Sidgreaves v State of New South Wales

Judgment

1. HIS HONOUR: The first plaintiff in these proceedings is Anthony Sidgreaves, and the second plaintiff is A J Holdings NSW Pty Ltd. There are three defendants; they are the State of New South Wales, the Chief Commissioner of State Revenue, and the Independent Liquor and Gaming Authority respectively. This is a notice of motion filed on 22 July 2019 by the three defendants seeking an order that the plaintiffs' amended consolidated statement of claim ("ACSOC") filed on 10 July 2019 be struck out pursuant to r 14.28 of the Uniform Civil Procedure Rules 2005 ("UCPR"). Alternatively, the defendants seek that certain paragraphs of the ACSOC be struck out pursuant to the same provision, or in some instances, dismissed pursuant to r 13.4(1) of the UCPR. The notice of motion also sought an order for security for costs pursuant to r 42.21 of the UCPR, but the parties have resolved that issue.
2. The essence of the plaintiffs' claim is that in 2012 and 2013, the defendants, acting jointly and/or severally, unlawfully thwarted attempts by the plaintiffs to sell their business and lease out the business premises, by the third defendant not processing applications by them to transfer a liquor licence, which was a necessary adjunct to the sale of the business, thus occasioning economic loss to them.

The relevant background to the ACSOC

1. The proceedings concern a tavern in Lismore known as "Tommy's Tavern" ("the Tavern"). As of 2011, the registered proprietors of the property were the second plaintiff and another company, Cumedo Pty Ltd ("Cumedo"). The first plaintiff was the sole director of the second plaintiff and one of two directors of Cumedo. The third defendant, then known as the Office of Liquor, Gaming and Racing, issued a liquor licence to the first plaintiff in 2005 in relation to the Tavern ("the liquor licence"). The business of the Tavern was owned by AJS Hotel Management Pty Ltd, of which the first plaintiff was the director.
2. On about 9 August 2011, the first plaintiff transferred the liquor licence to a Robert Parrott, who at the same time took over the business of operating the Tavern. The first plaintiff contended that on or shortly before 29 December 2011, he received a message from an employee of Mr Parrott's company, Buckoe Pty Ltd, to the following effect: "[T]he hotel has been closed since Christmas Eve, Mr. Parrott does not intend to reopen until the New Year, Mr. Parrott wants to meet with you in Sydney with a view to having discussions about the terms of the lease over Tommy's Tavern".
3. The first plaintiff contended that on 2 January 2012, he forwarded an email to Mr Parrott informing him that he was terminating his lease. On 4 January 2012, the first plaintiff reopened the Tavern and it appears that it operated until he transferred the liquor licence in 2016, as part of a sale of the business and lease of the premises.
4. At all relevant times, there were poker machines on the premises of the Tavern which made the hotelier liable for payment to the second defendant of tax ("gaming tax") pursuant to the Gaming Machine Tax Act 2001 (NSW) ("the Act"). An issue arose as to whether the plaintiffs or Mr Parrott were liable for payment of the gaming tax for the final quarter of 2011.
5. The relevant provisions of the Act are as follows: "3 Definitions In this Act: … hotel, hotel licence and hotelier have the same meanings as in the Liquor Act 2007. … 6 Tax on gaming machines (1) A tax is payable on profits from gaming machines kept in a hotel or on the premises of a registered club. (2) The tax is payable by the hotelier or registered club concerned. (3) In the event of a tax default (within the meaning of the Taxation Administration Act 1996) in respect of an amount of tax for which a hotelier is liable: (a) the hotelier, and (b) any person who, at the time the amount became due, was directly interested in the business, or the profits of the business, carried on under the hotel licence, are jointly and severally liable to pay the amount concerned, and section 45 of that Act applies accordingly. 7 Payment by instalments (1) For the purposes of this Act: (a) each tax year of a hotelier is divided into 4 periods of 3 months commencing on 1 July, 1 October, 1 January and 1 April, and (b) each tax year of a registered club is divided into 4 periods of 3 months commencing on 1 September, 1 December, 1 March and 1 June. (2) Quarterly instalments of tax are payable by a hotelier or registered club to the Chief Commissioner within 21 days after the end of each instalment period. (3) A hotelier or registered club must: (a) before the end of each such 21-day period, deposit the amount payable in a bank or financial institution, and (b) make such arrangements with the Chief Commissioner as enable the Chief Commissioner to access or appropriate that amount (such as by way of direct debit from the account of the hotelier or registered club concerned). Maximum penalty: 20 penalty units. (4) In the case of hoteliers, the liability to pay such an instalment lies with the hotelier who holds the relevant hotel licence at the time the instalment is due. … 11 Apportionment of liability for tax in certain circumstances (1) The Chief Commissioner may, in such manner as the Chief Commissioner considers appropriate: (a) apportion the liability for tax as between hoteliers: (i) in any case where there has been a change in the ownership of a hotel licence, or (ii) in such other circumstances as the Chief Commissioner considers appropriate, and (b) apportion the liability for tax as between registered clubs: (i) in the event of an amalgamation of a registered club as referred to in the Registered Clubs Act 1976, or (ii) in such other circumstances as the Chief Commissioner considers appropriate. Subsection (1) (a) does not affect the operation of section 7 (4)."
6. Certain provisions of the Liquor Act 2007 (NSW) are relevant. Section 40 provides that licence applications are to be made to "the Authority", which is defined in s 4 to mean "the Independent Liquor and Gaming Authority", which is the third defendant. The terms "hotel" and "hotelier" are defined in s 4 of the Liquor Act as follows: "hotel means the premises to which a hotel licence relates. hotelier means the holder of a hotel licence under this Act."
7. Other relevant provisions of the Liquor Act are as follows: "14 Authorisation conferred by hotel licence (1) A hotel licence authorises the licensee to sell liquor by retail on the licensed premises for consumption on or away from the licensed premises. … 45 Decision of Authority in relation to licence applications (1) The Authority may, after considering an application for a licence and any submissions received by the Authority in relation to the application, grant the licence or refuse to grant the licence. The Authority may determine the application whether or not the Secretary has provided a report in relation to the application. (2) The Authority may, in such circumstances as the Authority considers appropriate, treat an application for a licence as having been withdrawn. (3) The Authority must not grant a licence unless the Authority is satisfied that - (a) the applicant is a fit and proper person to carry on the business or activity to which the proposed licence relates, and (b) practices will be in place at the licensed premises as soon as the licence is granted that ensure, as far as reasonably practicable, that liquor is sold, supplied or served responsibly on the premises and that all reasonable steps are taken to prevent intoxication on the premises, and that those practices will remain in place, and (c) if development consent is required under the Environmental Planning and Assessment Act 1979 (or approval under Part 3A or Part 5.1 of that Act is required) to use the premises for the purposes of the business or activity to which the proposed licence relates - that development consent or approval is in force. Note - Section 48 also requires the Authority to be satisfied of certain other matters before granting a hotel, club or packaged liquor licence. (4) The regulations may also provide mandatory or discretionary grounds for refusing the granting of a licence. (5) Without limiting subsection (3)(a), a person is not a fit and proper person to carry on the business or activity to which a proposed licence relates if the Authority has reasonable grounds to believe from information provided by the Commissioner of Police in relation to the person - (a) that the person - (i) is a member of, or (ii) is a close associate of, or (iii) regularly associates with one or more members of, a declared organisation within the meaning of the Crimes (Criminal Organisations Control) Act 2012, and (b) that the nature and circumstances of the person's relationship with the organisation or its members are such that it could reasonably be inferred that improper conduct that would further the criminal activities of the declared organisation is likely to occur if the person is granted a licence. (5A) Without limiting subsection (3)(a), in determining whether an applicant is a fit and proper person to carry on the business or activity to which the proposed licence relates, the Authority is to consider whether the applicant - (a) is of good repute, having regard to character, honesty and integrity, and (b) is competent to carry on that business or activity. (6) The Authority is not, under this or any other Act or law, required to give any reasons for not granting a licence because of subsection (5) to the extent that the giving of those reasons would disclose any criminal intelligence. … 60 Transfer of licence (1) The Authority may, on application made in accordance with this section, approve the transfer of a licence to a person who, in the opinion of the Authority, would be entitled to apply for the same type of licence in relation to the licensed premises. (2) An application for approval to transfer a licence may be made by the licensee or the person to whom the licence is proposed to be transferred. (3) … (4) An application for approval to transfer a licence must - (a) be in the form and manner approved by the Authority, and (b) be accompanied by the fee prescribed by the regulations and such information and particulars as may be prescribed by the regulations, and (c) if made by a person other than the licensee - be accompanied by the written consent of the licensee to the proposed transfer, and (d) comply with such other requirements as may be approved by the Authority or prescribed by the regulations. (5) An application for approval to transfer a licence to another person is to be dealt with and determined by the Authority as if it were an application for the granting of a licence to the other person and the other person was the applicant for the licence. Accordingly, the provisions of Division 1 apply in relation to an application under this section. (6) … (7) The Authority may provisionally approve the transfer of a licence to another person if the Authority is satisfied that - (a) there is nothing that would preclude the Authority from approving the transfer of a licence, and (b) the circumstances of the case justify giving the approval on a provisional basis. (8) A provisional approval to transfer a licence is sufficient authority for the transfer of the licence. However, any such provisional approval ceases to have effect unless it is confirmed by the Authority before the end of the period specified by the Authority when provisionally approving the transfer (or such later period as may be allowed by the Authority before the expiration of the specified period). (9) If a provisional approval to transfer a licence ceases to have effect because of the operation of subsection (8), the Authority may make such orders in relation to the licence as the Authority considers appropriate, including any of the following orders - (a) an order that the licence is to revert to the transferor, (b) an order treating a person (with the person's consent) as licensee until a transfer of the licence is effected, (c) an order that the licence cannot be exercised until specified conditions are met or the Authority orders otherwise. (10) Any such order has effect according to its terms. (11) The Authority must not approve or provisionally approve the transfer of a licence unless satisfied - (a) that practices will be in place at the licensed premises of the transferee as soon as the licence is transferred that ensure as far as reasonably practicable that liquor is sold, supplied and served responsibly on the premises and that all reasonable steps are taken to prevent intoxication on the premises, and (b) that those practices will remain in place. (12) The transfer of a licence has effect as if the licence had been granted to the transferee. … 61 Application for transfer of licence on dispossession of licensee (1) This section applies in relation to a licence (other than a club licence) if - (a) the licensee is evicted from the licensed premises, or (b) the owner of the licensed premises comes into, or becomes entitled to, possession of the licensed premises to the exclusion of the licensee… (c) … (d) … (2) An application for a transfer of the licence may be made by the owner of the licensed premises or by the business owner. (3) The owner of the licensed premises who comes into, or is entitled to, possession of the premises, or the business owner (as the case requires), is taken to be the licensee of the premises until - (a) the day that is 28 days after this section becomes applicable, or (b) the day on which application is made under subsection (2), whichever first occurs. (4) If an application is made under subsection (2) not later than 28 days after this section becomes applicable, the applicant is, until the application is determined by the Authority, taken to be the licensee under the licence to which the application relates. …"
8. The term "owner of premises" in s 61 is defined in s 4 of the Liquor Act to mean "the person entitled to the rents or profits of the premises".
9. Also relevant is s 58 of the Gaming Machines Act 2001 (NSW), which provides: "58 Suspension or cancellation of authorisations (1) An authorisation by the Authority to keep or dispose of an approved gaming machine ceases to have effect if the authorisation - (a) is suspended or cancelled by the Authority or a court, or (b) is cancelled by the operation of a provision of this Act, or (c) relates to a gaming machine that has, in accordance with section 64, ceased to be an approved gaming machine. (1A) Without limiting subsection (1), an authorisation by the Authority to keep an approved gaming machine ceases to have effect if the disposal of the gaming machine is authorised by the Authority. (1B) Without limiting subsection (1), the Authority may suspend or cancel a hotelier's or club's authorisation to keep an approved gaming machine if the hotelier or club - (a) fails to pay a monitoring fee in accordance with section 134, or (b) fails to pay tax within the meaning of the Gaming Machine Tax Act 2001, or an instalment of any such tax, within the time allowed by or under that Act, or fails to pay a penalty or interest due for late payment of any such tax or instalment, or (c) fails to comply with any condition imposed by the Authority in relation to the approval of a local impact assessment under Division 1 of Part 4. …"
10. Pursuant to the Taxation Administration Act 1996 (NSW), gaming tax is payable to the second defendant: see s 3 (definition of "tax" includes a "tax … under a taxation law"); s 4 ("taxation laws" includes the Gaming Machine Tax Act); s 43 ("tax that is payable is payable to the Chief Commissioner"); and s 60 ("There is to be a Chief Commissioner of State Revenue").

The dispute over liability for the gaming tax

1. On 3 January 2012, Mr Parrott forwarded an email to the third defendant and a police email address, advising that he no longer had the leasehold of the premises and had relinquished responsibility for the liquor licence. On 20 January 2012, the first plaintiff sent an email to an employee of the third defendant. On that same date, an officer of the second defendant advised him, by email, that he was liable for the gaming tax. The officer wrote, relevantly: "Given the advice we've received from OLGR (Office of Liquor Gaming and Racing) that you evicted the tenant and took possession of the hotel as from earlier this month then we believe that you, as owner-in-possession, are the effective 'hotelier' for the purpose of s.6 and s.7 Gaming Machines Tax Act 2001. As such, and should you still be owner-in-possession as at 23 January, it is you who we believe has the liability to pay the gaming machine tax for the quarter ended 31 December 2011. Further, we do not believe that it is appropriate to apportion the liability for the quarter ended 31 December 2011 between hoteliers as we believe you to be the sole liable hotelier under s.6 and s.7."
2. On 4 February 2012, the first plaintiff lodged an objection to the gaming tax assessment with the second defendant. By letter dated 20 April 2012 from the second defendant, he was advised that his appeal was successful. The letter stated: "Our office cannot comment to you who is deemed liable to pay the assessment for the quarter ended 31 December 2011. We are, however, satisfied that under the Gaming Machine Tax Act 2001 that you are not liable to pay this assessment."
3. By letters dated 1 and 4 May 2012 respectively, Cumedo and the second plaintiff were advised they were "jointly and severally liable" to pay for the gaming tax, which was now calculated to be $26,441.21. They lodged an objection with the second defendant. By letter dated 3 September 2012, the second defendant disallowed the objection. The two companies unsuccessfully challenged the decision in the Administrative Decisions Tribunal ("ADT"), its judgment being handed down on 9 July 2013: A J Holdings (NSW) Pty Limited & Cumedo Pty Limited v Chief Commissioner of State Revenue [2013] NSWADT 156.
4. Cumedo and the second plaintiff successfully appealed this decision to the Appeal Panel of the New South Wales Civil and Administrative Tribunal ("NCAT"), which handed down its decision on 11 August 2014: A J Holdings (NSW) Pty Limited v Chief Commissioner of State Revenue [2014] NSWCATAP 40. The Appeal Panel found, at [90], that pursuant to ss 6(3)(a) and 7(4) of the Act, the relevant date for the determination of the gaming tax was 31 December 2011, and that the second defendant was not the "hotelier" at that time. The Appeal Panel remitted the matter to NCAT to determine whether the two companies were liable pursuant to s 6(3)(b) of the Act, as being at that time "directly interested in the business, or the profits of the business, carried on under the hotel licence" and, if so, whether it was appropriate to apportion liability. On 13 February 2015, NCAT determined the first part of the question in the negative, thus finding that Cumedo and the second defendant were not liable for the gaming tax: A J Holdings (NSW) Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 17.

Attempts by the plaintiffs to transfer the licence

1. On 23 January 2012, the first plaintiff lodged an application for transfer of the liquor licence from Mr Parrott to himself. The defendants claim that the licence transfer was provisionally approved on 30 January 2012, and that the first plaintiff held the licence until 24 January 2016, when an application by him to transfer it was approved.
2. At times between those dates and during the course of their dispute with the defendants, the plaintiffs sought to transfer the hotel licence as part of attempts to sell the business and lease out the premises, but the second and third defendants declined to process the transfer applications until the gaming tax was paid.
3. On 31 January 2012, the third defendant informed the first plaintiff by letter that the second defendant had recommended it to cancel "the hotel's authorisation to keep gaming machines" and that, if the outstanding amount of $8,512.00 was not paid before 7 February 2012, the first plaintiff's authorisation to keep gaming machines would be cancelled.
4. On 2 February 2012, Peter Wicks, the Acting Director of Licensing at the third defendant, sent an email to Eric Blazek, a Senior Compliance Officer of the second defendant, stating: "We received an application to transfer the licence to [the first plaintiff] on 24 January 2012. It has not been processed due to the outstanding tax. I suggest you get back to [the first plaintiff] as soon as possible with your decision so he is unable to use this as an excuse to drag out this matter."
5. Later the same day, Mr Blazek advised the first plaintiff by email that the second defendant would not be exercising its discretion under s 11 of the Act to apportion the liability for tax because it "believe[s] there is no need to apportion the tax". He concluded: "Please note that your application to have the licence transferred will not be approved until such time as the outstanding gaming machine tax is paid in full."
6. In about April 2013, the second plaintiff and Cumedo commenced negotiations to sell the business of the Tavern to 21st Century Hotel Company Pty Ltd ("21st Century"). The parties negotiated a sale of the business for $500,000 and a ten-year lease, the rent for the first year being $200,000. However, according to the first plaintiff, on 11 September 2013, the third defendant informed the first plaintiff that the liquor licence would not be transferred to 21st Century until the gaming tax was paid.
7. On 23 September 2013, the first plaintiff lodged an application with the third defendant to transfer the licence to TT Hotel Management Pty Ltd ("TT Hotel Management") "in an attempt to facilitate the transaction with [21st Century]". The application was made in the name of TT Hotel Management.
8. By email dated 3 October 2013, the third defendant advised that the application was "put on hold" subject to the first plaintiff providing details of the directors and shareholders of TT Hotel Management and settlement with the second defendant of the gaming tax. On 17 October 2013, the first plaintiff advised 21st Century that the sale could not proceed until the gaming tax was paid.
9. On 22 April 2014, Principal Member Seiden of the Appeal Panel that was hearing the second defendant's appeal from the ADT, issued a direction that the Chief Commissioner of State Revenue make inquiries as to whether the second defendant had made any decision affecting the second plaintiff's transfer of a liquor licence.
10. By letter dated 1 May 2014, the Crown Solicitor's Office of New South Wales informed the first plaintiff, as the director of the second plaintiff, as follows: "I refer to the directions hearing listed before Principal Member Seiden on 22 April 2014 and to the direction made that the respondent make enquiries as to whether any decision was made by the Office of State Revenue ('OSR') affecting the Appellant's transfer of a liquor licence. I advise that the OSR did not make any decision which affected the transfer of the liquor licence. However, the OSR notified the NSW Office of Liquor, Gaming and Racing (now known as Independent Liquor and Gaming Authority ('ILGA')) of an outstanding gaming machine tax liability concerning 'Tommy's Tavern' prior to you commencing the proceedings in the Administrative Decisions Tribunal. I note that this procedure of the OSR notifying the ILGA is adopted in circumstances where there is a tax default. In that respect, I refer you to paragraph 9 of the Statement of Michael Erwin Fabits dated 18 March 2014, and filed with the Respondent's Supplementary Submissions in the Civil and Administrative Tribunal on 19 March 2014. You will note that these type of notifications by OSR concern a gaming machine licence and does not concern an application for the transfer of a liquor licence."
11. On 4 August 2014, according to the third defendant, the transfer application lodged on 23 September 2013 was withdrawn by the first plaintiff's solicitors.
12. By email dated 10 September 2014, that is, in the month following the handing down of the Appeal Panel's decision, the first plaintiff wrote to the third defendant, requesting reasons for its decision to refuse his application of 23 September 2013 for a transfer of the liquor licence from himself to TT Hotel Management. By letter dated 25 September 2014, the third defendant responded as follows: "The Authority was not satisfied that the requirements under section 61 of the Liquor Act 2007 (Act) had been met. The refusal was originally communicated as a refusal pursuant to section 61(1)(c) though I note that the application was lodged under section 61(1)(a) or (b) of the Act. I understand the transfer application was lodged as Owner in Possession by the premises owner AJ Holdings NSW Pty Ltd to appoint the corporate licensee TT Hotel Management Pty Ltd through dispossession of the licensee Mr Anthony John Sidgreaves. However I note Mr Sidgreaves is the director of both AJ Holdings NSW Pty Ltd and TT Hotel Management Pty Ltd. Additionally, the Authority's records show Mr Sidgreaves has had an interest in Tommy's Tavern since 2005 where Mr Sidgreaves previously held the position of licensee from 2005 to 2011 and again from 2012 to the present. Under section 61(1)(a) and (b) the licenses would need to have been evicted from the premises or the owner becoming entitled to possession. It appears Mr Sidgreaves the individual was being dispossessed by AJ Holdings NSW Pty Ltd and appointing TT Hotel Management Pty Ltd, both with Mr Sidgreaves as director. Given the above, the Authority was not satisfied the requirements under section 61 of the Liquor Act 2007 were met, and as such, the application was refused."
13. Following the decision of NCAT of 13 February 2015, the second plaintiff and Cumedo recommenced negotiations to sell the business. Pursuant to those negotiations, an application to transfer the licence was lodged on 18 January 2016 and approved on 25 January 2016.
14. By letter sent in about May 2016, the third defendant responded to questions that had been asked by the first plaintiff, which involved an explanation of the procedure which had resulted in his earlier transfer applications not being processed. The letter stated, relevantly: "In your email … you also requested an answer to the following question: Q. Is it policy not to process applications to transfer a licence if the hotel is deemed to owe gaming machine tax to the Authority? It was a long standing practice that Licensing staff would place transfers on hold following information from the Office of State Revenue (OSR) that gaming machine tax was owing for the hotel. This practice had been in place for 10 years or more, ever since the collection of gaming machine taxes transferred from the Office of Liquor Gaming and Racing (OLGR) to OSR. At intervals, OSR issued Licensing staff with a list of venues with outstanding gaming debts and in processing transfer applications, the staff believed it was required to check whether any transfer related to premises on that debtors list, and if so, refer the matter to OSR. In the case of your transfer, the Licensing staff followed that understanding and referred the application to OSR who requested a hold be placed on the matter. You were aware of this as a far back as 23 June 2014 when you were advised so by Ms Boukaram of this office. On 24 June 2014, you requested Ms Boukaram provide a copy of the decision to not transfer the licence. Mr Boukaram could not provide a written decision because no decision to approve or refuse the transfer was ever made, and you subsequently withdrew the application. On 19 October 2015 you issued the Authority with a subpoena for all information held in relation to three transfers involving Tommy's Tavern … and you subsequently received a full copy of all documents held by the Authority relating to these applications. Licencing staff have always acted in good faith in this matter, has provided you with all the documents related to the withdrawn transfer under a subpoena, and previously offered an explanation as to why the application could not be progressed. There is no further information to offer you in respect to the transfer, but as a result of your concerns, the new managers in Liquor and Gaming NSW have reviewed processes and decided to no longer refer matters to OSR."

History of the proceedings

1. In 2018, the plaintiffs commenced proceedings in the District Court and in the Supreme Court. The District Court proceedings were transferred to the Supreme Court, and consolidated into one proceeding on 1 April 2019. The ACSOC was filed and served on 10 July 2019. By that time, the plaintiffs had filed or served six variants of statements of claim that combined to formulate the ACSOC. During that process, the defendants had frequently asked for further and better particulars.

The ACSOC

1. The plaintiffs nominate the first defendant because the Office of Liquor and Gaming is located within, and a part of, the New South Wales Department of Customer Service. The third defendant, the Independent Liquor and Gaming Authority, is a statutory corporation created by s 6 of the Gaming and Liquor Act 2007 (NSW).
2. The ACSOC relevantly pleads as follows: "4. At no material time up to and including 31 December 2011 or early January 2012 did either of the Plaintiffs operate Tommy's Tavern. 5. From and about early 2012 and thereafter, the First and/ or Second Plaintiffs or an entity or entities associated with the First and/or Second Plaintiffs operated the business known as Tommy's Tavern in Lismore. 6. At all material times the First Defendant and/or the Second Defendant was entitled to collect tax ('gaming tax') pursuant to the provisions of the Gaming Machine Tax Act 2001. 7. The Third Defendant was, by operation of the Liquor Act 2007 ('the Act'), the authority which determined whether liquor licences might be transferred. 8. At all material times in 2012 and late 2013 the First Defendant had authority, upon application, to transfer or grant liquor licences pursuant to the provisions of the Liquor Act 2007. 9. From and about early 2012, and thereafter until late 2013, the First and Second Plaintiffs made application to one or both of the First and Third Defendants to have a liquor licence transferred or granted to one or other or both of the Plaintiffs in respect of Tommy's Tavern pursuant to the provisions of the Act. 10. In considering whether to authorise the transfer or grant of a liquor licence to either or both of the Plaintiffs between 2012 and 2013 the First Defendant, or alternatively the Third Defendant, was under a duty to the Plaintiffs: (i) not to act in bad faith; (ii) to determine whether to grant a licence having regard to relevant matters only, being those matters specified in section 45 of the Act; not to have regard to matters other than those specified in section 45 of the Act or alternatively not to have regard to matters irrelevant to the objects of the Act as specified in section 3 of the Act. 11. From about early 2012 and at various times thereafter up to and including 2013, the First Defendant and/or the Second Defendant represented to the Third Defendant (howsoever known) that the Plaintiffs and a company associated with the Plaintiffs known as Cumedo Pty Ltd were liable to pay gaming tax in respect of the operation of Tommy's Tavern up to and including 31 December 2011 or early January 2012 in circumstances where none of the First Plaintiff, the Second Plaintiff or Cumedo Pty Ltd was so liable. Particulars of representations known to the Plaintiffs Email communications between Eric Blazek of the Office of State Revenue and Peter Wicks of the Fourth Defendant dated 2 February 2012. 11A. The representations: (i) were representations in trade and commerce within the meaning of section 18 of the Australian Consumer Law; and (ii) were misleading or deceptive or were likely to mislead or deceive; and/or (iii) were made negligently in circumstances where the First Defendant and/or the Second Defendant were under a duty of care to the First Plaintiff and the Second Plaintiff Particulars of Trade and Commerce (a) The Third Defendant was and is the licensing authority for the grant and transfer of liquor licences. (b) The liability of the First Plaintiff. the Second Plaintiff and/or Cumedo Pty Ltd for gaming tax claimed were dependent upon their being the holder of a liquor licence and being thereby able to sell and supply liquor for profit. Particulars of Negligence and Duty of Care (a) The duty of care owed to the First Plaintiff and to the Second Plaintiff arose from the facts that the First Defendant and/or the Second Defendant were aware that: (1) the right of any person, including the First Plaintiff and the Second Plaintiff, to trade lawfully as the operator of licensed premises and to sell and supply liquor for profit, depended upon the person being the holder of a liquor licence; (2) the Third Defendant had a policy of not authorising the transfer of liquor licences when there remained a liability for the payment of gaming tax in respect of licensed premises. (b) The representations were made negligently in that: (1) none of the First Plaintiff. the Second Plaintiff and/or Cumedo Pty Ltd was at law liable for the payment of the claimed gaming tax; (2) further or in the alternative the First and/or the Second Defendants had no basis or no sufficient basis for holding the view that the First Plaintiff. the Second Plaintiff and/or Cumedo Pty Ltd was at law liable for the payment of the claimed gaming tax; (3) further, or in the further alternative, it formed no part, or no necessary part, of the functions of the First Defendant and/or the Second Defendant to inform the Third Defendant of claimed outstanding liabilities for gaming tax, in particular having regard to particular (2) above. 12. By or about no later than August 2012 the First Defendant and/or the Second Defendant were aware, or ought to have been aware: (i) that the said representations were incorrect, or misleading or deceptive, or were likely to mislead or deceive the Third Defendant; and (ii) that none of the Plaintiffs nor Cumedo Pty Ltd was liable, or alternatively was likely to be liable, or alternatively may not be liable, for the said gaming tax. Particulars The First and Second Defendants, and each of them, were apprised of the facts: (a) that none of the Plaintiffs and/or Cumedo Pty Ltd was the holder of the said liquor licence as at 31 December 2011; (b) that the law was that unless a person or entity was the holder of the said liquor licence as at 31 December 2011 that person or entity was not primarily liable for the payment of gaming tax. 13. Between about early 2012 and thereafter until late 2013 either or both of the First and Third Defendants neglected, failed and/or refused to transfer or grant to one or other or both of the Plaintiffs a liquor licence as alleged in respect of Tommy's Tavern. 14. In so neglecting, failing and/or refusing to grant to one or other or both of the Plaintiffs a liquor licence as alleged in respect of Tommy's Tavern, the First and Third Defendants acted in bad faith in having regard to an irrelevant matter or otherwise had regard to an irrelevant matter, being the fact of gaming tax owed or allegedly owed to the Office of State Revenue in respect of liquor licence no. … for which neither of the Plaintiffs was liable. 15. In so doing the First and Third Defendants breached their duties to the Plaintiffs as specified in paragraph 10 above. 16. At all material times in and after August 2012 the First and Third Defendants were aware, or ought to have been aware, that the said gaming tax was not the responsibility of the First and/or Second Plaintiffs and in respect of which neither of the Plaintiffs was liable and were not likely to be held liable. 17. Notwithstanding the matters alleged in paragraph 12, the First Defendant and/or the Second Defendant continued to represent to the Third Defendant that the Plaintiffs and Cumedo Pty Ltd were liable to pay gaming tax in respect of the operation of Tommy's Tavern up to and including 31 December 2011 or early January 2012. 18. In the alternative to paragraph 17, the First Defendant and/or the Second Defendant were under a duty to the Plaintiffs to correct their misrepresentations to the Third Defendant. Particulars of Duty of Care The Plaintiffs repeat the particulars of duty pleaded in paragraph 11 above. 19. In breach of the duty pleaded in paragraph 10 hereof, the First Defendant and/or the Second Defendant did not inform the Third Defendant: (i) that the said representations were incorrect, or misleading or deceptive, or were likely to mislead or deceive the Third Defendant; and (ii) that none of the Plaintiffs nor Cumedo Pty Ltd was liable, or alternatively was likely to be liable, or alternatively may not be liable, for the said gaming tax. 20. In the alternative to the above, the Third Defendant was aware, or ought to have been aware, by no later than August 2012 that the said representations were misleading or deceptive or were likely to mislead or deceive and were not accurate. 20A In the alternative to paragraph 13 hereof, in or after January 2012 the Third Defendant transferred the liquor licence in respect of Tommy's Tavern to the First Plaintiff. 21. In or about mid-2013 the Plaintiffs were negotiating a sale of the business of Tommy's Tavern and a lease of the premises (of which the Second Plaintiff was a part owner) at a price of approximately $2,500,000 which sale required the transfer of the Liquor Licence. 22. The availability of a liquor licence in respect of Tommy's Tavern for transfer to the purchaser of the business and the lessee of the premises (being one and the same person) was a critical feature of the proposed sale. 23. By reason of the matters set out hereinabove and in particular by reason of the representations pleaded in paragraph 10, the Third Defendant would not, in or about mid-2013 or thereafter during 2013, authorise the transfer of the Liquor Licence to any person, including to the proposed purchaser of the the business of Tommy's Tavern. 24. In consequence of the Third Defendants refusal or failure to authorise the transfer of the Liquor Licence as pleaded in paragraph 23 the Plaintiffs were unable to conclude the sale and lease pleaded in paragraph 21 hereof. 25. By reason of the above matters the Plaintiffs suffered loss and damage. 25A Further, in or about early 2012, the Third Defendant represented to the Plaintiffs that any application to transfer the Liquor Licence ought be brought in the name of the First Plaintiff. 26 The First Plaintiff accordingly sought the transfer of the Liquor Licence into his name in consequence of which the Plaintiff suffered the loss and damage pleaded in paragraph 27. 27 By reason of the First, Second and Third Defendants breach of duty to the Plaintiffs and the Third Defendant's failure to grant or transfer a liquor licence to the Plaintiffs as alleged, or alternatively by reason of the Third Defendant's failure to further transfer the liquor licence in respect of Tommy's Tavern, the Plaintiffs were unable to effect the said sale of the business or the lease of the premises and the Plaintiffs thereby suffered loss and damage." Particulars (i) Loss of sale; (ii) Loss of rent."
3. In response to a request for particulars in respect of a paragraph in the amended statement of claim that was filed in the District Court on 1 June 2018, the plaintiffs identified the relevant licence transfer applications made by them as being those that were made on 24 January 2012 and 23 September 2013. The terms of the relevant part of that paragraph are almost identical to pars (9) and (13) of the ACSOC, with the ACSOC stating that the applications in question were those made "From and about early 2012, and thereafter until late 2013".

The notice of motion

1. The notice of motion was filed on 22 July 2019. I heard the matter on 13 February 2020. The orders sought are as follows: "1. An order that the Amended Consolidated Statement of Claim (ACSOC) be struck out in whole pursuant to r. 14.28 of the Uniform Civil Procedure Rules 2005 (UCPR). In the alternative, as to Paragraphs 11A(i) and 11A(ii) of Amended Consolidated Statement of Claim (ACSOC) 2. An order that the proceedings and any claim for relief in the proceedings, so far as they relate to the claims made in Paragraph ll(i) and 11(ii) of the ACSOC and s.18 of the Australian Consumer Law in Schedule 2 to the Competition and Consumer Act 2011 (Cth) (ACL), be dismissed pursuant to Rule 13.4(1) of the UCPR on the basis that: a) the proceedings to that extent are frivolous or vexatious; b) no reasonable cause of action is disclosed. 3. An order that the proceedings and any claim for relief in the proceedings, so far as they relate to the claims made in Paragraph 11A(i) and llA(ii) of the ACSOC and s.18 of the Australian Consumer Law as a law of New South Wales by operation of s.28 of the Fair Trading Act 1987 (NSW) (ACL NSW) be dismissed pursuant to Rule 13.4(1) of the UCPR on the basis that: a) the proceedings to that extent are frivolous or vexatious; b) no reasonable cause of action is disclosed. 4. In the alternative to Order 2 and 3, an order so far as Paragraphs llA(i) and 11A(i) of the ACSOC are claims made in relation to s.18 of the ACL NSW the claims contained in paragraphs 11A(i) and 11A(ii) of the ACSOC be struck out in whole, or alternatively in part, pursuant to Rule 14.28 of the UCPR on the basis that: a) the pleading discloses no reasonable cause of action; or b) the pleading has a tendency to cause prejudice, embarrassment or delay in the proceedings, by failing to plead the necessary elements of any such statutory cause of action. Paragraph 11A(iii) of the ACSOC 5. An order that Paragraph llA(iii) of the ACSOC be struck out in whole, or alternatively in part, pursuant to Rule 14.28 of the UCPR on the basis that: a) the pleading discloses no reasonable cause of action; or b) the pleading has a tendency to cause prejudice, embarrassment or delay in the proceedings, by failing to plead the necessary elements of any cause of action. Paragraph 14 of the ACSOC 6. An order that Paragraph 14 of the ACSOC be struck out in whole, or alternatively in part, pursuant to Rule 14.28 of the UCPR on the basis that: a) the pleading discloses no reasonable cause of action; or b) the pleading has a tendency to cause prejudice, embarrassment or delay in the proceedings, by failing to plead the necessary elements of a claim of bad faith. Paragraph 19 of the ACSOC 7. An order that Paragraph 19 of the ACSOC be struck out in whole, or alternatively in part, pursuant to Rule 14.28 of the UCPR on the basis that: a. the pleading discloses no reasonable cause of action; or b. the pleading has a tendency to cause prejudice, embarrassment or delay in the proceedings, by failing to plead the necessary elements of any cause of action or any asserted duty. Paragraphs 25A and 26 of the ACSOC 8. An order that Paragraphs 25A and 26 of the ACSOC be struck out in whole, or alternatively in part, pursuant to Rule 14.28 of the UCPR on the basis that: a. the pleading discloses no reasonable cause of action; or b. the pleading has a tendency to cause prejudice, embarrassment or delay in the proceedings."
2. Rule 14.28 of the UCPR is as follows: "14.28 Circumstances in which court may strike out pleadings (1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading - (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) The court may receive evidence on the hearing of an application for an order under subrule (1)."
3. Rule 13.4(1) of the UCPR provides: "13.4 Frivolous and vexatious proceedings (1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings - (a) the proceedings are frivolous or vexatious, or (b) no reasonable cause of action is disclosed, or (c) the proceedings are an abuse of the process of the court, the court may order that the proceedings be dismissed generally or in relation to that claim. (2) The court may receive evidence on the hearing of an application for an order under subrule (1)."

The complaint about pars (11A)(i) and (ii) of the ACSOC

1. The allegation in par (11A) of the ACSOC is confined to the first and second defendants. The defendants submitted that it is unclear from the plaintiffs' pleadings whether the expressed reliance on s 18 of the Australian Consumer Law ("ACL") is within Sch 2 of the Competition and Consumer Act 2010 (Cth), or pursuant to Pt 3 of the Fair Trading Act 1987 (NSW), which applies Sch 2 as a law of New South Wales: ss 27 and 28.
2. Section 18 of Sch 2 of the Competition and Consumer Act is as follows: "Chapter 2-General Protections Part 2-1 - Misleading or deceptive conduct 18 Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1). Note: For rules relating to representations as to the country of origin of goods, see Part 5-3."
3. The defendants submitted that if the pleading is in terms of the Commonwealth ACL, the claim is "doomed to fail", because there is no underlying cause of action, and should be dismissed pursuant to rr 13.4(1)(a), (b) or (c) of the UCPR. The application of Sch 2 is as follows: "Chapter 1 - Introduction 1 Application of this Schedule This Schedule applies to the extent provided by: (a) Part XI of the Competition and Consumer Act; or (b) an application law."
4. The defendants submitted that, pursuant to s 2B of the Competition and Consumer Act, Sch 2 does not apply to the States. Section 2B provides: "2B Application of Act to States and Territories (1) The following provisions of this Act bind the Crown in right of each of the States, of the Northern Territory and of the Australian Capital Territory, so far as the Crown carries on a business, either directly or by an authority of the State or Territory: (a) Part IV; (aa) Part V; (b) Part XIB; (ba) Part XICA; (c) the other provisions of this Act so far as they relate to the above provisions. (2) Nothing in this Act renders the Crown in right of a State or Territory liable to a pecuniary penalty or to be prosecuted for an offence. (3) The protection in subsection (2) does not apply to an authority of a State or Territory."
5. Section 131 of the Competition and Consumer Act provides that Sch 2 applies to the conduct of corporations, which the first and second defendants are not. Parts of Sch 2 also apply to "persons" in certain respects.
6. Accordingly, the defendants submitted that Sch 2 cannot apply to the first and second defendants.
7. Alternatively, if the pleading is in terms of the New South Wales ACL, then s 36 of the Fair Trading Act applies. Section 36 provides: "36 Application law of this jurisdiction The application law of this jurisdiction binds (so far as the legislative power of Parliament permits) the Crown in right of this jurisdiction and of each other jurisdiction, so far as the Crown carries on a business, either directly or by an authority of the jurisdiction concerned."
8. The defendants submitted that the first and second defendants are "the Crown" for the purposes of s 36: Wynyard Investments Proprietary Limited v Commissioner for Railways (NSW) (1955) 93 CLR 376; [1955] HCA 72 per Williams, Webb and Taylor JJ at 382-385. In order that the plaintiffs' action against them could proceed in line with s 36 of the Fair Trading Act, it was necessary for the plaintiffs to plead that the first or second defendants were, at the relevant times, "carrying on a business", and to plead "any material facts in respect of what the (un-pleaded) business was". Accordingly, pars (11A)(i) and (ii) should be struck out pursuant to r 14.28(1)(a)-(c) of the UCPR.
9. The defendants rely on the reasoning of Campbell J in PPK Willoughby Pty Ltd v Roads and Maritime Services [2014] NSWSC 407. That case concerned the sale of land that was "surplus to government requirements" by the defendants to the plaintiff. The plaintiff claimed damages for losses suffered as a result of, inter alia, alleged misleading and deceptive conduct in relation to the sale in contravention of federal and state consumer protection legislation. Campbell J concluded: "38 Paragraphs 2(c), 3(e) and 4(f) aver that each defendant 'is and has been carrying on a business'. By letter dated 24th September 2012, the plaintiff's solicitors said, I assume by way of particulars, that the Crown defendants 'have been and are significant landholders and apparently engage in the disposition of land on a regular basis. In any case, ultimately, whether your clients dispose of the said properties in carrying on the business is a matter of evidence'. 39 Bearing in mind the requirements of Rule 14.7 and the distinction between material facts and evidence which it maintains, I am of the view that the bare assertion that a defendant 'is carrying on a business' even amplified by the letter of 24th September 2012 is inadequate. I accept the argument of the Crown defendants that no material facts are pleaded in support of those allegations. The inadequate pleading, should, of course, be struck out …"
10. In oral submissions, the defendants claimed that they had twice sought clarification from the plaintiffs as to which ACL was relied upon, without success. However, having regard to the correspondence in which the defendants claim that clarification had been sought, it is not apparent to me that the query was made. Clarification was sought in the form of better and further particulars in respect of the same pleading in earlier statements of claim, in letters dated 25 June 2018 and 10 October 2018. In the first, they sought "facts, matters and circumstances" in support of the allegation that the ACL applies but did not specifically ask what legislation was relied upon. In the latter letter, the defendants observed that the asserted breach of ACL in Sch 2 to the Competition and Consumer Act is liable to be dismissed pursuant to r 13.4 or struck out pursuant to r 14.28 of the UCPR, but again, did not request clarification of which law was relied upon.
11. I also note that in a defence filed on 22 February 2019 to an earlier draft of the statement of claim, the defendants responded to the plaintiffs' assertion on each alternative basis without apparent difficulty. By letter dated 11 March 2019, the plaintiffs' solicitor advised: "We anticipate receiving instructions not to pursue the present claim under the Australian Consumer Law in the proposed Amended Statement of Claim."
12. The defendants submitted that, in any event, whatever the basis of the plaintiffs' pleading, it should be either dismissed or struck out.

The complaint about economic loss

1. The plaintiffs pleaded that, consequent to the alleged breaches of the defendants, they suffered loss and damages, which they particularised as loss of a sale and rent, apparently being the negotiated sale of the business and rent of premises to 21st Century in mid-2013.
2. The defendants submitted that pars (10), (13), (14), (15), (18), (19), (25A) and (26) of the ACSOC constitute a claim for pure economic loss, which the High Court has held to not be recoverable as damages in the absence of injury to person or property, even if the loss is foreseeable, subject to certain exceptions. Amongst other cases, the defendants relied upon Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185; [2014] HCA 36, which concerned whether a builder owed an owners' corporation a duty of care to avoid economic loss arising from latent defects in the building. The joint judgment of Crennan, Bell and Keane JJ provides an historical and theoretical context for claims of economic loss, as follows: "122 The causes of action known as the economic torts were established in the common law before the decision of the House of Lords in Donoghue v Stevenson. In Allen v Flood in 1897, the House of Lords held that a person may deliberately cause economic harm to another without liability in tort provided that the defendant was not part of a conspiracy and that the means employed to inflict the harm were not themselves unlawful. Unintentionally inflicted economic loss was held to be compensable by an action for negligence only after the decision in Hedley Byrne & Co Ltd v Heller & Partners Ltd. Until then, the common law of tort passed the burden of economic loss from plaintiff to defendant only where the defendant intentionally inflicted harm on the plaintiff by conduct which was unlawful for reasons other than that it was likely to, and did, cause economic loss. And even then, the expanded liability for economic loss established by Hedley Byrne & Co Ltd v Heller & Partners Ltd depended upon proof of the fact of assumption of responsibility by a person giving advice to another, and that other having relied upon the advice. 123 The respondent sought to rely upon the decision of this Court in Voli v Inglewood Shire Council. That case establishes that the appellant may have been liable in damages for physical injuries to third parties resulting from defective work performed in the course of its contract with the developer. But the respondent's argument fails to observe the crucial distinction between physical injury and economic loss. Under the common law, '[t]he former is protected by the law even when, in similar circumstances, the latter is not'. 124 A cause of action in negligence does not arise unless and until the plaintiff suffers damage. Damage is the gist of the cause of action in negligence. As Brennan J said in John Pfeiffer Pty Ltd v Canny, a 'duty of care is a thing written on the wind unless damage is caused by the breach of that duty'." (citations omitted)
3. In the same case, French CJ referred to the "special cases" in which a duty of care for economic loss has been recognised, and stated, at [22]: "The special cases would commonly, but not necessarily, involve an identified element of known reliance or dependence on the part of the plaintiff, or the assumption of responsibility by the defendant, or a combination of the two. The contract between the prior owner and the builder in that case was 'non-detailed and contained no exclusion or limitation of liability'. The subsequent owner would ordinarily be unskilled in building matters and inexperienced in the niceties of real property investment. Any builder should be aware that such a subsequent owner would be likely to assume that the building had been competently built and that the footings were adequate. Those considerations may be seen as elements of the notion of 'vulnerability', which has become an important consideration in determining the existence of a duty of care for pure economic loss. In this context, it refers to the plaintiff's incapacity or limited capacity to take steps to protect itself from economic loss arising out of the defendant's conduct." (citations omitted)
4. In CJD Equipment v A&C Constructions [2009] NSWSC 1362, McDougall J said at [245]: "… it is for a plaintiff, alleging a duty of care to avoid economic loss, to plead, particularise and prove vulnerability: specifically, why, in the circumstances of the particular case, it could not protect itself against the consequences of negligence on the part of the defendant."
5. The defendants submitted that it was incumbent upon the plaintiffs to plead particulars of the material facts on which they rely, identifying the assumption of responsibility by the defendants and their reliance and vulnerability, in the sense identified by McDougall J.

The complaint about the alleged duties in the ACSOC

1. The pleadings refer to the defendants being subject to certain duties to the plaintiffs: pars (10), (11A)(iii), (15), (18), (19) and (27). In particular, the pleadings allege that the defendants breached a duty to not act in bad faith towards the defendants: pars (10), (14), (15) and (19).
2. The defendants submitted that a pleading of "bad faith", which is expressed as an allegation in negligence, is a concept in the context of administrative decision-making and requires proper grounds. The defendants cited SCAS v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCAFC 397, in which the Court said, at [19]: "An allegation of bad faith is a very serious one. Bad faith in this context implies a lack of an honest or genuine attempt to undertake the task and involves a personal attack on the honesty of the decision maker … [B]ecause of the nature of the allegation of bad faith, serious questions of professional ethics arise. It should be clearly understood that an allegation of bad faith, like an allegation of fraud, should not be advanced by an advocate unless there are proper grounds for doing so."
3. The defendants also relied on NAKF v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 130 FCR 210; [2003] FCA 730, in which Gyles J said, at [24]: "Bad faith cannot be constituted by recklessness in the sense of negligence, no matter how gross the negligence. A tribunal member cannot blunder into bad faith, no matter how stupid and careless the tribunal member is, any more than a person can blunder into deceit or wilful blindness. What is required to make out this case is to find that the tribunal member was recreant to his duty by wilfully and deliberately making the impugned decision without attempting to carry out the statutory duty lying upon him - tossing a coin without reading the file, allowing in every third applicant, or allowing in applicants from various countries in rotation might be examples." (citations omitted)
4. The defendants submitted that the plaintiffs have failed to plead the material facts upon which "bad faith" on the part of the defendants is alleged and appear to have coupled the allegation of bad faith with negligence whereas, as noted by Gyles J in the above passage, the concepts are distinct.
5. To the extent that the pleadings suggest an allegation against the defendants of the tort of misfeasance in public office, the defendants submitted that the plaintiffs are obliged to plead the material facts on which the elements of the tort are alleged.

The complaint about par (11A)(iii) of the ACSOC

1. The defendants submitted that the pleadings at para (11A)(iii) fail to identify the duty of care which was allegedly breached, giving rise to negligence. The "Particulars of negligence and duty of care" in the ACSOC plead the breach, but not the duty itself, or the foreseeable risk of injury.

Miscellaneous complaints

1. The defendants submitted that a difficulty with the terms of par (9) of the ACSOC is that one of the two transfer applications relied upon, being the 23 September 2013 application, was not to one of the plaintiffs, but rather, as noted earlier, to TT Hotel Management. [T21.12]
2. The terms of par (10) of the ACSOC are that the defendants breached "a duty", but then refers to what appear to be three separate alleged duties. Paragraph (15) refers back to the "duties" at par (10), suggesting that it is not a single duty, but rather multiple duties.
3. In pars (18) and (19) of the ACSOC, the plaintiffs have not pleaded a foreseeable risk of injury.
4. The defendants submitted that par (20) of the ACSOC, as pleaded, is bereft of a cause of action against the third defendant. The plaintiffs submitted that the relevant cause of action is apparent from other paragraphs, but in any event concedes that it could be more clearly pleaded.
5. The defendants have challenged pars (25A), (26) and (27) of the pleadings on the basis that they are deficient, which is conceded by the plaintiffs and therefore I will not refer to that part of the notice of motion any further.

The plaintiffs' submissions on the notice of motion

1. At the hearing of this matter, the plaintiffs accepted the defendants' submissions as to why their pleading based on the Commonwealth ACL could not succeed. Although they maintained that the claim had merit in terms of the New South Wales ACL, they foreshadowed that on a re-pleading, they may abandon it. Accordingly, they abandoned par (11A)(i) of the pleadings and accepted that par (11A)(ii) needed to be re-pleaded
2. The plaintiffs acknowledged that they may have an issue in denying that the first licence transfer, which was to the first plaintiff, did not eventuate, and in any event clarified that only the failure of the second transfer application, made on 23 September 2013, allegedly resulted in an economic loss.
3. The plaintiffs submitted that the test for bad faith is not as strict as was submitted by the defendants, illustrating their point by reference to a passage from the judgment of the High Court in Thompson v The Council of Municipality of Randwick (1950) 81 CLR 87; [1950] HCA 33, which concerned a contested resumption of land by the defendant. At 105-106, the majority (Williams, Webb and Kitto JJ) stated: "In Westminster Corporation v London and North Western Railway Co., Lord Macnaghten said: 'It is well settled that a public body invested with statutory powers such as those conferred upon the corporation must take care not to exceed or abuse its powers. It must keep within the limits of the authority committed to it. It must act in good faith. And it must act reasonably. The last proposition is involved in the second, if not in the first.' In our opinion, for the reasons already stated, the Local Government Act does not authorize the defendant Council to implement the scheme approved of at the meeting of 20th January 1948. If it does, we are of opinion that the Council, in attempting to resume more land than is required to construct the road, is not acting in good faith. By that we do not mean that the Council is acting dishonestly. All that we mean is that the Council is not exercising its powers for the purposes for which they were granted but for what is in law an ulterior purpose." (footnotes omitted)
4. The plaintiffs submitted that the third defendant's functions did not extend to determining tax liability and restraining the plaintiffs from operating their business, which constituted an improper purpose, in the sense noted in Thompson v Council of Municipality of Randwick. The email correspondence between the second and third defendants on 2 February 2012 and the advice of the third defendant to the first plaintiff on 3 October 2013 (see [20] and [24] above) were evidence of the third defendant exceeding their authorised powers. The third defendant had acknowledged the policy behind these actions in its response to the first plaintiff's questions in May 2016, relevantly reproduced at [30] above.
5. The plaintiffs conceded that it had not expressly pleaded or particularised that the third defendant exceeded its authorised powers by holding up a licence transfer on the basis of the outstanding gaming tax, where liability was disputed.
6. In relation to the defendants' submissions on economic loss, the plaintiffs disputed that an assumption of responsibility should be pleaded. They noted that the authorities relied upon by the defendants concerned whether an incoming purchaser of a poorly-constructed building had a right of action for economic loss against the builder, and submitted that, therefore, they were of little relevance in that context. The question of assumption of responsibility did not arise, because the first plaintiff "stands aside and apart" from the defendants; the plaintiffs had no input into their decision-making.
7. Applying similar reasoning, the plaintiffs submitted that there was a degree of artificiality in pleading or particularising vulnerability in a case in which there was nothing that the plaintiffs could have done to protect themselves from the loss of the kind that they say they have sustained.
8. The plaintiffs conceded that the pleadings did not expressly state that the third defendant relied on representations from the second defendant, it was implied by the reference in par (14) to the third defendant relying on "an irrelevant matter", namely, the advice from the second defendant.

Consideration

1. In view of the plaintiffs' concession in relation to pars (11A)(i) and (ii) of the ACSOC pleadings insofar as they depend on the Commonwealth ACL in Sch 2 of the Competition and Consumer Act, if the defendants fail in their first sought order, the case for an order in terms of order (2) of the notice of motion is made out.
2. Similarly, in relation to alternative orders (3) and (4) of the notice of motion, although the plaintiffs have expressed a reservation as to whether they would persevere with their claim based on ACL by operation of Pt 3 of the Fair Trading Act, I do not assume that it is unarguable. Taking into account the absence of pleadings or particulars as to whether the defendants were "carrying on a business" and, if so, the material facts in respect of it, but also what I regard as a failure by the defendants to have sought further and better particulars on those issues, it should be struck out, with leave to re-plead.
3. I also note that the plaintiffs acknowledged difficulties with pars (20), (25A), (26) and (27), as presently pleaded.
4. The question then arises whether the defendants have satisfied the Court that the balance of the ACSOC should be struck out pursuant to r 14.28 of the UCPR, or only those paragraphs identified in orders (6), (7) and (8), or whether, in my view, the evidence on the notice of motion warrants a variation of those sought orders.
5. The plaintiffs admitted that they do contend economic loss and that they had not pleaded the material facts on which they rely, or identifying the assumption of responsibility by the defendants and their reliance and vulnerability. However, the plaintiffs countered that, in the circumstances of this case, it was arguably not appropriate to do so. I regard this explanation as unsatisfactory. The defendants are entitled to know the case against them, and as the ACSOC is presently drafted, in terms of economic loss being a basis of claim, the pleadings insufficiently inform the defendants of material facts on which the claim is based.
6. It is necessary, in my view, for the plaintiffs to plead with particularity how it is said that the defendants have acted in bad faith. The reliance by the plaintiffs on Thompson v Council of Municipality of Randwick does not mitigate that obligation, but rather demonstrates the importance of explaining the way in which plaintiffs claim that there has been an exercise in bad faith. I note the concern expressed by the Court in SCAS v Minister for Immigration & Multicultural & Indigenous Affairs that "proper grounds" for such an allegation must exist. At a minimum, it is appropriate to plead the material facts upon which the allegation is based.
7. My conclusion in relation to the need to re-plead economic loss and the allegation that the defendants acted in "bad faith" affects so much of the ACSOC that the case is made out for the pleadings as a whole, to be struck out, with leave to re-plead.

Costs

1. The defendants have succeeded on their first sought order and it is appropriate that costs follow the outcome of the application. Accordingly, I will make such an order.

Orders

1. I make the following orders: 1. Pursuant to r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW), the amended consolidated statement of claim filed 10 July 2019 is struck out. 2. Leave is granted to the plaintiffs to serve a proposed further amended statement of claim on the defendants by 16 November 2020. 3. The defendants are to file and serve any further notice of motion in relation to the proposed amended statement of claim by 30 November 2020. 4. The matter is listed before the Registrar on 2 December 2020 for directions. 5. The plaintiffs to pay the defendants' costs of the notice of motion filed on 22 July 2019.

---

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 October 2020