FEDERAL COURT OF AUSTRALIA

Jasmin Solar Pty Ltd v Trina Solar Australia Pty Ltd [2020] FCA 1018

ORDERS

THE COURT ORDERS THAT:

1.    The time fixed by the order of 27 April 2020 for the filing of the amended statement of claim be extended to 8 June 2020.

2.    The applicant have leave to amend the statement of claim as it sees fit in relation to the causes of action presently pleaded.

3.    The interlocutory application dated 22 June 2020 otherwise be dismissed.

4.    The parties are to be heard on the question of costs of the interlocutory application dated 22 June 2020.

5.    The applicant pay into court the sum of $300,000 (three hundred thousand dollars) as security for the respondents’ costs until the trial of this action.

6.    The parties are to be heard on the question of costs of the application for security for costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    The principle proceedings were commenced on 30 September 2015. Broadly speaking, the applicant’s complaint is that the respondents engaged in misleading and deceptive conduct under the Australian Consumer Law (‘ACL’) by misrepresenting its ability to supply a certain product within a certain timeframe so as to meet the applicant’s requirements, and that they have suffered loss as a result.

2    In the intervening five years, the parties have been engaged in arbitration and litigation in the United States, as well as litigation in this country, the latter relating to the applicant’s entitlement to serve these proceedings on the respondents. As a result of the arbitral proceedings, this action has been stayed since 12 June 2017. However, following the determination of the litigation in the United States, the parties have recently returned to the Court and the applicant wishes to proceed with its claim. The respondents, on the other hand, have taken some pre-emptive action by filing two interlocutory applications. The first seeks to strike out the applicant’s statement of claim or parts of it and, the second seeks to obtain an order for security for costs.

3    For the reasons which follow, the application to strike out the statement of claim should be dismissed. That is not to say however, that the statement of claim in its present form does not require some alterations, including the provision of appropriate particulars in respect of a number of allegations. Counsel for the applicant acknowledged as much during the hearing and the applicant should have leave to make amendments as it sees fit in relation to the causes of action presently pleaded.

4    In relation to the application for security for costs, the applicant should provide security in the amount of $300,000 by paying that amount into Court with the respondents having leave to make a further application in the future if the circumstances so require it.

Background

The identities of the parties

5    The applicant, Jasmin Solar Pty Ltd (‘Jasmin’) is an Australian registered company which generally operates and conducts business in Queensland. An associated company registered in the Unites States, called JRC Services LLC (‘JRC’) owns 10% of Jasmin’s shares. Jasmin’s business model involved it installing solar panels on the roofs of its customers’ houses and receiving a feed-in tariff and a rebate for electricity supplied from those panels to the power grid.

6    The first respondent, Trina Solar Australia Pty Ltd (‘Trina Australia’), is an Australian registered company albeit wholly owned by Trina Solar (Luxemburg) Holdings SARL. Its ultimate holding company is Trina Solar Ltd, which is incorporated in the People’s Republic of China in Changzhou. The second respondent, Trina Solar (US) Inc (‘Trina US’), is incorporated in the state of Delaware and is a related company of Trina Australia. The respondents, as a conglomerate, manufacture and distribute solar panels.

The circumstances leading to the making of the claim

7    On 25 June 2012, the Government of the State of Queensland announced a change in its policy, the result of which was that the feed-in tariff available in respect of electricity supplied through privately owned solar panels would be reduced by approximately 80%. That change, which was subsequently enacted in legislation, did not apply to persons who had been approved by Energex before 10 July 2012 for connection to the power grid and who had a solar system installed by 30 June 2013. Consequently, Jasmin sought out and entered into agreements with 2,167 customers in the period between 25 June 2012 and 10 July 2012. Those customers agreed to have a solar panel system installed on their roofs and Jasmin obtained Energex’s approval in respect of them. Consequently, an imperative for Jasmin was to obtain and install solar systems for these customers by 30 June 2013. If it failed to do so it would lose the benefit of the higher feed-in tariffs.

8    Jasmin entered into negotiations with Trina US for the supply of solar panels and mounts to meet its requirements. It alleges that in the course of those negotiations various representations were made by the respondents relating to the specifications of the solar panels and mounts which they had available for sale, and the timeframe in which they could be supplied. This, so it is said, caused Jasmin to seek, and persist in seeking, supply from the respondents in preference to other suppliers. Ultimately, JRC executed a supply agreement with Trina US on 7 November 2012, of which Jasmin was a guarantor.

9    Trina US ultimately made a number of shipments to Jasmin’s warehouse, for which Jasmin was invoiced USD$1,826,264. Jasmin refused to pay on the basis that the solar panels were said to have been delivered late and did not meet required specifications. Jasmin alleges that because it was unable to source the correct solar panels in time, 800 of its customers cancelled their contracts, and 250 of their customers’ installations occurred after the 30 June 2013 deadline with the result that it lost the benefit of the higher feed-in tariff.

Proceedings in the United States

10    In May 2014, Trina US initiated arbitral proceedings against JRC and Jasmin pursuant to an arbitration clause in the sales agreement. It sought recovery of the sum of USD$1,826,264. Jasmin claimed that it was not a party to the agreement and not bound by the arbitration clause and so it did not participate in the arbitration. Nevertheless, on 21 January 2016 the arbitrator made an award against both JRC and Jasmin, ordering payment of the USD$1,826,264.

11    In January 2017, Trina US successfully applied to enforce the arbitration award in the United States District Court. Jasmin lodged an appeal to the United States Second Circuit Court of Appeals in May 2017, which was subsequently allowed on 2 April 2020 on the basis that Jasmin had not been a party to the supply agreement and was not bound by the award.

Proceedings in Australia

12    Jasmin issued the present proceedings on 30 September 2015 seeking damages under the ACL and an order that the supply agreement dated 7 November 2012 was void ab initio. On 6 November 2015 Jasmin applied to serve the originating application and statement of claim on Trina US. That application was granted by Edelman J in this Court. Subsequently Trina US appealed that decision, but it was dismissed by the Full Court on 25 January 2017.

13    As previously mentioned, the present proceedings were stayed on 12 June 2017, pending the determination of the applicant’s appeal to the United States Court of Appeals for the Second Circuit. The parties advised the Court of the outcome of that appeal on 3 April 2020, which precipitated a case management hearing on 27 April 2020, at which orders were made for the further progression of the matter, including that:

(a)    Jasmin file and serve any amended statement of claim by 25 May 2020; and

(b)    The respondents file and serve any application for security for costs and/or an application to strike out all or part of the statement of claim by 8 June 2020.

14    Jasmin lodged an amended statement of claim (‘ASOC’) on 6 June 2020 (a Saturday), which was then filed on 8 June 2020 (ten days late). On 8 June 2020, the respondents filed an application for security for costs. On 22 June 2020, the respondents filed an application (ten days late) to strike out the statement of claim because of the late filing or, if leave were granted to extend time to file the ASOC, to strike it out.

the claim AS PLEADED

15    The content of the applicant’s ASOC is central to the respondents’ application, and it is necessary to set the nature of the claim now pleaded in some detail.

16    It begins by identifying the parties to the litigation and the nature of Jasmin’s business as identified above. Thereafter, it identifies Jasmin’s business model which was structured so as to take advantage of the higher feed-in tariff which was available until 30 June 2013.

17    Jasmin alleges that by mid-July 2012 it had held preliminary discussions with ET Solar Inc (‘ET Solar’) of San Francisco and had made an initial determination to source its solar panels from that company. It then alleges that Mr Parkins, one of Jasmin’s representatives, attended a trade fair in San Francisco where Mr John Dallapiazza of Trina US represented that the Trinamount solar panels included “ZEP mounting technology”, that using Trinamount solar panels could triple the installation speed of solar panel systems, and that Trina US could supply 250W Trinamount panels in large volumes in a timely manner to Queensland.

18    At paragraph 17 of the ASOC it is alleged that by certain email exchanges in July 2012, Trina US represented that it had the capabilities to deliver nine MW of the Trinamount modules to Brisbane in August 2012 and that it could fill any size order of the Trinamount modules. This representation is referred to in the pleadings as the “Trina US representation”.

19    It is alleged at paragraph 18 that in reliance upon those representations, Jasmin chose to use Trina US as its supplier of solar modules and mounts. As an aside, in the course of the hearing of the application to strike out this paragraph, Mr Mitchell for Jasmine “elaborated” upon this allegation by saying that the effect of choosing Trina US was that it did not seek to acquire solar panel systems from an alternative supplier and, in effect, locked in Jasmin’s association with Trina Solar. With respect, that “elaboration” ought to be expressly pleaded.

20    Paragraph 19 alleges that on 25 July 2012 Jasmin issued a purchase order to Trina US for the supply of Trinamount II 250W modules. It is then said that on or about 21 and 22 August 2012, Trina US advised Jasmin that it could not supply Trinamount 250W modules, that the price for Trinamount 245W modules would be cheaper, that Trina Australia was dragging its feet in supplying panels to Jasmin, and that panels may have to come from China. As a result, Jasmin sent a revised purchase order for 625 Trinamount II 245W modules to Trina US (the ‘Second Purchase Order’). In reply, Trina US indicated that the panels would be provided from stock in Australia if available or from China with a lead time of 6 to 8 weeks.

21    The allegation made in paragraph 23 is that on 12 September 2012, Trina Australia represented to Jasmin that “Trina Solar” would honour the Second Purchase Order subject to two matters: first, that the purchase order be placed for PAO5 modules (a US module not certified in Australia); and second that the ETA from the factory would be 8 to 10 weeks. This representation is referred to in the pleadings as the “Trina Australia representation”. It is alleged that in reliance on the Trina Australia representation Jasmin did not source the supply of 250W solar modules and mounts needed for its business from ET Solar.

22    It is then alleged at paragraph 25 that on 31 October 2012, Trina Australia advised Jasmin that there was no stock of Trinamount 250W or 300W modules in Australia, but that it could supply Trinamount 250W modules on order with a delivery date of 6 to 8 weeks. The next day, being 1 November 2012, Trina Solar (being either Trina US and/or Trina Australia) advised Jasmin that one pre-paid container of Trinamount 250W modules located in Shanghai could be shipped to arrive in 4 to 5 weeks and that Trina could supply 2.5MW of 195W panels available near Brisbane at 70¢ per watt.

23    It is alleged that Trina US delivered solar panels to Jasmin from 11 December 2012 to 28 March 2013. However, it is also alleged that the panels delivered were not those which Trina US or Trina Australia had represented they would supply against the Second Purchase Order: they were not 245W panels and they were not all Trinamount panels. Further they were not supplied in the time frame which had been indicated.

24    At paragraph 29, Jasmin alleges that the Trina US representations were misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL in that Trina US did not have reasonable grounds for representing that it could deliver 9MW of Trinamount modules to Brisbane in August 2012; and/or that it failed to disclose that it was not able to deliver stock from an Australian warehouse and that the ETA from the factory was, in fact, 8 to 10 weeks; and that it failed to disclose that there was no stock of 250W or 300MW modules in Australia.

25    At paragraph 30, Jasmin alleges that the Trina Australia representations were misleading or deceptive because Trina Australia did not have reasonable grounds for representing that it would honour the Second Purchase Order. Jasmin relies on s 4 of the ACL and asserts that the Trina Australia representation was as to a future matter and it also identifies a number of facts from which it says that it can be inferred that Trina Australia, in fact, did not have access to solar panels to provide to Jasmin or it did not intend to provide the required panels at all.

26    At paragraph 32 of the ASOC it is alleged that Trina US was involved in Trina Australia’s contraventions of s 18 of the ACL in that it was directly or indirectly knowingly concerned in or a party to the contraventions.

27    Jasmin alleges that it suffered loss and damage at paragraph 33 of the ASOC. The pleading is:

By reason of Trina US and/or Trina Australia’s contravening conduct as alleged above, Jasmin has suffered loss and damage.

The particulars of that allegation include the statement that had the contravening conduct not occurred, Jasmin would have obtained 250W panels from ET Solar in lieu of the panels supplied by Trina US. It is also alleged that the contravening conduct caused Jasmin to incur increased costs of installation, the replacement of roof fixtures, and additional storage costs in respect of unsaleable product. By a final claim it is said that it lost customers due to the delay in being able to supply panels to potential purchasers and alleges further losses arising from the damage to Jasmin’s reputation. It is said that the losses in this respect will be the subject of an expert’s report.

LEAVE TO EXTEND TIME TO FILE THE AMENDED STATEMENT OF CLAIM

28    As indicated above, Jasmin filed its ASOC almost two weeks after the date given by the Court’s orders of 27 April 2020. In their written submissions the respondents submitted that leave to extend time to file the ASOC should be refused.

29    The power to extend time is contained in r 1.39 of the Rules, which provides:

1.39 Extension and shortening of time

The Court may extend or shorten a time fixed by these Rules or by order of the Court:

                    (a)    before or after the time expires; and

                    (b)    whether or not an application for extension is made before the time expires.

This is a broad general power and it ought to be exercised in accordance with the principles in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (‘Federal Court Act’).

30    The following factors are relevant to the exercise of the Court’s discretion in the present case:

(1)    The respondents do not suggest that they suffer any prejudice by the Court extending time for the applicant to file its ASOC;

(2)    The extension sought is minimal in the context of the litigation to date;

(3)    An extant statement of claim exists such that a refusal to extend time will only result in a further application to amend that statement of claim; and

(4)    The failure to comply with the directions for the filing of the ASOC does not cause any real impediment to the litigation.

31    The respondents claimed that there was no explanation for the delay in the filing of the ASOC. Whilst that is true to some extent, it should also be recognised that at or around the date on which the ASOC ought to have been filed, the solicitors for Jasmin wrote to the solicitors for the respondents noting their inability to comply with the Court’s order and seeking an extension of time. This conciliatory and cooperative approach ought to be commended. The respondents rejected this offer and adopted a somewhat pugilistic approach to Jasmin’s non-compliance with the Court’s directions.

32    At the hearing of the interlocutory applications the ground based on Jasmin’s late compliance with the directions was only lightly advanced by Mr O’Sullivan QC for the respondents. He was right to do so. The overly aggressive correspondence from the respondents’ solicitors, and the punctilious nature of the application and supporting submissions – which included the threat of numerous interlocutory disputes in the action – had the consequence that had the respondents seriously opposed the granting of an extension of time in which to file the ASOC, the only conclusion which could be reached would have been that they were not intending to comply with s 37M and s 37N of the Federal Court Act. It can be accepted that the parties are entitled to engage in hard fought litigation and to utilise those forensic advantages which might be available to them. However, that must occur in the context of the performance of their obligation to conduct the proceedings in a manner which will facilitate the just resolution of the dispute according to law and as quickly, inexpensively and efficiently as possible. Because the parties’ compliance with ss 37M and 37N was not an issue on these applications there is no need for further comment on this issue.

Conclusion on the issue of leave to extend time

33    In the circumstances, all the relevant factors – which are identified above – point in favour of extending the time in which Jasmin might comply with the order of 27 April 2020 as to the filing and serving of its ASOC. Pursuant to r 1.39 of the Federal Court Rules 2011 (Cth) (‘Federal Court Rules’), the time fixed by the order of 27 April 2020 ought to be extended such that any ASOC be filed by 8 June 2020.

34    As a consequence of this conclusion it is unnecessary to consider the respondents’ application for the original statement of claim to be struck out, as it is now superseded by the ASOC.

Application to strike out AMENDED statement of claim

35    The application to strike out the statement of claim was made pursuant to r 16.21 of the Federal Court Rules. That rule provides:

16.21    Application to strike out pleadings

(1)    A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:

(a)    contains scandalous material; or

(b)    contains frivolous or vexatious material; or

(c)    is evasive or ambiguous; or

(d)    is likely to cause prejudice, embarrassment or delay in the proceeding; or

(e)    fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or

(f)    is otherwise an abuse of the process of the Court.

36    It is uncontentious that the power to strike out a pleading or portions of a pleading should only be exercised in a clear case where the claim or allegation is obviously devoid of merit. Numerous authorities support that proposition: see especially the descriptions used to by Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129, such as “obviously untenable that it cannot possibly succeed”; “manifestly groundless”; and “so manifestly faulty that it does not admit of argument”. The Court is cautious to strike out a pleading because to do so may well deprive a party of the opportunity to agitate a legitimate cause of action.

37    In relation to the ASOC filed 6 June 2020, the respondents submitted that the whole of the ASOC should be struck out, or, in the alternative, paragraphs 17, 23, 29, 30, 32, 33 and 34 should be struck out. The main foundation for the striking out of the whole pleading seemed to be that it was filed after the date prescribed by the Court’s directions. That ground has been rejected.

38    No application was made for summary judgment in respect of the whole or part of the proceedings. It seems, for that reason, that no contentious affidavit going to the facts underpinning the action has being filed.

Consideration

Paragraph 17: Pleading alleged to be unsupported by evidence

39    Paragraph 17 of the ASOC reads:

17.    On 18 and 20 July 2012, Trina US provided pricing to Jasmin in respect of Trinamount modules 235W, 240W and 245W and represented to Jasmin that:

17.1    Trina has the capabilities to deliver 9MW of the Trinamount modules to Brisbane in August 2012; and

   17.2    Trina can fill any order of the Trinamount modules,

(Trina US representations).

PARTICULARS

The Trina US representations were in writing and were contained in emails from Dallapiazza on behalf of Trina US to Parkins on behalf of Jasmin sent on 18 July 2012 at 4:20pm and 20 July 2012 at 10:38am and 4:26pm.

40    The precise nature of the respondents’ complaint in relation to paragraph 17 is difficult to ascertain. In general terms it was said that the representations alleged are at odds with the terms of the emails from which they are purportedly derived. Those emails (dated 18 July 2012 and 20 July 2012) were attached to the respondents’ submissions and Mr Mitchell for Jasmin did not object to their reception by the Court for the purposes of the application.

41    In relation to the representation in paragraph 17.1, the email of 18 July 2012, sent by Mr Dallapiazza of Trina US stated, inter alia, “we have the capabilities to deliver all 9MW in August”. That statement appears to fully support the alleged representation as to the respondents’ capacity to deliver a large amount of solar panels in the identified timeframe. Similarly, Mr Dallapiazza’s statement in his email of 20 July 2012 to the effect that, “because this will be coming from China, I can fill any size order”, supports the allegation in paragraph 17.2.

42    Although Mr Dallapiazza’s emails also refer to establishing credit lines and settling formal agreements, his comments as identified are unqualified. The respondents’ submission that certain statements in the email negated the possibility of the representations being drawn from the words used by Mr Dallapiazza should be rejected. Although he put forward alternative suggestions as to the supply of panels, that did not necessarily negate the representations made. It is not possible to reach any final conclusion on issues such as these on an application to strike out. It is only possible to determine that the respondents have not satisfied the stringent requirements for striking out the impugned paragraphs.

43    The respondents submitted that in Mr Dallapiazza’s email of 20 July 2012, a statement was made that the delivery time from approved purchase order to port will be approximately 6 to 8 weeks. It was said that this is inconsistent with the representations that goods could be delivered in August, because 6 weeks from 20 July 2012 was 1 September 2012. Whilst that may be so in a general sense, it should be recognised that the statement on which the respondents rely was only referring to an “approximate” delivery time and that the end of August was just outside the 6 week period. The reality is that this is a matter concerning the construction of the representation in the context in which it was given. No conclusive conclusion can be reached merely on the documents provided and in the absence of their context. The existence of the alleged representations are more than arguable on the material presently before the Court and there is no basis for striking them out as being likely to cause prejudice, embarrassment or delay in the proceeding or on any of the other grounds in r 16.21(1).

44    The respondents also submitted that notwithstanding that delivery would take approximately 6 to 8 weeks, and would therefore be later than August, Jasmin continued to deal with Trina US and negotiated for the supply of panels. It was said that this leaves it unclear as to how the Trina US representation could have caused loss. There was some superficial validity in that submission, however, it tends to dissipate when Jasmin’s case is considered as a whole.

45    Mr Mitchell for Jasmin submitted that the effect of the pleading was that it:

discloses a chain of causation which demonstrates that through the combination of the Trina US representation, the Trina Australia representation, Jasmin was strung along to continue treating with Trina in the expectation that it was bona fide intending to supply to meet all of Jasmin’s requirements which had been disclosed up front …

It was then said that, if rather than being “strung along”, Jasmin had engaged with ET Solar to begin with, it would have been able to obtain the supply which it required to meet its business model. It was said, in effect, that the counterfactual was that Jasmin would have acquired a different number of panels, being of the correct description, in a different time frame.

46    In general terms Jasmin’s submission was that the Trina US representation caused Jasmin to deal with Trina US as the supplier of solar panels to the exclusion of an alternative supplier and that causal effect continued and was ongoing unless an alternative decision was made. From there it is said that Jasmin attempted to place orders as appears from the allegations in paragraphs 20 and 21 of the ASOC. That position remained until the making of the Trina Australia representation and indeed, thereafter. Specifically in relation to the reliance which is alleged in paragraph 24, it was submitted by Mr Mitchell in the course of the hearing:

[W]e get to the reliance is then next pleaded in paragraph 24. And at this point of time there’s no attempt by Jasmin to source the supply of modules from ET Solar. And that’s based on – we don’t say in sole reliance on the Trina Australia representations, because what we’ve already said back at paragraph 18 is that the decision to choose Trina was based on the Trina US representations. That’s carried forward. We then get this further decision not to source supply of the 250 solar modules and mounts from ET Solar based on the Trina Australia representations. And perhaps that might be improved by adding the word further. So in further reliance on the Trina Australia representations.

47    In this way, Jasmin submitted that the pleading linked the Trina US representation and reliance.

48    In its present form the substance of the claim founded upon the Trina US representation can be adequately discerned, albeit at a somewhat general level. It is that the Trina US representation, which went to the capability of the Trina Solar group to expeditiously deliver a significant amount of solar panels, caused Jasmin not to investigate and deal with another potential supplier, namely ET Solar. The causal effect of the representation was ongoing through the latter part of 2012. If support for this was needed one need only go to paragraph 29 of the ASOC which provides the reasoning as to why the representation was misleading. There it is alleged that the representation was, in fact, misleading because Trina US did not hold stock in warehouses in Australia and that it would take eight to ten weeks to deliver from the factory. In other words, the representation was false because Trina US was not able to deliver large quantities of panels expeditiously to Jasmin.

49    It is without doubt that, as drawn, the statement of claim is not an exemplar of the art of pleading and Mr Mitchell acknowledged that it required amending in parts to clarify the case to be made. In these circumstances where the pleading does exhibit a discernibly arguable case, leave ought to be given to amend so as to permit clarification of the cause of action in relation to the Trina US representation.

Paragraph 23: Pleading alleged to be vague and unclear

50    Paragraph 23 of the ASOC reads as follows:

23.    On 12 September 2012, Trina Australia represented Jasmin that Trina Solar would honour the Second PO subject to two matters:

23.1    first, the Second PO was placed for PA05 modules which is a US module not certified in Australia – in Australia, it has to be a PC05 module; and

23.2    secondly, Trina manufactures Trinamount to order, we do not keep stock and especially here in Australia, and the ETA from the factory of 8 to 10 weeks.

(Trina Australia representations).

PARTICULARS

The Trina Australia representations were in writing and were contained in an email sent from Alan Ropers (Ropers) on behalf of Trina Australia copied to Dallapiazza on behalf of Trina US to Parkins on behalf of Jasmin on 12 September 2012 at 5:51pm.

Complaint 1: Reference to “Trina Solar” is vague

51    The first complaint is that paragraph 23 refers to “Trina Solar” and it is said that it is vague and unclear as to which of the respondents is being referred to. With respect, that submission lacks veracity. The statement in the email was, “it is important to remember that Trina Solar is committed to honour the purchase order”. Whilst that could refer to either entity it could also refer to both. That said, as the statement was made by Mr Ropers of Trina Solar Australia Pty Ltd, as is pellucid from the signature block at the foot of the email, there is fairly good reason for believing that the representation was made about that entity.

52    It might also be said that, on an application such as the present, the pleading needs to be read as a whole. When that is done, the statement in paragraph 30 that the Trina Australia representation was misleading because “Trina Australia did not have reasonable grounds for representing that it would honour the Second PO”, affords even the most casual reader a strong hint as to the entity referred to in paragraph 23. The submission that the expression “Trina Solar” is vague is founded upon an obdurate reading of the pleading and must be rejected.

Complaint 2: Reference to respondents honouring the Second Purchase Order is unclear

53    The second complaint is that it is unclear as to what is meant by “Trina Solar would honour the second purchase order”. Again, with respect, this submission cannot be sustained. It is sufficiently apparent that the allegation being made is that the statement was intended to represent that one or both of the respondents, but most likely Trina Australia, would fulfil the order which had been placed by Jasmin. In the context of the previous emails as to the respondents’ ability to deliver the requested solar panels, the expected arrival of the product would be somewhere between 6 to 10 weeks. All of this is fairly apparent on the face of the documents.

54    The respondents submitted that the substance of the Second Purchase Order rendered the allegation that it would be honoured by Trina Solar confusing and unintelligible.

55    First, it was said that the Second Purchase Order was addressed to JRC which, it was submitted, rendered the operative effect of the document unclear. That should be rejected. It may have been sent to JRC but it is sufficiently clear that it was intended that Trina US would be the vendor of the goods as the purchase order indicates. Trina Australia’s representation that it would assume responsibility for selling and delivering the panels referred to in the purchase order in lieu of Trina US also seems to be sufficiently clear.

56    Second, it was said that the delivery date on the purchase order was 10 August 2012 such that it is a nonsense to suggest that, in September 2012, Trina Australia represented that it would perform that obligation. Again, that submission is underpinned by an uncommercial and unrealistically inflexible reading of the document in the circumstances. It is sufficiently clear that Trina Australia’s representation was that it would perform the obligation to provide the solar panels as indicated in the purchase order. Clearly it was not intended that the goods would be delivered before the representation was made, but it is equally clear that the respondents had touted their ability to deliver large orders of solar panels within six to eight (or ten) weeks of order. Otherwise, the goods were specifically identified, as was the price of the total shipment and the consignor.

Complaint 3: Representation conveyed from actual words not pleaded

57    The respondents did make a meritorious submission in relation to this issue concerning the manner in which the representations, and particularly those in paragraph 23, are pleaded. Jasmin’s approach has been to use as nearly as possible the actual words used by the respondents rather than articulating the more precise representation which is said to be conveyed thereby. Whilst it would have been preferable for Jasmin to have articulated the effective representation conveyed by the words used, in the context of the pleading as a whole and the material produced on the hearing by the respondents, the alleged representations are sufficient to found a cause of action. As has been indicated above, the alleged representations arising from the words used by the respondents are sufficiently appear.

Complaint 4: No reference to later email which modifies effect of representations

58    The respondents also submitted that the ASOC made no reference to the further discussion contained in an email of 12 September 2012, which, so it is said, somehow modifies the effect of the words relied upon. Just how that modification might occur was not made clear and the fact that the respondents suggested alternative proposals does not seem to alter the existence of the representation on which Jasmin relies. Moreover, if the emails contain some matter or statement which alters the effect of the pleaded representation, that is something which the respondents might plead in due course. There was no substance in this criticism.

Complaint 5: Purchase order was not necessarily accepted by the respondents

59    The respondents further submitted that there was no allegation that the Second Purchase Order was accepted by either respondent or that there was ever a contract to supply the panels. That may be so. However, that is irrelevant in the context of a misleading or deceptive conduct claim. The question is not whether any contract was formed but whether the respondents made a representation as to what they would do and their ability and capacity to perform.

60    It follows that this paragraph is not deficient and it ought not to be struck out.

Paragraph 29: Pleading allegedly fails to advance claim of misleading conduct

61    Paragraph 29 of the ASOC reads as follows:

29.    The Trina US representations were misleading or deceptive, or likely to mislead or deceive, in contravention of s. 18 of the ACL in that:

29.1    Trina US did not have reasonable grounds for representing that it could deliver 9MW of Trinamount modules to Brisbane in August 2012; and/or

29.2    Trina US failed to disclose, in circumstances where it could be reasonably expected that it would disclose, that (as alleged by Trina Australia):

29.2.1    Trina manufactures Trinamount to order, does not keep stock in Australia, and the ETA from the factory is 8 to 10 weeks; and/or

29.2.2    there was no stock of Trinamount 250W or 300 MW modules in Australia;

PARTICULARS

Jasmin refers to and repeats the matters alleged in paragraphs 19 to 27 above. By reason of those matters, Jasmin infers that Trina US was never in a reasonable position to be able to supply 9MW of Trinamount modules to Jasmin in Australia or deliver any order of Trinamount modules by August 2012.

62    First, umbrage is taken at the words in parentheses in paragraph 29.2. The respondents contended they do not know how it is asserted that Trina Australia might have alleged those matters. Whilst the pleading is not clear and, indeed, the words in parentheses are probably irrelevant, the complaint by the respondents seems particularly abstruse. That is particularly so in circumstances where the respondents have produced the email of 12 September 2012 which demonstrates that Trina Australia asserted the matters in 29.2.1 and 29.2.2.

63    Second, the respondents complained that there is no allegation that Trina US was supposed to know of the matters therein alleged by Trina Australia. Again, that criticism is founded upon a reading of the pleading with an eye to error. The allegation that Trina US failed to disclose the identified matters can, at least in the first instance, be assumed to carry with it the allegation that they were known to Trina US. In any event, the pleading can stand in the absence of an allegation that Trina US knew of the matters so long as it is established that they existed.

64    Third, the respondents also complained that the use of the expression “and/or” at the end of paragraph 29.1 is confusing. With respect, whilst there may be issues around the use of that expression, it is commonly employed in legal documents and, as was submitted on behalf of Jasmin, it means either or both. In this case, the claim being advanced in 29.1 that the representation was misleading is founded upon it being as to a future matter and, as an alternative or cumulatively with that allegation, in 29.2 the ground is that the misleading nature of the representation arises by omission, the details of which are referred to therein. As Jasmin submitted, the matters in 29.2 purport to positively identify why the representation was misleading, otherwise than because it was as to a future matter. The use of the expression and/or is wholly justified in the circumstances and the respondents’ submission on this issue tends to reveal their tactics of taking every possible point regardless of its merit or value in resolving the issues between the parties.

65    It follows that there is no relevant lack of clarity in paragraph 29. However, the word “reasonable” in the particulars ought to be removed: it was rightly criticised by the respondents and Mr Mitchell on behalf of Jasmin properly acknowledged that it ought to be deleted.

Paragraph 30: Pleading alleged to be vague and unintelligible

66    Paragraph 30 of the ASOC provides:

30.    Further, the Trina Australia representations were misleading or deceptive, or likely to mislead or deceive, in contravention of s. 18 of the ACL in that Trina Australia did not have reasonable grounds for representing that Trina Solar would honour the Second PO as alleged in paragraph 23 above.

PARTICULARS

By reason of the matters referred to in paragraphs 24 to 27 above and the further matters set out below, Jasmin infers that Trina Australia did not have reasonable grounds for representing that it would honour the Second PO. Jasmin infers from the matters referred to below that Trina Australia did not have access to the product or otherwise did not wish to supply to Jasmin.

67    The sub-paragraphs of the particulars to paragraph 30 are too numerous to set out. However, their thrust is that the respondents delayed in fulfilling Jasmin’s orders by imposing unreasonable hurdles for Jasmin. It seems to be said that conduct was engaged in because of their inability to supply solar panels as they had represented.

68    The respondents submitted that the allegation in paragraph 30 is vague and unintelligible because it is not known what product was to be supplied. With respect, that submissions is founded upon a deliberately obstinate reading of the pleading. The allegation that the representation was misleading was directed to the assertion that Trina Australia could fulfil the terms of the Second Purchase Order when it had no ability to do so. The representation related to the supply of 245 Watt Trinamount II modules with ZEP hardware. Prima facie that was the product which Trina Australia represented it could supply and to which it is alleged it did not actually have access. That is supported by the further allegation that none of the panels supplied were 245 Watt and that many of the panels were not Trinamount modules.

69    A submission with some substance made by the respondents was that the allegations concerning the timing of the delivery of panels to Jasmin, albeit the wrong models and/or brand, are not sufficiently connected with the falsity of the representations. It would seem that the general claim being asserted was that the respondents had the capacity to supply the particular brand and model of solar panels within a particular time frame, but that the representation was misleading for a number of reasons. It is then said, in paragraph 27, that certain panels were delivered at particular times. This seems to be alleged as supporting the assertion that the representations concerning the respondents’ ability to deliver panels were false. The allegations in the particulars to paragraph 30 when taken together have the appearance of being instances of the respondents deliberately delaying the provision of the panels. This delay appears to be intimately connected to the damage which is alleged in paragraph 33 to have been suffered.

70    As Mr O’Sullivan QC correctly submitted, there is no express articulation of the extent to which the delivery of product departed from the deliveries which would have occurred had the representations been true. He said in the course of his submissions:

We don’t know, with great respect, what product we didn’t have access to, what time frame we were supposed to deliver the product on and failed to honour, and we are required to plead the facts which meant that we had reasonable grounds for making the representation that we would honour the purchase order on 12 September.

71    It may be that, in order to succeed in the action, Jasmin does not necessarily have to establish other than that the respondents could not sell product to it in accordance with their representations and did not. However, here, the pleading seems to allege facts, including those in paragraphs 27 and the particulars to paragraph 30, from which the Court is apparently to conclude that whatever supply of product occurred it was not in accordance with the representations, either in the timing of delivery or the type of panels. These facts seem to be relied on as evidencing the falsity of the representations and the extent of damage. If that is so, an express statement to that effect is required so as to enable the respondents to understand the case which they have to meet and to avoid them being taken by surprise.

72    Whilst some amendment is required to render paragraph 30 more comprehensible, it is far from unintelligible in the circumstances. Jasmin ought to have leave to amend the paragraph and any ancillary paragraphs to clarify the claim being made, but there is no basis on which the paragraphs should be struck out.

Paragraph 32: Pleading allegedly fails to advance claim of accessorial liability

73    The claim that Trina US was also liable for Trina Australia’s contravention is set out in paragraph 32 which reads:

32.    Further, Trina US was involved in Trina Australia’s contraventions of s. 18 of the ACL, in that it was directly or indirectly, knowingly concerned in or party to the contraventions.

PARTICULARS

Jasmin refers to and repeats paragraphs 14 and 26 above.

74    Here the complaint by the respondents has some validity. It is submitted that the decision of the High Court in Yorke v Lucas (1985) 158 CLR 661 (‘Yorke v Lucas’) is to the effect that in order for a person to be made liable as an accessory it must be shown that the person had knowledge of the essential matters which go to make up the contravention. It is further submitted that knowledge means actual and not constructive knowledge: Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1, 5. Indeed, whether the misrepresentation is as to a future matter or not, the accessorial respondent must have actual knowledge of the falsity of the representation. That is a matter which needs to be alleged and proved: Su v Direct Flights International Pty Ltd [1999] ATPR 41-677 [38]; Fernandez v Glev Pty Ltd [2000] FCA 1859 [18].

75    In Australian Competition and Consumer Commission v Online Dealz Pty Ltd [2016] FCA 732, Markovic J identified the now well accepted positon which flows from Yorke v Lucas. Her Honour said at [163] to [164]:

[163] It is necessary to show an intentional participation in and actual knowledge of the essential elements of the contravention. However, it is not necessary to show that the person appreciated that the conduct constituted a contravention. In Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [48] a majority of the High Court confirmed that the trial judge had rightly held that it was necessary to find that the relevant individuals participated in, or assented to, the companies’ contraventions with “actual knowledge of the essential elements constituting the contraventions” and that in order to “know the essential facts, and thus satisfy s 75B(1) of the Act and like provisions, it is not necessary to know that those facts are capable of characterisation in the language of the statute”.

[164] In Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17 a Full Court of this Court held at [133] that for a person to be involved in a contravention pursuant to s 75B(1)(c) of the Trade Practices Act, the person must be an “intentional participant in the contravention, the necessary intent being based upon knowledge of the essential elements of the contravention” relying on Yorke v Lucas. The Court went on to say that while it was not necessary to establish that the individual respondents had “knowledge that there was such a contravention … of the Act, it is necessary to demonstrate that each individual respondent had knowledge of each of the essential elements of the contravention”. …

76    It is apparent that paragraph 32 does not satisfy the requirement to plead knowledge on behalf of Trina US. Mr Mitchell for Jasmin sought leave to amend the particulars to paragraph 32 by adding references to paragraphs 20.3 and 30. However, there is nothing which is immediately apparent in those two paragraphs which might provide a panacea for the defects in paragraph 32. It may be that some of the matters referred to might give rise to an inference of knowledge on the part of Trina US but, if that is to be alleged, it should be expressly pleaded rather than left to the respondents to divine from vague inferences.

77    However, that is not to say that the facts alleged in the pleading could not give rise to an inference of knowledge by Trina US of the falsity of the representations by Trina Australia. That is a good reason for not striking out the claim at this stage but allowing the applicant an opportunity to re-plead, if it can.

78    In addition, Trina Solar submitted that s 4 of the ACL operates only as against a principle contravener of the Act and it does not have any relevance in relation to a claim against a person who is alleged to have been involved in or have been a party to a contravention by another: Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 [11]. That submission should be accepted and no real answer was given in opposition to it. It follows that any amendment will necessarily have to establish that at the time the future representation was made Trina US had knowledge of its falsity.

79    Rather than striking out paragraph 32 at this stage, Jasmin should have the opportunity to re-plead it, if it can. If after a suitable period it is not able to do so, it would be appropriate to terminate the accessorial liability claim.

Paragraph 33: Pleading allegedly fails to link representations and loss and damage

80    The pleading of loss and damage is found at paragraph 33 of the ASOC which provides:

33.    By reason of Trina US and/or Trina Australia’s contravening conduct as alleged above, Jasmin has suffered loss and damage.

PARTICULARS

But for the contravening conduct, Jasmin would have obtained 250W panels from ET Solar Inc at 485 sites in lieu of the 195W ,200W and 240W panels supplied by Trina US. As such, the contravening conduct caused Jasmin to incur the following increased costs:

(a)    increased costs of installation at 298 sites by an additional $300 per site in respect of labour (totalling $89,400);

(b)     at 485 sites, the roof fixtures supplied by Trina were not fit for purpose or supplied at all and had to be replaced at a total cost of $313,742.00 ($0.13 per watt);

(c)     solar panels supplied by Trina US failed at 276 sites due to water ingress because they were unfit for purpose. They were replaced by Jasmin and Jasmin did not generate a feed-in tariff of approximately $80,592 during the replacement period.

In addition, Jasmin has incurred storage costs of approximately $37,500 in respect of unsaleable products supplied by Trina US, which Trina US has refused to repossess despite request.

Further, by reason of the delay in supply, Jasmin lost customers. Approximately 300 customers who had registered via Jasmin with Energex and switched to an alternative solar panel installer because of this delay. In addition, Jasmin’s marketing campaign to attract customers from other solar installers was harmed by Jasmin’s inability to build a reputation as a reliable solar installer. The lost profit in respect of lost customers will be the subject of expert evidence to be filed and served prior to trial.

81    The respondents’ complaint is that the pleading merely alleges loss and damage arising as a result of alleged contraventions of the ACL without providing the necessary facts to show the loss and damage was in fact caused by the representations: McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409. That submission ought to be accepted. Putting aside the particulars, the facts alleged merely assert the existence of some causative effect of the misleading conduct rather than specifying the links in the causal chain.

82    The principles relating to the pleading of the necessary connection between contravening conduct and loss and damage under the ACL were referred to in Wyzenbeek v Australasian Marine Imports Pty Ltd [2017] FCA 1460 at [84] – [85]:

[84] The applicants further plead that “as a result of” the various representations they have suffered loss and damage which are particularised as being the costs of repairing the defects, the costs of and incidental to repairing and rectifying the vessel, the costs of rendering the vessel closer to fitness for the purpose for which it was purchased, diminution in the value of the vessel and loss of use. It should be recognised that attempts to plead causation in TPA / ACL claims by the use of phrases such as “as a result of”, “by reason of” or “because of” have long been deprecated. Those pieces of legislation require that the party alleging the breach plead the necessary material facts to establish the causal relationship between the misleading or deceptive conduct and the loss. In Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222 French J said that “facts and circumstances should be set out leading to a reasonable inference that the conduct and the damage stood to each other in the relation of cause and effect.” This observation has been referred to on numerous occasions (Barns v Forty Two International Pty Ltd (2014) 316 ALR 408; Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221; Hastie Group Ltd (In Liq) v Bourne; Hastie Group Ltd (In Liq) v Moore [2017] NSWSC 709 at [217]; Willmott Forests Ltd (recs and mgrs apptd) (in liq) v Armstrong Dubois Pty Ltd [2016] VSC 61). In Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2004] QSC 457, Chesterman J said at [15]:

In any cause of action in respect of which causation is an essential element it is necessary to plead the material facts which are said to give rise to the causal connection. In particular it is necessary to plead the facts which lead to a reasonable inference that the acts complained of (here the relevant non-disclosure) and the alleged later event (here the making of the dragline agreement) stand to each other in the relation of cause and effect. Douglas J put it this way in LBS Holdings Pty Ltd v The Body Corporate for Condor Community Title Scheme 13200 & Ors [2004] QSC 229 (at para [3]):

… The principle relied on is that facts must be set out which lead to a reasonable inference that the acts complained of and the loss claimed stand to each other in the relation of cause and effect and that the plaintiff must plead the necessary facts showing that causal link …

His Honour referred to Dow Hager Lawrance v Lord Norreys & Ors (1890) 15 App Cas 210at 221 and Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd & Ors (1987) 14 FCR 215 at 221–222. In the first of those cases Lord Watson had said:

There must be a probable, if not necessary, connection between the fraud averred and the injurious consequences which the plaintiff attributes to it; and if that connection is not sufficiently apparent from the particulars stated, it cannot be supplied by general averments. Facts and circumstances must in that case be set forth, and in every genuine claim are capable of being stated, leading to a reasonable inference that the fraud and injuries complained of stood to each other in the relation of cause and effect.

[85] Here the pleading barely suffices to establish the matters required of the above authorities. The conclusory statement in paragraph 60 that “as a result of” the alleged representations the applicants suffered loss and damage is, of itself, insufficient. However, other allegations to the effect that the applicants relied on the representations when purchasing the vessel, and, implicitly, that its true value was less than its sale value probably save the pleading in this respect.

83    Realising the deficiencies in the existing pleading, Mr Mitchell for Jasmin sought leave to amend the statement of claim further to add in a paragraph 24A. It reads as follows:

24A.    Had Jasmin decided to source its supply of solar modules from ET Solar Inc:

24A.1    it would have been able to purchase 10MW of 250W solar modules for delivery in full before 31 May 2013;

24A.2    the panels would have been delivered to Jasmin in Brisbane commencing 6 to 8 weeks after making the decision to purchase from ET Solar Inc;

24A.3    the 10MW of panels would have been delivered periodically in such amounts as were requested by Jasmin; and

24A.4    the panels would have cost US$0.86 per watt DAP inclusive of mounting equipment.

84    Although that amendment was objected to by the respondents, it is largely an embellishment of the allegation in the particulars of paragraph 33 to the effect that, but for the contravening conduct, Jasmin would have obtained the 250W panels from ET Solar. In the circumstances, the broad allegation comprehends within it the implicit allegation that the panels so obtained from ET Solar would have been delivered on time and installed. That being so, the proposed amendment in this respect is a matter of relocating the allegations from the particulars and elevating them as an allegation of material fact. As the allegations were already part of the pleading, albeit they were incorrectly contained in particulars, the proposed amendment should be allowed.

85    The proposed amendment overcomes a number of complaints made by the respondents and, in particular, the nature and circumstances of the delivery of the solar panels. That said, it seems to fall slightly short of establishing the existence of loss resulting from the misrepresentations. On the other hand, it might be implicit in the pleading that the panels from ET Solar would have been installed for the customers whom Jasmin had signed up so that it could put its business model as originally contemplated into effect. That would then constitute the counter-factual from which damages could be assessed by comparing it to the position which Jasmin found itself in, having relied upon the representations. However, if that is the case which is to be agitated, it should not be left to implication. It ought to be expressly pleaded.

86    A further complaint was made to the effect that there is no causal link between the alleged representations and the losses arising from Jasmin incurring costs associated with replacing solar panels which failed due to water ingress and the cost of storing unusable panels. There is, at first blush, some force in that submission. The claim is not a contractual one and, in that sense, no claim for the loss of bargained for benefits (expectation losses) are directly available. That is, however, not to say that elements of expectation losses cannot appear in a claim under the ACL for misleading conduct. In this case there is an indication that Jasmin seeks to calculate its loss as being the difference between the economic position it would have been in had it not relied upon the misrepresentations – namely it would have purchased panels from ET Solar and installed them on the roofs of their customers’ houses – and the economic position that it is in as a result of that reliance – namely that it made do with the panels it received from Trina Solar and installed them as best it could. That latter position was made worse, so it is seemingly said, because of the additional expenses relating to increased costs of installation, the unfit roof fixtures, defective panels and storage costs, all of which would not have been incurred had Jasmin acquired panels from ET Solar. The claim for loss of profits in relation to lost customers also appears to be consistent with the damages claim as identified.

87    Again, it is not unfair to observe that the pleading tends to adopt a conclusory approach to the allegations of causation and that is a practice which is best avoided, not in the least because it does not explicitly disclose to the respondents the case which they have to meet. So, for instance, if the damages claim is as has been explained above, Jasmine should plead that the additional costs would not have been incurred in the counter-factual scenario. That would then squarely establish a legally logical basis for them.

88    The respondents also complained that the allegation that Jasmin lost customers by reason of the delay in supply is objectionable. In this respect it was submitted there is no pleading that establishes the link between that delay and either Jasmin’s “choosing” Trina US in July 2012 (alleged in the ASOC at paragraph 18), or the failure to obtain solar panels from ET Solar at some later unspecified date as a result of Trina Australia’s representation that it would “honour” the Second Purchase Order. That submission cannot be sustained and the allegations sufficiently identify the connection even if is not entirely explicit. In particular, at paragraphs 18 and 24 Jasmin asserts that it relied upon the representations in not pursuing other avenues for the supply of products. The delay which caused Jasmin to lose customers was apparently the manifestation of the falsity of the representations and the connection to the counterfactual being that had the representations not been made, the loss caused by the delay would have been avoided by acquiring the product from ET Solar. Whilst it is possible to discern that connection by necessary implication, there is force in the submission that it should be expressed with greater clarity. In this respect also the pleading should be recast to elucidate the connection which is relied upon.

89    The respondents made a number of other complaints about several paragraphs of the damages claim, but they are of the same nature as those dealt with above such that any deficiency in the pleading does not warrant striking out any paragraph. It can be added that in the recent decision of Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq) (2019) 373 ALR 79 at [67]-[121], the Full Court appears to have adopted a much broader view of causation under the ACL and accepted that a loss which would not have been sustained “but for” the reliance on misrepresentation is compensable. It also seems to have radically extended the nature of the losses for which damages might be awarded under the ACL. Although special leave was refused from that decision: Gold Coast City Marina Pty Ltd v Wyzenbeek [2020] HCATrans 54; the Court recognised that a question of principle arose in that case but that the appeal did not provide a suitable vehicle for its consideration.

90    The result is that the complaints about the pleading of causation and damage were not made out. On the other hand, the respondents’ submissions did identify a number of areas where the statement of claim has adopted loose or conclusory language which, to an extent, obscures the case to be advanced. As I have identified above, Jasmin ought to clarify those matters by particulars or re-pleading so as to expose its case with greater clarity.

91    The respondents further complained that Jasmin’s claim for damages resulting from its loss of customers was unquantified. Although there is no express specification of how that loss arises, above it has been assumed that those customers would have been secured had Jasmin, rather than relying on the veracity of the representations made to it by the respondents, secured solar panels from ET Solar and installed them on the roofs of those customers’ houses in accordance with its business plan and thereby have secured an ongoing relationship. If that, or some variation of it, is the causal chain connecting the misrepresentations to this particular head of damages, the respondents are entitled to have it articulated in a manner that allows them to respond by way of a defence. Until an expert’s report is produced to quantify the claim, it is permissible for the amount of the claim to remain unstated, but that aside, the facts on which Jasmin intends to rely as founding the loss should be stated with some clarity.

Paragraph 34: Not pressed

92    Although the interlocutory application indicated that the respondents sought paragraph 34 to be struck out, their submissions both oral and written did not press this point.

Further attack on the ASOC

93    Jasmin mounted a further attack on the statement of claim on the basis that it failed to plead a proper cause of action for damages under s 236 of the ACL. The foundation of those further submissions appears to be the concerns previously considered in relation to the individual paragraphs. As indicated, those concerns were largely unfounded and, to the extent that they had some basis, leave has been given to make further amendments. In those circumstances there is no need to consider these issues further.

Conclusion on application to strike out

94    It follows from the foregoing that although the pleading has some deficiencies, it is not so defective that either it or particular paragraphs ought to be struck out. It is more than likely that most of respondents’ concerns as to the vagueness of the pleading could have been overcome by a request for particulars of the allegations. There is nothing to suggest that Jasmin has been unwilling to provide adequate particulars where it is able. The background circumstances as to the nature of the respondents’ complaints about the pleading are not fully before the court and nothing more need be said about it at this stage, although those matters are likely to become relevant on the question of costs. Jasmin ought to be given leave to make further amendments to the statement of claim to the extent they are required. The application to strike out the ASOC should be dismissed.

Security for costs

95    By a second application, the respondents sought security for costs of the proceedings pursuant to s 56 of the Federal Court Act or s 1335(1) of the Corporations Act 2001 (Cth). In this Court, the process of applying for security for costs is guided by Pt 19 of the Federal Court Rules, which provides:

19.01 Application for an order for security for costs

(1)     A respondent may apply to the Court for an order:

(a)    that an applicant give security for costs and for the manner, time and terms for the giving of the security; and

(b)    that the applicant’s proceeding be stayed until security is given; and

(c)    that if the applicant fails to comply with the order to provide security within the time specified in the order, the proceeding be stayed or dismissed.

(2)     An application under subrule (1) must be accompanied by an affidavit stating the facts on which the order for security for costs is sought.

(3)     The respondent’s affidavit should state the following:

(a)     whether there is reason to believe that the applicant will be unable to pay the respondent’s costs if so ordered;

(b)      whether the applicant is ordinarily resident outside Australia;

(c)     whether the applicant is suing for someone else’s benefit;

(d)     whether the applicant is impecunious;

(e)     any other relevant matter.

96    It is now well accepted that the primary purpose of an order for security for costs is to ensure that a successful defendant or respondent has protection for the costs incurred in successfully defending the proceedings brought against them. In other words, the order has the effect of providing a fund within the jurisdiction which will enable a successful defendant to recover their costs if the plaintiff is ordered to pay them: Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 3) (2009) 181 FCR 152, 175-176 [100]. Jasmin accepts that the circumstances are such that an order for security should be made and there is no need to deal further with that issue. The real question is the quantum of the security to be provided.

97    The process of assessing the amount of security is necessarily one which requires a broad brush approach, taking into account the information available to the Court. In the exercise of the discretion the Court must weigh the objective of ensuring an adequate and fair protection for the parties seeking security against avoiding injustice to the applicant: Pathway Investments Pty Ltd v National Australia Bank Ltd [2012] VSC 97 [55].

98    As to the quantum of security, in Lynx Engineering Consultants Pty Ltd v The ANI Corporation Ltd t/as ANI Bradken Rail Transportation Group (No 3) [2010] FCA 32 [25], it was observed that the Court does not order security for a complete and certain indemnity of an applicant’s costs but calculates that which is sufficient such that the security is neither illusory nor oppressive, neither too little nor too much, substantial but not in the nature of an indemnity.

99    The respondents seek security in the sum of $879,862.10. They say that this represents their recoverable costs of defending the proceedings. Conversely, Jasmin submits that the appropriate amount is around $240,000 up to the point of judgment. It further submits the Court should not order it to provide the full amount immediately and that any security should be delivered to the Court in instalments according to the progress of the litigation.

The material before the Court

100    The respondents relied upon an affidavit by Ms Costello, a partner of the firm who has carriage of the matter on behalf of the respondents. Ms Costello is an experienced litigation solicitor who is both well-known and well respected in Queensland. She has been involved in the proceedings since 2015. The substance of Ms Costello’s evidence is as follows:

(a)    The amount expended by the respondents to date in the litigation is $673,882.87. No doubt that figure relates to the applications to set aside service of the proceedings and the subsequent appeal. Those costs are not included in the amount sought as security.

(b)    She has identified what she has considered to be the work required to be undertaken by solicitors and barristers on behalf of the respondents from the close of pleadings until the end of trial.

(c)    Thereafter, she has identified what she ascertains to be the actual amounts which the respondents will have to pay for that work. She did so by identifying the type of work to be undertaken, the particular level of lawyer required to do that work, and the amount of time required for it to be done.

(d)    Thereafter, she has attributed a cost per hour for the work which she has identified as being reasonably foreseeable and calculates an amount of $1,221,403.50.

(e)    Ms Costello thereafter discounts that amount for the purposes of identifying the amount of costs which might be payable on a party and party basis. In doing so she applies benchmark deductions of 40% on solicitors’ fees, 10% on counsel fees and no deductions on other disbursements. Those percentages are said to be based on her experience with the assessment of costs in the Federal Court, the Supreme Court of Queensland and the High Court of Australia.

101    Conversely, Jasmin relies upon an expert’s report prepared by Mr Grisenti of Blackstone Legal Costing dated 14 June 2020. Mr Grisenti’s qualifications were not challenged and rightly so. His Curriculum Vitae discloses that he has been a legal practitioner since 2013 and from 2014 has practiced as a costs lawyer. He became an Accredited Costs Law Specialist in 2019 being an accreditation obtained through the Law Institute of Victoria. He was eminently qualified to give the opinions contained in his report.

102    Mr Grisenti’s approach was to identify a detailed breakdown of the work likely to be performed and identify the allowable costs in respect of that work. In that way he set out tasks which would be undertaken in the litigation and the amount of recoverable costs on a party-party basis. By that approach he estimated that the costs up until the first day of hearing would be around $409,000 and then $72,200 for the balance of the trial (assuming a five-day trial).

103    In his report, Mr Grisenti complied with the Federal Court Practice Note relating to Expert Evidence (‘GPN – EXPT’) and specifically stated that he had read the notes including the Harmonised Expert Witness Code of Conduct (‘Code’). Clause 2.2 of GPN – EXPT provides:

The purpose of the use of expert evidence in proceedings, often in relation to complex subject matter, is for the Court to receive the benefit of the objective and impartial assessment of an issue from a witness with specialised knowledge (based on training, study or experience - see generally s 79 of the Evidence Act).

104    Mr Grisenti also made the declarations required by cl 3 of the Code. That included the declaration required by cl 3(i) which refers to:

[A] declaration that the expert has made all the inquiries which the expert believes are desirable and appropriate (save for any matters identified explicitly in the report), and that no matters of significance which the expert regards as relevant have, to the knowledge of the expert, been withheld from the Court;

105    Naturally enough, Ms Costello was unable to comply with GPN – EXPT or the Code and she did not purport to do so. Indeed, in her affidavit Ms Costello expressly stated that she did not intend to waive privilege in any communication or record of privilege that is subject to client legal privilege. It is self-evident that compliance with the Code and the maintenance of solicitor-client privilege by the solicitor conducting the proceedings would generally be incompatible.

The approach to be preferred

106    Mr Mitchell submitted for Jasmin that Mr Grisenti has the advantage of being wholly independent of Jasmin and the solicitors who act for it. The converse of that submission is that Ms Costello does not have that degree of independence. This submission raises a point of principle, being whether a solicitor for a party involved in litigation is able to effectively swear a contentious affidavit of the nature under discussion. Such a solicitor owes the usual obligations of fidelity and loyalty to their client as well as the obligation to act in the client’s best interests. In an application for security for costs, it is in the interests of the respondents to obtain as much security as possible. That not only protects them if they are successful in the litigation against the possibility of not being able to recover the costs which they expend but, additionally, the higher the amount ordered to be secured the more likely it is that the applicant may capitulate and abandon their claim. These circumstances put a solicitor in the position of Ms Costello in a very difficult position if they were to attempt to comply with the Federal Court requirements for expert witnesses. In identifying the anticipated costs of the proceedings there will be ranges of costs within which her decisional freedom will permit the identification of a particular amount or amounts. It is in her clients’ interests for her to identify an amount of costs towards the higher end of the range. If a solicitor in Ms Costello’s position purported to comply with GPN – EXPT and the Code, they would find themselves unable to reconcile their competing obligations to their client and to the Court.

107    Nevertheless, as mentioned, Ms Costello did not purport to comply with the requirements of the Court in relation to expert evidence. Her evidence merely concerns what she anticipates the respondents will expend in the action and what she believes to be the discounts which might be applied to solicitor-client costs on a taxation undertaken on a standard party-party basis.

108    There was no cross-examination of either Mr Grisenti or Ms Costello and there is no reason to believe that their affidavits contain other than their honestly expressed statements. It should be mentioned that there is nothing pejorative in the observation that no cross-examination occurred. Given the restrictions under which the Court must operate during the current Covid-19 pandemic, including the requirement to conduct online hearings, the lack of utility in attempting to cross-examine witnesses of this nature is obvious.

109    However, where the Federal Court has a sophisticated regime for the production of expert evidence, the protocols of which are intended to produce objective and impartial assessments of issues on which the Court can rely, it is difficult for the Court not to prefer the evidence which complies with the regime over that which does not.

110    Despite the foregoing, in considering the veracity of the differing approaches of Mr Grisenti or Ms Costello, I have derived great assistance from the observations of Gordon J in Norcast S.ár.L v Bradken Limited [2012] FCA 765 (‘Norcast v Bradken’) at [17] – [19]. There, her Honour indicated that, in the end, the alternative approaches to calculating costs, which are the same as have been offered to the court in this matter, ought to achieve the same outcome, being “a reasonable estimate of the respondent’s costs which the applicant, if unsuccessful at trial, would be ordered to pay the respondent” (at [19]). In relation to the approach of assessing the amount of costs to be actually incurred and discounting to a party-party assessment, Gordon J eschewed the application of benchmark discounts. Her Honour provided a compelling reason for this, being that the reduction must necessarily depend on the basis upon which the solicitors and barristers charge their client. As her Honour said (at [23]), “[t]o put it bluntly, the more expensive the lawyers, the larger the discount”. It can be taken from her Honour’s reasons that, as the objective of the exercise is to attempt to ascertain the party-party costs which might be recoverable on taxation, the application of a benchmark discount of the indemnity costs figure is inappropriate. The approach of Gordon J should be followed.

111    In order to highlight the applicability of Gordon J’s observations, Mr Mitchell for Jasmin identified that the expected costs for senior counsel and solicitors as identified by Ms Costello were well above the scale costs and the discount of 40% for solicitors’ work and 10% for counsels’ fees applied by Ms Costello had the appearance of benchmark figures which were not supported by evidence. Indeed they were refuted by Mr Grisenti.

112    Mr Grisenti also identified some unusual aspects of Ms Costello’s compilation of the costs likely to be borne by the respondents in the action. First he referred to the assessment of the costs anticipated by Ms Costello for the conduct of three case management hearings. The total was the extraordinary amount of $45,000.00 for solicitor’s costs in addition to counsel’s costs of $39,000.00. Such costs exceed by a substantial margin any reasonable costs which might be expended on such steps in the litigation.

113    Next, Mr Grisenti referred to the costs anticipated by Ms Costello for the five day trial. He identified that Ms Costello expected that, in addition to senior and junior counsel, the attendance during that trial (being 25 Court hours), will involve 50 partner hours, 50 senior associate hours, 25 lawyer hours, 58 junior lawyer hours and 15 paralegal hours. This totalled 145 hours such that for every hour of court time the respondents’ solicitors will have staff in attendance for almost 6 person hours. That expenditure was to be in addition to the cost of having two counsel present. Mr Grisenti’s analysis of Ms Costello’s estimates was not challenged. The respondents did not provide any justification for the calculation of the hours expected to be worked by solicitors during the trial.

114    These anticipated court attendance hours by the respondents’ solicitors are excessive and especially so in the context of this case. Despite what has occurred in the past in relation to service of the proceedings in the USA and the arbitration process there, the subject matter of the action before this court is relatively straightforward. It is a case founded upon alleged misleading or deceptive conduct under the ACL and, as such, is in the “running down jurisdiction” of the Court. The alleged representations are said to have been in writing which removes what might otherwise be a difficult factual question. Whilst issues of causation and the quantification of damage, if any, will involve factual evidence and expert reports, the issues involved are not generally complex save, perhaps in relation to the question of the loss of customers and quantification of the damage sustained in that respect.

115    In these circumstances, Mr Grisenti’s conclusion that the allowance for the involvement of the staff of the respondents’ solicitors during the course of the trial was excessive should be accepted. On its face it is not possible to understand how the conclusion was reached that a five day trial will involve 145 hours of solicitors’ work. It follows that the Court should generally accept Mr Mitchell’s submission that party-party costs are intended to cover work that is reasonable and necessary and that if “Trina wish to receive service at this level it is welcome to do so at its own cost, but Jasmin would never be obliged to pay for it”.

116    The consequence is that it is appropriate to place general reliance on Mr Grisenti’s evaluation of the expected party-party costs of the trial. Importantly his view coincides with the approach favoured by Gordon J in Norcast v Bradken. His opinions are also supported by his discussion as to the underlying reasons for his conclusions. By contrast, Ms Costello’s conclusions are generally founded upon her experience. That is not to say that Ms Costello’s affidavit does not express her true opinion as to the costs likely to be expended by her clients in the litigation, however, it does reveal that the respondents are prepared to expend any amount of money in this litigation, regardless of its proportional relevance to the quantum in dispute or the complexity of issues.

117    On the other hand, the submission made by Ms Lubett for the respondents that Mr Grisenti’s calculations for some of the work required for the conduct of the proceedings was overly conservative had some force. That was particularly so in relation to the costs he allowed for the preparation of witness statements. Other calculations, especially those relating to the work with counsel appear to slightly underestimate the time and cost of that work, although not by a significant amount.

The amount of security for costs

Estimate of costs

118    Taking a broad brush approach, the total cost for the pre-trial work as assessed by Mr Grisenti should be increased by between 10% and 15% such that the total expected costs to the commencement of trial should be increased to the sum of $460,000. The total party-party costs to the end of trial is, therefore, approximately $535,000.

Discount to be applied

119    The respondents did not contest that once a figure for party-party costs is ascertained, the court can and should further discount the amount to be provided as security. It was accepted that the amount ordered to be paid is not to be a full indemnity in respect of the recoverable costs but a reasonable amount of security: Brundza v Robbie & Co (No 2) (1952) 88 CLR 171, 175. There is no specific formula to be applied to the discounting in this respect although it is necessary to gain an appreciation of the nature of the litigation. In this, considerations such as the chances of the matter settling, the possibility of substantial amounts being “taxed off” any claimed bill of costs, and any off-setting amount or costs orders are all relevant.

120    In the latter respect, Jasmin successfully defended the respondents’ appeal against the order of Edelman J allowing service of the proceedings in the United States. That would not have been an inexpensive exercise and it involved senior and junior counsel on each side. Otherwise, on the material before the Court as has been discussed above, it is likely that any bill of costs presented by the respondents will be subject to substantial discounting. Whilst they are entitled to expend as much money as they see fit in the action, they cannot expect to recover it all from Jasmin if the action is not successful. Presently, it is doubtful whether the action will settle prior to the trial, although that is not beyond the realm of possibility. It is also appropriate to take into account that the proceedings may prematurely resolve through the determination of a separate question or some other process.

121    On an impressionistic view of the case based solely upon the ASOC and the sparse material provided to the Court on the interlocutory application, it appears that Jasmin may have a good claim, even if, at present, it is poorly pleaded. Whether it will be successful is an entirely different question and no view is expressed as to the likely outcome of the action. At best, it can be said that the claim is reasonably arguable even though there remains a question as to the amount of damages which are likely to be recovered. It is to be kept steadily in mind that the respondents have not yet filed a defence and nor has any substantive evidence been filed.

122    One of the circumstances which a court may weigh in the decisional process is the quantum in dispute, although that is far from determinative and it must always be accepted that some litigants are prepared to spend more than any perceived benefit in order to enforce or defend their rights. In this case the particularised damages are $521,234 plus damages arising from the loss of customers. The latter amount as yet unquantified. At an early stage in the litigation it was asserted that the quantum of the claim was in excess of $30 million but there is presently nothing which would indicate that such remains the case. On the other hand, Jasmin submitted that it is in the process of obtaining an expert’s report in relation to that as yet unquantified loss. Whilst it might be difficult to fully assess the quantum of the claim, the nature of the losses which are being sought will involve some complexity and, at least, the provision of reports from one or two experts on each side. The cost to the respondents in defending the quantum of this claim is a not insignificant matter.

123    Again taking a broad brush approach, a discount of around 25% should be applied so as to reach the amount which Jasmin should provide by way of security. That provides substantial protection for the respondents in relation to a reasonable level of costs for this action up to the first day of trial, without being overly burdensome on Jasmin. On this basis, Jasmin should provide $300,000 by way of security for the costs of the proceeding.

124    If, as the matter proceeds, the security so ordered is found to be inadequate, the respondents are entitled to make a further application as they see fit. That is especially so in relation to the complexity or otherwise of the damages claim which is yet to be articulated. The respondents are also entitled to make a further application to obtain security for the costs of the trial.

How payment is to be made

125    An unusual aspect of this case is that in related proceedings Jasmin had paid into court the sum of USD$1,337,069. That money was paid in as a result of Trina US filing an originating application in this Court (QUD216 of 2017) seeking to enforce the arbitral award which it had secured in the United States against Jasmin. Those proceedings were adjourned by consent pending the outcome of the appeal against the award. Consent orders were made that Jasmin pay the above amount into court to secure Trina US’s position.

126    As mentioned previously, Jasmin’s appeal was successful and, as against Jasmin, the award was set aside. The consequence is that the provision of security by Jasmin is no longer justified.

127    Trina US accepts that its action, QUD216 of 2017, must be dismissed and that the amount of security be paid out to Jasmin. It was suggested by Mr O’Sullivan QC for the respondents that some of the funds held by the court in QUD216 of 2017 could be retained and held as security in the present proceedings. Whilst it can be accepted that this is not, prima facie, an unreasonable proposition, it is noted that the money held in action QUD216 of 2017 is of US denomination and the amount to be paid into court in the present proceedings is in Australian dollars. This is likely to have the result that a transfer of funds between the two proceedings will result in some administrative difficulties apart from that which will arise from transferring funds held between two actions. Overall, a process whereby Jasmin recovers the amount it has paid into court in QUD216 of 2017 and it then provides security as required by the orders made in these proceedings, will be cleaner and free from technical difficulty.

128    In the circumstances it is not appropriate to order that funds presently held in court in action QUD216 of 2017 be transferred and held in the present proceedings. Those funds should be paid out to Jasmin.

Costs

129    The parties will be heard in relation to the question of costs.

Associate:

Dated:    17 July 2020