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[2016] QSC 62
Supreme Court of Queensland
2016-03-23
Jackson J
Original judgment source is linked above.
PROCEDURE - CIVIL PROCEDURE IN STATE AND TERRITORY COURTS - PLEADINGS - STRIKING OUT - DISCLOSING NO REASONABLE CAUSE OF ACTION OR DEFENCE - where the plaintiffs allege that the defendants' refusal to make payments to a related corporation constituted unconscionable conduct under s 21 of the Australian Consumer Law - where the plaintiffs allege that the refusal, and consequent lack of payment to the plaintiffs by the related corporation, prevented the plaintiffs from converting some of their plant and thereby saving costs - where the costs savings not made were claimed as loss or damage - where the defendants apply to strike out the claim and statement of claim - whether the plaintiffs' allegation of unconscionable conduct is adequately supported by the pleaded facts that could reasonably support inferences of the alleged motives, intentions or other conditions of mind - whether the loss or damage claimed by the plaintiffs is recoverable as loss or damage suffered "because of" the contravening conduct
ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65, considered
Attorney-General (New South Wales) v World Best Holdings Pty Ltd (2005) 63 NSWLR 557; [2005] NSWCA 261, cited
Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18, cited
Batistatos v Roads & Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27, cited
Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, cited
Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 34 VR 536; [2011] VSCA 196, cited
Bow Valley Huskie (Bermuda) Ltd v St John Building Ltd (1998) 153 DLR (4th) 385, cited
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14, cited
Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) [1987] FCA 230; (1987) 16 FCR 410, cited
Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177, cited
Haggarty v Wood (No 2) [2015] QSC 244, cited
Harvey v Henzell [2015] QCA 261, cited
Henville v Walker (2001) 206 CLR 459; [2001] HCA 52, cited
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41, cited
Janssen-Cilag Pty Ltd v Pfizer Ltd [1992] FCA 437; (1992) 37 FCR 526, considered
Lyons v Kern Constructions (Townsville) Pty Ltd [1983] FCA 33; (1984) 47 ALR 114, cited
Marks v GIO Holdings Australia Ltd (1998) 196 CLR 494; [1998] HCA 69, cited
Melbourne City Investments Pty Ltd v UGL Ltd [2015] VSC 540, cited
Metropolitan Bank Ltd v Pooley (1885) 10 App Cas 210, cited
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473, cited
Monroe Topple and Associates Pty Ltd v Institute of Chartered Accountants in Australia (2002) 122 FCR 110; [2002] FCAFC 197, cited
Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3, cited
Park v Allied Mortgage Corp Ltd [1993] FCA 286; (1993) ATPR (Digest) 46-105, cited
Perre v Apand Pty Ltd (1999) 198 CLR 180; [1999] HCA 36, cited
Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, cited
Rodgers v ANZ Banking Group Ltd [2006] QSC 190, cited
Secure Funding Pty Ltd v Stark (2015) 293 FLR 453; [2015] NSWSC 223, cited
Sino Iron Pty Ltd & Anor v Palmer & Anor [2014] QSC 259, cited
Thomas v D'Arcy (2005) 1 Qd R 666; [2005] QCA 68, cited
Uniform Civil Procedure Rules 1999 (Qld), r 171
**[1] Jackson J: The defendants apply to strike out the amended claim ("claim") and amended statement of claim ("statement of claim") under r 171 of the Uniform Civil Procedure Rules 1999 (Qld) ("UCPR").
[2] There are two questions to be decided. First, is the central allegation of unconscionable conduct adequately supported by pleaded facts? The plaintiffs allege a number of facts as to the defendants' motives, intentions or other conditions of mind. The defendants contend that the plaintiffs do not specifically plead enough facts to arguably support inferences of those motives, intentions or other conditions of mind.
[3] Second, is the loss or damage that the plaintiffs claim to have suffered recoverable in law as loss or damage suffered because of the defendants' alleged conduct? The defendants contend that it is not.
[5] Section 21(1) provides that a person must not, in trade or commerce, in connection with the supply of goods or services to a person engage in conduct that is, in all the circumstances, unconscionable.
[6] The alleged contravention of s 21 is based on the failures and refusals of the first, second and third defendants to make royalty payments under three contracts.[2] Two of the contracts are described as a "Mining Right and Site Lease Agreement", a name abbreviated to "MRSLA". One was made between Mineralogy Pty Ltd ("Mineralogy") and the first defendant ("Sino MRSLA"). The other was made between Mineralogy and the second defendant ("Korean MRSLA"). The third contract is described as the "Fortescue Co-ordination Deed". It was made between Mineralogy and the first, second and third defendants.
[7] The plaintiffs allege that the refusals to make the payments to Mineralogy constituted unconscionable conduct by the first, second and third defendants in connection with the acquisition of services by the relevant defendant.[3]
[8] The other defendants are individuals who are alleged to have been persons involved in the contraventions.[4]
[9] The plaintiffs allege that because of the contraventions by the first, second and third defendants Mineralogy did not receive payment of "the sums"[5] which are also described as "the sums referred to herein from Sino and Korean".[6] Those sums include sums "in respect of royalty component B".[7]
[10] It will be noticed that Mineralogy is not a party to this proceeding, and the events so far described do not involve the plaintiffs. The plaintiffs' alleged connection is through Clive Palmer. The plaintiffs allege that he is "the ultimate sole shareholder"[8] of Queensland Nickel Pty Ltd ("QNI"), the plaintiffs and Mineralogy and that upon receipt of the royalty payments Mineralogy intended to advance the sum of approximately $120,000,000 to QNI.[9]
[11] The plaintiffs allege that money would have been used to convert some of the plaintiffs' plant.[10] The plaintiffs allege that the plaintiffs were prevented from achieving "cost savings to date of approximately $137,500,000" because QNI did not receive the advance or advances.[11] As well, the plaintiffs allege that they would have "continued to achieve cost savings in future in the amount of approximately $96 million per year".[12]
[12] In the premises of those facts, the plaintiffs allege that they have suffered loss or damage by reason of the contraventions by the first, second and third defendants of s 21 of the ACL and that pursuant to s 236 of the ACL they are entitled to recover the amount of their loss and damage from the defendants.
[13] First, the defendants base their application to strike out the claim and statement of claim on the failure of the plaintiffs to plead sufficient facts to sustain a claim that the first, second and third defendants engaged in unconscionable conduct. To understand the argument, it is necessary to say something more about the legal basis of the plaintiffs' claim.
Section 21 of the ACL
[14] The central allegation in the statement of claim is that the alleged refusal of the first, second and third defendants to make the royalty payments was unconscionable conduct within the meaning of s 21 of the ACL.[13] Sections 21 and 22 of the ACL replaced former s 51AC of the Trade Practices Act 1974 (Cth) ("TPA").
[15] Section 21(4) expressly provides that it is the intention of the Parliament that the section is not limited by the unwritten law relating to unconscionable conduct and that, in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of the manner in which and the extent to which the contract is carried out.
[16] Section 22(2) of the ACL lists relevant matters to which the court may have regard for the purpose of determining whether an acquirer has contravened s 21 in connection with the acquisition of services from a supplier. The relevant matters include whether any undue pressure was exerted on, or any unfair tactics were used against, the supplier by the acquirer in relation to the acquisition of the services.[14] Further, where there is a contract between the acquirer and the supplier for the acquisition of the services, the court may have regard to the conduct of the acquirer in complying with the terms of the contract.[15] The extent to which the acquirer acted in good faith is also a relevant matter.[16] The list does not limit the matters to which the court may have regard.[17]
[17] The unwritten law as to unconscionable conduct is not irrelevant. In Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd,[18] Gleeson CJ said that the decisions of Blomley v Ryan[19] and Commercial Bank of Australia Ltd v Amadio[20] "mark out the area of discourse involved" for the unwritten law as to unconscionable conduct.[21]
[18] Gleeson CJ in Berbatis[22] referred to one useful working statement of the unwritten law as to unconscionable conduct made by Kitto J in Blomley v Ryan:
"It applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands."[23]
[19] On the other hand, Gummow and Hayne JJ in Berbatis found it unnecessary to decide upon the breadth of the unwritten law as to unconscionable conduct referred to in the predecessor to s 20 of the ACL, saying:**
"Nor need this Court now determine whether the section is limited to matters of equitable doctrine so as, for example, to exclude developments in the common law respecting principles of duress. For example, in Crescendo Management Pty Ltd v Westpac Banking Corporation, McHugh JA considered, with reference to English authority, what has come to be called 'economic duress'. His Honour said that pressure will be illegitimate 'if it consists of unlawful threats or amounts to unconscionable conduct'."[24] (footnotes omitted)
**[20] A statement of claim that alleges a cause of action for damages under ss 21 and 236 of the ACL must allege as a material fact that the defendant engaged in conduct that was, in all the circumstances, unconscionable. The meaning of "engaging in conduct" under s 21 is informed by the definition of that expression in the ACL.[25] That the relevant conduct was unconscionable is a conclusion of mixed fact and law. The statement of claim must allege facts capable of sustaining that conclusion.
[21] Paraphrasing for brevity, the unconscionable conduct alleged in the statement of claim[26] is that (from some time after 21 March 2013) the first, second and third defendants failed and refused to make royalty payments under the MRSLAs and the Fortescue Co-ordination Deed. The statement of claim alleges the following further facts as to that conduct, namely that it was:**
(a) in breach of the MRSLAs and the Fortescue Co-ordination Deed;[27]
(b) deliberate and intentional and done knowing that the royalties were payable;[28]
(c) done for the purpose of applying financial pressure to Mineralogy to agree to vary the terms of the MRSLAs to the advantage of the first and second defendants;[29] and
[23] Whether or not there was a breach or breaches of contract in relation to the payment of Royalty Component B is the subject of court proceedings between Mineralogy and the first, second and third defendants. Those proceedings have had a long history already, as described below.
[24] On 21 January 2013, a director of the third defendant wrote to the Deputy Chairman of Mineralogy alleging that no amount of Royalty Component B was due or payable to Mineralogy.
[25] On 8 February 2013, the solicitors for Mineralogy responded. They disagreed that no payment was due and stated that it would become payable one month after 21 March 2013. They threatened to start proceedings without further notice unless a response was received within 7 days to confirm that the first, second and third defendants agreed to pay the Royalty.
[26] On 12 February 2013, the solicitors for Mineralogy wrote to the solicitors for the first, second and third defendants alleging that the third and fourth defendants had made provision in their accounts up to the 2012 year to pay US$195,385,000 (and an equivalent amount in HK$) for the disputed royalties.
[27] On 22 February 2013, the solicitors for the first, second and third defendants responded, referring to provisions in the accounts and explaining them. One point made was that the accounts had been prepared using a different benchmark from the "prevailing published annual FOB price for Brazilian pellets or Mount Newman fines."
[28] On 10 March 2013, Mineralogy filed a summons in the Supreme Court of New South Wales claiming, among other things, from the first defendant amounts alleged to be payable under cl 6.3 of the Sino MRSLA and from the second defendant under cl 6.3 of the Korean MRSLA. Mineralogy further claimed specific performance of the third defendant's obligations under the Fortescue Co-ordination Deed. The proceeding may have been started before the cause of action accrued, but at this point nothing turns on that.
[29] On 30 April 2013, that proceeding was transferred to the Supreme Court of Western Australia and is now CIV 1808 of 2013 ("Royalty Component B Proceeding").
[30] On 29 May 2013, the first, second and third defendants filed their further amended defence raising various grounds of defence.
[31] Curiously, at one time in that proceeding, Mineralogy admitted that Royalty Component B component was incapable of calculation.
[32] The Royalty Component B Proceeding has since gone through many interlocutory steps. Although it has been protracted, and there have been many interlocutory decisions, it is not necessary to do more for present purposes than to refer to a very recent application by Mineralogy to obtain an interlocutory mandatory injunction for payment of US$48 million on account of its claim to the disputed royalties.
[33] On 7 December 2015, the application was dismissed.[33]
[34] That is to say, the fact of the first, second and third defendants' liability to Mineralogy for the alleged royalties is the subject of a proceeding in the Supreme Court of Western Australia. It has not been suggested in the present proceeding that Mineralogy is entitled to summary judgment in the Royalty Component B Proceeding.
[35] On 11 December 2015, Mineralogy proposed to amend the statement of claim in the Royalty Component B Proceeding. Paragraphs 49 and 51 of the proposed amended pleading would claim the amounts of the royalty payments alleged in the statement of claim in the current proceeding as debts due to Mineralogy.
[36] For present purposes, the point is that an underlying premise of the plaintiffs' claim in the present proceeding is that the first and second defendants' refusals to make the royalty payments were made in breach of contract. The same is true for the third defendant. That question will be resolved when the Royalty Component B Proceeding is resolved. The plaintiffs may be right or wrong in that contention but it is not established at the present time.
[37] The defendants submit that the unresolved claim in the Royalty Component B Proceeding, taken alone, is an infirm foundation for the allegation of unconscionable conduct in the present proceeding.
[38] The defendants further submit that it follows that the plaintiffs' alleged case of unconscionable conduct in the present proceeding hangs on the allegations that the refusals to make the royalty payments were deliberate and intentional, done knowing that royalties were payable, done for the purpose of applying pressure to Mineralogy to renegotiate, and done in bad faith ("the unconscionable facts").
[39] The defendants do not submit that proof of the refusals to make the royalty payments together with the alleged unconscionable facts could not amount to unconscionable conduct within the meaning of s 21 of the ACL. Instead, they submit that none of the unconscionable facts is pleaded as required by the UCPR and the proceeding cannot go forward fairly on that form of pleading.
Facts from which a condition of mind is to be inferred
[40] Under r 150(1)(k) of the UCPR "motive, intention or other condition of mind, including knowledge or notice" are matters that must be specifically pleaded. Under r 150(2), any fact from which any of those matters is claimed to be an inference must be specifically pleaded.
[41] The plaintiffs plead only two facts from which the inference of each of the unconscionable facts is to be drawn.
[42] First, they allege that the financial statements for the fourth defendant for the financial year ended 31 December 2012, recorded in Note 17, show that the first defendant and the second defendant had a current liability to pay Mineralogy royalties under the MRSLAs in the sum of US$195,385,000 or alternatively US$152,776,000 ("first accounts admission").
[43] Second, they allege that the third defendant's financial statements for the year ended 31 December 2012, recorded in Note 34, show that the first and second defendants had a current liability to pay to Mineralogy HK$1,524,000,000 pursuant to the MRSLAs ("second accounts admission").[34]
[44] On the face of the fourth defendant's financial statements for 2012 and Note 17, it is clear that the amount provided as the carrying amount on account of any liability to pay royalties to Mineralogy at the end of the year was US$152,776,000, not US$195,385,000.
"The amount payable by each subsidiary (if the conditions for payment are met and the exceptions do not apply) is calculated by reference to the royalty payable on the amount of magnetite ore required to produce 6 million tonnes of iron ore concentrate. A provision has been made for this liability as reasonably estimated by the Group with a corresponding increase in intangible mining assets. Amortisation of this asset will occur from the production date, using the units of production method. The amount provided for in the accounts may differ from any eventual liability." (emphasis added)_**
**[46] Section 3 of the Financial Statements set out "Critical Accounting Estimates and Judgments" including the following entry:
The Mining Right and Site Lease Agreements entered into by two subsidiary companies of the Group in connection with the Sino Iron Project in Western Australia contain a clause that, unless certain exceptions apply, each subsidiary is to pay an amount if either of them produces less than 6 million tonnes of iron ore by March 2013. Under such clause, if the conditions for payment are met and the exceptions are not applicable, the amount payable is calculated by reference to the royalty payable on the amount of magnetite ore required to produce 6 million tonnes of iron ore concentrate. Due to changes in the iron ore market the formula for determining the amount in the contract is not capable of calculation. In the event that a liability crystalizes as a result of such clause a provision has been made for this liability as reasonably estimated by the Group and as required by accounting standards. Therefore, the amount provided for in the accounts may differ from any eventual liability. A corresponding increase in intangible mining assets has been made in relation to this provision. The Group has commenced a reassessment of its liability under these clauses." (emphasis added)
[47] The plaintiffs allege that the first and second defendants are subsidiaries of the fourth defendant.
[48] The fourth defendant's financial statements for 2012 and the notes to the financial statements comprised part of the financial report[35] required to be prepared for each financial year[36] and which must comply with the accounting standards.[37] Such a financial report[38] is a "book" that is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded.[39] I will assume in the present proceeding that Note 17 is thereby admissible against not only the fourth defendant but also against the other defendants.
[49] So it may be said that entries in the financial statements including the note are at least some evidence that the amounts for which provision is made may be debts. Further, the cogency of the evidence is relevant in weighing the possibility of the inferences of the unconscionable facts that the plaintiffs submit are open on the pleaded facts.
[50] The defendants submit that the entries relied on are not capable of supporting the inference that at the time of the refusals to make the royalty payments the first, second and third defendants had the conditions of mind necessary for the unconscionable facts, particularly the alleged bad faith.
[51] Note 34, contained in the third defendant's financial statements, recorded that the first and second defendants had a current liability to pay to Mineralogy in similar terms to Note 17. It is unnecessary to set it out separately or to separately canvass the admissibility of Note 34. I will make the same assumptions as for Note 17.
[52] The plaintiffs allege that the third defendant is the ultimate holding company of the first and second defendants.
[53] The defendants submit that these alleged facts are not enough to make out a reasonably arguable basis from which to infer the unconscionable facts. They submit that under r 150(2) the plaintiffs are required to plead all the facts from which the inferences of the unconscionable facts are to be drawn, and it can be seen that the unconscionable facts could not be found at trial based only on the alleged facts. Accordingly, they submit that the claim and statement of claim should be struck out and the proceeding dismissed.
[54] In my view, an inference might follow from the entries in the financial statements that, when the statements were finalised, the third and fourth defendants were of the opinion that there would be a liability to pay those sums within the period of 12 months from the balance date for the 2012 year.
[55] However, the defendants submitted that the entries relied on by the plaintiffs will not prove the allegation in par 23 of the statement of claim that the first, second, third and fourth defendants "necessarily satisfied themselves that [the first defendant] and [the second defendant] had no excuse pursuant to [cl 6.3] of each of the MRSLAs not to pay the said sums and necessarily satisfied themselves that the royalty payment was capable of calculation".
[56] I agree that that it is not reasonably arguable that par 23 of the statement of claim will be proved by inference from the effect of the entries. They will not prove that the defendants "necessarily" were satisfied that they had no excuse not to pay, in the sense that they could not have reasonably entertained the possibility that payment would not become due.
[57] Although the parties made detailed submissions as to the operation of the relevant accounting standards, it is not necessary to deal with them. To do so would distract from the more relevant question as to the extent of the basis of fact alleged in the statement of claim for the unconscionable facts alleged.
[58] In my view, the statements relied on as the first accounts admission and the second accounts admission were not unequivocal admissions that the third or fourth defendants' believed at the time that there were no grounds for refusing to make the royalty payments.
[59] The application is to strike out the claim and statement of claim under r 171 of the UCPR. That rule empowers the court to strike out a "pleading" which is defined in sch 4 as a concise statement in a claim of the material facts on which the plaintiff relies.[40] It is unclear whether the power in r 171 extends to striking out a claim. The UCPR separately defines "claim" as a document "under chapter 2, part 3 starting a proceeding".[41] Under r 22 a claim must state briefly the nature of the claim made or relief sought and attach a statement of claim. It is the statement of claim to which the pleading requirements under ch 6 of the UCPR, entitled "Pleadings", apply. Rule 171 is found in ch 6.
[60] Accordingly, on the text of the UCPR, it is not clear that the power to strike out a pleading extends to the claim itself. However, the provenance of r 171 and its predecessor and comparator rules makes it clear that the court's inherent power to stay or dismiss a proceeding as an abuse of process is preserved.
[61] The relationship between r 171 and the inherent power was explained by reference to the comparator rule of court in New South Wales in Batistatos v Roads & Traffic Authority of New South Wales.[42] In turn, the width of the inherent power to deal with cases of differing kinds including "a proceeding without reasonable grounds, so as to be vexatious and harassing",[43] was reaffirmed in Batistatos.[44]
[62] In Sino Iron Pty Ltd & Anor v Palmer & Anor[45] I said that the court should be slow to interfere by dismissal or the grant of a stay of a proceeding on this ground, as an abuse of process, in a way which might undermine the procedure for summary judgment. Nevertheless, it is a matter for the exercise of a discretionary judgment. I attempted to explore the interrelationship of rr 171 and 293 in Haggarty v Wood (No 2).[46] It is not necessary to do so further in this case.
[63] Where, as here, the problem lies in the ability of the plaintiffs to articulate a case sufficient to go forward because of non-compliance with the rules of pleading, or because of the inadequacy of the pleaded case as a matter of law, it is appropriate for the defendant to apply under either r 171 or in the court's inherent jurisdiction to strike out the pleading and, in some cases, for a stay or dismissal of the proceeding.
[64] An inability to give particulars of a condition of mind required under a relevant pleading rule may lead to an order striking out a statement of claim as an abuse of process.[47]
[65] There are a number of particular contexts where the inadequacy of a pleading may lead to a decision to strike it out. The procedural requirements for an adequate pleading are not a technical barrier to justice. On the contrary, the challenge that an inadequately particularised pleading represents to the basic requirement of procedural fairness was recently reaffirmed by the Court of Appeal in Harvey v Henzell.[48] In that case, in response to an argument that faults in the particularity of a pleading are not fatal to a claim and that a statement of claim should not be struck out under r 171 for lack of particularity, the Court said:**
"[I]n the later decision of Banque Commerciale SA (In liq) v Akhil Holdings Ltd, the High Court held that:
'The function of pleadings is to state with sufficient clarity the case that must be met. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness.'"[49] (footnotes omitted)
**[66] To say this is not to forget the restraint that a court should have before summarily terminating a proceeding for inadequacies that may be repaired. That restraint need not be as firm where the perceived inadequacy is one that will not change at trial and where the legal standards against which it must be measured are not themselves in a state of development or flux.
[67] It must be kept in mind that the present ground of the application is based on the absence of sufficient pleaded facts, no more and no less. The problem identified by the defendants is solely that facts required to support the claimed inferences of unconscionable facts do not appear.
[68] In some cases, the question is whether facts required to be pleaded or particularised in support of the alleged material fact may be obtained by interlocutory processes such as disclosure by a party, interrogation, third party document production, or perhaps by calling relevant witnesses who will not provide the facts to the plaintiffs without being required to do so under compulsion of law. However, the plaintiffs do not apply for any of those orders so as to be able to plead any other relevant fact from which the unconscionable facts could be inferred. It is not suggested by the plaintiffs that they can improve the pleading.
[69] So the question in the present case resolves to whether the allegations of the first and second accounts admissions are enough for the proceeding to go to trial based on the alleged unconscionable facts. The ultimate question is whether the proceeding as presently constituted amounts to an abuse of process, because a case at trial based on the alleged facts is clearly bound to fail, paying due regard to the care to be taken before a court denies a party the right to proceed to a trial of the proceeding.
[70] In my view, the answer to that question in the present case is "yes", having regard to the preceding discussion.
[71] It must be remembered that the conclusion I have reached is confined to the case as pleaded. It says nothing beyond that conclusion about any facts as between Mineralogy and the first second and third defendants that are the subject of other proceedings.
[72] This conclusion as to the insufficiency of the pleaded facts is enough to found an order dismissing the proceeding. But the defendants also base their application to strike out the claim and statement of claim on a second ground, namely that the plaintiffs' alleged loss and damage was not suffered because of the defendants' alleged contravening conduct for the purposes of s 236 of the ACL.
Loss or damage suffered because of contravening conduct
[73] Section 236 of the ACL provides that if a person (the claimant) suffers loss or damage because of the conduct of another person and the conduct contravened a provision of Chapter 2, the claimant may recover the amount of the loss or damage by action against that other person.
[74] The alleged contravening conduct in the present case is unconscionable conduct in the form of undue pressure or unfair tactics as previously described. In such a case, loss or damage may be suffered because of the conduct. Usually, the loss or damage is that said to be caused because the will of the person who was subjected to the undue pressure or unfair tactics was overborne.
[75] But that is not the plaintiffs' case. It is not alleged that Mineralogy in any way gave in to the undue pressure or unfair tactics. Quite the contrary. Mineralogy has refused to renegotiate to its disadvantage. It has started numerous legal proceedings against the first, second and third defendants. The proceedings include, broadly speaking, claims to recover the royalty payments that Mineralogy alleges are due. Mineralogy started the Royalty Component B Proceeding as long as 2.5 years ago.
[76] Once it is recognised that the plaintiffs' claim is brought on the factual footing that Mineralogy did not give in to the alleged undue pressure or unfair tactics and that the plaintiffs do not allege that Mineralogy has lost any contractual entitlement that it otherwise had to receive the royalty payments, the plaintiffs' claim stands or falls as a claim for loss or damage caused by the cash flow effect upon the plaintiffs of the delay in payments to Mineralogy.
[77] The causal connection alleged is that had the royalty payments been made to Mineralogy that company would have made payments to QNI to assist the plaintiffs' business. The damages claimed are the difference between the actual past and hypothetical future operating costs that the plaintiffs have incurred and will incur ("scenario A") and those operating costs that they would have incurred hypothetically if the planned improvements to the plaintiffs' plant had been made ("scenario B").
[78] There are questions as to the formulation of that difference as loss or damage. No account is taken in scenario B of the liability of QNI or the plaintiffs to Mineralogy for any payments that QNI would have received and would have used to make the improvements to the plant. But that may be passed by.
[79] The question for present purposes is whether the difference between the costs under scenario A and the costs under scenario B can be loss or damage suffered by the plaintiffs "because of" the alleged contravening conduct of the first, second or third defendants within the meaning of s 236 of the ACL.
[80] The plaintiffs submit that s 236 is similar to but far from identical to former s 82 of the TPA. However, they do not make any specific submission directed to the textual differences and generally relied on cases decided under the TPA provisions.
[81] They heavily rely on Janssen-Cilag Pty Ltd v Pfizer Ltd.[50] That was a case where the applicant claimed damages under s 82 of the TPA for contravention of s 52 of the TPA by misleading or deceptive conduct. The conduct was constituted by the respondent's misleading or deceptive representations as to the respondent's drug "Combantrin". The applicant alleged it had lost sales of its drug "Vermox" because pharmacists and consumers relied on the representations and were induced to purchase "Combantrin" instead of "Vermox". It was held that the applicant suffered loss or damage "by" the respondent's contravening conduct within the meaning of s 82. This was notwithstanding that the pharmacists and consumers, not the applicant, had been misled or deceived by relying on the representations. Lockhart J said:
"Section 82(1) should not be given a restricted meaning to be available only to the person who suffers loss or damage by reason of his own reliance upon the representations which constituted the relevant contravention of Pt IV or V; nor for that matter should it be given an extended meaning which strains the language used by the legislature. But a person who suffers damage by reason of or as a result of the conduct of the contravener (albeit that that person does not himself rely upon the representations) is not to strain the language of the subsection, but to interpret it according to its ordinary and natural meaning. For a person to recover under the section he must suffer loss or damage by reason of or as a result of the contravention. There is nothing unduly wide about that."[51]
[82] The plaintiffs also relied upon ABN AMRO Bank NV v Bathurst Regional Council.[52] The relevant claim in that case was also a claim for damages for misleading or deceptive conduct. The relevant statutory provisions were contained in the Corporations Act 2001 (Cth) and the Australian Securities and Investment Commission Act 2001 (Cth). The facts of the case are complex and the reasons for judgment are long. However, one of the arguments advanced by the appellants was that the respondents had not suffered loss or damage by the appellants' contravening conduct because the respondents had not relied on the misleading or deceptive representations in buying the securities. The Full Court of the Federal Court rejected the argument, relying upon Janssen-Cilag.[53]
[83] There are other cases that deal with whether a plaintiff who purchases securities in a market affected by the defendant's misleading or deceptive conduct may recover losses caused by the fact that the market price was affected by the defendant's conduct, even though the plaintiff did not specifically rely on the contravening conduct.[54]
[84] However, as the plaintiffs acknowledged in their submissions, both Janssen-Cilag and ABN AMRO were claims based on contraventions of provisions prohibiting misleading or deceptive conduct. In that particular context, they were both concerned with whether it was a requirement that the plaintiff must have relied on the conduct.
[85] In contrast, the context here is a claim for damages for contravention of s 21 of the ACL for unconscionable conduct. As was said by Heerey J in the Full Court of the Federal Court of Australia in Monroe Topple & Associates v Institute of Chartered Accountants in Australia:[55]
"As a matter of language s 51AC(1) [of the TPA] is directed not to conduct in trade or commerce generally, but rather to conduct in trade or commerce in connection with a particular kind of transaction, namely the supply or acquisition of goods or services to or from a person (other than a listed public company). This may be contrasted with s 52(1) which simply provides that a corporation shall not in trade or commerce engage in conduct that is misleading or deceptive or is likely to mislead or deceive."[56]
[86] It was s 51AC(1) of the TPA that, mutatis mutandis, became s 21 of the ACL.
[87] In my view, the difference between the costs under scenario A and the costs under scenario B cannot be regarded as loss or damage suffered by the plaintiffs "because of" the alleged contravening conduct of the first, second or third defendants within the meaning of s 236 of the ACL.
[88] First, the slight textual differences between s 236 and former s 82 of the TPA do not undermine the relevance of cases decided under s 82.
[89] Second, the case law to date does not support the conclusion that the plaintiffs' alleged loss can constitute loss or damage suffered because of the alleged contravening conduct.[57]
[90] Third, the loss or damage alleged in this case lies at the end of a long causal chain. The first link is that the defendants failed and refused to make the royalty payments because of the alleged unconscionable conduct. The second link is that, had the royalty payments been made, Mineralogy would have paid $120,000,000 to QNI. The third link is that, had Mineralogy made that payment, QNI would have used the money to convert some of the plant. The final link is that, had the plant been converted, the plaintiffs would have saved costs in the amounts claimed.
[91] Fourth, s 236 asks a question as to causation that is not answered solely by proving the factual connection between the alleged loss and the contravening conduct by such a causal chain. The answer to the question involves the attribution of a legal cause for the purposes of the operation of the section in its context in the statute. As Gleeson CJ said in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd:[58]
"The relationship between conduct of a person that is in contravention of the statute, and loss or damage suffered, expressed in the word 'by', is one of legal responsibility. Such responsibility is vindicated by an award of damages. When a court assesses an amount of loss or damage for the purpose of making an order under s 82, it is not merely engaged in the factual, or historical, exercise of explaining, and calculating the financial consequences of, a sequence of events, of which the contravention forms part. It is attributing legal responsibility; blame. This is not done in a conceptual vacuum. It is done in order to give effect to a statute with a discernible purpose; and that purpose provides a guide as to the requirements of justice and equity in the case. Those requirements are not determined by a visceral response on the part of the judge assessing damages, but by the judge's concept of principle and of the statutory purpose."[59]
[92] In the same vein, Gummow J said in Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2):[60]
"Wrapped up within s 82 are ... concepts the common law would describe by the terms 'causation' and 'remoteness' and 'measure of damages' ... [I]t would be an error to translate automatically to the particular statute what appeared the closest analogue from the common law 'rules' as to causation. It is rather a question of statutory construction ... Thus, in construing s 82 it is appropriate to bear in mind such matters as the scope and purpose of Pts IV and V [of the Trade Practices Act 1974 (Cth)] ... the wide range of subject-matters dealt with in Pts IV and V but all linked to s 82 ... the absence of any direct provision to apportion responsibility for loss or damage ... and the apparent telescoping of what to the common law would be issues of causation, remoteness and measure of damages."[61]
[93] Or as McHugh J put it in Henville v Walker:[62]
"Given the long history of the common law's recognition of the concept of remoteness in assessing damages in contract and tort and its relationship with the issue of causation, it seems proper to read the term 'by' in s 82 as including the concept of remoteness. By remoteness, I mean that the loss or damage was not reasonably foreseeable even in a general way by the contravener."[63]
[94] Further, in Finishing Services Pty Ltd v Lactos Fresh Pty Ltd[64] it was said that:
"The authorities accept that third party reliance may cause an applicant's loss ... However the authorities require there to be a 'sufficient and direct link' or a 'requisite element of proximity' in order for the section to be satisfied."[65]
[95] In saying this, I have not overlooked the statement in Marks v GIO Holdings Australia Ltd[66] that:
"... s 82 provides, in effect, that the loss or damage that may be recovered by action is the amount of the loss or damage suffered 'by conduct of' another person that was done in contravention of Pt IV or Pt V. It contains no stated limitation of the kinds of loss or damage that may be recovered and contains no express indication that some kinds of loss or damage are to be regarded as too remote to be recovered."[67]
[97] Fifth, the alleged contravening conduct was not directed at the plaintiffs. There was nothing unconscionable about the defendants' alleged conduct as between the plaintiffs and the defendants. Any unconscionability lay between the defendants and Mineralogy.
[100] Eighth, a cause of action for damages under s 236 is not able to be assigned by a party who is a person who suffers loss or damage as a result of contravening conduct: Park v Allied Mortgage Corp Ltd.[74]
"That s 51AC(1) is concerned only with conduct in relation to dealings between the corporation in question and a particular kind of person (a person other than a listed public company) is confirmed by s 51AC(3) and (4). In each case some 12 factors which may be taken into account are stipulated. It is true that they are non-exclusive but they are all concerned with dealings between 'supplier' and 'business consumer' (subs (3)) or between 'acquirer' and 'small business supplier' (subs (4)). They contemplate that the Court is engaged in the task of determining whether there has been a contravention of s 51AC(1), and thus are confined to a particular kind of transaction, namely the supply or acquisition of goods or services as between stipulated categories of person.
The conclusion that s 51AC is not concerned with the impact of conduct on third parties is confirmed by the legislative history: see Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (No 2). In the present case his Honour recounts in detail the legislative history. It is not necessary to repeat that history in these reasons. In my view it shows convincingly that the present s 51AC can be traced back to the original recommendation of the Swanson Committee in 1976 that unconscionable conduct be prohibited 'to give the Act a greater ability to deal with the general disparity between buyers and sellers'."[76] (citations omitted)
**[102] In my view, it follows that the statement of claim does not disclose a reasonable cause of action because the loss or damage claimed by the plaintiffs is not recoverable as loss or damage suffered "because of" the alleged contravening conduct of the defendants. The error is not capable of correction.
[103] The result is that the proceeding must be dismissed on this ground as well.**
[1] The ACL is set out in the Competition and Consumer Act 2010 (Cth) sch 2.
[2] Statement of claim, pars 11(e), 12(e) and 16.
[4] The third defendant is also alleged to have been a person involved in the first and second defendants' contraventions.
[8] Statement of claim, par 39. It is convenient to assume that each of the plaintiff and Mineralogy is a wholly owned subsidiary of a company or corporation in a chain of which Mr Palmer is the sole shareholder of the parent company or corporation.
[14] Australian Consumer Law, s 22(2)(d).
[15] Australian Consumer Law, s 22(2)(j)(iii).
[16] Australian Consumer Law, s 22(2)(l).
[17] Australian Consumer Law, s 22(2).
[21] [2003] HCA 18; (2003) 214 CLR 51, 62-64 [7]-[13]; see also Gummow and Hayne JJ at 71 [39].
[22] [2003] HCA 18; (2003) 214 CLR 51, 64 [13].
[23] [1956] HCA 81; (1956) 99 CLR 362, 415.
[24] [2003] HCA 18; (2003) 214 CLR 51, 74 [45].
[27] Statement of claim, pars 11(f), 12(f) and 16.
[31] Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196; (2011) 34 VR 536, 556 [92].
[32] Attorney-General (New South Wales) v World Best Holdings Pty Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557, 583 [121]; Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196; (2011) 34 VR 536, 555 [90]-[91].
[33] Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473.
[34] An amount alleged to be equal to US$195,385,000.
[35] Corporations Act 2001 (Cth), s 295(1).
[36] Corporations Act 2001 (Cth), s 292.
[37] Corporations Act 2001 (Cth), s 296(1).
[38] Corporations Act 2001 (Cth), s 9 (definition of "financial report").
[39] Corporations Act 2001 (Cth), ss 9 (definition of "books") and 1305(1).
[40] Uniform Civil Procedure Rules 1999 (Qld) sch 4 (definition of "pleading").
[41] Uniform Civil Procedure Rules 1999 (Qld) sch 4 (definition of "claim").
[42] [2006] HCA 27; (2006) 226 CLR 256, 268-270 [19]-[26].
[43] Metropolitan Bank Ltd v Pooley (1885) 10 App Cas 210, 220-221.
[44] [2006] HCA 27; (2006) 226 CLR 256, 265-268 [10]-[16], 274-276 [44]-[47].
[45] [2014] QSC 259, [13].
[46] [2015] QSC 244, [62]-[86].
[47] Lyons v Kern Konstructions (Townsville) Pty Ltd [1983] FCA 33; (1983) 47 ALR 114, 124-127.
[49] [2015] QCA 261, [33].
[51] [1992] FCA 437; (1992) 37 FCR 526, 531.
[53] [2014] FCAFC 65; (2014) 224 FCR 1, 272 [1376].
[54] See, for example, the discussion of Robson J in Melbourne City Investments Pty Ltd v UGL Ltd [2015] VSC 540, [144]-[155].
[57] Compare Rodgers v ANZ Banking Group Ltd [2006] QSC 190 and Secure Funding Pty Ltd v Stark [2015] NSWSC 223; (2015) 293 FLR 453, 462 [47].
[59] [2002] HCA 41; (2002) 210 CLR 109, 119 [26].
[61] [1987] FCA 230; (1987) 16 FCR 410, 418-19.
[63] [2001] HCA 52; (2001) 206 CLR 459, 504 [136].
[65] [2006] FCAFC 177, [31].
[67] [1998] HCA 69; (1998) 196 CLR 494, 509 [34].
[68] [2004] HCA 3; (2004) 216 CLR 388, 407-408 [44]-[48].
[69] [1999] HCA 36; (1999) 198 CLR 180, 218 [97]-[98].
[71] [2005] QCA 68; (2005) 1 Qd R 666, 677 [21].
[73] [2006] QSC 190, [45].
[76] (2002) 122 FCR 110, 140-141 [115]-[116].
QNI Resources Pty Ltd & Anor
Sino Iron Pty Ltd & Ors [2016] QSC 62
(2014) 224 FCR 1
(2005) 63 NSWLR 557
(2003) 214 CLR 51
(2006) 226 CLR 256
(1956) 99 CLR 362
(2011) 34 VR 536
(1983) 151 CLR 447
(1987) 16 FCR 410
(2001) 206 CLR 459
(2002) 210 CLR 109
(1992) 37 FCR 526
(1984) 47 ALR 114
(1998) 196 CLR 494
(2002) 122 FCR 110
(2004) 216 CLR 388
(1999) 198 CLR 180
(2015) 293 FLR 453
(2005) 1 Qd R 666
(1983) 47 ALR 114