Trade Practices Act 1974 s.82, s.87

State of Western Australia v. Bond Corporation Holdings Ltd and Ors [1990] FCA 522; (1991) ATPR 41-081

Solicitors for the Respondent: Mallesons Stephen Jaques

1. Paragraphs 6, 7, 9, 10.2, 15 and 18.2 of the Amended Statement

of Claim be struck out.

2. The applicant have leave to further amend the statement of

claim.

3. The applicant pay the respondent's costs of the motion.

Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

Mark Turner says that on 29 June 1989 and 29 June 1990 he entered into contracts with a company called Kinian Pty Ltd ("Kinian") under which the company would implant calf embryos into cattle which it owned, lease the cattle back to Mr Turner and manage calves born of the leased cattle for him. The agreements as pleaded have the hallmarks of an end of financial year tax avoidance scheme. Mr Turner says he was induced to enter into the contract by false representations made by Kinian, that the representation constituted misleading or deceptive conduct and that he has suffered loss and damage as a result. He alleges in the alternative that the company has breached express or implied terms of the contracts, that the consideration for them has wholly failed and that he has suffered loss and damage as a result. He claims damages pursuant to s.82 of the Trade Practices Act 1974, alternatively a variation of the contract pursuant to s.87 and damages for breach of contract. By a motion filed on 3 August 1992, Kinian seeks to strike out the statement of claim as disclosing no reasonable cause of action and having a tendency to cause prejudice, embarrassment or delay. The principles which regulate the power of the Court to strike out a pleading are well established and require that the power be exercised sparingly and only where there is a manifestly untenable case.

2. The first complaint raised on the motion is that the facts falsifying the 1989 representations are pleaded as particulars rather than as material facts. The objection is well founded but it is not a strike out point in this case and is readily met by deletion of the word "PARTICULARS" where it appears in paragraph 4. The second complaint, which relates to paras. 2 to 6 of the statement of claim, is that there are no facts pleaded to establish a causal link between entry into the 1989 contracts which resulted from the alleged misleading or deceptive conduct and the loss or damage suffered by Mr Turner. That is, it is said, he has failed to plead that the contracts were breached. The short answer to that latter proposition is that breach of the contracts is not necessary to establish loss flowing from a contravention of the Trade Practices Act which induced entry into them. The causal link to loss, however, is not adequately exposed. The fact that Mr Turner suffered loss and damage is asserted at para.6 without additional facts relating to it being pleaded. Particulars are provided by reference to various heads of loss. The causal link between the fees paid under the agreement and the conduct complained of is self explanatory. However, the reference to penalties which will or may be imposed by the Deputy Commissioner of Taxation and liabilities to pay tax are neither self explanatory nor explained. The pleading of loss pleads material facts as particulars and fails to plead the facts necessary to show how it is said that the loss resulted from Kinian's conduct. Paragraph 6 cannot stand in its present form. In my opinion the so called particulars to that paragraph form part, but not the whole of the material facts necessary to establish the loss which is an element of the cause of action under s.82.

3. The next complaint relates to para.7 which says:

"Further and in the alternative, to the extent that the

representations are found to be representations as to

future matters the Applicant will rely on s.51A Trade

Practices Act 1974."

I accept that the form of pleading is unsatisfactory. A party invoking the application of s.51A does not discharge the duty of informing the Court and the respondent of the case to be made by resorting to an ambit claim of this kind. If s.51A is to be invoked then the representation in respect of which it is invoked must be identified. The general approach to pleading s.51A was outlined in State of Western Australia v. Bond Corporation Holdings Ltd and Ors [1990] FCA 522; (1991) ATPR 41-081 at 52,279. A party invoking s.51A in respect of a representation as to a future matter should make clear that it is doing so. In this way the respondent will know that, if the representation was made, it has the burden of showing and must plead that there were reasonable grounds for making it. The proposition that the specific representations relied upon must be identified is a corollary of that more general statement. There are obvious evidentiary implications for the respondent's case if the section is applicable to a particular representation. Paragraph 7 is embarrassing in its present form.

4. Paragraph 8 pleads that it was an express or implied term of the contracts and each of them that Kinian would implant embryos into the cattle and produce calves therefrom which complied with the contract description. The express term is not identified and the implication is said to arise "as a matter of law and/or to give the contracts business efficacy". The alleged breach is that Kinian "failed to implant embryos of the contract description into the cattle and/or to produce calves which complied with the contract description". As a result it is said that the consideration for the contracts has wholly failed and Mr Turner has suffered the loss and damage. The complaint is made that it is not known whether Mr Turner alleges that Kinian failed to implant embryos of the contract description or whether the embryos, having been implanted, the calves were stillborn. In my opinion, the pleading as it stands is adequate, although barely so. No doubt Mr Turner is faced with the difficulty, arising from the nature of the arrangements, of not knowing precisely what has happened because the cattle in question were part of a herd which he may never have seen.

5. The claim for loss and damage flowing from the breach relies upon the same heads of damage as are claimed under s.82. The contractual measure may, but will not necessarily support all elements of that claim. The incorporation in para.10.2 of the particulars of loss to para. 6 does not explain the way in which that loss relates to the contractual measure. The problem in this regard is analogous to that which arises with respect to para.6. Paragraph 10.2 cannot stand in its present form.

6. Paragraph 9 is said to be redundant. It pleads that it was an express term of the contract that if a calf produced of the embryos should fail to survive for 9 months after its birth, then Kinian would provide a substitute calf of the same breed and of equivalent class and quality for the dead calf. It is submitted for Mr Turner that the term is also breached by the alleged failure to produce calves which complied with the contract description. This is not a particularly convincing reply as para.10 expressly relates only to para. 8 and pleads the breach in terms of the term of the contract pleaded in para. 8. The breach of the term pleaded in para. 9 should be spelt out. If it is not, then para. 9 raises a false issue and is embarrassing. It should be struck out although it may be repleaded in an appropriately amended statement of claim.

7. Paragraphs 11 to 15 are attacked on the same basis as paragraphs 2 to 6. In my opinion, paragraph 15 which sets up the loss said to flow from the contravention cannot stand for the same reasons as apply to para.6. Paragraph 16 is embarrassing for the same reasons as para.7 in relation to future representations. The damages alleged for breach of contract in paragraph 18.2 incorporate by reference those set up under para.15.

8. The relief sought in para. 19 is attacked on the basis that the claim for a variation of the contracts is inconsistent with the allegations that the consideration for them has wholly failed. Alternatively, it is said there are no material facts to support the claim for a variation. The claim for variation is made in the alternative. Whether that claim could be supported by facts established at trial can be a matter for argument at trial. The paragraph can stand.

9. On the respondent's motion filed 3 August 1992 it is ordered that:

1. Paragraphs 6, 7, 9, 10.2, 15 and 18.2 of the Amended Statement

of Claim be struck out.

2. The applicant have leave to further amend the statement of

claim.

3. The applicant pay the respondent's costs of the motion.