Williams v FAI Home Security Pty Ltd

REASONS FOR JUDGMENT HIS HONOUR: 1 The respondents have sought by an amended notice of motion filed on 30 November 1999 to have various paragraphs of the amended statement of claim struck out pursuant to O 20 r2 or O 11 r16 of the Federal Court Rules. Alternatively, they seek pursuant to those Orders and s 33C(1) of the Federal Court of Australia Act 1976 (Cth) to have the amended application and the amended statement of claim struck out. Alternatively, they seek further and better particulars of the applicants' further and better particulars which are dated 10 November 1999. As discrete relief, they seek that the names of the group members contained in a confidential communication from the applicants' solicitors to the respondents' solicitors be disclosed to them. 2 The proceeding is brought pursuant to the provisions of Pt IVA of the Federal Court of Australia Act by the applicants as the representative party of persons who purchased two home alarm systems, known as the Security Guard I and the Security Guard II system, from the first respondent. It is alleged in the amended statement of claim, to which I shall refer, that the second respondent financed the purchase of those alarms. 3 The group members to whom the proceeding relates are persons who on or after 9 July 1993 purchased the alarm systems from the first respondent and entered into loan contracts with the second respondent to finance the purchase of the alarm systems and to whom it was represented that the system was the latest technology available and who acted on the faith of the representations by entering into the sales contract and loans contract and thereby suffered loss and damage. 4 In the amended statement of claim it is alleged that the first respondent carried on the business of supplying the alarm systems and the second respondent carried on the business of providing credit to consumers in relation to the acquisition of goods and services, including the alarm systems. It is alleged that the first respondent established a distribution network through various distributors for the door-to-door sale of the alarm systems and prepared and supplied to the distributors various written materials for use in the door‑to‑door sale of the alarm systems. It is alleged that on various dates after 9 July 1993 the distributors made sales presentations to consumers in accordance with the script prepared by the first respondent and entered into negotiations with the consumers in respect of the sale of the alarm systems. Paragraph 16 of the amended statement of claim is in the following terms: "In the course of the sales presentation referred to in paragraph 10 and the negotiations referred to in paragraph 11, the distributors, following the FAI instructions: (a) said to each of the consumers in respect of the first home alarm system or the second home alarm system, as the case may be, words to the effect that the system was the latest technology available; and (b) further said to some of the consumers in respect of the first home alarm or the second alarm system, as the case may be, words to the effect that the system was: (i) the best on the market; and/or (ii) for sale at much less than comparable systems." Particulars of those representations are then given under para 16 in the following terms: "The representations were partly written, partly oral and partly to be implied. In so far as they were written, the representation referred to in subparagraph (a) was contained in the sales presentation and in written material handed to the relevant customer. In so far as they were oral, they were constituted by conversations between the consumers and the relevant distributors on various dates and at the homes of the group members, further particulars of which will be provided in due course, the substance whereof was as alleged." It is then alleged that the consumers entered into sales contracts in reliance upon the representations which sales contracts were financed by loans entered into with the second respondent. It is then said that the alarm systems were not the best on the market or the latest technology available and were not for sale at much less than comparable systems. It is then alleged that the conduct of the respondents, as a result, was in contravention of s 52, s 53 and s 74G of the Trade Practices Act 1974 (Cth). There was also a plea of negligent misstatement against the first respondent and claims under s 76 for accessorial liability against the second respondent and liability under s 73 of the Trade Practices Act. 5 At an earlier stage of the proceeding the respondents challenged the applicants' claim that the number of group members exceeded seven, as required by s 33C of the Federal Court of Australia Act. Apparently, the applicants' solicitors agreed to provide the respondents' solicitors, on a confidential basis, with the names of the group members at the present time on the basis that those names not be disclosed to the respondents. These names were supplied on this basis. 6 The principal complaints about the amended statement of claim made by the respondents are as follows: para 16(b) of the amended statement of claim did not plead the material facts which existed, but rather pleaded something which might have occurred. It was said that, properly read, para 16(b) alleged that some consumers might have been told that the alarm system was the best on the market and for sale at much less than comparable systems. It was then said that para 16(a) was confusing because of its reference to "sales presentation". This expression is specifically defined in para 6(b) and it was not clear whether the representations referred to were found in the documents referred to or in conversations. It was also noted that although it was particularised that the representations were partly to be implied, no basis was set out for any implication. It was then said that the particulars given of the representations did not give particulars of the representations given to such of the group members who are presently known to the applicants. The particulars given of the group members visited by the distributors and representations made by them did not identify who were the persons who were visited and which distributor visited which group member. 7 Submissions were initially made about paras 23, 25 and 36 of the amended statement of claim, but these were not pressed with any vigour, and I do not consider that the complaints made are warranted. Submissions were also made in relation to para 29 of the amended statement of claim which dealt with the accessorial liability of the second respondent. Before me, the applicants have propounded proposed amendments which will amend para 29 and which also include a further para 29A in respect of which I will grant them leave to amend the amended statement of claim. In relation to those amendments, the respondents do not wish to be heard any further, except that they have submitted that the particulars in relation to them are inadequate. Counsel for the applicants has indicated that further particulars will be given. Until such particulars are given, no view can be formed upon the adequacy of any particulars which may be given under paras 29 and 29A as proposed. I reserve all parties' positions in relation to them. 8 Turning, then, to the objections which remained in relation to the specific allegations in the amended statement of claim. I do not consider that para 6(b) does not plead a material allegation of facts but rather pleads that some fact or event might have occurred. In my opinion, it does plead a material allegation of fact. In its terms it alleges that two representations were made to some of the consumers. This does not mean that the representations might have been made to some other consumers, or indeed any consumers. If there be a defect or inadequacy in the pleading, it relates to the failure to particularise the identity of the consumers to whom the representations were made, the dates of the representations and the persons who made the representations. I will return to this issue. 9 I turn to para 16(a) of the amended statement of claim. There is substance in the submission that para 16(a) and the particulars given under it are confusing. If it is to be alleged that the representations were partly to be implied, there ought to be some particularisation of the basis for the implication. I do not understand counsel for the applicants to dissent from this proposition. But there is also confusion by the use of the expression "sales presentation" in para 16(a) which, as I have noted earlier, is defined in para 6(b) as a written document. 10 I understood counsel for the applicants to accept that this matter needed to be clarified because the expression in para 16: "In the course of the sales presentation referred to in paragraph 10 …", did not make it clear whether the representations arose only out of the written documents or were also to be found in conversations between the distributors and the consumers. I understood counsel for the applicants to accept that para 16 would need to be amended, and indeed would be amended, to clarify this matter, as would the definition of the "sales presentation"in para 6(b), so as to make it clear that it was not an inclusive definition but rather identified the relevant documents relied upon. 11 The main issue in dispute between the parties was whether the applicants were required to plead and particularise the particulars of the representations which were made to the group members presently known to the applicants. The respondents submitted that they were entitled to know the dates of the representations made to the group members, the persons to whom the representations were made, the persons who made the representations and the substance of the representations. In the particulars provided, particulars had been given of dates on which distributors had visited consumers and the names of the distributors. But the particulars did not specify which distributors had visited which group members and on what dates. I should also point out that the particulars given of the actual representations under para 16 appeared to state that the representations were only in writing. Counsel for the applicants said that on his instructions, the representations had been contained in conversations as well, and that the particulars needed to be amended to reflect this fact. 12 The issue between the parties is whether at this stage I should order the applicants to provide particulars of the representations made to such of the group members as are presently known to them. The respondents submitted that they are entitled to know the case which was being put against them so that they could obtain instructions in relation to the particular incidents relied upon and prepare their defences accordingly. 13 In short, the respondents relied upon the traditional approach which the courts have taken to pleadings: see for example Mitanis v Pioneer Concrete (Vic) Pty Ltd (1997) ATPR 41,591, and the cases therein referred to, Banque Commerciale SA (in Liq) v Akhil Holdings Ltd (1990) 169 CLR 279. The applicants submitted that the provisions of Pt IVA of the Federal Court of Australia Act in relation to representative proceedings had an impact on the principles which related to pleadings and that the Court should not necessarily apply the principles of pleading in the usual way to representative proceedings. In particular, the applicants submitted that the particulars which the respondents wanted in relation to the representations made to the particular group members presently known to the applicants were immaterial at the present stage and not necessary to enable the respondents to prepare their case. 14 The applicants submitted that advertisements in relation to group members had not yet been published and the provisions in relation to group members opting out of the proceeding had not yet occurred. The applicant submitted that it was only when the opt‑out period had closed that it could be said that the group was stable, so that at that time it would be appropriate to provide the individual particulars for each group member. They submitted that there was no reason at the present time to provide the details of particular representations to particular group members and that those details would only be relevant after the applicants' case had been heard. 15 The applicants submitted that requiring particulars of the representations to group members presently known to the applicants would be an exercise in arbitrariness because there was a large indeterminate group which was involved or would be involved in the proceedings so that the provision of particulars for the group members presently known to the applicants would be a trivial preview which served no useful objective. The respondents said that in order to prepare their defences to the proceeding they needed to know the allegations made against them in relation to all known group members. 16 Although the provisions of Pt IVA of the Federal Court of Australia Act wrought a radical change in the manner in which representative proceedings can be conducted in the Federal Court, I consider that it is still necessary to have regard to the rules of pleading. It is true that the provisions of Pt IVA are to be considered as beneficial and remedial legislation but it does not follow that the usual structure of pleadings and the way they are presented to the parties should be altered or not observed. I consider that it is still necessary for the rules of pleading to be followed to the extent that the respondents are to be informed of the case which is put against them to the extent to which the applicants are able to formulate and particularise that case. 17 I am prepared to accept that in some respects, as counsel for the applicants pointed out, that Pt IVA may have an impact on pleadings. Indeed, the terms of Pt IVA are such that it has to be recognised and reference to it incorporated in the statement of claim. But as Lehane J pointed out in Bright v Femcare [1999] FCA 1377 at [18]: "There is nothing in Pt IVA which dispenses with the requirement that the applicant plead the material facts on which all claims for relief are made on behalf of each group member. To the extent that that is not done the pleading, like a pleading in any other proceeding, is liable to be struck out. Equally, if a claim made on behalf of any group member is to succeed, the factual basis of each element of the cause of action will have to be established by evidence." Hely J made similar observations in Harrison v Lidoform Pty Ltd (24 November 1998, unreported), where he said at 14: "A representative party may be able to enforce the rights of others in a proceeding brought under Part IVA but the statement of claim needs to identify what the rights of those represented are claimed to be and how they are said to arise. In my view this is necessary in order to give definition to the proceedings, and to expose the issues for determination in the proceedings. It is also necessary that class members know with some precision the nature of the case which the applicant seeks to bring on their behalf so that they can decide, in terms of s 33J, whether to opt out of a claim formulated in that way. A judgment given in a representative proceeding binds all group members other than persons who have opted out: Section 33ZB of the Federal Court of Australia Act 1976. Whilst the amended statement of claim remains in its present form, one simply does not know to what it is that group members are bound. The applicant points to ss 33Q, 33R, 33S and 33ZF as mechanisms by which orders can later be made so as to expose and determine the issues which will arise in the proceedings. On this approach, the issues in the case, insofar as it is a representative action, will emerge by some means other than the pleadings. I do not think that Pt IVA of the Act was intended to operate in this way." Although the pleading before Hely J was quite different from the pleading before me and, in a sense, was more inadequate, I consider that the observations of his Honour are apposite to the matters presently before me. 18 I do not consider that it is an arbitrary decision to require the applicants to particularise in relation to those group members presently known to the applicants the representations upon which they rely. I consider that it is important for the respondents to know at an early stage what is the extent of the representations made against them. I accept that further down the track there will be a need when the opt‑out period is closed and where the group has probably expanded, for further particulars to be given. Nevertheless I consider it appropriate at this time for the respondents to be as fully informed as they can be from the information available to the applicants what are the matters in respect of which the representations have been made. 19 I consider therefore that the applicant should supply further and better particulars under paras 9, 11, 16 and 18 of the statement of claim. Those are the provisions which plead matters relating to the distributors attending the homes of the applicants and the group members, the negotiations with the consumers as they are defined, that is the applicants and the group members, the representations made and the contracts entered into. The particulars presently given under those paragraphs are given by reference to the applicants but the particulars given state, "Except so far as it concerns the applicants, the relevant paragraph of the request is not a proper request for further and better particulars". In my opinion it is a proper request for further and better particulars in each case insofar as it relates to the group members presently known to the applicants. 20 I do not consider there is any basis for me at this stage to vary the undertaking as to confidentiality, given in relation to the names of the group members supplied on a confidential basis by the applicants' solicitors to the respondent's solicitors on 10 November 1999. I also consider there is no basis for striking out the whole of the application and the amended statement of claim and dismissing the proceeding as sought in the amended notice of motion. 21 The respondents have substantially succeeded in what are their key complaints in relation to the amended statement of claim and the matter has been argued on the merits. I think in all of the circumstances the respondents should have their costs of the application. I order that the applicant pay the respondents' costs of the amended notice of motion. I will reserve the costs thrown away by the delivery of the further amended statement of claim. I certify that the preceding twenty‑one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg J.