FEDERAL COURT OF AUSTRALIA

Instyle Contract Textiles Pty Limited v Good Environmental Choice Services Pty Ltd (No 3) [2010] FCA 466

THE COURT ORDERS THAT:

1.                  Paragraphs 6, 7, 8 and 9 of the Notice of Motion filed by the Applicant on 30 October 2009 be dismissed. 

2.                  The parties are to exchange written submissions on any outstanding question of costs by no later than 21 May 2010. 

3.                  The parties are to exchange written submissions in answer by no later than 28 May 2010. 

4.                  In each case, the written submissions must not exceed three pages in length. 

5.                  Copies of all submissions are to be provided to my Associate at the time they are exchanged by the parties.   

6.                  The parties are to approach my Associate to appoint a directions hearing.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

INTRODUCTION

1                     By notice of motion dated 30 October 2009 and filed on 2 November 2009 (the principal motion) the applicant in the proceeding, Instyle Contract Textiles Pty Limited (Instyle), sought various forms of relief.

2                     On 5 February 2010 I gave judgment (Instyle Contract Textiles Pty Limited v Good Environmental Choice Services Pty Ltd (No 2) [2010] FCA 38) in respect of Instyle’s claims for relief other than in respect of the relief sought in paragraphs 6, 7, 8 and 9 of the principal motion.  These reasons deal with the determination of those outstanding matters. 

3                     It is convenient to refer to the reasons for judgment given on that occasion as Reasons No 2.  In these reasons I will use the same abbreviations as used in Reasons No 2.

4                     The background to the parties’ dispute is set out in Reasons No 2 at [13]-[34].

5                     Paragraphs 6, 7 and 8 of the principal motion seek orders for the determination of a separate question and advance alternative formulations of that question.   

6                     Paragraph 9 of the principal motion seeks a postponement of further discovery in relation to issues falling outside the ambit of the issues raised by the separate question sought in paragraph 6 of the principal motion. 

7                     At the time of giving judgment on 5 February 2010 I expressed the view that it would be premature to decide paragraphs 6, 7, 8 and 9 of the principal motion before the respondents had filed a foreshadowed cross-claim.  Accordingly, Instyle’s application for the orders sought in paragraphs 6, 7, 8 and 9 of the principal motion was adjourned to enable that cross-claim to be filed.  At the time I said that, once the full dimensions of the controversy between the parties was fixed, I would, if necessary, hear the parties further on whether, and if so which, orders should be made with respect to the hearing of a separate question and with respect to the question of discovery.

8                     On 2 March 2010 two cross-claims were filed: one by the first respondent and the other by the third respondent.

9                     On 3 May 2010 Instyle filed its defences to the cross-claims.

10                  In the meantime the parties served supplementary written submissions with respect to the relief sought in paragraphs 6, 7 and 8 of the principal motion.

11                  Originally Instyle advanced considerations of efficiency and convenience and the prospect that, ultimately, costs might be saved, as factors in support of its motion for the determination of a separate question in terms of paragraphs 6 and 7 of the principal motion.  However, in light of the cross-claims that have been filed, it no longer advances the relief sought in those paragraphs because the separate determination of a question confined to the issues identified in either of those paragraphs would serve no utility.  I agree with that assessment.  Given that the relief sought in paragraph 6 of the principal motion is no longer pressed I have proceeded on the basis that the relief sought in paragraph 9 relating to the postponement of discovery is also no longer pressed. 

12                  Thus the remaining issue to be determined is whether the relief sought in paragraph 8 of the principal motion should be granted.  Relevantly, the order that is sought in that paragraph is in the following terms:

… that the question of liability in relation to all of the separate claims pleaded in the [2FASC] be decided separately and before the question of damages and other relief.

The applicant’s claims

13                  In Reasons No 2 at [35]-[47] I summarised the allegations pleaded in the 2FASC.  I noted that three main claims had been pleaded: the Corporate Express claim, the EPD claim and the Market Advisories claim.  Each of the claims involve alleged contraventions of ss 52 and 53 of the Trade Practices Act 1974 (Cth) (TPA) and corresponding provisions of the Fair Trading Act 1987 (NSW) (FTA).  The Corporate Express claim also involves alleged unconscionable conduct in contravention of s 43 of the FTA.  Instyle claims injunctive relief including mandatory orders for the publication of corrective statements.  In addition, Instyle claims damages pursuant to s 82, or alternatively compensation pursuant to s 87, of the TPA.  As currently pleaded its claims for pecuniary relief are not based on the corresponding provisions of the FTA. 

14                  The Corporate Express claim relates to representations made to Richard Haigh, the National Merchandising Manager of Corporate Express, in the period 2 to 3 April 2009.  Instyle alleges that those representations were false, misleading or deceptive or likely to mislead or deceive.  It alleges that Corporate Express (through Mr Haigh) relied on the representations and advised Instyle that its fabrics could not be included as a component of Corporate Express EXP chairs until those fabrics had achieved GECA certification.  Instyle also alleges that Corporate Express declined to advertise Instyle’s products as a component of the EXP chairs.  Instyle alleges that it has suffered or is likely to suffer substantial loss and damage as a result. 

15                  In the EPD claim Instyle alleges that the first respondent and the third respondent issued EPDs to suppliers of furniture (referred to as “the Certified Suppliers”) containing statements (referred to as “the EPD Statements”) that included representations that were false, misleading or deceptive or likely to mislead or deceive.  Instyle alleges that, because of the EPD Statements, the Certified Suppliers will not use, or are less likely to use, or will less commonly use, Instyle’s fabrics in GECA certified products and that, as a result, it has suffered or is likely to suffer substantial loss and damage.

16                  In the Market Advisories claim Instyle alleges that, in certain emails and email attachments designated as Market Advisories, sent to undisclosed recipients, the respondents made a number of representations that were false, misleading or deceptive or likely to mislead or deceive.  Instyle alleges that recipients of  those emails and attachments will not use or specify, or are less likely to use or specify, or will less commonly use or specify, Instyle’s fabrics in GECA certified furniture because of the representations made in those documents.  Instyle alleges that, as a result, it has suffered or is likely to suffer substantial loss and damage.

17                  It can be seen that Instyle’s claims for pecuniary relief concern alleged loss or damage arising because discrete individuals or groups of individuals have acted on the representations made by the respondents.  The Corporate Express claim involves only Corporate Express (through Mr Haigh).  The EPD claim involves 18 identified Certified Suppliers.  The Market Advisories claim involves recipients of the Market Advisories, although the identity of those recipients is not presently known.  None of the claims for pecuniary relief involve alleged loss or damage arising because, for example, the public at large have acted on representations made by the respondents.

The respondents’ cross-claims

18                  The cross-claims allege Instyle has made a number of representations concerning the compliance of certain of its fabrics with the GECA Furniture Standard and the GECA Textiles Standard, in contravention of ss 52 and 53 of the TPA.  The respondents claim injunctive relief pursuant to s 80 of the TPA including mandatory orders for the publication of corrective statements.  Significantly, pecuniary relief is not claimed.

relevant principles

19                  Order 29 r 2 provides for the determination of separate questions as follows:

The Court may make orders for -

(a)        the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings; and

            (b)        the statement of a case and the question for decision.

20                  The general principles relating to the application of the rule are well-known. They are set out in Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495.  It is not necessary to recite those principles.  Recent case examples in which Reading has been considered and applied include: Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2010] FCA 254; Permanent Custodians Ltd v Tony Geagea & Ors [2010] NSWSC 117; Scantech Ltd v Asbury [2009] FCA 1480; SA Water Corporation v United Water International Pty Ltd [2009] SASC 383; BW Offshore Ltd v Anzon Australia Limited [2009] FCA 1133; Sadiqi v Commonwealth (No 2) (2009) 181 FCR 1; Media Ocean Limited v Optus Mobile Pty Limited (No 5) [2009] FCA 659; and Apache Northwest Pty Ltd v Agostini (2009) 177 FCR 449.

21                  Order 29 r 2 gives the Court wide powers to regulate the procedures to be adopted for the hearing and determination of a proceeding.  In Reading Branson J at [9] observed that ultimately the issue for the Court is whether it is “just and convenient” for the order to be made: see also Arnold v Attorney-General (Vic) (unreported, Sundberg J, 8 September 1995).  That observation, and the considerations it involves, now finds expression in s 37M of the Federal Court of Australia Act 1976 (Cth) which requires the Court’s civil practice and procedure provisions (including the Federal Court Rules) to be interpreted and applied in the way that best promotes the overarching purpose of facilitating the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible.

22                  In the ordinary course, all issues of fact and law should be determined at the one time.  However, some classes of proceeding lend themselves to the application of O 29 r 2.  In Reading, Branson J at [9] referred to intellectual property cases and proceedings in which an application in the nature of a demurrer was appropriately made, as examples of classes of cases where, typically, it has been appropriate to order the determination of a separate question.   The present is not one of those classes of proceeding.  Her Honour at [8] noted that the factors that tended to support the making of an order for the separate determination of a question included the fact that the separate determination may contribute to savings of cost and time by substantially narrowing the issues at trial or even leading to the disposal of the proceeding, including by way of settlement.  Her Honour also noted that the factors that would tell against the making of an order for the separate determination of a question included the fact that the separate determination may lead to a significant overlap between the evidence adduced on the hearing of the separate question and at the later hearing, with the possible calling of the same witness or witnesses at both stages of the proceeding and with the attendant risk and inconvenience of credibility findings being made at the first stage.

23                  These considerations resonated in the competing submissions of the parties.

The parties’ SUBMISSIONS

Instyle’s submissions

24                  Instyle submitted that there are four reasons why the order sought in paragraph 8 of the principal motion should be made.

25                  First, it submitted that any hearing on damages will, if the respondents are successful, be unnecessary.  Secondly, it submitted there is an obvious difficulty in assessing damages in circumstances where the conduct is ongoing.  Instyle submitted that, in those circumstances, the evidence must involve some degree of speculation as to the future, in particular the time between the date of the preparation of the evidence, and the uncertain date of judgment.  This speculation would be unnecessary, it submitted, if the question of damages was heard subsequently to the date of judgment on liability.  Thirdly, Instyle submitted that there is uncertainty in assessing damages before liability on all claims has been determined.  It submitted that it is impractical for the evidence to consider all the possible permutations of successful claims and unsuccessful claims.  It advanced the proposition that once judgment had been delivered on liability, the evidence of both parties can focus on the successful claims, relieving the Court of the near impossible task of determining, in the absence of evidence, the impact of any particular successful or unsuccessful claim.  Fourthly, Instyle submitted that in a hearing on quantum there is not likely to be any contested evidence from witnesses who will give evidence on liability.

The respondents’ submissions

26                  The respondents raised what they submitted were a number of impracticalities and difficulties in proceeding with any form of split hearing.

27                  They submitted that, on the issue of whether the respondents engaged in conduct that was misleading or deceptive, they anticipated calling a number of witnesses to give evidence on whether Corporate Express, the 18 Certified Suppliers and recipients of the Market Advisories were actually misled or deceived as Instyle had alleged.  These witnesses would include persons from each of the 18 Certified Suppliers and persons who received the Market Advisories.  The potential witnesses also included Mr Haigh (presumably on the assumption that he was not called by Instyle). The respondents submitted that the overwhelming probability was that each of these persons would also be required to give evidence on the question of damages.  Thus it was probable in a split hearing that numerous witnesses would be required to give evidence more than once.  They specifically raised the problem of credit findings arising on the hearing of the first stage of a split hearing.  The position of Mr Haigh was given as an example based on the fact that apparently inconsistent statements had been given by him to the respective solicitors for the parties: see Reasons No 2 at [95].

28                  In their supplementary written submissions the respondents sought to illustrate their submissions by giving an example of the kinds of issues that might need to be determined at the two stages of a split hearing.

Instyle’s submission in reply

29                  Instyle submitted that the respondents’ submissions proceeded on an incorrect assumption, namely that to succeed on liability Instyle must satisfy the Court that the Certified Suppliers were misled into procuring the supply of fabrics from third parties ahead of Instyle’s fabrics.  They submitted that the evidence tendered on the hearing of the principal motion showed that fabrics used in the manufacture of upholstered furniture were generally specified by customers or by architects and interior designers representing them, not merely the suppliers of upholstered furniture.  It foreshadowed that the issue of whether or not a particular person or entity was misled would likely be best determined by survey evidence given the number of persons who, potentially, have been misled. 

30                  Instyle also criticised the example given by the respondents.  The criticism had essentially two limbs.  First, it repeated its submission (noted above) that the persons likely to have been misled or deceived extended beyond the suppliers of upholstered furniture.  Secondly, it submitted, in substance, that the example focussed on the profit made by suppliers rather than on the loss or damage allegedly suffered by Instyle, with the consequence that it was unlikely that there would be a need to call the same witnesses at both stages of a split hearing.

consideration

31                  The parties’ submissions focussed on the question of damages and the convenience or otherwise of separating this question from the decision on all other questions to be heard.  In my view this focus was warranted because, although paragraph 8 of the principal motion effectively seeks the separation of the question of all relief from all other questions and issues, consideration of the separation of the question of damages best informs the question whether it is just and convenient, or otherwise best promotes the overarching purpose, to make the order sought in paragraph 8.  It is important to note, however, that, contrary to some suggestion in the parties’ submissions, an order in terms of paragraph 8 of the principal motion will not merely provide for the separate determination of the quantum of damages.

32                  The terms in which paragraph 8 of the principal motion is couched blur a number of issues that will arise in the course of the hearing of the proceeding.  In this connection the distinction between “liability” on the one hand and “damages and other relief” on the other hand is illusory and provides no useful demarcation.  As Toohey J remarked in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 551, s 52 of the TPA does not of itself give rise to any liability.  The consequences of a contravention of s 52 are to be found in other sections of the TPA.  The same is true of s 53 of the TPA and the corresponding sections of the FTA on which Instyle also relies.  Thus the use of the word “liability” in paragraph 8 of the principal motion fails to expose the detail of what is intended to be determined at the first stage of a split hearing and what is to be determined at the second stage, given that issues of liability in relation to the granting of pecuniary relief will be present at both stages.

33                  In a claim for damages under s 82 of the TPA, damage is the gist of the action: the claimant for relief must be a person who has suffered loss or damage by conduct of another person that was done in contravention of a relevant provision of the TPA.  If the claimant does not establish that loss or damage has been suffered then the cause of action is incomplete.  In this context, loss or damage means actual loss or damage as distinct from potential or likely damage: Wardley at 526-527.  Section 87, on the other hand, expressly envisages the granting of relief to compensate a claimant who has suffered loss or damage or is likely to suffer loss or damage by conduct of another person in contravention of a relevant provision of the TPA. 

34                  Thus, in the present case, it will be necessary for Instyle to prove in relation to its claim for damages under s 82 of the TPA, that it has suffered actual loss or damage by reason of the respondents’ alleged conduct.  On this limb of its case, Instyle must prove both the fact and the quantum of the loss or damage.  But, critically, it must also prove the causal connection between the loss or damage and the alleged contravention of the TPA. 

35                  The same considerations come into play to the extent that Instyle seeks monetary compensation under s 87 of the TPA for loss or damage it alleges it has suffered.

36                    This, however, is only part of the evidentiary complex that is inherent in a case seeking pecuniary relief for conduct alleged to be in contravention of s 52 and similar or corresponding provisions under the TPA and FTA.

37                  In Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202, Deane and Fitzgerald JJ observed:

Irrespective of whether conduct produces or is likely to produce confusion or misconception, it cannot, for the purposes of s 52, be categorized as misleading or deceptive unless it contains or conveys, in all the circumstances of the case, a misrepresentation. The difficulty which will commonly arise in a s 52 case is in determining whether the conduct contains or conveys, in all the circumstances, a misrepresentation and in assessing the significance to that question of evidence that one or more persons were in fact led into error. In extreme, but not necessarily infrequent, cases, it may be correct to hold that, as a matter of law, conduct said to contravene s 52 is incapable of conveying the untrue meaning alleged or any other false meaning. Such cases aside, whether or not conduct amounts to a misrepresentation is a question of fact to be decided by considering what is said and done against the background of all surrounding circumstances.

38                  This is particularly so in the present case.  In Reasons No 2 at [115]-[116] I pointed out that the parties are not only at issue with respect to the interpretation of aspects of the GECA Furniture Standard, but also with respect to how the standard is to be applied and has been applied in given circumstances.  I also pointed out that statements, whether written or oral, which are viewed in the abstract or at least viewed without a full understanding of all the surrounding circumstances, may not truly reflect what was actually conveyed in the circumstances.

39                  There is likely to be in the present case a significant interplay between the evidence adduced on the question of the making of the representations, how those representations (if made) affected the minds of those to whom they were made in the particular circumstances in which those persons found themselves, and whether and, if so, how and to what extent those persons acted in reliance on the representations to Instyle’s detriment.  Although it is possible for the purposes of analysis to discuss these matters separately, as a practical matter the evidence adduced on them will tend to coalesce.  As Branson J observed in Reading at [12], it is not possible in respect of claims for relief based on ss 82 and 87 of the TPA for the determination of the question of damages to be wholly separated from the question of contravention. 

40                  It is necessary at this point to say something further about Instyle’s claims. 

41                  The Corporate Express claim involves representations made to a single supplier (Corporate Express) and the response of that supplier acting in reliance on those representations, allegedly causing actual loss or damage to Instyle.  It does not seem to me that there is any utility in separating relief (damages and injunctive relief) from the other issues that fall for determination in relation to that claim.  Indeed, it is difficult to see how that could be done in any practical or commonsense way.  It is likely that Mr Haigh (who appears to be the relevant operative mind of Corporate Express in relation to the events in question) will be called as a witness.  It is likely that his evidence will cover a number of issues in relation to the Corporate Express claim ranging from the making of the alleged representations to the assessment of the quantum of damages.  The respondents have also identified, correctly, that there is a real prospect that issues of credit will arise in relation to Mr Haigh’s evidence having regard to the material differences in the information provided by Mr Haigh to Mr Fraser, as deposed to by Mr Fraser, and the information provided by Mr Haigh to Ms Young, as deposed to by Ms Young.  In these circumstances the likelihood of Mr Haigh giving evidence in stages, where there is a prospect of credit findings being made at the first stage of the hearing, should be avoided rather than fostered. 

42                  With respect to the EPD claim, Instyle’s claim for damages is plainly based on the allegation that the 18 Certified Suppliers named in annexure 1 to the 2FASC will not use, are less likely to use, or will less commonly use Instyle’s fabrics in GECA certified products: see para 49 of the 2FASC.  Its submission that, in order for it to succeed on liability (by which I take it to mean, in order for it prove that the statements made in the identified EPDs were false, misleading or deceptive or likely to mislead or deceive), it is not necessary for it to satisfy the Court that the Certified Suppliers were misled into procuring the supply of other fabrics ahead of Instyle’s fabrics, is not how it has pleaded its case on damages.  It is difficult to see how the case on “liability” will be run without evidence being given by some or all of those suppliers.  Indeed the respondents themselves have indicated, in their written submissions, that they propose to call witnesses from each of those suppliers.  There is a real prospect that witnesses from these suppliers will give evidence at both stages of a split hearing, for the reasons I have given above.  Although the prospect of credit findings has not been raised with the same acuity with respect to these witnesses as it has with Mr Haigh in relation to the Corporate Express claim, the likelihood that the same witnesses may be called at both stages of a split hearing on the EPD claim means that that prospect cannot be excluded.  Quite apart from this, considerations of convenience and efficiency would indicate that, where it is possible that evidence will be adduced from the same witnesses on a range of issues, that evidence should not be given in a staged manner.

43                  The same considerations apply with respect to the Market Advisories claim.  This conclusion is not affected by the fact that the recipients of the Market Advisories have not as yet been identified. 

44                  These considerations alone indicate that, on present information, it would not be just and convenient, or otherwise best promote the overarching purpose, to make the order sought in paragraph 8 of the principal motion.  They are not outweighed by the advantages of a split hearing referred to in Instyle’s first three submissions.

45                  Even if the order sought in paragraph 8 of the principal motion was amended to seek the separate determination of the quantum of pecuniary relief and whether and if so what injunctive relief should be granted, I would not be persuaded, on the basis of present information, that there should be a split hearing.  It seems to me that, in a matter such as the present one, evidence adduced on reliance and causation will necessarily stray into the question of the quantum of pecuniary relief.  

disposition

46                  Paragraphs 6, 7, 8 and 9 of the principal motion should be dismissed.  This now disposes of all relief sought on the principal motion other than the question of costs. 

47                  I will hear the parties in relation to all questions of costs not dealt with in Reasons No 2.  The parties should exchange written submissions on costs by no later than 21 May 2010.  The parties should exchange written submissions in answer by no later than 28 May 2010.  In each case the written submissions should not exceed three pages.  Copies of the submissions are to be provided to my Associate at the time of their service.  I will then proceed to determine the question of all outstanding costs on the papers. 

48                  In the meantime the parties are to approach my Associate for the purpose of appointing a further directions hearing. 

Associate:

Dated:         14 May 2010