FEDERAL COURT OF AUSTRALIA

Australian Automotive Repairers’ Association (Political Action

Committee) Inc v NRMA Insurance Limited [2002] FCA 1568

PRACTICE AND PROCEDURE – pleading – motion for summary dismissal of proceeding under O 20 r 2, or alternatively for striking out of statement of claim under O 11 r 16, of Federal Court Rules – cause of action of exclusive dealing under subss 47(1) and (7) of Trade Practices Act 1974 (Cth) – whether statement of claim pleaded all “material facts” – distinctions between material facts and evidence and between material facts and particulars.

Trade Practices Act 1974 (Cth) subs 47(7)

Federal Court Rules O 4 r 6;  O 11 r 2;  O 11 r 6;  O 20 r 2

Bruce v Oldhams Press Ltd [1936] 1 KB 697 cited

Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 cited

Rubenstein v Truth and Sportsman Ltd [1960] VR 473 cited

H 1976 Nominees Pty Ltd v Galli (1979) 40 FLR 242 cited

SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) 48 FLR

445 cited

Stationers Supply Pty Ltd v Victorian Authorised Newsagents Association Ltd (1993) 44 FCR 35 cited

Beach Petroleum NL v Johnson (1991) 105 ALR 456 cited

Trade Practices Commission v Australian Iron & Steel Pty Ltd (1990) 22 FCR 305

referred to

AUSTRALIAN AUTOMOTIVE REPAIRERS’ ASSOCIATION (POLITICAL ACTION COMMITTEE) INC v NRMA INSURANCE LIMITED (ACN 000 016 722)

N 953 OF 2002

LINDGREN J

20 DECEMBER 2002

SYDNEY

THE COURT ORDERS THAT:

1.         The statement of claim filed on 16 September 2002 be struck out.

2.         The applicant file and serve any amended statement of claim by 31 January 2003.

3.         The applicant pay two thirds of the respondent’s costs relating to pars 3 and 4 of the motion brought by the respondent by notice of motion filed on 10 October 2002.

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

REASONS FOR JUDGMENT

introduction

1                     By its notice of motion filed on 10 October 2002, the respondent (“NRMA”) seeks, relevantly, an order that the proceeding be dismissed pursuant to O 20 r 2 of the Federal Court Rules (“the Rules”), or, in the alternative, an order that the statement of claim be struck out pursuant to O 11 r 16 of the Rules. As well, NRMA seeks costs.  (By its notice of motion, NRMA also sought security for costs but that issue was resolved by consent when the proceeding was before me on 4 December 2002.)

2                     The applicant (“AR”) claims that NRMA has engaged, and is proposing to engage, in conduct that constitutes and will constitute a contravention of subs 47(1) of the Trade Practices Act 1974 (Cth) (“the TP Act”).  Subsection 47(1) provides that, subject to s 47, a corporation must not, in trade or commerce, engage in the practice of exclusive dealing.  AR seeks only injunctive relief under s 80 of the TP Act.

3                     AR relies on its status as “any other person” as referred to in subs 80(1) of the TP Act for its standing to institute this proceeding.  Notwithstanding this, it does not seem amiss to observe that AR was incorporated under the Associations Incorporations Act 1987 (WA)on 20 August 2002 and is an association of automotive repairers, all or most of which carry on business in New South Wales, and other persons who support AR’s aims.

4                     For convenience, a copy of AR’s statement of claim (“the Pleading”) filed on 16 September 2002 is annexed to these reasons for judgment.

5                     The form of exclusive dealing alleged is that described in subs 47(7) of the TP Act, which provides, relevantly, as follows:

“A corporation ... engages in the practice of exclusive dealing if the corporation refuses:

(a)       to supply ... services to a person;

(b)       ... ;

(c)        ... ;

for the reason that the person ... has not acquired, or has not agreed to acquire, ... services of a particular kind or description directly or indirectly from another person.”

6                     As can be seen from the Pleading, AR’s case, in summary, is that NRMA, in trade or commerce, engages in this form of exclusive dealing, because it refuses to supply certain services to its insureds for the reason that they have not acquired, or have not agreed to acquire, automotive repair services from any one of a number of particular repairers favoured by NRMA.

7                     There was debate on the hearing as to the precise nature of the services which, according to the Pleading, NRMA refuses to supply (see below), but for present purposes those services may be conceived of as being:

• payment of the cost of repairs within fourteen days of their being effected; and
• provision of indemnity for expenses incurred by the insured while waiting for the repairs to be effected, such as, the hire of a replacement vehicle.

rules

8                     Order 20 r 2 of the Rules, relied on by NRMA, provides, relevantly, as follows:

“2(1)   Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding –

(a)       no reasonable cause of action is disclosed;

(b)       ... ; or

(c)        ... ,

the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim for relief in the proceeding.”

9                     Order 11 r 16 of the Rules, relied on by NRMA, provides, relevantly, as follows:

“16      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)        ... ,

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

10                  NRMA’s motion is concerned only with the content of the Pleading, not with the evidence proposed to be relied on by either party in relation to the underlying facts.  Accordingly, I am not presently concerned with the substantive merits of AR’s claim.

11                  Order 4 r 6 of the Rules requires an application to be accompanied by an affidavit or a statement of claim.  Subrule 6(2) requires the statement of claim to show “the material facts on which it is based”.

12                  Order 11 r 2(a) of the Rules provides, relevantly, that “a pleading of a party shall contain ... , a statement in a summary form of the material facts on which the party relies, but not the evidence by which those facts are to be proved”.  Read together, O 4 subr 6(2) and O 11 rr 2 and 16 signify that the Pleading was required to contain a statement in summary form, which does not have a tendency to cause prejudice, embarrassment or delay, of the material facts of a reasonable cause of action for contravention of subs 47(1) (read with subs 47(7)) of the TP Act, but not of the evidence by which those material facts are to be proved.

13                  The “material” facts are those facts, no more and no less, which are relied on as establishing all the essential elements of the cause of action;  cf Bruce v Oldhams Press Ltd [1936] 1 KB 697 (“Oldhams Press”) at 712-713 per Scott LJ.

14                  The distinctions between material facts and evidence and between material facts and particulars are sometimes blurred in their application.  Counsel for AR responded to several submissions of counsel for NRMA by asserting that a suggested deficiency in the Pleading could be overcome by a request for, and supply of, particulars.  This is not so.

15                  The requirement that material facts be stated has two purposes: the natural justice purpose of adequately informing the other party of the nature of the case alleged against that party; and the purpose of providing a basis for determining whether that alleged case, so exposed, constitutes a cause of action cognisable at law.  Particulars serve only the former purpose.  Consistently with the distinction, a respondent is required to plead to a statement of material facts, but not to particulars (Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 (“David Jones”)) and it is not a function of particulars to remedy an omission of material facts (Oldhams Press, above;  Rubenstein v Truth and Sportsman Ltd [1960] VR 473;  H 1976 Nominees Pty Ltd v Galli (1979) 40 FLR 242).  Particulars have a role to play where all the material facts have been pleaded but leave the other party inadequately informed of the case to be met;  cf Oldhams Press, above. 

16                  In David Jones, above, applying the distinction between material facts and particulars, Fisher J struck out a statement of claim which, in substance, “pleaded” the terms of subpar 45(2)(a)(ii) of the TP Act and stated the material facts relied on as particulars.

17                  Notwithstanding the well established distinction between material facts and particulars to which I have referred, a less strict view may be taken of that distinction now than was taken previously;  cf Beach Petroleum NL v Johnson (1991) 105 ALR 456 at 466.  According to this view, the particulars contained in a statement of claim may be taken into account for the purpose of determining whether the statement of claim amounts to a statement of all the material facts.  But even this more flexible view of pleading does not countenance the omission of material facts from the statement of claim regarded as a whole.  Accordingly, if the Pleading, regarded as a whole, does not contain a clear statement of all the material facts on which AR relies, it is no answer to suggest that NRMA can request AR to supply particulars.

reasoning

18                  AR relied on an affidavit of Robert Montagnino, legal clerk employed by the solicitor for AR, annexing copies of the pleadings in four High Court cases.  The purpose was to show that the Pleading descends to a greater level of particularity than those pleadings did.  I do not find the evidence helpful in the absence of any judicial discussion of the appropriateness of the pleadings in those cases.

19                  Does the Pleading adequately allege a contravention by NRMA of s 47 of the TP Act? 

20                  NRMA points to numerous alleged deficiencies in the Pleading.  I do not think it necessary to address every one of them (a minor point made, for example, is that within par 11 something is missing after the expression “over 30 days” – probably the words “of the repairs being made”, since that expression appears in par 10).

Refusal

21                  NRMA submitted that there is a failure to plead “refusal”.  But AR refers to subs 4(2)(c) of the TP Act which provides, relevantly, as follows:

“(2)     In this Act:

(a)       ... ;

(b)       ... ;

(c)        a reference to refusing to do an act includes a reference to:

(i)         refraining (otherwise than inadvertently) from doing that act; or

(ii)        making it known that that act will not be done; ...”

22                  It follows that NRMA refuses to supply a service if it advertently refrains from providing the service or makes it known that the service will not be provided.  The pleading of the “System” in the Pleading imports deliberateness and there is a pleading of “making known” in par 14 and of “refraining” in par 15 of the Pleading.  Therefore, the Pleading does plead the material fact of refusal. 

Particular instances of contravention

23                  NRMA submits that the Pleading is defective for not containing a statement of the facts of particular instances of contravention that have occurred.  But under s 80 of the TP Act it suffices to support a grant of injunctive relief that NRMA proposes to engage in conduct that would constitute a contravention of s 47.  Since AR seeks only injunctive relief, provided the contravention proposed is otherwise adequately pleaded, past instances are merely evidence on which the Court will be asked to infer that NRMA proposes to contravene in the future.  NRMA is not entitled to have AR’s evidence pleaded.

“Services”

24                  In par 16 of the Pleading the services which NRMA is alleged to refuse to supply are referred to as “the aforesaid right to indemnity and the payment pursuant thereto”.  The word “services” is defined in s 4 of the TP Act to include “any rights”.  This is reflected in par 17 of the Pleading.  Paragraph 18 pleads that “[i]n the premises, where an insured acquires or seeks to acquire motor repairs from a person who is not an approved repairer, [NRMA] pursuant to its System refuses to supply services to insureds”.  The suggestion is that the services which NRMA refuses to supply are a right to indemnity and to payment pursuant to that right.  But earlier paragraphs in the Pleading, such as pars 10 and 11, suggest that the insured does have a “right to indemnity” and that NRMA does make payment pursuant to that right, the complaint being as to tardiness in payment and lack of indemnification in respect of “extra expenses”.

25                  An alternative reading of par 18 is that the right to indemnity referred to in that paragraph is nothing other than the right to indemnity in respect of the extra expenses.  On this reading, the word “payment” in par 16 must also refer to payment pursuant to the right to indemnity in respect of the extra expenses alone.  But other paragraphs, such as pars 10, 11, 12, 14 and 15, make it clear that the AR’s complaint is that payment of the cost of repairs is tardy in the case of repairers who are not “approved repairers”.

26                  Identification of the services which it is alleged NRMA refused to supply is at the heart of AR’s case.  By reason of its failure to identify clearly the services which it is alleged NRMA refuses to supply, the Pleading fails to plead a reasonable cause of action and has a tendency to cause prejudice, embarrassment and delay by not informing NRMA of the case it has to meet.

“System”

27                  NRMA complains that the pleading of the “System” is a pleading of a conclusion rather than of a material fact.  This distinction is sometimes elusive.  There is clearly an element of interpretation, summary or conclusion involved in the significance of the word “System”.  But the same can be said of many, if not most, words, such as the words “claims”, “repairer”, “policy”, “agreement”, “insured” and “contract” found in the Pleading itself.  It would not be permissible for a witness to testify in the terms of the Pleading, but that is another matter.  NRMA seems to submit that AR must plead a number of instances of the alleged discrimination as between approved repairers and other repairers.  I disagree.  To require this would be to require a pleading of evidence of the System.

28                  It seems to me that the question to be resolved in relation to any particular pleading is one of fairness:  do the words fairly, and therefore, necessarily, clearly, inform the other party of the facts alleged?  The answer to this question may depend on the nature of the cause of action and on the background knowledge of the party against whom an allegation is made.

29                  Applying this test, I think the Pleading’s reference to “System” gives rise to a difficulty.

30                  It may be that nothing more is meant by “System” than a unilateral practice or policy of NRMA of ensuring that the bills of approved repairers are paid within fourteen days after the repairs are effected and of indemnifying insureds in respect of extra expenses incurred by them when the vehicles are repaired by an approved repairer.  The words “approved repairer’s [sic – repairers’] scheme” in subpar 4(c) of the Pleading might suggest that this is so.  On the other hand the reference to a “distinctive and unique method for the payment of claims” earlier in that subparagraph suggests that something different may be meant.  The Pleading makes clear that it is under the System that the repair bill of an approved repairer is paid within fourteen days and that extra expenses incurred by the insured are met where an approved repairer has been selected, but leaves open the question of whether there is anything more to the System than the practice mentioned.

31                  The reference to “agreements” in the particulars of subpar 4(c) raises the possibility that the “System” may be contractual – something different from a policy or practice adopted unilaterally by NRMA.

32                  I accept that the word “System” signifies organisation, regularity and deliberateness, as distinct from chance or fortuitousness.  But I think NRMA is entitled to know whether anything more than a mere policy or practice in relation to the two matters mentioned is intended by the use of the word “System”.  For lack of a clear definition of “System” the Pleading has a tendency to cause prejudice, embarrassment and delay.

Approved repairers, Preferred Smash Repairers and Associate Smash Repairers

33                  The Pleading demonstrates confusion as between “approved repairers”, “Preferred Smash Repairers” and “Associate Smash Repairers”.  The expression “approved repairers” is not defined.  Nor, for that matter, is the expression “Preferred Smash Repairers” or the expression “Associate Smash Repairers”.

34                  Paragraphs 10 and 11 refer to a “Preferred Smash Repairer” (par 10) and a “Preferred Motor [sic] Repairer” (par 11) as the classes of repairer which attract prompt payment of a repair bill, but par 13 refers to an “approved repairer” as the category of repairer which attracts payment of extra expenses incurred by an insured.  The significance of the reference to “Associate Smash Repairers” does not appear in the Pleading.  If it is intended to allege that “approved repairers” include both “Preferred Smash Repairers” and “Associate Smash Repairers” and that the selection of an approved repairer of either class will give rise to both of the benefits mentioned, it seems unnecessary for the Pleading to refer to the sub-categories of “Preferred Smash Repairers” and “Associate Smash Repairers” at all:  the relevant contrast is simply between “approved repairers” and others.  If, on the other hand, it is only the sub-category of “Preferred Smash Repairers” which attracts those two benefits, the Pleading should refer to them alone and not to the larger category of “approved repairers” or the other sub-category of “Associate Smash Repairers”. 

35                  The Pleading has a tendency to cause prejudice, embarrassment and delay in the present respect.

The particulars to subpar 4(c)

36                  In the absence of any information as to the effect of the agreements referred to in particulars (i) and (ii) of subpar 4(c) of the Pleading their significance is obscure and they have no place in the Pleading.  The reference to “a significant degree of control” in particular (iii) does not save the position.  The reference to encouragement in particular (iv) is also obscure.  If it is intended to refer only to the fact that NRMA informs its insureds when they make a claim that if they engage a non-approved repairer, they will not receive payment within fourteen days or indemnity in respect of certain expenses, this should be made clear.  Similarly, if particular (v) is intended to signify only that if the repairs are effected by Preferred Smash Repairers, the insured will receive the two services mentioned, this should be made clear.

37                  In the absence of clarification, the Pleading has a tendency to cause prejudice, embarrassment and delay in the present respect.

Compulsion

38                  NRMA relies on SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) 48 FLR 445 at 464 and Stationers Supply Pty Ltd v Victorian Authorised Newsagents Association Ltd (1993) 44 FCR 35 at 62.  Both of those cases were concerned with the form of exclusive dealing identified in subs 47(6) of the TP Act, not subs 47(7).  In particular, they were both concerned with the expression “on the condition that the person…will acquire…” in subs 47(6).  In both cases, it was accepted that this expression signified something more than mere persuasion, and involved, to use the words of Northrop J in the SWB case (at 464), “attributes of compulsion and futurity”.  NRMA submitted that an element of compulsion was inherent in subs 47(7) also.

39                  The words in subs 47(7) to be compared with the expression mentioned in subs 47(6) are “for the reason that the person … has not acquired, or has not agreed to acquire,…”.  This expression does not suggest compulsion or futurity and I do not find the SWB and Stationers Supply cases helpful.  There was no debate before me as to whether “the reason” must be the sole reason, the dominant reason, a substantial reason or a significant reason for the refusal, and I will not discuss that question.  It is clear, however, that the fact that the insured has not acquired, or has not agreed to acquire, repair services from a non-approved repairer must be alleged to be “the reason” why NRMA has refused to supply services to the insured.  Paragraphs 14 and 15 of the Pleading satisfy this requirement.  I do not accept NRMA’s submission that there must additionally be a pleading of some element of compulsion.

conclusion

40                  NRMA made numerous attacks on the Pleading, some of which I have upheld.  I think it desirable that there be a re-pleading.  Clarity would not be assisted by my striking out only particular paragraphs:  cf Trade Practices Commission v Australian Iron & Steel Pty Ltd (1990) 22 FCR 305 (“Australian Iron”) at 323.

41                  NRMA submits that the proceeding should be dismissed and that the Pleading cannot be cured by a re-pleading.  I am not satisfied that this is so.

42                  In the alternative to seeking dismissal, NRMA invites me to follow the course taken by Lockhart J in Australian Iron, above, of making it a condition of leave to re-plead that affidavit evidence be filed showing that “there really are facts which can probably be proved and which, if proved, would support the general statements made in the statement of claim” (at 323).  A particular reason why his Honour thought it appropriate to impose that condition was that there had been several attempts by the applicant in that case “to properly formulate its case” (at 323).  To date AR has made only the one unsuccessful attempt to plead its case.  I am not yet satisfied that AR does not know sufficient facts to enable it to plead its claim of exclusive dealing in proper form.  I decline at this stage to impose the condition suggested by NRMA.

43                  In these reasons I have not touched on the question of whether NRMA would be entitled to particulars of certain material facts if it were to seek them.

44                  NRMA has generally succeeded but has failed in certain respects, and, in particular, has failed to have the proceeding summarily dismissed.  The appropriate costs order is that AR pay two thirds of NRMA’s costs relating to pars 3 and 4 of the motion.

Associate:

Dated:              20 December 2002

ANNEXURE

IN THE FEDERAL COURT

OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION                                                         No                  of 2002

                                    AUSTRALIAN AUTOMOTIVE REPAIRERS’

                                    ASSOCIATION (POLITICAL ACTION COMMITTEE)

                                    INC

                                                                                                            Applicant

                                    NRMA INSURANCE LIMITED

                                    A.C.N. 000 016 722

                                                                                                            Respondent

STATEMENT OF CLAIM

1.         The Applicant is and was at all material times an association duly incorporated and capable of suing and being sued.

2.                  In the premises, the Applicant is “any other person” within the meaning of sub-section 80(1) of the Trade Practices Act 1974 (Cth).

3.                  The Respondent:

(a)                            is and was at all material times a company capable of suing and being sued;

(b)                           is a corporation within the meaning of the term as defined in the Trade Practices Act 1974 (Cth).

4.         The Respondent:

(a)    carries on the business of a general insurer licensed under federal legislation;

(b)   is the largest comprehensive motor vehicle insurer in the State of New South Wales in term of number of policies issued;

(c)    in the course of its business, has developed a distinctive and unique method for the payment of claims to insureds whose motor vehicles are

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damaged and who have an entitlement to indemnity under a policy underwritten by the Respondent, in New South Wales and the Australian Capital Territory, namely the approved repairer’s scheme (“the System”)

PARTICULARS

(i)                  The Respondent selects and enters agreements in a standard form with person designated “Preferred Smash Repairers”;

(ii)                The Respondent selects and enters agreements in a standard form with persons designated “Associate Smash Repairers”;

(iii)               In both cases the agreement imposes a significant degree of control over automotive repairers of vehicles whose owners are entitled to indemnity from the Respondent;

(iv)              When an insured makes a claim, the Respondent encourages the insured to take his work to a “Preferred Smash Repairer”;

(v)                If the repair is made by a Preferred Smash Repairer then the claim is dealt with within the aforesaid “System”.

5.         Under the System motor repairers in New South Wales are divided into the following classes:

            (a)        “Preferred Smash Repairers”;

            (b)        “Associate Smash Repairers”;

            (c)        Others.

6.         An “insured” herein means a person who has a policy with the Respondent or is entitled to claim under such a policy respecting motor repairs.

7.         “Motor repairs” herein means repairs made to a motor vehicle respecting which the Respondent grants indemnity to an insured, whether such repairs consist solely of work and labour done or of work and labour done and the provision of parts to replace damaged or destroyed parts.

8.         Motor repairs, in the ordinary course, are made pursuant to an contract between the insured and the motor repairer to effect the repairs.

9.         The insured relies on the Respondent to discharge his liability to the repairer.

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10.       An insured who makes his claim upon the Respondent in accordance with the System receives payment of his indemnity by the Respondent in the ordinary course within 7 to 14 days of the repair being made, as the amount is billed to the Respondent by the Preferred Smash Repairer and the liability to pay is acknowledged by the Respondent, the insured is credited with the amount and the vehicle is released into the insured’s possession.

11.       An insured who makes his claim upon the Respondent otherwise than in accordance with the System by securing the services of a motor repairer otherwise than a Preferred Motor Repairer under the System receives payment of his indemnity by the Respondent on average generally over 30 days and accordingly the insured’s vehicle is kept by the motor repairer, unless a separate arrangement can be made between the insured and the motor repairer.

12.       In the premises, an insured who receives his indemnity earlier generally has his motor vehicle repaired earlier and is accordingly, back on the road earlier.

13.       The Respondent does not indemnify insureds for extra expenses incurred as a result of waiting for a repair to be effected by a person who is not an approved repairer, such as vehicle hire.

14.       By virtue of the terms of the System and further or in the alternative, by virtue of its administration, the Respondent has made it known that an insured who utilizes the services of other than an approved repairer will receive a later payment of indemnity.

PARTICULARS

(a)                The Respondent has scripts at its call centers for its call centre operator who receive claims to read to insureds in making a claim;

(b)               The scripts convey the information stated above, but their exact terms will be pleaded after discovery.

15.       Further or in the alternative to the preceding paragraph, in virtue of its administration of the System, the Respondent refrains from paying an indemnity to an insured if he utilizes the services of other than an approved repairer as soon as he would be paid if he did utilize such an approved repairer.

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16.       In the premises, both the aforesaid right to indemnity and the payment pursuant thereto are rights provided granted or conferred by the Respondent in trade or commerce, under a contract of insurance, within the meaning of the definition of “services” in section 4 of the Trade Practices Act 1974 (Cth).

17.       In the premises, the provision, granting or conferring of such a right as is referred to in the preceding paragraph is a “supply” of such services within the meaning of section 4 of the Trade Practices Act 1974 (Cth).

18.       In the premises, where an insured acquires or seeks to acquire motor repairs from a person who is not an approved repairer, the Respondent pursuant to its System refuses to supply services to insureds for the reason that the insured has not acquired or has not agreed to acquire goods or services namely motor repairs, directly or indirectly from an approved repairer.

19.       The conduct pursuant to its System of the Respondent averred in paragraphs 8 and 9 contravenes sub-section 47(9) of the Trade Practices Act 1974 (Cth).

The Applicant claims the relief specified in this application.

Dated:  13 September 2002

(Signed) Peter Glover

PETER R GLOVER

Solicitor for the Applicant