Alleged misleading or deceptive conduct: Blogs and Facebook
83 This claim is set out at [3A] to [17] of the FASOC. It is alleged that ProSEO or its former director, Mr Bertrand, engaged in misleading or deceptive conduct by using the phrase "Qualify Me" in website content and keywords for the purpose of optimising search engine results and that one or other of them established certain websites and Facebook accounts which contained material for that purpose.
84 Firstly, GQA and Mr Wadi submit that the particulars provided of the alleged conduct by ProSEO and Mr Bertrand are wholly inadequate. To the extent that Qualify Me says that it will provide particulars after discovery, GQA and Mr Wadi submit that it is difficult to see how Qualify Me will ever be able to provide further particulars of these allegations after discovery because:
(1) Qualify Me must first obtain an order for discovery under r 20.12 of the Rules, having persuaded the Court that such an order will facilitate the just resolution of the proceedings as quickly, inexpensively and efficiently as possible pursuant to r 20.11;
(2) neither ProSEO or Mr Bertrand are parties to the proceedings - ProSEO has been deregistered and Mr Bertrand lives overseas; and
(3) GQA and Mr Wadi have given informal discovery and Mr Wadi has deposed that they have nothing to produce in relation to these allegations.
85 The pleading against Mr Wadi arising from this part of the FASOC is that he was knowingly concerned in the contravention of s 18 of the ACL by ProSEO or, in the alternative, by Mr Bertrand. GQA and Mr Wadi next submit that Qualify Me is unable to particularise or plead in any cogent way the necessary elements to establish that Mr Wadi was knowingly concerned in the alleged contravention of s 18 ACL by ProSEO or Mr Bertrand and rely on Fernandez v Glev Pty Ltd [2000] FCA 1859 at [18], where Hely J said that:
The facts necessary to sustain a conclusion that the individuals were involved in a contravention of s 52 should be pleaded. That includes whether involvement in, or knowledge of the making of the representations is relied upon and knowledge of the falsity of the representations in question.
86 It is submitted by GQA and Mr Wadi that the only material fact pleaded relevant to that claim is that Mr Wadi was a director of ProSEO. GQA and Mr Wadi submit that the evidence is that Mr Wadi denies that he had any knowledge of the matters alleged in this part of the claim and that, relying on Ridgway v Consolidated Energy Corporation Pty Ltd (1987) ATPR 40-754 (Ridgway) at 48,189, if Qualify Me bases its case against Mr Wadi only on "inferences, innuendo and suspicion", it has no reasonable prospects of success.
87 In J & A Vaughan Pagone J in considering a pleading that two individuals were involved in the contraventions pleaded against the corporate first respondent said the following at [9]:
…. That involvement, as previously mentioned, is said to take the form of aiding, abetting, counselling, procuring, being knowingly concerned and conspiring with others, but no facts of any of those are pleaded or found in the particulars. The majority in Yorke v Lucas (1985) 158 CLR 661 said at 667 (and see Brennan J at 673) that the term "involved in" as used in s 75B of the Trade Practices Act 1974 (Cth) was derived from analogous concepts in the criminal law and "should be given [no] new or special meaning". In Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (in liq) (2008) 252 ALR 41, Finklestein J said at [13]:
To establish secondary liability … it is settled that in order for a defendant to be "knowingly concerned" in another party's wrongdoing, actual knowledge of the essential facts is required … With respect to conduct, the defendant must have done some positive act amounting to participation …
(Emphasis added, footnote omitted)
88 There is a paucity of material facts pleaded in relation this aspect of the claim against Mr Wadi. Particulars of the relevant paragraphs of the FASOC (and its predecessors which were in identical terms), being paragraphs 11(b) and 15(b), were sought by GQA and Mr Wadi. The particulars sought and the responses provided were as follows:
Paragraph 11(b)
Please specify:
(a) what matters concerning the contravention are alleged to have been known by Mr Wadi; and
(b) how is it alleged that he was 'concerned' in the contravention.
Answer
(a) This is a matter for discovery by the Respondents.
(b) By reason at least of Mr Wadi's being a director of Proseo. Further particulars are a matter for discovery by the Respondents.
Paragraph 15(b)
Please specify:
(c) what matters concerning the contravention are alleged to have been known by Mr Wadi; and
(d) how is it alleged that he was 'concerned' in the contravention.
Answer
(c) This is a matter for discovery by the Respondents.
(d) By reason at least of Mr Wadi's being a director of Proseo, of which Bertrand was a director and manager. Further particulars are a matter for discovery by the Respondents.
89 In my view, the pleaded case against Mr Wadi as set out in paragraphs 3A to 17 of the FASOC does not identify the factual elements which constitute Mr Wadi's knowing involvement in ProSEO's, or alternatively Mr Bertrand's, conduct. Nor is Mr Wadi assisted in this regard by the response provided to the relevant particulars.
90 However, it does not follow that Qualify Me's claim against Mr Wadi has no reasonable prospects of success because it is founded on inferences as to misconduct. In that regard GQA's and Mr Wadi's reliance on Ridgway is misplaced. As submitted by Qualify Me, in Ridgway Fox J held that no evidence of being knowingly concerned in the contravention could be inferred based on the facts of that case. It is not the case that Fox J found that the requisite degree of knowledge could only ever be established by direct evidence. In Compaq Computer Australia Pty Ltd v Howard Merry & Ors (1998) 157 ALR 1, Finklestein J said the following at 4 to 5:
… But where it is sought to make a person liable as an accessory to a contravention of s 52(1) based in s 75B it is necessary to establish that the person has intentionally participated in the contravention. To establish intentional participation it must be proved that the person has knowledge of the essential matters that make up a contravention of s 52(1) … In this regard "knowledge" means actual and not constructive knowledge. For example, it would not be sufficient to merely show that the person charged with accessorial liability had shut his eyes to the obvious if that is intended to be a substitute for actual knowledge … Of course, where there is a combination of suspicious circumstances and a failure to make an inquiry it may be possible to infer knowledge of the relevant essential matters. (Citations omitted)
91 In J & A Vaughan Pagone J also considered whether the applicant in that case ought to be given leave to file a further amended statement of claim. The problem identified with the amended pleading was that the applicant's case was essentially based on inferences but that the draft pleading did not clearly enough identify the inferences it would, in the future, seek to have drawn and the facts which it would contend permitted the inferences to be drawn. Pagone J observed at [18] that the applicant should not be shut out of its cause of action "merely because its case depends upon inferences" but that it was incumbent on the applicant to "file a statement of claim which discloses a cause of action on the facts as they are known to" it. His Honour continued at [19]:
Inferences require facts from which an inference is capable of being drawn. That requires that the facts relied upon bear probatively upon those inferences which are sought to be drawn. In Holloway v McFeeters (1956) 94 CLR 470 Dixon CJ said at 477 (albeit on dissent on the outcome of the case) in the context of a motor vehicle negligence case:
What is required is a basis for some positive inference involving negligence on the part of the driver as a cause of the deceased's death. The inference may be made only as the most probable deduction from the established facts, but it must at least be a deduction which may reasonably be drawn from them. It need not be an inference as to how precisely the accident occurred, but it must be a reasonable conclusion that the accident in one or another occurred through the lack of due care onto the part of the driver and not otherwise.
Williams, Webb and Taylor JJ in a joint judgment in that case referred at 480-1 to the earlier decision of the High Court in Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 where it had been said:
[Y]ou need only circumstances raising a more probable inference in favour of what is alleged … where direct proof is not available it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference; they must do more than give rise to conflicting inferences of equal degree of probability so that the choice between them is mere matter of conjecture … All that is necessary is that according to the course of common experience the more probable inference from the circumstances that sufficiently appear by evidence or admission, left unexplained, should be that the injury arose from the defendant's negligence. By more probable is meant no more than that upon a balance of probabilities such an inference might reasonably be considered to have some greater degree of likelihood. (Citation omitted)
92 Qualify Me submits that even on the basis of the factual material currently available there is substance to the allegations that Mr Wadi was knowingly concerned in the breach of s 18 of the ACL as set out in paragraphs 11(b) and 15(b) of the FASOC. Qualify Me sets out in its written submissions a list of the matters from which it says the necessary inferences leading to such a conclusion may reasonably be drawn. However, those matters and/or inferences to be relied upon as material facts have not been pleaded and ought to be to the extent that they are essential elements in the cause of action against Mr Wadi: see J & A Vaughan at [14].
93 Turning now to the claim that ProSEO and Mr Bertrand were agents of GQA (see [12] and [16] of the FASOC), Qualify Me submits that paragraphs 11, 12, 15 and 16 of the FASOC allege that GQA by itself or by its agents, ProSEO or Mr Bertrand, is responsible for the misleading or deceptive conduct represented by the derogatory materials identified in its submissions, that while Mr Wadi denies that conduct that is not determinative of the matter and that at trial Qualify Me will rely on inferences arising from objective matters to support its case.
94 Qualify Me submits that applying the general law of agency and s 84(2) of the CC Act, GQA as principal is liable for the conduct of its agent and that, contrary to the submissions made by GQA and Mr Wadi, it is not necessary for Mr Wadi's state of mind to be established for these paragraphs to be established at law. GQA and Mr Wadi submit that this allegation should be struck out as it does not disclose any cause of action under the ACL or otherwise.
95 In the pleading it is alleged that ProSEO or, alternatively Mr Bertrand personally, was engaged by GQA ([4] and [6] of the FASOC) and that pursuant to that engagement, ProSEO, or alternatively Mr Bertrand, implemented ORM strategies or provided SEO services to GQA ([5] and [6A] of the FASOC). It is then alleged that the ProSEO conduct, or alternatively the Bertrand conduct, was engaged in on behalf of GQA ([12] and [16] of the FASOC). I note that in its defence to the statement of claim first filed GQA and Mr Wadi, while denying paragraph 4 also admit in answer to it that, between May and October 2014, GQA engaged ProSEO to provide SEO services. In evidence Mr Wadi denies any such engagement by GQA of ProSEO.
96 Particulars were sought by GQA and Mr Wadi of this aspect of the pleading and answers provided as follows:
Paragraph 4
3 Was the 'engagement' express or implied?
4 If express or partly express, was the 'engagement' made orally or in writing?
5 If the 'engagement' was oral or partly oral, please state by whom and to whom the words were said, the date of the conversation and the substance of the words used.
6 If the 'engagement' was in writing or partly in writing, please provide a copy of the writing.
7 If the 'engagement' was implied or partly implied, please particularise all of the facts and circumstances said to give rise to the engagement.
Answer: Items 3-7 are matters for discovery by the Respondents.
Paragraph 6
9 Was the 'engagement' express or implied?
10 If express or partly express, was the 'engagement' made orally or in writing?
11 If the 'engagement' was oral or partly oral, please state by whom and to whom the words were said, the date of the conversation and the substance of the words used.
12 If the 'engagement' was in writing or partly in writing, please provide a copy of the writing.
13 If the 'engagement' was implied or partly implied, please particularise all of the facts and circumstances said to give rise to the engagement.
Answer: Items 9-13 are matters for discovery by the Respondents.
Paragraph 12
19. Is the conduct alleged to have been engaged in by ProSEO on behalf of GQA pursuant to the engagement pleaded in paragraph 4? If not, please provide the same particulars of the engagement as are sought in relation to paragraph 4.
Answer: Yes.
Paragraph 16
23. Is the conduct alleged to have been engaged in by ProSEO (sic) on behalf of GQA pursuant to the engagement pleaded in paragraph 6? If not, please provide the same particulars of the engagement as are sought in relation to paragraph 6.
Answer: Yes.
97 In my view the pleading as to the alleged agency is deficient. It does not plead the material facts out of which the agency is said to arise. If it arises as a result of inferences that are to be drawn, as set out in Qualify Me's written submissions, then, in my view, GQA and Mr Wadi are entitled to know, and Qualify Me ought to plead, the material facts from which it will contend those inferences are to be drawn. While there is no reference to s 84(2) of the CC Act in the pleading, Qualify Me submits that the pleading sufficiently engages the language of the section and that there is no requirement that the section be specifically pleaded. However, in my view, at the very least, a party would expect, if there is reliance on s 84(2) of the CC Act, reference to it in the particulars to the relevant pleading. GQA and Mr Wadi should not be taken by surprise in that respect.