FEDERAL COURT OF AUSTRALIA

Tada Constructions Corporation Pty Ltd v JP Dixon Real Estate Pty Ltd [2011] FCA 703

THE COURT ORDERS THAT:

1.    The applicant, on or before 4.00pm on 22 June 2011, provide further and better particulars to paragraphs 12 and 16 of the amended statement of claim dated 25 February 2011.

2.    Alternatively to order 1, the applicant, by 4.00pm on 22 June 2011, file and serve a further amended statement of claim, including re-pleadings of paragraphs 12, 16 and 19 of the amended statement of claim dated 25 February 2011, providing full particulars thereof.

3.    Order 16 made on 2 March 2011 be varied by adding the preface “In so far as is practicable”.

4.    The applicant pay the costs of the respondents’ notice of motion dated 25 May 2011 and any costs thrown away by reason of the amendment.

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

1    On 19 June 2011, I ordered that the applicant, Tada Constructions Pty Ltd (“Tada”) provide further and better particulars of loss and damage or alternatively to re-plead the relevant paragraphs of its amended statement of claim. I also ordered that Tada pay the respondents’ costs of the notice of motion dated 25 May 2011 and any costs thrown away by reason of the amendment, as follows:

1.    The applicant, on or before 4.00pm on 22 June 2011, provide further and better particulars to paragraphs 12 and 16 of the amended statement of claim dated 25 February 2011.

2.    Alternatively to order 1, the applicant, by 4.00pm on 22 June 2011, file and serve a further amended statement of claim, including re-pleadings of paragraphs 12, 16 and 19 of the amended statement of claim dated 25 February 2011, providing full particulars thereof.

3.    Order 16 made on 2 March 2011 be varied by adding the preface “In so far as is practicable”.

4.    The applicant pay the costs of the respondents’ notice of motion dated 25 May 2011 and any costs thrown away by reason of the amendment.

2    My reasons for making those orders are set out below.

3    By a notice of motion dated 25 May 2011, JP Dixon Real Estate Pty Ltd (“JP Dixon”) and Jonathan Dixon, the respondents in proceeding VID 309 of 2010 (collectively “Dixon”) sought orders that the amended statement of claim filed on 18 March 2011 (“ASOC”) by Tada be struck out on the ground that it tends to cause prejudice, embarrassment or delay, or alternatively that Tada provide specified further and better particulars as to loss and damage and loss of commission on sales.

4    Dixon also sought discovery of specified documents and an order that the trial date fixed for 25 July 2011 be vacated.

5    In particular, the notice of motion sought the following relief:

1    An order pursuant to Order 11, rule 16(b) that the Applicant's Amended Statement of Claim be struck out on the basis that it has a tendency to cause prejudice, embarrassment or delay in the proceeding.

2    Alternatively, an order pursuant to Order 12, rule 5(1)(c) that within fourteen (14) days of making the order the Applicant provide the following further and better particulars of its Amended Statement of Claim ("the ASOC") including the usual calculations (as defined below):

(a)    in relation to paragraphs 12 and 16 of the ASOC, the loss and damage suffered by the Applicant as a result of pursuing ‘the development and growth of goodwill in the Market in the name “JP Dixon” rather than pursuing the development and growth of goodwill in the name “Troy Daly” or similar name’; and

(b)    in relation to paragraph 16 of the ASOC, the loss of commission on sales.

Wherever in this request “the usual calculations” are sought of any amount, figure or number, and the further and better particulars are to state how the same was calculated, quantified, derived or ascertained and set out all relevant calculations concerning the same.

3    An order pursuant to Order 15, rule 8 that within fourteen (14) days of making the order the Applicant provide discovery of the following documents:

(a)    the ‘Background business information paper prepared by Troy Daly’, referred to in the Expert Report of G E Blashki dated 12 May 2011;

(b)    a full history of sales and listings data of the Applicant since it commenced trading as JP Dixon Portsea Sorrento (pursuant to the agreement set out as exhibit TAD 4 to the affidavit of Troy Daly sworn 23 April 2010) to date, as recorded on the Applicant's digital practice management and accounting system, including the following information:

                                    i)    referral source;

                                    ii)    by whom listed;

                                    iii)    by whom sold;

                                    iv)    details of the property; and

                                    v)    details of property sale price and any commission payments made to or by the Applicant.

(c)    a full history of rent roll commissions data of the Applicant since it commenced trading as JP Dixon Portsea Sorrento to date as recorded on the Applicant's digital practice management and accounting system.

4    An order vacating the trial date.

5    Costs.

6    Such further or other orders as the Court considers appropriate.

6    The application is supported by the affidavit of Michael John O’Brien sworn 25 May 2011 and written submissions filed on 14 June 2011.

7    The application was opposed. Written submissions dated 15 June 2011 were filed in opposition.

Relevant RULES

8    Order 11 rule 16(b) of the Federal Court Rules 1979 (Cth) (“the Rules”) provides:

Where a pleading:

…

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

…

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

9    Order 12 rule 5(1)(c) of the Rules provides:

(1)    The Court may order a party to file and serve on any other party:

…

(c)    where he claims damages, particulars relating to general or other damages.

10    Order 15 rule 8 of the Rules provides:

Order for particular discovery

Where, at any stage of the proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any matter in question in the proceeding may be or may have been in the possession, custody or power of a party, the Court may order that party:

(a)    to file any affidavit stating whether that document or any document of that class is or has been in his possession, custody or power and, if it has been but is not then in his possession, custody or power, when he parted with it and what has become of it; and

(b)    to serve the affidavit on any other party.

bACKGROUND

11    As appears from the affidavit of Mr O’Brien and related material filed, JP Dixon Real Estate is a brand name of a real estate agency established and conducted by JP Dixon in the Melbourne area for decades. Prior to August 2007, there were JP Dixon Real Estate agencies in Brighton, Sandringham and Toorak. It is alleged that Mr Dixon was a director of JP Dixon and United Realty Pty Ltd (“United Realty”), which conducted business under the JP Dixon banner from the Brighton and Toorak offices. It is also alleged that JP Dixon itself engaged in business from the Brighton office.

12    Tada, a company of which Troy Daly is the director, has operated a real estate agency on the Mornington Peninsula (“JP Dixon Portsea-Sorrento”) under the JP Dixon banner since executing an agreement with JP Dixon on 22 August 2007 setting out the terms and conditions of the arrangements.

13    The present proceeding was commenced by Tada and its director, Troy Daly, by an application and statement of claim filed on 30 April 2010 and an affidavit of Mr Daly sworn on 23 April 2010. The applicants alleged, in essence, that between June and August 2007, Mr Dixon, on behalf of JP Dixon, made representations in pre-contractual negotiations that an agreement to be entered between Tada and JP Dixon for Tada to open a real estate agency on the Mornington Peninsula under the JP Dixon banner would grant Tada exclusive rights to operate under the banner in the Portsea-Sorrento and Peninsula area, and that other JP Dixon and other agencies who used the banner under its control, if engaged to sell properties in the Portsea-Sorrento market (“Market”), would hand them to Mr Daly to sell.

14    On 1 December 2010, the trial date was fixed for 25 July 2010, with an estimate of 4 to 5 days, and orders for preparation for trial were made by consent. In December 2010, the applicants’ solicitor proposed an amended statement of claim containing substantial amendments, including the removal of the second applicant, Mr Daly, and the addition of a new respondent, United Realty. On 24 February 2011, the parties proposed consent orders giving Tada leave to file and serve an amended application and the ASOC, and leave for the respondents to file and serve a defence to same. On or about 25 February 2011, Tada filed and served an amended application and the ASOC and, on 11 March 2011, the respondents filed and served a defence to the ASOC.

amended statement of claim

15    The ASOC, in its final version, removed Troy Daly as a party to the proceeding, but while it referred to United Realty, did not add it as a new respondent as had been foreshadowed.

16    The ASOC alleges that Mr Dixon, on behalf of JP Dixon, represented that JP Dixon would grant Tada an exclusive licence to carry on the real estate business under the JP Dixon banner in the Market, controlled the use of the banner by other entities, would not compete with Tada in the Market during the licence term, and if JP Dixon or other entities using the banner gained properties to list in the Market, it would hand them over to Tada. Further, the proposed licence agreement would not be a franchise agreement.

17    The ASOC alleged that JP Dixon made further representations on or about 14 August and 22 August 2007 that the licence agreement would contain certain terms, including that Tada would pay JP Dixon 10% of the gross commission on all sales, 5% of gross commission on all rentals and a fee of 20% of gross commission on sale of properties sold in the Market which had been introduced by JP Dixon or other entities using the banner and operating in Melbourne. Further, that JP Dixon would not license other entities to use the banner in the Market during the licence agreement or compete with Tada in the Market and Mr Dixon would not allow other entities of which he was a director, or controlled, to do so.

18    The ASOC pleads that the representations and the further representations were made in trade and commerce and in reliance on, and induced thereby, Tada entered the agreement dated 22 August 2007 (not executed that day).

19    The ASOC pleads that the representations and further representations were misleading and deceptive as neither Dixon nor JP Dixon, had, as at August 2007, determined not to compete with Tada in the Market by using the JP Dixon name to sell real estate on the Peninsula, did not inform Tada that they intended to sell property on the Peninsula in the Market without referring it to Tada, or, where the opportunity arose (although they would not establish a real estate agency office in the Market), that Mr Dixon would procure JP Dixon or other entities he controlled to sell property on the Peninsula, rather than refer it to Tada.

20    The ASOC alleges that Dixon contravened s 52 of the Trade Practices Act 1974 (Cth) (“TPA”) or engaged in unconscionable conduct contrary to ss 51AA and 51AC of the TPA and ss 7 and 8A of the Fair Trading Act 1999 (Vic), by reason of which paragraph 12 of the ASOC alleges Tada has suffered loss and damage. The particulars to paragraph 12 of the ASOC provide:

Since approximately August 2007 Tada has pursued the development and growth in the Market in the name “JP Dixon” rather than pursuing the development and growth of goodwill in the name “Troy Daly” or similar name.

Tada has become bound to and has paid to JP Dixon commission in the sum of $232,937.90 which it otherwise would not have paid.

21    On 16 May 2011, Tada’s solicitors provided an updated Pitcher Partners expert report (“Blashki report”) to Dixon’s solicitors. The Blashki report followed an earlier report by Blashki dated 1 September 2010. It stated that it provided an expert opinion in relation to the cost of re-establishing Tada’s business in the event that its agreement with JP Dixon was terminated. It contemplated that Tada would terminate the agreement, thereby lose significant income and would re-establish the business to its present level of profitability.

22    On 16 May 2011, in response to Dixon’s request, Tada’s solicitors also gave further and better particulars to paragraph 12 as follows:

As to paragraph 12 of the Amended Statement of Claim

1.    But for the Representations and Further Representations, the Applicant (“Tada”):

a.    Would not have entered into the Licence Deed; and

b.    Would have established a real estate agency business in the Market under a banner other than “JP Dixon”.

By reason thereof, Tada has suffered the following loss and damage:

a.    Cost and expenses of entering into the Licence Deed;

b.    Costs and expenses of running the Portsea/Sorrento Office;

c.    Interest on loans, if any, to continue the daily running of the Portsea/Sorrento Office; and

d.    Costs and expenses of re-establishing the business.

2.    Further, Tada has suffered a loss of the net profit that it would have otherwise have earned if it carried on business in the Market under a banner other than “JP Dixon” and JP Dixon did not compete in the market for the term of the Licence Deed.

3.    The loss of net profits has diminished the value of any business carried on by Tada including but not limited to the goodwill of such a business.

23    The ASOC also alleges breach of contract in that the licence deed contained terms including that Tada must pay various commissions quarterly to JP Dixon and pay various other costs, that JP Dixon must pay Tada 20% of gross commission on sales by the Portsea-Sorrento office of Brighton office listings, that JP Dixon would not start up another office on the Peninsula and would not compete with Tada in the Market or list properties there, but would refer them to Tada to sell. Further or alternatively, the ASOC pleads an implied term that Tada would operate the business exclusively in the Market and the Brighton office would list properties there, but refer them to Tada to sell. The implied term is said to be implied from the course of dealings or the need to give business efficacy.

24    The ASOC alleges that JP Dixon breached the licence deed by denying that Tada has a basis to claim commission for sales and listings by the JP Dixon offices in Brighton, Toorak, Sandringham and Beaumaris in the Peninsula area.

25    The ASOC alleges that JP Dixon breached the licence deed because it denied that Tada could claim commission for sales and listings in the Peninsula region by the Brighton, Toorak, Sandringham and Beaumaris offices and further, because JP Dixon operates and carries on business there in competition with Tada.

26    In paragraph 16, the ASOC alleges:

By reason JP Dixon’s said breach of the Licence Deed Tada has suffered loss and damage.

Particulars

i.    Loss of commission on sales.

ii.    Since approximately August 2007 Tada has pursued the development and growth of goodwill in the Market in the name JP Dixon rather than pursuing the development and growth of goodwill in the name “Troy Daly” or similar name.

27    On 16 May 2011, Tada provided the following further and better particulars to paragraph 16:

As to paragraph 16 of the Amended Statement of Claim

4.    Tada has suffered the loss of commission earned on the listing and sale of properties in the Market for the period November 2009 to today being the loss of gross commission o the sale of:

a.    16 and 18 Tranquillity Court, Portsea;

b.    71 Hughes Road, Blairgowrie;

c.    12 Timaru Close, Sorrento; and

d.    3489 Point Nepean Road Sorrento

5.    Tada will suffer a loss of commission on the listing and sale of properties in the Peninsula region by the JP Dixon office in Brighton, Toorak, Sandringham and Beaumaris for the term of the Licence Deed. The monetary amount of loss suffered is to be estimated and calculated based on a net present value of the said commission as at the date of judgment.

28    Further or alternatively, the ASOC, by paragraphs 19 and 20, alleges that the licence deed should be rectified, because the parties intended that it should provide that Tada would carry on the business exclusively in the Market and pay the Brighton office 20% of gross commission Tada earned on the sale of properties listed by the Brighton office, but, instead by oversight, it caused Tada to pay JP Dixon 20% of gross commission earned by the Portsea-Sorrento office on sales and listings on the sale of properties listed by the Brighton office.

defence

29    By a defence dated 11 March 2011, Dixon admits that from before June 2007 until about February 2007, JP Dixon conducted the Brighton business under the name “JP Dixon Real Estate Brighton”, which it sold to United Realty on 1 March 2008, since when United Realty has conducted the business.

30    Dixon admits that JP Dixon granted licences over the JP Dixon trading name to various entities for Beaumaris, Sandringham, Brighton, Toorak and Noosa.

31    Dixon admits that negotiations occurred to enable Tada to open a real estate business under the name “JP Dixon Portsea-Sorrento” and executed the agreement with Tada.

32    Dixon denies that they represented that Tada would have an exclusive licence to operate in the area, that JP Dixon would not compete with Tada during the licence term and that the agreement would not be a franchise agreement. They admit that they represented that JP Dixon would be entitled, but not obliged, to list properties in the Portsea-Sorrento area and refer the listings to Tada.

33    Dixon denies that they represented that JP Dixon would not establish another office in the Market. They admit that the relevant correspondence stated that properties signed up by agents from Brighton, Sandringham, Portsea-Sorrento offices would receive 20% commission, but dispute the meaning attributed to the term.

34    Dixon denies that the representations induced Tada to enter the agreement.

35    Dixon admits the various pleaded clauses of the licence deed, but deny the implied term.

36    Dixon denies that JP Dixon operates offices in Brighton, Toorak, Sandringham or Beaumaris.

37    Dixon denies the rectification claim.

PARTIES’ CORRESPONDENCE

38    Between March and May 2011, the parties corresponded. Dixon sought responses and further and better particulars of loss and damage and foreshadowed that it would issue a summons for orders for further and better particulars (due on 1 April) and the filing and service of expert evidence. Mr O’Brien deposed to the correspondence as follows:

21.    On 2 May 2011 I received a facsimile from Mr Morehead in which he proposed that the trial be split on liability and damages. He also proposed that, on the assumption that the trial was on both liability and damages, his client file and serve all of its expert evidence (including a supplementary report from Pitcher Partners) and further and better particulars of loss and damage by 13 May 2011, with the Respondents to file and serve any expert evidence by 10 June 2011…

22.    On 4 May 2011 I responded to Mr Morehead's facsimiles of 21 April 2011 and 2 May 2011. In paragraph 4 of my letter by email, I requested to be provided with certain documents referred to in the first Pitcher Partners report on the basis that they were discoverable. As a separate matter, I indicated that the Respondents did not agree to conducting a split trial and wished to proceed to trial on 25 July 2011 on both liability and loss and damage issues…

23.    On 16 May 2011 I received a facsimile from Mr Morehead enclosing further and better particulars of the Amended Statement of Claim and a further report of Mr Blashki of Pitcher Partners…

24.    On 19 May 2011, I sent a further facsimile to Mr Morehead dated 18 May 2011, responding to his facsimile of 16 May 2011. In the facsimile I requested discovery of particular documents some of which have been requested under our facsimile of 4 May 2011. Further to this, in detail I set out the Respondents’ concerns about the Applicant’s Amended Statement of Claim, and in particular, the failure of the Applicant to provide Further and Better Particulars of Loss and Damage and the nature of relief sought by the Applicant. I requested to be advised by the end of the week, being Friday 20 May 2011. On 25 May 2011 I received a response from Mr Morehead to my letter dated 18 May 2011. Mr Morehead's response provided some but not all of the documents requested in my letter and none of Further and Better Particulars of Loss and Damage, nor clarification of the nature of relief sought by the Applicant…

39    On 17 March 2011, Dixon’s solicitors sought to be formally served with the earlier Blashki report if it were to be relied on in court. The facsimile relevantly stated:

Your client appears to be alleging that by entering into the agreement it has lost the opportunity to pursue and develop a business using its own name or a similar name. If it is your client’s intention to rely upon the report as evidence of this allegation then we will object to the report on the basis that it is irrelevant. The report does not deal with your client’s alleged opportunity losses as opposed to “the cost of re-establishing” your client’s business in the event that the agreement with our client is terminated.

40    In a letter dated 18 May 2011, Dixon complained that the further and better particulars were inadequate. The letter stated:

(a)    on the basis of the Pitcher Partners reports, it appears that your client is seeking termination of the agreement, which is not sought in the application;

(b)    in the application, your client is seeking:

(i)    rectification of the agreement so that it is exclusive, and enforcement of the agreement as rectified for the balance of the term; and

(ii)    damages in respect of its losses entailed as a result of trading under the JP Dixon name instead of:

(A)    trading under the name of Troy Daly or a similar name; or

(B)    entering into a ‘similar agreement’ (to the one with JP Dixon, presumably on an ‘exclusive basis’ although this is not clear and the nature of a ‘similar agreement’ needs to be particularised by your client).

41    The letter complained that Dixon still did not know whether Tada was seeking termination of the agreement or rectification, and did not know the quantum claimed in the case made against them. Dixon could not engage a real estate industry expert to provide evidence on Tada’s claim for loss and damage, as it did not know the case they had to meet. Whether Tada traded under Mr Daly’s own name, a similar name or entered into an agreement with an established agency, would be critical in assessing Tada’s alleged loss and damage.

42    The letter stated:

Our client does not want the trial of the matter to be delayed and therefore we request that you take immediate steps to properly inform our clients of the nature of your client's case through the provision of adequate further and better particulars of loss and damage, and that your client comply with its obligations to provide discovery of relevant documents (which we have raised with you in this letter in previous correspondence).

Insofar as further and better particulars of loss and damage is concerned, we request that you:

(a)    state the nature of the relief your client is seeking in the proceeding (in particular, whether it is termination or rectification);

(b)    provide further and better particulars of the loss and damage claimed by your client as relevant to the relief sought including the usual (numerical) calculations of that loss and damage, which we would expect to include:

(i)    in the case of termination, the calculations of your client's loss and damage taking into account, on the one hand, your client's current financial position as a result of trading under the JP Dixon banner (including the financial benefits obtained under) and, on the other hand, the position had your client:

(A)    traded under the name of Troy Daly or a similar name; or

(B)    entered into ‘a similar agreement’ to the one with JP Dixon (the scope of which needs to be clarified by your client at the relevant time);

(ii)    in the case of rectification, the calculations of your client's loss and damage suffered to date, and to the extent to which an amount is claimed in relation to the balance of the agreement after rectification, calculations of that amount (if any).

43    The letter further complained that:

(a)    No usual particulars of loss and damage including the usual “calculations” were provided. No calculations or monetary sums were included.

(b)    There was no basis on which to assess the relative position between Tada pursuing the development of a business in Troy Daly’s own name “or a similar name”, as pleaded, and the position of Tada under the agreement.

(c)    There were no calculations in relation to the sum of $232,937.90 which Tada claimed it otherwise would not have paid to JP Dixon. No allowance was made for the financial benefits (such as commissions) obtained by Tada as a result of trading under the JP Dixon banner or having listings referred to it by other JP Dixon offices. The further and better particulars did not address the financial position that Tada would have been in had it operated under the name Troy Daly “or a similar name”. There was no comparative financial analysis of the two positions, including the costs, expenses, revenues and profits/losses associated with the two positions (and an allowance for goodwill).

(d)    Paragraph 12 of the ASOC provided no figures or calculations in relation to the items listed as loss and damage in sub-paragraphs 1(a)-(d) of the further and better particulars, some of which would have been incurred by Tada in any event had Tada not set up under the JP Dixon banner.

(e)    Paragraph 2 of the further and better particulars claimed that Tada suffered a loss of the net profit it would have earned if it had traded under a banner other than JP Dixon and JP Dixon did not compete in the market, which ignored the fact that if Tada had operated under a banner other than JP Dixon, JP Dixon would have been free to compete in the market.

(f)    Tada appeared to suggest that had it not operated under the JP Dixon banner, it may have operated under the banner of another real estate agent, rather than under the name “Troy Daly or similar” which was different from the scenario in the ASOC in the further and better particulars to paragraph 12. The likelihood that the loss and damage claim would be different had Tada traded under the banner of an established real estate agent rather than trading under the name “Troy Daly or similar name” was not addressed by adequate further and better particulars.

(g)    The particulars to paragraph 16 of the ASOC were likewise not expressed as sums of money and the calculations by which they were reached.

(h)    The Blashki report was not a substitute for further and better particulars because it appeared to be a “rehash” of the Pitcher Partners report dated 1 September 2010. The calculations of loss and damage were updated with respect to a schedule of “background sales information by property” apparently provided to Pitcher Partners. The additional information provided to Pitcher Partners was not provided to the respondents and it was unclear how the updated calculations had been arrived at in the absence of the instructions to Pitcher Partners.

(i)    As with the 1 September 2010 Pitcher Partners report, the Blashki report was premised on Tada terminating the agreement in place with JP Dixon, but Tada did not seek to terminate the agreement. Further, the report assumed that Tada would enter into another agreement with a real estate group, as opposed to trading under the name of Troy Daly or a similar name. It thus appeared to be irrelevant to the pleaded case.

(j)    The report did not remedy the deficiency in particulars of loss and damage, as it did not relate to the remedy sought, which was apparently damages (for sales made to date) and rectification of the agreement for the balance of the term into the future.

44    The letter also sought discovery of various documents.

45    By a letter to Dixon dated 25 May 2011, Tada’s solicitors provided some but not all documents sought, but no further and better particulars. The letter also stated that Tada did not seek “to terminate the 2007 agreement”.

TADA’S CONTENTIONS

46    In its written submissions, Tada contended that the statement of claim was not so fatally flawed as to justify strike out.

47    It submitted that by consenting to the filing and service of the ASOC on 24 February 2011 and serving its amended defence, Dixon had implicitly acknowledged that the pleadings clearly defined the issues to be tried and it must have understood the case.

48    It submitted that Dixon only sought further and better particulars of loss and damage three months after being served with the ASOC, having filed a defence.

49    Tada also asserted that the Blashki report evidences the loss and damage Tada suffered by its reliance on the representations and, in particular:

18    The expert report settled with the particulars estimates the costs of re-establishing the business. The expert report considers, , the estimated:

a.    "savings in cost of sales, insurance, internet subscription and salary related expenses";

b.    "lost sales income based in year one, based on actual sales in 2008 as a proportion of sale in 2010";

c.    "lost sales income in year two and the lost rental income in years one and two";

d.    "savings in cost of sales, insurance, Internet subscriptions and salary related expenses in years one and two assuming that they would decrease in proportion to the reduction in income."

19.    The expert report evidences the loss and damage suffered by Tada in consequence of its reliance on the misrepresentations. Tada's case as pleaded is that but for the representations it would have pursued the development of its own real estate agency without using the name JP Dixon. If it had done so Tada would have established itself and would reasonably anticipate earning profits as an established real estate agency. The measure of this loss which Mr Blashki has calculated is to show the profits which Tada will forego if it is now required to establish itself as a real estate agency using a name other than "JP Dixon".

20.    Dixon complains that Mr Blashki's evidence is not relevant to the pleaded case. Mr Blashki's evidence addresses precisely the issue of the position Tada would find itself today but for the misrepresentations which induced it to enter into the agreement with JP Dixon.

21.    Mr Blashki's evidence addresses the financial position that Tada would have been in if it had operated other than under the "JP Dixon name, but under the name of another real estate group." Mr BIashki sets nut a comparative financial analysis of the position now with what can be reasonably anticipated if Tada "recommences" using another name.

(footnotes omitted)

Discussion

50    It is well established that the fundamental object of pleadings and particulars is to inform the opposite party of the nature of the case it has to meet. Order 12, rule 5 of the Rules provides that the Court may order a party to file and serve particulars of any claim, or where a party claims damages, particulars relating to general or other damages.

51    In McKellar v The Container Terminal Management Services Ltd (1999) 165 ALR 409; [1999] FCA 1101, Weinberg J stated, at [21]:

The purpose of pleadings is to define the issues and thereby to inform the parties in advance of the case they have to meet so as to enable them to take the steps necessary to deal with it: Dare v Pulham (1982) 148 CLR 658 at 664; 44 ALR 117.

52    In McIntyre v Southern Cross Equities Ltd [2011] FCA 455, Mansfield J approved Weinberg J’s views and ordered pleadings alleging loss and damage as a result of entering into an agreement in reliance on misleading and deceptive conduct to be struck out, because the respondent had:

...serious difficulties in identifying the real issues to be determined at trial, so that it cannot decide what evidence might be required in defence of the claim, or the scope of the expert advice or other evidence to be procured in preparation for the trial.

53    The power to strike out, should, however be exercised sparingly and only where there is a manifestly untenable case. Frequently, further and better particulars suffice, as an alternative to striking out the entire pleading.

54    In my opinion, Dixon’s complaints of inadequacy of the particulars of loss and damage were well-founded.

55    Tada alleges that misleading and deceptive representations induced it to enter the licence deed with JP Dixon. The loss and damage alleged in paragraph 12 constitutes an assertion that since August 2007, Tada has pursued one course of action rather than another. The further and better particulars to paragraph 12 assert that but for the misleading representations, Tada would not have entered the licence deed and would have adopted a different course instead, establishing a business under a banner other than JP Dixon. That is a much wider assertion than the allegation in paragraph 12 itself, which somewhat obliquely alleges that Tada had developed goodwill in the market under JP Dixon, rather than under Troy Daly or a similar name.

56    Some of the heads of damages in the further and better particulars (a), (b) and (c) would follow from having entered the licence deed and establishing the business under it (although expenses would also be incurred in establishing the alternative business). Particular (b) refers to the costs and expenses of re-establishing the business (which do not appear to flow from the establishment of one business rather than another as at August 2007) and that Tada has been building up goodwill under the JP Dixon banner, rather than one associated with Mr Daly. While that would always have been the necessary consequence of entering the licence deed, the further and better particulars allege that Tada has suffered a loss of the net profit it would have earned if it had carried on business under a banner other than JP Dixon (again, a very wide category) if JP Dixon did not compete in the Market for the term of the licence deed.

57    The allegations that Tada would not have entered the licence deed and that JP Dixon would not compete appear mutually incompatible, as the licence deed is the only apparent basis on which JP Dixon would be precluded from competition. In any event, the allegation is that Tada’s net profit would have been greater had it pursued the alternative option.

58    The further and better particulars then assert that the loss of net profits (which is based on a comparison with a hypothetical) diminished the value of the goodwill of the business Tada carried on (that is, the goodwill under the JP Dixon banner). The apparent core assertion is thus that Tada would have made more net profit under another banner (which is not identified, save that it would not be JP Dixon). The assertion is underpinned by an assumption that JP Dixon would not have been competing with that business.

59    In addition to a number of apparent logical flaws and lack of requisite specificity, the further and better particulars indicate no particular quantum or even a general “ball park” figure, nor necessarily, how it has been calculated.

60    No calculations or figures are included. Further, the Blashki report is predicated on termination of the licence deed, which Tada does not seek. It also assumes that Tada would enter an agreement with another real estate group.

61    The loss and damage alleged in paragraph 12 includes the amounts of commission in the sum of $232,937.90 Tada paid to Dixon which it would not otherwise have paid, but does not identify the transactions or give particulars of amounts, figures or a means whereby the total was arrived at.

62    The loss and damage for breach of contract has the identical, generalised alternative “pursuit of goodwill” assertion as the misleading and deceptive conduct allegation, although the latter is predicated on rejection of Tada’s construction of the licence deed. There is also a bare assertion of “loss of commission on sales”. The further and better particulars supplied on 16 May 2011 identify four transactions in the Market from November 2009 to today, being loss of gross commission on sales, but there is no identification of the sum of the sales or commission or how the total sum is calculated.

63    As Dixon submitted:

13.    In this proceeding, the Applicant has not clarified in the pleadings or given particulars of how it alleges it has the suffered loss and damage in its amended claim. In particular, it is not clear to the Respondents whether the Applicant alleges that, had the Agreement not been entered into, it would have traded as "Troy Daly" or similar name"' or under the banner of another established real estate agency, presumably with offices in other locations in the Melbourne region capable of providing referrals to the Applicant's business on the Mornington Peninsula. Nor does the Applicant provide any particulars of the nature of the commercial relationship it allegedly would have entered into, had it entered into a relationship with another real estate agency, including whether the relationship would have provided 'exclusive territory' to the Applicant, and the likely commission structure. In so far as the Applicant has purported to provide further and better particulars, it has not provided any of the usual calculations to show how the particulars have been arrived at, or indeed any quantum or damages.

14.    Depending upon the material ultimately proffered by the Applicant, the Respondents propose to engage an expert from within the real estate industry to provide an opinion on the validity of the assumptions in the Applicant's claim, and on the loss and damage claimed. However, the Respondents are unable to proceed with this course of action until the Applicant has clearly articulated the basis of its claim for loss and damage, including the assumptions relied upon support [sic] of the claim and he [sic] Applicant's calculations of loss and damage.

64    It is necessary to identify the loss and damage alleged with sufficient precision. Dixon is entitled to such particulars in order to know the case it must meet and to prepare its evidence, including expert evidence, accordingly.

65    In addition to the particulars of loss and damage of which Dixon principally complains, there are a number of obscure features of the ASOC, including paragraph 19, the meaning of which was unclear.

66    Despite the breadth of criticism in Dixon’s submissions, at the hearing before me, the issues between the parties narrowed.

67    Dixon made clear that they principally sought clarification of whether Tada contended that, as paragraphs 12 and 16 on their face suggested, it would have traded under the name Troy Daly or a similar name, as Dixon had initially apprehended; or alternatively, whether Tada more broadly contended that it would have started a business under the banner of a real estate agent other than Troy Daly or similar. Dixon contended that those alternatives remained unclear.

68    If the latter alternative were advanced, Dixon required particulars of the terms of alleged alternative agreements and possibly the subpoena of documents in order to prepare answering evidence. Dixon sought vacation of the trial date only if Tada alleged the wider alternative and could meet the claim for loss and damage on the scheduled trial date if it were limited to Tada trading on its own account under the name Troy Daly or similar.

69    Notwithstanding Dixon’s contention that Tada’s expert evidence and elements of its claim were flawed, contained incompatible assumptions, and did not make good the pleaded case, Dixon primarily sought clarification of the principal question, which many requests in repeated correspondence had failed to elicit.

70    Dixon acknowledged that Tada had now provided a substantial number of the documents sought and the parties might resolve the dispute over discovery of the few outstanding documents.

71    Senior counsel for Tada made clear that, at trial, Tada would maintain that in the event that Tada failed on its contract and rectification claims, it would allege that the loss and damage arising from the alleged misleading and deceptive conduct was that Mr Daly would not have started up the business pursuant to the licence deed (without exclusivity in the Market) but would have started up a business under his own name or similar, and would have been better off. Senior Counsel submitted that the Blashki report indicated that in such a case, the business would be poised to make a certain level of profit. The gist of Tada’s alleged loss was having to build a business twice, which the report addressed.

72    Senior counsel indicated that Tada was willing either to provide further and better particulars reflective of clarifications articulated at the hearing, or to re-plead paragraphs 12 and 16 of the ASOC with full particulars and to clarify some further issues identified by the Court.

73    In the light of the parties’ respective positions, I ordered either that further and better particulars be provided or alternatively that the relevant paragraphs be re-pleaded with full particulars.

Costs

74    Tada submitted that costs should be in the cause or reserved, because Dixon had applied for orders vacating the trial date and strike out, but at the hearing had essentially sought only limited relief and the hearing had proved useful in preparation for trial. I considered, however, that Dixon’s complaints about the lack of clarity of the pleading and inadequacy of the particulars of loss and damage were well founded and, together with the principal query, had been reiterated from an early stage without a sufficient response.

75    There was no satisfactory explanation for why Tada had hitherto failed to proffer the fundamental clarification.

76    In such circumstances, I concluded that Tada should pay the respondents’ costs of the notice of motion and any costs thrown away by reason of the amendment.

Associate:

Dated:    22 June 2011