FEDERAL COURT OF AUSTRALIA

Grant v Eddington [2000] FCA 1550

PRACTICE AND PROCEDURE - Application to strike out the statement of claim - consideration of the applicant using as a direct template pleadings against him in another matter.

Prudential Assurance Co Ltd v Newman Industries & Ors (No 2) [1982] 1 Ch 204 (CA) Cited

Gould v Vaggelas (1985) 157 CLR 215 Cited

Re Wakim ex parte McNally (1999) 198 CLR 511 Cited

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

STEPHEN FREDERICK GRANT v BARRY EDDINGTON

Q287 OF 1999

COOPER J

BRISBANE

1 NOVEMBER 2000

THE COURT ORDERS THAT:

1.         The statement of claim be struck out.

2.         The applicant, Stephen Frederick Grant, pay the respondent Barry Eddington, his costs of and incidental to the notice of motion to strike out the statement of claim, including reserved costs, if any, to be taxed if not agreed.

3.         The proceedings be listed before a Deputy District Registrar for directions as to the future conduct or disposition of the proceedings.

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

REASONS FOR JUDGMENT

background

1                     In proceedings S91 of 1999, the Australian Competition and Consumer Commission (“the ACCC”) commenced proceedings against Stephen Frederick Grant for relief under the Trade Practices Act 1974 (Cth) (“the Act”). 

2                     The ACCC alleged that Mr Grant aided or abetted, or was directly or indirectly knowingly concerned in, or a party to, contraventions of ss 52 and 59(2) of the Act by The Furniture Wizard Pty Ltd (“the company”).  The ACCC alleged that Mr Grant was at all material times the managing director and sole shareholder of the company.  It alleged that Mr Grant instructed certain named employees of the company, including Mr Barry Eddington, as to representations to be made to prospective franchisees of the company.  Those representations, it is alleged, were false and misleading in contravention of ss 52 and 59(2) of the Act.

3                     On 1 December 1999, Mr Grant commenced these proceedings against Mr Eddington as respondent.

present application

4                     Mr Eddington has sought to have the statement of claim filed by Mr Grant on 1 December 1999 struck out on the grounds that :

(a)        it discloses no reasonable cause of action appropriate to the nature of the pleading;

(b)        it has a tendency to cause prejudice, embarrassment or delay in the proceeding;

(c)        it comprises a proceeding that is frivolous or vexatious;  or

(d)        the proceeding is otherwise an abuse of the process of the Court.

conclusion on the applICATION

5                     A comparison of the pleadings in the ACCC proceedings with the pleadings in the within action demonstrate that the ACCC pleadings have been used as a template for the application and statement of claim in these proceedings.  Mr Grant has deleted such of the allegations in the ACCC pleadings as involves allegations of direct conduct on his part or on the part of another employee.  Where the ACCC pleading alleges conduct against the company, Mr Grant and Mr Eddington, references to the company and Mr Grant are removed.  Thus paragraphs 2 to 20 inclusive of the ACCC statement of claim are identical with paragraphs 12 to 19 inclusive of the present statement of claim, except that paragraph 4 of Mr Grant’s statement of claim reflects Mr Eddington’s position with the company rather than Mr Grant’s.  Paragraphs 28 to 43 inclusive of the ACCC statement of claim which deal with representations allegedly made to a Mr and Mrs Kingham are deleted, as are paragraphs 59 to 75 which deal with representations allegedly made to a Mr Cepon.

6                     The present statement of claim includes a new allegation in paragraph 42 in the following terms :

“42.     That the Respondent obtained from the Applicant money for commissions and bonuses for the sale of franchises during the period July 1997 to September 1998 totaling [sic] $96,500.00 (ninety six thousand five hundred dollars).  That the respondent obtained same money under false pretenses [sic] and by supplying misleading information.  The Applicants company and reputation was damaged in the process.”

7                     The ACCC statement of claim alleged in paragraphs 76 to 84 inclusive :

“76.     The respondent has engaged in similar conduct with other purchasers of a Furniture Wizard Pty Ltd franchise amounting to breaches of sections 52 and 59 of the Act.

77.       The respondent has engaged and is continuing to engage in similar conduct in respect of purchases or prospective purchases of franchises from Surface Master Pty Ltd which conduct amounts to breaches of sections 52 and 59 of the Act.

78.       The respondent has engaged and is continuing to engage in similar conduct in respect of purchasers or prospective purchasers of a franchise from Furniture Master Pty Ltd contrary to sections 52 and 59 of the Act.

79.       Unless restrained, the respondent will continue to engage in conduct that amounts to a breach of sections 52 and 59 of the Act.

80.       Further and better particulars of the matters referred to in paragraphs 76 - 78 (above) will be supplied prior to trial.

CONTRAVENTIONS

81.       By reason of the matters referred to in paragraphs 27, 43, 58 and 75 above the Company, in trade or commerce:

(a)       engaged in conduct that was, in all the circumstances, misleading or deceptive, or likely to mislead or deceive, contrary to the provisions of section 52 of the Act;

(b)       invited, by advertisement and representations, members of the public to engage or participate in the business of mobile furniture repair and restoration and laminex repair business for the Company and Respondent, requiring performance by franchisees of work, and, with respect to the profitability of such business and the work required to perform such business, made representations that were false or misleading in a material particular, contrary to the provisions of sub-section 59(2) of the Act.

82.       On each occasion that the Company contravened section 52 and sub-section 59(2) of the Act, the Respondent :-

(a)       aided, abetted, counselled or procured the Company to contravene the Act;

(b)       further or alternatively, was knowingly concerned in or a party to the Company so contravening the Act.

Particulars

The Applicant relies on the matters pleaded in paragraphs 3 to 80 hereof.

83.       At all material times:

(i)        the conduct of the Respondent as to the matters referred to above in paragraphs 3 to 80 above, was the conduct of the Company, and the Applicant relies upon the provisions of Section 84 of the Act;

(ii)       the state of mind of the Respondent as to matters referred to in paragraphs 3 to 80 above was the state of mind of the Company and the Applicant relies upon the provisions of Section 84 of the Act.

84.       The Applicant seeks the Orders set out in the Application in these proceedings.”

8                     This is to be contrasted with paragraphs 43 to 48 inclusive of the present statement of claim :

“43.     The Respondent has engaged in similar conduct with other purchasers of a Furniture Wizard Pty Ltd franchise amounting to breaches of sections 52 - 59 of the Act.

44.       The Respondent has engaged and is continuing to engage in conduct that is detrimental to the applicants standing in the business community, his business dealings with his general state of affairs with the intention of causing loss of standing in the business community and loss of income of the applicant.

45.       The Respondent has engaged and is continuing to engage in similar conduct against the Applicant with the view of damaging the applicants standing in the business community and his income earning potential.

46.       Unless restrained, the Respondent will continue to engage this conduct.

47.       That the Respondent be restrained from disposing of money obtained from the Applicant for the sale of franchises in the form of commissions and bonuses during the period July 1997 to September 1998 totaling [sic] $96,500.00 (ninety six thousand five hundred dollars).

48.       Further and better particulars of the matters referred to in paragraphs (above) will be supplied prior to trial.”

9                     Paragraphs 49 to 52 inclusive of Mr Grant’s statement of claim are identical with paragraphs 81 to 84 inclusive in the ACCC statement of claim, save for paragraph 51(ii) which shows the numeral “37” in lieu of the numeral “80”

10                  The claims for relief in the ACCC application and Mr Grant’s application are identical, save for paragraph 4 and for the insertion of two additional orders sought.  In the ACCC application the ACCC seeks orders against Mr Grant that he personally pay money to certain named persons who allegedly acquired franchises in reliance upon the pleaded representations.

11                  In these proceedings Mr Grant pleads the following :

“4.       An order that the Respondent refund in full all monies paid to him by The Furniture Wizard Pty Ltd (in liquidation) for commissions and bonuses on sales of the franchises to Brian and Patricia Wood and Barry and Roslyn McIntyre and for all other commissions and bonuses for sales of franchises for the period July 1997 to September 1998 amounting to $96,500.00 (ninety six thousand four [sic] hundred dollars), plus interest earned on money received by the Respondent for the sale of the franchises.”

12                  The additional orders sought are contained in paragraphs 6 and 7 of the present application.  They plead :

“6.       An order that the Respondent be restrained from engaging in conduct that is detrimental to the applicants standing in the business community, his business dealings and his general state of affairs with the intention of causing loss of standing in the business community and loss of income of the applicant.

7.         An order that the Respondent be restrained from continuing to engage in similar conduct against the Applicant with the view of damaging the applicants standing in the business community and his income earning potential.

Unless restrained, the Respondent will continue to engage in this conduct.”

13                  It is clear from the affidavit of Mr Grant filed in support of his statement of claim that the $96,500 allegedly paid to Mr Eddington was paid by the company.  The company is now in liquidation.  Any right to recover that money on the basis that the company was induced to pay it as a result of misleading and deceptive conduct on the part of Mr Eddington is that of the company and not Mr Grant.  Mr Grant does not show any loss of his own by merely asserting that the company of which he is a shareholder has suffered loss:  Prudential Assurance Co Ltd v Newman Industries & Ors (No 2) [1982] 1 Ch 204 (CA) at 222 - 223.  Mr Grant does not, in the pleading or in the supporting affidavit, show circumstances of loss distinct from the losses of the company flowing from the alleged misrepresentations.  He does not thereby demonstrate a cause of action of the type recognised in Gould v Vaggelas (1985) 157 CLR 215.

14                  In his affidavit in support, Mr Grant says :

“24.                 These rumours have been and are continuing to be circulated by the Respondent, and an ex franchisee Bob Lumby and the plaintiffs in my partnership dispute in NSW Supreme Court.  This campaign to discredit me is continuing to this day and has been extended to my workplace, which has resulted in me being given notice.  I am now unemployed and in debt because of the Respondents continuing vendetta against me.

24.[sic]           Unless the Respondent is restrained from making false and misleading statements against myself and also my family I will be disadvantaged and forced into bankruptcy because I will not be able to get a job anywhere so that I can pay off the debt I am currently in through the liquidation of Furniture Wizard.  I also request the Respondent return commissions and bonuses of $96,000.00 (ninety six thousand dollars) paid to him for the sale of franchises.  He earned this income while engaging in false and misleading conduct which resulted in the company and myself being in contravention of Section 52 of the Trade Practices Act.”

15                  A perusal of so much of the affidavit as is admissible shows that Mr Grant alleges that Mr Eddington was responsible for any misleading representations made, and that he has set out to harm Mr Grant in the way of his business and to defame him.

16                  Paragraphs 44, 45 and 46 of the present statement of claim are additional to the earlier matters pleaded in the statement of claim.  In the form in which they appear they are embarrassing in a legal sense, and attempt to raise causes of action in defamation and deceit which are not within the jurisdiction of this Court, unless coming within the pendant jurisdiction of the Court:  Re Wakim ex parte McNally (1999) 198 CLR 511.  As presently pleaded, it is not at all certain that the matters of which Mr Grant complains arise out of the same matter that gives rise to the relief sought under the Act.  Indeed, much of the conduct complained of relates to conduct of Mr Eddington since he ceased employment with the company and after it was placed in liquidation.

17                  Although it may be that the matters pleaded in paragraphs 1 to 19, 24, 25, 27 to 37, 38 and 39 may sustain an argument that he is entitled to contribution or an indemnity for any sum he is ordered to pay in the ACCC proceedings, a matter upon which I express no view, that is not the reason why these proceedings were brought.  It is tolerably clear that Mr Grant wants to recover from Mr Eddington for his losses consequent upon the collapse of the company.  He also seeks to prevent the continuation of what he alleges are defamatory statements being made by Mr Eddington which are injuring him in his reputation and in his ability to earn an income.

18                  There is no real question to be determined in these proceedings whether or not Mr Eddington was a party to conduct by the company in contravention of ss 52 and 59(2) of the Act and whether the relief sought in paragraphs 1, 2 and 3 of the application ought to be made.  The proceedings are therefore to that extent frivolous and vexatious and amount to an abuse of process.

19                  So far as the matters pleaded in paragraphs 42 and 47 of the statement of claim and paragraph 4 of the application are concerned, they give no cause of action to Mr Grant and cannot succeed.  Finally, the matters pleaded in paragraphs 44, 45 and 46 of the statement of claim and paragraphs 6 and 7 of the application are not shown to be matters justiciable within this Court.  Nor do they show in any event the elements of common law actions in deceit or defamation.  The circumstances necessary to justify the striking out of the statement of claim have been made out:  General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 - 130.

20                  Costs should follow the event.

Associate:

Dated:              1 November 2000