Homemakers North Pty Ltd v MJM Investments Australia Pty Ltd
[2015] QDC 16
To print this judgment please return to the case and click on the PDF icon
next to the
case name. For court use, a full PDF copy is required or preferred.
Exit Distraction Free Reading Mode
Please Note: You are about to print a copy of the onscreen
version of
this judgment. For court use, a full PDF copy of the judgment is required or preferred. Please
return to
the case for PDF printing options.
- Unreported Judgment
- Homemakers North Pty Ltd v MJM Investments Australia Pty Ltd[2015] QDC 16
- Add to List
Homemakers North Pty Ltd v MJM Investments Australia Pty Ltd[2015] QDC 16
Homemakers North Pty Ltd v MJM Investments Australia Pty Ltd[2015] QDC 16
DISTRICT COURT OF QUEENSLAND
CITATION: | Homemakers North Pty Ltd v MJM Investments Australia Pty Ltd & Anor [2015] QDC 16 |
PARTIES: | HOMEMAKERS NORTH PTY LTD (ACN010208125) (plaintiff) v MJM INVESTMENTS AUSTRALIA PTY LTD (ACN108735217) (first defendant) and MICHAEL MUCHOW (second defendant) |
FILE NO: | 4107/14 |
DIVISION: | Trial Division (Civil) |
PROCEEDING: | Claim |
ORIGINATING COURT: | District Court (Brisbane) |
DELIVERED ON: | 13 February 2015 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 5 February 2015 |
JUDGE: | Dorney QC, DCJ |
ORDERS: |
|
CATCHWORDS: | Summary judgment – alternatively, striking out part of pleading – “involved” in misleading or deceptive conduct – “knowingly concerned” |
LEGISLATION CITED: | Uniform Civil Procedure Rules 1999, r 171, r 293 Competition and Consumer Act 2010 (Cth), Schedule 2: The Australian Consumer Law, s 2, s 18, s 18(1), s 236 |
CASES CITED: | Bundaberg Sugar Ltd v Isis Sugar Mill Co Ltd [2006] QSC 2 Butcherv Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 Google Inc v Australian Competition and Consumer Commission (2012) 249 CLR 435 Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357 Haros v Linfox Australia Pty Ltd [2012] FCAFC 42 Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 Royalene Pty Ltd v Registrar of Titles [2007] QSC 59 Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 |
Yorke v Lucas (1985) 158 CLR 661 | |
COUNSEL: | B D O'Donnell QC and D de Jersey for the second defendant (applicant) S J Webster for the plaintiff (respondent) |
SOLICITORS: | Bennett & Philp Lawyers for the second defendant (applicant) Cooper Grace Ward for the plaintiff (respondent) |
Introduction
- [1]The concern here is whether Michael Muchow (“Muchow”), the second defendant, who was the sole director of the first defendant, MJM Investments Australia Pty Ltd (“MJM”), should have either judgment in his favour against the plaintiff or an order that relevant paragraphs in the Further Amended Statement of Claim be struck out as disclosing no reasonable cause of action, or as unnecessary or scandalous, frivolous or vexatious, the former pursuant to r 293 of the Uniform Civil Procedure Rules 1999 (“UCPR”) and the latter pursuant to r 171 of the UCPR.
Background
- [2]Essentially, the claim against Muchow is that he was “involved in a contravention” by MJM of s 18 in Schedule 2, containing the Australian Consumer Law, to the Competition and Consumer Act 2010 (Cth) prohibiting misleading or deceptive conduct.
- [3]It is not in dispute that the plaintiff, Homemakers North Pty Ltd (“Homemakers”), operated as a wholesale furniture company, ordering furniture from third party wholesalers, both within Australia and overseas. Such suppliers were directed to deliver the furniture directly to MJM, who then stored it for Homemakers.
- [4]It is common ground that a written agreement (“Contract”) entered into in 2012 (dated 22 April 2012) between Homemakers and MJM governed the legal entitlements relevant to the present dispute. It is not also not in dispute that there was an earlier written agreement entered into in 2007.
- [5]The Contract related to two categories of charges. The first was with respect to charges for MJM storing furniture for Homemakers at its storage facility. And the second was for such charges for unpacking, variously called “devanning” or “decanting”, such furniture from containers.
- [6]By Clause 5.1 of the Contract the payment for services was set out in Schedule 1 (which, in turn, was referable to charging at $2.26 per cubic metre per week for storage and $31.15 per cubic metre per week for container decanting).
- [7]There are two aspects of the underlying dispute. The first regards the furniture storage. It is submitted:
- by Homemakers, that the rate should have been charged on the actual volume of each separate item of furniture used; and
- by MJM, that it should have been charged on the volume of storage space taken up in storing the products of Homemakers (as outlined in paragraph 12 of the Amended Defence filed 18 December 2014).
- [8]Regarding the decanting of containers, the respective submissions are:
- by Homemakers, that the charges should have been on the actual volume of each separate item of furniture being decanted from a container; and
- by MJM, that they should have been based on the internal volume of the container (as alleged in paragraph 10 of the Amended Defence).
- [9]It is also not in issue that MJM provided storage and decanting services to Homemakers between May 2012 and 2 October 2014, and that MJM was paid in accordance with the invoices issued and delivered by MJM to Homemakers, but only up until, and including, the Invoice of May 2014.
- [10]Because the concern here is simply with misleading and deceptive conduct, it is unnecessary to consider the other pleaded claims. With respect to such alleged conduct, Homemakers claim that each invoice, issued pursuant to the Contract, between May 2012 and September 2014 was misleading “in that each conveyed that the storage and decanting charges had been charged pursuant to the terms of the agreement and that all amounts in the invoices were due and owing”: see Muchow’s Outline of Submissions (p. 4). As that Outline of Submissions goes on to contend, the alleged contravention was pleaded to be of s 18 of the Australian Consumer Law. The basis is that the amounts stated in the invoices were not due and owing by Homemakers because the invoices were not calculated in accordance with the Contract.
- [11]Muchow is alleged to be liable as a person “involved in the contravention” (as defined in s 2 of the Australian Consumer Law), for the purposes of s 236, on the basis that he was “knowingly concerned” in the calculation of the storage and decanting charges and “knowingly concerned” in the preparation and issuing of the invoices to Homemakers.
- [12]As for the invoices, there is no dispute about their form or content, with many copies being relevantly exhibited.
Summary judgment principles
- [13]It is not in dispute that r 293 of the UCPR obliges Muchow to satisfy the court, on the material before it, both that the plaintiff has no real prospect of succeeding, and that there is no need for a trial, against him.
- [14]For its part, Muchow stresses a statement by Muir J (as he then was) in Bundaberg Sugar Ltd v Isis Sugar Mill Co Ltd[1] that it is incumbent on a respondent/plaintiff, assuming that the defendant’s material makes a case out to be answered, to adduce sufficient evidence to demonstrate a real prospect of success and, in doing so, that “it has long been recognised that the affidavits relied on by a respondent to a summary judgment application ought ‘condescend upon particulars’”: at [21]-[22].
- [15]Homemakers, for its part, stresses the exercise of significant caution, the exercise of power only in the “clearest of cases” and the need for a high degree of certainty of satisfaction that a party will not be able to succeed at trial (with relevant reference to cited authority).
Principles concerning striking out
- [16]Homemakers refers, with reference to General Steel Industries Inc v Commissioner for Railways,[2] at 129-130, that the power to strike out is to be used sparingly. Further, it stresses the importance, in such applications, for restraint, particularly where the case pleaded is a circumstantial one and the inferences to be drawn from evidence which is critical to determining liability are not common ground and where the evidence is untested, referring to Royalene Pty Ltd v Registrar of Titles[3] at [6].
“Misleading or deceptive”
- [17]The High Court has recently reaffirmed in Google Inc v Australian Competition and Consumer Commission,[4] in the joint judgment of French CJ, Crennan and Kiefel JJ, that the provision is not confined to conduct which is “intended” to mislead or deceive, because a corporation could contravene the provision even though it acted reasonably and honestly: at 443 [9].
- [18]As Butcher v Lachlan Elder Realty Pty Ltd[5] establishes for a case such as this, for it to be found that the representation was made and, if it was so made, that it constituted contravening conduct, the “plaintiff must establish a causal link between the impugned conduct and the loss that is claimed” and that “depends on analysing the conduct of the defendant in relation to that plaintiff alone” (emphasis added): see Gleeson CJ, Hayne and Heydon JJ, at 604 [37].
- [19]It is not disputed that both Homemakers and MJM each assert a different interpretation as to the meaning of the Contract concerning the calculation of charges.
- [20]Descending into the consequences of the asserted different interpretations, Homemakers contends that any separate invoice is in contravention of s 18(1) of the Australian Consumer Law if the true meaning, as determined by the court, of the Contract concerning charging is the one that it now contends for, because then it must be the fact that any relevant invoice contained false statements, with the consequence that the charges detailed in any such invoice are misleading or deceptive, even if MJM acted reasonably and honestly. Consequently, according to Homemakers, it does not matter, for the moment at least, which interpretation of the Contract is correct, because Muchow cannot, in a summary judgment application, satisfy the court that no primary contravention can be excluded on the material before this Court. This is asserted to follow because, where there are two possible interpretations and neither of them can be determined without a trial, it is impossible for Muchow to successfully contend that the plaintiff has no real prospect of succeeding and that there is no need for a trial, at least with respect to the issue of the primary contravention, before a consideration of loss.
- [21]The second aspect of the issue of primary contravention involves the question of the causal link between the impugned conduct and the loss. Muchow contends that, in the absence of evidence from any of the persons identified by Homemakers who, prior to 2014, considered authorisation of the payment of the relevant invoices, and who then approved them, such a lack of particularity means that Homemakers cannot satisfy the Court that there is evidence from which it could be inferred that it was misled or that the content caused Homemakers to make payments that it otherwise would not have made, during that time. The only other authorising person within Homemakers was William John Fagan (“Fagan”) who was appointed the new CEO in January 2014. With respect to him, Muchow contends that all invoices that he examined could not be the subject of a relevant causal link because he expressed the view on and from his first email of 21 January 2014 that the interpretation that Homemakers now alleges was not the basis of the content of the charges in the invoices. Therefore, as expressly contended for in Muchow’s Outline of Submissions, not one witness from Homemakers has sworn an affidavit saying that he or she was misled by the invoices having not been calculated by reference to Homemaker’s interpretation.
- [22]Homemaker’s response is that actual reliance does not have to be the subject of express testimony. It asserts that it is open to reasonable inferences, on a proper circumstantial case approach, that the authorised approvers of the payments in the invoices gave approval because each was an amount – though objectively false in its content – that was represented by the form of the invoice to be the total of the charges which the Contract entitled MJM to charge, and recover, from Homemakers, particularly where the “typical” selection of monthly accounts reveals a consistent reference to “as per agreement”.
- [23]Thus far, I accept the submissions of Homemakers that, for a contravention of s 18(1) of the Australian Consumer Law to succeed at this stage, it only needs to be open on the evidence before this Court at this time that the basis of the charging in the relevant invoices was arguably false (because the correct interpretation of the Contract might be that which Homemakers has asserted), that such falsity does not depend upon reasonableness and honesty on MJM’s part, and that it is open to be inferred on the evidence that it was reasonable commercial conduct on Homemakers’ part that the payment was made and the loss sustained because of inferred reliance on the implied representation that the charges made were those to which MJM was, in truth, entitled to under the Contract. Such an approach, at least as to determining a primary contravention, bypasses the detail expressed in the invoices, because it relies on falsity alone and not whether it is discernable to a reasonable examiner of the invoices that a different basis of calculation has been used. As to reliance, it is arguable on the material that such reliance could be found by a trial judge, based on commercial reality: see the comments of Kiefel J, with whom Wilcox J agreed at [11], in Hanave Pty Ltd v LFOT Pty Ltd[6] to the effect that “(t)he question of causation can sometimes be resolved not by direct evidence … but by a Court determining what effect must be taken to have resulted”: at [45]. This is applicable here even noting that those statements are “replete with qualifications”: see Haros v Linfox Australia Pty Ltd[7] at [57]. Therefore, I hold that Homemakers does have a “real” prospect of succeeding on the primary contravention.
“Knowingly concerned”
- [24]Even if Homemakers satisfies this Court that the primary contravention cannot be excluded within the ambit of r 293, it is still necessary to consider whether Muchow himself, despite the conclusions reached with respect to the primary contravention, satisfies the requirements for his liability.
- [25]It is not in dispute that Yorke v Lucas[8] has held that actual rather than constructive knowledge of the “essential elements of the contravention” is necessary for such knowing concern, pursuant to the requirement that there be proof of “intentional” participation: per Mason ACJ, Wilson, Deane and Dawson JJ at 666-670.
- [26]It is also clear that in order to know the essential facts, it is not necessary to know that those facts are capable of characterisation in the language of the statute: per Gummow, Hayne and Heydon JJ in Rural Press Ltd v Australian Competition and Consumer Commission[9] at 74 [48].
- [27]The Full Court of the Federal Court of Australia in Keller v LED Technologies Pty Ltd,[10] after stating that knowledge may be considered to include wilful blindness but not to include recklessness or negligence, held that, to establish accessorial liability where it must be established that the relevant person knew both that the representation was made and the facts of the representation (which otherwise made it misleading or deceptive, or likely to mislead or deceive, or false), it need not be shown that a person actually drew the conclusion that the representation was misleading or deceptive, or likely to mislead or deceive, or was false: per Besanko J, with whom Jessup J agreed, at 520 [336]. As he went on to comment, in many cases, knowledge that a statement has been made will be knowledge that the representation has been made, because the representation is clear from the statement (with an example being a statement about the weekly takings of a business): at 520 [337].
- [28]Contrary to Muchow’s submissions, I do not accept that it is necessary – although such proof would satisfy the necessary requirements – for Homemakers to establish that, at the time each invoice was issued, Muchow was aware that:
- Homemakers was interpreting the agreement as requiring the actual volume of furniture to be used in calculating storage and accounting charges;
- the invoices would be understood by Homemakers as conveying that MJM had calculated storage and accounting charges based upon the actual volume of the furniture stored or decanted; and
- the invoices were likely to lead Homemakers into error.
- [29]Even accepting that there is evidence to the effect that Muchow knew that the invoices were issued, delivered and paid for, knew the terms of the Contract and knew the basis of calculation of the charges included in the invoices, there is no evidence at all that he knew that the basis of the charges was not consistent with the true interpretation of the Contract (if only because that is not yet known, even now). In order to satisfy the last of those matters, it would be necessary to show that there is some evidence that he knew of matters that enabled the representations in the invoices to be characterised as false or misleading: see Moore J, with whom Mansfield J agreed, in Medical Benefits Fund of Australia Ltd v Cassidy[11] at 11 [15].
- [30]The best that Homemakers can identify about Muchow’s knowledge of the terms of the Contract arises through a combination of documents from which the inference is sought to be drawn that Muchow knew that the Contract did not provide for the storage and decanting charges to be calculated and charged in the way that MJM did so. The first document identified was an email of Muchow sent to Homemakers on 21 January 2014, in response to an email from Homemakers of that day (which had referred to “a few discrepancies” in MJM’s calculations). The reply by Muchow referred to the fact that the procedure for calculation had “always been the same” since MJM took the contract over from Johnson’s Transport. Muchow also stated that the storage costs were based on “this practice” and that “past Boards as well as the current Board are aware this is the case”. Homemakers contend that a failure by Muchow to refer to the Contract itself and, in particular, to its terms, where on its face such a “practice” was contrary to both Clause 11 and Schedule 1 of the Contract, means that there was an available inference that Muchow was prepared to ignore the terms of the Contract and that Homemakers should be able to explore this in cross-examination at trial. Clause 11 of the Contract is an “entire agreement” clause. But that does not mean that there is a reasonable inference that what Muchow was stating was not in accordance with Schedule 1. The problem about inferences is that, even at this stage of the process, there must be grounds for establishing that it is the more probable inference rather than simply one of a number of equally competing inferences – or at least that evidence can be identified which now shows that such probability is possible. Given the conclusion that I have just, earlier, expressed, equally competing inferences are open, and no such “possible” evidence has been idenitified, particularly where Muchow is not required to give evidence at any trial, (even acknowledging the risk that Jones v Dunkel can entail). Here, such a fact does not satisfy the need for a trial in the absence of any other evidence which in any way could support the drawing of such an inference.
- [31]The second aspect contended for by Homemakers is that Muchow’s affidavit, in approaching this inferential reasoning, should be viewed with “some circumspection” because the facts stated in the affidavit are apparently directly contrary to contemporaneous documents (in particular an earlier agreement in 2007) and that casts doubt upon Muchow’s evidence that the storage charges have “always represented the amount of space needed to store the product … and … bears no relationship to … the loadability in a container” (emphasis added). As to that matter, while it is true that Muchow’s affidavit stated that the relationship between MJM and Homemakers continued for approximately eight years “without a formal contract” and that, in 2012, he wanted to formalise the arrangement by having the parties enter into a written agreement, his expressed concern was that the board of Homemakers was continuing to change and he wanted to make sure that the annual fee increases would be protected. But it was only after that affidavit of his was filed that the affidavit of Fagan was filed which exhibited the Warehousing Agreement dated 1 May 2007. Nevertheless, a potential difficulty for Muchow is that it is at least arguable that the 2007 Agreement contained a pricing clause which was different from the pricing clause in the 2012 Contract, even though the Tax Invoice of June 2013, by its accompanying Container Count referable to a percentage of a container’s volume, may be arguably consistent with both the 2007 Agreement and the 2012 Contract – but, given the contest here, these matters can only be determined after evidence is led at trial.
- [32]Even if Muchow were to be able to overcome this difficulty by successfully contending that the identified features were not matters that directly showed the required knowledge, they are features that, to my mind, call for an examination of it at trial, thereby demonstrating a need for a trial.
- [33]With respect to the period after Fagan became aware of the discrepancies in January 2014, while MJM continued to issue invoices on a basis that might on judgment be found to be false, it becomes difficult to escape the conclusion that Muchow did then know that the charges being made were different from what was being clearly contended by Homemakers to be the correct interpretation of the Contract, insofar as it dealt with the basis of charges made. But it is particularly at this stage that it becomes necessary to bring into account the lack of any evidence of a causal relationship between contravention and loss. Once Fagan was aware, on behalf of Homemakers, that there were different interpretations advanced by both Homemakers and MJM and that no one interpretation was unarguable, the falsity which drove the contravention would still need to cause a loss. Yet there is no evidence that from January 2014 onwards the link between payment of MJM’s invoices and the falsity was a causal factor of loss, given this “new” knowledge possessed by Homemakers.
- [34]Thus, overall, r 171 becomes the appropriate way to deal with this last canvassed matter. Rule 293 of the UCPR has not been satisfied in a way whereby judgment for Muchow can be entered, since there is at least a need for a trial on some aspects of the claim against him.
Strike out
- [35]For the reasons that I have canvassed in the consideration of r 293 of the UCPR, there is no basis, on the principles already enunciated, for this Court to strike out “all” of those parts of the pleading which deal with the allegations against Muchow, at least until January 2014.
- [36]It is necessary to turn, then, to the particular allegations which are contained in the Second Amended Statement of Claim filed 2 February 2015.
- [37]As to paragraph 3, that can, obviously, remain.
- [38]As to paragraph 35A, Muchow contends that the crucial allegations are those in subparagraphs (c) to (i), particularly the allegation in subparagraph (f) that Muchow knew that the storage charges and decanting charges set out in the invoices were not being calculated in accordance with the basis which Homemakers contends is the true interpretation.
- [39]Given my conclusions, subparagraphs (c), (d) and (e) are unobjectionable. Because I have determined that whether Muchow knew that the various charges set out in the invoices were not being calculated according to the Contract is a matter for evidence at trial, that allegation in subparagraph (g) will not be struck out either. But as to subparagraph (f), there is no evidence at all that Muchow personally knew that the storage and decanting charges set out in the invoices were not being calculated on a specific basis which was in accordance with the basis pleaded by Homemakers (i.e. the one advanced by Homemakers as the proper interpretation) before late January 2014. Consequently, that allegation will be struck out. Since, concerning loss (examined below), I am limiting allegations – if only against the second defendant – to the times before the pre-January 2014 knowledge of Fagan, it will be necessary, also, to strike out (b) and amend (a) (limited to times prior to such knowledge). That will have consequences not only for the “Particulars” of paragraph 35A but also for paragraph 35 as well.
- [40]Turning, then, to paragraph 37, insofar as it pleads allegations against Muchow, all words referable to Muchow, as the second defendant, will be struck out because it is impossible to otherwise selectively engage in a simple striking out operation concerning loss. As for paragraph 7 of the “claim” for relief, without an amendment as to the amount sought, it is at least vexatious, on a strict interpretation of r 155(1) of the UCPR. Even though I will give leave to Homemakers to replead so as to amend the latest Statement of Claim concerning allegations against the second defendant, those new allegations will be limited to the time before Fagan, on behalf of Homemakers, knew of error in the actual basis on which MJM was charging, because that is the outcome of evaluating the evidence in this application.
Summary
- [41]Since I have found that there is a need for a trial against the second defendant but that the allegations against him should be restricted to events prior to sometime in January 2014 which is yet to be clearly identified (although the relevant pleading appears to rely on 21 January 2014), I will allow the application insofar as it seeks the striking out of parts of the allegations against the second defendant, with limited leave to replead. I will seek minutes of the orders to be made and give leave to file, and serve, submissions on costs. I indicate that, given the relief to be granted, the plaintiff should pay the second defendant’s costs of the application and costs, if any, consequential upon the leave to replead.