FEDERAL COURT OF AUSTRALIA

practice and procedure – pleadings - statement of claim – amendment – defamation – trade practices – whether futile amendment – whether no reasonable cause of action – whether embarrassment – whether abuse of process.

Trade Practices Act 1974 ss 51A, 52, 75.

Federal Court Rules O13 r2, O10A.

Hooker Corporation Ltd v Commonwealth (1986) 65 ACTR 32.

Pacific Composites Pty Ltd v Blue Anchor Line (unreported, Federal Court Judgment No. 576 of 1997, Tamberlin J, 30 June 1997.)

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125.

Lidden v Composite Buyers Ltd (unreported, Federal Court Judgment No. 728 of 1996, Finn J, 12 July 1996.)

Egg and Egg Pulp Marketing Board v KH Korp Tocumal trading Co Pty Ltd (1963) VR 378.

Cyril Leonard & Co v Simo Securities Trust Ltd (19720 1 WLR 80.

Meckiff v Simpson [1968] VR 62.

Sungravure Pty Ltd v Middle East Airline Airliban S.A.L. [1974-1975] 134 CLR 1.

SPC Limited v Petersville Industries Limited (unreported, Federal Court Judgment No. 467 of 1989, Wilcox J, 16 August 1989.)

Richochet Pty Ltd and Ors v Equity Trustees Executors and Agency Company Ltd (1993) 41 FCR 229.

aquashelf sales and rentals pty and ors  -v- csr ltd and ors

Wg 149 OF 1995

coc pty ltd and ors –v- CSR LTD AND ORS

Wg 117 OF 1997

THE COURT ORDERS THAT:

1.      The Applicants have leave to amend their statement of claim in terms of the minute of proposed amended statement of claim filed on 4 December 1997, as amended:

(a)  by the schedule attached to the applicant’s submissions filed on 20 May 1998; and

(b)  to give effect to the reasons for decision published with these orders.

2.      The applicants have leave to amend their application in the terms of the minute of proposed substituted application filed on 15 October 1997.

3.      The minute of amended statement of claim amended in accordance with order 1 be filed by the applicants within 28 days and stand as the amended statement of claim.

4.      The minute of proposed substituted application filed on 15 October 1997 stand as the substituted application.

5.      That the respondents have leave to amend their defences within 28 days of the applicants filing the minute of amended statement of claim.

6.      The applicants pay any costs thrown away by the respondents as a consequence of the above orders, but otherwise the respondents pay the applicants’ costs of the application incurred after 20 May 1998.

7.      That the parties have liberty to apply.

Note:                Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

THE COURT ORDERS THAT:

1.      The Applicants have leave to amend their statement of claim in terms of the minute of proposed amended statement of claim filed on 4 December 1997, as amended:

(a)  by the schedule attached to the applicant’s submissions filed on 20 May 1998; and

(b)  to give effect to the reasons for decision published with these orders.

2.      That the minute of amended statement of claim amended in accordance with order 1 be filed by the applicants within 28 days and stand as the amended statement of claim.

3.      That the respondents file defences within 28 days of the applicants filing the minute of amended statement of claim.

4.      The applicants pay any costs thrown away by the respondents as a consequence of the above orders, but otherwise the respondents pay the applicants’ costs of the application incurred after 20 May 1998.

5.      That the parties have liberty to apply.

Note:                Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR DECISION

Index

Index........................................................................................................................................... 3

1.     History of the Proceedings................................................................................................... 4

2.     The Interlocutory Applications.............................................................................................. 6

3.     The Structure of the Proposed Statements of Claim.............................................................. 7

4.     Approach to Determination.................................................................................................. 9

5.     Objections......................................................................................................................... 11

5.1   General Objection to the Structure of the Pleadings......................................................... 11

5.2   Pleas as to Respondents’ Conduct................................................................................. 12

5.3   Pleas that Conduct in Contravention of the Trade Practices Act or Equivalent Provisions. 17

5.4   Pleas that Conduct Defamatory of the Applicants’.......................................................... 18

5.5   Pleas that Applicants’ Loss and Damage Caused by Respondents’ Conduct................... 27

6.     Costs................................................................................................................................. 32

These are interlocutory applications concerning the statements of claim in two related proceedings.

The background to the proceedings is complicated, and the issues raised by the interlocutory applications are numerous. I will begin, therefore, by outlining the history of the two proceedings and their relationship with each other. I will then identify the interlocutory applications before me, set out their history, and outline my approach to their determination.

1.     History of the Proceedings

The first application was commenced on 22 December 1995 (“the 1995 proceedings”). There are five applicants. It appears from a perusal of the pleadings that they all carried on business as manufacturers and installers of cellulose insulation under several business names, including “Cool and Cosy Natural Insulation”. The Third Applicant, COC Pty Ltd (“COC”), carried on business at various times in Western Australia, New South Wales and Queensland. The other four applicants each carried on business in a single state, namely Western Australia (“Aquashelf”), New South Wales (“Ceil Comfort”), South Australia (“Morcanna”) and Queensland (“Natural Fibre”).

The first and third respondents, C.S.R. Ltd and Insulco Pty Ltd, carried on business as manufacturers and installers of a different form of insulation, made with fibreglass or “rockwool”. The other five respondents were engaged in the promotion of fibreglass or rockwool insulation. The areas within which the respondents carried out their businesses are not identified.

The applicants claim that the respondents engaged in misleading and deceptive conduct by making, publishing or distributing various brochures, advertisements, broadcasts and statements which included false claims about the cellulose insulation manufactured and installed by the applicants. The applicants claim this conduct caused them loss. The applicants originally pleaded breaches of the Trade Practices Act 1974 and the relevant State Fair Trading Acts. They now seek, among other things, to add pleas in defamation. They seek damages and injunctive relief, including the placement of corrective advertisements.

A second application was commenced on 15 October 1997 (“the 1997 proceedings”).

Four of the applicants in the 1995 proceedings are also applicants in the 1997 proceedings They had continued to carry on business as manufacturers and installers of cellulose insulation under several business names, including “Cool and Cosy Natural Insulation”. Each carried on business in a single state, namely Western Australia (COC), South Australia (Morcanna), New South Wales (Ceil Comfort) and Queensland (Natural Fibre). The first applicant in the 1995 proceedings, Aquashelf, was no longer engaged in the cellulose insulation business, while the new fourth applicant in the 1997 proceedings, Thermo-seal Insulation Pty Ltd (“Thermo-seal”), had begun carrying on business in New South Wales as an installer of cellulose insulation.

The 1997 proceedings concerned conduct which occurred after the commencement of the 1995 proceedings, and conduct the applicants were not aware of at that time. The 1997 proceedings were begun to avoid any objection in the 1995 proceedings to the pleading of causes of action arising from conduct which had occurred after those proceedings issued.

The 1997 proceedings were brought against C.S.R. Ltd, Carter Holt Harvey Insulation Pty Ltd (formerly Insulco Pty Ltd) and a new respondent, ACI Australia Limited, all of whom carried on business as manufacturers and installers of fibreglass or rockwool insulation. A further new respondent, Gerado Holdings Pty Ltd, carried on business as an installer and distributor of fibreglass or rockwool insulation. The second respondent to the 1997 proceedings, the Fibreglass and Rockwool Insulation Manufacturers’ Association of Australia Incorporated (“FARIMA”), was engaged in the promotion of fibreglass or rockwool insulation, and is also a respondent in the 1995 proceedings. The areas within which the respondents carried out their business are again not identified.

The applicants in the 1997 proceedings claim that the respondents in those proceedings engaged in separate and distinct misleading and deceptive conduct by publishing or distributing various brochures, advertisements and statements which included false claims about the cellulose insulation manufactured and installed by the applicants, and that this conduct caused loss to the applicants. The applicants have again pleaded breaches of the Trade Practices Act and the relevant State Fair Trading Acts, seek to add pleas in defamation and seek similar remedies.

Given the similarities in the two proceedings, interlocutory matters have been dealt with concurrently by the Court.

Reference will be made later in these reasons to another application commenced in the Victorian Registry of this Court in 1995 (“the Victorian proceedings”). The applicant in those proceedings was FARIMA, which is a respondent in both the 1995 and 1997 proceedings, and was engaged in the promotion of fibreglass or rockwool insulation. FARIMA claimed that COC and another had engaged in misleading and deceptive conduct by making false allegations to the effect that fibreglass insulation was carcinogenic or contained asbestos. The Victorian proceedings were settled with the respondents giving detailed undertakings to the effect that they would not make such statements in future.

2.     The Interlocutory Applications

The current statement of claim in the 1995 proceedings is the re-amended statement of claim filed on 28 February 1996.

A notice of motion for leave to substitute an application and statement of claim was filed by the applicants on 24 October 1997. An amended notice of motion was filed on 29 May 1998.

The first minutes of proposed substituted application and statement of claim were filed by the applicants on 15 October 1997. At the hearing, the applicants relied upon amended minutes filed on 4 December 1997, subject to further amendments filed on 20 May 1998 (“the 1995 pleading”).

The respondents’ opposition to the proposed substitution is set out in a notice of grounds of opposition filed on 4 November 1997, the first respondent’s objections filed on 27 March 1998 and the second to seventh respondents’ objections filed on 31 March 1998. The applicants filed responses to the each of these objections on 8 May 1998.

In the 1997 proceedings, the current statement of claim is the original statement of claim filed on 29 October 1997.

That statement of claim is the subject of a notice of motion to strike out, filed on 4 November 1997 by the first, second and third respondents.

A notice of motion for leave to amend the statement of claim was filed by the applicants on 4 December 1997. An amended notice of motion was filed on 29 May 1998.

At the hearing, the applicants relied upon a minute of proposed amended statement of claim filed on 4 December 1997, subject to further amendments filed on 20 May 1998(“the 1997 pleading”).

The respondents’ opposition to the proposed amendment is set out in the first respondent’s objections filed on 27 March 1998 and the second and third respondents’ objections filed on 31 March 1998. The applicants filed responses to the each of these objections on 8 May 1998.

The interlocutory applications in both proceedings have been referred to me for hearing and determination.

Though the strike out application was not formally before me, many of the objections raised in that application were maintained by the respondents to the extent that they were applicable to the 1995 pleading and the 1997 pleading (“the proposed statements of claim”).

3.     The Structure of the Proposed Statements of Claim

Each of the proposed statements of claim has a similar structure.

An introductory group of paragraphs describe each of the applicants and each of the respondents.

The next group of paragraphs describe conduct of the various respondents.

Most of these paragraphs as to conduct each plead:

·      the production and, sometimes, publication by one or more of the respondents of a particular statement (whether in the form of a television broadcast, a video, an oral statement in person or by telephone, a pamphlet or a brochure) (“the statement(s)”);

·      a transcription of that statement, broken up into the various express representations contained within it (“the express representations”);

·      the extent to which those express representations are false and why;

·      any implied representations incorporated within the express representations (“the implied representations”); and

·      the extent to which those implied representations are false and why.

Some paragraphs within this group deal only with the publication or further publication of statements described in earlier paragraphs.

Typically, any given paragraph deals with one specific statement that is usually pleaded to have been produced by one particular respondent. That paragraph, or a later paragraph, will also plead that the statement was then published by a particular respondent on a number of occasions within a defined area over a defined period.

The final group of paragraphs contains pleas that refer to and depend upon the earlier paragraphs for their foundation. They include pleas that:

·      certain identified implied and express representations pleaded in the earlier paragraphs (“the representations”) were statements of advice or opinion incorporating various implied representations of fact and that those implied representations of fact were false;

·      certain identified representations, which were promissory or related to a future matter or event, were misleading by virtue of Section 51A of the Trade Practices Act 1974 and the equivalent provisions of the State Fair Trading Acts;

·      certain of the representations caused members of the public to act in various ways so as to cause loss to the applicants;

·      the corporate respondents have breached Section 52 of the Trade Practices Act 1974;

·      a respondent who is a natural person:

·      is liable as an accessory, under Section 75 of the Trade Practices Act 1974, for another respondent’s breach.

·      had breached the provisions of the relevant State Fair Trading Acts; and that

·      some of the representations made by each of the respondents were defamatory of the applicants.

4.     Approach to Determination

Put very broadly, the amendments effected by the proposed statements of claim would introduce new causes of action in defamation and are otherwise intended to improve the pleading of existing causes of action under the Trade Practices Act 1974 and the relevant State Fair Trading Acts. Some causes of action in negligent misstatement and under the State Fair Trading Acts are also removed; there is, of course, no objection to that.

The notices of motion for leave to amend are brought under Order 13 rule 2 and, in particular, sub-rule 2(2) of the Federal Court Rules.

However, given the principle that the Court will not grant leave to amend where the proposed amendment is obviously futile because the amended pleading would be in a form which should be struck out[1], the interlocutory argument was often conducted as if it were an application to strike out the proposed statements of claim.

In addressing many of the issues, therefore, it has also been necessary to consider the prospective application of Order 11, rule 16. In terms of that rule, the respondents have objected to various paragraphs of the proposed statements of claim on the grounds that the relevant paragraphs:

·      disclose no reasonable cause of action;

·      have a tendency to cause prejudice or embarrassment; or

·      are otherwise an abuse of the Court.

In considering whether the proposed statements of claim, or parts of them, are liable to be struck out, I have been cognisant of the principle that the power to strike out should be exercised sparingly[2].

Given the numerous objections taken to the proposed statements of claim, counsel for all parties directed their submissions to the issues arising from the objections, referring to particular paragraphs of the pleadings for illustrative purposes only. Appropriately, counsel did not attempt to argue the matter point by point.

Similarly, I propose to consider and determine each of the issues raised in the objections generally, leaving it for the applicants to apply my determination of those issues to each of the paragraphs in the proposed statements of claim to which objection has been taken.

Given the divergent approaches taken by counsel in their submissions, I have had some difficulty placing the various objections to the pleadings within a coherent framework.

I have opted to view each pleading as being in two parts. The first part contains those paragraphs that describe the parties and the individual instances of their conduct. These paragraphs are the building blocks upon which the applicants draw to construct their pleas of various causes of action in second part.

There are numerous objections to the paragraphs to be found in the first part. However, these objections differ in nature.

Some of the objections relate to the nature of the paragraph in itself; it may be contended for example that a particular paragraph is generally embarrassing, or repetitive, or that its meaning is not sufficiently clear. The contention is effectively that the paragraph is not a fit building block for any purpose. I will deal with the few objections in this category first.

Other objections depend upon the purpose to which the paragraph is later put. Thus a paragraph which is not adequate to serve as a building block to construct a cause of action in defamation may be a perfectly serviceable foundation to a claim under the Trade Practices Act 1974. It seems to me that such objections are best regarded as objections to the later paragraphs in the second part of the pleading that seek to put the earlier paragraph to an inappropriate use.

I will therefore consider this category of objection together with the other objections that are explicitly expressed to be objections to paragraphs in the second part of the pleadings.

5.     Objections

5.1     General Objection to the Structure of the Pleadings

The applicants in these proceedings have joined together to bring a group of claims based upon a series of statements made by various of the respondents in various places within Australia over a substantial period of time.

While counsel for the first respondent complained, in the course of his objection to the structure of the pleadings, that the proceedings involved “a back door consolidation of separate actions”, there has been no application for misjoinder, and it was not seriously contended that such an application would be successful.

Doubtless, if each applicant had brought a separate application against each respondent in relation to each statement, a pleading of admirable brevity and clarity would have been possible in each of those proceedings. Given, however, that such a multiplicity of proceedings is not to be encouraged, it was inevitable that the combination of the various claims into just two proceedings would result in longer and more complex pleadings.

It is desirable in the interests of brevity that those pleadings be structured in such a way that unnecessary repetition can be avoided. Even so, there is considerable repetition and it must be recognised that some repetition may be necessary to ensure that the pleadings, which are required to encompass numerous causes of action between numerous parties, retain sufficient clarity.

Counsel for the respondents have objected to the structure of the pleadings in these proceedings, which they have variously described as “rolled up” or “modular”. They object that references within single pleas to numerous parties or incidents are embarrassing and are thus liable to be struck out.

I will consider below whether particular rolled up paragraphs complained of by the respondents are embarrassing. As a general issue, however, it is not apparent to me that the use of rolled up pleas will inevitably result in the introduction of unacceptable ambiguities. Pleadings structured to facilitate the use of such “rolled up” pleas may sometimes be cumbersome and inelegant and may require the reader to engage in some analysis before their complete meaning is apparent. However, if the pleading provides within it the means by which each of the respondents can inform itself of the case against it, the pleading should not, in my view, be struck out, particularly where the alternative would be a longer, repetitive pleading.

Subject to my specific findings in relation to particular paragraphs below, I do not generally regard the structure of the applicants’ proposed statements of claim to be objectionable.

5.2     Pleas as to Respondents’ Conduct

5.2.1     Pleas of Implied Representations

5.2.1.1     Whether “and/or” Raises a False Issue

It is objected that the manner in which implied representations are pleaded by reference to express representations pleaded earlier in each paragraph is sometimes embarrassing, because the use of the expression “and/or” in the identification of the express representations has the potential to create a false issue.

Typically, the applicants have pleaded the statements verbatim, breaking them up into a series of express representations, each of which is allocated a numbered sub-paragraph. They have then referred to all of the express representations, listing every sub-paragraph and using the conjunction “and/or”, and gone on to plead that the listed subparagraphs incorporated implied representations, which are then detailed. The plea is that the implied representations are incorporated into some or all of the express representations that make up the original statement.

I accept that the use of the conjunction “and/or” rather than “and” introduces uncertainty without narrowing the case the respondent must answer. It does not assist the respondent to know that the applicants may possibly rely on parts of the statement rather than the whole unless the applicants identify the parts of the statement upon which they may rely. However, this uncertainty is of little moment. If the respondent is ready to answer the allegation that the statement, read as a whole, incorporates within it various implied representations, then it will be ready to answer an allegation that part of the statement incorporates within it some or all of those representations.

I am satisfied that these objections are therefore trivial and would be dismissed.

5.2.1.2     Whether Implied Representations Are Repetitive

The first respondents object that many of the implied representations pleaded by the applicants are identical or substantially similar to each other, so that they should be struck out where they are repetitive.

Many of the various statements complained of are pleaded to give rise to the same sets of implied representations. The representations are as follows:

(a)  “...implied statements to the effect that cellulose insulation manufactured with fire retardant products and installed in a ceiling in an Australian domestic roof space:

(a)  is unsafe, and

(b)`is unsuitable to be installed above the ceiling in an Australian domestic roof space

by reason that:

(i)   it presents a significant fire danger or, alternatively,

(ii)  it presents a not insubstantial fire danger”; and

(b)   “...an implied statement to the effect that cellulose fibre insulation remains a safety hazard even when fire retardant chemicals have been added to the material”.

Particular statements are also pleaded to give rise to one of the following implied representations:

(c)  “...an implied statement to the effect that whereas the use of fire retardant chemicals on cellulose fibre may mean that it is safe for 5 or 8 years, thereafter the fire retardant leaches out of the fibre making the product a fire danger”.

(d)  “...an implied statement to the effect that there is a significant risk that fire retardant materials used in the manufacture of cellulose fibre will become less effective with age increasing the fire dangers associated with the product”

(e)  “...an implied statement to the effect that the governing standard for cellulose fibre insulation is Australian Standard 1530.3”

(f)  “...an implied statement to the effect that there is a significant and immediate risk of a house being severely damaged or destroyed and/or injury loss or damage being suffered by those people sleeping in that house where cellulose insulation has been installed”.

The first respondents contend that the first two implied representations are repetitive, and that each of the other implied representations is also repetitive of the first implied representation.

The applicants simply deny that the implied representations are repetitive.

I accept that implied representations (B) and (F) are repetitive of implied representation (A). While I might not have gone so far as to strike them out, it is desirable that any leave to amend not knowingly permit unnecessary repetition. Those implied representations should therefore be deleted.

5.2.2     Whether Claim that Product is Possibly Carcinogenic is Abuse of Process

The respondents object that a plea that the respondents’ products are possibly carcinogenic to humans is an abuse of process, being in breach of undertakings given by COC in the Victorian proceedings.

Having considered the terms of the undertakings, I accept that one of the applicants, COC, has undertaken in the Victorian proceedings not to engage in conduct which is misleading or deceptive or which is likely to be misleading or deceptive by reason, among other things, of the making of any statement from which it can be reasonably inferred that fibreglass insulation causes cancer, or statements to the like effect. I also accept that COC reserved the right at the time the undertakings were given to, among other things, repeat statements currently contained on the packaging of fibreglass insulation products distributed by any of FARIMA’s members at the time of the repetition.

In my view, a statement that the product is “possibly carcinogenic to humans” (my emphasis) falls significantly short of a statement that the product causes cancer. Nor is it a statement of like effect, given that it does not assert a definite causal link.

I also note that the affidavit of Mr Kevin Martin Burke sworn on 31 October 1997 is evidence that, as at that date, a fibreglass insulation product manufactured by CSR Ltd was available for purchase with packaging containing the following statement:

“Risk Warning...

Glasswool has been classified as Group 2B, possibly causing cancer in humans, by the International Agency for Research on Cancer (IARC).“

I am satisfied, therefore, that the pleadings objected to are not an abuse of process.

5.2.3     Whether the Circumstances Giving Rise to Implied Representations Underlying Opinions is Sufficiently Pleaded

There is an objection to the plea that the various express and implied representations of the various respondents constituted statements of advice or opinion and that, “in the circumstances in which they were made”, the various representations incorporated various implied representations of existing and past fact. The plea is objected to on the grounds that it fails to particularise those circumstances.

The applicants join issue on this objection.

While one might assume that the relevant circumstances are those set out earlier in the pleadings, it is at least notionally possible that there are additional relevant facts which form part of the circumstances in which the various representations were made which have not been pleaded, and of which the respondents are uninformed. The pleadings should therefore be amended so that this possibility is ruled out or confirmed.

5.2.4     Whether the Falsity of Implied Representations Underlying Opinions is Sufficiently Pleaded

The Respondents object to paragraphs 29 and 30 of the 1995 pleading and to paragraphs 34 and 35 of the 1997 pleading. They object that, while a basis is provided for the plea that the implied representations of advice or opinion are false, no attempt has been made to detail the bases upon which the implied representations underlying those representations of opinions are said to be false. It follows, they contend, that the material facts relied upon to support the underlying allegations have not been pleaded and the respondents are not informed of the case which they are to meet.

The applicants respond that the plea is sufficient and that they have pleaded the facts necessary for formulating the cause of action under the Trade Practices Act 1974.

The position is clearer when one has regard to the nature of the representations that are said to be false. For example, paragraph 29.2 of the 1995 pleading identifies an implied underlying representation that the respondents had made all reasonable inquiries to establish that the statements were reliable and well informed. Paragraph 30.2 then pleads that the respondents had not made all reasonable enquiries to establish that the identified representations were reliable and well informed.

I am satisfied that the applicants have pleaded the material facts to raise these issues, and have identified with sufficient clarity the case that must be met by the respondent. It is clear, for example, that one of the issues the respondents will be required to address is whether each of them made those reasonable enquiries. The other issues should be apparent to the respondents with similar clarity. It is difficult to envisage how more detailed pleadings or particulars could be framed on issues of this nature without descending to evidence.

5.3     Pleas that Conduct was in Contravention of the Trade Practices Act or Equivalent Provisions

5.3.1     Relevance of Claim that Product is Superior

Many of the paragraphs in the proposed statements of claim which relate to the respondents’ conduct contain pleas that:

·      the statement which is the subject of the paragraph incorporates implied statements to the effect that the particular respondent’s products are

·      better and safer insulation products than cellulose insulation; and

·      generally are a superior product

because they do not pose any danger to health or, alternatively, pose a substantially lesser danger to health than cellulose insulation; and that

·      the particular respondent’s products are not better and safer insulation products than cellulose insulation, for various listed reasons, including the claim that it is “possibly carcinogenic to humans”.

Objection is taken to these paragraphs on a number of grounds.

The first of these is that the pleas relating to whether the respondents’ products are superior are irrelevant and therefore extraneous.

The applicants respond that the relevant plea is the allegation that the respondents’ implied representations were false. It happens that those implied representations were to the effect that the respondents’ products are generally superior products to cellulose insulation.

I accept therefore that, if the express statements are found to incorporate within them implied representations to the effect that the respondents’ products are generally superior products to cellulose insulation, then the truth or falsity of those representations could not be said to be irrelevant to the applicants’ claims under the Trade Practices Act 1974. Even so, in my view, they are extraneous to the resolution of this litigation. It will never be necessary for the Court to determine as a general question whether the applicants’ or the respondents’ products are superior. In reality, the Court will be required to make findings about representations raising more specific issues, such as the relative safety of the products, which a consumer would take into account in making his or her general assessment as to which product to purchase. If the pleadings raise those specific issues, so that they can be determined by the Court, then any finding on the general issue, which would have to be based upon the findings on the specific issues, would take the matter no further.

Accordingly, I find the references in the pleadings to implied representations that the respondents’ products are generally superior products would be liable to be struck out on the grounds that they are extraneous and therefore embarrassing. The proposed pleadings should therefore be amended to refer only to specific subsidiary issues, such as the relative safety of the products.

5.3.2     Relevance of Claim that Product is Possibly Carcinogenic

The second objection is that the plea that the respondents’ products are possibly carcinogenic to humans is also irrelevant and therefore extraneous.

The applicants respond that the plea that the respondents’ products are possibly carcinogenic to humans is relevant to the truth or falsity of the implied representations of the respondents that the respondents’ products are safer insulation products than cellulose insulation because they do not pose any danger to health or, alternatively, pose a substantially lesser danger to health than cellulose insulation.

The applicants’ contentions are, in my view, arguable, so that the plea would not be liable to be struck out.

5.4     Pleas that Conduct Defamatory of the Applicants’

5.4.1     Jurisdiction for Claims in Defamation

Some of the respondents objected that the proposed statements of claim fail to comply with Order 10A of the Federal Court Rules, as is required if the cross-vesting jurisdiction is invoked. The applicants’ respond that they rely upon the Court’s accrued jurisdiction for their proposed claims in defamation, rather than the Courts (Cross-Vesting) Act 1987.

Some of the respondents then initially submitted that the claims in defamation are not within the Court’s accrued jurisdiction, or that the Court should exercise its discretion against finding jurisdiction on the basis that:

·      the resolution of that attached defamation claim is not essential in any way to the determination of the Trade Practices claims;

·      defamation is a specialist area in which the State Supreme Courts have recognised expertise and special lists and procedures; and

·      the defamation pleas are untenable as presently pleaded.

However, the respondents did not press this objection.

5.4.2     Limitation Periods

Some of the respondents object that the proposed claims in defamation based upon some of the publications of which particulars have been given (eg a pamphlet produced on January 1992, referred to in paragraphs 17 and 22 of the proposed statement of claim in the 1995 proceedings) would be statute barred if they were the subject of new proceedings.

However, Order 13, rule 2(7) permits amendments to be made notwithstanding that their effect will be to add another foundation in law for a claim for relief, if that foundation arises out of substantially the same facts as those already pleaded. Order 13, rule 2(3) permits the granting of such leave to amend where the application for leave to amend is made after any relevant period of limitation current at the date of the proceeding has expired, if the Court thinks it just to do so.[3]

I am satisfied that the proposed causes of action in defamation arise out of substantially the same facts as those already pleaded and that would be just to allow an amendment which raised such causes of action in these circumstances.

5.4.3     Separate Pleas of Publication

Some of the respondents object to the applicants pleading the production of the various statements and their publication in separate paragraphs. I see no reason in principle why the various elements in a cause in action could not be pleaded separately, so long as the relationship between them is pleaded. I am satisfied that the pleading is sufficiently clear in that regard.

5.4.4     Objection that Applicants Are Relying on a “Fishing” Discovery as to Publication

The respondents object that the applicants’ various pleas of publication are inadequate, in that they typically plead publication in very broad terms (eg publication “throughout the States and Territories of Australia... to consumers of insulation products or alternatively potential consumers”) but provide no or no sufficient particulars, indicating instead that further and better particulars will be provided after discovery and interrogatories.

The respondents contend that the applicants seek to rely upon a “fishing” discovery to attempt to assert a case, and that their claims should be restricted to the specific publications they have particularised.

The applicants respond that they have properly pleaded their case and deny that discovery based upon the proposed pleadings would amount to “fishing”. They again contend that they have provided particulars of publication to the full extent that they are able, and say that it is entirely regular that further and better particulars be provided by the applicants after discovery and interrogatories.

They also point to an affidavit of Robert Guy Johnston filed on behalf of the respondents on 10 November 1997 in the 1995 proceedings, wherein Mr Johnston deposed:

“I am instructed by Mr Chris Bertuch of the first respondent and verily believe that at least since 1992 it has been the practice of the first respondent to distribute its promotional brochures regarding its insulation products (including certain of those the subject of the applicants’ motion for interim injunctions) on an extensive, Australia wide basis. This has included distribution in the States and Territories of Australia to:

(a)               the first respondents offices in those States and Territories;

(b)               the sales representatives in those offices;

(c)               the authorised distributors and agents of the first respondent across the country including:

(i)         entities offering insulation installation services; and

(ii)        retail insulation outlets such as hardware stores;

(d)               a large number of new home builders and building companies; and

(e)               exhibitors at various home shows, expos, displays and other such promotional events throughout Australia.”

The pleadings are thus not merely speculative.

I am satisfied that those parts of the pleadings which deal with publication have been properly pleaded. The statements which are alleged to have been published have been specifically identified. The case to be met by each of the respondents is not unclear. Did they publish the particular statements to any potential consumers in each State or Territory of Australia or not?

While it may be appropriate in due course that the applicants to give further particulars of publication, this is a case where the respondents know the facts and the applicants do not, so that it is good sense that the respondents should give discovery before the applicants deliver particulars[4].

5.4.5     State Statutes Governing Newspaper Publication

The respondents object to the failure of the applicants to specifically plead the State of publication of various newspaper advertisements, (eg the claim in paragraph 14 of the statement of claim in the 1995 proceedings that an identified advertisement was placed “in various newspapers in Australia”) given that each of the States has a statute dealing with newspaper publication. At least some of those statutes provide for shorter limitation periods.

The applicants respond that they have provided particulars of publication as fully as they are able, saying that it is impracticable, given the applicants’ current factual knowledge, for them to provide full particulars of publication. The applicants indicate they will be able to file those particulars after discovery and interrogatories.

I do not consider the failure to rule out publication within any of the States and Territories renders the plea liable to being struck out. Should additional issues, such as limitation periods, become apparent to the respondents when further particulars are provided, they can be pleaded at that time[5].

5.4.6     Whether Separate Pleas of Defamation are Required for Each State and Territory

Some of the respondents object that the pleas of alleged defamation have not been separately pleaded for each State and Territory, and complain that this failure inhibits the respondents’ ability to plead their defences in accordance with the divergent requirements of each jurisdiction. They note that defamation proceedings are rare in this Court, and that normally a Plaintiff would be required to choose a single forum in which to sue in relation to the publication of the same matter complained of in more than one Australian jurisdiction[6]. The applicants respond, correctly in my view, that while the divergence in the law of defamation in the various jurisdictions throughout Australia affects the pleading of defences, there is no reason why the respondents cannot plead particular defences by reference to jurisdiction. It is not necessary nor appropriate for the Applicants to plead with reference to the various jurisdictions in anticipation of the defence.

5.4.7     Whether the Pleaded Imputations Are Defamatory

It was contended that the pleadings fail to set out or precisely identify each defamatory meaning that the applicants allege ordinary men would infer from the words used. Given that the applicants have identified as imputations a series of implied representations which the statements were understood to mean in their natural and ordinary meaning, the respondents appear to be contending that many of those implied representations, which are precisely identified, carry no defamatory meaning and are incapable of conveying a defamatory meaning.

The applicants would contend that each of the implied representations identified as an imputation convey a defamatory meaning.

The question of whether the representations are capable of conveying a defamatory meaning is to be determined by the Court as a matter of law according to whether reasonable men, to whom publication is made, would be likely to understand them as defamatory.

To my mind, the chief problem posed by the implied representations that have been identified by the applicants as imputations is whether a reasonable person would understand them to be defamatory of the applicants.

5.4.8     Whether Plea that the Allegedly Defamatory Statements were of or concerning the Applicants

The respondents object that it is not apparent on the face of the pleadings of the statements complained of that they were directed at the applicants and, if so, which of them; there is no plea that any of the publications were made of and concerning the applicants or any one of them. They contend that extrinsic facts must be pleaded to the effect that some of those to whom the statements were published had knowledge (for example, the names of the applicants and the fact that they manufactured or distributed cellulose insulation) such that they were capable of identifying that the statements referred to the applicants.

The applicants respond that their plea that the statements complained of were defamatory of each of the applicants in the conduct of their respective cellulose insulation businesses have been properly pleaded. They submit that they have pleaded that the publications complained of are directed towards a group, viz manufacturers and/or installers of cellulose insulation, and that the applicants were members of that group. Importantly, the proposed amendments to the descriptions of the applicants go further to include pleas that each of the applicants had acquired reputations throughout Australia with respect to the manufacture and installation of cellulose insulation.

The respondents submit that the statements complained of the applicants go to the cellulose insulation products of the various applicants, and not to their reputations. Putting it another way, they contend that the pleadings fail to distinguish between the tort of injurious falsehood and the tort of defamation.

In response, the applicants rely upon Sungravure Pty Ltd -v- Middle East Airline Airliban S.A.L.[7] as authority for the proposition that the statements relied upon do amount to an attack on the applicants’ reputations. They submit that where the relevant statements contain an innuendo that cellulose insulation is unsafe and dangerous, for example because it presents a significant fire risk, those statements attribute unfavourable characters to the applicants as manufacturers or installers, and are therefore damaging to the applicants’ reputations.

The applicants submit that, as in any defamation claim, it is a matter for evidence whether a reasonable reader could conclude that the applicants as individuals were “pointed at” by the statements. The applicants are content, therefore, to join issue on this point.

In dealing with these objections I have begun by noting the course adopted by Wilcox J of this Court in SPC Limited v Petersville Industries Limited[8]. In that case, application was made to strike out a claim in defamation on the ground that the imputations relied upon were incapable of defaming the applicant.

His Honour observed that the test to be applied in considering a strike out application in connection with a defamation action is the same as that which applies in connection with other actions. It is a jurisdiction to be employed sparingly, where the plaintiff’s case is clearly untenable and cannot possibly succeed.

His Honour then went on to consider the pleaded imputations, and whether they were capable, as a matter of law, of defaming the applicant.

In these proceedings, I accept that it is not untenable to claim that the imputations are capable of being defamatory of the manufacturers and installers of cellulose insulation products where those products are the subject of the statements.

The issue is thus not whether the imputations are capable of being defamatory per se, but rather whether they were capable, on these pleadings, of defaming each of the applicants.

I accept that the imputations, in their natural and ordinary meaning, do not permit the identification of the applicants. Knowledge of extrinsic facts is required.

The question of whether each of the statements is reasonably capable of being understood by the ordinary reasonable person with knowledge of the relevant extrinsic facts as identifying each of the applicants is a question of law.

The relevant extrinsic facts, that each of the applicants is a manufacturer and/or installer of the cellulose insulation product, has been adequately pleaded in the paragraphs describing each applicant. If it is assumed that those facts are known to the ordinary reasonable person, then I would again find that the statements were reasonably capable of identifying each of the applicants.

The other material fact, that readers of each of the statements knew that each of the applicants was a manufacturer and/or installer of the cellulose insulation product, is contained within the proposed pleas that each of the applicants had acquired reputations throughout Australia with respect to the manufacture and installation of cellulose insulation.

Again, as the applicants submit, this is a matter for evidence. The respondents know the case they are required to meet. Did each of the applicants have reputations in each of the States so that the readers of each of the statements know that they manufactured and/or, installed the cellulose insulation products.

In conclusion, this is an area in which the modular nature of the pleadings is less than ideal. It is awkward to have to resort to a combination of the early paragraphs describing the applicants and to the identified implied representations in order to construct the imputations capable of being defamatory of the applicants. I have no doubt that this aspect of the pleadings could have been more satisfactorily drafted, and that counsel for the applicants would be capable of improving them if required to do so. I am not satisfied, however, that the proposed pleadings are so flawed that they would be liable to be struck out. They contain within them all that is required to identify imputations which are arguably capable, as a matter of law, of defaming the applicants.

5.4.9     Plea that Statements Conveyed Imputations “By Their Natural and Ordinary Meaning”

One of the respondents raised the objection that the pleas in these paragraphs that the express representations “incorporated implied statements” were vague and embarrassing. I do not accept this as a general objection; the submissions raised no uncertainty in my mind as to the meaning of the phrase.

One of the respondents more particularly objects to various paragraphs that plead that the various statements “incorporated” implied representations; these implied representations are referred to later in the pleadings as imputations. The respondents object that the applicants fail to plead whether the statements complained of conveyed an imputation by their natural and ordinary meaning, or conveyed an extended meaning by virtue of extrinsic facts. The respondents complain that the pleading is silent as to whether the imputation is conveyed by reason of some facts known to the recipient that give the words complained of a particular defamatory meaning.

This objection identifies a difficulty in the pleading of the imputations.

The applicants sought to rely upon the later paragraphs that plead the claims in defamation. Those paragraphs include the plea that the statements “meant and were understood to mean in their natural and ordinary meaning” the imputations pleaded in the earlier paragraphs as implied representations.

The difficulty, as I have concluded, is that in my view the imputations are only capable of being defamatory of the applicants if the reader of the statement knew certain extrinsic facts, ie that the applicants were manufacturers and/or installers of the cellulose insulation product.

While the applicants have pleaded those extrinsic facts and have pleaded the applicants’ reputations, they have not pleaded that the statements conveyed the imputation defamatory to the applicants by virtue of extrinsic facts. Indeed, as I have noted, they appear to plead the contrary.

The pleading should therefore be amended to reflect the applicants’ reliance on knowledge of extrinsic facts. Of course, had I not found the applicants to be relying upon extrinsic facts, then I would have held that the imputations were not capable of being defamatory of the applicants, and would not have given leave to amend the pleading to include the pleas in defamation.

5.5     Pleas that Applicants’ Loss and Damage Caused by Respondents’ Conduct

5.5.1     Whether Each Publication Affected All of the Applicants

The paragraphs containing the pleas of defamation each allege that identified images and statements made and published by a particular respondent were “defamatory of each of the applicants in the conduct of their respective cellulose insulation businesses... in the states where those applicants carried on their businesses...” and that the reputation of each of the applicants in the conduct of their respective businesses has been seriously damaged.

The respondents object that, in relation to any given publication, some of the applicants:

·      did not carry on business in the state where it is alleged that the publication took place; or

·      were not carrying on business at the time when the publication took place

so that those applicants could not have been affected by the publication.

The applicants respond that an entity does not have to be carrying on business in the place of publication to have a reputation there and that such a publication may therefore defame the entity.

The applicants also point out that publication is usually pleaded to have taken place “from time to time”, so that publications may apply to applicants who were not carrying on business at the time of the original publication. Once particulars of publication are provided, it will be possible for the respondents to ascertain fully which publications are alleged to have defamed which applicant.

I accept the applicant’s submissions on these points.

5.5.2     Plea of Damage Caused by Defamation

The applicants’ plea of damage is objected to on the ground that the applicants have failed to:

·          plead and particularise the:

·      details of sales prior to each alleged defamation; and

·      details of any loss of custom following the alleged defamation

the respondent contends are required to establish a general loss of business following the alleged defamation; and

·          plead any causal nexus between each alleged defamation and alleged loss of business.

The applicants dispute the proposition that they are required to plead and particularise the details of sales before and following each alleged defamation.

The pleas of damage against each respondent allege damage to the reputation of each of the applicants in the conduct of their respective businesses “in consequence of” the defamatory statements and imputations for which that respondent was responsible.

The applicants do not attempt to distinguish between the loss and damage caused by each of statements made by the respondent, nor each of the publications of that statement. Indeed, given that the pleas of damage against the various respondents in each proceedings refer to the same particulars of loss and damage for the various applicants, the applicants have not attempted to distinguish between the loss and damage caused by each respondent.

The applicants respond that they have provided particulars of loss and damage as fully as they are able, and say that it is impracticable, given the applicants’ current factual knowledge, for them to provide further particulars distinguishing between the loss and damage caused by different respondents and different publications. The applicants indicate they will be able to file those particulars after discovery and interrogatories, when they would expect to have information (eg as to the distribution of brochures) currently in the sole possession of the respondents.

The applicants also dispute that they have failed to plead a causal nexus between each alleged defamation and alleged loss of business. I accept that the pleas of damage against each respondent can and should be understood as alleging damage to the reputation of each applicants in the conduct of its business in consequence of each and every defamatory statement and imputation for which that respondent was responsible until the contrary is indicated by the provision of particulars.

5.5.3     Failure to Apportion Liability for Loss and Damage Between the Respondents

The respondents object to the combined pleading of several causes of action against the several respondents, on the grounds that the pleadings fail to distinguish between the alleged conduct of each respondent, and fail to plead against each separate respondent the damage said to arise from each item of alleged misleading and deceptive conduct. The objection is thus that the pleading is embarrassing, as it does not sufficiently inform each individual respondent of the case it has to meet.

Paragraph 31 of the 1995 pleading is an illustration of the style of pleading against which this objection is brought.

Broadly, that paragraph pleads that the making by the respondents of numerous identified representations was conduct which caused or would in future be likely to cause, members of the public to act in various ways, each of which is described, thereby causing the applicants to lose past and future sales of their insulation products which they otherwise may have made had the respondents not made the identified representations. Particulars of the quantum of loss and damage for each applicant are provided.

Each respondent is able, in most cases,[9] to precisely identify the conduct alleged against it, given the manner in which the various representations have been pleaded in the earlier group of paragraphs describing the conduct of the respondents. Paragraph 31 identifies these representations by reference to those earlier sub-paragraphs. Generally, the first and third sub-paragraph of each of the earlier paragraphs relating to conduct are cited, identifying respectively the express and implied representations pleaded in relation to each statement. Most of those earlier paragraphs identify the particular respondent alleged to have been responsible for each statement.

I accept that each respondent would not be able to identify precisely the extent of the loss and damage it is alleged to have caused each of the applicants.

However, the applicants respond that it is impossible, or at least impracticable, given the applicants’ current factual knowledge, for them to distinguish between the respondents with regard to the loss and damage suffered by the applicants. The applicants contend they will not be able to apportion the liability for the loss and damage between the respondents until the completion of discovery and, perhaps, interrogatories, when they will have access to evidence currently within the sole possession of the respondents as to the extent of production and distribution of the statements by each of the various respondents.

Some of the respondents contend that the applicants’ position really amounts to a mere assertion that there is a possibility that their alleged loss may be the result of an alleged dissemination of the material they complain of. They contend this is simply not sufficient[10].

An alternative analysis however is that the damages sought from each of the respondent is yet to be quantified. Claims for unquantified damages, with particulars to be provided in due course, are acceptable in pleadings. In these pleadings, at least, the global figure of the damages sought by each applicant from all the respondents is provided.

5.5.4     Causal Nexus Between the Respondents’ Conduct and the Actions of Consumers

One of the respondents also objects that no material facts are pleaded with respect to the allegation that the conduct caused members of the public to act in the manner pleaded. They also object that the pleadings fail to identify exactly which conduct of which respondents is said to have caused members of the public to behave in which of the various ways pleaded.

The applicants respond that sufficient material facts have been pleaded with respect to the allegations, and that any further pleading would probably amount to the pleading of evidence. They add that it is impractical and impossible for the applicants to further distinguish between the representations complained of and the reliance placed on those representations by various members of the public. Different members of the public would have acted in the ways pleaded because of different representations or combinations of representions.

Again, I find it difficult to envisage what greater level of detail could be pleaded on this matter.

5.5.5     Whether Plea that Respondents Acting in Concert

Finally, some of the respondents object that some pleas suggest that representations were made by the respondents acting in concert, or as joint tortfeasors. An example relied upon is paragraph 29 of the 1995 pleading.

That paragraph refers to numerous earlier paragraphs, most of which detail various individual incidents of conduct on the part of various individual respondents. These references are followed by a series of general pleas, which can be understood to be equally applicable to each of the paragraphs referred to.

Certainly, the paragraph could be recast into a single paragraph which, while combining the plea, would be completely unambiguous. However, in the absence of an express plea that the representations were made by the respondents acting in concert, or as joint tortfeasors, and given the references to the earlier paragraphs which deal with individual conduct, the various “rolled up” paragraphs would not properly be interpreted as alleging joint conduct and is not, in my view, liable to be struck out.

6.     Costs

Given that the applicants have been substantially but not wholly successful in these interlocutory proceedings, I will make the orders for costs proposed in their amended notice of motion filed in the 1995 proceedings on 29 May 1998.

Associate:

Dated:              2 October 1998

No. WAG 149 of 1995

No. WAG 117 of 1997