FEDERAL COURT OF AUSTRALIA

Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 1645

PRACTICE AND PROCEDURE – application to strike out part of statement of claim – whether pleading should be struck out where particulars are not reasonably capable of sustaining the substantive allegation – whether reliance on a failure to warn must be pleaded as causative of loss in a s 52 claim for damages

PRACTICE AND PROCEDURE – representative proceedings under Part IVA – whether proceeding should no longer continue as representative proceeding where the federal claim is struck out

JURISDICTION – whether s 52 and negligence claims are severable and therefore separate matters – whether the Court no longer has jurisdiction in the matter if the federal claim is struck out - whether s 52 claim has been brought to fabricate jurisdiction

Federal Court of Australia Act 1976 (Cth) Pt IVA; ss 33G and 33N

Trade Practices Act 1974 (Cth) ss 52 and 82

Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 477 – applied

Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 569 - applied

Yorkshire Provident Life Assurance Co v Gilbert (1895) 2 QB 148 – cited

Trade Practices Commissioner v George Weston Foods Pty Ltd (1979) 39 FLR 182 – cited

Davey v Bentinick (1893) 1 QB 185 – cited

Minichin v Adamson (1975) 10 SASR 119 – cited

Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 – cited

Qantas Airways v Cameron (1996) 66 FCR 246 – cited

Chappel v Hart (1998) 195 CLR 232 – cited

Bright v Femcare [1999] FCA 1377 – cited

Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 – cited

Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 – cited

Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 – cited

Re Wakim; Ex parte McNally (1999) 163 ALR 270 – cited

Fencott v Muller (1983) 152 CLR 570 – applied

Burgundy Royale Investments Pty Ltd v Westbank Banking Corporation (1987) 18 FCR 212 - applied

Fitzroy Motors Pty Ltd v Hyundai Automotive Distributors Australia Pty Ltd (1995) 133 ALR 445 – considered

New South Wales Land Council v Australian Securities and Investments Commission (1995) 131 ALR 559 – cited

Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 56 – cited

Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 636 - cited

JOHNSON TILES PTY LTD v ESSO AUSTRALIA LTD

VG 519 OF 1998

STATE ELECTICITY COMMISSION OF VICTORIA v BHP PETROLEUM (BASS STRAIT) PTY LTD

VG 524 OF 1998

JUDGE:          MERKEL J

DATE:            25 NOVEMBER 1999

PLACE:          MELBOURNE

The Court directs that the parties bring in minutes of orders within 7 days to give effect to these reasons for judgment.

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

REASONS FOR JUDGMENT

Introduction

1                     On 25 September 1998 an explosion and fire occurred at the Longford gas plant in the State of Victoria.  The plant was owned, operated and conducted by the respondents (“Esso”).  As a consequence of the explosion, reticulated gas ceased to be available to gas consumers in the State of Victoria until the resumption of supply on 12 October 1998.

2                     The applicants, representing themselves and group members, commenced proceedings against Esso under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (“the Act”).  The applicants claim that, as a result of Esso’s negligence and misleading and deceptive conduct, the applicants and group members have suffered loss and damage.  The loss and damage alleged to have been suffered is said to have been caused by the unavailability of gas to consumers between 25 September 1998 and 12 October 1998.  The proceeding was commenced as a representative proceeding under Part IVA as the Court was alleged to have jurisdiction in the matter by reason of the misleading and deceptive conduct claim (“the s 52 claim”) which is made pursuant to ss 52 and 82 of the Trade Practices Act 1974 (Cth) (“the TPA”): see s 33G of the Act.

3                     Esso brought proceedings, by way of cross-claim, against a number of instrumentalities and authorities of the State of Victoria which were involved in the distribution and sale of gas to consumers (“the State entities”).  The State entities brought proceedings, by way of cross-claim, for contribution against other entities involved in the distribution and sale of gas and a number of insurance companies against whom they claimed a right to be indemnified under various insurance policies.  The State entities also brought a proceeding, by way of cross-claim, against BHP Petroleum (Bass Strait) Pty Ltd (“BHP”) on the basis that Esso operated the Longford plant as agent for BHP, alternatively, that BHP was itself an operator of the plant and was responsible for the loss and damage allegedly suffered by the applicants and group members.

4                     It is unnecessary for present purposes to outline the various cross-claims.  An essential element in each is that one of the bases of alleged liability is predicated upon Esso being liable to the applicants and to group members by reason of the s 52 claim.  Although a number of the cross-respondents to the various cross-claims (“the cross-respondents”) have brought motions which seek to strike out certain paragraphs that relate to s 52 claims in the cross-claim that relate to them in substance, if not in form, the strike out motions can be determined by reference to the s 52 claim pleaded by the applicants.  If the applicants’ pleading of their s 52 claim is to be struck out, the main basis for claiming contribution in the cross-claims in relation to misleading and deceptive conduct will fall, essentially for the same reasons.  The parties have approached and argued the motions before the Court on that basis.

5                     In the result all parties, other than the applicants, have joined in contending that the s 52 claim is misconceived and ought to be struck out.  The issues for determination by the Court are whether the s 52 claim pleaded in paras 16-27 of the Second Further Amended Statement of Claim (“the statement of claim”) is to be struck out and whether the negligence claim in the proceeding should no longer be permitted to continue as a claim in the representative proceeding, or otherwise, in the Federal Court on the ground that it is not a matter or part of a matter in respect of which the Federal Court has, or should exercise, jurisdiction.

6                     Esso has sought to strike out the s 52 claim on two previous occasions.  If Esso was the only party seeking to raise the issues the subject of the present motions there might be some force in the contention of the applicants that the Court, as a matter of discretion, should not consider Esso’s motion at this late stage.  However, two factors make that course inappropriate.  The first is that the motions are reliant on the particulars of the s 52 claim that operate to limit the generality of the pleading which, in that form, have not been the subject of previous consideration by the Court.  The second factor is that the cross-respondents are entitled, as of right, to raise the pleading issues they seek to agitate.  The fact that Esso might benefit from that course cannot preclude the cross-respondents from raising the issues the subject of their respective motions.

7                     The main submission on the s 52 claim was put by senior counsel for BHP and the main submission as to the consequences of the matter before the Court not having a sufficient federal element to give the Court jurisdiction was put by senior counsel for the State entities.  As Esso and the cross-respondents, in general, adopted those submissions it is appropriate to refer to the various submissions as submissions of the cross-respondents.

Esso’s previous strike out applications

8                     The genesis of the current s 52 pleading was the striking out of critical paragraphs of the s 52 claim pursuant to orders made by me on 21 April 1999.  The claim against Esso, at that time, was based upon an alleged failure by Esso to correct or contradict assumptions made by gas consumers that the availability of gas to them was “secure, reliable, continuous and adequate” for their needs.  If the collocation of words used to express the assumptions is to have any meaning in the present context it must, at the least, mean that the continuity of supply will not be seriously or significantly interrupted.  It was not alleged that Esso’s conduct contributed to the assumptions made by gas consumers or that Esso was under a duty to correct or contradict the assumptions.  At that stage the only conduct of Esso that was relied upon as constituting a contravention of s 52 was the failure to correct or contradict the assumptions, that is, silence.

9                     In my reasons for judgment of 21 April 1999 (Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 477) at [4] and [5] I noted that, putting to one side the vexed question of a duty to disclose, silence has been recognised as justifying a claim of misleading and deceptive conduct in two situations.  I described those situations as follows:

“The first situation is where it is an element, in all the circumstances of a case, which renders the conduct in question misleading or deceptive: see Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 at 88 per Samuels JA and Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32 per Black CJ and at 40-41 per Gummow J.  For example, where the relevant conduct involves the supply of goods or services in circumstances where there is an omission to impart information relating to a particular quality or aspect of the goods or services, silence may be the element which renders the conduct in question misleading or deceptive.  Such an omission might occur where a product is supplied to a consumer who, to the knowledge of the supplier, dedicates its manufacturing process to that supply on the basis of its continuity, and the supplier fails to inform the consumer that it cannot provide continuity of supply.  The conduct in question in that example is not silence alone; it is supply of the product in circumstances in which the failure to inform might render the supplier’s conduct misleading and deceptive.  The example given is of conduct, involving silence, which is capable of, and therefore may be properly pleaded as, constituting misleading and deceptive conduct.

The second situation is where silence alone constitutes misleading and deceptive conduct.  That situation arises by reason of the extended definition of ‘conduct’ in s 4(2) of the TPA which provides that, for the purposes of the TPA, ‘conduct’ includes a refusal to do any act and refraining from doing that act otherwise than where the refraining was inadvertent.  However, in this situation there must be an element of intent in the refusal to do, or the refraining from doing, the act in question: see Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 722 per Finkelstein J and the authorities there cited.  In substance, the authorities referred to by his Honour require that the silence be intentional or deliberate.

Applying these principles to the present case, the applicants’ pleading of misleading and deceptive conduct is deficient.  It plainly falls outside of the two situations, discussed above, as it relies on the mere silence of the respondents as constituting their contravening conduct without an allegation that:

·                     the silence was the element that resulted in the respondents’ conduct  being misleading or deceptive; or

·                     that the respondents’ silence was intentional or reckless.”

10                  As a consequence of the orders made on 21 April 1999 the applicants delivered a further statement of claim which, in turn, was the subject of a further strike-out motion by Esso.  After certain minor amendments were made to the statement of claim in the course of the hearing of that motion I concluded that the motion should be dismissed.  In my reasons for judgment of 4 May 1999 (Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 569) at [2] to [4] I described the s 52 cause of action of the applicants as follows:

“Complaint was made as to the manner in which the material facts establishing the necessary causal link between misleading conduct and loss and damage have been pleaded.  In Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222 French J observed that, in pleading the necessary material facts establishing the causal relationship between contravention of s 52 and the loss which is a necessary element of the cause of action pleaded, the facts and circumstance should be set out which lead

‘to a reasonable inference that the conduct and the damage stood to each other in the relation of cause and effect.’

The substantive allegation made by the applicants is that Esso’s conduct in operating its plant and being the monopoly supplier of gas used by consumers in Victoria and its failure to correct or contradict assumptions made by the public as to the reliability and continuity of that supply constituted misleading and deceptive conduct.  It is then pleaded that in reliance upon that ‘conduct’ the applicants, business users, domestic users and stood down workers ordered their affairs on the basis of the assumptions and, in the case of business users and stood down workers, did not take certain steps to protect themselves against cessation of supply.  It is then alleged that, as a consequence of those matters, the applicants and the various group members suffered economic loss and damage by reason of the explosion at the Longford plant that led to a cessation of gas supply.  In my view the pleading, as it has been amended in the course of the present application, satisfies the criteria stated by French J in Bond Corporation at 222.

An alternative argument was put on behalf of Esso that even if that difficulty was overcome the s 52 cause of action has still not been properly pleaded as the pleading of loss and damage must be alleged to have been caused by the silence of Esso as the conduct in question rather than the operation of the plant, supply and silence as the conduct in question.  In my view the submission misconceives the basis upon which the applicants are putting their claim.  The applicants have not pleaded that silence alone constituted the misleading conduct giving rise to their loss.  Rather, they have pleaded that the operation of the Longford plant and the supply of gas as a monopoly supplier together with the ‘silence’ is the misleading conduct upon which they relied to order their affairs which led to their reliance on continuity of supply of gas and to the loss they allege they have suffered.  The fact that it is the silence that is the element that resulted in the conduct being misleading does not alter the claim that it is the totality of the conduct, rather than the silence alone, that is being relied upon as constituting the breach of s 52.  Whether the causal link sought to be pleaded between conduct and loss can be successfully established at trial is not the question presently before me.  In my view the amendments made to para 27 sufficiently deal with the complaint made by Esso.”

11                  The cross-respondents did not challenge my decision on either of the previous strike-out applications.  Rather, the cross-respondents contended that the generality of the s 52 claim has now been limited by the particulars and, when so limited, is demonstrably untenable: see Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 and General Steel Industries Ltd v Commissioner for Railways (1964) 112 CLR 125.

The s 52 claim

12                  The s 52 claim can be summarised as follows:

·        Esso is a monopoly supplier of natural gas to gas users in Victoria (para 16);

·        since 1970 gas has been regularly advertised in Victoria as a reliable source of energy for domestic, business and industrial users (para 17);

·        as a result of Esso being a monopoly supplier, and as a result of the advertising, persons in the State of Victoria assumed that the supply of gas to gas users was, and would remain, secure, reliable, continuous and adequate (“the assumptions”) (para 19);

·        Esso, although aware of the assumptions and of the fact that the supply of gas to gas users was not, and would not remain, secure, reliable, continuous and adequate, continued to operate the Longford gas plant and to supply gas for distribution to gas users but failed to correct or contradict the assumptions (“Esso’s conduct”) (paras 18, 20, 22, 23, 24 and 25);

·        Esso’s conduct was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA (para 26);

·        the applicants and group members suffered loss by reason of Esso’s conduct (paras 21, 26 and 27).

13                  It appears that the allegations that are relied upon by the applicants as being central to the s 52 claim include:

·        the assumptions made by the public were induced by reason of Esso being the “monopoly” supplier of natural gas and by certain advertising in Victoria by entities other than Esso;

·        Esso was aware of the assumptions and of the facts that made them erroneous but failed to correct the misconception of the public.

14                  The cross-respondents accepted that whether or not the public made the assumptions may be a question for evidence, rather than of pleading.  However, they contended that whether the fact that Esso was a monopoly supplier and the advertising were capable of giving rise to the assumptions was able to be determined from the pleadings now that full particulars had been given of the relevant allegations.  In that regard the applicants have had discovery on both issues and did not state in the statement of claim that further particulars will be provided.  In the course of argument senior counsel for the applicants suggested that further particulars may be provided but I indicated that, in the absence of any detail of the content of the further particulars, I would assume that they would relate to advertising to the same effect as the advertising set out in the current particulars.

15                  It is well established that particulars limit the generality and ambit of the pleadings (Saunders v Jones (1877) ChD 435, Yorkshire Provident Life Assurance Co v Gilbert (1895) 2 QB 148 at 152 and Trade Practices Commissioner v George Weston Foods Pty Ltd (1979) 39 FLR 182 at 186.  Further, particulars are part of the pleading and, as such, are subject to the rules relating to striking out a pleading: see Davey v Bentinick (1893) 1 QB 185 at 188, Searle v Mirror Newspapers Ltd (1974) 1 NSWLR 180 at 186-187 and Minchin v Adamson (1975) 10 SASR 119 at 122.

16                  Accordingly, it is open to the cross-respondents to contend that the pleadings they challenge ought to be struck out if the particulars given are incapable of supporting or sustaining the substantive allegation.  In any such case the pleading would have a tendency “to cause prejudice, embarrassment or delay in the proceeding” (O 11 r 16(b) of the Federal Court Rules) and may also fail to disclose a “reasonable cause of action” (O 20 r 2).

17                  There is little point in outlining the detail of the advertisements.  In general, they extol the efficiencies, comforts and general desirability of natural gas appliances and might be said to impliedly represent that natural gas is a reliable source of energy.  The applicants go no further than contending that the gist of the advertisements is to encourage reliance on natural gas as a principal energy source.  There is nothing in the advertisements that expressly, or impliedly, represents that the supply of gas was and would remain secure, reliable, continuous and adequate in the sense that it is not vulnerable to a shut down or some other interference with supply.  Extolling, in general terms, the reliability of gas as a source of energy does not mean that the supply of gas will not be interrupted.  Likewise, para 22 necessarily suffers from a similar deficiency in so far as it relies upon Esso’s knowledge of the advertisements as a basis for its knowledge of the assumptions which relate to the reliability etc of supply.

18                  The applicants contended that I had not struck out an earlier, but unparticularised, version of the pleading, inter alia, on the basis that the pleading did not rely on a logical connection between the advertising and the assumptions.  Whilst that may be correct, the advertisements are relied upon as inducing the assumptions and as one of the bases for Esso’s awareness of the assumptions.  If the advertisements are not capable of giving rise to the assumptions then it is difficult to accept that they can have any material role in the s 52 claim.  In any event the advertisements have been particularised and the generality of the pleading is limited by those particulars.

19                  I also agree with the submission of the cross-respondents that the fact that Esso is a monopoly supplier, of itself, can have little relevance to inducing the public to assume that its supply of gas was and would remain secure, reliable, continuous and adequate in the sense set out above.

20                  These conclusions must lead to paras 16 and 17, and para 19 to the extent that it relies on paras 16 and 17, being struck out on the basis that the matters pleaded (as limited by the particulars) are not reasonably capable of giving rise to the assumptions.  Other paragraphs, such as para 22, which are dependent upon the assumptions, must likewise be struck out.

21                  It does not follow that the deficiency in those paragraphs reveals a fundamental flaw in the s 52 claim or is otherwise not capable of rectification by an appropriate amendment.  On the basis of the limited evidence before me at this stage I would expect that a domestic or industrial consumer of any essential service, whether water, gas or electricity, would be likely to make certain assumptions when he or she turns on a tap or a switch to receive the water, gas or electricity, or acquires an appliance or equipment dependent upon the service.  One of the assumptions would be that the supply of the water, gas or electricity will be secure, reliable, continuous and adequate.  The assumption is inherent in the nature of the essential service provided, the infrastructure that is known to be necessary to enable the provision of the service and the known dependence of consumers of the service on its supply being secure, reliable, continuous and adequate.  Part of the “infrastructure” enabling continuous gas supply in Victoria is likely to be Esso’s gas reserves in Bass Strait, Esso’s facilities for the production and processing of gas at Longford and the system for the distribution of gas, via the State entities, to consumers.

22                  Thus, although “monopoly” supply and the advertising relied upon by the applicants may not, of themselves, be capable of inducing the assumptions, there may be more relevant factors that might have done so.  I need not pursue this aspect further other than to conclude that the deficiencies complained of by the cross-respondents might be overcome by amendment.

23                  In the course of argument it became clear that the real and more fundamental difficulty with the pleading of the s 52 claim related to what was meant by the collocation of the words “secure, reliable, continuous and adequate supply of gas”.  The words relate to relative, rather than absolute, concepts.  Thus, it would not be inconsistent with the assumptions if supply were interrupted by reason of a natural disaster or industrial action.  Indeed, the retail contracts entered into by gas consumers for the supply of gas from the State entities and the regulatory regime specifically provide for interruptions of supply in certain circumstances.

24                  The allegation of “secure, reliable, continuous and adequate supply of gas”:

·        does not mean an uninterruptable supply of gas;

·        does not describe a system of supply of gas that is not vulnerable to an event that can lead to a shut down of supply whether that event be a natural disaster, a negligently caused explosion or industrial action.

25                  It is relevant also to consider the particulars given under para 23 as to why, contrary to the assumptions, it is alleged that Esso was not able to provide a secure, reliable, continuous and adequate supply of gas.  The gist of the particulars as to that alleged inability is:

·        the vulnerability of Esso’s processing and supply network to a shutdown;

·        the vulnerability of Esso’s network to a total cessation of supply of gas as a result of events such as those that occurred on 25 September 1998;

·        the systemically flawed management and operation of Esso’s Longford gas plant;

·        the absence of an alternative means of supply of gas in the event of a critical failure in Esso’s gas plant.

26                  The fundamental flaw in the pleading in relation to “secure, reliable, continuous and adequate” supply in paras 16, 17, 19, 23 and 24 is that the central allegation in the s 52 claim, that Esso’s supply of gas was not reliable, secure, adequate and continuous, is not able to be sustained by the particulars under para 23 (see also para 24).  The flaw is not merely technical in the sense of the particulars not sustaining the allegation pleaded.  As I pointed out to senior counsel for the applicants in the course of argument, the gist of the applicants’ s 52 claim appears to be an allegation that Esso failed to correct the erroneous assumption by the public that the supply of gas to the public was not vulnerable to interruption of supply by events of the kind that occurred at the Longford gas plant on 25 September 1998, or to the other matters particularised in para 23.  As I am not prepared to construe the assumptions as relating to “uninteruptable” supply, it follows that there is a significant disconformity between paras 16, 17 and 19 which relate to the assumptions and paras 23 and 24 of the statement of claim which relate to why they were alleged to be erroneous.

27                  For the above reasons I am satisfied that the main criticisms made by the cross-respondents of the applicants’ s 52 pleading are well founded.  As the assumptions and the failure to correct them are central to the s 52 claims it would be appropriate to strike out the whole of the s 52 claim rather than particular paragraphs of it.

28                  The cross-respondents also criticised the pleading of causation in para 27.  They contended that the s 52 claim for damages requires identification of a causal link between loss and damage and conduct in contravention of s 52: see Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 at 346.  Where the cause of action is based on an alleged failure to warn or inform, it is said that it is necessary to identify the kind of warning or information which the circumstances called for and to prove that if the warning or information called for had been given, the loss or injury alleged would not have been suffered.  Thus, it was contended that the evidence must establish that it is more probable than not that the applicants would have heeded the warning or acted upon the information and taken a course which would have resulted in the applicants not suffering the loss or damage claimed: see Qantas Airways v Cameron (1996) 66 FCR 246 at 293-294.

29                  To support the submissions the cross-respondents also relied upon the recent High Court decision in Chappel v Hart (1998) 195 CLR 232 at 239, 246, 256-257 and 282 to argue that, where a breach of a duty to inform is relied upon, it is necessary for the plaintiff to establish what would have happened if the information in question had been provided.  Thus, it is contended that the present pleading of causation is deficient because it fails to comply with the above requirements.

30                  Putting to one side the fact that a number of the authorities relied upon relate to a claim in negligence based upon breach of a duty to inform, the cases are primarily concerned with the evidence that is required to be adduced at trial rather than the manner in which causation in such cases is to be pleaded.  A distinction is to be drawn between the requirement to plead the material facts on which a cause of action is based and the evidence that is required to establish the factual basis of each element of the cause of action: see Bright v Femcare [1999] FCA 1377 at [18].  Further, in a claim for damages pursuant to s 82 of the TPA, the applicants must establish by evidence that the loss and damage they suffered was suffered “by reason of” Esso’s conduct.  The extent to which the principles relied upon in respect of a negligent failure to warn are applicable to cases where silence forms part of the conduct relied upon for the purposes of the claim for damages under ss 52 and 82 of the TPA may be a matter of some contention.

31                  I am satisfied that I need not pursue these matters further in the present context as I dealt with a similar argument on the pleading of causation on an earlier challenge by Esso.  In my reasons for judgment of 4 May 1999, the relevant part of which I set out earlier in these reasons, I stated that I was satisfied that the current pleading of causation in the s 52 claim (para 27 of the statement of claim) sufficiently sets out the facts and circumstances which lead to a reasonable inference that the conduct and damage stood to each other in relation to cause and effect: see Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222 per French J.  It may well be that further particulars are appropriate as to causation but that is a different matter from striking out the pleading.

32                  In the result, it is appropriate to strike out the whole of the s 52 pleading.  But for that conclusion I would not have acceded to the submissions of the cross-respondents in relation to the pleading of causation in para 27.  However, as the pleading in para 27 is dependent upon the conduct of Esso outlined in para 26 which, in turn, is dependent upon pleadings relating to the assumptions, it is appropriate to strike out para 27 in any event.

A Federal matter

33                  Independently of the outcome of the challenge to the s 52 claim, the cross-respondents contended that the Court does not have jurisdiction in relation to the cause of action based on negligence.  They also contended that that cause of action, standing alone, is not one in which the Court has original jurisdiction as it arises under the common law and not an Act of the Commonwealth Parliament.

34                  Section 86(1) of the TPA confers jurisdiction on the Court in a “matter” arising under the TPA.  Thus, the negligence claim falls within the jurisdiction of the Court if it is part of “the matter”.  Since the striking down of the State cross-vesting legislation the Court only has jurisdiction to hear and determine a non-federal matter, such as a claim in negligence, if it is part of the matter by reason of it falling within the Court’s “accrued jurisdiction”: see Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 and Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 at 290 per Mason, Brennan and Deanne JJ.

35                  Further, s 33G of the Act provides that a representative proceeding under Pt IVA may not be commenced if the proceeding would be concerned only with claims in respect of which the Court has jurisdiction solely by virtue of the jurisdiction of Courts (Cross-Vesting) Act 1987 or a corresponding law of a State or Territory.  Accordingly, the question of jurisdiction in the proceeding as a representative proceeding is not affected by the recent decision of the High Court in Re Wakim; Ex parte McNally (1999) 163 ALR 270, in which it was held that the jurisdiction conferred upon the Court under cross-vesting legislation in respect of matters in which it did not otherwise have jurisdiction, was beyond legislative power and therefore invalid.

36                  The cross-respondents contended that the negligence claim is not within the accrued jurisdiction of the Court because the claim is not “within the scope of one controversy” and is therefore not “within the ambit of a matter”.  The “matter” is the subject matter for determination in a legal proceeding rather than the proceeding: see Re Judiciary and Navigation Acts (1921) 29 CLR 257 at 265.

37                  The negligence claim must meet the test stated by the High Court in Fencott v Muller (1983) 152 CLR 570 at 608 per Mason, Murphy, Brennan and Deane JJ:

“What is and what is not part of the one controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships.  The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleading in which the issues in controversy are defined and the claims for relief are set out.  But in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter.”

38                  Gummow and Hayne JJ in Re Wakim (at 311) cited the above passage and continued (at 312):

“The references to ‘impression’ and ‘practical judgment’ cannot be understood, however, as stating a test that is to be applied.  Considerations of impression and practical judgment are relevant because the question of jurisdiction usually arises before evidence is adduced and often before the pleadings are complete.  Necessarily, then, the question will have to be decided on limited information.  But the question is not at large.  What is a single controversy ‘depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships’.  There is but a single matter if different claims arise out of ‘common transactions and facts’ or ‘a common substratum of facts’, notwithstanding that the facts upon which the claims depend ‘do not wholly coincide’.  So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other, as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination.  Conversely, claims which are ‘completely disparate’, ‘completely separate and distinct’ or ‘distinct and unrelated’ are not part of the same matter.

Often, the conclusion that, if proceedings were tried in different courts, there could be conflicting findings made on one or more issues common to the two proceedings will indicate that there is a single matter.  By contrast, if the several proceedings could not have been joined in one proceeding, it is difficult to see that they could be said to constitute a single matter.”

39                  At the outset it is necessary to identify the justiciable controversy, the subject of the present proceeding.  Although the final form of the s 52 claim may remain to be determined, the actual and proposed pleading of the claim to date, as well as the material that relates to it, enables the Court to identify the justiciable controversy being litigated.  In that regard it is well established that the concept of a justiciable controversy is identifiable independently of the proceedings brought for its determination (Fencott v Muller at 603) and may or may not be co-extensive with the legal proceedings already instituted: see Hooper v Kirella Pty Ltd [1999] FCA 1584 at [48] to [54] and the authorities there cited.

40                  The controversy the subject of the present proceeding may fairly be described as whether the applicants and the group members they represent (business and domestic users of gas, and workers stood down from their employment) who suffered pecuniary loss as a result of the cessation of supply are entitled to recover from Esso the pecuniary loss they suffered.  The causes of action that are being relied upon to recover the loss are negligence and the s 52 claim.

41                  The gist of the negligence claim is that Esso was under a duty of care when designing, installing, operating and maintaining the Longford gas plant to avoid causing pecuniary loss of the kind suffered by the applicants and the group members, and are liable to the applicants and the group members for that loss because of their breach of duty.  The breach is separately particularised in relation to the:

·        design and installation of the Longford gas plant;

·        operation and maintenance of the Longford gas plant.

42                  The gist of the s 52 claim is that Esso supplied gas for sale to business and domestic users but failed to correct the assumptions by the public, that it knew to be erroneous, that its supply of gas was not vulnerable to interruption by events of the kind that occurred on 25 September 1998.  In alleging that the assumptions that gas supply was secure, reliable, continuous and adequate was erroneous, the applicants, inter alia, rely upon particulars pleaded in respect of the negligence claim and the absence of an alternative means of supply in the event of a critical failure at the plant.  The absence of an alternative means of supply is relied upon by Esso in its claim for contribution from the State entities on the ground that the entities were themselves negligent in not securing an alternative means of supply of gas to consumers.

43                  It is alleged that the pecuniary loss suffered by the applicants and group members, as a result of cessation of supply, was suffered by reason of Esso’s negligence and Esso’s conduct in contravention of s 52.

44                  It is plain that there is a substantial common substratum of fact upon which the negligence and the s 52 claims depend, albeit that the substratum in respect of each claim does not wholly coincide.  Essentially, the commonality arises from the fact that the claims being made are for substantially the same pecuniary loss suffered by reason of the same cessation of supply occurring as a result of the same event namely, the explosion and fire at Esso’s Longford gas plant on 25 September 1998.  Although the substratum of fact relied upon to establish breach of duty is not the same as the substratum of fact relied upon to establish the vulnerability of Esso’s supply system to failure, the facts relied upon to allege breach of duty substantially overlap with the facts relied upon to establish the vulnerability.  The commonality of fact in the federal and non-federal claims for the same damage arising out of substantially overlapping circumstances plainly imply that there is a single justiciable controversy or matter before the Court.  As was explained in Wakim at [145], a third party proceeding by the respondent for contribution will usually be part of the same matter.

45                  In McMahon v Smith (1986) 69 ALR 527 at 529-530 Burchett J stated that the summary jurisdiction of the Court to strike out a claim on the ground that it is not within the accrued jurisdiction of the Court should only be exercised in a “clear case”.  Irrespective of whether I adopt that, or a less onerous, criterion at this stage I am not satisfied that the cross-respondents have established that the controversy, the subject of the present proceeding, is not within the jurisdiction of the Court or does not satisfy the requirements of s 33G of the Act.

46                  The above discussion also disposes of another aspect of the cross-respondents’ submissions being that the s 52 claim is “trivial or insubstantial” (Fencott v Muller at 609-610) and is such a minor aspect of the matter that it is not sufficient, of itself, to attract jurisdiction.

47                  Triviality, in this context, does not mean that the federal claim is less likely to succeed than the non-federal claim.  Accrued jurisdiction does not depend on an assessment being made of the strength or weakness of the federal claim in order to determine whether the Court’s accrued jurisdiction is attracted to the non-federal claim.  The question of whether federal jurisdiction is attracted in a matter depends on the genuineness of the claim rather than its merits.  In that regard Mr Owen Dixon KC, as he then was, in evidence to a Royal Commission on the Constitution of the Commonwealth (Minutes of Evidence 13 December 1927 at 788) stated:

“If a boy is prosecuted before justices of the peace under a municipal by-law for riding a bicycle on the footpath, and objects that he did so in the performance of his duties as a messenger of the Post and Telegraph Department, and that the by-law cannot affect him, however untenable his objection may be as a defence, yet instantly the justices lose their jurisdiction, because the interpretation of the Constitution is involved.  (See Troy v Wrigglesworth, 26 C.L.R. 305).  So, if a tramp about to cross the bridge at Swan Hill is arrested for vagrancy and is intelligent enough to object that he is engaged in interstate commerce and cannot be obstructed, a matter arises under the Constitution.  His objection may be constitutional nonsense, but his case is at once one of Federal jurisdiction.”

48                  More recently it has been accepted that the Federal Court may have jurisdiction in respect of a matter though the only federal element of the matter has failed or the federal claim has been struck out: see Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 at 218-219, Unilan Holdings Pty Ltd v Kerin (1993) 44 FCR 481 at 481-482 and Hooper v Kirella Pty Ltd at [55].

49                  Although the applicants continue to have difficulty in formulating the s 52 claim it does not follow that it is “trivial” in the sense in which that expression is used in the cases.

50                  In my view the s 52 claim is not an insubstantial or trivial aspect of the matter before the Court and is not severable from the negligence claim.  I would add that in so far as accrued jurisdiction is “discretionary” (Wakim at [149]) I am not satisfied that there are valid reasons for the Court to exercise any discretion it might have to refuse to hear and determine the whole of the justiciable controversy between the parties.

Fabricating jurisdiction

51                  The alternative submission of the cross-respondents is that the s 52 claim is “colourable”, in the sense that it is made for the improper purpose of “fabricating” jurisdiction and therefore ought not to be permitted to proceed.

52                  The law in that regard, was summarised by the Full Court (Bowen CJ, Morling and Beaumont JJ) in Burgundy Royale Investments where proceedings had been brought to recover damages for misleading and deceptive conduct under s 52 of the TPA and damages at common law for breaches of collateral warranties and negligence.  The federal claims were found by the Court, on a determination of a preliminary question of law, not to be sustainable against the second and third respondents on the ground that they were not bound by the TPA.  The question then arose as to whether that affected the Court’s jurisdiction to deal with the non-federal claims in respect of those respondents.  The Court stated (at 219):

“It is true that in answering questions 1 and 2 in the negative, we have determined preliminary points of law in the claims under the Act brought against the second and third respondents; and that, in consequence, there will be no further trial of those issues.  But it does not follow that the Court ever lacked jurisdiction to deal with such claims.  Nor does it follow that the Court now loses its jurisdiction to deal with the attached common law claims: see Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457 at 469, 472, 477; Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd (1987) ATPR 40-795; 75 ALR 271, and Dorotea Pty Ltd v Vancleve Pty Ltd (1987) ATPR 40-807; 75 ALR 629.  In principle, the position is no different than it would have been if the claims under the Act had proceeded to trial and had been dismissed on the merits.  In that situation, it could not seriously be suggested that the dismissal of the claims under the Act had the effect of depriving the Court of jurisdiction to deal with any attached non-federal claim.

The position may have been different if the claims under the Act had been ‘colourable’ in the sense that they were made for the improper purpose of ‘fabricating’ jurisdiction: see PH Lane, Lane’s Commentary on the Australian Constitution (1986), pp 367-368 and the cases there cited.  There is no room for such a suggestion here.  The applicants’ case that the second and third respondents were bound by the Act cannot be said to be unarguable; and we think it was pursued bona fide: cf R v Cook; Ex parte Twigg (1980) 147 CLR 15 per Gibbs J at 26.”

53                  In Fitzroy Motors Pty Ltd v Hyundai Automotive Distributors Australia Pty Ltd (1995) 133 ALR 445 at 450, Wilcox CJ treated Burgundy Royale Investments as deciding that the Court’s jurisdiction is not lost because the federal claim is not maintainable unless that claim is not “genuinely” brought.  Wilcox CJ said (at 450):

“I think that the test adopted in Burgundy Royale was simply a test of genuineness; the primary claim must not be a sham claim for the purpose of fabricating a jurisdiction that would not otherwise exist.  If the claim was unarguable, this would tend to suggest that it was not being genuinely made and that the purpose of the claim was to fabricate jurisdiction.  On further reflection, I think that, in Burgundy Royale, the Full Court was merely saying that this was not the situation in that case; the applicant’s Trade Practices Act claim was not unarguable and was made bona fide.  If there is only one test, it is at least theoretically possible for there to be a case where the primary claim is unarguable, but the applicant persuades the court that the claim was not fabricated.  In such a case, the court will not lack jurisdiction to determine the associated claim.”

54                  Accordingly, the fact that a federal claim, that is genuinely brought, is dismissed or struck out on a summary application on the basis that it is not arguable does not result in the Court losing its jurisdiction.  However, if the Court is satisfied that no relevant relief could be granted against a respondent whose presence in the proceeding was “merely for the purpose of obtaining jurisdiction” then the jurisdictional element is “colourable”: see New South Wales Land Council v Australian Securities and Investments Commission (1995) 131 ALR 559 at 572-573.

55                  In the present case I am not satisfied that the applicants have not been genuine in bringing their TPA claim or that the claim, when brought, was believed by them to be unarguable.  Whilst I have acceded to the submission of the cross-respondents that the s 52 claim, as presently formulated, ought to be struck out that outcome, of itself, does not result in the Court no longer having jurisdiction in the “matter” the subject of the proceeding.

56                  The cross-respondents also contended that the Court ought not to permit the action to continue as a representative proceeding under Pt IVA of the Act in the event that the federal cause of action was struck out.  They relied upon s 33N which, relevantly, provides:

“(1)     The Court may, on application by the respondent or of its own motion, order that a proceeding no longer continue under this Part where it is satisfied that it is in the interests of justice to do so because:

…

(d)     it is otherwise inappropriate that the claims be pursued by means of a representative proceeding.”

57                  The discretion conferred under s 33N arises where, in the “interests of justice”, it is no longer appropriate that the proceeding continue as a representative proceeding.  It is to be noted that the exercise of discretion does not mean that the proceeding will no longer continue in the Court; rather, it only means that it will no longer continue in the Court as a representative proceeding.  If it is appropriate that a proceeding continue as a representative proceeding, notwithstanding that the federal claim has been struck out, then it is unlikely that any order could be made under s 33N(1)(d).

58                  As the proceeding appears to be within the jurisdiction of the Court and therefore satisfied the requirements of s 33G, and the other requirements of Pt IVA when it was commenced, the fact that the federal claim in the proceeding is struck out does not, of itself, afford a reason for the Court to exercise the discretion under s 33N(1)(d) adversely to the applicants.

59                  In my earlier reasons for judgment of 5 February 1999 (Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 56) and, on appeal, in the Full Court’s reasons for judgment (Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 636) it was accepted that the common issues of fact and law set out in those reasons made it appropriate for the matter to proceed as a representative proceeding under Pt IVA of the Act.  Nothing has been put forward by the cross-respondents that alters that position.

60                  Accordingly the motions, in so far as they seek dismissal of the proceeding on jurisdictional grounds and orders that the proceeding no longer be permitted to continue in the Court as a representative proceeding or otherwise, should be refused.

Amendment of the s 52 claim

61                  For the reasons set out earlier I have concluded that, within 21 days, the applicants are to be given the opportunity to apply for leave to replead the s 52 claim.  I would add that although there are difficulties in the s 52 claim, a court would hesitate before exercising its discretion to finally dismiss or strike out the claim notwithstanding that the legal basis for it may be doubtful or problematic in circumstances where the court will nevertheless be required to hear and determine substantially the same factual matters in respect of the remaining cause of action: see Wickstead v Browne (1992) 30 NSWLR 1 at 5 and on appeal to the High Court (1993) 10 Leg.Rep page SL 2.

62                  In any event the applicants have foreshadowed a number of proposed amendments in the event that I strike out the s 52 claim.  In the circumstances I have decided not to comment on those amendments which have been the subject of extensive criticism by the cross-respondents.  It is preferable that the applicants have time to consider these reasons for judgment and be required then to apply for leave to amend the statement of claim.

Costs

63                  The cross-respondents and Esso have succeeded on their motions, in effect, to strike out the s 52 claim but failed on their motions to have the proceeding dismissed and for the proceeding to no longer continue as a representative proceeding in the Court.  In all the circumstances it is appropriate to order that the taxed costs of all parties of and incidental to their respective motions be costs in the cause.

Conclusion

64                  The parties are to be directed to bring in Minutes of Orders, within 7 days, that give effect to my reasons for judgment.

Associate:

Dated: