FEDERAL COURT OF AUSTRALIA

Kirela Pty Limited v Westfield Holdings Limited [2002] FCA 1223

PRACTICE AND PROCEDURE – pleadings - motion to strike out amended statement of claim – claim under Trade Practices Act 1974 (Cth) ss 52, 82 - whether failure to plead a casual connection between the respondents’ allegedly wrongful conduct and the damage allegedly suffered by the applicants – estoppel by convention – alleged covert and overt campaigns by respondent to influence re-zoning of applicants’ land

Federal Court Rules O16 r16

Trade Practices Act 1974 (Cth) ss 52, 82

Marks v GIO Australia Holdings Limited [1998] HCA 69; 196 CLR 494 referred to

Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 referred to

Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd (1998) 157 ALR 135 cited

Gould v Vaggelas (1985) 157 CLR 215 referred to

Midland Counties Dairy Ltd v Midland Dairies Ltd (1948) 65 RPC 435 cited

ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 cited

Legione v Hateley (1983) 152 CLR 406 referred to

Con-Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited (1996) 160 CLR 226 referred to

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

Spencer Bower and Turner: The Law Relating to Estoppel by Representation, 3^rd ed, Butterworths, London, 1977

KIRELA PTY LIMITED (ACN 079 721 127) AND ANOTHER v WESTFIELD HOLDINGS LIMITED (ACN 001 671 496) AND OTHERS

N 1038 of 2001

BRANSON J

3 OCTOBER 2002

SYDNEY

THE COURT ORDERS THAT:

1.                  Paragraph 83 of the amended statement of claim be struck out.

2.                  Leave be granted to the applicants to further amend their statement of claim within twenty‑one days of today’s date.

3.                  Further consideration of the respondents’ respective notices of motion be stood over to a date to be fixed.

4.                  Leave to the respondents to restore the notices of motion, or either of them, on forty‑eight hours’ written notice to the other parties.

REASONS FOR DECISION

INTRODUCTION

1                     In this proceeding the first to seventh respondents have moved pursuant to a notice of motion dated 22 July 2002 for an order that paragraphs 33d, 33i, 78, 79, 80, 82, 83 and 84 of the amended statement of claim be struck out.  The eighth and ninth respondents have moved pursuant to a notice of motion dated 23 July 2002 for identical orders.  In each case reliance is placed on O 11 r 16 of the Federal Court Rules.

2                     Order 11 Rule 16 relevantly provides:

“Where a pleading:

(a)               discloses no reasonable cause of action … ;

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

(c)               is otherwise an abuse of the process of the Court;

the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out.”

3                     I do not consider that it is necessary to set out in any detail the factual background to the proceeding.  In summary the applicants were the owners and developers of land in New South Wales known as the “Old Arnotts Biscuit Factory Site”(“the Site”).  The first to seventh respondents (“the Westfield Respondents”) are either members of the “Westfield Group” of companies or employees of one of those companies.  The ninth respondent is a director of the eighth respondent, which carries on the business of a public relations consultancy and political lobbyist.  Together I will describe them as the “Hooper Respondents”.

4                     The amended statement of claim (“the statement of claim”) contains, amongst other things, the following allegations:

·               that in or about 1993 the Westfield Group retained the Hooper Respondents to help protect the interests of the Westfield Group by lobbying local communities and government in favour of its proposals for the development of shopping centres and against competing developments;

·               that in the performance of their retainer the Hooper Respondents worked in opposition to the applicants’ proposal for the development of the Site by implementing a covert campaign (“the covert campaign”) of a misleading and deceptive character;

·               that the Westfield Group, in conjunction with the covert campaign, conducted an overt campaign to oppose the applicants’ proposal for the development of the Site;

·               that in December 1999 the New South Wales Minister for Urban Affairs and Planning (“the Minister”) made the “Concord Local Environment Plan No. 100” by which the Site was re‑zoned thus causing the applicants to lose the benefit of an earlier local government resolution to recommend a re‑zoning of the Site in a manner more favourable to the applicants; and

·               that had the respondents not, in effect, conducted the covert campaign the Government would have given effect to the earlier local government decision.

Relevant Pleadings

5                     Paragraph 33 of the statement of claim is in the following terms:

“At all material times essential features of the Covert Campaign proposed to be conducted, and in the event conducted, by the Hooper Respondents for and on behalf of the Westfield Group were that:

a.                  Mr Hooper would (as in the event he did) draft and arrange to be printed pamphlets (described variously as ‘newsletters’, ‘brochures’, ‘flyers’ or ‘circulars’) expressing opposition to the Arnotts’ Development by people residing in the area local to the Site.

b.                  Mr Hooper would (as in the event he did) arrange for such pamphlets to be distributed to members of the public residing or working in the area local to the Site.

c.                  Mr Hooper would (as in the event he did) arrange for newspapers circulating in the area local to the Site and surrounding areas to publish to the public reports of opposition to the Arnotts’ Development.

d.                  Mr Hooper would (as in the event he did) arrange for the purported opposition of local residents to be brought to the notice of the respective members of the Parliament of New South Wales for the electorates of Drummoyne and Strathfield as well as Ministers in the New South Wales Government.

e.                  Mr Hooper would (as in the event he did) keep confidential to those engaged in the Arnotts’ Campaign on behalf of the Westfield Group the fact that the Hooper Respondents and people (including Messrs Photios, Pooley and Eldridge) engaged by them in the Campaign were acting on behalf of the Westfield Group.

f.                   Mr Hooper would not (as in the event he did not) disclose to the public that, in opposing the Arnotts’ Development, the Hooper Respondents and those people (including Messrs Photios, Pooley and Eldridge) engaged by them in such opposition were acting on behalf of the Westfield Group.

g.                  Mr Hooper would (as in the event he did) present himself and people engaged by the Hooper Respondents in the Arnotts’ Campaign as people acting only (or, alternatively, principally) on behalf of, or in the interests of, local residents.

h.                  The Westfield Group would (as in the event it did) make representations to the New South Wales Government in opposition to the Arnotts’ Development.

i.                    In making such representations to the New South Wales Government the Westfield Group would (as in the event it did) rely upon the existence, or purported existence, of local opposition to, or an absence of local need for, the Arnotts’ Development.”

6                     Paragraphs 78, 79, 80, 82, 83 and 84 of the statement of claim contain the following allegations:

“78.     At no time before the State Government Decision was made did the Respondents disclose to the public (as was the fact) that the Covert Campaign was conducted by and on behalf of the Westfield Group.

Particulars

a.                  As late as 23 September 1999 or thereabouts when Westfield Holdings, on behalf of the Westfield Group, wrote a letter of that date to Mr Photios the Westfield Group denied any knowledge of or involvement in the work undertaken by Mr Photios in the Covert Campaign.

b.                  By a Media Release entitled ‘Statement to Media In relation to the Sydney Morning Herald Article of 18 December 1999’ issued by Westfield Holdings on behalf of the Westfield Group on or about 20 December 1999 the Westfield Group (in paragraph 1) stated that it would vigorously contest claims made by Mr Photios (in an affidavit sworn by him on 9 December 1999 in preliminary discovery proceedings numbered NG 1036 of 1998) to the effect that the Covert Campaign existed and he worked in the Campaign in the interests of the Westfield Group.

c.                  The State Government Decision was made on or about 21 December 1999 and gazetted on or about 24 December 1999, as alleged in paragraph 25 hereof.

d.                  The first public acknowledgement by or on behalf of the Respondents of the fact that the Hooper Respondents had engaged in conduct on behalf of the Westfield Group without disclosing that the Westfield Group were their principals was made by a media release entitled ‘Background Statement’ issued by Westfield Holdings on behalf of the Westfield Group on or about 3 February 2000.

79.       At all material times before the State Government Decision was made the Respondents represented to the public that the opposition of the Westfield Group to the Arnotts’ Development, and the Group’s representations to Government in opposition to the Development, were confined to open and public activities.

Particulars

            The Applicants repeat the allegations pleaded and particularised in paragraph 78 hereof.

80.       By making representations to government as alleged in paragraph 44 hereof, in the circumstances pleaded in paragraphs 78 and 79 hereof, the Westfield Group (including Westfield Holdings, Westfield Management, The Westfield Trust, Westfield Limited and Westfield Developments) engaged in conduct that was misleading or deceptive or likely to mislead or deceive within the meaning of section 52 of The Trade Practices Act 1974 (Cth) and section 42 of The Fair Trading Act 1987 (NSW).

82.       Had the Respondents not (as alleged in paragraphs 53, 59, 65, 71, 77 and 80 hereof) engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, the NSW Government would have given effect to the Council Decision.

Particulars

a.                  The Applicants rely upon the facts pleaded in sub-paragraphs 83 (a) – 83 (d) as supporting an inference to the effect that the Respondents, by their deliberate conduct and achievement of the object of their conduct, materially affected the decision of the Minister for Urban Affairs & Planning to intervene so as not to give effect to the Council Decision.

b.                  The Applicants reserve a right to give further particulars after discovery.

83.       Further an [sic] alternatively to paragraph 82 hereof, by reason of:-

a.         The fact that representations were made to the public as pleaded:-

(i)            In respect of the First Flyer, in paragraphs 37 (a) – 37 (d), 48 – 50 and 52 hereof;

(ii)          In respect of the First Newsletter, in paragraphs 38 (a) – 38 (d), 54-57 and 58 hereof;

(iii)        In respect of the Second Newsletter, in paragraphs 39 (a) – 39 (d), 60-62 and 64 hereof;

(iv)        In respect of the SIR Flyer, in paragraphs 40 (a) – 40 (d), 66-68 and 70 hereof; and

(v)          In respect of the SIR Media Release, in paragraphs 41, 72-74 and 76 hereof.

b.                  The fact that members of the public were entitled to rely (and did rely) upon those representations as representations of truth;

c.                  The fact that the Applicants, in the absence of public acknowledgment by the Westfield Group of their involvement in the Covert Campaign, were constrained in their endeavours to respond to opposition to the Arnott’s Development and compelled thereby to act upon a conventional assumption that the Westfield Group was not the principal on whose behalf the Covert Campaign was conducted;

d.                  The fact that the Westfield Group made representations to the NSW Government as alleged in paragraph 44 hereof;

e.                  The fact that (as alleged in paragraphs 45-46, 50, 56, 62, 68 and 74 hereof) the Respondents conducted their Campaign against the Arnotts’ Development with an intention of persuading the NSW Government to make a decision such as the State Government Decision; and

f.                   The fact that (as alleged in paragraph 47 hereof and to the detriment of the Applicants) the Respondents achieved the objects of their Campaigns against the Arnotts’ Development upon and by the making of the State Government Decision,

the Respondents are estopped from contending in these proceedings that their conduct (as alleged in paragraphs 53, 59, 65, 71, 77 and 80 hereof) did not materially affect the making of the State Government Decision or otherwise cause loss or damage to the Applicants.

84.       By reason of the facts pleaded in paragraphs 81, 82 and 83 hereof the Applicants suffered loss and damage by reason of the fact that the Respondents (as alleged in paragraphs 53, 59, 65, 71, 77 and 80 hereof) engaged in conduct that was misleading or deceptive or likely to mislead or deceive.

Particulars

a.                  The Applicants lost an opportunity to have their Re-zoning Application approved in accordance with the Council Decision.  Had the Site been re-zoned in accordance with the Council’s recommendation it would have been significantly more valuable than it was upon being re-zoned in accordance with the State Government Decision.  The Applicants lost that difference in value.

b.                  The Applicants incurred costs, and lost opportunities to earn income, by reason of delays in determination of their Re-zoning Application.

c.                  The Applicants incurred costs in endeavouring to respond to the Covert Campaign.”

consideration

7                     The respondents identified the central question for determination on the motions as whether the applicants have adequately pleaded a causal connection between the respondents’ allegedly wrongful conduct and the loss and damage allegedly suffered by the applicants, namely a reduction in the land value of the Site.

8                     The applicants’ claims for relief are primarily based on s 52 and 82 of the Trade Practices Act 1974 (Cth) (“the TPA”).  Section 82(1) of the TPA relevantly provides:

“A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part … V … may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.”

Section 52 is within Part V of the TPA.

9                     The respondents complain, in effect, that the statement of claim relies in a fundamental way on allegations that the respondents did not disclose to the public that the covert campaign was conducted by and on behalf of the Westfield Group but does not contain any allegation as to how the non‑disclosure to the public resulted in the New South Wales Government or the Minister being misled, deceived or otherwise relevantly influenced to alter its or his conduct.

10                  In one sense it may be thought to be self‑evident that in a democratic society a way of influencing the conduct of government or a Minister of the Crown is to influence the views of the electorate.  However, the respondents wish to know by what mechanism the applicants allege that the failure by the respondents to disclose to the public the true nature of the covert campaign relevantly affected the conduct of the New South Wales Government or the Minister.  They draw attention to the statutory framework within which the Minister’s decision was made.  They also draw attention to the plea of a concurrent overt campaign and to the allegation that there were communications between the Westfield Group and representatives of both local government and the New South Wales Government, including the Minister, in the course of, and for the purpose of, both the covert and the overt campaign.

11                  In Marks v GIO Australia Holdings Limited [1998] HCA 69; 196 CLR 494 at [38] McHugh, Hayne and Callinan JJ observed:

“It can be seen … that both ss 82 and 87 require examination of whether a person has suffered (or, in the case of s 87, is likely to suffer) loss or damage ‘by conduct of another person’ that was engaged in the contravention of one of the identified provisions of the Act.  That inquiry is one that seeks to identify a causal connection between the loss or damage that it is alleged has been or is likely to be suffered and the contravening conduct.  But once that causal connection is established, there is nothing in s 82 or s 87 (or elsewhere in the Act) which suggests either that the amount that may be recovered under s 82(1), or that the orders that may be made under s 87, should be limited by drawing some analogy with the law of contract, tort or equitable remedies.” 

12                  The inquiry into the causal connection between the alleged loss and damage and the contravening conduct is central to a claim under s 82 of the TPA.  In Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222 French J said in respect of a claim under s 82:

“Loss or damage as a consequence of the contravention is an element of the cause of action … .

The material facts establishing the necessary causal link should be pleaded.  In cases of contravention of s 52 said to be constituted by misrepresentation this will generally require more than appears in the opening words of par 50 [i.e. of the statement of claim in that case]: ‘ by reason of such conduct … ’.”

See also Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd (1998) 157 ALR 135 at 141 per Drummond J.

13                  This case is not, in my view, comparable to that considered by the High Court in Gould v Vaggelas (1985) 157 CLR 215.  In that case Brennan J at 250-251 observed:

“An inference of inducement may be drawn when a party enters into a contract after a material representation has been made to him, but it is no more than an inference of fact and it is settled law that such an inference may be rebutted by the facts of the case … .  The tribunal of fact may infer that such a material misrepresentation induced the representee to enter into the contract and the fact that there were other inducements to him to do so does not necessarily prelude the drawing of that inference.  The relevant question for the tribunal of fact to answer on all the evidence is whether the misrepresentation alone, or with or notwithstanding other things that accompanied it, was a real inducement, or one of the real inducements to the plaintiff to do whatever caused his loss … .” (citations omitted)

See also per Wilson J at 236 and 238-239.

14                  The statement of claim in this case does not allege that the covert campaign, or any part of it, misled or deceived the Minister.  It does not allege that the covert campaign, or any part of it, was a real inducement, or one of the real inducements, to the Minister to cause the Site to be re‑zoned.  In any event, the passages from Gould v Vaggelas upon which the applicants placed reliance, and which are referred to above, are concerned with inferences open to be drawn from evidence and the weight to be attributed to evidence; they are not concerned with issues of pleading.

15                  I accept the submission of the respondents that the statement of claim is defective in that it fails to plead any connection between the conduct of the covert campaign, which allegedly misled and deceived the public but is not pleaded to have misled or deceived the Minister, and the conduct of the Minister which led to the alleged loss and damage.

16                  I also accept the submission of the respondents that the statement of claim fails to plead any connection between the conduct alleged in subparagraphs 33d and 33i (see [5] above) and the decision of the Minister which led to the alleged loss and damage.

17                  Paragraph 83 (see [6] above) is a valiant attempt to overcome the difficulties which face the applicants in identifying and articulating in the form of a pleading the means by which a complex campaign, with both overt and covert aspects, influenced the conduct of the Minister.  It perhaps reflects the approach not uncommonly taken in passing‑off cases where, if evidence of fraud is available, the court “will not be astute to find the defendant has failed in his nefarious design” (see Midland Counties Dairy Ltd v Midland Dairies Ltd (1948) 65 RPC 435 cited by Lockhart J in ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 at 345).  However, the Court is not presently concerned with inferences that might, at the end of the day, be open to be drawn from evidence.

18                  Paragraph 83 pleads an estoppel, namely that the respondents are estopped from contending that their conduct did not materially affect the making by the Minister of the Concord Local Environment Plan No 100.  The applicants characterise the estoppel pleaded as an estoppel by convention.  They have indicated that they place no reliance on the final phrase of paragraph 83, namely “or otherwise cause loss or damage to the Applicants”.

19                  In Legione v Hateley (1983) 152 CLR 406 at 430-431 Mason and Deane JJ said:

“It is customary to recognize three general classes of estoppel, namely, of record, of writing and in pais (see, e.g., Coke's Littleton, 352a). Estoppel in pais includes both the common law estoppel which precludes a person from denying an assumption which formed the conventional basis of a relationship between himself and another or which he has adopted against another by the assertion of a right based on it and estoppel by representation which was of later development with origins in Chancery. It is commonly regarded as also including the overlapping equitable doctrines of proprietary estoppel and estoppel by acquiescence or encouragement.

Notwithstanding their diverse origins, one may discern a common principle underlying the established emanations of estoppel in pais.  The classic statement of that principle is that of Dixon J in Thompson v Palmer [(1933) 49 CLR 507 at 547]:

‘The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct … ; or because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do so … ; or because he directly made representations upon which the other party founded the assumption. But, in each case, he is not bound to adhere to the assumption unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted.’” (citations omitted)

20                  The learned author of Spencer Bower and Turner: The Law Relating to Estoppel by Representation, 3^rd ed, Butterworths, London, 1977 at 157 describes estoppel by convention as being closely related to estoppel by representation.  He describes estoppel by convention in the following way:

“This form of estoppel is founded, not on a representation of fact made by a representor and believed by a representee, but on an agreed statement of facts the truth of which has been assumed, by the convention of the parties, as the basis of a transaction that they are about to enter.  When the parties have acted in their transaction upon the agreed assumption that a given state of facts is to be accepted between them as true, then as regards that transaction each will be estopped against the other from questioning the truth of the statement of facts so assumed.”

21                  In Con-Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited (1996) 160 CLR 226 at 244 the High Court observed:

“Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying.”

22                  Having regard to the above authorities, it is plain that any attempt to support paragraph 83 of the statement of claim as a plea of an estoppel by convention faces grave difficulties.  There was no relationship of any relevant kind between the applicants and the respondents; no contractual or other mutual relationship exists or existed between them.  For this reason, no statement of fact, the truth of which has been assumed by the convention of the parties, can be said to have formed the basis of any transaction between them.  Indeed, paragraph 83 has been carefully drawn, and as I am prepared to assume deliberately drawn, to avoid any reference to a belief in the applicants as to the truth of the representations pleaded to have been made to the public.

23                  The applicants contended that, having regard to the principles enunciated in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, it would be inappropriate to shut the applicants out from advancing at trial the estoppel pleaded in paragraph 83.  However, the applicants did not put forward any positive contentions in support of paragraph 83.  In my view, the purported estoppel pleaded by paragraph 83 is “so obviously untenable that it cannot possibly succeed” (General Steel Industries Inc v Commissioner for Railways (NSW) per Barwick CJ at 129).  There will be an order that the paragraph be struck out.

24                  I do not propose at this stage to make an order striking out any other paragraph of the statement of claim.  I am of the view, for the reasons set out above, that the statement of claim is deficient in that it:

(a)                    does not adequately plead a causal connection between the respondents’ allegedly wrongful conduct and the loss and damage suffered by the applicants; and

(b)                    does not plead any connection between the conduct identified in subparagraphs 33d and 33i and the decision of the Minister upon which the applicants’ claim for loss and damage relies.

However, these deficiencies may be able to be remedied by the pleading of additional material facts.

25                  Senior counsel for the applicants indicated that, should the Court conclude that the statement of claim is deficient, the applicants sought the opportunity to file a further amended statement of claim that remedied the deficiency.  I consider that the applicants should be given that opportunity.  I do not accept the submission advanced on behalf of the Hooper respondents that the applicants should be denied leave to replead.  The time might come when I am satisfied that it is either inappropriate to grant the applicants leave to further amend their statement of claim or that no utility would attend the granting of such leave.  That time has not yet arrived.

26                  The appropriate course, in my view, is to grant leave to the applicant to further amend their statement of claim and to stand over further consideration of the respondents’ respective notices of motion until the time within which the applicants are at liberty to amend has

expired.  The respondents will have leave to restore the notices of motion for further consideration, including consideration as to costs, on forty‑eight hours’ notice.

Associate:

Dated:              3 October 2002