NSWNSWSC

Traderight (NSW) Pty Ltd (ACN 108 880 968) v Bank Of Queensland Limited

[2011] NSWSC 972

Supreme Court of NSW|2011-08-18|Before: Ball J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2011-08-18

Before

Ball J

Catchwords

Plaintiff in 08/258225
Plaintiff in 08/279848
Defendant in 08/281332
First Defendant in 08/282126

Source

Original judgment source is linked above.

Catchwords

Plaintiff in 08/258225Plaintiff in 08/279848Defendant in 08/281332First Defendant in 08/282126Defendant in 08/282304First Plaintiff in 09/287360Defendant in 09/287814First Defendant in 07/256081Fourth Defendant in 09/287816First Defendant in 09/287824Defendant in 10/304306Defendant in 10/305568Defendant in 10/306022Defendant in 10/367086Defendant in 10/367117) SME Business Assist Pty Limited (ACN 108 524 232) (First Defendant in 08/279848Tenth Defendant in 09/287360First Plaintiff in 09/287814Sixth Plaintiff in 07/256081) Scott Rolfe McCoy (Second Defendant in 08/279848Eleventh Defendant in 09/287360Second Plaintiff in 09/287814Second Defendant in 09/287360

Judgment (10 paragraphs)

[1]

y (Third Plaintiff in 08/282126; Fourth Defendant in 09/287360; Third Plaintiff in 07/256081; Third Plaintiff in 09/287816) Ross Chapman (Fourth Plaintiff in 08/282126; Fifth Defendant in 09/287360; Fourth Plaintiff in 07/256081; Fourth Plaintiff in 09/287816) Luke Nolan (Fifth Plaintiff in 08/282126; Sixth Defendant in 09/287360; Fifth Plaintiff in 07/256081; Fifth Plaintiff in 09/287816) David Liddy (Second Defendant in 08/282126; Second Plaintiff in 09/287360; Second Defendant in 07/256081; First Defendant in 09/287816; Second Defendant in 09/287824) Jude Financial Services Pty Ltd (ACN 115 763 481) (First Plaintiff in 08/282304; Seventh Defendant in 09/287360; Eighth Plaintiff in 07/256081; First Plaintiff in 09/287824) Russell Jude Edward Gardner (Second Plaintiff in 08/282304; Eighth Defendant in 09/287360; Ninth Plaintiff in 07/256081; Second Plaintiff in 09/287824) Penelope Ann Gardner (Third Plaintiff in 08/282304; Ninth Defendant in 09/287360; Tenth Plaintiff in 07/256081; Third Plaintiff in 09/287824) Industrial Court of New South Wales (First Defendant in 09/287360) Donna Quinn (Third Plaintiff in 09/287360; Third Defendant in 07/256081; Second Defendant in 09/287816; Fourth Defendant in 09/287824) Gary Allsop (Fourth Plaintiff in 09/287360; Fourth Defendant in 07/256081; Third Defendant in 09/287816; Third Defendant in 09/287824) Southpole Financial Services Pty Ltd (First Plaintiff in 10/304306) Harunur Rashid Chowdhury (Second Plaintiff in 10/304306) Iftekhar Tarek Hassan (Third Plaintiff in 10/304306) Ikthedar Hassan Murad (Fourth Plaintiff in 10/304306) Best Deal Pty Limited (ACN 119 366 433) (First Plaintiff in 10/305568) Jeffrey Bruce Jones (Second Plaintiff in 10/305568) LJH Group Pty Limited (ACN 123 507 497) (First Plaintiff in 10/306022) Leslie Xu (Second Plaintiff in 10/306022) Jin Yu Yang (Third Plaintiff in 10/306022) Leokate Pty Ltd (ACN 111 162 068) (First Plaintiff in 10/367086) Stephen Sargent (Second Plaintiff in 10/367086) Lauren Sargent (Third Plaintiff in 10/367086) Shamarbre Pty Ltd (First Plaintiff in 10/367117) Ronald George Johnson (Second Plaintiff in 10/367117) Representation: N A Cotman SC (OMB Parties) R D Glasson (OMB Parties) S Couper QC (Bank Parties) J V Gooley (Bank Parties) G A F Connolly (Bank Parties) McCabe Terrill Lawyers (OMB Parties) HWL Ebsworths (Bank Parties) File Number(s):

[2]

Introduction 1This is an application to strike out various paragraphs of a number of statements of claim which have been filed in proceedings commenced by franchisees of the Bank of Queensland and persons associated with them (together, referred to as the OMB (Owner Manager Branch) Parties ) against the Bank (abbreviated in the pleadings as BoQ or BOQ ) and persons associated with it (together, the Bank Parties ). In all, there are 17 sets of proceedings concerning 10 franchises. It is not necessary for present purposes to describe each set of proceedings. The number of proceedings exceed the number of franchises because, in the case of a number of franchises, the franchisees commenced separate proceedings in the New South Wales Industrial Court seeking relief under s 106 of the Industrial Relations Act 1996 ( IR Act ) and those proceedings have been transferred to this court. In two cases, the Bank commenced proceedings in the Supreme Court of Queensland seeking to recover moneys said to be owing to it under various agreements and those proceedings have been cross-vested to this court. In one case, the Bank Parties commenced proceedings in the Federal Court seeking orders preventing the respondents in that case from proceeding with their claim in the New South Wales Industrial Court on the basis that s 106 of the IR Act was inconsistent with s 7(1)(c) of the Independent Contractors Act 2006 (Cth) and is, therefore, to that extent invalid under s 109 of the Constitution . That proceeding and an application for leave to appeal against an interlocutory order of Logan J in that proceeding have also been cross-vested to this court. 2The pleadings from which the Bank Parties seek to strike out paragraphs or claims are, speaking very broadly, in similar terms. They all allege that the Bank Parties made a large number of false representations which induced the OMB Parties to enter into various agreements that together established the terms on which the franchisees would operate what are referred to as Owner Manager Branches ( OMBs ) of the Bank and to expend money in establishing and operating those branches. None of the branches in question was successful and, as a result, the OMB Parties have suffered substantial losses. They seek to recover those losses from the Bank Parties together with a number of ancillary orders. The claims are put in various ways. They include claims for damages under s 82 and claims for other relief under s 87 of the Trade Practices Act 1974 (Cth) (now the Competition & Consumer Act 2010) (the TP Act ) for contraventions of s 52 of that Act, claims under equivalent provisions of the Fair Trading Act 1987 (the FT Act ) and Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act ), and claims for damages for negligent misrepresentation and for breach of warranty. There are also additional claims for relief for contraventions of ss 51AA and 51AC of the TP Act and s 12CC of the ASIC Act (relating to unconscionable conduct). Some claims also now incorporate a claim made under s 106 of the IR Act. 3The paragraphs or claims which are sought to be struck out fall into two categories. First, there are paragraphs in each relevant statement of claim which plead a number of what are defined in the statements of claim to be "Post Opening Representations" - that is, representations said to have been made by the Bank Parties to the OMB Parties after the relevant branches had opened. Second, in two proceedings, the OMB Parties have served particulars of loss which include claims for personal injuries in respect of three individuals who are said to have suffered psychiatric illness as a consequence of the conduct of the Bank Parties. The Bank Parties seek to strike out those particulars with the result that the claims for personal injuries will be struck out. 4The parties have helpfully identified two pleadings which together raise all the issues requiring determination by the Bank Parties' motion. Those proceedings are the proceedings commenced by Jude Financial Services Pty Ltd and Mr and Mrs Gardner (who controlled that company) and the proceedings commenced by Best Deal Pty Limited and Mr Jones (who controlled that company). Jude opened an OMB in Bathurst and Best Deal opened an OMB in Toronto (a town located near Newcastle). The parties accept that, once I determine the issues raised by the Bank Parties' motion in relation to those proceedings, it will be possible to determine the fate of the relevant paragraphs of the other pleadings and particulars of personal injuries. 5Before turning to the pleadings themselves, two other points are worth making. 6First, the only bases on which the Bank Parties seek to strike out the relevant paragraphs or claims are under UCPR r 14.28(1)(b) or s 61 of the Civil Procedure Act 2005 (NSW) ( CP Act ). UCPR r 14.28(1)(b) provides: 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) ... (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) ... Section 61 of the CP Act gives the court a broad power to give directions for the conduct of the proceedings. Subsection (1) provides: The court may, by order, give such directions as it thinks fit (whether or not inconsistent with rules of court) for the speedy determination of the real issues between the parties to the proceedings. The balance of s 61 goes on to spell out the powers of the court, but not in a way which limits the general discretion given by subs (1). In exercising the powers conferred by s 61, the court must seek to give effect to the overriding purpose of the CP Act and Uniform Civil Procedure Rules - that is, the just, quick and cheap resolution of the real issues in the dispute: CP Act s 56(1), (2). 7In this case, the Bank Parties say that the paragraphs in issue are either irrelevant or do not identify a cause of action and plead the material facts relevant to that cause of action and should be struck out for that reason. This is not a case where the Bank Parties seek to strike out the paragraphs in issue because those paragraphs disclose no cause of action, although some of the submissions made on behalf of the OMB Parties proceeded on the basis that they did. 8Secondly, it is relevant to observe that this case involves considerable complexity. As I have said, there are 10 different franchises. Most of the principal statements of claim filed by the OMB Parties are in excess of 150 pages. All of the claims are supplemented by separate statements of particulars. The case has been set down commencing in April next year with an estimate of 28 weeks. Having regard to those matters, the need to define clearly and precisely the issues well in advance of the hearing takes on added significance. Adherence to the rules of pleading are an important means by which that goal is achieved: Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 per Mason CJ and Gaudron J; at 287-8 per Brennan J.

[3]

Post Opening Representations 9The pleadings in relation to the Post Opening Representations fall into two categories. An example of the first category is contained in a combination of paras 124 to 127, 177, 180, 231, 255 and 274 of the Further Amended Statement of Claim (the FASC ) filed in the Jude proceedings. 10Paragraph 124 pleads that Mr Edwards, on behalf of the Bank Parties, represented in trade and commerce in an email dated 9 May 2007 that: (a) Mr Gardner and his team are doing a fantastic job, (b) with the initiatives, structure and work ethic in place, the Bathurst OMB will achieve its projections; (c) impliedly, the Viable Business Representation. The "Viable Business Representation" is defined in para 33 of the FASC to be a representation that the Bank Parties: [A]ctually believed on reasonable grounds that a viable business could be conducted in NSW as a BOQ franchisee, and in particular in Bathurst, by the Plaintiffs on the proposed terms of the BOQ OMB Franchise ... The Viable Business Representation is also said to be one of a number of representations impliedly or expressly made by the Bank Parties prior to the opening of the branch (defined in the FASC as the Pre Opening Representations ). The 3 representations pleaded in para 124 are together defined as the First Email Representations . 11Paragraphs 126 and 127 then plead: 126. The First Email Representations were made with the purpose of the BOQ inducing the Plaintiffs to continue to perform services for the BOQ, expend money for the benefit of the BOQ and to incur further debt to the BOQ. 127. The Plaintiffs, relying upon the First Email Representations were induced to continue to operate the Bathurst OMB Branch. 12The First Email Representations are, together with a number of other representations, defined in para 177 as the Post Opening Representations . 13The act of reliance pleaded in para 127 was the act of continuing to operate the Bathurst OMB Branch. In some cases, however, other acts of reliance are pleaded. For example, para 180 relevantly pleads: In October 2006, relying upon the Pre-Opening Representations and the Post-Opening Representations, Mr Gardner determined to recruit an experienced mobile lender/business development manager to increase business. 14Paragraph 231 then pleads that: The Pre-Opening Representations, the Post-Opening Representations and the Pre-Termination Representations were false, misleading or deceptive or likely to mislead or deceive. The "Pre-Termination Representations" are a third set of representations which are said to have been made after the branch was opened, but before the franchise was terminated. No attack is made on the Pre Termination Representations, although it is difficult to see why they should be treated differently from the Post Opening Representations. 15Paragraph 231 goes on to give particulars of the falsity of the Post Opening Representations. Those particulars are in the following terms: (jj) As to the representations as to there being a viable business at Bathurst or as to the OMB businesses elsewhere in NSW, the Pre-Opening representation falsity matters are repeated; (kk) The concerns raised by other OMB's as to the results of their businesses were not as a result of the lack of commitment and ability to succeed of those OMB's and it was untrue that those OMB's were seeking to blame others; (ll) BOQ's success did not depend on the success of the OMB network as the BOQ benefited from any new business written by the OMB's even though the OMB's themselves were unprofitable; (mm) The vast majority of the OMB's were not successful or even viable as businesses which fact was known to the BOQ at the time of the first public representation; (nn) It was not true that success with the OMB Business Model was possible through hard work, hard knocks and long hours; (oo) The BOQ did not and could not support the Plaintiffs in any meaningful way; (pp) In spite of the Plaintiffs "doing all the right things" they were not able to ensure the success and viability of the Bathurst OMB Branch; (qq) There were no reasonable grounds for believing that borrowing further money to expend in the conduct of the Bathurst OMB would or could lead to a viable business capable of servicing the debt, repaying the debt or allowing payment of proper remuneration to the employees including Mr Gardner; (rr) The option presented by the BOQ at the Eighth Meeting, that Mr Gardner should continue to operate the Branch and try to write $3 million in loans per month was not a viable option in fact; and there were no reasonable grounds for the BOQ believing that that was a viable business option; and there were in fact reasons known to the BOQ why it was not a viable option, to wit the experience of all other BOQ OMB's in NSW; (ss) The BOQ knew or ought to have known that its franchise model for the New South Wales franchisees was flawed and, when tested, in fact failed and was incapable of sustaining a viable business. 16Paragraph 255 then pleads: In the premises, in trade or commerce, the Defendant, by its servants or its agents, has engaged in conduct that is misleading or deceptive or is likely to mislead or deceive in contravention of section 52 of the Trade Practices Act 1974. The particulars of this allegation refer back, among other things, to the Pre Opening Representations and the Post Opening Representations and the facts and matters said to falsify those representations. 17Paragraph 274 then pleads: By reason of the breaches and contraventions aforesaid, the Plaintiffs have suffered loss and damage. Particulars of that loss and damage are given in a separate document entitled "Schedule of Damages". That document lists the total damages claimed by the plaintiffs. There is no attempt to identify which losses are said to flow from which representations (or other wrongful conduct). 18An example of the second type of pleading based on the Post Opening Representations is contained in a combination of paras 143-145, 147-149A, 237, 238, 273 and 293 of the Best Deal Amended Statement of Claim ( ASC ). 19In paras 143 and 144 of the ASC, the plaintiffs plead that Mr Jones became aware that the Bank Parties had decided to terminate the Maroubra Junction and Hurstville OMBs. Paragraph 145 then pleads that Mr Jones raised those terminations with Mr Schofield, an employee of the Bank, who made a number of representations (in trade or commerce) including the following: (c) There were no problems with the viability of the OMB model; the problem was with the former Owner Managers of those branches; (d) ... (e) That the BoQ was confident that it was taking the OMB business in the right direction and that the BoQ was on the right track to achieving continued strong performance through its OMB network; (f) That the issues raised by the former Owner Managers of the Hurstville and Maroubra Junction OMBs with the OMB network did not apply to the Toronto OMB and should not be a cause of concern for Jones. These representations (and some others that need not be referred to in the present context) are together defined as the "Maroubra Junction and Hurstville Representations". It is also alleged that by making those representations the BOQ impliedly made the Viable Business Representation (defined in para 33 in similar terms to the way it is defined in the Jude FASC). 20The pleading then contains the following paragraphs: 147. By repeating the Viable Business Representation and making the separate Maroubra Junction and Hurstville Representations BoQ represented that the factual matters were true and as to the future matters, it had reasonable grounds for believing the matters would happen or occur as represented. 148. The BoQ made the Viable Business Representation and the Maroubra Junction and Hurstville Representations in trade or commerce for the purpose of inducing Jones (as a director of Best Deal and in his own personal capacity) to continue operating the Toronto OMB branch and to continue investing his own personal resources (time and financial) into the continued operation of the Toronto OMB for the benefit of the BoQ. 149. Induced by the Maroubra Junction and Hurstville Representations and relying upon the Pre-Opening Representations and the Maroubra Junction and Hurstville Representations, Jones continued to invest his own personal resources to ensure the continued operation of the OMB franchise for the benefit of the BoQ. 149A. Had the Bank told Best Deal in September 2006, that: (a) the experience of the operation of OMBs in NSW was showing that the Bank's products were not competitive in NSW; (b) the majority of other OMBs in NSW were not achieving their monthly lending targets to make them profitable; (c) any adjustments to the OMB model would not, or it was highly likely that any adjustments would not, make the Toronto OMB or the OMB model successful; (d) the issues raised by the former Owner Managers of the Hurstville and Maroubra Junction OMBs with the OMB network did apply to the Toronto OMB and should be a cause of concern for you; (e) the failure of the Hurstville and Maroubra Junction OMBs was not related to the conduct of the individual owner managers; (f) by reason of these matters, regardless of how hard you work, whether you "hang in there", "do everything right" or keep "pounding the pavement", you will not, or it was highly likely that you will not, be able to make the Toronto OMB earn sufficient income to achieve break even and become profitable; (g)by reason of these matters, the Toronto OMB was not, or was highly likely not to be, viable because the OMB model was not sound or proven but was flawed and could not yield the results represented by the Bank, Best Deal would have ceased operating the Toronto OMB. 21The pleading then follows a similar structure to the allegations in the Jude FASC described above. The "Post Opening Representations" are defined in para 237 to include the Maroubra Junction and Hurstville Representations (as well as a number of others). Paragraph 238 pleads: The Post Opening Representations were false and misleading or deceptive or were substantially false and misleading or deceptive or were likely to mislead or deceive. The relevant particulars given in relation to the Maroubra Junction and Hurstville Representations are: (i) As to the representations as to there being a viable business in Metropolitan Sydney or as to the OMB businesses elsewhere in NSW, the Pre Opening Representations matters are repeated; (ii) It was false and misleading for the BoQ to make the Maroubra Junction and Hurstville Representations because the BoQ should have made full and frank disclosure to Jones about its knowledge about the true performance of the OMB network in NSW and Australia and the fact that the issues raised by the former Owner Managers at the Maroubra Junction and Hurstville OMB [sic] were issues that affected the whole of the OMB network and, in particular, the Toronto OMB franchise being another NSW OMB; 22Paragraph 273 then pleads: In the premises, in trade or commerce, the BoQ, by its servants or its agents, has engaged in conduct that is misleading or deceptive or is likely to mislead or deceive in contravention of section 52 of the Trade Practices Act 1974. The particulars to this paragraph are said to be the Pre Opening Representations, the Post Opening Representations and the facts and matters that are said to falsify or render misleading those representations. 23Paragraph 293 then pleads: By reason of the contraventions of the [FT Act], [TP Act] and ASIC Act pleaded above, the Plaintiffs have suffered loss and damage. Again, the particulars of the loss and damage are given in a separate document, which lists the total damages claimed by the plaintiffs. 24The principal difference between this pleading and the pleading in the Jude FASC is the inclusion of paragraph 149A. That paragraph, together with a number of similar paragraphs in the Best Deal ASC and some of the other pleadings, were included as a result of leave I gave on 3 June 2011. That leave was given in these terms: The OMB Parties have leave to amend their Amended Statements of Claim to allege, in respect of the Post Opening Representations, that but/for those representations they would have closed down the OMB businesses and to claim losses they incurred from that date as the damages flowing from those representations. That leave was given following previous objections taken by the Bank Parties to the pleading of the Post Opening Representations. The precise terms of the leave were agreed between the parties following an indication I gave, after hearing argument, that the then current form of the pleadings was unsatisfactory. 25I should add for the sake of completeness that, in some cases, the amendments made in accordance with the leave that I gave simply plead that but for the relevant representation the franchisee would have ceased operating the relevant OMB shortly after the representation was made. An example is paras 168A and 168B of the Best Deal ASC. Paragraph 164 of the ASC pleads a number of representations said to have been made after the opening of the Toronto branch which are defined as the General Comments and Representations . The content of those representations is not important in the present context. Paragraph 168 pleads that the General Comments and Representations induced Mr Jones, among other things, to continue to fund the Toronto OMB, to perform unpaid work and to borrow funds to finance the working capital requirements of the OMB. Paragraphs 168A and 168B then plead: 168A But for the General Comments and Representations, in about June 2007 Best Deal would have ceased operating the Toronto OMB. 168B Alternatively, but for the General Comments and Representations, in about September 2007 Best Deal would have ceased operating the Toronto OMB. As in the case of other representations, the General Comments and Representations are defined to be included in the Post Opening Representations and the allegations of falsity, contravention and loss in relation to the Post Opening Representations therefore apply to them. 26The OMB Parties seek to defend the pleadings of the Post Opening Representations on four grounds. First, they say that some of the representations are intended to give rise to separate causes of action under s 52 of the TP Act consistently with the leave that I gave. Secondly, they say that there is an issue in the case whether the OMB Parties acted reasonably in continuing to operate the branches and that the pleading of the Post Opening Representations is relevant to that issue. Third, the OMB Parties say that the pleading of the Post Opening Representations is relevant to an arrangement which is said to be caught by s 106 of the IR Act. Lastly, the OMB Parties submit that the Post Opening Representations are raised by the pleadings in relation to unconscionable conduct.

[4]

Post Opening Representations as Separate Causes of Action 27In my opinion, there are a number of difficulties with the pleadings in relation to the Post Opening Representations insofar as they are intended to plead additional causes of action to the causes of action based on the Pre Opening Representations. 28First, the OMB Parties submitted that not all the pleaded Post Opening Representations were intended to give rise to separate causes of action. As I understand it, the pleading of the First Email Representations in the Jude FASC is meant to be an example of a Post Opening Representation which does not give rise to a separate cause of action. But it is difficult to see why that is so. The representation is pleaded. It is pleaded that the representation induced the plaintiffs to act in particular ways. The representation is said to be false or misleading. As a result, it is said that the Bank contravened s 52 of the TP Act, by reason of which the plaintiffs are said to have suffered loss or damage. On its face, that appears to be a pleading of a cause of action for damages for contravention of s 52. On the other hand, the pleading of the Maroubra Junction and Hurstville Representations and the pleading of the General Comments and Representations are meant to be examples of representations said to give rise to separate causes of action. It is true that that pleading in relation to the Maroubra Junction and Hurstville Representations contains the additional allegation in para 149A that had Best Deal been told of various matters - which presumably are matters that are said to make the Maroubra Junction and Hurstville Representations false - Best Deal would have ceased operating the Toronto OMB and that the pleading in relation to the General Comments and Representations contains paras 168A and 168B. However, it is difficult to see how those allegations convert what was not a pleaded cause of action into something that is. The allegation of reliance is already contained in paras 149 and 168, and in other respects the causes of action seems to be complete. If the pleadings are meant to draw a distinction between Post Opening Representations that give rise to a cause of action and those that do not, then they are embarrassing because they fail to draw that distinction clearly. 29Second, the claims based on the Post Opening Representations do not identify the loss that is said to flow from reliance on the relevant representations. This point lay behind the objection originally taken by the Bank Parties to the pleading of the Post Opening Representations. It was intended to be addressed in the leave given on 3 June 2011 by the words "and claim losses they incurred from that date as the damages flowing from those representations". 30In some cases, it may be possible to guess what loss is said to flow from the representations. For example, where the reliance is said to be the continued operation of the branch, it might be assumed that the loss includes continuing trading losses of the branch. But are other losses claimed? And if so, what are they? The only thing that is clear is that the losses cannot be all the losses set out in the particulars of loss, since those particulars set out all the losses that are said to flow from entering into the various agreements that establish the franchise. In other cases, it is not even possible to guess what loss is claimed. For example, para 180 of the Jude FASC pleads that relying on the Pre Opening Representations and the Post Opening Representations, Mr Gardner determined to recruit someone with particular experience. It is unclear whether any loss is said to flow from that conduct and, if so, what it is. 31I do not think that it is necessary for the OMB Parties to quantify the precise loss that they claim, but in my opinion the Bank Parties should not be left to guess what that loss might be. It needs to be spelt out with sufficient particularity so that the Bank Parties know the case they have to meet and the court is in a position to know what claim is made and to rule on that claim. It is not sufficient for the OMB Parties simply to say that they have identified all their loss and the loss they claim is some unidentified subset of that loss. 32Third, in my opinion there are difficulties with the way in which para 149A of the Best Deal ASC is pleaded. The reliance that is pleaded is not reliance on the Maroubra Junction and Hurstville Representations, but rather reliance on the Bank's failure to tell Best Deal certain things. However, nowhere in the pleading is it alleged that the Bank engaged in misleading or deceptive conduct by failing to tell Best Deal those things. Silence can, of course, amount to misleading and deceptive conduct: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. But if that is what is alleged, it is necessary to plead the facts which, taken together with the silence, amount to the misleading conduct and to plead that that conduct is misleading or deceptive or likely to mislead or deceive. The ASC does not do that. That difficulty is repeated in the particulars to the pleading of the falsity of the Post Opening Representations and, in particular, the falsity of the Maroubra Junction and Hurstville Representations. Particular (ii) to para 238 states that the Maroubra Junction and Hurstville Representations were false and misleading because "the BoQ should have made full and frank disclosure to Jones about its knowledge about the true performance of the OMB network in NSW" etc. But that is not a proper particular of the falsity of the Maroubra Junction and Hurstville Representations - for example, the falsity of the representation that "[t]here were no problems with the viability of the OMB model". Rather, it is an assertion about the duties of the Bank. However, there is no clear identification of the facts that are said to give rise to that duty. 33Fourth, in my opinion there is a difficulty with the formulation - examples of which are found in para 180 of the Jude FASC and para 149 of the Best Deal ASC - that the OMB Parties did something relying upon the Pre Opening Representations and the Post Opening Representations. The difficulty arises because it is not clear whether what is intended to be pleaded is that it is the combination of the Pre Opening Representations and the Post Opening Representations which caused the relevant plaintiff to do something or whether what is asserted is that each of the Pre Opening Representations and the Post Opening Representations caused that conduct. If the former, it is not clear what the pleading of the Post Opening Representations adds to the pleading of the Pre Opening Representations since, if the OMB Parties fail on the Pre Opening Representations, any claim based on both will also fail. On the other hand, if it is the latter, it is not clear what the pleading of the Pre Opening Representations adds in this context since what is asserted is that the Post Opening Representations induced the relevant conduct. In any event, the pleading does not make what is asserted clear.

[5]

Post Opening Representations as Relevant to Reasonableness of OMB Parties' Conduct 34The parties agree that there is an issue in the case whether all the losses claimed by the OMB Parties flowed from the pleaded Pre Opening Representations even assuming that those representations were made in contravention of s 52 of the TP Act. Relevant to that question is the reasonableness of the OMB Parties' post opening conduct and relevant to that question is the conduct of the Bank Parties. In this context, the OMB Parties place particular reliance on the decision in Bateman v Slatyer (1987) 71 ALR 553. In that case, the applicants were induced to purchase a retail franchise as a result of misleading statements made by the vendor. It became apparent shortly after they purchased the business that the representations were misleading and that the business was not profitable. Nonetheless, the applicants continued to trade and were encouraged to do so by the respondents. Burchett J held that the applicants were entitled to claim trading losses for a considerable period of time on the basis that those losses should be seen as flowing directly from respondents' misleading conduct. One of the matters his Honour took into account in reaching that conclusion was the encouragement that had been given to them by the respondents which effectively continued the misrepresentations. 35However, it is unclear from the judgment whether the encouragement given by the respondents was pleaded; and there is no suggestion in the case that it needed to be. In addition, another matter that Burchett J took into account was the difficulty that the applicants had in extricating themselves from the franchise because, for example, they had signed a 5 year lease and that lease contained a covenant restricting the use of the shop; and, again, there is no suggestion that that fact was pleaded or that it needed to be. 36The Bank Parties accept that there is an issue in these proceedings whether the OMB Parties acted reasonably in the way in which they ran and continued to run their respective OMB branches. That issue having been raised, the OMB Parties are free to lead any evidence relevant to that issue. The Bank Parties have not suggested otherwise. That evidence may include evidence of any encouragement the OMB Parties received from the Bank Parties to continue to operate the relevant branch as well as evidence of other matters - such as evidence of the type considered by Burchett J in Bateman going to the difficulties of extricating themselves from the position they found themselves in. None of that evidence needs to be pleaded. Even if it were to be pleaded, it cannot be pleaded in the form that the OMB Parties have done. The allegations of falsity, contravention and loss in relation to the Post Opening Representations are irrelevant to the question whether the OMB Parties were induced by the Bank Parties to persevere with their businesses.

[6]

Post Opening Representations as Relevant to Claims under s 106 of the IR Act 37Section 106 of the IR Act relevantly provides: (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as: (a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and (b) the performance of work is a significant purpose of the contractual arrangements made by the person. ... (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. "Contract" is defined in s 105 to mean "any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument". 38In Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420 at 432 the Full Bench of the Industrial Relations Commission said: In a very real sense, it seems to us, the making of representations known to be acted upon by a person in considering entry into a contractual relationship and on the basis of which representations an agent as the representor intends the person to act may well, quite apart from any other connection with the contract subsequently made, be itself an arrangement whereby work is performed in an industry or, at the least, a collateral arrangement to such a contract or arrangement. 39That passage was applied by Backman J in Robberds v Turner Franchising & Allied Services Pty Ltd [2005] NSW IRComm 321. In that case, Backman J held that pre-contractual representations made by individuals associated with the respondent that had induced the applicant to enter into a franchise agreement were part of the arrangement by which the applicant performed work in an industry. Her Honour declared the whole arrangement, including the franchise agreement, void and ordered the respondents, including the individuals who had made the representations, to pay an amount of $358,641.21. It appears that one basis for that order against the individuals was that, by making the representations, they became parties to the arrangement that had been declared void. However, her Honour also took the view that there was a sufficient connection between the individuals and the franchise agreement to justify an order against them either on the basis that they had received monies paid by the applicants under the franchise agreement or on the basis that they were "culpably associated with its making or operation by reason of [the] misrepresentations": at [192]. 40The OMB Parties also point out in this context that post contractual conduct is relevant to whether a contract is unfair, as s 106(2) itself makes clear: see Walker v Industrial Court of NSW (1994) 53 IR 121 at 133-4 per Kirby P; 142-3 per Sheller JA. 41The Jude FASC is an example of a pleading in which the OMB Parties rely on s 106 of the IR Act. Paragraph 276 pleads: The Pre Opening Representations and the Post Opening Representations were or are arrangements within the meaning of section 105 of the IR Act. Paragraph 277 defines those arrangements together with the contracts entered into between the parties as the Arrangements . 42Paragraph 283 pleads that two of the relevant contracts (the OMB Agreement and the Bathurst OMB Agency Agreement) were agreements pursuant to which work was done by Mr and Mrs Gardner in the banking or financial services industry. Paragraphs 284 and 285 then plead: 284 Mr Gardner performed work as a Branch Manager of the Bathurst OMB and as an employee of [Jude] and performed work under the Arrangements. 285 Mrs Gardner was employed as a Teller, by [Jude], and performed work under the Arrangements. Paragraph 286 pleads that each of the Post Opening Representations were made with the intention of inducing Jude, Mr Gardner and Mrs Gardner to continue to perform the work of conducting the OMB franchise and continuing to invest further moneys and assume further liabilities in connection with the franchise. It is then pleaded in paragraphs 287-290 that the Arrangements were or became unfair for various reasons. Finally, so far as the Post Opening Representations are concerned, para 295 pleads: By reason of the Pre Opening Representations and the Post Opening Representations made by the Bank to (variously) [Jude], Mr Gardner and Mrs Gardner and its conduct including the failure by the Bank to disclose the almost total failure of the OMB Franchises in New South Wales to achieve the break even point let alone a viable business, the Plaintiff [sic] were persuaded to fruitlessly expend monies and incur further debt to the BOQ. The point of this paragraph to the overall claim, or any claim based on the Post Opening Representations, remains obscure. 43Various relief is claimed under s 106, including compensation and orders declaring void or varying "the contracts, arrangements, conditions and collateral agreements" between the parties. 44It is at least arguable that a representation which induces a franchisee to continue the business of the franchisee, and induces the employees who control that franchisee to continue to work as employees in that business, is an arrangement by which those individuals continue to perform work in an industry. It is more difficult to see that that arrangement could be a contract (or arrangement) for the purposes of s 106 of the IR Act because it is difficult to see how an order could be made declaring that contract in whole or in part void or varying it. On the face of it, the contract or arrangement that must be varied is the contract or arrangement by which the work came to be performed in the first place. That, however, is not an issue that is appropriate for resolution on a strikeout application. 45Even so, in my opinion, the pleading of the claim based on the Post Opening Representations under s 106 of the IR Act is defective in its present form. That is because the pleading does not identify clearly whether there is one or a number of arrangements relied on and what is said to constitute that arrangement or those arrangements. Nor does the pleading identify in the case of each arrangement the reasons that arrangement is unfair and the compensation that is claimed in respect of that arrangement. Rather, what the pleading does is lump all the contracts and arrangements together. It then claims that those arrangements are unfair for reasons which are not all relevant to each arrangement and claims compensation without identifying what compensation is sought in respect of each unfair arrangement. This approach does not give rise to a difficulty in the case of the Pre Opening Representations. In the case of those, it makes sense to say that there is a single arrangement that includes the agreements and representations which induced those agreements. To the extent that any of those representations or agreements involves unfairness, it is at least arguable that that unfairness affects them all. The position is different in the case of the Post Opening Representations. Those representations are said to be made at different times, and they must have different consequences because they involve the franchisees deciding to continue in business (or possibly doing something else) at different times. The problem is illustrated by considering paragraphs 289 and 290. Paragraph 289 asserts that the Arrangements were unfair because if it had not been for the representations and conduct of the Bank Parties: (a) [Jude] would not have entered into the Bathurst OMB Agency Agreement, the Fit Out Loan, the Overdraft and would not have given the fixed and floating charges in favour of the BOQ; (b) Mr and Mrs Gardner would not have borrowed money from the BOQ or given any guarantees to the BOQ; and (c) Mr and Mrs Gardner would not have utilised their own financial resources as capital to support the ongoing operation of the OMB Business. Paragraphs (a) and (b) have nothing to do with any arrangement arising from the Post Opening Representations. Paragraph (c) may do, but it would be necessary to know what financial resources it is said were used on the faith of which Post Opening Representation. 46Paragraph 290 sets out particulars of how the Arrangements became unfair. Many of those particulars concern the lack of support given to Jude by the Bank such as management and systems support and marketing support, the failure to process loan applications quickly and the failure to offer competitive products. Others concern the Bank's agreement to permit Jude to increase its overdraft in circumstances where it is said that the Bank Parties knew or ought to have known the business was not viable. Again, it is possible to see how those matters might be said to have caused the original agreements to become unfair because they were all events that occurred after the original agreements were entered into. However, in the case of the arrangements arising from the Post Opening Representations, some of the matters relied on (such as the Bank approving Jude to increase its overdraft to $200,000) occurred before some of the Post Opening Representations were made. It is simply not clear which matters are relevant and which are not. Nor is it clear what compensation is said to be payable in respect of each arrangement arising from the Post Opening Representations. In this last respect, the problem with the pleading in relation to the claim under s 106 of the IR Act based on the Post Opening Representations mirrors the problem arising in respect of the claim for damages under s 82 of the TPA for contravention of s 52 based on those representations. 47If these problems were confined to a particular representation, then it may be that the pleading would be sufficiently precise to permit it to stand. It seems possible with some analysis and some guess work to arrive at a conclusion about precisely what the arrangement is and why that arrangement is said to be unfair, although even then it remains unclear what is to be declared void or varied in consequence of those findings and what compensation order it is said should be made flowing from that declaration. However, there is not a single representation. There are a substantial number of them and a substantial number of reasons are given for why the arrangements said to arise from those representations are unfair. It is not in the interests of a just, quick and cheap resolution of the real issues in the dispute to require the Bank Parties, or the court, to sift through that material to work out or guess which representations or combination of representations give rise to an arrangement, why that arrangement is said to be unfair and what consequences are said to follow from that finding in relation to each such arrangement.

[7]

Post-Opening Representations as Relevant to Unconscionable Conduct Claim 48This issue is raised by para 259 of the Best Deal ASC. The thrust of the unconscionability claim is that various contracts and arrangements were unconscionable for reasons particularised in the ASC. The relevant contracts and arrangements are identified in para 255 and defined in that paragraph to be the Contracts and Arrangements . They include the contracts by which the franchise was established, the overdraft given by the Bank in connection with the franchise together with security given in respect of that overdraft and "[a]ny other related documents in respect of the establishment, financing, operation and termination of the Toronto OMB Branch" (sub-para (h)). Paragraph 255 does not include any reference to the Post Opening Representations. Although it is not entirely clear, it is hard to believe that sub-para (h) is intended to include a reference to all correspondence between the parties. It is, however, far from clear what it is intended to include. For that reason, although no specific attack is made on sub-para (h), it should be struck out. 49After pleading that specific agreements were unconscionable for identified reasons, the ASC pleads in paragraph 259 that: The Contracts and Arrangements are a product of and are causative of unconscionable conduct as a basis of dealing with the Plaintiffs by reason of being the product of, or operating in relation to, the following: (a) The Pre-Opening Representations; (b) The Post-Opening Representations: (c) ... There is, so far as I can see, no other reference to the Post Opening Representations in the pleading of the unconscionability claim. 50In my opinion, para 259 of the ASC is very unclear. For the most part, and leaving aside sub-para 255(h), the Contracts and Arrangements are not a product of the Post Opening Representations. They are the contracts and arrangements which established the franchise relationship and precede the Post Opening Representations. It is simply not clear what is meant by saying that the Contracts and Arrangements operate in relation to the Post Opening Representations or why that should be causative of unconscionable conduct. For that reason, paragraph 259 should be struck out. Once that paragraph is struck out, the pleading of the Post Opening Representations is irrelevant to the unconscionability claim.

[8]

The Personal Injury Claims 51The claims for damages for personal injuries are, as I have said, contained entirely in particulars. The claim by Mr Jones in the Best Deal proceedings is an example. The ASC in those proceedings simply pleads that the plaintiffs have suffered loss and damage. That pleading is contained in a number of paragraphs. For example, para 281 pleads that the plaintiffs suffered loss and damage as a result of relying on negligently made representations. Paragraph 292 pleads: By reason of the facts and matters aforesaid, the Plaintiffs have suffered loss and damage and seek the payment of money in connection with the contract avoided as to the loss incurred. This appears to be a general pleading of loss and damage respecting all causes of action. However, para 293 (quoted above at para [23]) then contains a pleading of loss and damage by reason of the contraventions of the FT Act, TP Act and ASIC Act. The relationship between paras 292 and 293 is unclear. 52In support of their claim for damages, the OMB Parties have served schedules of damages in each proceeding. The schedule of damages in the Best Deal proceeding was not before me on this application. However, the schedules all take a similar form and there is no reason to think that the structure of the schedule in that case is any different from the structure of those that I have seen. Each schedule sets out the total damages claimed by each plaintiff. It does not distinguish between different causes of action. However, it does set out different heads of damage, such as expenditure made by the plaintiff, liabilities for certain loans and other amounts and loss of opportunity to earn income. 53In the case of Mr Jones's claim for personal injuries, additional particulars are provided in a letter dated 17 August 2011 from McCabe Terrill to HWL Ebsworth and in a statement of particulars served in accordance with UCPR r 15.12. The latter document describes the psychiatric illness from which Mr Jones is said to suffer and gives particulars of his continuing disabilities, out of pocket expenses, loss of income and loss of earning capacity together with a list of documents served. The former document gives some additional particulars of those matters. For example, the letter gives some details of Mr Jones's previous occupation and states that he had to give up that occupation to become a franchisee of the Bank. It also gives details of his experience and states, in effect, that but for Mr Jones's psychiatric illness, he would have been able to obtain employment with a financial institution "on an employment package of at least $101,641 per annum". Under the heading "Psychiatric illness" the letter states that Mr Jones alleges that his psychiatric illness was as a result of the Bank's conduct and goes on to explain why that is the case. In essence, the letter asserts that Mr Jones was induced to enter into the OMB Agency Agreement in circumstances where, contrary to the representations made by the Bank, the franchise was not viable. It goes on to assert that Mr Jones came under increasing financial pressure, that the Bank only offered assistance on the basis that Mr Jones provide additional security, that it suggested that it was his fault the branch was failing, that the Bank refused permission to Mr Jones to bring in other investors and continued to encourage him to persevere with the branch by maintaining that the OMB model was viable with the result that Mr Jones's financial position became even worse, leading to his psychiatric condition. 54The Bank Parties submit that this claim should be properly pleaded and that, since it is not, I should strike out the particulars of personal injuries under s 61 of the CP Act. I accept that the claim for personal injuries should be pleaded properly. In my opinion, the appropriate order is to order that the relevant OMB Parties not be entitled to pursue a claim for personal injuries until that claim is properly pleaded. 55One difficulty with the claim as it is currently formulated is that it is unclear on what basis it is put. As things stand, the claim for personal injuries is treated as a particular of damage in respect of all causes of action that are pleaded. However, there are difficulties with that. At common law, a claim for personal injuries is a separate cause of action from a claim for other types of loss, at least where the claim is brought in negligence: for discussion, see R P Balkin and J L R Davis, Law of Torts , 4 th ed, LexisNexis, at [27.36]. Whether the same is true for statutory causes of action where damages are the gist of the action - such as a claim under s 82 of the TP Act - is unclear. Whatever the position, the pleading should make it clear whether damages for psychiatric illness are sought in respect of each pleaded claim. The particulars contained in McCabe Terrill's letter dated 17 August 2011 suggest that it is alleged that the Bank Parties engaged in conduct over a period of time that could be characterised as unconscionable and that that conduct caused Mr Jones's psychiatric illness. If that is what is alleged, the conduct must be clearly pleaded and it must be pleaded that that conduct was unconscionable and had the consequences alleged. There is a pleading of unconscionable conduct in the ASC. However, as Mr Couper SC, who appeared for the Bank Parties, pointed out, the facts and matters that are alleged in support of that pleading are quite different from the allegations set out in McCabe Terrill's letter. 56Mr Cotman SC, who appeared on behalf of the OMB Parties, suggested that the issue was largely a question of where the relevant material should be included and, if the court thought that it should be included in the pleading, then that could be done. However, I do not think it is as simple as that. There is material in the letter from McCabe Terrill that could be pleaded as part of an unconscionable conduct claim and, to that extent, the material can be relocated. But by saying that, I should not be taken as saying that it is unnecessary for the claim to be pleaded properly. It should be. Once that is done, the Bank Parties will be able to file a defence which clearly identifies what is in issue between the parties. One issue that the Bank Parties have already flagged is whether the claim is statute barred under s 87F of the TPA (to the extent that the claim is brought under that Act). 57Similar comments apply if the claim is put on any other basis. In each case, it is necessary for the relevant OMB Parties to plead the facts on which they rely - such as the representations which caused them to act in a particular way - and the connection between those facts and their psychiatric illness. That is particularly important in this context because special rules apply to claims for personal injuries or claims for psychiatric illness. For example, s 82(1AAA) of the TP Act prevents a claim for personal injuries from being brought in respect of contraventions of s 52 that occurred after 20 April 2006. A precise pleading of the representations said to amount to misleading conduct that caused the psychiatric illness will permit the Bank Parties to determine whether they should rely on a defence under s 82(1AAA). Similarly, Part 3 of the Civil Liability Act 2002 limits the circumstances in which a claim for mental illness can be brought as a result of negligent conduct. In particular, s 32(1) provides: A person ( the defendant ) does not owe a duty of care to another person ( the plaintiff ) to take care not to cause the plaintiff mental harm unless the defendant ought to have foreseen that a person of normal fortitude might, in the circumstances of the case, suffer a recognised psychiatric illness if reasonable care were not taken. A precise pleading of the facts which are said to give rise to a duty of care not to cause the plaintiff mental harm (if that is what is alleged) will assist in determining whether the relevant OMB Parties have met the requirements of the section.

[9]

Conclusion 58It follows from what I have said, that the claims based on the Post Opening Representations should be struck out and the claims for personal injuries should not proceed until they have been properly pleaded. The OMB Parties should have leave to replead their claims based on the Post Opening Representations and to plead their claims for personal injuries. The parties should bring in short minutes of order consistent with this judgment. I will hear the parties on the length of time the OMB Parties should be given to file and serve amended pleadings. 59The relevant OMB Parties should pay the Bank Parties' costs of the motion filed on 15 July 2011. Again, the parties should bring in short minutes of order to give effect to this order. 60If there is any dispute about the form of the orders that should be made, any party may approach my Associate to re-list the matter for further argument.

[10]

Amendments 28 October 2011 - (No 6) inadvertently omitted from case title published Amended paragraphs: case title 29 October 2014 - case title amended Amended paragraphs: coversheet 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: 29 October 2014

Traderight (NSW) Pty Ltd (ACN 108 880 968) v Bank Of Queensland Limited

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