Saizeriya Co Ltd v Peregrine Management Group Pty Ltd

the claims made by Saizeriya 4 Saizeriya Australia is a subsidiary of Saizeriya Japan (a company engaged in the business of establishing and conducting restaurants in Japan) and was established to conduct a food processing operation at Melton in Victoria ("the Melton site"), in order to supply products exclusively for the use of Saizeriya Japan in its restaurants. 5 The applicants' amended statement of claim provides the following account of the circumstances that led the applicants to commence the present proceeding. According to the amended statement of claim, in 1999, Saizeriya Japan examined options in Victoria and elsewhere for the location of a food processing plant. In discussions with the Victorian Government in early 2000, the Government informed the applicants that, if the plant were located in Victoria, then the applicants would receive special treatment and concessions. In early 2001, the applicants began the design work and the earthworks needed for the food processing plant at the Melton site. From April to November 2001, however, the applicants closed down the site as a result of industrial disputation. The applicants initiated legal proceedings against the AMWU in respect of a secondary boycott ("the secondary boycott proceedings"). In late 2001, Saizeriya Japan decided that, in order to protect its business in Japan and obtain food products for its business, it should consider abandoning the Melton site and establishing a food processing plant in New Zealand. In late 2001 and early 2002, the applicants visited New Zealand for this purpose and purchased a factory in New Zealand that could be converted for use as a food processing plant. The Victorian Government met with the applicants when it became aware that they might abandon their undertaking in Victoria. The Victorian Government recommended that the applicants use Peregrine and, in particular, Mr Paynter, as the industrial relations consultant for the development of the plant, in order to complete the project by 31 August 2002. Peregrine subsequently provided industrial relations services to the applicants. On Peregrine's advice, the applicants retained IMS to perform the installation works. The food processing plant was not, however, ready for production by 31 August 2002. In March 2003, the applicants engaged another contractor to complete the remaining installation works at a cost of about $970,000. 6 The applicants allege that, in reliance on representations made by Peregrine and Mr Paynter, on behalf of Peregrine, that Peregrine was, amongst other things, "an experienced and well qualified industrial relations consultant suitable for the needs of Saizeriya Japan and/or Saizeriya Australia", the applicants accepted Peregrine as the appropriate expert to provide industrial relations consulting services at the Melton site. The applicants also claim that, in reliance on the representations of Peregrine and Mr Paynter that IMS was, amongst other things, "the most appropriate contractor for the installation works", the applicants retained IMS to perform the installation works. The applicants allege that these representations were false; that Peregrine was in breach of warranties; that Peregrine engaged in misleading and deceptive conduct contrary to s 52 of the Trade Practices Act and s 9 of the Fair Trading Act; and that, by reason of this conduct, the applicants have suffered and continue to suffer loss and damage. Further or alternatively, the applicants allege that Peregrine was negligent in performing its role as an industrial relations consultant and thereby caused the applicants loss and damage. 7 The applicants allege further or in the alternative that, in order to induce them to retain IMS, IMS, and Mr Triggs on behalf of IMS, represented, amongst other things, that it "would exercise all reasonable skill and care in carrying out the installation works" and that it "had relevant experience performing installation works in the food processing industry". The applicants say that they engaged IMS in reliance on these representations. The applicants allege that these representations were false; that IMS was in breach of warranties; that IMS engaged in misleading and deceptive conduct contrary to s 52 of the Trade Practices Act and s 9 of the Fair Trading Act; and that, by reason of this conduct, the applicants have suffered and continue to suffer loss and damage. Amongst other things, the applicants assert that they would not have engaged IMS to conduct the installation work had Peregrine and Mr Paynter not recommended IMS and had IMS not represented that it was a skilled installation contractor. Further or alternatively, the applicants allege that IMS was negligent in making the representations and in the installation work, and in breach of its retainers. As a result, the applicants suffered loss and damage, including the additional costs arising from the resulting delays in the opening of the Melton site and the cost to complete the installation works after February 2003.

The IMS Motion 8 I deal first with the IMS motion. IMS has moved for orders under s 5(4)(b) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) ("the Cross-Vesting Act") and s 86A of the Trade Practices Act. Subsection 5(4) of the Cross-Vesting Act provides: "Where (a) a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Federal Court or the Family Court (in this subsection referred to as the first court); and (b) it appears to the first court that: (i) the relevant proceeding arises out of, or is related to, another proceeding pending in the Supreme Court of a State or Territory and it is more appropriate that the relevant proceeding be determined by that Supreme Court; (ii) having regard to: (A) whether, in the opinion of the first court, the relevant proceeding or a substantial part of it would have been incapable of being instituted in that court, apart from this Act and any law of the Australian Capital Territory or the Northern Territory relating to cross-vesting of jurisdiction; and (B) whether, in the opinion of the first court, the relevant proceeding or a substantial part of it would have been capable of being instituted in the Supreme Court of a State or Territory, apart from this Act and any law of a State or Territory relating to cross-vesting of jurisdiction; and (C) the extent to which, in the opinion of the first court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State or Territory referred to in sub-subparagraph (B) and not within the jurisdiction of the first court apart from this Act and any law of the Australian Capital Territory or the Northern Territory relating to cross-vesting of jurisdiction; and (D) the interests of justice; it is more appropriate that the relevant proceeding be determined by that Supreme Court; or (iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of a State or Territory; the first court shall transfer the relevant proceeding to that Supreme Court." 9 Section 86A of the Trade Practices Act relevantly provides: "(1) Where: (a) a civil proceeding instituted (whether before or after the commencement of this section) by a person other than the Minister or the Commission is pending in the Federal Court; and (b) a matter for determination in the proceeding arose under Part IVA or IVB or Division 1, 1A or 1AA of Part V; the Federal Court may, subject to subsection (2), upon the application of a party or of the Federal Court's own motion, transfer to a court of a State or Territory the matter referred to in paragraph (b) and may also transfer to that court any other matter for determination in the proceeding. (2) The Federal Court shall not transfer a matter to another court under subsection (1) unless the other court has power to grant the remedies sought before the Federal Court in the matter and it appears to the Federal Court that: (a) the matter arises out of or is related to a proceeding that is pending in the other court; or (b) it is otherwise in the interests of justice that the matter be determined by the other court." 10 Paragraph 5(4)(b) of the Cross-Vesting Act and s 86A of the Trade Practices Act both draw attention to the same broad "interests of justice" criterion, which is now relied on by the third and fourth respondents. Therefore, for the purpose of this judgment, I discuss the proposed transfer in terms of par 5(4)(b) of the Cross-Vesting Act. The following discussion would also be relevant in connection with s 86A of the Trade Practices Act. 11 In support of their application, IMS and Mr Triggs rely on two affidavits of their solicitor, Wilhelm Kyle Laird Siebel (sworn on 12 September 2003 and 6 October 2003), as well as the submissions and another affidavit of Mr Siebel that have been filed in the arbitration (both exhibited to an affidavit of David Opperman sworn on 2 October 2003). 12 IMS and Mr Triggs submitted that this matter is more appropriately conducted in the Supreme Court of Victoria ("the Supreme Court") than this Court. According to them, the interests of justice favour the transfer because the procedures available under the Supreme Court (General Civil Procedure) Rules 1996 ("the Supreme Court Rules") will facilitate a more efficient administration of the dispute. They further contended that the specialist Building Cases List of the Supreme Court is a more appropriate forum than the Federal Court of Australia for the conduct of matters of the kind arising in this proceeding. If the matter were entered into the Building Cases List, IMS would, it appears, seek to have the building and construction issues determined in the arbitration or by a special referee. 13 According to Mr Siebel's affidavit of 12 September 2003, Saizeriya Australia entered into two separate contracts with IMS for the installation of process and packaging equipment at the Melton site. These contracts were (1) a Schedule of Rates Contract made on or about 15 May 2002 and (2) a subsequent Lump Sum Contract made on or about 21 January 2003 (collectively, "the Contracts"). On 11 June 2003, Mr Siebel, on behalf of IMS, issued notices of dispute to Saizeriya Australia under the Contracts. The notices of dispute claimed payment of unpaid invoices and damages for "work done and materials provided by IMS to Saizeriya under the Contracts, misleading and deceptive conduct, unconscionable conduct, wrongful termination of the Lump Sum Contract and, in the alternative, quantum meruit claims and unjust enrichment claims". According to Mr Siebel, the matters raised by the notices of dispute were not resolved within the 28-day period stipulated in the Contracts and IMS referred the matters to arbitration. Saizeriya Australia stated that it intended to commence proceedings against IMS in the Federal Court. The parties did not agree upon an arbitrator. On 30 July 2003, Mr Siebel, on behalf of IMS, wrote to the President of the Australasian Dispute Centre ("ADC") requesting the appointment of an arbitrator. As already noted, Mr Elliot-Smith was ultimately appointed. 14 Plainly enough, the Contracts are, as Mr Siebel described them, "construction and engineering contracts for major building works involving the installation of significant items of machinery and equipment". Mr Siebel deposed that, in order to assess the applicants' claims, the Court would be required to assess the installation works performed by IMS under the Contracts, including valuing the works and the equipment and materials supplied by IMS; ascertaining the extent to which IMS performed its obligations under the Contracts; determining whether the installation works were completed in a timely manner under the Contracts; and considering the claims for payment made by IMS under the Contracts. Mr Siebel also deposed that "the expertise of [a] specialist judge in the Building Cases List is likely to result in a more expeditious and satisfactory determination of this matter". In his opinion: "… the Supreme Court of Victoria …is better equipped than this Court to be able to supervise and control a dispute relating to major construction and engineering works; and … has recourse to the option of referring matters requiring specialist, technical expertise for proper resolution of such matters, which recourse this Court does not have." 15 IMS and Mr Triggs submitted that, whilst the applicants relied on three causes of action (i.e., breach of contract, negligence and breach of s 52 of the Trade Practices Act and/or s 9 the Fair Trading Act), the central issue was whether or not IMS performed its obligations under the Contracts. This issue must, they submitted, be determined first because the representations on which the applicants' misleading and deceptive conduct (and negligence) claims depend relate to the capability of IMS to fulfil its obligations under the Contracts. IMS and Mr Triggs contended that if there was no breach of the Contracts, then the misleading and deceptive conduct (and negligence) case would fall away; and if IMS were found to have breached its obligations under the Contracts, then an award of contractual damages would preclude damages being recovered under s 52 of the Trade Practices Act (and under the Fair Trading Act and in negligence). IMS and Mr Triggs also submitted that their draft defence and cross-claim supported this contention. The focus of this proceeding was, so they said, a non-federal claim "with a section 52 claim tacked onto it". At the hearing, IMS and Mr Triggs also submitted that the case against the other respondents, Peregrine and Mr Paynter, would fail if IMS was found not to have breached the Contracts because there would be no sustainable claim against them for loss and damage. 16 In written submissions, IMS and Mr Triggs contended that: "Courses available in the Supreme Court include staying the wider issues in the proceeding whilst the building and construction issues are resolved in arbitration; alternatively, the judge in charge of the Building Cases List might refer building and construction questions to be resolved by a Court appointed referee." They argued that the Supreme Court Rules, and in particular O 50, gave the Supreme Court wider powers than this Court in relation to references out of Court. They contended that, under O 72 r 1 of the Federal Court Rules ("the Federal Court Rules"), this Court could refer a proceeding to arbitration only with the agreement of the parties. Under O 50 of the Supreme Court Rules, so they said, the Supreme Court could, of its own motion and without the parties' consent, compulsorily refer a question or questions to a special referee for determination. This was potentially significant, given the fact that Saizeriya Australia currently opposes the arbitration. The Supreme Court was, so they submitted, better placed to manage the role of the existing arbitration within the court proceeding. 17 IMS and Mr Triggs drew particular attention to the existing arbitration, noting that the arbitration was governed by the Commercial Arbitration Act 1984 (Vic) ("the Commercial Arbitration Act"). It was, they submitted, more appropriate for the Supreme Court to decide any application for a stay or challenge to the arbitration under the Commercial Arbitration Act than for this Court. 18 Having regard to all these matters, IMS and Mr Triggs submitted that it was in the interests of justice (in the sense referred to in par 5(4)(b)(iii) of the Cross-Vesting Act) that the proceeding be transferred to the Supreme Court. 19 The submissions of Peregrine and Mr Paynter on the question of transfer were linked to their submissions on their strike-out motion. Their counsel submitted that the applicants' damages claim was the "key" to the case. He contended that the claim for damages, which was found in par 21A of the amended statement of claim, had nothing to do with the representations pleaded against Peregrine and Mr Paynter. According to counsel for Peregrine and Mr Paynter, the measure of pleaded damages was, effectively, the difference between the applicants' position had IMS performed the Contracts and the applicants' position as a result of what was said to be non-performance by IMS. Counsel's argument was that the misleading and deceptive conduct claims against Peregrine and Mr Paynter could not stand without a resolution of the Contractual issues involving IMS. Counsel drew attention to the fact that there was no serious industrial relations issue disclosed either in the applicants' pleading, or in any affidavit material filed on their behalf, notwithstanding that the applicants had ample time to prepare for the transfer application. Counsel for Peregrine and Mr Paynter also noted that this proceeding was commenced after IMS had instituted the arbitration, in which IMS was claiming payment of substantial amounts of money. 20 In written submissions, the applicants maintained that to characterise the matters in issue as "essentially construction and engineering matters … discount[ed] the materiality of the section 52 claims against Peregrine, Paynter, IMS and Triggs". Referring to the affidavits of Graeme Peterson sworn on 1 October 2003 and David Opperman sworn on 2 October 2003, they submitted that: "(a) the current Federal Court proceeding is primarily a TPA misrepresentation case which arose from an industrial relations context; (b) the Federal Court is the more appropriate Court to hear and determine the Applicants' claims; and (c) IMS overstates the alleged procedural advantages of appointing a Special Referee in the Building Cases List of the Supreme Court of Victoria and has not taken into account the practical limitations of any such appointment." At the hearing, the applicants emphasized that it was premature to decide whether the proceeding should be transferred to the Supreme Court because the pleadings were not closed. According to the applicants, it was only once the pleadings were completed that it would be possible for the Court reliably to ascertain the nature of the case. 21 According to the applicants, their case is that "both Peregrine and IMS were in fact unsuitable for the tasks that they were appointed to perform and there was never any reasonable basis for representing that Peregrine and IMS were suitable for those tasks". They added "the Federal Court proceedings are primarily concerned with the pre-contractual misleading and deceptive conduct of Peregrine, Paynter, IMS and Triggs". They accepted, however, that this conduct could not be "meaningfully separated and compartmentalised from an analysis of the performance of IMS after it was retained by Saizeriya Australia". 22 In their written submissions, the applicants said: "[T]he industrial relations issues will become more significant in view of the entities and persons involved in the conduct that the Applicants allege is misleading and deceptive as the Applicants may seek to join certain unions as respondents … ." The applicants submitted that the industrial relations issues might assume more importance depending on the defence raised by IMS to the breach of contract claim. They stated that they had yet to decide whether to join unions to the present proceeding and whether they should seek to reinstate the secondary boycott proceedings. These decisions would, so they said, be affected by the nature of the respondents' defences. According to the applicants, both joining unions to the proceedings and reinstating the secondary boycott proceedings would bring an industrial element into the matter. 23 Referring to some observations of Byrne J in Abigroup Contractors Pty Ltd v BPB Pty Ltd [2000] VSC 261 at [15], the applicants further contended that the respondents overstated the procedural advantages of the Supreme Court, because "the powers under Order 50 of the Supreme Court Rules are in fact exercised in only very limited circumstances"; and "apart from its powers under Order 72 of the Federal Court Rules, this … Court can appoint an expert as the Court expert to enquire into and report upon a relevant question which arises in any proceeding under Order 34 of the Federal Court Rules". 24 In response to the applicants' contention that a decision on transfer is premature, counsel for IMS and Mr Triggs submitted that, if no decision were taken until the pleadings were closed, then IMS would be prejudiced by losing the ability to seek a stay of the proceeding as of right under s 53 of the Arbitration Act. These respondents had, counsel emphasized, specifically filed a "without prejudice" defence in order to preserve this "as of right" ability. The respondents contended that the applicants had already had sufficient time to consider their position with respect to other potential parties, such as unions.

reasoning on the transfer application 25 The outcome of the IMS motion depends on s 5(4)(b)(iii) of the Cross-Vesting Act. In Bankinvest AG v Seabrook (1988) 14 NSWLR 711 Street CJ said, at 714, in relation to the cross-vesting scheme, that: "It calls for what I might describe as a "nuts and bolts" management decision as to which court, in the pursuit of the interests of justice, is the more appropriate to hear and determine the substantive dispute. Consideration of textured principle and deep learning - in particular principles of international law such as forum non conveniens - have no place in a cross-vesting adjudication. There is, in substance, no principle to be enunciated other than the necessity of applying the specific considerations stated in the cross-vesting legislation, primary amongst which is the pursuit of the interests of justice." 26 Further, in connection with the "interests of justice" criterion in s 5(4)(b), Wilcox J observed in Bourke v State Bank of New South Wales (1988) 22 FCR 378 at 394 that: "Under that rubric, as it seems to me, the Court is entitled to consider not only the ability of a particular court to deal with all aspects of a matter, and to make and to enforce all the orders to which a party may be entitled, but also adjectival matters such as the availability of particular evidence, the procedures to be adopted, the desirable venue for trial and the likely hearing date. It is not in "the interests of justice" to adopt a course, in relation to those matters, which places unnecessary burdens and delays upon the parties to the litigation." In the present case, the respondents submit that the interests of justice would be better served in the Supreme Court than in this Court because the procedures available in that Court are better adapted to building and constructions cases and the Supreme Court is more familiar than this Court with cases of that kind. 27 I turn first to the submission that this matter is essentially a building case with "some … representational claims tacked around the edges". If it were indeed the case that this matter involved no more than a dispute about a building contract, then I would be inclined to the view that the "interests of justice" favoured the transfer of this matter to the Supreme Court, having regard to that Court's greater familiarity with matters of this kind and to s 5(4)(b)(ii)(A), (B) and (C) of the Cross-Vesting Act. 28 The question is whether this matter can really be so narrowly confined. In the amended statement of claim, the applicants make the following allegations against IMS: (a) breach of contract on the basis of IMS's failure to: (i) exercise reasonable skill and care in carrying out the installation works (pars 37 - 40A); (ii) complete its obligations under the first retainer and/or second retainer (pars 37, 37A, 38, 40 and 40A); (iii) complete its obligations by the Date for Practical Completion under the second retainer (pars 38, 40 and 40A); (iv) select suitably qualified and appropriate workers to perform work on the installation works (pars 37, 37A, 40 and 40A); and (b) misleading and deceptive conduct under the Trade Practices Act and the Fair Trading Act arising from: (i) representations made by IMS prior to entry into the first and second retainers (pars 26, 28 and 29) to: (A) exercise reasonable skill and care in carrying out the installation works; (B) carry out the installation works competently;

(C) complete the installation works within 12 weeks of being given access to the site;

(D) select suitably qualified and appropriate workers to work on the installation works; and

(c) breach of the duty of care owed by IMS to the applicants to: (i) act with all due skill and care in: (A) completing its obligations under the first and/or second retainers (par 43(a) and (b)); (B) making representation in relation to IMS (par 43(d)); (C) giving accurate professional advice to the applicants in relation to the project (par 43(e)); (ii) exercise all reasonable skill and care in carrying out the installation works (particulars (i) to par 43); (iii) carry out the installation works in a timely manner (particulars (ii) to par 43); (iv) select suitably qualified and appropriate workers to carry out the installation works (particulars (iii) to par 43); (v) have any or any proper procedure for the identification and selection of qualified and appropriate workers (particulars (iv) to par 43); (vi) advise the applicants that it was not competent to perform the installation works (particulars (v) to par 43); (vii) act properly or at all to safeguard and protect the financial interests of the applicants (particulars (vi) to par 43); (viii) take any or any proper care and attention with respect to the hiring of equipment for use at the site (particulars (vii) to par 43); (ix) take any or any proper attention in the provision of invoices to the applicants in respect of the installation works performed on-site (particulars (viii) to par 43); and (x) give accurate advise or assessment to the applicants about when the installation works would be complete (particulars (ix) to par 43). 29 At this stage, having regard to the amended statement of claim, it appears that, in determining the applicants' breach of contract, trade practices and negligence claims against IMS, a court will be required, amongst other things, to: (a) assess the installation works performed by IMS; (b) ascertain the extent to which IMS performed its obligations under the Contracts; (c) determine whether the installation works were completed in a timely manner, having regard to whether IMS is and was entitled to extra time or additional payment on the basis of its claims for extensions of time and/or variations; (d) consider whether the claims for payment of IMS are reasonable in view of the value of the installation works performed by IMS, having regard to whether IMS had sufficient skills and experience to undertake the installation works and select workers with adequate skills and expertise; and (e) consider the surrounding factual matrix. 30 The applicants apparently accept that, as things now stand, these will be important parts of the trial court's inquiry: see Opperman affidavit, par 59. Inquiries of this kind are typical of a building and construction case. Further, the amended statement of claim lends support to the proposition that, if the applicants failed in their breach of contract claim against IMS, they would struggle to make out their case against IMS for damages in negligence or under the Trade Practices Act. In the absence of knowledge of the substance of the respondents' defences, it is, however, impossible to form any concluded view on matters of this kind (see further below).

31 The amended statement of claim also makes significant allegations against Peregrine and Mr Paynter. These allegations cannot be so easily confined because there was apparently no contractual relationship between Peregrine and the applicants. As against Peregrine and Mr Paynter, the applicants claim:

(a) misleading and deceptive conduct under the Trade Practices Act and the Fair Trading Act arising from:

(A) act responsibly and cost effectively in negotiations with unions to ensure that there were no industrial disputes on site and, to the extent that industrial disputes did occur, they would not affect the timely performance of the installation works at the Melton site (pars 17(b) and 20(d));

(B) recommend an appropriate entity to manage the installation of equipment on-site as IMS:

· was not an experienced supplier of labour (pars 17(d)(i) and 20(d));

· was not skilled in dealing with the unions and their claims (pars 17(d)(ii) and 20(d));

· was not capable of managing the site at a senior level (pars 17(d)(iii) and 20(d));

· was not committed to achieving the completion dates (pars 17(e)(i) and 20(d));

· was not capable of managing and co-ordinating the electrical and mechanical installation works (pars 17(e)(ii) and 20(d));

· did not use carefully selected and managed labour (pars 17(e)(iii) and 20(d));

· did not have a track record of negotiating and communicating with the unions (pars 17(e)(iv) and 20(d));

· did not use a good and effective methodology to enhance the installation works program (pars 17(e)(v) and 20(d));

(ii) Peregrine's and Mr Paynter's lack of relevant experience or qualifications as an industrial relations consultant suitable for the needs of the applicants (pars 17(a) and 20(d)); and

(b) breach of duty of care owed by Peregrine and/or Mr Paynter to the applicants to act with due skill and care in:

(i) providing industrial relations consulting services and advice to them (par 25(a));

(ii) managing the industrial relations issues on-site (par 25(b));

(iii) advising the applicants on which installation works contractor to retain (par 25(c)); and

(iv) assisting and advising the applicants on an industrial relations strategy to ensure that the food processing plant would be ready for production by 31 August 2002 (par 25(d)).

32 It is clear enough that the applicants' claims against Peregrine are closely linked to the claims against IMS. As already noted, the applicants allege that Peregrine's misleading and deceptive conduct caused them to rely on Peregrine's advice in the management of industrial relations at the Melton site and to rely on Peregrine's recommendation of IMS as a suitable contractor. As the applicants' claim is presently formulated, the extent to which the applicants can establish that Peregrine failed to recommend a competent installation contractor will apparently depend on whether the applicants can establish that IMS was incompetent and lacked the necessary skills and expertise to carry out the installation works. Further, the applicants' claim against Peregrine for loss and damage is alleged to arise from Peregine's representations about IMS (pars 14-16), which the applicants say were not based on reasonable grounds (par 18) and were false, misleading and deceptive (par 17). As the applicants apparently acknowledge (Opperman, par 69), the measure of any damages for which Peregrine may be liable will depend, in part, on an assessment of the loss and damage suffered by the applicants as a result of IMS's failure to perform the installation works in a competent manner. As all the respondents noted, the loss and damage that the applicants claim arises from Peregrine's misconduct, at least as currently particularised, resembles the loss and damage alleged to flow from the applicants' breach of contract claim against IMS. If the applicants failed against IMS, then, so the respondents argued, they would fail against Peregrine. For various reasons, but principally because the pleadings are incomplete, it does not seem to me that I can form a concluded view about this aspect of the case. 33 I accept the applicants' submission that, since the pleadings are not closed, it is premature to characterise the proceeding as essentially a building and construction case. The proceeding is, plainly enough, more than a typical building case. As counsel for the applicants noted, this proceeding has a complex and unusual history. According to the amended statement of claim, as a result of industrial action, work at the Melton site effectively ceased for the best part of a year and, in consequence, the applicants took steps to move their investment to New Zealand. According to the amended statement of claim, they were stopped from so doing only because of discussions with the Victorian Government which, amongst other things, recommended the engagement of an industrial relations management specialist to manage the project in Victoria. Against this background, I would, at this early stage, hesitate before characterising the proceeding as a whole. There are many potential levels of complexity that may yet emerge. 34 Peregrine and Mr Paynter have not given any indication of what their defences might be. IMS and Mr Triggs (against whom separate claims are made) have filed an "indicative" defence and cross-claim. The defence consists largely of bare denials or similar. It is not an informative document, although the cross-claim emphasizes that, from the respondents' point of view, the case is a contractual one. Counsel for the applicants intimated to the Court that IMS might ultimately rely on contractual provisions relieving it of liability "in the event of industrial relations actions by individual workers or by the unions which meant that the obligations contained in the contract were not satisfied". In the absence of defences of an appropriately detailed kind, the applicants are not, so their counsel said, in a position to decide whether it was appropriate to join a union as a third party or to add a union as a respondent. I accept the applicants' submission that, even if IMS were not contractually liable for the losses sustained by them as a result of industrial relations activities, the amended statement of claim raises the possibility that Peregrine might well be so liable. It was open to the applicants to look to both IMS and Peregrine for damages. Whatever may turn out to be the correct position, I accept that it is premature for the Court now to characterise this proceeding as simply, or essentially, a building case, as the respondents would have it. If, however, the proceeding were to retain its present dimensions when the pleadings close, then this characterisation might very well be apposite. 35 Further, in light of the applicants' submissions, the amended statement of claim and the affidavits of Messrs Peterson and Opperman, I cannot discount the possibility that even now the applicants may make an application to join a union or unions to this proceeding. Mr Opperman deposed that he expected the applicants "will make an application for non-party discovery to obtain further information and documents in relation to [the unions'] conduct" and "review this issue after the Respondents have filed defences and any third party claims and/or discovery". Mr Petersen also stated that the applicants were considering the reinstatement of the earlier secondary boycott proceedings. The full ramifications of these matters, which give yet another level of complexity to the proceeding, are uncertain at this stage. 36 If the applicants are correct in their submission that this proceeding is multidimensional, the Supreme Court will face the same difficulties in managing the case as this Court. To some extent, as the respondents ultimately conceded, the respondents initially overstated the procedural advantages of the Supreme Court as compared with this Court, although it is, I think, true to say that O 50 of the Supreme Court Rules would, in many building cases, better equip the Court to manage the case. 37 Order 50 of the Supreme Court Rules provides for a reference to a special referee. The Order relevantly reads:

50.01 (1) In any proceeding the Court may, subject to any right to a trial with a jury, refer any question to a special referee for him to - (a) decide the question; or (b) give his opinion with respect to it. (2) Where an order is made under paragraph (1), the Court - (a) shall state the question referred; (b) shall direct that the special referee make a report in writing to the Court on the question referred to him stating, with reasons, his decision or opinion; (c) may direct that the special referee give such further information in his report as it thinks fit. (3) The Court may upon application by a party or by the special referee set aside or vary an order made under this Rule. … 50.04 The Court may as the interests of justice require adopt the report of a special referee or decline to adopt the report in whole or in part, and make such order or give such judgment as it thinks fit. The Supreme Court Rules, in O 50.07 and O 50.08, also provide for references to mediation and arbitration. 38 Pursuant to O 50, the Supreme Court may refer to a special referee a question of fact, a question of law, or a question of fact and law. A reference may be appropriate where the question requires some technical expertise for its resolution, as in many building cases. The Supreme Court will not, however, ordinarily make a reference to a special referee where a party opposes the reference. The Court's approach was explained by Byrne J in Abigroup at [15] as follows: " … an order for reference out will not be made over the opposition of a party unless a case for this is demonstrated by the applicant. The applicant must show that the question or questions to be referred are appropriate to be enquired into before the other questions in issue in the proceeding. It must, further, demonstrate that the proceeding is of such an exceptional nature that the genuine wishes of the respondent for a judicial determination should be disregarded. This is not the case for me to attempt to enlarge upon this requirement and I will not do so. It is sufficient that I emphasise that the applicant will not succeed unless it is able to demonstrate at least that the procedure which it would have the court adopt rather than a conventional trial is more likely to achieve the objectives of the Building Cases List, namely, the effective complete, prompt and economical determination of the proceeding." 39 As things presently stand, it seems that the applicants are not disposed to consent to a reference under O 50 of the Supreme Court Rules if the entirety of this proceeding is transferred to the Supreme Court. Thus, in written submissions, the applicants refer to this passage from Abigroup and say: "[T]here is no basis to suggest that these broad criteria can be satisfied. Further, IMS and Triggs have made no effort to demonstrate how the appointment of a Special Referee would facilitate ' … the effective, complete, prompt and economical determination in the proceeding …'." It appears, however, that the applicants might well take a different approach if the trial judge in this Court were to take the view, once the pleadings had closed, that there was merit in some aspects of the building contract part of the case being sent to a special referee. There was agreement in principle, so the applicants' counsel said, to this course. Just how this might be done can be discussed at a later time. 40 In this connection, too, the applicants refer to O 34 of the Federal Court Rules. Pursuant to O 34 r 2 the Court may, on its motion or on application, appoint a court expert. A court expert appointed pursuant to this rule may assist the Court in dealing with evidence of a technical kind. Order 34 r 2 relevantly provides: "(1) Where a question for an expert witness arises in any proceedings the Court may, at any stage of the proceedings, on its own motion or on application by a party or the Registrar: (a) appoint an expert as court expert to inquire into and report upon the question; (b) authorize the court expert to inquire into and report upon any facts relevant to his inquiry and report on the question; (c) direct the court expert to make a further or supplemental report or inquiry and report; and (d) give such instructions as the Court thinks fit relating to any inquiry or report of the court expert." 41 Order 34 r 3 states: "(1) The court expert shall send his report to the Registrar, together with so many copies of the report as the Court may direct. (2) The Registrar shall send a copy of the report to each party interested in the question. (3) The report shall, unless the Court otherwise orders, be admissible in evidence on the question on which it is made, but shall not be binding on any party except to the extent to which that party agrees to be bound by it." It is probably unnecessary to say that the appointment of a court expert is not the same as reference to a special referee. In making a reference to a special referee in a building case, a court follows a well-known path. This, plainly enough, has its own inherent efficiencies. 42 The rules of both courts provide for reference to arbitration and mediation. In written submissions, IMS and Mr Triggs also contended that: "…it would be possible to appoint the Arbitrator [Mr Elliott-Smith] as a special referee pursuant to order 50 if the parties are not able to agree on which issues should be refereed to the Arbitrator or other special referee and which issues (if any) should remain before the Court." This course would not be available in this Court. In this Court, however, a reference to arbitration or mediation may be made notwithstanding that a party does not consent. The deficiencies in O 72 of the Federal Court Rules, which were previously noted by Wilcox J in Trade Practices Commission v Collings Construction Pty Ltd (1994) 53 FCR 137 ("Collings Constructions"), had been met by amendment to the Rules. 43 As already noted, IMS and Mr Triggs also supported their motion by reference to the Commercial Arbitration Act and, in particular, s 53. By virtue of s 79 of the Judiciary Act 1903 (Cth), however, recourse may well be had to the Commercial Arbitration Act in proceedings in this Court. Alternatively, this Court has power pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth), to order a stay of its own proceeding if it were appropriate in order to do justice between the parties: see Collings Constructions at 142 per Wilcox J. 44 The question that remains is whether IMS will suffer any real prejudice if I were to defer determining this application for transfer until the pleadings had closed. Counsel for IMS stated that IMS and Mr Triggs were not intending to take what I shall call "industrial relations defences" and that they had prepared an "indicative" defence in order to avoid compromising their rights under s 53 of the Arbitration Act. Section 53 of the Arbitration Act relevantly provides: "(1) If a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement, that other party may, subject to sub-section (2), applyto that court to stay the proceedings and that court, if satisfied - (a) that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement; and (b) that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration - may make an order staying the proceedings and may further give such directions with respect to the future conduct of the arbitration as it thinks fit. (2) An application under sub-section (1) shall not, except with the leave of the court in which the proceedings have been commenced, be made after the applicant has delivered pleadings or taken any other step in the proceedings other than the entry of an appearance." 45 There are, it seems to me, at least two answers to this submission. First, it is open to the respondents to make application for a stay of these proceedings in this Court before pleadings are delivered. Secondly, if the respondents choose to file their defence and cross-claim formally, then it is still open to them, with the leave of the court, to make a stay application subsequently. In determining whether leave should be granted, a court would, presumably, have regard to all the relevant circumstances, including these reasons. 46 I am not now persuaded that it would be in the interests of justice that the Supreme Court, as distinct from this Court, determine this proceeding. I would not make the order for transfer at this stage of the proceeding. The IMS motion should be adjourned until the pleadings have closed, when IMS and Mr Triggs shall have liberty to renew their transfer application. I would reserve the costs of the motion.

the strike out motion 47 By motion, notice of which is dated 11 November 2003, Peregrine and Mr Paynter seek orders striking out certain paragraphs of the amended statement of claim. The motion is supported by the affidavit of the first and second respondent's solicitor, Genevieve Herschell Hughes, sworn on 10 November 2003. 48 The respondents rely on O 11 r 16, alternatively O 20 r 2, of the Federal Court Rules. Order 11 r 16 is in the following terms: "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." The principles to be applied on a strike out application are well-established: see Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-130 per Barwick CJ; and Murex Diagnostics Australia Pty Limited v Chiron Corporation (1995) 55 FCR 194 at 203 per Burchett J. I discuss below, and seriatim, the respondents' challenges to the applicants' amended statement of claim. paragraphs 16 and 17 of the amended statement of claim 49 In par 16 of the amended statement of claim, the applicants allege that, in consideration of the applicants retaining IMS to perform the installation works at the Melton site, Peregrine warranted the truth of certain representations that it allegedly made. In par 17, the applicants allege that the representations were false and the warranty was breached. By way of particulars, the applicants say that the warranty was partly constituted by Peregrine's draft report of 24 February 2002 and a letter dated 28 February 2002 from Mr Paynter to Mr Peterson. These documents are exhibited to Ms Hughes' affidavit. I also note that, in his 1 October 2003 affidavit, Mr Peterson deposed, in par 26, to a conversation with Mr Paynter in early February 2002. 50 Peregrine and Mr Paynter contended that neither of the documents referred to in these particulars was "contractual in nature, or even hint[ed] at an intention on behalf of Peregrine to create legal relations". They said further that: "There is absolutely nothing in [Mr Peterson's] account of the alleged conversation which indicates that Mr Paynter made any promissory statements, or that Mr Paynter and Mr Peterson intended to enter into contractual relations in respect of any recommendation that Mr Paynter may have made." According to counsel for Peregrine, Peregrine was engaged by a third party to supply its services, and there was no contract between it and the applicants. Peregrine submitted that the particulars subjoined to par 16 did not make out the applicants' case. 51 It may be that the applicants would fail if they did not adduce any further evidence of the February 2002 conversation referred to in particulars. The applicants submit, however, that, at this stage of the proceeding, the Court ought not to assume that it has the full extent of the evidence before it. I accept this submission, especially as Mr Peterson's affidavit was not prepared for the purpose of meeting Peregrine's strike-out motion. I would not, therefore, accede to the respondents' motion regarding pars 16 and 17 of the amended statement of claim. I would, however, grant leave to the applicants to amend the particulars subjoined par 16 should they so wish. paragraphs 20 and 21 of the amended statement of claim 52 Paragraphs 20 and 21 of the amended statement of claim allege that, by reason of par 75B(1)(a) and (c) of the Trade Practices Act, Mr Paynter was knowingly concerned in Peregrine's alleged contravention of s 52. In written submissions, it was said that Mr Paynter had two complaints about this allegation. They were: "(a) the allegations of material fact necessary to constitute the cause of action have not been pleaded; and (b) although the word 'fraud' has not been used, the allegations made against Mr Paynter involve assertions of serious dishonesty against him. Particulars of the allegation have not been included in accordance with Order 12 Rule 5 or the ethical obligations on practitioners. This [is] in spite of repeated requests that particulars be provided, and the fact that the amended statement of claim constitutes the applicants' third attempt to plead their case." 53 There are particulars subjoined to par 21 to the following effect: "Paynter knew that: (i) the Saizeriya project at Melton was IMS's first project for installation works in Victoria; (ii) IMS was a newly established company without a proven industry record; (iii) IMS had no experience in the food processing industry; (iv) Peregrine did not have an industrial relations agreement in place with the unions in respect of the Melton site." 54 In order for the applicants to make out their claim against Mr Paynter, they must prove that Mr Paynter had knowledge of the essential elements constituting Peregrine's alleged contravention of s 52 of the Trade Practices Act: see Yorke v Lucas (1985) 158 CLR 661 at 670. Amongst other things, they must establish not only that Mr Paynter knew that the representations were made but also that they were misleading or deceptive or likely to mislead or deceive. 55 As counsel for Mr Paynter observed, the applicants have not, as they are required to do, alleged as a material fact that Mr Paynter was aware that each of the representations alleged in par 14 of the amended statement of claim was misleading or deceptive or likely to mislead or deceive. The deficiency cannot be cured by the particulars subjoined to par 21: see, e.g., Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 ("Bond Corp") at 223 per French J. In any event, even as particulars, they are inadequate to support the applicants' claim because they do not apparently relate to each of the representations alleged in par 14 of the amended statement of claim. In the circumstances, I would accept that, as counsel for Mr Paynter submitted, the applicants have not properly pleaded a cause of action against him arising from his alleged involvement in Peregrine's alleged contravention of s 52 of the Trade Practices Act. I would strike out pars 20 and 21, although I would grant the applicants leave to replead the claim against Mr Paynter. paragraph 21a of the amended statement of claim 56 One of the applicants' allegations against Peregrine is that: (a) it made representations about its own competence and that of IMS (par 14); (b) if the representations had not been made the applicants would not have: (v) 'accepted' Peregrine as an appropriate expert to provide services; (vi) retained IMS; (vii) established the plant in Australia and would have established it in New Zealand (par 15A); (c) the representations were misleading or deceptive in contravention of the Trade Practices Act (pars 17-19). 57 In order to make out their case under s 52 in respect of each pleaded representation, the applicants need to establish (1) that the representation was made; (2) that, viewed objectively and subject to s 51A (if applicable), the representation was misleading or deceptive or likely to mislead or deceive; and (3) that they relied on the representation. In order to be compensated for any loss and damage under s 82(1) of the Trade Practices Act, the applicants also need to establish a causal connection between Peregrine's conduct and the loss for which they seek compensation: see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525, where Mason CJ, Dawson, Gaudron and McHugh JJ said: "Here we are concerned with contraventions of s 52(1) in the form of misleading conduct constituted by misrepresentations. In this situation, as at common law, acts done by the representee in reliance upon the misrepresentation constitute a sufficient connexion to satisfy the concept of causation. And, if those acts result in economic loss, that is, loss other than physical injury to person or property, that economic loss will ordinarily be recoverable under s 82(1)." As Weinberg J said in McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at 419, after referring to Bond Corp at 222: "It is not sufficient simply to allege loss and damage as a result of alleged contraventions of the Act; it is necessary to identify a causal connection between the impugned conduct and such loss as is said to have been suffered by the applicants." 58 Peregrine and Mr Paynter contended that the loss and damage that the applicants claim to have suffered is unrelated to what they contend they did in reliance on the representations allegedly made by Peregrine. In written submissions, Peregrine and Mr Paynter submitted: "Paragraph 21A appears to relate to an expectation loss that the applicants say they have suffered. There is no assertion of reliance loss. In particular, there is no allegation in the amended statement of claim to the effect that the applicants would have fared better if the plant had been constructed in New Zealand, rather than Australia. This is a particularly pertinent issue, given that it appears that the site in Australia had already been developed to some extent prior to the applicants having any dealings with Peregrine. Accordingly, if the allegation in paragraph 15A is accepted, the applicants would have abandoned much of the work they had done in Australia, and would have had to start afresh in New Zealand. How could the applicants have been better off? The answer is not addressed in the pleadings. Another matter that is not dealt with in the pleadings is which contractor the applicants would have retained if they had not retained IMS, and how that other contractor would have been able to achieve a better outcome for the applicants than IMS. Paragraph 21A is therefore embarrassing, as it is entirely unclear how the loss alleged could be at all attributable to the applicants' reliance on any representations made by Peregrine." Counsel for the respondents reiterated these submissions at the hearing of the motion. 59 In this instance, I adopt some observations of French J in Bond Corp at 222, where his Honour said: "In the case of misleading and deceptive statements said to constitute a contravention of s 52 … facts and circumstances should be set out leading to a reasonable inference that the conduct and the damage stood to each other in the relation of cause and effect." Peregrine and Mr Paynter submitted, in substance, that the loss particularised in par 21A of the amended statement of claim is not loss that can be said to be causally related to the misrepresentations alleged. Their counsel contended that the applicants were, in truth, seeking contractual damages and only contractual damages. 60 The applicants' allegation is, in substance, that they suffered loss and damage by reason of Peregrine's misrepresentations concerning its ability to provide effective industrial relations consulting services and the suitability of IMS as a contractor to carry out the installation works. By way of particulars, the applicants claim the extra cost of sourcing supplies from places other than the plant at Melton between August 2002 until July 2003, as well as any loss or damage that it fails to recover from IMS in respect of these supplies. The applicants also claim lost profit on sales during this period, as well any loss or damage it fails to recover from IMS on account of its failure to sell product from the Melton site. Finally, the applicants claim the cost of engaging another contractor to complete the installation works. 61 I accept Peregrine's submission that, for the most part, the particularised loss and damage is in the nature of contractual damages referable to the alleged breach by IMS of its contractual obligations. Further, as presently pleaded, there is some force in counsel's further observation that some of the alleged loss and damage has not yet arisen, although it is, in the circumstances, unnecessary to pursue this matter further. Counsel for the applicants did not, so it seems to me, seek to defend as adequate the particulars subjoined to par 21A. Instead, the applicants' counsel characterised the loss and damage flowing from Peregrine's alleged contravention of s 52 of the Trade Practices Act as the "additional costs that were borne … in solving the industrial relations problems that occurred …". I would strike out par 21A and the particulars subjoined to it, with liberty given to the applicants to replead par 21A in the same or a different form. If par 21A is to remain in the same form, however, it will be necessary for the applicants to provide better particulars than they have done to date. paragraphs (vi), (vii), (viii), (x), (xi) of the particulars subjoined to paragraph 25 of the amended statement of claim 62 The applicants allege, in par 25 of the amended statement of claim, that Peregrine was in breach of its duty of care to them in that it failed to act with "all due skill and care" in a number of respects, including in advising and providing them with industrial relations consulting services. The particulars subjoined to par 25 relevantly include the following: "(vi) making arrangements with unions or workers on the site without the prior consent and approval of Saizeriya Japan and/or Saizeriya Australia; (vii) failing to manage properly or at all the industrial issues which arose on the site; (viii) failing to act properly or at all in order to safeguard and protect the financial interests of Saizeriya Japan and/or Saizeriya Australia; … (x) failing to act properly or at all in the best interests of Saizeriya Japan and/or Saizeriya Australia; (xi) failing to carrying out its responsibilities to Saizeriya Japan and/or Saizeriya Australia with proper skill and attention … ." The respondents' submissions maintained that "Peregrine cannot possibly understand why the applicants allege that Peregrine has been negligent". In substance, the respondents complained that these allegations were so vague and broad that they ought not to be permitted to remain in the pleading. Counsel reiterated these submissions on the hearing of the motion. 63 I accept that paragraphs (vii), (viii), (x) and (xi) of the particulars subjoined to paragraph 25 are expressed in such broad terms that they provide the respondents with little information that would assist them in understanding the case they must meet. Peregrine and Mr Paynter also made submissions concerning par (vi), although it was not referred to in their strike-out motion. Although perhaps a matter of mere impression, I do not consider par (vi) so broad that it is objectionable. I would strike out paragraphs (vii), (viii), (x) and (xi) of these particulars with liberty to the applicants to provide further and better particulars of par 25 should they so wish. paragraph 25A of the amended statement of claim 64 Paragraph 25 of the amended statement of claim alleges that the applicants have suffered loss and damage as a result of Peregrine's negligence. The particulars of loss and damage refer to the particulars subjoined to par 21A. 65 Peregrine and Mr Paynter submit that no causal nexus has been pleaded between Peregrine's alleged negligence and the applicants' alleged losses. In written submissions, they said: "Most of the clearly articulated allegations of negligence made against Peregrine in the particularis subjoined to paragraph 25 of the amended statement of claim are trivial. For example, it is alleged that Peregrine: (a) engaged Night Owl Plumbing Pty Ltd to perform works at a cost not to exceed $6,000, and then processed a payment to Night Owl Plumbing Pty Ltd [of] $13,500; (b) agreed that a BBQ be held on the site; (c) agreed that unions would receive a paid leisure day, without consulting the applicants; (d) made an agreement that an electrician be employed on standby; and (e) agreed to the construction of a covered walkway." The respondents referred to the observations of Byrne J in John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brown Pty Ltd (1996) 13 BCL 262 at 270-271. 66 For the reasons already stated, I accept that, as the respondents submit, the applicants have not set out the nexus between the alleged loss and damage and Peregrine's alleged breach of duty with sufficient particularity to allow the respondents to know the nature of the case that they will be required to meet. On the contrary, the loss and damage that has been particularised does not show any relevant relationship to Peregrine's alleged negligence. I would strike out par 25 of the amended statement of claim and the particulars subjoined to it, with liberty given to the applicants to replead par 25 in the same or a different form. If par 25 is to remain in the same form, however, it will be necessary for the applicants to provide better particulars than they have done to date.

67 For the most part, Peregrine and Mr Paynter have been successful on their strike-out motion. As already stated, I would give the applicants liberty to amend their amended statements of claim further in accordance with these reasons, since the proceeding is at an early stage and this is the first occasion upon which the applicants have been required to defend their pleading in court. I would, however, order that the applicants pay the first and second respondents' cost of the motion dated 11 November 2003. I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.

Associate: Dated: 12 December 2003 Counsel for the Applicant: Mr R R S Tracey QC with Mr A J Laird

Counsel for the 1st & 2nd Respondent: Mr D G Collins SC with Mr A McClelland

Solicitor for the 1st & 2nd Respondent: Brian Ward & Partners Counsel for the 3rd & 4th Respondent Mr J W K Burnside QC with Mr M G Roberts Solicitor for the 3rd & 4th Respondent Phillips Fox Date of Hearing: 14 November 2003

Date of Judgment: 12 December 2003