Westham Dredging Co. Pty Ltd v Woodside Petroleum Development Pty

Federal Court of Australia|1987-03-17|Before: French J

Paragraphs 45 to 55 of the Statement of Claim be struck out.
The applicant have leave to file an amended statement of

The application be relisted for further directions on 7

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION

conduct in trade or commerce for the purposes of s.52 of the Trade

In 1982 the applicant engaged the second respondents to act as consulting and supervising engineers for road, earth and drainage works associated with a residential subdivision at

Acting 1t says, on the advice of the second respondents, and following the calling of tenders, the applicant in March 1985

engaged the first respondent to carry out the works.

The first respondent claims to have been underpaid to the extent of $1,684,604.00 for work done pursuant to its contract

It referred that claim to arbitration on 12 September 1986. On 24 November 1986 the applicant instituted the present

On 24 February 1987 I made an order restraining the first respondent from prosecuting the arbitration until further order and dismissed its motion seeking a stay of these proceedings

In the reasons for the judgment a narrative of relevant

events was set out which it is unnecessary to repeat here.

As against the second respondents the applicant alleges that they misrepresented their experience and expertise in the design and supervision of land subdivisions and their abilities to provide competent engineers with such experience, to provide accurate estimates of subdivisional costs and to provide accurate estimates of the cost of subdividing the land and carrying out the

These representations it was said were made in trade and commerce, were false and caused the applicant to suffer damage. The applicant claims that as a result of its reliance upon the second respondents' advice it 18 likely to have to pay more than $5.4m in excess of the estimated total cost of the subdivisional

The second respondents it is said also represented that the works could be carried out for about $1,786,000.00. These representations were allegedly made at a time when the second respondents did not and could not have any reasonable expectation that the works could be carried out for that amount. Again it is said, this was a representation made in trade or commerce and amounted to misleading and deceptive conduct by reason of which

It was further contended against the second respondents that in breach of their contract with the applicant they failed to exercise reasonable care, skill and judgment in the performance of their duties as consulting and supervising engineers and in estimating the total cost to the applicant of subdividing the land. Extensive particulars of this breach involving some 29

separate items are set out in the statement of claim.

The second respondents were also said to be in breach of their duty of care to the applicant in relation to the performance of their duties under the contract and in relation to the

By way of relief the applicant claims against them damages pursuant to Part VI of the Trade Practices Act, damages for breach of contract and for negligence and a declaration that they are liable to indemnify the applicant in respect of any

moneys which may be found due and owing to the first respondent.

The second respondents now move under 0.10 r.7 to set

aside the application as against them. Alternatively, they seek orders under 0.11 r.16 that paragraphs 45 to 50, 51 to 55 and 56 to 66 of the statement of

As is evident from the above, the applicant seeks to establish against the second respondents that the21r conduct in making the misrepresentations alleged amounts to a contravention

of sub-s.52(1) of the Trade Practices Act which provides:-

"A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or 1s likely to mislead or deceive."

Counsel for the second respondents put at the forefront of his submissions the proposition that the provision of services by a member of a profession is not capable of being conduct in

As the relevant conduct alleged against his clients comprised the provision of their professional services. as

consulting engineers, it was not, he argued, conduct in trade or

He relied in part upon the judgment of St. John J. in

Westham Dredging Co. Pty Ltd v Woodside Petroleum Development Pty Ltd and Others (1983) 66 FLR 14. Counsel's submissions upon that

case however seem to be based upon a misreading of the judgment.

His Honour considered, inter alia, the validity of a defence pleaded by consulting engineers to allegations that they

had contravened s.52 of the Trade Practices Act. The

contravention was alleged to have arisen from the provision, to prospective tenderers for a dredging contract, of inaccurate information concerning geological features of King Bay in the

The plea relevant for present purposes was contained in paragraph 16(ii1) of the defence and was in the following terms

"(ii1l) Section 52 of the Act is not concerned with the inaccuracy or unreliability of information furnished, or information negligently furnished, by a corporation engaged in conducting the profession of consulting engineering, that is to. say,

information furnished to a client in pursuance of a professional engineering retainer."

"Because of the definition of "services" in s.4 of the Act, I see no merit in the defences set out in sub-pars.(i), (111) and (v) of par. 16 of the defences. Professional advice or service, provided the other necessary ingredients are present, may lead to breach of s.52."

Nor does anything said by the Full Court in Bevanere Pty

Ltd v Lubidineuse (1985) 59 ALR 334, which declined to follow the

Westham case in other respects, undermine that part of the

Counsel further submitted that the concept of "trade" in "trade or commerce" denoted some form of mercantile or commercial activity not applicable to the activity of a member of a

He endeavoured to draw a distinction between professions and trades based on the proposition, as he put it, that the professional 1s engaged in what is "essentially an intellectual

activity and not an activity of a commercial or mercantile kind".

The submission invites a consideration of the scope of

the terms "trade" and "commerce" as used in s.52 and the concept

These terms have been discussed too often to warrant

In s.4 of the Trade Practices Act "trade or commerce" is said to mean "trade or commerce within Australia or between

While that definition makes clear that the concept extends to conduct with extra territorial components, it does not

In Larmer v Power Machinery Pty Ltd (1977) 29 FLR 490 at 493 Nimmo J. said that:-

"...ethe provisions of the Trade Practices Act, including the definition given to the expression in s.4, demand that a very wide meaning be given to it. In my view, the expression is intended to cover the whole field in which the nation's trade or commerce is carried on."

Section 4 of the Act defines the term "services" to include rights, benefits, privileges or facilities to be provided under a contract for or in relation to "the performance of work (including work of a professional nature) whether with or without

Although the word does not appear in s.52, it 1s found in s.53 in a context which casts further light on the ambit of

Section 53 prohibits certain enumerated classes of misleading conduct which fall within its general description of conduct "in trade or commerce, in connexion with the supply or

The express inclusion of "work of a professional nature" in the definition of services and the use of that term in s.53 to qualify the area of "trade or commerce" to which the section applies, suggests very strongly that the words "trade or commerce" as used in the Act are intended to apply to the provision of

This view is reinforced by the observations of the Trade

Practices Review Committee in its 1976 Report on the operation and

The submission had been put to the committee that professionals should not be regarded for trade practices purposes as a part of the business community. The committee reported on

"10.31 The Committee has already expressed its view that the Act should apply in a general fashion to those in the community engaged in trade or commerce. We regard as unrealistic the proposition

that members of the professions are not part of the business community.

10.35 Division 1 of Part V sets certain minimum standards of business conduct. Most, 1£ not all, professions 1mpose equal, 1f not stricter,

these provisions should not apply to the professions nor would we expect its application to

The last statement cited was made at a time when the

full potential of s.52 of the Act in creating a civil liability

for innocent non-negligent but inaccurate or misleading statements

context, Dixon J. in Bank of New South Wales v The Commonwealth

"It has been said that "trade" strictly means the buying and selling of goods. That, however, is a specialised meaning of the word. The present primary meaning is much wider, covering as it does the pursuit of a calling or handicraft, and its history emphasises rather use, regularity and course of conduct, than concern with

And on the central concept of the term "commerce" in the

context of the American commerce power his Honour said:-

"Transportation, traffic, movement, transfer, interchange, communication, are words which perhaps together embrace an idea which is dominant in the conception of what the commerce clause requires."

The width of the terms so interpreted in their constitutional sense is reflected in the meaning attributed to

them in the statutory context of the Trade Practices Act - Re:

Ku-ring-gai Co-Operative Building Society (No. 12) Ltd (1978) 36 FLR 134, 139 and 167, Menhaden Pty Ltd v Citibank N.A. (1984) 55

ALR 709, 712, Bevanere Pty Ltd v Lubidineuse (supra) at 339.

The scope of "trade or commerce" can be considered against the concept of "profession" to determine whether there 1s

anything about the latter that excludes it from the former.

The word "profession" is descriptive of a class of occupations. The membership of that class 1s not rigid or static but shifts with general community perceptions - Bradfield v Federal Commissioner of Taxation (1924) 34 CLR 2 at 7 per Isaacs

Whether a person carries on a profession in a given case 1s a question of degree and always of fact - Robbins Herbal

Institute v Federal Commissioner of Taxation (1923) 32 CLR 457 at

It has been said that the word involves the idea of an

occupation requiring either purely intellectual skill or else

manual skill controlled, as is painting and sculpture or surgery, by the intellectual skill of the operator as distinct from an occupation which is substantially the production or sale or arrangement for the production or sale of commodities -

Commissioners of Inland Revenue v Maxse (1919) 1 KB at 651.

The concept has created difficulties for social scientists. Theoretical definitions by reference to the crucial characteristics of professions are said to have resulted in "...a confusion so profound that there is even disagreement about the existence of the confusion" - Professions and Power - 1T.J.

One suggestion for definitive criteria includes the existence of a requirement for formal technical training accompanied by some institutionalised mode of validating both the adequacy of the training and the competence of the trained undividual. The training, it 1s said, must lead to some order of mastery of a generalised cultural tradition in a manner giving primacy to an intellectual component. Skills in some form of the use of the tradition must be developed and there must be some institutional means of ensuring that the skills will be put to socially responsible uses - Parsons - "Professions" (1968) 3

International Encyclopaedia of Social Sciences cited in Partlett -

A recent paper in the Modern Law Review speaks of "a specific historical formation in which the members of an occupation exercise a substantial degree of control over the market for their services, usually through an occupational

association" - Abel R.L. - The Decline of Professionalism (1986)

The literature on the subject is evidently substantial

and reflects conflicts on proper approaches to definition.

That question may never be satisfactorily resolved for

However, where the conduct of a profession involves the provision of services for reward, then in my opinion, even allowing for widely differing approaches to definition, there is no conceivable attribute of that aspect of professional activity which will take it outside the class of conduct falling within the

This conclusion flows from both the judicial exposition

It follows that the provisions of s.52 are applicable to the giving of professional advice by a consulting engineer and nothing flowing from the characterisation of that occupation as a

Insofar as the second respondents seek to set aside the

application on this basis their motion will be dismissed.

Paragraph 45 of the statement of claim pleads an agreement between the applicant and the second respondents whereby the applicant retained the second respondents to act as its consulting and supervising engineers for the development of the

Particulars of the various services to be provided by

Paragraph 46 alleges that in order to induce the applicant to enter into that agreement, the second respondents

made various representations as to their experience and expertise.

It 1s then pleaded that the representations were made in trade or commerce (para. 47), that they were false (para.48), and that the making of them constituted misleading and deceptive

"50. By reason of such conduct Bond has suffered loss and damage.

(2) Whereas on 28 February 1985 Ove Arup advised Bond, and Bond relied on the advice, that the total cost of all works necessary for the redevelopment of the sub-division, (namely works for water supply, roads, stormwater and engineering fees and service) would total $10,091,700. The actual cost which Bond has and/or is likely to be obliged to pay for the work 1s at least $15,561,000 and Bond claims against Ove Arup the difference and interest thereon, namely the sum of at least $5,469,300."

Para. 16 which is incorporated by reference in sub-para. (1) of the particulars to para.50, is the applicant's plea of loss and damage resulting from misrepresentations allegedly made by the

"16. By reason of such conduct Bond has suffered loss and damage.

(1) Had Bond not been induced to enter into the Agreement 1t could have had the Works completed by another contractor within 21 weeks at a price of $2,828,743.10. Bond has already paid Thiess $2,774,573, for the work completed by it and has paid other contractors $530,000.00 for those parts of the Works completed by them, and is likely to have to pay further sums. Bond claims the difference between $2,774,573 and the final amount paid by it for the Works.

(2) Thiess seeks to obtain payment of a further sum of $1,684,604.00 from Bond.

Bond claims that 1t 1s not obliged to pay any further sum to Thiess.

(3) The Works were not completed until 27 March 1986 some 30 weeks late. Bond claims holding charges, interest, and other sums' referable to this delay. Particulars of this claim are being

The second respondents objected to the form in which the representation of their capacity to provide accurate cost estimates for the subdivision was pleaded. Their point seemed to be that it was pleaded prospectively as a representation that they "would be able to provide to Bond accurate estimates of the cost

of subdividing Brigadoon and of carrying out the works".

It was said that there was uncertainty as to whether the pleading alleged a representation of a present or a future capacity.

-~- " [T agree that there may be some ambiguity in this regard, but would follow the approach taken by Pincus J. in Right Home

Improvements Pty Ltd v Imperial Alarm Screens (Aust.) Pty Ltd (1986] ATPR 40-641 at 47,201 and would not strike the paragraph

Turning to para.50 the second respondents' complaints

The complaints have substance for the particulars as presently drafted do not show a logical relationship between the misleading and deceptive conduct pleaded and the loss and damage

Sub-paragraph 16(1) particularises loss said to flow from the fact that the applicant was induced to enter into an

Nowhere 1S 1t pleaded that it was so induced by reason of the misleading and deceptive conduct attributed to the second

Of sub-para.16(2) it is sufficient to say that it does

Sub-paragraph 16(3) alleges late completion of the works by the first respondent. It also bears no logical relationship to

Turning to sub-para. 50(2) this seems to be an attempt

Facts constituting a causal relationship between the conduct alleged and the loss suffered are included in this

The cause of action upon which the applicant relies in

paras. 46 to 50 1s created by s.82 of the Trade Practices Act.

"A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention."

Loss or damage as a consequence of the contravention is an element of the cause of action. - Fenech v Sterling (1983) 51

ALR 205, 221, Arcadi v Colonial Mutual Life Assurance Society Ltd [1984] ATPR 40-473 at 45,454, James v ANZ Banking Group Ltd [1985]

The material facts establishing the necessary causal link should be pleaded. In cases of contravention of s.52 said to be constituted by misrepresentation this will generally require more than appears in the opening words of para.50 - "by reason of

Some guidance to the proper approach may be derived from

the ordinary rule of pleading applicable in cases of fraud of

which Lord Watson said in Dow Hager Lawrance v Lord Norreys (1890)

",...The ordinary rule of pleading applicable to cases of fraud, ... was thus expressed by Earle Selborne in Wallingford v Mutual Society 5 App. Cas.697: "General allegations, however stronq may be the words in which they are stated, are insufficient to amount to an averment of fraud of which any Court ought to take notice." It is not a sufficient compliance with the rule to state facts and circumstances which merely imply that the defendant, or someone for whose action he 1s responsible, did commit a fraud of some kind. There must be a probable, if not necessary, connection between the fraud averred and the injurious consequences which the plaintiff attributes to it; and 1f that connection 1s not sufficiently apparent from the particulars stated, 1t cannot be supplied by general averments. Facts and circumstances must in that case be set forth, and in every genuine claim are capable of being stated, leading to a reasonable inference that the fraud and the injuries complained of stood to each other in the relation of cause and effect."

A perusal of the relevant precedents in Bullen & Leake & Jacob's Precedents of Pleadings 12th Edition pp 702-707, supports the view that the approach enunciated by Lord Watson is equally

While the same point did not arise squarely in James v ANZ Banking Group Ltd [1985] ATPR 40-504, Toohey J. in striking

out particulars of loss and damage there pleaded said at 46,034:-

"While the Bank is not required to plead specifically to particulars of damages, it 1s entitled to know with some certainty what is being claimed and the basis of the claim."

In my opinion the statement of claim in para.50 does not Plead the necessary material facts to establish the causal relationship between contravention and loss which 1s necessary to the cause of action. In the case of misleading and deceptive Statements said to constitute a contravention of s.52, to paraphrase Lord Watson, facts and circumstances should be set out leading to a reasonable inference that the conduct and the damage

stood to each other in the relation of cause and effect.

To the extent that sub~-para.50(2) contains the relevant allegation as a particular, it does not cure the defect in the

In H.1976 Nominees Pty Ltd v Galli (1979) 40 FLR 242,

Northrop J. speaking of the function of particulars said at 246:-

"In order to disclose a reasonable cause of action the statement of claim must contain statements of material facts which support the claims made. Particulars are not statements of material facts; particulars perform a different purpose."

Quoting from the judgment of Scott LJ in Bruce v Odhams

Press Ltd (1936) 1 KB 697, his Honour made the point that

particulars cannot be used to f111 gaps in the statement of claim which ought to have been filled by appropriate statements of the

various material facts together constituting the cause of action.

In my opinion the particulars given in para.50 cannot

I therefore find that as pleaded paras. 46 to 50 of the

statement of claim do not disclose a reasonable cause of action.

Para.5l of the statement of claim alleges that in order to induce the applicant to proceed with the works, the second respondents represented to 1t, 1n February 1985, that they could be carried out for about $1,786,000. In para.52 it is alleged that the representations were in trade and commerce and in para.53 that at the time 1t was made the second respondents did not have and could not have had any reasonable expectation that the works

In para.54 the applicant pleads the making of the representations constituted misleading and deceptive conduct.

"55. By reason of such conduct Bond has suffered loss and damage.

It 1S common ground that the reference to para.48 should be a reference to para.50. So the terms of para.50 are

incorporated in these particulars and in turn, para.16.

The relationship of the pleaded conduct to the alleged damage as particularised, if previously difficult to follow, is

The deficiencies of the particulars highlight the failure to plead material facts establishing the relevant relationship between the second respondents' conduct and the

damage suffered. On this basis and for the same reasons as in relation to paras. 45 to 50, I hold that paras.51 to 55 do not disclose a

The second respondents' motion seeks to strike out paras. 56 to 66 of the statement of claim on the basis that they do not disclose a cause of action within the jurisdiction of the

Para. 56 alleges that 1t was a term of the agreement between the applicant and the second respondents that the second respondents would exercise reasonable skill care and judgment in

the performance of their duties as consulting engineers.

The applicant pleads in para.57 that the second respondents breached that term. Particulars of some 29 alleged

The damages are particularised by reference to para.48,

again 1t would seem, intended to be ,a reference to para.50.

The particulars of damage so incorporated do not bear any reasonably intelligible relationship to the breaches of

In para.59 a further breach of the agreement between the applicant and the second respondents is alleged in that, it 1s said that the second respondents did not exercise reasonable skill, care and judgment in estimating the total cost to the applicant of subdividing the whole of the subject land and stage 1

"On 6 November 1984 Ove Arup advised Bond that the cost of complete sub-division would be $7,692,200 and the cost of stage 1 would be $3,850,000. On 11 November 1985 Ove Arup advised that the cost of the complete sub-division would be $15,561,000 and the cost of state 1 (sic) would be $6,307,00. The first estimates were so unrealistic that a competent engineer acting reasonably could not have reached them."

Further loss and damage is said in para.60 to have flowed from this breach. The "particulars" of the damage are as

"Had Bond been advised in November 1984 of the realistic likely cost of carrying out the whole sub-division or of carrying out stage 1, Bond would not have proceeded with the Works."

Both this particular and the particulars of para.59 seem to involve allegations of material fact which ought to have been

separately pleaded, rather than set up as particulars.

A plea of negligence 1s raised under para.62 and 1s

This seems to be yet another error in numbering. If the intention was to refer back to para.57 then under the particulars of negligence the applicant brings 1n all the 29 breaches of

Para.64 alleges a duty on the part of the second respondents to exercise reasonable skill, care and judgment in providing estimates of the cost of the subdivision and in para.65

1t is pleaded that the second respondents breached that duty.

"(a) Failed to assess the cost of the works accurately;

(b) Bond will rely upon the maxim "res ipsa loquitur."

Resulting damage pleaded in para.66 is particularised by reference to para.48, again in error, for what 1s, in this

context, the marginally less unintelligible para.50.

The second respondents' attack on paras.56 to 66 rests however upon the proposition that they allege causes of action

which are not within the jurisdiction of the Court.

The argument runs that if the strike out motion succeeds in respect of paras.45 to 50 and 51 to 55 respectively, then there 1S no remaining federal claim against the second respondents and there can be no basis for suggesting that the claims in contract

I will express no concluded view on whether the Court would have jurisdiction to entertain the common law claims after striking out those parts of the statement of claim relating to the federal matter. It would be premature to do so in view of the

However the Court has a discretion to decline the exercise of accrued jurisdiction. I would need to be convinced that this was an appropriate case to exercise that jurisdiction in relation to the common law claims divorced from consideration of

The statement of claim in its present form, is as against the second respondents, an unsatisfactory pleading. There 1s as I have already indicated a confusion between material

facts that must be pleaded and particulars which are provided.

There are material facts not pleaded. The particulars of damage as set out in the document, leave the reader in considerable doubt as to the way in which loss and damage were

In relation to the claims based on contravention of the Trade Practices Act, there is a failure to allege the facts

necessary to show that the damage flows from the conduct pleaded.

It 1s likely that these deficiencies can be cured by

I am not prepared to say in advance of such amendment that the allegations made in paras.56 to 66 would fall outside the scope of the controversy between the parties and therefore outside

In the circumstances I will strike out paragraphs 45 to

I will however allow the applicant time within which to

amend 1ts pleading. I will hear counsel as to the precise form of

I hereby certify that this and the preceding twenty five (25) pages are a true copy of the

French. a Associate: fan Cte th, Che ne Cs Ve4 % AE Lf

Counsel

for the Applicant : Mr N. McKerracher instructed by Robinson Cox

instructed by Kott Gunning Date of Hearing: 27 February 1987

At a glance

Court

Decision date

Before

Source

Judgment (198 paragraphs)

Parties

Cases Cited (10)

Cited By (1)