9 and 79

Federal Magistrates Act 1999 (Cth), ss.3(2)(a) and (b), 43(2)(b)

Federal Magistrates Court Rules 2001 (Cth), rr.1.03 (4), 1.05(2), 14.10, Schedule 1

Trade Practices Act 1974 (Cth), ss.4(1), 51A, 52, 82, 87

Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41

Akron Securities Ltd v Iliffe & Ors (1997) 143 ALR 457

Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349

Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82; [2006] WASC 281

Bartlett v Swan Television & Radio Broadcasters Pty Ltd [1995] FCA 1429; (1995) ATPR 41-434

Bruce v Odhams Press Ltd [1936] 1 KB 697

Buckingham v KSN Engineering Pty Ltd & Anor (2008) 177 IR 427; [2008] FMCA 546

Burger King Corporation v Hungry Jacks Pty Ltd (2001) 69 NSWLR 558; [2001] NSWCA 187

Burton v Shire of Bairnsdale [1908] HCA 57; (1908) 7 CLR 76

Byrne & Anor v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410

Codelpha Construction Pty Ltd v State Rail Authority NSW [1982] HCA 24; (1982) 149 CLR 337

Coolstar Holdings Pty Ltd v Cleary & Ors [2006] FMCA 1442

Cummings v Lewis (1993) ATPR 46-103

Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658

Davids Holdings Pty Ltd v Coles Myer Limited & Ors (1993) ATPR 41-227

Doukidis v Williamson (2008) 6 ABC (NS) 717; [2008] FMCA 1352

Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228

Far Horizons Ltd v McDonald's Australia Ltd [2000] VSC 310

Fraser v NRMA Holdings (1995) 55 FCR 452

Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703; [1999] FCA 903

Guglielman v Trescowthick [2004] FCA 326

Harris v Cigna Insurance Australia Ltd (1995) ATPR 41-445

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4; [1964] AC 465

Henderson & Ors v Merrett Syndicates Ltd & Ors [1994] UKHL 5; [1995] 2 AC 145

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) [1988] FCA 40; (1988) 39 FCR 546

Howden v Truth & Sportsman Ltd [1937] HCA 74; (1937) 58 CLR 416

Hughes Aircraft Systems International v Airservices Australia [1997] FCA 558; (1997) 146 ALR 1

Jacques v Cut Price Deli Pty Ltd (1993) ATPR 46-102

Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950

Liberty USA Pty Ltd v Telstra Corp Ltd (Unreported, Federal Court of Australia, Branson J, VG 166 of 1994; 24 August 1994)

March v Stramare [1991] HCA 12; (1991) 171 CLR 506

McKechnie v Campbell (1996) 17 WAR 62

Miba Pty Ltd & Ors v Nescor Industries Group Pty Ltd & Anor (1996) 141 ALR 525

Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254; [2000] HCA 61

Mutual Life & Citizens' Assurance Co Ltd v Evatt [1970] UKPCHCA 2; (1970) 122 CLR 628

Olsen v Wellard Feeds Pty Ltd [2007] FMCA 1885

Pancontinental Mining Ltd v Posgold Investments Pty Ltd [1994] FCA 983; (1994) 121 ALR 405

Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457

Pyrenees Shire Council v Day (1998) 192 CLR 330; [1998] HCA 3

Re Ku-ring-gai Co-operative Building Society (No.12) Ltd [1978] FCA 50; (1978) 36 FLR 134

Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234

Scott v Beneficial Finance Corp Ltd [1993] FCA 633

Shelton v National Roads and Motorists Association Ltd (2004) 51 ACSR 278; [2004] FCA 1393

State of Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41-691; [1999] FCA 499

Sterling Commerce (Australia) Pty Ltd v Iliff (2008) 173 IR 378; [2008] FCA 702

The State of Queensland & Anor v JL Holdings Pty Limited (1997) 189 CLR

Ting v Blanche [1993] FCA 524; (1993) 118 ALR 543

Verge & Anor v Devere Holdings Pty Ltd & Ors [2008] FMCA 591

W & A McArthur Ltd v Queensland [1920] HCA 77; (1920) 28 CLR 530

Welton v Missouri [1875] USSC 187; 91 US 275 (1875) 146

Williams & Anor v Natural Life Foods & Anor [1996] 1 BCLC 288

Williams & Anor v Natural Life Foods & Anor [1997] 1 BCLC 131

Williams & Anor v Natural Life Foods & Anor [1998] UKHL 17; [1998] 2 All ER 577

Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd (2006) 33 WAR 1; [2006] WASC 161

G Blainey, A Short History of the World (Camberwell: Penguin, 2001)

KE Lindgren & CM Branson, Federal Civil Litigation Precedents (Butterworths: Sydney, 1998)

NC Seddon & MP Ellinghaus, Cheshire and Fifoot's Law of Contract (Ninth Australian Edition) (Chatswood: LexisNexis Butterworths, 2008)

CALMER PTY LTD AS TRUSTEES FOR THE MERCAL FAMILY TRUST

(1) That:

• (a) the words "very good" in paragraph 9.5;
• (b) paragraphs 18 and 19;
• (c) the words "and/or the disclosure pleaded at paragraph 18" in each of paragraphs 20 and 21;
• (d) paragraphs 25-28 (inclusive);
• (e) paragraphs 29 to 33 (inclusive);

(2) An Amended Statement of Claim be filed on or before 5 February 2009.

(3) Costs in respect of both matters be reserved, and absent agreement between the parties, be argued at the next directions hearing.

(4) The parties to confer as to appropriate directions for the future conduct of the matter.

(5) The matter is adjourned to 12 noon on 12 February 2010 for further directions.

(1) That:

• (a) the words "very good" in paragraph 9.7(c);
• (b) paragraphs 18 and 19;
• (c) the words "and/or to make the disclosure pleaded at paragraph 18" in paragraph 20;
• (d) the words "and/or the failure to make the disclosure as pleaded at paragraph 18" in paragraph 21;
• (e) paragraphs 25-28 (inclusive);

(2) An Amended Statement of Claim be filed on or before 5 February 2009.

(3) Costs in respect of both matters be reserved, and absent agreement between the parties, be argued at the next directions hearing.

(4) The parties to confer as to appropriate directions for the future conduct of the matter.

(5) The matter is adjourned to 12 noon on 12 February 2010 for further directions.

CALMER PTY LTD AS TRUSTEES FOR THE MERCAL FAMILY TRUST

1. The first and second respondents in matter PEG 144 of 2008,[1] Michel's Patisserie (WA) Pty Ltd and Grant Caddy,[2] filed an application in a case on 3 February 2009[3] seeking orders that:
   • Pursuant to Order 11 r 16:[4]
     • 1. Paragraphs 5.2, 7 to 14, 16 to 22, 30 to 32, 34 and prayer for relief A(iii) be struck out as they have a tendency to cause prejudice, embarrassment or delay in the proceedings;
     • 2. Paragraphs 4 to 22, 23 to 24, 25 to 28 and 29 to 33 be struck out as they disclose no reasonable cause of action; and further or alternatively,
     • 3. Paragraphs 4 to 22, 23 to 24, 25 to 28 and 29 to 33 be struck out as they are otherwise an abuse of the process of the Court.
     • 4. The applicants pay the Respondents' costs of and incidental to the Application.
     • 5. Such further or other Orders as the Court considers appropriate.[5]
2. The respondents in matter PEG 146 of 2008 have also filed a substantially identical application in a case[6] in that matter.[7]
3. The O'Brien Application and the Calmer Application are supported by the affidavit of Kirsty Jane Ridling, a solicitor employed by the solicitors for the respondents, and sworn 3 February 2009.[8] The two applications in a case were argued together, and for reasons of convenience the court has primarily used the O'Brien Matter pleading for the purposes of the argument, but has referred to the Calmer Matter pleading where it relevantly differs from the O'Brien Matter pleading.
4. Both the O'Brien Application and the Calmer Application are opposed by the applicants in each of the O'Brien Matter and the Calmer Matter.[9]

1. The issue is whether the statements of claim as pleaded in the O'Brien Matter and the Calmer Matter are defective, and, if they are, whether they should be struck out as claimed.

1. In each of the O'Brien Matter and the Calmer Matter the substantive applications were filed on 9 September 2008 by way of application and statement of claim. In broad terms, the applicants were franchisees and operators of retail patisserie businesses under agreements with Michel's Patisserie, and claim:
   1. as against Michel's Patisserie:
      • damages under ss.82 and an order and 87 of the Trade Practices Act 1974 (Cth);[10]
      • damages for breach of contract; and
      • damages for negligence;

1. as against Mr Caddy:
   • damages under s.79 of the Fair Trading Act 1987 (WA);[11] and
   • damages for negligence.

1. Order 11 rule 16 of the Federal Court Rules relevantly provides that:
   • 16 Embarrassment etc
   • Where a pleading:
     • (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading;
     • (b) has a tendency to cause prejudice, embarrassment or delay in the proceeding; or
     • (c) is otherwise an abuse of the process of the Court,
   • the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out.
2. In Guglielman v Trescowthick the Federal Court said:
   • "Whether a pleading should be struck out depends upon whether, in the particular circumstances, it is necessary to do so in the interests of justice. If the object of pleadings is sufficiently met, the striking out of the pleading will be unnecessary." [12]
3. The modern approach to litigation is to discourage interlocutory applications of the type made here because they are extremely time consuming and costly.[13]
4. A proper pleading must put a respondent on notice of the case to be met and should sufficiently define the issues for decision so that the preparation of the case and hearing can be controlled.[14]
5. The statement of claim must plead the necessary facts for the purpose of formulating a complete cause of action.[15] While it is not permissible to merely state a conclusion drawn from facts not set out in the statement of claim,[16] consideration should be given to whether the conclusionary pleading still achieves the objective of pleadings.[17] A pleading should be allowed to stand if it would be open to the applicant upon the pleadings to prove facts at the trial which would constitute a cause of action.[18]
6. Embarrassment in the context of O.11 r.16 of the Federal Court Rules carries the connotation of a pleading:

1. which is susceptible to various meanings; or 2. which contains inconsistent allegations; or

1. in which alternatives are confusingly intermixed; or

1. in which irrelevant allegations are made tending to increase expense.[19]
2. The Court may protect its processes from abuse by summarily disposing of an action as frivolous or vexatious, but only if it is so obviously untenable that it cannot possibly succeed.[20]
3. The general rules concerning pleadings need to be considered in the context of the FM Act which provides that the objects of the Court are:
   1. to enable the Federal Magistrates Court to operate as informally as possible in the exercise of judicial power; and
   2. to enable the Federal Magistrates Court to use streamlined procedures.[21]
4. The Federal Court dealt with the issue and nature of pleadings required in this Court in Sterling Commerce v Iliff. [22]
5. In Iliff it was alleged that an issue determined by this Court was not raised by the pleadings, evidence or submissions.[23] The Federal Court (on an appeal heard by a single Judge) said as follows:
   • 21. In considering this ground of appeal, "the philosophy of the Federal Magistrates Act and the intention of the Attorney-General at the time of the introduction of the Federal Magistrates Bill" in establishing the Federal Magistrates Court cannot be ignored (per Lander J in Rana v University of South Australia [2004] FCA 559; (2004) 136 FCR 344 at [34]): see also Granada Tavern v Smith [2008] FCA 646; (2008) 173 IR 328 at [106]. As Lander J stated in Rana at [37]:
     • The Federal Magistrates Court has abandoned pleadings in favour of affidavits. In doing so, it has recognised that the Court has been created to offer relatively inexpensive and expeditious justice. It is a court which should proceed without undue formality and should ensure that the proceedings are not protracted: s 42. It has abandoned the formal procedures of superior courts. That course is consistent with the Act and the FMCA Rules.
   • See also O'Neill v Medical Benefits Fund of Australia Ltd [2002] FCAFC 188; (2002) 122 FCR 455 where the Full Court of the Federal Court (Carr, Moore and Marshall JJ) said at [16]:
     • We are prepared to accept that in a case such as the present MBF was entitled to know, as a matter of procedural fairness, that s 51A was relied on either expressly or by clear implication. It is unnecessary to address the question of whether it needed to be pleaded in this case particularly having regard to the comparative informality created by the legislative scheme governing the Federal Magistrates Court including its Rules.
   • 22. What then did the Federal Magistrate do? His Honour made the following finding at [147]:
     • On one view [Sterling Commerce] might be thought to have been likely to have sought a release from any employee with an enforceable entitlement to return to work who had ended up in dispute about that return. Nonetheless, it seems to me that the return to work provisions in the WR Act, involving civil penalties as they clearly do, is more probably than not the reason why the Respondent required a release from Ms Iliff. Even if it was not the only reason, it was clearly part of the reason, and this is enough (s 8 - SDA)
   • 23. Sterling Commerce submitted that the finding of Burchardt FM that Sterling Commerce contravened the SDA in the manner outlined above (see [17]) involved a breach of procedural fairness. It relied on what was said in Kioa v West (1985) 159 CLR 550 (at 588 per Mason J, 628 per Brennan J and 634 per Deane J). It may be doubted that the analogy with an administrative decision maker is wholly apt. It is true that a party to proceedings in the Federal Magistrates Court must be put on notice of the case against it and have an opportunity to respond. That obligation is not of the same kind as the obligation of an administrative decision maker to accord procedural fairness. It is a fundamental principle of justice that a Court must not determine an issue that is not raised by the pleadings, or in the evidence or submissions before it.[24]
6. The Court recently dealt with the approach to be adopted in relation to a strike out application in KSN Engineering where it said:
   • 16. In considering the relevant procedural rules it is appropriate to note that this Court was not originally a court of pleadings. In Rana v University of South Australia the Federal Court observed that:
   • a) the Federal Magistrates Court Rules 2001 (Cth) do not require pleadings;
   • b) parties are not obliged to tender all their evidence when the Application and Response is filed; and
   • c) the Court should be cautious about summarily dismissing a proceeding.
   • 17. In some respects, the role of this Court has changed since the judgment in Rana. The FMC Rules were amended in 2007 to provide that applications might be commenced by the filing of a Statement of Claim or Points of Claim to which a Defence or Points of Defence might be filed in response, and in neither case was there a requirement for the filing of an affidavit. Further, in 2006 this Court obtained significant jurisdiction under the WR Act, concurrent with that of the Federal Court in those matters in relation to which this Court was given jurisdiction. It is fair to observe that, where, as here, claims under the WR Act involve corporate entities or statutory bodies then the matter usually proceeds on pleadings, unless it is of such simplicity that pleadings are simply not necessary.
   • 18. Because the FMC Rules are silent in respect of striking out pleadings the Federal Court Rules (Cth) can apply so far as is necessary, because of the insufficiency of the FMC Rules.
   • 19. Because the parties to this matter have agreed that the matter ought to proceed on the pleadings, it is unnecessary to consider the First and Second Respondents' objections to the application, because an application is not a pleading and an application cannot be struck out, under the FC Rules. However, a pleading which discloses no reasonable cause of action or which has a tendency to cause prejudice, embarrassment or delay, may be struck out at any stage of the proceedings, either in whole or in part.
   • 20. The Court recognises that in determining to strike out all or part of a pleading it must exercise a discretion, and that that discretion is one to be exercised with caution having regard to the objects of the Federal Magistrates Act 1999 (Cth) and FMC Rules, and modern case management techniques.[25]
7. In determining the application, the Court will apply the principles outlined in Iliff and KSN Engineering, modifying the former to have regard to the introduction of pleadings in the FMC Rules.

1. The respondents submit that the interests of justice require that the strike out application be granted as it will:

1. avoid irreparable prejudice to them; 2. avoid prejudice at hearing; and

1. result in a more efficient utilisation of the resources of the parties and the Court because the disputed pleadings, which they say have no reasonable prospects of success, will otherwise prolong the time in hearing preparation and the conduct of the hearing.
2. The respondents claim that the pleadings are deficient in three broad categories, namely:

1. global problems: 1. a complete cause of action has not been pleaded; [26] 2. the pleading of a series of conclusions not supported by pleaded material facts; and 3. questions of causation and loss are not articulated and are insufficient to allow the respondents to determine whether or not the losses are by reason of the alleged wrongful behaviour; 2. various issues within each cause of action which are set out in more detail below; and

1. a number of miscellaneous complaints arising from the pleadings, which are set out in more detail below.
2. The respondents contend that on the above bases the claim should be struck out as frivolous and vexatious.
3. The applicants submit that the FMC Rules provide litigants with three methods of defining the issues: affidavits, points of claim or pleadings.
4. The applicants characterise the respondents' objections into four categories, as follows:

1. submissions for hearing and not pleading points.
2. The applicants submit that the respondents' reliance on Young and Odhams Press is misplaced, as they are decades old English decisions, and that the attitude of courts towards pleadings have changed significantly over the past century. In any event, they submit that whilst all relevant material facts have been pleaded in their Statement of Claim, it is not necessary to plead every material fact to the cause of action.[27]

1. The respondents contend that no facts have been pleaded to establish there has been misleading or deceptive conduct and that a pleading should not leave the respondents to speculate on the circumstances alleged, to give the facts alleged the quality of being misleading and deceptive.[28] The respondents identify the following paragraphs as lacking in sufficient detail to establish any conduct or circumstances which were misleading or deceptive.

1. Paragraph 5 pleads that a meeting was held between the applicants and Mr Caddy, where a brochure and financials were provided to the applicants. The particulars at paragraph 5.2 state that those documents may be inspected at the applicants' solicitors' office.
2. The respondents submit that paragraph 5.2 is embarrassing and should be struck out. The respondents take issue with the assertion that the documents may be inspected at a particular location and say it does not assist the respondents' understanding of the case against them. They say that the plea raises a false issue and will cause additional time and expense to the respondents.
3. The applicants submit that it is standard practice to refer to documents in a pleading. The applicants say that r.14.10 of the FMC Rules provides for parties to access documents referred to in Court documents and affidavits. The documents are common to both parties. The respondents have requested a copy of each document and the applicants have subsequently provided copies to them. The applicants submit that no prejudice has been caused to the respondents.
4. In the Court's view there is no reason to strike out paragraph 5.2. Paragraph 5 simply sets out that two documents ("the Brochure" and "the Financials") were provided at a meeting, and the particulars at paragraph5.2 say where they may be inspected. Pleading the fact of the meeting and the provision of the documents is part of the material factual matrix and sets up the plea in paragraphs 7 and 8 of written representations in the two documents. Read in that necessary context, as a part of the pleading as a whole, there is no basis for striking out paragraph 5.2. And whilst it might be strictly unnecessary to particularise where the two documents may be inspected, it is a common feature of pleadings to do so, and to strike out paragraph 5.2 on that basis would be to adopt an unnecessarily formal approach.[29]

7. By the Brochure, Michel's Patisserie and Mr Caddy...made a written representation regarding the Michel's Franchise opportunity at the Whitfords City Store that: Michel's Patisserie would provide support in all aspects of running your business including administration, finance, coffee making, marketing and customer service; (First Written Representation)

8. By the Financials, Michel's Patisserie and Mr Caddy ... made the following written representations regarding Michel's Patisserie Franchise opportunity at the Whitfords City Store:

8.1 the average top 20% of Michel's Patisserie store were achieving turnover of $924,909 and an operating profit of $187,774...

8.2 expenses included wages of $137,710... and rent of $95,598...

8.3 the average middle 60% of Michel's Patisserie stores:

(a) were achieving turnover of $511,731 and an operating profit of $93,961...

(b) expenses included wages of $70,745... and rent of $55,515...

8.4 the average bottom 20% of Michel's Patisserie stores:

(a) were achieving turnover of $315,317 and operating profit of $51,019...

(b) expenses including wages of $33,592 ... and rent of $42,019...

(a) were achieving turnover of $554,901 and operating profit of $104,093...

(b) expenses including wages of $76,084 ... and rent of $60,810...

8.6 Michel's Patisserie pursues possible locations and investigates their suitability as Michel's Patisserie site;

8.7 a comprehensive training programme is provided for all new owners including theory, practical, coffee making and onsite assistance at opening or takeover stage;

8.8 by necessary implication from the First Written Representation, the representations referred to at paragraphs 8.1 to 8.7 and the Financials as a whole if Mr & Mrs O'Brien acquired a Michel's Franchise they could reasonably expect:

(a) Michel's Patisserie would only allow the Franchise to operate as a Michel's Franchise from a suitable location;

(b) Mr & Mrs O'Brien would derive a wage for working in the Michel's Franchise in addition to the operating profit;

(c) comprehensive training, instruction and ongoing assistance from Michel's Patisserie in relation to all matters pertaining to the successful operation of a Michel's Franchise;

(d) to make an operating profit of approximately $100,000

9. In or about July 2006, at a further meeting between Mr & Mrs O'Brien and Mr Caddy, Mr Caddy represented orally to Mr & Mrs O'Brien:

9.1 the Financials were a reflection of the current trends in Western Australia as no actual sates figures were available for Western Australia;

9.2 Mr & Mrs O'Brien could expect to achieve sales of between $12,000 -$15,000 per week in the Whitfords City Store;

9.3 In order to achieve sales of $12,000-$15,000 per week, Mr & Mrs O'Brien would have to do better than the "average middle 60%, but not as well as the "average top 20"...

9.4 Mr & Mrs O'Brien would receive comprehensive training and ongoing support;

9.5 By necessary implication from the representations referred to at paragraphs 9.1 to 9.4 if Mr & Mrs O'Brien acquired a Michel's Franchise and operated from the Whitfords City Store they could reasonably expect to achieve turnover of approximately $650,000 a year and make a very good operating profit.

1. The respondents submit that the pleas are conclusory and are not supported by any material facts. The respondents point to the fact that the applicants have not pleaded what conduct, or written words, give rise to the representations, nor have they pleaded any conduct or written words which are relied upon for the representations that the average financial information provided could found a representation for any particular store in Western Australia.
2. The applicants contend that the words in the Brochure are, as in the pleading, that it "would provide support in all aspects of running a Michel's Franchise..." and that the representations, conduct or words relied upon in the Financials are pleaded from paragraph 8.1-8.7. The applicants say that the implications from those representations are pleaded at paragraph 8.8 of the Statement of Claim.
3. In the Court's view the material facts are pleaded in the form of specific written representations made in the Brochure (at paragraph 7) and the Financials (at paragraph 8). The written words are themselves the representations relied upon. The implications said to arise are pleaded at paragraph 8.8, and there is nothing in what is pleaded to arise by implication which could not reasonably be said to be an available implication from the written representations pleaded at paragraphs 7 and 8.1-8.7. This part of the pleading is sufficient to raise an arguable cause of action under s.52 of the TP Act, and inform the respondents of this part of the case that has to be met.[30] Whether the pleaded case is made out at hearing is another matter.
4. The respondents submit that paragraphs 7, 8.6, 8.7, 8.8, 9.4[31] and 9.5[32] are vague and embarrassing. They specifically question the effect of the terms used such as "provide support", "suitability", "comprehensive training", "suitable location", "comprehensive training and support" and "a very good operating profit".
5. The respondents further say that paragraph 8.8(c) and (d) are vague and embarrassing as the applicants have failed to plead the facts and matters relied upon which link the pleaded representation to the pleaded expectation.
6. The applicants submit that:

1. they have pleaded material facts not evidence; 2. the effect of the pleadings is that the applicants were misled;

1. the respondents are making a request for further particulars;

1. the terms used were representations as to future matters, and were misleading and deceptive.
2. Save for the phrase "a very good operating profit" which is dealt with below, the words and phrases complained about by the respondents are common English words and phrases to which the Court can attribute a meaning. Whether the evidence makes out that meaning is a matter for any further affidavits which might be filed on behalf of the applicants, to which the respondents will be able to reply by the filing of further affidavits before hearing.
3. Paragraph 8.8(c) is a plea which arguably flows by necessary implication from paragraphs 7 and 8.7, which respectively plead material facts concerning:
   1. the support to be provided in running "all aspects" of the business; and
   2. the provision of a "comprehensive training programme" and "onsite assistance".
4. Likewise, paragraph 8.8(d) is a plea which arguably flows by necessary implication from paragraph 8.5(a), as well as paragraphs 8.1, 8.3(a) and 8.4(a).
5. The claim that paragraphs 7, 8.6, 8.7, 8.8 and 9.4 are vague and embarrassing is not made out.
6. As to the phrase "a very good operating profit" in paragraph 9.5,[33] the Court considers that the words "very good" in that phrase are subjective and not apt to convey a single discernible meaning, or even discrete discernible meanings. The words "very good" should be struck out of paragraph 9.5. The Court considers that there is an implication, as pleaded, of an "operating profit" on the basis of the reasonably expected turnover.

1. Paragraphs 8.8, 9.5 and 11.3[34] plead that the necessary implications from the representations made by the respondents were that the applicants could reasonably expect to achieve a specific turnover and operate at a profit every year.
2. Paragraphs 8.8 and 9.5 have been set out above. Paragraph 11.3 pleads as follows:

11.3 by necessary implication from the representations referred to in paragraphs 11.1 and 11.2 and the Second Written Representations that if Mr & Mrs O'Brien entered into a franchise agreement and sale of business agreement with Michel's Patisserie for the Whitfords City Store they could reasonably expect to average turnover of not less than $36,795 a month and the Whitfords City Store would operate at a profit...

1. The respondents claim that these paragraphs are embarrassing, and that the applicants have failed to identify the material facts and circumstances on which it is alleged that expectations sought to be implied are:
   1. reasonable and equitable, capable of clear expression, so obvious it goes without saying, not contrary to express terms and necessary to give commercial efficacy; and
   2. alternatively, a necessity, insofar as unless such an expectation be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory.
2. The applicants say that the basis of the expectations or implications arise from the express written representations of the Financials, Brochure and Oral Representations, which have been pleaded. The applicants say that the respondents' submissions refer to criteria necessary for the Court to imply terms into a contract,[35] but that these principles do not apply to implications arising from a pleaded claim of misleading or deceptive conduct.
3. With respect to paragraph 8.8, the necessary implication that:
   1. franchises would only be allowed to operate from a "suitable location" (paragraph 8.8(a)) arguably flows by implication from paragraph 8.6 which refers to the respondents':
      1. pursuit of possible locations for; and
      2. investigations as to their suitability as,

1. the applicants would derive a wage for working as well as operating profits (paragraph 8.8(b)) arguably flows from each of paragraphs 8.1-8.5 inclusive and the references therein to wages and operating profits.

1. For reasons already set out above,[36] the pleas set out in paragraphs 8.8(c) and (d) arguably flow from the other paragraphs of the Statement of Claim there referred to.
2. The necessary implication set out in paragraph 9.5, namely that a turnover of $650,000 a year could be achieved, arguably flows from the preceding paragraphs 9.1-9.4,[37] which set out material facts in the form of alleged oral representations relating to sales and turnover figures and the receipt of "comprehensive training and ongoing support".
3. The necessary implication set out in paragraph 11.3, namely that if the applicants entered into a franchise agreement, the Whitfords store could have:
   1. an average turnover of not less than $36,795 a month; and
   2. operate at a profit,

1. paragraphs 11.1 and 11.2[38] which set out further written representations in the form of recorded sales (described as "Turnover Figures") at the Whitfords store for the months of April to June 2006, and what was alleged to be the average turnover per calendar month;

1. the Second Written Representations, which are contained in paragraph 8.

1. Once again, the necessary implication set out arguably flows from the preceding paragraph and the preceding written representations referred to.
2. In respect of each of paragraphs 8.8, 9.5 and 11.3 therefore the necessary implications pleaded arguably flow from other paragraphs of the Statement of Claim and the various representations alleged to have been made by the respondents, save, for reasons set out above,[39] as to the words "very good' in paragraph 9.5.
3. The respondents' contention that tests used to imply terms into contracts at law ought to be used to determine whether or not the necessary implications pleaded arise is misconceived. An action under s.52 of the TP Act is a statutory action, not a common law contract action. Whether a representation is misleading does not depend upon its contractual efficacy. As such, the tests for the implication of terms into a common law contract do not apply to pleadings in a s.52 TP Act action, and need not be met in this case.
4. In the circumstances, the claims with respect to paragraphs 8.8, 9.5 (save as to the words "very good") and 11.3 have not been made out.

1. Paragraph 9 is set out above. Paragraphs 10 and 12[40] of the Statement of Claim read as follows:

10. The Oral Representations were made by Mr Caddy on behalf of Michel's Patisserie.

12. Each of the Oral Representations, the First Written Representation, the Second Written Representations, and the Third Written Representations (together the Representations) were conduct in trade or commerce as that expression is used in the Act and the FTA.

1. The respondents submit that these paragraphs are conclusory and that no material facts are pleaded to give rise to the conclusions arrived at. The applicants in response submit that:

1. paragraphs 9.1 to 9.5 plead the words used by Mr Caddy; 2. Mr Caddy's involvement is pleaded at paragraph 2 as being "on behalf of the Franchisor", the "Franchisor" being pleaded (at paragraph 1.3) to be Michel's Patisserie; and

1. that paragraphs 1, 2, 3 and 4 of the Statement of Claim plead material facts, namely that: 1. Michel's Patisserie was a company duly incorporated, a "trading corporation" as defined in the TP Act,[41] and the "Franchisor" under the franchise agreement;[42] 2. Mr Caddy was an employee and representative of, and agent for, Michel's Patisserie;[43] 3. Michel's Patisserie was the proprietor of a franchise system used in connection with, or related to, the conduct of a retail patisserie business supplied by a central bakery that developed and refined business procedures and systems for the conduct of the business and granted franchises giving a right to conduct a franchise business in a manner and from a location set out in the franchise agreement;[44] 4. Mr and Mrs O'Brien are franchisees.[45]
2. There is nothing that the Court can usefully add to the applicant's submissions on this point, save to say that it agrees with them, and for reasons set out in them, the claim made concerning paragraph 9 has not been made.
3. As to paragraph 10, the material facts as pleaded at paragraphs 1.3 and 2 are sufficient to sustain a plea that the "Oral Representations" were made by Mr Caddy on behalf of Michel's Patisserie. The respondents' claim with respect to paragraph 10 of the Statement of Claim has not therefore been made out.
4. As to paragraph 12, under s.4(1) of the TP Act "trade or commerce" is defined as including "trade or commerce within Australia". The term "trade or commerce" is not a term of art, but a term of common knowledge and wide import, covering intercourse for the purposes of trade, including the sale of commodities.[46] It is difficult to imagine a commercial activity more rooted in civilised human history than baking,[47] albeit, in this case in the form of a retail patisserie.[48] The pleaded conduct of the sale of a business and entry into franchise, being a retail franchise selling baked products in a shopping centre in the Perth suburbs, is "trade or commerce within Australia". It is difficult, in the face of the way in which the case is pleaded, to understand how the respondents came to contend to the contrary.
5. The respondents' claims with respect to paragraph 12 of the Statement of Claim have not therefore been made out.

1. Paragraph 13[49] pleads that the representations made were statements of opinion and statements as to future matters as the expression is used in s.51A of the TP Act and s.9 of the FT Act.
2. The respondents contend that the applicants have failed, at paragraph 13, to plead explicitly the alleged representations with respect to future matters.[50]
3. The applicants say the relevant representations as to future matters have been pleaded. They also submit that the material facts to determine if the pleaded representations are as to future matters have also been pleaded.
4. The "Representations" referred to in paragraph 13 are defined in paragraph 12, which is set out above.[51] Each of the Representations defined in paragraph 12 are expressly pleaded:

1. paragraph 7: the First Written Representation is pleaded as a representation that Michel's Patisserie "would provide support in all aspects of running of your business including administration, finance, coffee making, marketing and customer service"; 2. paragraph 8: the Second Written Representations are pleaded on the basis that "if" a franchise was acquired the applicants "could reasonably expect" certain things including: * operating from a "suitable location"; * deriving a wage in addition to operating profit; * training, instruction and ongoing assistance; and * making an operating profit.

1. paragraph 9: the Oral Representations are pleaded on the basis that "if" a franchise was acquired and operated from the Whitford's City store the applicants "could reasonably expect" to achieve a particular turnover figure and make an operating profit;

1. paragraph 11: the Third Written Representations are pleaded on the basis that "if" a franchise agreement and a sale of business agreement were entered into for the Whitford's City store the applicants "could reasonably expect" a specified average turnover a month and that the store would operate at a profit.
2. The "applicability of s.51A is to be ascertained by a proper characterisation of the representation made in each case."[52] The mere fact that a representation as to profit or turnover generated by a business in a particular period of time "was" a particular sum would not preclude that representation from being a representation, or part of a representation, as to a future matter.[53] The Representations pleaded here assert that the applicants were told that the profit and turn-over "could" be made if the franchise was acquired, and that various kinds of training and operational and administrative support "would" be provided in the running of the franchise business. The representations were therefore, patently, representations as to future matters. The respondents' contentions to the contrary are seemingly based on an extremely narrow and isolationist reading of paragraph 13, and a failure to have regard to the pleading as a whole, and in particular paragraphs 7, 8, 9 and 11 where the Representations, as defined in paragraph 12, are set out.
3. The material facts pleaded support the assertion in paragraph 13.2 that the Representations were as to future matters. The respondents claim with respect to paragraph 13 has not been made out. Paragraph 13 will not be struck out.

14. Implied in the representations referred to at paragraphs 7, 8, 9 and 11 were the further representations that:

14.2 the opinions expressed were based on reasonable grounds;

14.3 the opinions expressed were a product of the exercise of reasonable care and skill.

1. The respondents submit that the material facts on which the implied representations arise have not been pleaded and that the paragraph is embarrassing and should be struck out.
2. The applicants say that the basis of the implied representation is that the respondents as the proprietors of the franchise would only express opinions that were genuinely held, based on reasonable grounds and the product of reasonable care and skill.
3. The Court has already held that sufficient material facts are pleaded to support the Representations pleaded at paragraphs 7, 8, 9 and 11. The question now is whether it is arguable that those same material facts, and the nature of the franchise system operated by Michel's Patisserie as proprietor (and Mr Caddy as an alleged employee or representative of Michel's Patisserie), can give rise to the further implications pleaded in paragraph 14.
4. The purchase of a franchise was seemingly a serious business proposition for both the applicants and respondents. In that context, the production of the written Brochure and the written Financials in the terms set out in paragraphs 7 and 8, in connection with the purchase of a franchise business for a not insubstantial sum of money (allegedly $275,000),[55] might arguably imply that any opinion expressed in them was genuinely held, based on reasonable grounds and the product of the exercise of reasonable care and skill. In the Court's view that implication is certainly arguably open on the basis of, at least, the First Written Representation and the Second Written Representations. There is further support for the implication in the making of the alleged Oral Representations and Third Written Representations, as set out in paragraphs 9 and 11, when considered in conjunction with the First Written Representation and the Second Written Representations, particularly when those representations were alleged to have been made by Mr Caddy on behalf of Michel's Patisserie, in his capacity as a representative or employee of Michel's Patisserie.
5. The respondents claim with respect to paragraph 14 has not been made out. Paragraph 14 will not be struck out.

1. Paragraph 15[56] of the Statement of Claim provides that:

15. The making of the representations was misleading and deceptive conduct or conduct likely to mislead or deceive:

15.1 by Michel's Patisserie - in contravention of section 52 of the Act;

15.2 by Mr Caddy - in contravention of section 10 FTA.

(a) the opinions contained therein were not genuinely held;

(b) the opinions contained therein were not based on reasonable grounds; and

(c) the opinions contained therein were not the product of reasonable care and skill.

15.3 Insofar as the Representations were as to future matters, section 51A of the Act and section 9 of the FTA are relied on.

1. The respondents submit that no material facts are pleaded to support the conclusory statements made by the applicants.
2. The applicants claim the material facts are set out in paragraph 16 of the Statement of Claim as follows:
   1. In support of the averment in paragraph 15, Mr & Mrs O'Brien relies [sic] on the following facts:

16.1 In reliance on the Representations, on 13 November 2006 Mr & Mrs O'Brien entered into:

(a) a sale of business agreement for the Whitfords City Store...; and

(b) a franchise agreement for the franchise of the Whitfords City Store....

16.2 Mr & Mrs O'Brien paid to Michel's Patisserie the sum of $300,027.00 pursuant to the Sale of Business Agreement and Franchise Agreement:

(a) purchase price for the Business - $275,000 (plant, equipment and goodwill);

(d) Michel's Patisserie's legal costs - $1,850.00;

16.3 On 11 November 2006 Mr & Mrs O'Brien commenced trading at the Whitfords City Store.

16.4 In the year ended 30 June 2007 Mr & Mrs O'Brien made a net operating loss.

16.5 In the year ended 30 June 2008 Mr & Mrs O'Brien made a net operating loss. Particulars of Mr & Mrs O'Brien's net operating loss for 2006/07 and 2007/08 financial years will be provided prior to trial.

16.6 Mr & Mrs O'Brien have been unable to consistently achieve sales of $12,000 to $15,000 per week.

16.7 The Whitfords City Store operating expenses (excluding borrowing costs) were significantly higher than that provided for in the Representations:

(a) wages expense for November (from 11th) 2006 to 30 June 2007...was $77,868.49 (25.71% of turnover);

(b) rent expense for the months of November (from 11th) 2006 to 30 June 2007...was $45,497.97 (15.02% of turnover);

(c) wage expense for the financial year ended 30 June 2008 was $138,812.68 (23.76% of turnover);

(d) rent expense for the financial year ended 30 June 2008 was $74,127.23 (12.69% of turnover).

16.8 Mr & Mrs O'Brien operated the Whitfords City Store in accordance with the terms of the Franchise Agreement.

16.9 The Michel's Patisserie failed to provide any, or any adequate, training, marketing or operational support to Mr & Mrs O'Brien.[57]

1. In light of the facts alleged at paragraphs 16.1-16.9, which are expressly said to be in support of the averment at paragraph 15, the respondents' contention that no material facts have been pleaded in support of paragraph 15 must fail. The facts alleged at paragraph 16 are directly relevant to the pleas at paragraph 15, and particularly the pleas that any opinion expressed in the Representations was not genuinely held, based on reasonable grounds or the product of the exercise of reasonable care and skill.
2. The respondents claim with respect to paragraph 15 has not been made out. Paragraph 15 will not be struck out.

1. The respondents submit that the applicants have failed to plead reliance, causation or loss which is required where damages are sought under s.82 of the TP Act.[58] A claim in damages requires a demonstration that there has been an inducement to do something or refrain from doing something, which gives rise to damage, attributed to the conduct complained of.[59] The applicants are required to plead the circumstances which entitle the applicants to damages, namely reliance on representation, damages and causation.[60] The applicants agree with these principles.[61]
2. The respondents identify paragraph 16 as being relevant to the pleadings of reliance, causation and loss. The respondents say that subparagraphs 16.7, 16.8 and 16.9 are conclusory and should be struck out.
3. The applicants submit that the reliance on the representations is not pleaded in paragraph 16, which they say relates to material facts. The applicants say that reliance on the representations is pleaded at paragraph 21 and damages and causation is pleaded at paragraph 22.
4. The applicants contend that further pleadings of operating losses will be provided prior to the trial and taking such a course would not prejudice the respondents. Also the cause of action is intentionally formulated without these particulars because trading losses are not the applicants' only losses, and that the cause of action is made out because other losses are claimed.
5. The applicants argue that it is unnecessary to plead every fact to the cause of action, and that a level of generality is permissible.[62] The applicants submit that the respondents are on notice of the case they must meet. The applicants say further that the relevant documents in relation to paragraph 16 will be discovered in due course and this is an attempt by the respondents to obtain particulars or evidence.
6. In the Court's view reliance, damages and causation are pleaded at paragraphs 21 and 22, and therefore the objection to paragraph 16, which seeks to set out material facts, is misconceived. Further, the Court is of the view, subject to what is said below in relation to paragraphs 21 and 22,[63] that reliance, damages and causation are adequately, or at least sufficiently, pleaded at paragraphs 21 and 22, to put the respondents on notice of the case to be met.
7. The other objections to paragraphs 16.4, 16.5, 16.7, 16.8 and 16.9, and to paragraphs 16.2 and 16.3 of the Calmer Matter pleading are, in the Court's view, objections which seek particulars or evidence, and they cannot therefore be made out. Facts which are merely evidentiary are not material facts, and evidence should not be disclosed in a pleading.[64]
8. The respondents' claim with respect to paragraph 16 has not been made out. Paragraph 16 will not be struck out.

1. Paragraph 17 of the Statement of Claim pleads as follows:

17. The Representations were continuing representations which continued from the date they were made until Mr & Mrs O'Brien made the Franchise Agreement and the Sale of Business Agreement on or about 13 November 2006. Between the making of the Representations and the making of the Franchise Agreement:

17.1 Mr & Mrs O'Brien negotiated with Mr Caddy, on behalf of Michel's Patisserie for the Sale of Business Agreement and the Franchise Agreement;

17.2 neither Michel's Patisserie nor Mr Caddy corrected or modified, in any way, the Representations and thereby further impliedly represented:

(a) the turnover figures referred to in the Second Written Representations, the Oral Representations and the Third Written Representations were reasonable;

(b) the operating profit referred to in the Second Written Representations, the Oral Representations and the Third Written Representations was achievable.

1. The respondents contend that paragraph 17 is conclusory and that the applicants have not pleaded material facts, particularly as to how negotiations prior to entry into a contract give rise to a continuing representation. The respondents also say that paragraph 17.2 of the O'Brien Matter pleading (which is paragraph 17.3 in the Calmer Matter pleading) is a bundled conclusory plea because the applicants have not pleaded the facts and matters that they say the respondents have failed to correct or modify that give rise to the implied representation. Further, the respondents say that the use of the word "achievable" in paragraph 17.2(b) is vague and embarrassing. The respondents also say that paragraph 17.2 of the Calmer Matter pleading is internally inconsistent and thereby vague and embarrassing, and say that the plea that Michel's Patisserie selected the store is inconsistent with it being a newly established store.
2. The applicants submit that paragraph 17 is adequately pleaded. They argue that the continuing nature of the representations arise from the failure to correct or modify the Representations between when they were made and when the Franchise Agreement was entered into. The applicants say further that paragraph 17.2 is not a "bare" pleading, and refers to the failure to correct or modify the Representations, and should be read in the context of paragraphs 18 and 20. Paragraphs 18 and 20 provide as follows:

18. Mr & Mrs O'Brien had a reasonable expectation that if:

18.1 the level of profits and the turnover referred to in the Second Written Representations, the Oral Representations and the Third Written Representation was not reasonably achievable; or

18.2 Mr & Mrs O'Brien were not suited to operate a Michele's Patisserie franchise, alternatively, was not likely to operate a Michel's Patisserie franchise profitably,

then Michel's Patisserie and/or Mr Caddy would disclose such facts to Mr & Mrs O'Brien.

20. The failure by Michel's Patisserie and Mr Caddy to make the correction or modification referred to at paragraph 17 and/ or the disclosure pleaded at paragraph 18 was misleading conduct or conduct likely to mislead or deceive in contravention of section 52 of the Act and section 10 of the FTA.

1. The applicants say that the facts giving rise to the further implied representations in paragraph 17.2 are the failure to correct or modify the Representations.
2. The applicants submit that the use of the word "achievable" is obvious. Paragraph 17.2(b) refers to the operating profit representations made in relation to the Second Written Representations and the Oral Representations, which are defined at paragraphs 8.8 and 9.
3. From the pleading it is clear that it is contended that the continuing representations are said to arise from the time the Representations were made. It is immaterial, and not unusual, that representations are made during negotiations and prior to entry into a relevant contract. The applicants have pleaded the facts and matters that they say the respondents have failed to correct or modify, namely, the Representations (as pleaded at paragraphs 7, 8, 9 and 11), and which they say are the continuing representations, and in paragraph 20 have asserted that this constitutes misleading and deceptive conduct or conduct likely to mislead or deceive.
4. When paragraph 17 is read in conjunction with:
   1. the material facts alleged to give rise to the Representations (the Representations being variously referred to in paragraph 17); and
   2. the plea in paragraph 20 of failure to correct or modify being misleading or deceptive conduct or conduct likely to mislead or deceive,

it has been sufficiently pleaded to make the propositions concerning continuing representations in paragraph 17 clear and arguable.

1. The respondents' arguments concerning the use of the word "achievable" in paragraph 17(2)(b) are an example of the kind of interlocutory argument which ought to be "actively discouraged" in modern litigation,[65] especially, for reasons set out above,[66] in a court such as this Court. The respondents ask: "What is meant by "achievable"?".[67] The word "achievable" is an ordinary English word the meaning of which is readily ascertainable, and when regard is had to the pleading as a whole, and in particular to those of the Representations referred to in paragraph 17.2(b), it is tolerably clear that it means operating profit achievable by the applicants after the completed purchase of the franchise business. The argument that the plea in paragraph 17.2 of the Calmer Matter pleading is inconsistent is not, in the Court's view, an obviously sustainable argument. There is nothing to prevent a newly established store from having been selected by Michel's Patisserie as the site of a store to be run by a Michel's Patisserie franchisee, which fairly clearly appears to be what is pleaded.
2. The respondents' claim with respect to paragraph 17 has not been made out. Paragraph 17 will not be struck out.

1. Paragraphs 18 and 20 are set out above,[68] and paragraph 19 is as follows:

19. In fact the operating profit and level of turnover referred to in the Second Written Representations, the Oral Representations and the Third Written Representations were unlikely to be achieved by Mr & Mrs O'Brien operating the Whitfords City Store;

1. The respondents submit that paragraph 18 is conclusory, vague and embarrassing. The respondents say that paragraph 18 does not outline:

1. the facts and matters as to why there was a reasonable expectation; 2. the meaning of "not suited to operate" and "not likely to operate"; and

1. no material facts have been pleaded to identify why the applicants were not suited to operate or not likely to operate.
2. The respondents say that if a plea of misrepresentation by silence arises in paragraph 18, the material facts which would give rise to such a claim have not been pleaded, and that silence may only constitute misleading and deceptive conduct where there is a duty to reveal relevant facts.[69]
3. The applicants submit that the facts giving rise to the expectations are pleaded, being:
   1. the Representations; and
   2. the failure to correct or modify the Representations or make the relevant disclosures, these being matters pleaded in paragraph 20.
4. The applicants say that the pleading is not that they were not suited or not, inherently at least, likely to operate, but rather that if the respondents considered the applicants were not suited or not likely to operate, this ought to have been disclosed, and failure to do so was misleading and deceptive. They say that suitability is a matter within the respondents' knowledge and that this is, in effect, a request for particulars.
5. The applicants contend that they are only required to plead material facts and not causes of action. The applicants contend that s.52 of the TP Act:
   1. only requires there to be misleading and deceptive conduct, or conduct which is likely to mislead or deceive; and
   2. does not require separate elements, such as misleading and deceptive conduct by silence, to be pleaded.[70]
6. The basis for the reasonable expectation allegedly held by the applicants is not pleaded in paragraph 18. It may be that, as the applicants submit, the facts giving rise to the expectations pleaded are:
   1. the Representations; and
   2. the failure to correct or modify the Representations or make the relevant disclosures, these being matters pleaded in paragraph 20,

but this is not what is pleaded, nor is it sufficiently apparent from what is pleaded, for the Court to be able to say that it is otherwise clear that this is what is meant in paragraph 18. It is not apparent what material facts give rise to the alleged expectation of disclosure.

1. The respondents' claim with respect to paragraph 18 has been made out. Paragraph 18 will therefore be struck out.
2. The respondents say that paragraph 19 is conclusory and unsupported by material facts. The applicants say that paragraph 19 is supported by the plea at paragraph 16 relating to turnover and levels of profitability, and that the respondents are effectively seeking particulars.
3. It may be, as the applicants submit, that the material facts supporting the pleading in paragraph 19 are the matters pleaded in paragraph 16, but this is not what is pleaded, nor is it sufficiently apparent from what is pleaded, for the Court to be able to say that it is otherwise clear that this is what is meant in paragraph 19. It is not sufficiently apparent what material facts give rise to the allegation that the levels of turnover and operating profit were unlikely to be achieved. Paragraph 19 amounts to a submission not a pleading.
4. The respondents' claim with respect to paragraph 19 has been made out. Paragraph 19 will therefore be struck out.
5. Consistent with their earlier submissions the respondents argued that paragraph 20 was unsupported by the earlier pleas, and the applicants argued that it was supported by the earlier pleas. Having regard to the Court's findings concerning paragraphs 17, 18 and 19, it follows that the words "and/or the disclosure pleaded at paragraph 18" should be struck out of paragraph 20.[71]

21. In reliance on the Representations and/or the failure to make the correction or modification pleaded at paragraph 17 and/ or the disclosure pleaded at paragraph 18, Mr & Mrs O'Brien:

21.2 paid to Michel's Patisserie the following sums on or about the following dates:

(a) 11 November 2006 $275,000.00 (Purchase price of the Whitfords City Store comprising plant and equipment and goodwill)

(b) 11 November 2006 $12,000.00 initial training fee

(c) 11 November 2006 $1,850.00 (Michel's Patisserie's legal costs)

(d) 11 November 2006 $1,250 (Michel's Patisserie's legal costs)

(e) 24 June 2007 $9,927.00 (Stamp duty and penalties).

22. By reason of the misleading and deceptive conduct pleaded at paragraph 15, and conduct pleaded at paragraph 16, Mr & Mrs O'Brien has suffered loss and damage.

1. The respondents submit that paragraph 21 is conclusory and embarrassing and ask on the basis of what facts and matters it is alleged that the applicants relied on the Representations. The respondents also say the use of the word "made" in paragraph 21.1 is vague and query whether it is alleged that the relevant agreement was "entered into" or whether some other allegation is made.[72]
2. The applicants say that paragraph 21 is properly pleaded and that the facts and matters upon which the applicants rely are set out, namely the Representations, the failure to correct or modify pleaded at paragraph 17 and the failure to disclose at paragraph 18. For the avoidance of doubt the applicants submit that "made" means "entered into".[73]
3. Little need be said concerning paragraph 21. It is a relatively standard TP Act reliance plea,[74] and is properly pleaded, save that the words "and/or the disclosure pleaded at paragraph 18" should be struck out for reasons set out above.[75] As to the use of "made" in paragraph 21.1, it may not be elegant but it is obvious, both in its immediate context and reading the pleading as a whole that it means "entered into". The Court repeats its observations, set out above,[76] concerning arguments that ought to be actively discouraged in modern litigation.
4. The respondents' claim with respect to paragraph 21 has not been made out, save that the words "and/or the disclosure pleaded at paragraph 18" should be struck out, and but for those words paragraph 21 will not otherwise be struck out.[77]
5. The respondents argue that paragraph 22 it is not supported by any claim that the loss was "by reason of" the "alleged representation", and that in support of the plea material facts "from entry into the contract to the incurrence of loss" must be pleaded. The respondents further contend that there is therefore no basis for finding that the loss was "by reason of" any representation.
6. The applicants say that the loss claimed is clearly identified by reference to the conduct pleaded in paragraphs 15 and 16 (which have not been struck out). In the Court's view, the plea is a relatively standard TP Act plea,[78] and is properly pleaded,
7. The respondents' claim with respect to paragraph 22 has not been made out. Paragraph 22 will not be struck out.

1. Paragraphs 23 and 24 relevantly plead as follows:

23. Further, or in the alternative, the provisions of:

23.3 was conduct in trade or commerce as that expression is used in the Act and the FTA;

23.4 contained information that was not set out in accordance with Regulation 7/ Annexure 1 of the Trade Practices (Industry Codes - Franchising) Regulations (Code);

23.5 was earnings information for the purposes of clause 19 of Annexure 1 of the Code (Earnings Information);

23.6 contained Earnings Information that was not based on reasonable grounds;

23.7 contained Earnings Information that did not permit analysis of the historical or future financial performance of the Whitfords City Store;

23.8 contained Earnings Information that did not provide:

(a) the facts and assumptions on which the Financials or the Turnover Figures were based;

(b) the extent of the inquiries and research undertaken by Michel's Patisserie and any other compiler of the Financials or the Turnover Figures;

(c) an explanation of the choice of the period covered by the Financials or the Turnover Figures;

(d) whether the Financials or the Turnover Figures included depreciation;

24. In the premises pleaded at paragraph 23 Michel's Patisserie:

24.2 caused Mr & Mrs J O'Brien to suffer loss and damage.

1. The respondents say that this claim is misconceived because the pleaded document is not, nor does it purport to be, a disclosure statement within the meaning of the Franchise Code. The respondents say that an actual disclosure statement was given to the applicants, and any claim under this heading should be made in relation to that document. The respondents say that the claim is an abuse of process and should for that reason be struck out.[79]
2. The applicants do not dispute that they were given a disclosure statement by the respondents. The applicants submit that the paragraphs are not misconceived and if the respondents believe the Financials and Turnover Figures were not Earnings Information, then that is a matter to be proven at hearing.
3. The existence of a disclosure statement already provided by the respondents does not preclude the Financials and Turnover Figures from being Earnings Information, and the factual question as to whether the Financials and Turnover Figures are Earnings Information is obviously arguable. The:
   1. factual question as to whether the Financials and Turnover Figures are Earnings Information; and
   2. issue of whether there is any contravention arising from any proven facts,

are matters for hearing. The plea cannot therefore constitute an abuse of process as claimed by the respondents.

1. The respondents' claim with respect to paragraphs 23 and 24 has not been made out. Paragraphs 23 and 24 will not be struck out.

1. Paragraphs 25-28 set out the applicants' negligence claim. The paragraphs plead that:

25. Further, or in the alternative, the Respondents and each of them knew that:

25.1 If Mr & Mrs O'Brien decided to enter into a sale of business agreement and a franchise agreement of the type referred to at paragraph 16 and the franchise business was not successful, Mr & Mrs O'Brien would suffer economic loss.

25.2 Mr & Mrs O'Brien would rely on representations made to it by, or on behalf of, the Respondents (and in particular the Representations) in making the decision whether to enter into the Franchise Agreement and the Sale of Business Agreement.

26. In the premises each of the Respondents owed to Mr & Mrs O'Brien a duty not to cause them avoidable economic loss.

27. Each of the representations were made negligently: paragraphs 14 and 15 are repeated.

28. By reason of the Respondent's negligence, Mr & Mrs O'Brien have suffered loss and damage.

1. The respondents submit that these paragraphs are frivolous and vexatious as they disclose no cause of action. The respondents submit that the pleadings do not identify any facts to support the finding of a relationship of sufficient proximity between the applicants and the respondents as to find that the respondents assumed a responsibility to supply information.[80] The respondents say it is unclear what duty the respondents allegedly owed to the applicants; or, whether it is a duty:
   1. to take reasonable steps to ensure that the applicants' businesses will be a success, which the respondents say should not be recognised;[81] or
   2. of a fiduciary nature, and if so the respondents submit that the cause of action is incomplete in that it fails to plead whether the applicants were vulnerable to risk of loss or under a special disability.
2. If the claim is for pure economic loss, then the respondents say there is no plea of a duty to provide advice, nor that the respondents knew, or ought to have known, that the applicants would enter the transaction in reliance on the information or advice without further inquiry and that the applicants, did in fact, rely upon the information or advice. [82]
3. The applicants submit that a franchisor making negligent representations to franchisees is a recognised cause of action. The applicants claim that the duty owed is not a fiduciary duty, but a duty not to cause the applicants avoidable economic loss by making the misleading and deceptive representations which the applicants would rely upon. The applicants cited Williams & Anor v Natural Life Foods & Anor.[83] That case, on appeal before the House of Lords, related to whether the managing director of the respondent company was personally liable to the franchisees on the basis that he had assumed personal responsibility for advice given to the franchisees. The House of Lords held that:

...a director of a contracting company may only be held liable where it is established by evidence that he assumed personal liability and that there was the necessary reliance.[84]

1. In so holding, the House of Lords upheld the majority view on this point in the Court of Appeal.[85] The House of Lords allowed the appeal however because it said there was insufficient evidence of assumption of personal responsibility by the managing director.[86] At first instance, in the Queen's Bench Division, the first issue which arose for resolution was whether the defendant company, the franchisor, owed a duty to the putative franchisees by reason of the making of negligent misstatements or for the giving of negligent advice. At first instance, the court said it had:

...no doubt that the defendant company was in a relationship in which its advice on the financial viability of the proposed franchise was a vital part of the service it offered and that it knew and intended that that advice would be relied on by the plaintiffs, as I find it in fact was.[87]

1. The facts in Natural Life Foods are sufficiently similar to those in the O'Brien Matter for the Court to find that a similar duty is applicable in this case, and the respondents contention that there is no duty, or no proximate relationship giving rise to a duty, cannot be sustained. This finding does not however dispose of the matter, because in order to establish the cause of action there must be reliance by the applicants, otherwise the negligence has no causative effect.[88] And it is at this point that the applicants run into difficulty. Having pleaded in paragraph 25.2 that the respondents knew that the applicants "would rely" on the representations, the applicants then plead:
   1. in paragraph 27, negligence relying on a repetition of paragraphs 14 and 15; and
   2. in paragraph 28, loss and damage by reason of the alleged negligence, and repeat the particulars of paragraphs 16.2, 16.4 and 16.5.
2. The applicants do not go on to expressly plead that the applicants did rely on the Representations. It might be argued that the repetition of paragraph 15 imports the reliance on the Representations as pleaded in paragraph 16.1, given that paragraph 16 sets out certain alleged facts in support of the averment in paragraph 15, that averment being that the Representations were misleading and deceptive conduct or conduct likely to mislead or deceive. A number of things tell against that argument. First, paragraph 15 is repeated in relation to a plea that "[e]ach of the Representations were made negligently", not that the Representations were relied upon by the applicants. Second, paragraph 15 is an averment in relation to the making of the representations, not reliance on them. Thirdly, the drafter of the pleading has expressly referred, in the negligence pleading, to specific parts of paragraph 16, but not to paragraph 16.1 which pleads reliance on the Representations in entering into the Sale of Business Agreement and the Franchise Agreement. Either advertently or inadvertently the reliance plea has not been made expressly, or adverted to in such as way as to enable the Court to say that it ought to be, or is, implied in the pleading. An essential element of the cause of action is therefore not pleaded, and the cause of action in negligence cannot be sustained.
3. The respondents' claim with respect to paragraphs 25-28 (inclusive) has been made out. Paragraphs 25-28 (inclusive) will therefore be struck out.

1. Paragraphs 29-33 set out the applicants' contract claim. Paragraph 29 pleads certain alleged express terms. Paragraphs 30-33 plead that:

30. There was an implied term of the Franchise Agreement that Michel's Patisserie would act in good faith and in the interests of Mr & Mrs O'Brien. The term was implied as a matter of law.

31. In breach of the express and implied terms referred to at paragraphs 29 and 30 Michel's Patisserie:

31.1 did not provide to Mr & Mrs O'Brien any, or any adequate training, sales, marketing or business development support in connection with Mr & Mrs O'Brien's operation of the Whitfords City Store; and

31.2 in the premises pleaded at paragraphs 29, 30 and 31.1 Michel's Patisserie did not act in good faith.

32. In further support of the averment made at paragraph 31, paragraphs 14 and 15 are repeated.

33. By its conduct (paragraph 31 is repeated) Michel's Patisserie repudiated the Franchise Agreement. By letter dated 5 September 2008 Mr & Mrs O'Brien accepted Michel's Patisserie's repudiation and terminated the Franchise Agreement.

1. The respondents seek to strike out paragraphs 30-33 on the following bases:

1. that paragraph 30 is embarrassing in that: * there is no settled law in relation to the implication of a term as to good faith in a contract between a franchisor and franchisee;[89] * the applicants have failed to identify that the facts and circumstances sought to be implied are reasonable and equitable, capable of clear expression, so obvious it goes without saying, not contrary to an express term and necessary to give the contract commercial efficacy; and * alternatively, the applicants have not pleaded the material facts relied upon to establish that the term sought to be implied is a necessity, insofar as unless such a term is to be implied the enjoyment of the rights conferred by the contract would be rendered nugatory; 2. that paragraph 31 is vague and embarrassing because: * paragraph 31.1 is a bundled plea in which no material facts have been pleaded in support; and * in paragraph 31.2 no duty of "good faith" is sustainable and the pleaded conclusion is unsupported by material facts;

1. paragraph 32 is conclusory and unsupported by material facts; and

1. paragraph 33 is a causation plea, however no facts or matters pleaded would enable the Court to find that a breach of contract lead to a chain of events (which are not pleaded) that gave rise to losses (also not pleaded).
2. The applicants contend that the respondents' complaint is misconceived because:

1. the respondents' criterion relates to a term of good faith implied as a matter of fact, whereas the applicants allege that the implied term is implied as a matter of law;[90] 2. in relation to paragraph 31.1 the respondents are requesting particulars or evidence, and that the respondents have failed to appreciate the distinction between terms implied as a matter of fact and terms implied at law in paragraph 31.2; and

1. it is trite law that an implied term of good faith is available in contract between a franchisor and franchisee,[91] and in a franchise agreement is implied as a matter of law not fact. The applicants say they will invite the Court to infer that the representations pleaded at paragraphs 14 and 15 are the same representations which constitute a breach of an implied term of good faith, but in any event, this is a submission for trial and not a pleading point.

Can a duty of good faith be implied into a contract?

1. Australian courts have recognised a duty of good faith implied in many contracts,[92] but it has not been unequivocally recognised as a mandatory obligation in all contracts.[93]
2. Leading text writers have observed that the preponderance of authority favours implication in contracts of a duty of good faith either on a generic basis, or by the criteria of ad hoc implication of specific terms,[94] but qualify that by saying that despite Australian courts reluctance "to treat good faith as a term implied in all contracts, it can scarcely be understood in any other way."[95] Certainly in Burger King the New South Wales Court of Appeal observed that:

There appears to be increasing acceptance ... that if terms of good faith are to be implied, they are to be implied as a matter of law.[96]

1. For a term to be implied at law in a new category of case, it must be both reasonable and necessary.[97] In Renard Constructions it was said that necessity should not be used in the absolute sense, because it was not that the terms are so imperative that the contract would not work without the implied term:
   • ...but because the Court decided it would be better or more appropriate or more reasonable in accordance with the contemporary thinking of the judges and parties concerned with such contracts that the term should be implied than that it should not.[98]

1. Burger King involved an appeal from an award of damages in relation to alleged wrongful termination by Burger King of an agreement granting Hungry Jack's a non-exclusive right to develop and to be franchised to operate, Burger King restaurants in Australia.[99]
2. Under a development agreement, Hungry Jack's was required to develop at least four restaurants a year either by itself or through a third party. Each restaurant was to come under an individual franchise agreement and was required to comply with a number of preliminary issues. Burger King imposed a freeze on Hungry Jack's recruitment of third party franchisees, and withdrew financial and operational approval for the opening of new Burger King restaurants, which affected Hungry Jacks' ability to comply with the development agreement. After a number of franchise agreements expired, Burger King did not offer new agreements in accordance with the original agreement.
3. Burger King served notices of termination of the development agreement, based on Hungry Jacks' breach in failing to develop the required number of stores, and on the basis that Hungry Jack's continued to operate stores despite the expiry of franchise agreements.
4. Hungry Jack's claimed that there was an implied term in the development agreement that Burger King would do all that was reasonably necessary to enable Hungry Jacks to enjoy the benefits of the agreement.[100]
5. The New South Wales Court of Appeal held that in a commercial contract there will ordinarily be implied, as a matter of law, as an incident of such a contract, a term of good faith, especially in a standard form contract containing a general power of termination.[101]
6. In Garry Rogers Motors (decided two years before Burger King) the Federal Court said that:

Recent cases make it clear that in appropriate contracts, perhaps even in all commercial contracts, such a term will ordinarily be implied; not as an ad hoc term (based on a presumed intention of the parties) but as a legal incident of the relationship ...[102]

1. In Far Horizons McDonalds had an expansion policy which allowed for licensed franchisees to be eligible to be granted further licences if certain criteria were satisfied. Far Horizons claimed that its agreement with McDonalds had implied into it a term that McDonalds was under a duty to act fairly and in good faith towards Far Horizons.[103]
2. In Far Horizons (decided a year before Burger King) the Victorian Supreme Court said it would not depart from the authorities following Renard Constructions, and therefore it proceeded:

... on the basis that there is to be implied in a franchise agreement a term of good faith and fair dealing which obliges each party to exercise the powers conferred upon it by the agreement in good faith and reasonably, and not capriciously or for some extraneous purpose. Such a term is a legal incident of such a contract.[104]

1. In the circumstances it is clearly arguable that a duty of good faith can be implied as a matter of law into a commercial franchising contract, and contracts associated with a commercial franchising contract. Furthermore, it is arguable that the implication of a term of good faith may not depend upon traditional tests for the implication of a term into a contract, and in particular whether the term is reasonable or necessary in the strict sense.[105] In circumstances where a matter is arguable, but the law is not settled, a motion to strike out ought not to be used as a vehicle to stultify the possible development, or further development, of the law.
2. Paragraph 30, and likewise paragraph 31.2, is therefore sustainable on the basis that a duty of good faith can be implied as a matter of law into a commercial franchising contract, and contracts associated with a commercial franchising contract.
3. Ought paragraph 30 be struck out because particulars of reasonableness and necessity have not been provided? In the Court's view it would be unnecessary to do so in this case because the implication of a term of good faith in relation to a franchise contract as a matter of law is not being considered for the first time.[106] If, after further consideration, the respondents still consider that particulars of the alleged implied term are necessary, an application for particulars could be made in the usual way.[107]

Consideration - remainder of breach of contract claims

1. Paragraph 31.1 sufficiently sets out the breaches of terms alleged, and sufficient material facts are otherwise set out in the Statement of Claim (see, for example, paragraphs 29 and 32, and paragraphs 14 and 15 - which are repeated for the purposes of paragraph 32 - and the Representations referred to in paragraphs 14 and 15), for what is alleged:
   1. to be properly understood; and
   2. to, for present purposes, allow the parties to prepare for the next phase of the matter, and for the Court to control the conduct of the matter.[108]
2. Paragraph 32 refers to other paragraphs - which are repeated - of the Statement of Claim, which are then said to be relied on for the purposes of paragraph 31.
3. Paragraph 33 is a basic but understandable plea that the Franchise Agreement has been repudiated, which includes reference to material facts, being the letter by which the repudiation was said to be accepted and the Franchise Agreement terminated.
4. Paragraphs 31.1, 32 and 33 would not ordinarily be struck out. However, a fundamental problem besets the applicants in that there are no particulars of damage claimed for the alleged breach of contract in the O'Brien Matter pleading. In the complete absence of particulars of the claim for damages for breach of contract the breach of contract claim in the O'Brien Matter must be struck out. Therefore paragraphs 29 to 33 (inclusive) of the O'Brien Matter pleading will be struck out.
5. The same problem does not beset the Calmer Matter pleading where the contractual damage and particulars are pleaded at paragraph 34. The pleading is a little awkward, because of the use of "loss and damage" rather than just "damage", and because the particulars of damage repeat themselves by reference to paragraphs 16.4 and 21. Adopting an informal approach,[109] it is both appropriate and a matter of commonsense, to view the repeated particulars of damage as being a single set of particulars of damage. Taking that view, paragraph 34 is sufficiently identifiable as a claim for damages in contract, with appropriate supporting particulars.
6. It follows that the respondents have mot made out their claims concerning paragraphs 29-34 (inclusive) of the Calmer Matter pleading, and therefore those paragraphs will not be struck out.

Calmer Matter - second applicant's misleading and deceptive conduct claim

1. The respondents argue that paragraph 35 of the Calmer Matter pleading is not supported by pleaded material facts and amounts to 'double dipping"[110] in relation to loss and damage because the second applicant, Ms Merritt, cannot claim loss of profit and loss of salary. In the Court's view, the material facts are sufficiently pleaded: the giving up of employment and the non-receipt of salary whilst operating the Park Centre Store. The claimed "double dipping" is misconceived as there is no claim by Ms Merritt for loss of profit.
2. The respondents have mot made out their claims concerning paragraph 35 of the Calmer Matter pleading, and that those paragraph will not be struck out.

1. The respondents argue that the relief claimed by way of an order under s.87 of the TP Act is at large and ought to be struck out. The complaint belies the very nature of s.87 as a "remedial smorgasbord"[111] in relation to which the Court itself has extensive discretion as to what order or orders it may make. There will no doubt come a time when the applicants will necessarily have to indicate to the respondents, and the Court, what specific orders they seek under s.87 of the TP Act, but it is unnecessary for them to do so at this early stage. The respondents' claim with respect to this part of the prayer for relief has not been made out. This part of the prayer for relief will not be struck out.

Whether the applicants should have leave to re-plead

1. The findings made by the Court require that parts of the Statement of Claim be struck out, and proposes that orders be made accordingly. This is the first occasion on which these pleadings have been subject to scrutiny by the Court. The applicants ought to therefore have an opportunity to amend the Statement of Claim.

1. Having regard to the findings set out above the Court proposes that the orders set out below be made.
2. In the O'Brien Matter (PEG 144 of 2008) orders that:

1. the words "very good" be struck out of paragraph 9.5; 2. paragraphs 18 and 19 be struck out;

1. the words "and/or the disclosure pleaded at paragraph 18" be struck out of paragraphs 20 and 21;

1. paragraphs 25-28 (inclusive) be struck out; and 2. an Amended Statement of Claim be filed on or before 5 February 2009.
2. In the Calmer Matter (PEG 146 of 2008) orders that:

1. the words "very good" be struck out of paragraph 9.7(c); 2. paragraphs 18 and 19 be struck out;

1. the words "and/or to make the disclosure pleaded at paragraph 18" be struck out of paragraph 20;

1. the words "and/or the failure to make the disclosure as pleaded at paragraph 18" be struck out of paragraph 21; 2. paragraphs 25-28 (inclusive) be struck out; and 3. an Amended Statement of Claim be filed on or before 5 February 2009.
2. Costs in respect of both matters will be reserved, and absent agreement between the parties, can be argued at the next directions hearing.[112]
3. The parties will be ordered to confer as to appropriate directions for the future programming of both matters, and both matters will be adjourned to 12 noon on 12 February 2010 for further directions.

I certify that the preceding one-hundred and fifty-eight (158) paragraphs are a true copy of the reasons for judgment of Lucev FM

[2] Respectively, "Michel's Patisserie" and "Mr Caddy" (collectively "the respondents").

[4] In the absence of express provisions in the Federal Magistrates Court Rules 2001 (Cth) ("FMC Rules") allowing for an application to strike out the contents of a statement of claim, the O'Brien Application and the Calmer Application have been made under O.11 r.16 of the Federal Court Rules ("FC Rules"), as provided for by s.43(2)(b) of the Federal Magistrates Act 1999 (Cth) ("FM Act") and r.1.05(2) of the FMC Rules.

[5] Ultimately the respondents did not make submissions with respect to all of the paragraphs the subject of the applications, and the Reasons for Judgment therefore only deal with those paragraphs on which submissions were made.

[9] In the O'Brien Matter the applicants are Alan and Joanne O'Brien ("Mr and Mrs O'Brien") and in the Calmer Matter the applicants are Calmer Pty Ltd as Trustees for the Mercal Family Trust ("Calmer Pty Ltd") and Vicki Merritt ("Ms Merritt") and Glenn Alexander Caldwell ("Mr Caldwell") (collectively, "the applicants").

[12] [2004] FCA 326 at para.8 per Mansfield J.

[13]Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161; (2006) 33 WAR 1 at 2; [2006] WASC 161 at para.2 per Martin CJ ("Youlden Enterprises").

[14] State of Queensland v Pioneer Concrete (Qld) Pty Ltd [1999] FCA 499; (1999) ATPR 41-691 at 42,827 per Drummond J; [1999] FCA 499 at para.12 per Drummond J ("Pioneer Concrete"); Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 at 664 per Murphy, Wilson, Brennan, Deane and Dawson JJ; Buckingham v KSN Engineering Pty Ltd [2008] FMCA 546; (2008) 177 IR 427 at 433 per Lucev FM; [2008] FMCA 546 at para.21 per Lucev FM ("KSN Engineering").

[15] Bruce v Odhams Press Ltd [1936] 1 KB 697 at 712-713 per Scott LJ ("Odhams Press").

[16] Davids Holdings Pty Ltd v Coles Myer Limited & Ors (1993) ATPR 41-227 at 41,148 per Spender J.

[17] Pioneer Concrete ATPR at 42,829 per Drummond J; FCA at para.20 per Drummond J.

[18] Mutual Life & Citizens' Assurance Co Ltd v Evatt [1970] UKPCHCA 2; (1970) 122 CLR 628 at 631 per Lords Hodson, Guest and Diplock; Pancontinental Mining Ltd v Posgold Investments Pty Ltd [1994] FCA 983; (1994) 121 ALR 405 at 414 per Beaumont J.

[19] Bartlett v Swan Television & Radio Broadcasters Pty Ltd [1995] FCA 1429; (1995) ATPR 41-434; Shelton v National Roads and Motorists Association Ltd [2004] FCA 1393; (2004) 51 ACSR 278 at 283-284 per Tamberlin J; [2004] FCA 1393 at para.18 per Tamberlin J.

[20] Burton v Shire of Bairnsdale [1908] HCA 57; (1908) 7 CLR 76 at 92 per O'Connor J.

[22] (2008) 173 IR 378; [2008] FCA 702 ("Iliff").

[23] Iliff IR at 387 per Gordon J; FCA at paras.18-19 per Gordon J.

[24] Iliff IR at 387-388 per Gordon J; FCA at paras.21-23 per Gordon J.

[25] IR at 432-433 per Lucev FM; FMCA at paras.16-20 per Lucev FM (footnotes omitted).

[26] Odhams Press at 705 per Greer LJ ("casue of action must be alleged with particularity").

[27] Pioneer Concrete at 42,829 per Drummond J.

[28] Harris v Cigna Insurance Australia Ltd (1995) ATPR 41-445 at 41,009 per Kiefel J.

[29] See Iliff and KSN Engineering above at paras.16 and 17 respectively.

[30] Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 at 84 per Martin CJ; [2006] WASC 281 at para.7 per Martin CJ ("Barclay Mowlem").

[31] Paragraph 9.6 in the Calmer Pleading.

[32] Paragraph 9.7 in the Calmer Pleading.

[33] At paragraph 9.7(c) in the Calmer Pleading.

[34] Paragraph 11.3 has no equivalent in the Calmer Pleading.

[35] Codelpha Construction Pty Ltd v State Rail Authority NSW [1982] HCA 24; (1982) 149 CLR 337; Byrne & Anor v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410 at 422-423 per Brennan CJ, Dawson and Toohey JJ; and 441-453 per McHugh and Gummow JJ ("Byrne").

[37] Paragraphs 9.1-9.4 of the Statement of Claim are set out at para.30 above.

[38] Paragraphs 11.1 and 11.2 have no equivalent in the Calmer Pleading.

[40] Paragraph 11 in the Calmer Pleading.

[46] Welton v Missouri [1875] USSC 187; 91 US 275 (1875) at 280 per Field J; W & A McArthur Ltd v Queensland [1920] HCA 77; (1920) 28 CLR 530 at 545-550 per Knox CJ, Isaacs and Starke JJ; Re Ku-ring-gai Co-operative Building Society (No.12) Ltd [1978] FCA 50; (1978) 36 FLR 134 at 167 per Deane J (with whom Brennan J agreed: at 146).

[47] The Egyptians were the first known bakers of a modern style yeast bread in about 2600BC, and they invented the baking stove with the oven on top and firebox below: G Blainey, A Short History of the World (Camberwell: Penguin, 2001), page 84 ("Blainey"). "In Europe the bakehouse in the village street was in effect a simple supermarket with two kinds of bread for sale... Their bread being central to daily existence, bakers were often controlled by special laws, and could be hanged for selling underweight bread. The price of bread was often the barometer of social stability": Blainey, page 411.

[48] A "patisserie" is traditionally a French bakery specializing in the production of pastries and sweets. In France the title is legally controlled and may only be used by bakeries that employ a licensed master pastry chef. See en.wikipedia.org/wiki/P%C3%A2tisserie.

[49] Paragraph 12 in the Calmer Pleading.

[50] Liberty USA Pty Ltd v Telstra Corp Ltd (Unreported, Federal Court of Australia, VG 166 of 1994, 24 August 1994), at page 7 per Branson J).

[52] Miba Pty Ltd & Ors v Nescor Industries Group Pty Ltd & Anor (1996) 141 ALR 525 at 536 per Merkel J.

[53] Ting v Blanche [1993] FCA 524; (1993) 118 ALR 543 (a statement by agent about rental income likely to be achieved if property leased a statement both as to agent's present state of mind (not within s.51A) and a representation as to a future matter (within s.51A)); Cummings v Lewis (1993) ATPR 46-103 (financial projections made by an accounting firm representations as to a future matter); Jacques v Cut Price Deli Pty Ltd (1993) ATPR 46-102 ("Cut Price Deli") (representation as to gross profit could be a representation as to future matter whereas a statement of gross profit is a representation as to a present state of mind and not a future matter).

[54] Paragraph 13 in the Calmer Pleading.

[55] Statement of Claim, para.16(2)(a).

[56] Paragraph 14 in the Calmer Pleading.

[57] Paragraphs 16.2-16.3 have their equivalents in paragraphs 16.4-16.5 of the Calmer Pleading, and paragraphs 16.4-16.9 have their equivalents in paragraphs 16.6-16.11 of the Calmer Pleading.

[58] Scott v Beneficial Finance Corp Ltd [1993] FCA 633 ("Scott").

[59] Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950 at 50,378 per Lockhart J; March v Stramare [1991] HCA 12; (1991) 171 CLR 506.

[61] Applicants Submissions in O'Brien Matter, para.35 ("Applicants Submissions").

[62] Pioneer Concrete ATPR at 42,829 per Drummond J; FCA at para.20 per Drummond J.

[65] Youlden Enterprises WAR at 2 per Martin CJ; WASC at para.2 per Martin CJ. See also Barclay Mowlem WAR at 84 per Martin CJ; WASC at para.12 per Martin CJ.

[67] Repondents' Submissions in O'Brien Matter, para.31(c) ("Respondents' Submissions").

[69] Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) [1988] FCA 40; (1988) 39 FCR 546.

[70] Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at 577-578 per Gaudron, McHugh, Gummow and Hayne JJ quoting Barwick CJ in Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 473.

[71] A slightly different form of words, but to the same effect, is used in the Calmer Matter Statement of Claim. The difference is reflected in the orders to be made by the Court.

[72] Respondents' Submissions, para.37.

[74] See N Moshinsky QC "Pleadings" in KE Lindgren & CM Branson, Federal Civil Litigation Precedents (Butterworths: Sydney, 1998) at 24,508, para.12.

[77] A slightly different form of words, but to the same effect, is used in the Calmer Matter Statement of Claim. The difference is reflected in the orders to be made by the Court.

[78] See N Moshinsky QC "Pleadings" in KE Lindgren & CM Branson, Federal Civil Litigation Precedents (Butterworths: Sydney, 1998) at 24,509, paras.15 and 16.

[79] Howden v Truth & Sportsman Ltd [1937] HCA 74; (1937) 58 CLR 416 ("Howden"); McKechnie v Campbell (1996) 17 WAR 62 at 75 per Owen J.

[80] Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4; [1964] AC 465; Hawkins v Clayton (1988) 164 CLR 539 at 576 per Deane J.

[81] Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254; [2000] HCA 61.

[82] Bryan v Maloney (1995) 182 CLR 609; Pyrenees Shire Council v Day (1998) 192 CLR 330; [1998] HCA 3.

[83] [1998] UKHL 17; [1998] 2 All ER 577 ("Natural Life Foods (HL)").

[84] Natural Life Foods (HL) at 584 per Lord Steyn.

[85] Williams & Anor v Natural Life Foods & Anor [1997] 1 BCLC 131 ("Natural Life Foods (CA)").

[86] Natural Life Foods (HL) at 584-585 per Lord Steyn.

[87] Williams & Anor v Natural Life Foods & Anor [1996] 1 BCLC 288 at 296 per Langley J ("Natural Life Foods").

[88] Natural Life Foods (HL) at 581 per Lord Steyn, citing Henderson & Ors v Merrett Syndicates Ltd & Ors [1994] UKHL 5; [1995] 2 AC 145 at 180 per Lord Goff of Chieveley.

[89] Citing Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228 ("Esso Australia").

[90] Citing Burger King Corporation v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558; [2001] NSWCA 187 ("Burger King").

[92] Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, especially at 268 per Priestley JA ("Renard Constructions"); Hughes Aircraft Systems International v Airservices Australia [1997] FCA 558; (1997) 146 ALR 1 ("Hughes Aircraft"); Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903 ("Garry Rogers Motors"); Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 369 per Sheller JA ("Alcatel Australia").

[93] Examples are cited in Burger King NSWLR at 569 per Sheller, Beazley and Stein JJA; NSWCA at paras.164-166 per Sheller, Beazley and Stein JJA, and see Esso Australia at para.25 per Buchanan JA: "It may ... be appropriate in a particular case to import ... an obligation [of good faith] to protect a vulnerable party from exploitative conduct which subverts the original purpose for which the contract was made. Implication in this fashion is perhaps ad hoc implication ... rather than implication as a matter of law, creating a legal incident of contracts of a certain type."

[94] NC Seddon & MP Ellinghaus, Cheshire and Fifoot's Law of Contract (Ninth Australian Edition) (Chatswood: LexisNexis Butterworths, 2008) at para.10.43, page 448 ("Cheshire and Fifoot"). The authors cite a case involving a franchise agreement as one where the good faith term was implied on a generic basis: Far Horizons Ltd v McDonald's Australia Ltd [2000] VSC 310 at para.120 per Byrne J ("Far Horizons").

[95] Cheshire and Fifoot at para.10.43, page 448.

[96] Burger King NSWLR at 569 per Sheller, Beazley and Stein JJA; NSWCA at para.164 per Sheller, Beazley and Stein JJA.

[97] Burger King NSWLR at 569-570 per Sheller, Beazley and Stein JJA; NSWCA at para.167 per Sheller, Beazley and Stein JJA, quoting Byrne CLR at 450 per McHugh and Gummow JJ.

[98] Renard Constructions at 261 per Priestley JA.

[99] Burger King NSWLR at 559 per Sheller, Beazley and Stein JJA; NSWCA at para.1 per Sheller, Beazley and Stein JJA.

[100] The above very brief overview of the contractual arrangements and events leading to the termination of those arrangements is summarised from Burger King NSWLR at 561-564 per Sheller, Beazley and Stein JJA; NSWCA at paras.26-42 per Sheller, Beazley and Stein JJA.

[101] Burger King NSWLR at 569 per Sheller, Beazley and Stein JJA; NSWCA at paras.163-164 per Sheller, Beazley and Stein JJA.

[102] Garry Rogers Motors ATPR at 43,014 per Finkelstein J; FCA at para.34 per Finkelstein J.

[103] Far Horizons at para.13 per Byrne J.

[104] Far Horizons at para.120 per Byrne J.

[105] Renard Constructions; cf Byrne.

[106] Burger King NSWLR at 569-570 per Sheller, Beazley and Stein JJA; NSWCA at para.167 per Sheller, Beazley and Stein JJA quoting Byrne CLR at 450 per McHugh and Gummow JJ; and see, for example, Far Horizons and Garry Rogers Motors referred to at paras.138-140 above.

[107] Barclay Mowlem WAR at 85 per Martin CJ; WASC at paras.15-16 per Martin CJ. As to this Court's attitude towards applications for particulars see, for example, Olsen v Wellard Feeds Pty Ltd [2007] FMCA 1885 (particulars rarely ordered; not a complex case, no particulars ordered); Verge & Anor v Devere Holdings Pty Ltd & Ors [2008] FMCA 591 at para.24 per Lucev FM (particulars ordered in complex matter where it was of the essence of the relevant section of the Bankruptcy Act 1996 (Cth) that the Court be put in a position to assess the value of the transaction); Doukidis v Williamson (2008) 6 ABC (NS) 717 at 723-725 per Lucev FM; [2008] FMCA 1352 at paras.30-34 per Lucev FM (particulars ordered of a common intention constructive trust having regard to the complexity of the case, the quasi pleading nature of the application and that the particulars sought were confined and would assist in narrowing and clarifying the issues).

[108] Pioneer Concrete ATPR at 42,827 per Drummond J; FCA at para.12 per Drummond J; KSN Engineering IR at 433 per Lucev FM; FMCA at para.21 per Lucev FM

[110] Respondents' Submissions in the Calmer Matter, para.50(b).

[111] Akron Securities Ltd v Iliffe & Ors (1997) 143 ALR 457 at 469 per Mason P.

[112] In this regard the parties should note that costs are those under Schedule 1 to the FMC Rules, unless the Court can be persuaded otherwise. In those circumstances, and bearing in mind that the applications were not wholly successful, an argument as to costs may or may not be cost effective for any of the parties.