FEDERAL COURT OF AUSTRALIA

Truth About Motorways Pty Ltd (ACN 080 135 191) v Macquarie Infrastructure Investment Management Ltd (ACN 072 609 271) [2000] FCA 918

TRADE PRACTICES – application for summary judgment –whether claims for relief in the case as pleaded are clearly untenable and cannot possibly succeed – representation of estimate of likely future traffic volumes on toll road – alleged breaches of ss52, 53(aa) and 53(c) Trade Practices Act 1974 (Cth) – corrective advertising and declaration of misleading and deceptive conduct sought – applicant would not derive any advantage as a result of a successful outcome in the litigation – whether there could reasonably be any current misapprehension as a result of the impugned publication – whether it would be futile to order corrective advertising – significant lapse of time between statement and commencement of proceedings – whether redressed by superseding statements

COSTS – security for costs – proceedings involved no private right or special interest of the applicant – public interest nature of litigation only one factor to be considered in deciding whether or not to order that security for costs be provided – whether there was sufficient grounds to displace the respondent’s entitlement to security

Corporations Law s 1335

Fair Trading Act 1987 (NSW) ss42, 44(b), 44(e)

Federal Court of Australia Act 1976 (Cth) s 56

Trade Practices Act 1974 (Cth) ss 52, 53(AA), 53(c), 80, 80A, 163A, Part V

Truth About Motorways Pty Limited v Macquarie Infrastructure Investment Management Limited (2000) 169 ALR 616 applied

Orison Pty Limited v Strategic Minerals Corporation NL (1988) 81 ALR 183 referred to

Janssen Pharmaceutical Pty Limited v Pfizer Pty Limited (1985) 6 IPR 227 cited

Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 cited

Australian Competition & Consumer Commission v On Clinic Australia Pty Limited (1996) ATPR 41-517 cited

HCF Australia Limited v Switzerland Australia Health Fund Pty Limited (1988) ATPR 40-846 cited

Annand & Thompson Pty Limited v Trade Practices Commission (1979) ATPR 40-116 cited

Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 cited

Australian Competition & Consumer Commission v The IBM Group Pty Limited (1999) ATPR 41-688 cited

Re Wakim; Ex parte McNally (1999) 163 ALR 270 referred to

Australian Solar Mesh Sales Pty Limited v Spruson & Ferguson, Patent & Trade Mark Attorneys [1999] FCA 1730 applied

Tradestock Pty Limited v TNT (Management) Pty Limited (No 1) (1977) 30 FLR 343 applied

Equity Access Limited v Westpac Banking Corporation (1989) ATPR 40-972 applied

Friends of Hinchinbrook Society Inc v Minister for Environment (No 1) (1996) 69 FCR 1 distinguished

Bell Wholesale Co Limited v Gates Export Corporation (1984) 2 FCR 1 cited

Qantas Airways Limited v Cameron (1997) 148 ALR 378 cited

South-West Forest Defence Foundation Inc v Department of Conservation & Land Management [1998] HCA 35 cited

Botany Bay City Council v Minister of State for Transport & Regional Development [1999] FCA 65 cited

M A Productions Pty Limited v Austarama Television Pty Limited (1982) 1 ACLC 404 applied

TRUTH ABOUT MOTORWAYS PTY LTD (ACN 080 135 191) v MACQUARIE INFRASTRUCTURE INVESTMENT MANAGEMENT LTD (ACN 072 609 271)

NG 833 OF 1997

HELY J

10 JULY 2000

SYDNEY

THE COURT ORDERS THAT:

1.                  The motion for summary judgment is dismissed.

2.                  The applicant provide security for the respondent’s costs of these proceedings, the form and amount of such security to be the subject of later determination.

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

REASONS FOR JUDGMENT

1                     The Second Further Amended Statement of Claim (“SFASC”) alleges that the respondent is the manager of two unit trusts (“the trusts”).  One of the assets of those trusts is a toll road project in Sydney known as the “Eastern Distributor”.  In November 1996, the respondent issued a prospectus and a supplementary prospectus (the “first prospectus”) inviting members of the public to purchase units in the trust.  The prospectus contained the following statement:

“Traffic volume on the Eastern Distributor is anticipated to build up rapidly, as a consequence of the existing traffic volumes and the current congestion in the corridor, to an average daily traffic volume of nearly 60,000 vehicles by 2006.  Thereafter, traffic volume on the Eastern Distributor is forecast to increase more slowly.”

(“The statement”)

2                     The applicant claims that in making the statement set out above, the respondent contravened ss 52, 53(aa) and 53(c) of the Trade Practices Act 1974 (Cth) (“the Act”) and equivalent provisions of the Fair Trading Act 1987 (NSW).

3                     By its Amended Application the applicant seeks:

-                     an order pursuant to s 80 of the Act that the respondent publish corrective advertising ... so as to provide an accurate estimate of likely future traffic volumes on the Eastern Distributor, and so as to correct the estimates of such traffic volume made in the prospectus ...;

-                     a declaration that the respondent, in making traffic volume forecasts for the Eastern Distributor in the prospectus, has engaged in misleading and deceptive conduct contrary to s 52 of the Act.

4                     The applicant does not assert that it suffered any loss or damage in consequence of the conduct of which it complains.  Further, it is admitted that none of the directors of the applicant would derive any personal advantage as a result of a successful outcome for the applicant in the litigation.  The applicant invokes the jurisdiction conferred on this Court by ss 80 and 163A of the Act simply in its capacity as a (corporate) person.  Its entitlement so to do was upheld by the High Court on the removal of these proceedings into that Court: see Truth About Motorways Pty Limited v Macquarie Infrastructure Investment Management Limited (2000) 169 ALR 616.

5                     The defence to SFASC pleads in par 27(b) that even if the respondent has contravened Part V of the Act, or the corresponding provisions of the Fair Trading Act, it would be futile and/or not a proper exercise of the Court’s discretion, to order that the respondent commission corrective advertising with respect to those statements.  The particulars to that paragraph rely upon two matters:

(i)         the time which elapsed between the issue of the prospectus on 5 November 1996, and the commencement of these proceedings on 9 October 1997;

(ii)        superseding statements issued by the respondent about traffic forecast to security holders and to Australian Stock Exchange Limited for announcement to the market in specified publications, including a second prospectus dated 8 October 1997 (the “second prospectus”).

6                     Par 27(c) of the defence alleges that the Court ought not exercise its discretion to make the declaration sought by the applicant.  The particulars of that contention are that:

(i)                  the claim for a declaration is hypothetical.  The applicant has never had any financial or other interest in the securities issued pursuant to the prospectus;

(ii)                no person who holds or held securities issued pursuant to the prospectus has made or notified any claim to the respondent in relation to the statement.

7                     Paragraph 5 of the Amended Reply contains a “denial” of par 27 of the defence to SFASC.  The particulars supplied in support of that denial include:

(i)                  the subsequent statements said to supersede the statements made in the prospectus do not state that the statements in the prospectus are wrong and should be disregarded;

(ii)                the prospectus is still publicly available;

(iii)               the traffic forecast in the prospectus dated 8 October 1997 is affected by errors similar in nature and form to the original prospectus.

8                     By letter dated 13 April 2000, the applicant gave the respondent notice of its intention to amend its claim, or alternatively to issue fresh proceedings, alleging that the traffic forecasts contained in the second prospectus were misleading and deceptive.

9                     I have before me an Amended Notice of Motion which appears to have been filed on 17 March 1998 and a Further Amended Notice of Motion filed on 22 June 1998.  In substance, the relief which is sought is that:

-                     the proceedings be dismissed or permanently stayed under Order 20 rule 2;

-                     in the alternative the applicant provide security for costs for the respondent’s costs in these proceedings in an amount of $138,850.43 or such other amount as the Court thinks fit;

-                     all steps in the proceedings be stayed until such security is given.

Summary dismissal

10                  On the hearing of the application documents were placed before me which are later in time than the first prospectus and which contain traffic forecasts different from the forecasts made in the first prospectus.  Six company announcements made by the respondent to the Australian Stock Exchange in the period commencing 20 December 1999 and ending on 5 April 2000 were also placed before me.  Those announcements reveal the total number of toll paying vehicles using the Eastern Distributor at particular points in time.  In none of these documents is any reference made to the statement in the first prospectus, nor is there any disclosure that the statement in the first prospectus was wrong, or not soundly based.

11                  For the purpose of the application for summary dismissal, it is assumed that the applicant will establish the case which it has pleaded, and it is assumed that the Court has power to make the order and declaration sought in the amended application.  However, it is the respondent’s contention, that in the exercise of its discretion, the Court would not do either of those things.  In Re Truth About Motorways at [130] Kirby J adverted to what his Honour described as “obvious defects” in the form of order and declaration sought.  This observation was not taken up in the submissions advanced by the respondent in support of the motion for summary judgment, which did not depend upon the form of the order or the form of the declaration sought.

12                  This is not a case in which the passage of time has deprived the issues in controversy between the parties of any real significance, in the sense that the applicant continues to maintain, and the respondent continues to deny, that the statement in the first prospectus was made in contravention of Part V of the Act.  However, the passage of time, and the other publications made during that time are relied upon as demonstrating that the claims for relief cannot possibly succeed.

13                  If contravention of Part V is assumed, whether relief should be granted in the form of an order for corrective advertising, or in the form of a declaration as to past contravention of the Act, involves discretionary considerations, although it may be, in the case of a declaration, that it cannot be made if it will produce no foreseeable consequence for the parties: see Re Truth in Motorways at [52] per Gaudron J.

14                  The time for the exercise of that discretion is at the trial, in the light of findings made upon the evidence that is adduced.  The issue under Order 20 rule 2 is not how I would exercise the discretion to grant or withhold relief on such materials as are before me, which cannot be assumed to be the same as the evidence at the trial.  Rather, the issue is whether the claims for relief are clearly untenable and cannot possibly succeed, no matter what evidence is adduced at the trial, within the confines of the case as pleaded.

15                  In Orison Pty Limited v Strategic Minerals Corporation NL (1988) 81 ALR 183 at 189 French J said:

“There is ... much force in the argument that the Court ought not dispose summarily of a proceeding on considerations which are in essence discretionary.  Where, however, a Court, acting on the assumption that all facts alleged by the applicant are found, can see no proper basis upon which it would exercise its discretion in favour of the applicant to grant the relief sought, it would, in my opinion, be an abuse of process to allow the hearing to proceed.”

In that case a mandatory order was sought requiring a meeting of shareholders of the company when the holding of such a meeting could serve no useful purpose.  The futility in making an order of the kind sought was so patent that the continuation of the proceedings was held to be an abuse of the process of the Court.

16                  This is not the first occasion on which summary disposal of the proceedings has been sought.  On 13 February 1998 it was sought to strike out the Statement of Claim on the ground that it was inconceivable that a court would make the order for corrective advertising sought by the applicant.  Foster J came to the conclusion, “with some hesitation and misgiving”, that he would not be justified in striking out the version of the statement of claim which was before his Honour at that stage of the proceedings.  That decision does not dictate the outcome of the present application, but it forms part of the general history of the proceedings which may be relevant to the exercise of the discretion to grant or refuse summary judgment.

17                  The claim for corrective advertising is made under the general injunction power under s 80(1) of the Act.  A specific power to order corrective advertising under s 80A of the Act can only be invoked by the Minister or the Australian Competition & Consumer Commission (“ACCC”).  However, the existence of the specific power does not detract from the general power: Janssen Pharmaceutical Pty Limited v Pfizer Pty Limited (1985) 6 IPR 227: Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114, 133: Re Truth About Motorways at [51] per Gaudron J.

18                  It is well established that the purpose of corrective advertising is not to punish, but to protect the public interest: Australian Competition & Consumer Commission v On Clinic Australia Pty Limited (1996) ATPR 41-517 at p 42,459: Australian Competition & Consumer Commission v Real Estate Institute (supra) p 133.

19                  In determining whether or not to order corrective advertising the Court would consider whether there could reasonably be any current misapprehension as a result of the impugned publication and whether there would be any utility in ordering corrective advertising, having regard to the time which has elapsed since the publication, and the likelihood that the recipients had already acted on the faith of the publication: see HCF Australia Limited v Switzerland Australia Health Fund Pty Limited (1988) ATPR 40–846 at p 49,117.  Corrective advertising must not, itself, create confusion: Annand & Thompson Pty Limited v Trade Practices Commission (1979) ATPR 40–116 at p 18,273.

20                  There is, however, no principle that any particular period is appropriate as a point beyond which corrective advertising is not warranted.  Nor is it the case that corrective advertising is necessarily inappropriate merely because those affected by the misleading and deceptive conduct have already changed their position in reliance upon it.  Nor can it be said that the subsequent traffic forecasts, or the publication of figures as to actual traffic volumes, necessarily disentitle the applicant from obtaining an order for corrective advertising.  They may be factors to be taken into account, but until all material factors are known, their weight cannot be assessed.  For example, it is not known whether the applicant would rely upon evidence of actual deception from the making of the statement in the first prospectus, nor is it possible to assess at this point in time, the significance of any such evidence in terms of the relief sought.

21                  So far as the claim for a declaration is concerned, there are some statements in the cases to the effect that the public interest character of litigation involving alleged contraventions of Part V of the Act, is a factor which may be taken into account in the exercise of the discretion to make a declaration that conduct in which a respondent was involved in the past contravened a provision of the Act: see Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89, 100; Australian Competition & Consumer Commission v The IBM Group Pty Limited (in liquidation) (1999) ATPR 41-688.  Whether, to adopt the words of Gaudron J in Re Truth About Motorways at [52], a bare declaration that the statement in the first prospectus contravened Part V of the Act will serve to redress some or all of the harm brought about by that contravention, is not a matter capable of satisfactory determination on a summary judgment application when the issue of contravention is assumed, and when there has been no investigation of whether any harm was sustained by anybody by reason of the contravention, assuming that it is ultimately proven.

22                  The applicant may face formidable obstacles in obtaining the relief which it claims.  However, the existence of those obstacles provides an insufficient basis for a summary dismissal of the proceedings.  The history of this litigation provides some support for the view that it is not appropriately disposed of summarily.  Foster J declined to take that course on 13 February 1998, the proceeding has been pending in this Court for three years, and has already been to the High Court on the issue of the validity of ss 80 and 163A of the Act.

23                  The application for summary judgment is refused.

Security for costs

24                  The respondent seeks security for costs in reliance on s 1335 of the Corporations Law and/or s 56 of the Federal Court of Australia Act 1976 (Cth).  It does so on the assumption that the applicant has an arguable case.

25                  Section 1335 provides that where a corporation is a plaintiff in a legal proceeding, the Court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.  Section 56 is a broad discretionary power to order an applicant in a proceeding in the Court to give security for the payment of costs that may be awarded against that applicant.

26                  Counsel for the applicant, Mr Glissan QC, did not take any point as to the applicability of s 1335 because he accepted, correctly, that impecuniosity of the applicant would in any event enliven the power of the Court to make an order for security for costs pursuant to s 56 of the Federal Court of Australia Act.  However, in the light of Re Wakim; Ex parte McNally (1999) 163 ALR 270, it seems that the true source of the authority for the Court to deal with this aspect of the respondent’s motion is s 56 of the Federal Court of Australia Act: Australian Solar Mesh Sales Pty Limited v Spruson & Ferguson, Patent & Trade Mark Attorneys [1999] FCA 1730 par 9-10 per Sackville J.

27                  The request for a security was made timeously, on 17 December 1997, and it was not suggested that any disentitling delay had occurred in connection with the application.

28                  The applicant has no assets, other than its subscribed capital of $3, and has no business other than the prosecution of these proceedings.  The applicant was incorporated on 19 September 1997, and I infer that the applicant was either formed, or acquired by its present controllers, for the purpose of conducting this litigation.  The applicant would be unable to satisfy any order for costs made against it in these proceedings.

29                  The evidence establishes that all three members of the applicant had some assets at the time the motion for security for costs was filed.  Mr Richardson had, and still has, a one-fifth share in a property in the Bega Valley.  Mr Gaffney and Ms Zeibots each had interests in real estate which each disposed of in August and October 1998 respectively in favour of the other joint tenant with whom the interest was held for nil or nominal consideration.  No evidence was placed before me by or on behalf of the shareholders in the applicant as to their financial position, and the only information which I had in this respect was the real property searches tendered by the respondent.  The respondent also tendered a letter from the applicant’s solicitors which contained the following “concessions”:

-                     6          none of the directors would derive any personal advantage as a result of a successful outcome for the applicant in this litigation;

-                     7          the applicant’s legal representatives (solicitor and counsel) are assisting in this matter on a contingency basis, in relation to their legal costs.

-                     8          If an order is made for security of costs, it would prevent current litigation from proceeding.

30                  There is no rule that an impecunious or insolvent company will be ordered to provide security for costs.  Whether security will be ordered involves a range of discretionary considerations, many of which point in different directions.  It has been said that the Court attempts to achieve a balance between ensuring that protection is provided to a defendant and, on the other hand, to avoid injustice to an applicant by unnecessary shutting it out or otherwise stultifying it in the conduct of litigation: see Tradestock Pty Limited v TNT (Management) Pty Limited (No 1) (1977) 30 FLR 343 at 347-348.  The “injustice” lies in preventing the prosecution of a claim in the outcome of which the applicant has an interest.  Factors which are relevant to the exercise of the discretion include:

-                     the extent to which it is reasonable to expect creditors or shareholders to make funds available to satisfy any order for security which is made;

-                     the fact that the party seeks to enforce obligations in the nature of public standards of conduct which it is in the public interest to maintain.

Halsbury’s Laws of Australia (325-9725)

31                  The principal grounds on which the giving of security is resisted is that neither the applicant nor its officers or shareholders will derive any financial benefit from the litigation which has been instituted to uphold the norms of commercial behaviour established by the Act.

32                  It is clear that the applicant has no interest in the proceedings and will not derive any benefit from a successful outcome.  In Re Truth About Motorways at [17] Gleeson CJ and McHugh J said that an application for injunctive relief under s 80 is, in its nature, one for the protection of the public interest.  The same was said of s 163A.  But, at [165], Kirby J recognised that it might nonetheless be appropriate for security for costs to be awarded in such proceedings.

33                  For the purposes of this application it is assumed that the applicant’s case is an arguable one.  The making of an order for security may well have the effect of preventing the continued prosecution of these proceedings.  The respondents submitted that this would be the effect of making an order, and whilst there are some deficiencies in the evidence in this respect, I think I should proceed on the basis that the probable effect of an order for the provision of substantial security is as the respondent contends.

34                  However, no private right or special interest of the applicant is involved in the proceedings.  If the statement in the first prospectus was false or without adequate foundation, then those who may have been detrimentally affected thereby are persons who took up units in the trust in reliance on the statement.  The applicant is not a member of that class, nor does it represent it.

35                  In the exercise of the discretion whether or not to order the provision of security, some weight is to be given to the legislative desire to provide an effective mechanism whereby the question of whether conduct contravenes Part V of the Act can be agitated before a court: Equity Access Limited v Westpac Banking Corporation (1989) ATPR 40-972 at p 50,637.  The public interest, however, is simply one of many factors to be weighed in the balance.  The legislative context is different from that which was the subject of consideration by Branson J in Friends of Hinchinbrook Society Inc v Minister for Environment (No 1) (1996) 69 FCR 1, 21-23, where the legislative scheme was such that legitimate organisations concerned with world heritage properties should be able to agitate issues arising under the World Heritage Properties Conservation Act 1983 (Cth), and where the defendant in the proceedings was the Minister charged with the administration of that Act.

36                  There is some evidence (Exhibit B) that the applicant has been funded by donations “to the anti-motorway movement”.  The applicant was established for the purpose of conducting these proceedings with a view, as I would infer, of shielding those who stand behind it from the risk of exposure to a costs order: see Bell Wholesale Co Limited v Gates Export Corporation (1984) 2 FCR 1, at p 4; Tradestock at 351.  As earlier indicated, the three shareholders in the applicant had interests in real property at the time when the application for security for costs was made, and the fact that two of those persons subsequently disposed of their interests for nominal consideration is beside the point.

37                  In my view, the fact that no private right or special interest of the applicant is involved in these proceedings is a factor which weighs in favour of making an order for security, rather than against it.  The applicant is free to assert a claim in what it perceives to be the public interest even though it has no interest in the outcome, and those whose interests may be affected by the conduct in question have not sought to challenge it.  But if the applicant is ultimately refused relief in those proceedings, all other things being equal, a costs order is likely to be made against it: see Qantas Airways Limited v Cameron (1997) 148 ALR 378, 380: South-West Forest Defence Foundation Inc v Department of Conservation & Land Management [1998] HCA 35; Botany Bay City Council v Minister of State for Transport & Regional Development [1999] FCA 65.  If the applicant is ultimately refused relief, the respondent should have the ability to recoup the costs needlessly expended by it.  Unless an order for security is made, there is no possibility that the respondent would be able to recoup from the applicant the costs involved in mounting a successful defence.  The fact that the trusts have financial substance, whilst relevant, is not sufficient to displace the respondent’s entitlement to security.

38                  In M A Productions Pty Limited v Austarama Television Pty Limited (1982) 1 ACLC 404 at 408 it was said that if creditors who had the only interest in the litigation wished to have the benefit of the litigation, then they should be required to undertake some of its risks.  If those who control the applicant wish to have the benefit of litigating when no private right or special interest of the applicant is at stake in the proceedings and when the applicant is impecunious, then it is appropriate that security for the respondent’s costs be provided.

39                  At the request of the parties, consideration of the form and amount of security was deferred.  I propose to order that the applicant provide security for the respondent’s costs of these proceedings.  The form and amount of such security is to be the subject of later determination.

Associate:

Dated:              10 July 2000