Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd

[2020] SASC 161

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

ADELAIDE BRIGHTON CEMENT LTD v HALLETT CONCRETE PTY LTD & ORS

[2020] SASC 161

Judgment of The Honourable Justice Doyle

28 August 2020

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - STRIKING OUT - DISCLOSING NO REASONABLE CAUSE OF ACTION OR DEFENCE

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - ENDING PROCEEDINGS EARLY - SUMMARY DISPOSAL - GENERALLY

The plaintiff (ABCL) and first defendant (Hallett) are parties to a cement supply agreement (the CSA), originally entered into in April 2008, but amended from 1 July 2014.  Under the CSA, ABCL was obliged to supply cement to Hallett on favourable terms, and Hallett was obliged to purchase cement exclusively from ABCL.

In its second statement of claim ABCL alleges that from early 2018 Hallett has not purchased exclusively from ABCL, in breach of its purchase obligations under the CSA.  It also alleges other related causes of action.  Hallett has filed a second defence in which it denies ABCL’s claim. 

Hallett also wishes to pursue a counterclaim.  The essence of the proposed counterclaim is an allegation of breach by ABCL of its obligation to supply Hallett with cement on favourable terms.  It contends that from time to time during the period from July 2014 to the present, ABCL has charged Hallett higher prices than it charged its other customers. 

Hallett was late in filing its counterclaim and applied for an extension of time to file its counterclaim.  On the eve of the argument of its application, Hallett proffered a second version of its proposed counterclaim.  Argument proceeded on the second version of the proposed counterclaim. Following the argument, the Court delivered reasons to the effect that there was “sufficient substance to the inferential case” to permit the counterclaim to be filed.  However, before the proposed orders came to be perfected by entry into the records of the Court, ABCL notified its intention to apply to reopen Hallett’s application for leave to file its counterclaim.

ABCL ultimately brought a formal application in which it seeks to reopen argument on Hallett’s application. In the alternative, ABCL’s application seeks summary judgment on the counterclaim, summary dismissal of the counterclaim, or an order striking out the counterclaim.

Held, per Doyle J:

1.      It would not be appropriate to reopen Hallett’s application for permission to file its counterclaim. The public interest in finality outweighs any prejudice occasioned to ABCL.

2.      As there is a reasonable basis for some of the particulars of breach alleged by Hallett, it would not be appropriate to enter summary judgment on, or summarily dismiss, Hallett’s counterclaim.

3.      However, the pleading does not disclose a proper basis for Hallett’s allegation of breaches of the breadth that is currently made in the counterclaim. The case as presently pleaded by Hallett in its counterclaim is not reasonably sustainable. It should be struck out as either an abuse of process or on the basis that the pleading does not disclose a reasonable cause of action.

Acts Interpretation Act 1915 (SA); Evidence Act 1929 (SA) s 59J; Evidence Act 1995 (SA) s 75; Federal Court of Australia Act 1976 (Cth) ss 24(1D)(b), 31A; Supreme Court Civil Rules 2006 (SA) rr 3, 113, 116, 117, 162(2), 232; Supreme Court Rules 1987 (SA) rr 25, 83.04; Uniform Civil Rules 2020 (SA) rr 1.5, 2.1, 3.1, 3.2, 12.1, 12.2, 31.7(12), 51.2, 63.1, 67.1, 67.2, 70.3, 101.1(3)(h), 101.4(1), 101.4(5), 143.1, 143.2, 144.2, 182.2, referred to.
Andrews v Australia and New Zealand Banking Group Ltd (2011) 281 ALR 113; Attorney-General (SA) v Kowalski [2015] SASC 123; Australian Securities and Investments Commission v Cassimatis [2013] FCA 641; Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300; Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937; Buurabalayji Thalanyji Aboriginal Corporation v Onslow Salt Pty Ltd (No 2) [2018] FCA 978; Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1; Clone Pty Ltd v Players Pty Ltd (2018) 264 CLR 165; Collins v Djunaedi [2016] SASCFC 48; Davies v Minister for Urban Development and Planning (2011) 109 SASR 518; Fokas v Mansfield (No 2) [2020] FCA 30; Hollington v F Hewthorn & Co Ltd [1943] KB 27; Jennings v Police (2019) 133 SASR 520; JT Nominees Pty Ltd v Macks (2007) 97 SASR 471; Kowalski v Mitsubishi Motors Australia Staff Superannuation Fund Pty Ltd [2018] SASCFC 44; Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2009) 178 FCR 401; Legal Profession Conduct Commissioner v Fittock [2017] SASCFC 169; McAdam v Robertson (1999) 73 SASR 360; Proude v Visic (No 4) (2013) 117 SASR 560; Settlement Wine Co Pty Ltd v National and General Insurance Co Ltd (1988) 146 LSJS 150; SK Foods LP v SK Foods Australia (No 3) (2013) 214 FCR 543; Spencer v Commonwealth (2010) 241 CLR 118; Tavitian v Commissioner of Highways (2015) 123 SASR 306; Viscariello v Tamasauskas (No 3) [2019] SASC 79; A Pines Pty Ltd v Bannerman (1980) 41 FLR 175; Wentworth v Woollahra Municipal Council (1982) 149 CLR 672; Wunda Joinery Pty Ltd v Wunda Projects Australia Pty Ltd [2007] SASC 301, considered.

ADELAIDE BRIGHTON CEMENT LTD v HALLETT CONCRETE PTY LTD & ORS
[2020] SASC 161

Civil.

1. DOYLE J:     The plaintiff (ABCL) and first defendant (Hallett) are parties to a cement supply agreement (the CSA), originally entered into in April 2008, but amended from 1 July 2014.

2. Under the CSA, and speaking in very general terms, ABCL is obliged to supply cement to Hallett on favourable terms, and Hallett is obliged to purchase cement exclusively from ABCL.

3. ABCL commenced these proceedings in September 2019.  In its second statement of claim, filed 20 December 2019, ABCL alleges that from early 2018 Hallett has not purchased exclusively from ABCL, in breach of its purchase obligations under the CSA.  It further alleges that the defendants have combined to circumvent Hallett’s purchase obligations by deploying the second defendant to purchase cement from other suppliers that would otherwise have been purchased from ABCL.  ABCL alleges breach of the CSA, as well as various other causes of action.

4. Hallett has filed a second defence in which it denies ABCL’s claim.  Hallett also wishes to pursue a counterclaim.  The essence of the proposed counterclaim is an allegation of breach by ABCL of its obligation to supply Hallett with cement on favourable terms.  It contends that from time to time during the period from July 2014 to the present (defined as ‘the Relevant Period’) ABCL has charged Hallett higher prices than it charges its other customers. 

5. On 20 December 2019, I ordered that Hallett file its proposed counterclaim by 27 January 2020.  Hallett did not do so until 14 February 2020, and so sought an extension of the time within which to file its counterclaim.

6. ABCL opposed any extension of time.  In general terms, it relied in this respect upon what it contended was the lack of any adequate explanation for the delay, as well as several defects in the counterclaim.  ABCL contended that the counterclaim transgressed the rule in Hollington[1] in that the particulars of various of the allegations involved references to evidence and findings in certain Federal Court proceedings between ABCL and one of its customers (Concrete Supply) (the Federal Court proceedings); and that it was vague and embarrassing in several places.  ABCL also contended that the counterclaim was, at least in the broad terms in which it was pleaded, unsustainable and/or involved impermissible fishing.

   [1]    Hollington v F Hewthorn & Co Ltd [1943] KB 27.

7. Hallett’s application for an extension of time was listed for argument on 8 May 2020.  In its written submissions, Hallett had sought to address ABCL’s complaint that the counterclaim transgressed the rule in Hollington by indicating that it intended to prove the matters referred to from the Federal Court proceedings.  It had also indicated that it would not press reliance upon paragraph 17.8, which was one of the paragraphs ABCL had submitted was vague and embarrassing.

8. However, on the eve of the argument of its application, Hallett proffered a second version of its proposed counterclaim.  This version omitted the references to the Federal Court proceedings that were said to offend the rule in Hollington.  It also contained some further amendments by way of additional allegations.

9. Argument proceeded on 8 May 2020 on the basis of the second version of the proposed counterclaim.  I reserved judgment, and later the same day sent some short reasons for decision to the parties by email.  In those reasons, I indicated that I proposed to give Hallett leave to file its counterclaim.  Whilst recognising that Hallett’s pleaded case of breaches throughout the Relevant Period was dependent upon a general inference which it was said could be drawn from the pleaded facts, and that the issue was finely balanced, I concluded that there was “sufficient substance to the inferential case” to permit the counterclaim to be filed.

10. However, before those orders came to be perfected by entry into the records of the Court, I was notified of ABCL’s intention to apply to reopen Hallett’s application for leave to file its counterclaim.  Having by then had an opportunity to consider in greater detail some of the factual matters sought to be relied upon by Hallett in its counterclaim, ABCL wished to (further) challenge the sufficiency of the inferential case relied upon by Hallett.

11. ABCL ultimately brought a formal application in which it seeks to reopen argument on Hallett’s application.  In the alternative, ABCL’s application seeks summary judgment on the counterclaim, summary dismissal of the counterclaim, or an order striking out the counterclaim.

12. For the reasons which follow, I have decided that it is appropriate that Hallett’s counterclaim be struck out.  Now that I have a better understanding of several of the factual matters relied upon by Hallett in support of its inferential claim, I do not think it is sustainable or permissible in the broad terms in which it is presently pleaded.

    Hallett’s counterclaim

13. Hallett’s counterclaim relies upon a contention that it was a term of the CSA, defined as ‘the Most Favoured Customer Term’, that ABCL would supply Hallett with Product at the lowest of (i) the price which ABCL notified Hallett from time to time (‘ABCL’s Notified Price’); (ii) the lowest net price charged by ABCL for Product delivered to its customers in South Australia in the same month in which the same Product was delivered to Hallett under the CSA; and (iii) in the case of Product supplied to Hallett for use on a specific project, the lowest net price charged by ABCL for the same Product supplied to its customers in South Australia for use on that same project.

14. After referring to some further details of the terms and dealings between the parties under the CSA, Hallett then pleads that ABCL:

    ·breached the Most Favoured Customer Term in respect of prices charged by ABCL for the supply of cement to Concrete Supply (paragraph 15), BHP (paragraph 16) and Turners ReadyMix Concrete (paragraph 17.7A);

    ·had a large number of customers during the Relevant Period (paragraph 17.2), and a practice of providing bespoke and tailored pricing and rebates to its customers (paragraph 17.3) which it had a history and practice of keeping secret (paragraph 17.4);

    ·did not always issue invoices or monthly statements to its other customers, or require (or take action to enforce) payment by those customers, and indeed had turned off or disabled its automated system in respect of the same (paragraphs 17.5 and 17.6);

    ·did not charge its current list price to up to 60 of its customers (which allegation was based upon an investigation undertaken by ABCL together with KPMG) (paragraph 17.7); and

    ·had offered to supply product to seven named customers at prices which were lower than those paid by Hallett (paragraph 17.8),

    (collectively, the particulars of breach).

15. Hallett pleads that by reason of the particulars of breach, it can be inferred that ABCL’s other customers paid lower prices than Hallett for the same product during the same month (paragraph 17.9), and that some of them were not charged, invoiced or otherwise required to pay for the product they received (paragraphs 17.10 and 17.11).

16. Hallett’s counterclaim culminates in an allegation in paragraph 18.1 that ABCL:

    breached the Most Favoured Customer Term, in that from time to time during the [Relevant] Period[2] (as will be particularised after disclosure) ABCL’s Lowest Monthly Price[3] was lower than ABCL’s Notified Price[4], but nevertheless ABCL issued invoices to Hallett in which it charged Hallett its higher ABCL’s Notified Price.

    [2]    Earlier in the proposed counterclaim (paragraph 13) the ‘Relevant Period’ is defined to mean from July 2014 to the present.  I was told during the course of argument that the CSA was terminated in April 2020.

    [3]    Essentially, the lowest net price charged by ABCL for the same product delivered to its customers in South Australia during the same month it was delivered to Hallett.

    [4]    Essentially, the price that Hallett was charged and paid.

17. In essence, Hallett thus pleads a case that from time to time throughout the Relevant Period, ABCL breached the Most Favoured Customer Term by charging Hallett prices for the Product that were greater than prices it was charging other customers.

18. Hallett also pleads a related case in paragraph 18.2 that ABCL breached further terms of the CSA (referred to as ‘the Further Assurance Term’ and ‘the Implied Term’) by not keeping invoices or maintaining records that permitted a calculation of ABCL’s lowest monthly price, and thus depriving Hallett of the benefit of the Most Favoured Customer Term.

19. It can thus be seen that Hallett has pleaded a very broad and general case by way of counterclaim.  While Hallett has pleaded (in schedule 1) each of the monthly prices it paid during the period July 2014 through to early 2020, it has not particularised which of these prices were too high, or to what extent.  It says that it paid ABCL tens of millions of dollars for the Product it purchased during the relevant period, and so expects to have a significant claim, but cannot be precise about the ambit and value of its claim until it has had discovery from ABCL.  Hallett’s pleaded case is, in effect, one predicated upon an inference of potentially widespread, but largely unidentified, breaches of the Most Favoured Customer Term (paragraph 18.1), and the Further Assurance Term and Implied Term (paragraph 18.2), throughout the Relevant Period.  For convenience, I shall refer to these compendiously as an allegation of widespread breaches.

    ABCL’s challenge to the pleaded counterclaim

20. In the course of the argument on 8 May 2020, ABCL challenged the sustainability and permissibility of a counterclaim in these broad terms.

21. In particular, ABCL contended that Hallett wished to pursue a claim without a sufficient, or at least sufficiently precise, basis and that it should not be entitled to do so; that its proposed counterclaim involved impermissible fishing.  It contended that the Court should be reticent to permit the claim to go forward in circumstances where it would give rise to enormous discovery obligations, given that ABCL had about 120 other customers to whom it was selling relevant product during the period covered by Hallett’s claim; and in circumstances where its pricing arrangements with its other customers are confidential.

22. While acknowledging that discovery would be a significant task, Hallett responded that ABCL’s concerns about the scope of the task needed to be seen in a context in which ABCL contractually agreed to provide Hallett with prices no higher than those charged to other customers, and so must have documents available to it that enable the necessary comparison task to be undertaken.  It said that discovery might, initially at least, be confined to such documents.  It also contended that a good proportion of the documents in question may be required to be discovered in the main proceedings in any event.  And it also pointed out that a confidentiality regime has been agreed in the main proceedings, and hence that it could be expected that a similar regime would be agreed for the purposes of documents discovered in response to the counterclaim.

23. Hallett also rejected the contention that it did not have, or had not pleaded, a proper basis for its allegation of widespread breaches.  It said that its claim was one based not upon speculation, but rather upon inference properly drawn from the pleaded facts.  It relied in this respect upon the particulars of breach that I have summarised above. 

24. In response to Hallett’s reliance upon the particulars of breach as sustaining a claim of the breadth pleaded by Hallett, ABCL contended that not much could be made of the allegations of particular breaches:  in the case of Concrete Supply, because it was a unique situation involving the dishonest actions of a particular individual; in the case of BHP, because (despite Hallett’s pleading) it was not a “Customer” within the meaning of the CSA; and in the case of Turners ReadyMix Concrete, because it related to only one particular month.  ABCL contended that the balance of the matters relied upon by Hallett were so general in nature that the claim was ultimately one founded upon no more than speculation.

    Reasons given on 8 May 2020 for permitting the counterclaim to be filed

25. In my reasons of 8 May 2020, I commenced by observing that I did not think that the late timing of the proposed counterclaim was a significant matter, given the absence of any evidence of time-related prejudice.  However, I said that it remained to consider the merits of ABCL’s pleading complaints, because if the deficiencies were significant, then this might have inclined me to refuse an extension of time to file the proposed counterclaim.  Focussing upon the complaint that the breadth of the pleaded claim meant that it was unsustainable and/or involved a fishing expedition, I summarised the applicable principles in the following terms.

26. It is true that courts routinely permit parties to plead cases with full particulars not provided until after discovery.  Whether that is appropriate in a given case depends upon the circumstances of the case;[5] it is a matter of fact and degree. 

    [5]    Wunda Joinery Pty Ltd v Wunda Projects Australia Pty Ltd [2007] SASC 301 at [26].

27. On the one hand, courts should not allow a party without a tittle of evidence to make a broad allegation with the hope that by ransacking the other party’s documents through the discovery process which the allegation generates, they will find a case.[6]  On the other hand, a party does not need to know, and indeed often will not know, every detail of the claim they wish to pursue.  They must have a reasonable basis for making their claim, but this basis may rely upon inferences that can properly be drawn from the limited information available to them prior to discovery.  They may then plead a case based upon inference, the precise ambit of which will fall to be articulated with more precision once discovery has taken place.

    [6]    WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 at 181-182; Andrews v Australia and New Zealand Banking Group Ltd (2011) 281 ALR 113 at [50].

28. The former is often described as ‘mere’ fishing, or impermissible fishing.  To stay with the fishing analogy, the former involves a situation where the party is in reality speculating as to the existence and location of the fish it hopes to catch, and is in effect utilising the court’s processes to trawl for those fish.  The latter involves a situation where the party has a sound basis for inferring the existence of the fish it wishes to catch, but cannot be precise about the detail of the fish it expects to catch.  It involves a more focussed use of the court’s processes.

1. Applying those principles to Hallett’s proposed counterclaim, I concluded:

   The issue is finely balanced, but ultimately I have concluded that Hallett’s pleading discloses a sufficient basis for the pleading to be filed in its proposed form.  I consider that there is sufficient substance to the inferential case that Hallett has pleaded and wishes to pursue that it is appropriate for it to file its counterclaim, with an expectation that its precise ambit will be the subject of refinement, through particularisation or amendment, once discovery has been undertaken.  That said, I am conscious of the burden discovery may impose upon ABCL, and will expect Hallett to engage constructively in relation to how that task may be defined and confined so as to ensure that it does not become oppressive.

2. After dealing with some other complaints made by ABCL, I indicated my intention to give Hallett leave to file its proposed counterclaim.

   Application to reopen

3. In support of its application to reopen, ABCL contends that given the late amendments and concessions made by Hallett, it did not have a proper opportunity to consider certain aspects of the proposed counterclaim.  It contends that having had an opportunity to reflect upon that proposed pleading, it now wishes to advance further argument as to the deficiencies in Hallett’s pleaded case.  To that end, ABCL has filed a significant volume of evidence in support of ABCL’s submission that the various limbs of Hallett’s particulars of breach are individually unsustainable, and further, or in the alternative, are cumulatively incapable of sustaining the inference necessary to support the general case of widespread breaches which Hallett seeks to plead.

4. Hallett opposes the application to reopen.  While accepting that it did not make its position clear until the eve of the argument, it contends that it was apparent from the revised draft of its proposed counterclaim that it no longer sought to plead reliance upon any evidence or findings from the Federal Court proceedings, and hence that there was no longer any issue arising in relation to the rule in Hollington.  It further contends that other than deleting the references to the Federal Court proceedings, the only late changes to its proposed counterclaim were to add the relatively confined allegations in paragraphs 17.7A (the alleged breach involving Turners ReadyMix Concrete) and 17.8 (the alleged offers to seven named customers).  Hallett contends that ABCL had an adequate opportunity to assess the significance of these proposed amendments, and that rather than seek an adjournment of the argument to consider its position further, it made a tactical decision to proceed with the argument on 8 May 2020.  It contends that ABCL should thus be stuck with the consequences of this tactical decision, and not be permitted another opportunity to argue the application.

5. Once an order or judgment of the Court has been not only pronounced, but perfected through its entry in the records of the Court,[7] then the circumstances in which the Court will permit reopening or reconsideration of its judgment or order are very limited indeed.[8]  Conversely, prior to the point at which an order or judgment has been pronounced, the Court has a relatively broad discretion whether to permit reopening.

   [7]    Uniform Civil Rules 2020 (SA), r 182.2.

   [8]    See Viscariello v Tamasauskas (No 3) [2019] SASC 79 at [17]-[26], and the cases referred to therein, including Clone Pty Ltd v Players Pty Ltd (2018) 264 CLR 165.

6. The present case involves a situation between these two ends of the spectrum.  It involves an application to reopen after an order or judgment has been pronounced, but before it has been perfected.  There is an express power under the rules to vary the terms of the Court’s order or judgment at this stage;[9] however, this seems to me to be a power directed towards those situations usually described as involving an application of ‘the slip rule’. Putting that category of case to one side, the authorities considering an application to reopen between the time at which an order or judgment is pronounced and when it is perfected indicate that while the Court has a discretion to reopen if satisfied that it is in the interests of justice to do so, the public interest in finality is a very significant consideration.  The power is not one intended to be exercised merely for the purpose of re-agitating matters already considered by the Court, or to enable arguments to be put with greater or different detail or focus.[10] 

   [9]    Uniform Civil Rules 2020 (SA), r 182.2(4).

   [10] Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 302-303; Wentworth v Woollahra Municipal Council (1982) 149 CLR 672 at 684; McAdam v Robertson (1999) 73 SASR 360 at [21]-[40].

7. Returning to the circumstances of the present case, I accept that Hallett’s late amendments to its proposed counterclaim placed ABCL in a difficult position.  It had only very limited time to consider the implications of Hallett’s concessions and amendments.  That said, while there was perhaps some room for ambiguity about whether there might be some residual scope for the operation of the rule in Hollington, it was reasonably apparent from the amendments that this would no longer be a basis for opposing leave to file the counterclaim.  Further, the additions to the proposed pleading were factually confined, and while I accept that ABCL would not have had time to take full instructions on these issues, let alone to file evidence in response, there was sufficient time for those advising ABCL to have at least taken some instructions to enable them to have some understanding of the issues raised.  Further, ABCL had, of course, been on notice of the remaining issues in the proposed counterclaim for a significant period of time, albeit that the removal of the particulars pleaded by reference to the Federal Court proceedings did alter the landscape for the consideration of these issues.

8. Having considered all of the matters put forward by the parties, I have decided that it would not be appropriate to reopen Hallett’s application for permission to file its counterclaim.  In my view, despite the difficult position in which ABCL found itself, there was at least a tactical element to the decision made by its legal advisors to press ahead with the argument rather than seek an adjournment to consider further its approach to the proposed counterclaim in light of the late amendments.  In my view, the public interest in finality outweighs any prejudice occasioned to ABCL by reason of it being forced to make a difficult decision. 

9. I thus reject ABCL’s application to reopen.

10. For completeness, I mention that any prejudice that ABCL might otherwise have experienced by reason of my refusal to reopen Hallett’s application for leave to file its counterclaim will be largely, if not entirely, assuaged by my preparedness to entertain ABCL’s alternative applications for summary judgment, summary dismissal or an order striking out the counterclaim.  Even if reopening were permitted, ABCL’s ability to successfully resist Hallett’s application for leave to file its proposed counterclaim would likely have turned upon ABCL’s ability to establish that the proposed counterclaim, if filed, would have been vulnerable to summary judgment, summary dismissal or an order striking it out.  As such, even if reopening were permitted, the outcome of Hallett’s application would likely have turned upon the very considerations to be considered on ABCL’s alternative applications.

11. In the ordinary course it might be considered an abuse of process to bring subsequent applications along the lines of ABCL’s alternative applications if they sought to do no more than re-agitate issues that were, or should have been, agitated upon an earlier application for leave to file the relevant pleading.  However, as counsel for Hallett quite properly conceded, for reasons similar to those advanced by ABCL in support of its application to reopen, there is nothing improper about ABCL seeking to ventilate the issues it now seeks to raise through the prism of these alternative applications.  It is to those alternative applications that I now turn.

    Challenges to Hallett’s pleaded case

12. As mentioned, in the alternative to its application to reopen, ABCL seeks summary judgment, summary dismissal or an order striking out the counterclaim.  Before setting out the rules governing each of these three bases for challenging Hallett’s pleading, it is appropriate to commence by mentioning the rules within the Uniform Civil Rules 2020 (SA) governing their object, and the overarching obligations imposed upon the parties, for it is with those objects and obligations in mind that the relevant rules fall to be construed and applied.

    The Uniform Civil Rules

13. The starting point in considering and construing the Uniform Civil Rules is UCR 1.5, which sets out the object of the rules:

    1.5—Object

    The object of these Rules is to facilitate the just, efficient, timely, cost-effective and proportionate resolution or determination of the issues in proceedings governed by these Rules.

14. As the note to this rule explains, because the Uniform Civil Rules are a “statutory instrument” within the meaning of the Acts Interpretation Act 1915 (SA), where a rule is reasonably open to more than one construction, a construction that would promote the purpose or object of the rules must be preferred to a construction that would not.

15. Next, the flexibility intended to be conferred upon the Court in giving effect to the object of the Uniform Civil Rules is apparent from the terms of UCR 12.  In particular, UCR 12.1(1) provides that the Court may, on its own initiative or on application by any person, make any order that it considers appropriate in the interests of justice.  A non-exhaustive list of the orders that might be made is set out in UCR 12.1(2)(a) to (p).  Importantly, UCR 12.2 provides that in making orders, the Court may have regard to the object of the rules:

    12.2—Regard to object of Rules

    (1)     The Court may, in making orders, have regard to the object of these Rules.

    (2)     For example, the Court may have regard to—

    (a)     the nature and complexity of the issues in the proceeding or appellate proceeding or step;

    (b)     the importance and value (monetary or non-monetary) of the subject matter of the proceeding or appellate proceeding or step;

    (c)     the time and cost incurred in the proceeding or appellate proceeding or step;

    (d)     the proportionality between the time and cost incurred in and the importance and value of the subject matter of the proceeding or appellate proceeding or step;

    (e)     the proportionality between the time and cost incurred in and the complexity of the issues in the proceeding or appellate proceeding or step;

    (f)     the desirability of early resolution by agreement of disputes the subject of or in proceedings;

    (g)     the efficient conduct of the business of the Court;

    (h)     the efficient use of judicial and administrative resources;

    (i)    the extent to which the parties have undertaken pre-action steps;

    (j)    the extent to which a person has complied with overarching obligations; or

    (k)     any prejudice that may be caused to a person as a consequence of making or not making, or the terms of, an order.

16. It can thus be seen that the object of the rules is a matter of significance both in construing and applying the Uniform Civil Rules.  Further, the pursuit and achievement of the object of the rules is also supported by the imposition of a series of complementary overarching obligations upon the parties and their lawyers.  Those obligations, and the significance of their breach, are set out in UCR 3:

    3.1—Overarching obligations

    (1)     A party must in relation to a proceeding or an appellate proceeding—

    (a)     act honestly;

    (b)     not engage in misleading conduct;

    (c)     not take a step that is frivolous, vexatious or an abuse of process;

    (d)     not make an assertion or response to an assertion for which they do not, on the material available at the time, have a proper basis;

    (e)     not take a step unless they reasonably believe that it is necessary to facilitate the resolution or determination of the proceeding;

    (f)     cooperate with the other parties and with the Court in relation to the conduct of the proceeding;

    (g)     use reasonable endeavours to resolve, or alternatively narrow the scope of, a dispute in or the subject of the proceeding by agreement;

    (h)     use reasonable endeavours to ensure that the time and costs incurred are reasonable and proportionate to—

    (i)the importance and value of the subject matter of the proceeding or step in the proceeding; and

    (ii)the complexity of the issues in the proceeding or step in the proceeding;

    (i)    comply with these Rules and orders made by the Court;

    (j)    be prepared for and ready to proceed with a hearing, directions hearing or trial at the appointed time; and

    (k)     use reasonable endeavours to act promptly and minimise delay.

    (2)A lawyer acting or appearing for a party, or a person exercising subrogated rights (including an insurer or indemnifier) in respect of, or who is otherwise entitled to exercise control or influence over, a party (by reason of providing litigation funding or otherwise), must, in relation to a proceeding or an appellate proceeding—

    (a)     act in accordance with subrule (1); and

    (b)     not engage in conduct that causes or permits that party to act contrary to subrule (1).

    3.2—Breach of obligations

    (1)In exercising any power in relation to a proceeding or appellate proceeding, the Court may take into account a failure by a person to comply with the obligations imposed by rule 3.1 (overarching obligations).

    (2)The Court may make such order as it thinks fit in the interests of justice by reason of a failure by a person to comply with overarching obligations.

    (3)     For example, the Court may—

    (a)     order that a person who has failed to comply with overarching obligations take or not take specified steps to remedy or mitigate the failure;

    (b)     order that a person who has failed to comply with overarching obligations pay costs of any person arising from the failure; or

    (c)     make any other or further order to avoid or mitigate the prejudice suffered by a person arising from the failure.

17. Similar rules existed under the Supreme Court Civil Rules 2006 (SA).  I refer in this respect to SCR 3 (Objects), 113 (General duty of parties), 116 (Court’s power to manage litigation) and 117 (Power to make orders controlling conduct of litigation).

18. However, it seems to me that the Uniform Civil Rules have been drafted in terms which seek to afford particular prominence and significance to both the objects of the rules, and the complementary obligations upon parties and their lawyers.  They seek to encourage and empower the Court (and the parties) to construe and apply the rules in a practical and robust manner designed to promote the just, efficient, timely, cost-effective and proportionate resolution or determination of civil proceedings.  Whilst the interests of justice remain paramount, what this requires in the context of modern litigation must be informed by the increasing concerns associated with the complexity, delay and expense associated with civil proceedings.

    Pleadings and strike out applications

19. Pleadings and challenges to them are addressed in Chapter 7 of the Uniform Civil Rules, and in particular Parts 7 (Pleading rules) and 10 (Particulars and strike out) of that Chapter. 

20. The general rules governing pleadings are set out in Part 7, and in particular UCR 67.2:

    67.2—Pleading rules

    (1)     A pleading must—

    (a)     comply with the relevant prescribed form;

    (b)     be divided into consecutively numbered paragraphs, each paragraph dealing with a separate matter; and

    (c)     be as concise and precise as practicable.

    (2)     A pleading must—

    (a)     set out the affirmative facts[11] relied on by the party to establish the party’s claim or defence to a claim;

    [11] “Fact” is defined in this context to mean a proposition of fact or law (UCR 67.1).

    (b)     identify any statutory provision relied on by the party to establish the party’s claim or defence to a claim or in answer to an allegation of fact by the opposing party; and

    (c)     give fair notice of the party’s case to the opposing party so as to avoid the opposing party being taken by surprise at or in preparation for trial.

    (3)     A pleading must not—

    (a)     make inconsistent allegations of fact unless one is expressed to be in the alternative to the other;

    (b)     contain material that is irrelevant or unnecessary to perform the functions of the pleading identified in subrule (2);

    (c)     contain material that is evasive or ambiguous;

    (d)     contain material that is scandalous, frivolous or vexatious; or

    (e)     be an abuse of the process of the Court.

    (4)     A pleading may refer to events occurring after institution of the proceeding.

21. There are specific rules for particular pleadings, but they do not add anything of relevance in the present context.

22. Part 10 deals with particulars and striking out.  As to the latter, UCR 70.3 states:

    70.3—Strike out

    (1)     The Court may strike out all or part of a Claim or pleading if—

    (a)     it does not comply with these Rules;

    (b)     it is frivolous, vexatious or an abuse of the process of the Court; or

    (c)     it does not disclose a reasonable cause of action or defence (as applicable).

    (2)If the Court strikes out all or part of a document under subrule (1), it may if it thinks fit grant leave to file within a specified time an amended or substituted document rectifying the matter that caused the original document to be struck out.

    Summary dismissal and summary judgment

23. Chapter 12 of the Uniform Civil Rules is entitled ‘Early finalisation’, and deals in Parts 3 and 4 with summary dismissal and summary judgment.  In respect of the former, UCR 143 provides for summary dismissal on two grounds, namely on the ground that no reasonable cause of action (or defence) is capable of being disclosed, or on the ground that the action (or defence) is frivolous, vexatious or an abuse of process.  The rule provides:

    143.1—Judgment for failure to disclose basis

    (1)The Court may grant judgment dismissing an action on the ground that no reasonable cause of action in the case of a claim, or basis for the application in the case of an originating application, is capable of being disclosed.

    (2)The Court may grant judgment in favour of an applicant in an action on the ground that no reasonable defence in the case of a claim, or basis to contest the application in the case of an originating application, is capable of being disclosed.

    143.2—Judgment for abuse of process

    (1)The Court may grant judgment dismissing an action on the ground that it is frivolous, vexatious or an abuse of the process of the Court.

    (2)The Court may grant judgment in favour of an applicant in an action on the ground that a defence of or contest to it is frivolous, vexatious or an abuse of the process of the Court.

24. In respect of summary judgment, UCR 144.2 provides:

    144.2—Summary judgment

    (1)The Court may, on application by a party, give summary judgment in favour of an applicant—

    (a)     on a claim if there is no reasonable basis for defending the claim;

    (b)     on a cause of action in a claim if there is no reasonable basis for defending the cause of action; or

    (c)     on a separate issue that arises in a claim if there is no reasonable basis for contesting that issue.

    (2)The Court may, on application by a party, give summary judgment against an applicant—

    (a)     on a claim if there is no reasonable basis for prosecuting the claim;

    (b)     on a cause of action in a claim if there is no reasonable basis for prosecuting the cause of action; or

    (c)     on a separate issue that arises in a claim if there is no reasonable basis for contesting that issue.

    (3)An application for summary judgment must be made by filing an interlocutory application and supporting affidavit in accordance with rule 102.1.

    Summary judgment: general principles

1. Focussing upon the situation where, as here, a respondent seeks summary judgment on the applicant’s claim, under UCR 144.2(2)(a) the respondent must establish that there is “no reasonable basis for prosecuting the claim”. This may be contrasted with the test under SCR 232 of the 2006 Rules (“no reasonable basis for the claim”), and the test under s 31A of the Federal Court of Australia Act 1976 (Cth) (“no reasonable prospect of successfully prosecuting the proceeding”).

2. I do not think that there is any material difference between the test under UCR 144.2(2)(a) and the test that applied under SCR 232.  The focus remains upon the existence of a “reasonable basis” for the claim, and the addition of the words “for prosecuting” does not add anything (other than, perhaps, to achieve some symmetry with the reference to “for defending” which appeared in SCR 232(2)(a), and remains in UCR 144.2(1)).

3. Assuming equivalence between these tests, I note that there has been some discussion in the authorities by way of comparison between the test under SCR 232 and the test under its predecessor in the 1987 Rules.  While it has been accepted that SCR 232 was intended to “lower the bar”, there has been some disagreement as to the extent to which this is so.  In Ceneavenue Pty Ltd v Martin,[12] Debelle J (with whom Duggan and Anderson JJ agreed) accepted that there had been a lowering of the bar, but also suggested that it did not involve any “material difference” or “substantial relaxation” in the approach to be taken to summary judgment.[13] Subsequently, in Davies v Minister for Urban Development and Planning,[14] Bleby J doubted whether the Full Court in Ceneavenue Pty Ltd v Martin had given proper effect to the words used in SCR 232.  But perhaps more significantly, his Honour also expressed the view that the Full Court’s decision had in any event been overtaken by the decision of the High Court in Spencer v Commonwealth.[15]

   [12] Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1.

   [13] Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1 at [93]; cf JT Nominees Pty Ltd v Macks (2007) 97 SASR 471 at [81], [86].

   [14] Davies v Minister for Urban Development and Planning (2011) 109 SASR 518 at [43].

   [15] Spencer v Commonwealth (2010) 241 CLR 118. at [43].

4. The decision of the High Court in Spencer v Commonwealth was a decision in relation to s 31A of the Federal Court of Australia Act. Although there is some basis for thinking that the intended scope of this section may be broader than SCR 232 and UCR 144.2,[16] the focus of the High Court’s analysis was upon the words “reasonable prospect of success”.  In my view, there is no material difference between this test, and the test under UCR 144.2.  Both require a focus upon whether the claim has a “reasonable” basis or prospect. 

   [16] Jennings v Police (2019) 133 SASR 520 at [40], where Kourakis CJ suggested it may encompass what would in this jurisdiction be treated as summary dismissal.

5. It is accurate to observe that, at least from a linguistic standpoint, “reasonable basis” is directed to the present, whereas “reasonable prospect” is directed to the future.[17]  However, as Kourakis CJ explained in Collins v Djunaedi,[18] it is doubtful whether any difference between the two will ever lead to different results.[19]  It is difficult to see how there could be a reasonable prospect of future success in prosecuting a claim unless there is a presently existing reasonable basis upon which to prosecute it.  And it is difficult to conceive of a claim which has a reasonable basis but which does not have a reasonable prospect of success.  It seems to me that both tests require consideration of the existing basis for the claim, whilst at the same time allowing for the possibility that further or different evidence may emerge during the prosecution of the claim, or be presented during any trial of the claim.

   [17] Proude v Visic (No 4) (2013) 117 SASR 560 at [16].

   [18] Collins v Djunaedi [2016] SASCFC 48.

   [19] Collins v Djunaedi [2016] SASCFC 48 at [16]; see also Debelle J’s reference to “reasonable prospects of success” when describing the content of “reasonable basis” in Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1 at [81].

6. For these reasons, I agree with the observation by Bleby J in Davies v Minister for Urban Development and Planning to the effect that any need for debate about the extent of the lowering of the bar under the South Australian rules has been overtaken by the decision in Spencer v Commonwealth.[20]  While aspects of the reasoning in cases such as Ceneavenue Pty Ltd v Martin remain of assistance, they should be seen through the prism of the High Court’s reasons in Spencer v Commonwealth.

   [20] Davies v Minister for Urban Development and Planning (2011) 109 SASR 518 at [43].

7. By way of summary of the approach articulated in Spencer v Commonwealth,[21] it can be said that the power to determine a claim summarily should not be exercised lightly.  Exercise of the power requires a practical assessment of whether the applicant has real, as opposed to merely fanciful, prospects of success.  While the Court need not be satisfied that the claim is hopeless or bound to fail,[22] nevertheless it must be cautious not to do a party injustice by summarily determining an action, particularly where there are disputed issues of fact or law or mixed fact and law, merely because the Court considers that the claim is unlikely to succeed.  However, beyond these very general guidelines, the Court should focus upon the words used in the rules and avoid applying any judicial gloss.

   [21] Spencer v Commonwealth (2010) 241 CLR 118 at [24]-[26] (French CJ and Gummow J), [52]-[60] (Hayne, Crennan, Kiefel and Bell JJ); see also the more detailed summary of the applicable principles in Buurabalayji Thalanyji Aboriginal Corporation v Onslow Salt Pty Ltd (No 2) [2018] FCA 978 at [3], subsequently applied in several other cases.

   [22] Strictly this proposition comes from the proviso to s 31A of the Federal Court of Australia Act, but it seems an inherent corollary of the “no reasonable prospect” test that would thus be applicable even without being made express, and hence also applicable in the present context.

8. Related to the requirement that the Court undertake a “practical” assessment is the notion that the Court should not embark upon a ‘mini trial’ of the claim.  Rather, the claim should be assessed in a summary manner, while being cognisant of the incomplete nature of the evidence upon which the Court’s decision must be based.[23]  Adversarial argument may assist, and indeed may result in the emergence of a sufficiently clear answer to a complex issue that summary judgment is appropriate.[24]  On the other hand, the need for prolonged argument may be indicative of a reasonable basis for the claim.[25]

   Summary dismissal and striking out:  general principles

   [23] Australian Securities and Investments Commission v Cassimatis [2013] FCA 641 at [46]; Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1 at [82].

   [24] SK Foods LP v SK Foods Australia (No 3) (2013) 214 FCR 543 at [115].

   [25] Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1 at [82].

9. The grounds upon which the Court may strike out a pleading under UCR 70.3, or summarily dismiss an action under UCR 143 are expressed in similar terms.  The grounds for each encompass both (a) a claim, pleading or action that is frivolous, vexatious or an abuse of process and (b) the failure or inability to disclose a reasonable cause of action.[26]

   [26] A pleading may also be struck out on a third basis, namely that it does not comply with the Uniform Civil Rules.

10. The courts have generally eschewed any attempt to define frivolous and vexatious.  While the concepts overlap to some extent, and are sometimes treated as a single compendious concept, the former invites a focus upon whether the claim or issue is worthy of serious attention, whereas the latter invites a focus upon whether the claim or issue is being pursued for the purposes of harassing or vexing the other party.

11. Abuse of process is a broad concept.  It may take a number of different forms, but is usually associated with some improper or collateral purpose.  Relevantly in the present context, it will be informed by the overarching obligations of the parties and their lawyers under UCR 3.1, and extend to the pursuit of a claim which does not have a proper basis in light of that rule.  The claim might lack a proper basis because it is based upon an assertion for which there is no basis in the material available to the party, which misstates the material upon which it is based, or which extends beyond any assertion for which that material might provide a basis.

12. As to this last matter, I refer to my earlier articulation (at [26]-[28] above) of the distinction between a pleaded case which is based upon a general inference with a proper foundation, and a pleaded case that involves impermissible fishing or trawling for a case. The latter may be seen as either a species of abuse of process, or the absence of a reasonable basis for the pleaded case.

13. It has been suggested that abuse of process in this context may include the pursuit of a pleading that does not disclose a reasonable cause of action.[27]  However, I consider it unnecessary to dwell on whether abuse of process extends this far given that the failure or inability to disclose a reasonable cause of action is itself a basis for striking out a pleading or summarily dismissing an action.

    [27] JT Nominees Pty Ltd v Macks (2007) 97 SASR 471 at [30].

14. While the criteria for the exercise of the Court’s power to strike out and summarily dismiss are expressed in similar terms, the difference between the two mechanisms for challenging an applicant’s claim lies in the nature and focus of the challenge.  The power to strike out under UCR 70.3 is directed to the applicant’s “Claim or pleading” (with the former defined as the document by which an action is commenced[28]), whereas the power to dismiss is directed to the applicant’s “action” (which is defined to mean a claim in the sense of a proceeding in which the applicant claims a remedy for a cause of action[29]).  The focus of the former is thus upon the articulation of the applicant’s case in the relevant document, usually a pleading.  And the focus of the latter is upon the applicant’s case itself.

    [28] See the definition of “Claim” in UCR 2.1, which cross-refers to UCR 63.1.

    [29] “Action” is defined in UCR 2.1 by reference to a “claim”, which is in turn defined in UCR 2.1 in terms that cross-refer to UCR 51.2.

15. The difference in focus between the two has implications for the use that may be made of evidence in the determination of the applications.  In the case of a strike out application, the Court’s consideration of the nature and adequacy of the claim, as disclosed in the pleading itself, may require recourse to a document or documents referred to in the pleading (such as a contract) in order to make sense of the pleading.  It may also require consideration of some evidence so as to enable the Court to understand the pleaded allegations in their proper context, and hence expose their inadequacy or their frivolous, vexatious or abusive character.  However, it will not ordinarily require any consideration of evidence going to the underlying merits of the applicant’s claim, let alone making findings on that evidence.[30]

    [30] Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937 at 941.

16. In the case of a dismissal application, on the other hand, there will often be greater scope for reliance upon evidence so as to make good the proposition that the applicant’s case itself is deficient in some respect, or is otherwise frivolous, vexatious or an abuse of process.[31]  That said, the nature of the exercise will nevertheless differ from that which is undertaken on a summary judgment application.  While the difference is difficult to articulate, an application for summary dismissal is typically addressed more to the absence of any identifiable proper claim, whereas an application for summary judgment is typically addressed more to a particular defect in, or answer to, an otherwise properly articulated and disclosed case.

    [31] Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937 at 944.

17. The difference between strike out and dismissal applications also relates to, and explains, the difference in the consequences to which they lead.  The former leads to an order that the relevant pleading (or part thereof) be struck out.  However, as the conclusion justifying this order is one based upon a deficiency in the pleading, and not necessarily the case itself, the applicant is usually given an opportunity to replead.  The latter, on the other hand, because it is predicated upon a defect in the applicant’s case (rather than merely the pleaded articulation of it), leads to an order that the action or proceeding itself be dismissed.  Whilst such an order brings the relevant action or proceeding to an end, it does not ordinarily give rise to res judicata or otherwise prevent a fresh claim being brought in appropriate circumstances.[32]

    [32] Tavitian v Commissioner of Highways (2015) 123 SASR 306 at [20]; although in Jennings v Police (2019) 133 SASR 520 at [31], Kourakis CJ suggested it may do so in some circumstances.

18. While I have attempted to summarise what I see as the key features of, and differences between, summary judgment, summary dismissal and strike out applications, I accept that in practice the distinctions are often difficult to draw and observe, and there is, quite appropriately, scope for overlap and flexibility in their operation.

    Admissibility of hearsay evidence

19. An issue which has arisen in the present matter is the extent to which it is permissible for the parties to rely upon hearsay evidence (or evidence given by way of affidavit ‘on information and belief’) on applications such as the present.  The parties accept, and I agree, that such evidence will often be admissible on strike out and summary dismissal applications.  However, the position is less clear in relation to summary judgment applications.

20. In contesting the admissibility of hearsay evidence on a summary judgment application, Hallett relied upon Settlement Wine Co Pty Ltd v National and General Insurance Co Ltd.[33] In that case, the plaintiff succeeded in obtaining judgment in its favour via an application for immediate relief under r 25 of the 1987 Rules.  King CJ reasoned that because the 1987 Rules only contemplated the receipt of affidavits on information and belief in interlocutory proceedings, and because the application for immediate relief involved final rather than interlocutory proceedings, the hearsay evidence tendered by the plaintiff was inadmissible.

    [33] Settlement Wine Co Pty Ltd v National and General Insurance Co Ltd (1988) 146 LSJS 150 at 151-152.

21. Under both the 1987 Rules (r 83.04) and the 2006 Rules (r 162(2)), the admissibility of hearsay affidavit evidence was conditioned upon its use being for “interlocutory proceedings”.  However, under UCR 101.4(1), the position is as follows:

    (1)Unless the Court otherwise orders or these Rules otherwise provide, an affidavit to be tendered at a directions hearing may contain first hand hearsay if it will save time or expense and it complies with rule 31.7(12).

22. The receipt of first hand hearsay affidavit evidence under UCR 101.4(1) is thus conditioned upon (i) it being tendered at a “directions hearing”; (ii) it saving time or expense; (iii) compliance with UCR 31.7(12) (which requires that the deponent identify the source of the hearsay statement and his or her belief in it); and (iv) the Court not exercising its discretion to make an order to the contrary.

23. Before returning to the conditions associated with the receipt of hearsay evidence under UCR 101.4(1), I also note that UCR 101.4(5) is potentially relevant in this context.  It provides:

    (5)The Court may inform itself on any matter without requiring formal proof on the basis of information the Court considers reasonably reliable.

24. The primary purpose of UCR 101.4(5) is to permit a level of informality when the Court considers that formal evidence is not required; for example, when making routine timetabling orders, or otherwise dealing with issues where it would be inefficient to require formal evidence (as opposed to information received from the bar table).  However, it is potentially also available to facilitate the Court’s reliance upon hearsay evidence in circumstances where it considers that such evidence is reasonably reliable and otherwise appropriate to be relied upon.

25. Returning to the receipt of hearsay evidence under UCR 101.4(1), and in particular the condition that the evidence be tendered at a “directions hearing”, this is defined in UCR 2.1 to mean “any hearing in a proceeding other than a trial or hearing at which the proceeding is or may be finally determined.”  On the face of this definition of a directions hearing, UCR 101.4(1) does not permit the receipt of affidavit evidence on any application that might result in a final order (and hence including an application for summary judgment if it may result in a final order).

26. There is a potential complication in the context of summary judgment applications that arises from the wording of UCR 101.1(3)(h) and UCR 144.2(3).  The former describes the purposes of a directions hearing as including “hearing and determining of interlocutory applications”; and the latter provides that an application for summary judgment must be made by way of “interlocutory application” and supporting affidavit.  It might be said that UCR 144.2(3) treats an application for summary judgment as interlocutory rather than final (even if it might result in a final order),[34] thus opening the way to the receipt of hearsay affidavit evidence upon such an application under UCR 101.4(1). However, I do not think this construction of the rules is available. In my view, given the definition of a directions hearing (as opposed to its stated purposes), UCR 101.4(1) does not permit the receipt of hearsay affidavit evidence on an application (even if properly described as an interlocutory application) if it may result in a final determination. In that situation, receipt of the evidence would have to be justified, if at all, in some other way, such as through reliance upon UCR 101.4(5), or the Court’s power to dispense with formal proof under s 59J of the Evidence Act 1929 (SA).

    [34] Consistently with the recognition in Legal Profession Conduct Commissioner v Fittock [2017] SASCFC 169 at [7] that an application may be interlocutory even though it seeks orders which will result in a final determination.

27. In the context of the present case, Hallett objects to various aspects of the affidavit evidence sought to be relied upon by ABCL on the ground that it is hearsay.  Hallett does not challenge the admissibility of that evidence on ABCL’s applications for summary dismissal or strike out, implicitly accepting that they will not result in any final determination of the parties’ rights. However, Hallett does challenge its admissibility on ABCL’s application for summary judgment, on the basis that, if granted, the order for summary judgment would be final in nature.

28. It has been observed in this Court that the issue of whether an order for summary judgment is interlocutory or final is a vexed one.[35]

    [35] Kowalski v Mitsubishi Motors Australia Staff Superannuation Fund Pty Ltd [2018] SASCFC 44 at [12].

29. In the Federal sphere, while the issue was a vexed one, it is now tolerably clear that an order for summary judgment under s 31A of the Federal Court of Australia Act is an interlocutory order.  This position has recently been given statutory force in the context of whether it is necessary to obtain leave to appeal;[36] however, it is also the position that was ultimately reached as a matter of general law.  As Wheelahan J recently explained in Fokas v Mansfield (No 2)[37] (in deciding that an order for summary judgment under s 31A was interlocutory for the purposes of the Court’s power to set aside or vary judgments):

    For the purposes of appeal, a judgment given under s 31A of the Federal Court of Australia Act is taken to be interlocutory, with the consequence that leave to appeal is required: Federal Court of Australia Act, ss 24(1A) and (1D)(b). Independently of those provisions, summary judgment of the Court under s 31A has been held to be interlocutory: Zoia v Commonwealth Ombudsman [2007] FCAFC 143; 240 ALR 624 (Spender J at [19] by way of obiter, French J and Gilmour J agreeing); Simundic v University of Newcastle [2007] FCAFC 144 at [12] (Allsop, Lander and Siopis JJ); Pham v Secretary, Department of Employment and Workplace Relations [2007] FCAFC 179 at [15] (French, Lindgren and Jacobsen JJ); Wills v Australian Broadcasting Corporation [2009] FCAFC 6; 173 FCR 284 (Rares J at [28] by way of obiter, Emmett J agreeing, North J not deciding); Luck v University of Southern Queensland [2009] FCAFC 73; 176 FCR 268 (Graham J and Rares J, North J not deciding). A contrary view was expressed by Finkelstein J (dissenting as to the result) and Gordon J (by way of obiter) in relation to summary judgment disposing of the entire proceeding in Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd [2008] FCAFC 60; 167 FCR 372. Rares J, who otherwise formed part of the majority with Gordon J in Jefferson Ford, considered that a judgment under s 31A of the Federal Court of Australia Act was interlocutory. In Macatangay v New South Wales (No 2) [2009] NSWCA 272, the New South Wales Court of Appeal (Allsop P, Tobias JA and Handley AJA) held at [11]-[12] that an order summarily dismissing a proceeding because it is frivolous, vexatious, an abuse of the process of the court, or does not disclose a reasonable cause of action, was interlocutory because of its legal effect: there was no triable issue and the order therefore did not finally determine the rights of the parties or create res judicata estoppels. In Kowalski v MMAL Staff Superannuation Fund Pty Ltd [2009] FCAFC 117; 178 FCR 401, at [32]-[44], the Full Court (Spender, Graham and Gilmour JJ) respectfully disagreed with the views of Finkelstein J and Gordon J in Jefferson Ford, and agreed with the views of Rares J in Luck, and held that summary judgment under s 31A(2) of the Federal Court of Australia Act is interlocutory. In Davis v Insolvency and Trustee Service Australia [2010] FCAFC 141 at [11], the Full Court (Keane CJ, Besanko and Perram JJ) referred to Jefferson Ford and Kowalski and held that it was unnecessary to consider the question as to whether judgment under s 31A was interlocutory or final, because the purpose of the introduction of s 24(1D)(b) of the Federal Court of Australia Act was to put an end to the debate.

    The reasons for judgment of Finkelstein J in Jefferson Ford were dissenting reasons, and the observations of Gordon J to the extent they related to orders disposing of the whole proceeding were obiter. On the other hand, in Kowalski, the question whether the decision of the primary judge was interlocutory or final was a necessary issue for the Full Court to decide, and the Court at [32] described the issue as an important one for consideration. For these reasons, I shall follow the decision of the Full Court in Kowalski and regard the judgment given against Mrs Fokas under s 31A of the Federal Court of Australia Act as interlocutory. That has the consequence that there is power under r 39.05 to set aside or vary the judgment.

    [36] Federal Court of Australia Act 1976 (Cth) s 24(1D)(b).

    [37] Fokas v Mansfield (No 2) [2020] FCA 30 at [29]-[30].

1. In Australian Securities and Investments Commission v Cassimatis,[38] Reeves J relied upon the interlocutory nature of an order for summary judgment in holding that hearsay evidence was admissible on an application for summary judgment under s 75 of the Evidence Act 1995 (Cth).

   [38] Australian Securities and Investments Commission v Cassimatis [2013] FCA 641 at [110].

2. Central to the reasoning of the decisions supporting the interlocutory status of an order for summary judgment under s 31A of the Federal Court of Australia Act is that “[w]hat the judge does, when considering a summary judgment application, is make a determination, on the material then before the Court, as to the prospects of the moving party successfully prosecuting the proceeding.  The legal effect of such a judgment is not final.”[39]

   [39] Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2009) 178 FCR 401 at [40].

3. In this jurisdiction, in Attorney-General (SA) v Kowalski,[40] Blue J considered the line of intermediate appellate authority in support of the interlocutory status of orders for summary judgment under s 31A of the Federal Court of Australia Act, concluding that “[w]hatever view might be taken of the merits of those decisions, it cannot be said that they are plainly wrong.  They are therefore binding in a practical sense on the courts of this State.”[41]

   [40] Attorney-General (SA) v Kowalski [2015] SASC 123 at [113]-[136].

   [41] Attorney-General (SA) v Kowalski [2015] SASC 123 at [136].

4. While Blue J was considering the status of an order that had in fact been made under s 31A of the Federal Court of Australia Act, it is difficult to see why the reasoning that underpins the authorities in relation to that section would not apply equally to the status of an order for summary judgment under UCR 144.2 (or its predecessor under the 2006 Rules, SCR 232). Just as consideration of whether a claim has “reasonable prospects” requires something of a forecast of the ultimate outcome of the claim on a summary basis and with incomplete evidence, so too does consideration of whether there is a “reasonable basis” for prosecuting the claim under UCR 144.2. I have already explained why, in my view, little if anything turns upon the difference in wording between UCR 144.2 and s 31A. On one hand, because both require consideration of the ultimate outcome of the claim, it could be argued they are final. On the other hand, as the courts considering s 31A have ultimately come to hold, it can also be argued that the prism through which, and incomplete footing upon which, that consideration occurs supports the view that the order is merely interlocutory in nature.

5. The above analysis would have led me, sitting as a single judge, to accept that an application for summary judgment under UCR 144.2 was not capable of resulting in a final determination, thus permitting receipt of hearsay affidavit evidence under UCR 101.4(1) (subject to the other conditions of that subsection being met).

6. However, the decision in this jurisdiction of Jennings v Police[42] presents an apparent obstacle to this approach.  In that case, Kourakis CJ (with whose reasons Stanley and Parker JJ agreed) surveyed several of the leading authorities in relation to the legal effect of summary determinations, both by way of summary judgment and summary dismissal.  His Honour reasoned that whether or not an order for summary determination of a matter gives rise to an order which is final in its legal effect (and hence renders the legal controversy between the parties res judicata) depends upon the basis upon which the relevant order is made, and in particular the extent to which it entails a determination of the legal controversy between the parties upon an agreed or complete factual matrix, and after full argument.[43]  In his Honour’s view, not only may an order for summary judgment be final, but so too may an order for summary dismissal.  While his Honour’s observations in this respect were expressed obiter, and did not include reference to some of the most recent Federal Court decisions on the topic, they are nevertheless of significant persuasive value in the present context.

   [42] Jennings v Police (2019) 133 SASR 520.

   [43] Jennings v Police (2019) 133 SASR 520 at [48].

7. In light of the preceding paragraph, I do not think that I can proceed on the basis that the application for summary judgment in the present case was not capable of leading to a final determination, and hence do not think I can proceed on the basis that ABCL’s hearsay evidence is admissible under UCR 101.4(1).

8. However, that is not the end of the matter, given the existence of UCR 101.4(5).  Under that rule, the Court has a broad discretion to inform itself, without requiring formal proof, on the basis of information which it considers reasonably reliable.  Whilst that discretion is unfettered, at the same time I should not exercise it in a manner that loses sight of the significance of the boundary for the reliance upon hearsay evidence marked out in UCR 101.4(1). While not determinative of the scope of the discretion, the fact that the information sought to be relied upon falls outside the boundary of that more specific sub-rule is a significant consideration.

9. Speaking generally, the hearsay evidence sought to be relied upon by ABCL in this matter is from two solicitors, Scott Foreman and Leo Walsh. 

10. Mr Foreman, of Lipman Karas, represented ABCL in the Federal Court proceedings (to which I have referred elsewhere in these reasons) in relation to the trading arrangements between ABCL and Concrete Supply, and indeed in ABCL’s investigations into those arrangements more generally.  The impugned aspects of his evidence relate to his statements concerning ABCL’s supply and invoicing practices vis-à-vis Concrete Supply. Whilst Mr Foreman was not directly involved in ABCL’s operations, it is readily apparent from his affidavit that he has an extensive knowledge of, and close familiarity with, those operations (and in particular the relevant documentation generated in those operations), gained through his representation of ABCL over a number of years in the Federal Court proceedings.  Indeed, significant aspects of the matters deposed to by Mr Foreman emerge in any event from the business records which have been exhibited to his affidavit, albeit that his evidence does add some matters of context and is of assistance in determining the significance of those documents.

11. Mr Walsh, of DMAW Lawyers, is one of ABCL’s solicitors in the present proceedings.  The impugned aspects of his evidence also relate to statements made in relation to ABCL’s business practices.  While his involvement in, and familiarity with, the matters to which he deposes is less extensive, it is again knowledge that is to a significant extent founded in business records of ABCL.

12. In the circumstances I have described, and speaking generally, I am satisfied that Mr Foreman’s and Mr Walsh’s evidence is reasonably reliable, and appropriate for me to rely upon.  The foundation for the various statements made is in my view sufficiently exposed for me to be able to assess the appropriate weight to be afforded to that evidence on the issues that I need to consider. 

13. I note the requirement for the admissibility of hearsay evidence under UCR 101.4(1) that its receipt will “save time or expense”, and consider that this will also be an important consideration under UCR 101.4(5).  In that respect, I observe that while the degree of urgency associated with an application will inform the Court’s view of whether receipt of the hearsay evidence will “save time or expense” for the purposes of UCR 101.4(1), I do not think that circumstances of urgency exhaust the content of that phrase.  In my view, there will often be a saving of time and expense associated with the proof of matters that are not genuinely in contest through the receipt of hearsay affidavit evidence. 

14. In the present case, it is also significant that Hallett accepts that it would be open to the Court, under UCR 101.4(1) to receive the hearsay evidence of Mr Foreman and Mr Walsh in any event on the summary dismissal and strike out limbs of ABCL’s application.

15. In all of the circumstances, I consider it appropriate to receive Mr Foreman’s and Mr Walsh’s affidavit evidence on all applications.  I do not consider that it is necessary for me to descend to the detail of separately addressing each of the individual objections that were taken, including those taken on the grounds of relevance.  Consistently with the objects of the Uniform Civil Rules, I consider it sufficient and appropriate to approach the matter at the more general level which I have to this point.  In my view, the detail of the objections made by Hallett (and the submissions put in support of them), can be appropriately addressed through careful consideration of the appropriate weight to be attached to the various aspects of the evidence relevant to the various issues that need to be considered on the applications presently before the Court.

16. Whilst the above reflects a relatively flexible approach to the receipt of hearsay evidence, my observations in this respect should not be seen as an open invitation to rely upon such evidence, particularly in circumstances where it would be almost as convenient to obtain direct evidence, let alone where it is apparent that recourse to hearsay evidence has been motivated by a desire to shield a person with direct knowledge from cross-examination.  To the contrary, for the reasons I have just mentioned, and because of the diminished weight that hearsay will usually have, practitioners should be wary of too ready a reliance upon affidavit evidence of this type, and should not resort to it without proper consideration of the desirability and practicalities of obtaining direct evidence.  Particularly is that so in the context of an application for summary judgment.  Even if an order for summary judgment is properly to be treated as interlocutory, there is no doubting its significant practical consequences.  For that reason, and given the need to always bear in mind the nature and significance of a matter to be proved in determining the sufficiency of the evidence required to establish it, it will often be the case that hearsay evidence, even if appropriately received by the Court, will be insufficient to make out an entitlement to the relief sought.

    The ABCL challenges to Hallett’s counterclaim

17. I have earlier summarised Hallett’s counterclaim, and the essence of ABCL’s challenges to it.  Those challenges are made both as to the individual limbs of the particulars of breach alleged by Hallett, and as to the sufficiency of them to sustain the ultimate allegation of widespread breaches of the CSA by ABCL.

18. It is convenient to consider the challenges to the individual limbs before addressing their cumulative effect in the context of the allegation of widespread breaches.

    Concrete Supply

19. In paragraph 15 of its counterclaim, Hallett alleges that during the period from July 2014 to October 2017, Concrete Supply was a customer of ABCL; that ABCL supplied Concrete Supply with significant quantities of cement; that ABCL “did not charge or require, by invoice or other demand, Concrete Supply to pay” for all of the product supplied to it; that Concrete Supply paid only between 60 and 70 per cent of ABCL’s list price for the product supplied (meaning it did not pay for cement to the value of about $12.5 million); and hence that Concrete Supply paid either nothing, or less than the amount ABCL charged Hallett, for the same cementitious products in the same months.

20. On the present applications, ABCL does not challenge the broad factual premise underpinning the above allegations.  It accepts that during the relevant period, Concrete Supply paid significantly less than it should have for the cementitious products supplied to it, and hence at least on some occasions less than Hallett paid for the same product during the same month.  However, ABCL makes two broad submissions.  The first is that given the circumstances in which this occurred (namely, a fraud perpetrated upon it by one of its employees) it did not involve any breach of the Most Favoured Customer Term vis-à-vis Hallett.  The second is that given those same circumstances, even if there was a breach of the Most Favoured Customer Term, the exceptional nature of it means that it provides little if any basis for an inference of widespread breaches in the context of its supply to other customers.

21. As to the first submission, as the application was argued, it ultimately came to turn upon the meaning to be attributed to the word “charged” in the CSA, and in particular whether it could be said that in the circumstances that occurred between ABCL and Concrete Supply that ABCL did not “charge” Concrete Supply the full prices that it apparently invoiced.

22. The evidence adduced by ABCL, primarily from Mr Foreman and based upon his knowledge of matters ascertained through his representation of ABCL in the Federal Court proceedings involving Concrete Supply, was to the effect that ABCL kept records of all of its deliveries of cementitious products to Concrete Supply during the pleaded period; that Concrete Supply generated recipient created tax invoices (RCTIs) for each of those deliveries which set out the identity and price of all product supplied and which were consistent with ABCL’s own records of those deliveries; that there was no suggestion that these prices were relevantly less than those charged to Hallett; that Concrete Supply wrote cheques for the full amounts in each RCTI and claimed input tax credits and income tax deductions based upon the same; but that by reason of fraudulent entries in ABCL’s accounts by an employee of ABCL (Ms Burgess), the fraudulent nature of which was not uncovered for several years, the amounts in ABCL’s accounts and in fact received by ABCL from Concrete Supply fell short of the invoiced amounts by some millions of dollars.  ABCL’s evidence was that upon uncovering the fraud, it took steps to hold Concrete Supply to account, including by lodging a proof of debt with the company, and bringing the Federal Court proceedings.

23. ABCL contends that in light of the above evidence, the allegation that ABCL “charged” Concrete Supply less than Hallett is unsustainable; that Hallett’s case assumes a meaning of “charged” that means something along the lines of “charged by invoice at the time of delivery, and made demands in a short period of time, and ensured payment was received in a short period of time”; and that this would involve attaching a meaning to the word “charged” that involves a distortion of that word, stretching it beyond breaking point.  ABCL contends that “charged” should and can mean no more than the dictionary definitions of this word to the effect of imposing a price or liability to pay, or holding liable for payment, or recording a debt or entry to the effect that an amount is owed.  ABCL contends that the evidence demonstrates that it satisfied this definition of the concept of “charged”.

24. In response to this, Hallett contends that whether or not there was a breach or breaches arising out of ABCL’s dealings with Concrete Supply will depend upon the construction of the CSA, and in particular the meaning of the word “charged” in the context of that agreement.  It contends that the resolution of this issue is not straightforward, will involve consideration of the circumstances surrounding entry into the CSA, and is not a matter apt for resolution in a summary manner.

25. Hallett also contests the factual basis for the contentions put by ABCL.  It contends that the evidence of Mr Foreman is not a sufficient evidential foundation to find the existence of the relevant fraud, let alone to support the assertions he has made about the universal provision of RCTIs.  Indeed, Hallett points to some matters suggesting that RCTIs may not have been provided in at least some instances, or for some periods of time.

26. In the end, I am not satisfied that ABCL has made out a sufficiently clear factual or legal basis for the entry of summary judgment in favour of ABCL in respect of the allegation of breach arising out of the supply of cementitious products to Concrete Supply.  While the evidence of Mr Foreman is sufficient to establish the general nature of the dealings between ABCL and Concrete Supply, I do not consider that it is sufficient to enable me to make the clear and comprehensive findings that would be necessary to refute the allegation of any breach at all during the relevant period.  I do not accept the full extent of Hallett’s attack upon the evidence of Mr Foreman; indeed, I do not think it lies in the mouth of Hallett to entirely discount the general thrust of that evidence, given that it would appear that its primary basis for pleading the Concrete Supply breach is its own understanding of the Federal Court proceedings.  That said, I do not think my acceptance of the general thrust of that evidence is ultimately sufficient for ABCL’s purposes.  It does seem that there is a reasonable basis for thinking that there may have been at least some breakdown in the invoicing arrangements to which Mr Foreman referred.  And to the extent that occurred, I am not able to make any findings about the circumstances in which that occurred, and hence the implications of this for whether ABCL “charged” Concrete Supply for the affected supplies. 

27. Further, and perhaps more significantly, while I consider that Hallett’s construction of the concept of “charged” for the purposes of the CSA does appear to involve a somewhat strained construction, I do not think it is safe for me on the present hearing to reach a concluded view as to the precise breadth of that concept.  At one level, the CSA is a fairly straightforward and readily understandable agreement; however, experience tells me that when dealing with agreements in the context of particular industries which may have their own established practices and trading arrangements, there are often details or nuances in the evidence that are capable of affecting the ultimate construction of critical terms.

28. For similar reasons, I do not think I can or should summarily dismiss or strike out the allegation in relation to Concrete Supply as a stand-alone allegation.  It may be that the plea needs some refinement and confinement once discovery has been made, but I do not think it either fails to disclose a reasonable cause of action or is otherwise abusive in its present form.

29. However, before leaving the topic of the Concrete Supply allegation, I should mention ABCL’s second submission, namely that even if there was a breach of the Most Favoured Customer Term through ABCL’s dealings with Concrete Supply, the exceptional nature of it means that it provides little if any basis for an inference of widespread breaches in respect of ABCL’s dealings with its other customers.  In my view, there is significant force in this submission.  In considering this submission, I consider that the general thrust of Mr Foreman’s evidence is sufficient to establish that to the extent that there was any breach arising out of ABCL’s dealings with Concrete Supply, it was largely, if not entirely, a product of circumstances arising out of the conduct of a rogue employee.  Even though it is not possible for me to make precise findings as to those circumstances, and the extent of the supply to Concrete Supply which was affected, the evidence is sufficient to satisfy me of the general nature and character of those circumstances.  And this general character is sufficient to significantly undermine the weight that might otherwise have been attached to a series of breaches vis-à-vis one customer in providing a basis for inferring more widespread breaches vis-à-vis other customers.  Once the nature and character of the alleged breaches vis-à-vis Concrete Supply is properly understood, those breaches provide little if any basis for inferring widespread breaches vis-à-vis other customers.  I shall return to the implications of this later in these reasons, when considering the cumulative sufficiency of the basis for Hallett’s allegation of widespread breaches of the CSA.

    BHP

1. In paragraph 16 of its counterclaim, Hallett pleads that BHP was a “Customer” of ABCL within the meaning of the CSA; that ABCL supplied and delivered product to BHP in the same month that it delivered the same product to Hallett; and that the lowest price charged by ABCL for the type of product delivered to BHP in any given month since July 2014 was lower than that which ABCL charged Hallett for the same product in the same month. 

2. As well as a complaint about the very general and sweeping nature of this pleading of breach, ABCL contends that it is untenable on two bases. 

3. The first basis for this contention of untenability is that the products supplied to BHP were not products the subject of the CSA, and hence their supply is not relevant for the purposes of the Most Favoured Customer Term.  I received significant evidence on this issue, including expert evidence, however ABCL ultimately conceded that it is not an issue apt for summary determination, and so no longer presses this first basis for contending that there is no reasonable basis for the allegation of breach in relation to BHP. 

4. The second basis for this contention of untenability is that BHP is not a “Customer” of ABCL, with the result that the prices charged by ABCL to BHP for the product supplied to it are not relevant to ABCL’s obligations under the Most Favoured Customer Term (and in particular, the calculation of the comparator prices for the purposes of that term).  In support of this, ABCL points to: Hallett’s allegation in paragraph 3 of the counterclaim to the effect that the market for the supply of pre-mixed concrete is highly competitive and price-driven, with the consequence that a seller of pre-mixed concrete who is able to sell at a lower price than its competitors will have an increased market competitiveness enabling it to win business over its competitors; its allegation in paragraph 4 to the effect that the primary cost and determinant of the sale price for pre-mix concrete is the price paid for the cementitious products supplied under the CSA; its allegation in paragraph 5 to the effect that ABCL is the dominant supplier of bulk cementitious materials to the pre-mixed concrete market in South Australia; and its allegation in paragraph 9 that in construing the CSA, the Court must take into account the surrounding circumstances, including those alleged in paragraphs 3 to 5.

5. Picking up on these aspects of the pleaded counterclaim, ABCL contends that even if the products supplied to BHP were covered by the CSA, they were supplied for BHP’s use in its own business and not for it to on-sell in competition with Hallett as a supplier of pre-mixed concrete.  As such, ABCL contends that the supply to BHP was not as a “Customer” within the meaning of the CSA.

6. Hallett responds with two difficulties in ABCL’s contentions in this respect.  The first is that ABCL’s contentions involve a misunderstanding of Hallett’s pleaded case in relation to the CSA.  While the scope of the CSA is to be informed by the surrounding circumstances pleaded in paragraphs 3 to 5, it is not suggested that they operate in some mechanical way to confine the notion of a “Customer” under the CSA to an entity who is a competitor of Hallett.  The second is that even if the notion of “Customer” under the CSA was intended to be confined to supply to entities which would affect Hallett’s competitiveness in the marketplace, the supply by ABCL of cement to BHP for its own use in products which might otherwise have been supplied to BHP by Hallett would be sufficient for this purpose.

7. For similar reasons to those mentioned in the preceding section of these reasons in relation to the meaning of the notion of “charged” under the CSA, I do not think the precise construction of the notion of a “Customer” under that agreement is sufficiently clear to enable me to summarily determine the allegation in relation to supply to BHP.  I think the construction of “Customer” for the purposes of the CSA should await the hearing of evidence as to any relevant surrounding circumstances, and full argument in relation to the same.

8. For these reasons, I would not enter summary judgment in relation to the allegation of breach relating to the supply to BHP.  Again, while the allegation is in very general terms, and may well require refinement and confinement following discovery, I also do not think it is appropriate to order that it be summarily dismissed or struck out as a stand-alone allegation.

9. However, similarly with the allegation in relation to supply to Concrete Supply, the matters raised by ABCL in this context again have implications for the weight of the allegation of breach relating to the supply to BHP in supporting the inference of the allegation of widespread breaches of the CSA.  In particular, the limited and particular nature of the impugned supply to BHP makes it of little weight in this respect.

   Turners ReadyMix Concrete

10. In paragraph 17.7A of its counterclaim, Hallett pleads that ABCL supplied cement to Turners ReadyMix Concrete, and issued it with an invoice dated 2 January 2018 for the supply to it of 27.4 tonnes of a particular type of cement at a price of $286.95 per tonne, which included haulage of the cement from ABCL’s Birkenhead plant to the customer of $79.60 per tonne, thus giving an ex haulage price of $207.35 per tonne; and that during the same month (January 2018), and in breach of the Most Favoured Customer Term, ABCL charged Hallett a higher price of $225.16 per tonne for the same type of cement.

11. ABCL challenges this limb of Hallett’s counterclaim on the basis that the price of $286.95 per tonne charged to Turners ReadyMix Concrete was calculated using a base price of $268, less a discount of $18.31 but plus a freight charge of $37.26.  By the time of the 2 January 2018 invoice, the cost of freight incurred by ABCL in transporting the cement to Turners ReadyMix Concrete had unexpectedly risen to $79.76.  However, because ABCL considered itself bound by the previously agreed cost for freight, it absorbed that increase itself, resulting in an effective price of $207 per tonne as alleged by Hallett.  ABCL contends that in these circumstances the price it charged Turners ReadyMix Concrete was higher than the price charged to Hallett; that the increase in the costs of freight, that ABCL decided to absorb itself, did not alter the analysis.

12. There does not appear to be any dispute about the relevant facts in relation to the supply to Turners ReadyMix Concrete.  The issue is one that turns upon the construction of the contractual mechanism for determining the comparator price for the purposes of the Most Favoured Customer Term.  In my view, there is a reasonable basis for Hallett to allege that the relevant price is the one that is net of freight costs, with a result that there is a reasonable basis for Hallett’s allegation of breach.

13. However, despite the existence of a reasonable basis for this allegation of breach, the explanation for it is in my view, relevant to its weight in terms of supporting an inference of widespread breaches.  Given that it involves only the supply to one customer in one month, and is explained by a change in freight charges imposed by a third party, it provides limited if any support for an inference of widespread breaches throughout the nearly six year period covered by Hallett’s counterclaim.

    Failure to charge list price to up to 60 customers

14. In paragraph 17.7 of its counterclaim, Hallett alleges that ABCL did not charge up to 60 of its customers its then current list price for cementitious product at the time or shortly after delivery of that product, with a total impact on ABCL in terms of profit of $17.1 million, which after deducting Concrete Supply ($12.5 million) and BHP ($3.7 million), leaves at least 58 other customers affected to a value of at least $0.9 million.  By way of particulars in support of this allegation, Hallett pleads that ABCL, with the assistance of KPMG, conducted an investigation of its accounts which, as at January 2018, identified 60 customers who were affected by non-invoicing, and irregular debits and credits within ABCL’s accounts, with a total impact of $17.1 million.

15. In challenging the significance of this allegation in terms of its ability to support an allegation of widespread breach, ABCL relies upon the table in the KPMG report upon which the pleaded particulars are based, and some evidence of Mr Foreman by way of explanation and context.  From the table, it is apparent that KPMG concluded that there were 53 customers (or, more accurately, 53 entries in ABCL’s accounts) affected by irregular or incorrect entries.  However, it would seem that the relevant entries went both ways, and did not have any overall net impact upon ABCL’s accounts receivable balance.  Of the 53 incorrect entries, only 15 had the effect of reducing ABCL’s accounts receivable balance.  And even then, neither the table nor the report established or suggested that these 15 errors were necessarily the product of a failure to invoice or otherwise charge the relevant customer.

16. In addition to the above, which may be gleaned from the report relied upon by Hallett in its particulars, Mr Foreman’s evidence (on information and belief from relevant officers of ABCL) was to the effect that of the 15 errors which had the effect of reducing the accounts receivable balance: one involved Concrete Supply; one involved a cash sale that was paid for in full at the time of collection; two related to a point in time prior to 1 July 2014; 10 related to supplies to entities which were not “Customers” for the purposes of the CSA; and, in any event, all entries were corrected on 28 February 2018.

17. I do not think the evidence enables me to reach a concluded view on the present applications that none of the entries identified by KPMG involved a breach of the CSA.  Not only is there no direct evidence about the relevant transactions and entries, but also it would appear that the entries may again raise issues about the precise meaning of the terms “charged” and “Customer” for the purposes of the CSA.  I do not think I can rely upon Mr Foreman’s evidence in relation to these matters; they are matters the resolution of which will be significantly informed by my construction of the CSA which, for the reasons already explained, is a task not suited to summary determination.

18. However, I do think that the matters raised by ABCL are significant in exposing the limited basis that Hallett has for its pleading in paragraph 17.7, and perhaps more importantly, the limited support that the matters pleaded in this paragraph provide for the ultimate allegation of widespread breaches.

    Offer to supply product to seven customers at lower prices

19. In paragraph 17.8 of its counterclaim, Hallett pleads that in or about November 2018, ABCL made an offer to a number of its customers to supply cement at certain prices ($200 per tonne for General Purpose Cement Type GP Bulk, and $195 per tonne for Premium Cement Type GB Bulk), but during the same month charged Hallett higher prices for the same cement ($235.16 per tonne and $229.16 per tonne respectively).  In its particulars in support of this allegation, Hallett pleads that the offer was made on 21 November 2018 to one particular customer, and was also made to six other named customers.

20. In challenging the significance of this allegation, ABCL emphasises that the allegation is one of offers to supply, and not actual supplies.  The allegation is thus not one of breaches that occurred, but rather at most provides some circumstantial or inferential support for the allegation of widespread breaches.  Further, in assessing the weight to be attached to the offers, ABCL relies upon its evidence to the effect that on about 30 November 2018, ABCL gave Hallett notice of a change in the price of the two types of cement in question to $185 per tonne and $180 per tonne respectively, with the result that it can be inferred that any supply that did subsequently occur to the seven named customers who received the pleaded offers would have been at prices higher than those then being charged to Hallett.  ABCL adduced some additional evidence as to the subsequent supplies that did occur to these customers, which was to the effect that the prices charged were higher than those charged to Hallett.

21. Hallett’s response to the above involves an acceptance on its part that it relies upon the offers merely as providing circumstantial or inferential support for the widespread breaches which it alleges.  Hallett complains of the hearsay nature of the evidence of Mr Walsh as to the terms of subsequent supplies made to the relevant customers.  While this complaint has some force in terms of the ability of Mr Walsh to disprove any relevant breach, at the same time the evidence and submissions have again exposed the limited basis for Hallett’s allegation.  Hallett does not itself suggest that it has any basis for positively asserting any particular breach in respect of the seven named customers, or for otherwise impugning the evidence of Mr Walsh.  Hallett merely complains that it was denied “the opportunity to test” the evidence of employees with direct knowledge of the relevant supplies, but without disclosing any basis (beyond the fact of the offers) for believing that there were relevant breaches.

    Other matters

22. Having addressed the customer-specific allegations in Hallett’s counterclaim, it remains to consider the more general allegations that Hallett also relies upon in support of its allegation of widespread breaches.

23. As mentioned earlier, these remaining allegations may be summarised as allegations to the effect that ABCL:

    ·    had a large number of customers during the Relevant Period (paragraph 17.2), and a practice of providing bespoke and tailored pricing and rebates to its customers (paragraph 17.3), which it had a history and practice of keeping secret (paragraph 17.4); and

    ·    did not always issue invoices or monthly statements to its other customers, or require (or take action to enforce) payment by those customers, and indeed had turned off or disabled its automated system in respect of the same (paragraphs 17.5 and 17.6).

24. As to the matters in the first of these bullet points, there does not seem to be any dispute that they are broadly accurate, albeit that ABCL contends that it has about 120 customers that are relevant for the purposes of pricing under the CSA, rather than the 600 to 700 customers suggested by Hallett.  However, by themselves, they do not take the inferential basis for Hallett’s allegations of widespread breaches very far at all.

25. As to the matters in the second of these bullet points, there is a factual dispute as to the matters alleged.  According to ABCL, the allegation is one that is taken from the findings made in the Federal Court proceedings and, properly understood, those findings only relate to a limited period of time and indeed are confined to ABCL’s dealings with Concrete Supply.  It seems that Hallett accepts that its only basis for this allegation is the findings in the Federal Court proceedings, but it does not accept ABCL’s confinement of those findings. 

26. The evidence does not enable me to make any findings as to the existence or extent of the matters mentioned in the second bullet point.  However, once again, the evidence and submissions have exposed the limited basis that Hallett has for the allegations it has made.

    Conclusion

27. Having addressed the individual limbs of the particulars of breach pleaded by Hallett in support of its case alleging widespread breaches, it remains for me to make some concluding observations as to the cumulative significance of those limbs.

28. For the reasons I have explained, I am not satisfied that ABCL has established that Hallett does not have a reasonable basis for prosecuting its allegations of breach in respect of Concrete Supply, BHP and Turners ReadyMix Concrete.  As explained, there are difficulties with the allegations in respect of each of these customers, however the evidence is not sufficient for me to reach a summary determination that there is no reasonable basis for those allegations.  While the allegations against Concrete Supply and BHP are couched in very general terms, I accept that there is a reasonable basis for alleging at least some breach in respect of each of these three customers.

29. However, the case as pleaded by Hallett does not in terms seek relief linked to these particulars customers.  Rather, as presently drafted, the counterclaim relies upon these alleged breaches in support of a broader allegation of widespread breaches of the CSA.  As identified in my reasons dated 8 May 2020 (as summarised earlier), the issue is whether the individual limbs of Hallett’s pleaded particulars of breach are cumulatively sufficient to sustain the allegation of widespread breaches. 

30. As at the time of preparing my reasons dated 8 May 2020, my view was that the issue was finely balanced, but that there was sufficient substance to Hallett’s inferential case to sustain the pleading.  However, now that I have had the benefit of additional evidence and submissions in relation to the various limbs of that inferential case, I have come to a different view.  While accepting that there is a reasonable basis for the allegations of breaches in relation to supplies made to Concrete Supply, BHP and Turners ReadyMix Concrete, the evidence adduced on the present applications has exposed what I consider to be the limited circumstantial or inferential significance of any breaches that might be established in respect of these customers.  The alleged breaches in respect of Concrete Supply appear to be explained by the fraudulent conduct of an employee of ABCL.  The alleged breaches in respect of BHP were limited in scope, and to the extent BHP was a “Customer” at all for the purposes of the CSA, it was not a customer which was a direct competitor of Hallett in the market for the sale of pre-mixed concrete.  And the alleged breach in respect of Turners ReadyMix Concrete was the product of a particular issue that arose as a result of a significant increase in freight costs imposed by a third party.  Understood in their proper context, I do not think any of these allegations provides much of a basis at all for inferring breaches in respect of other customers throughout the relevant period.

31. Further, once the allegations in relation to the supply to Concrete Supply, BHP and Turners ReadyMix Concrete have been put in their proper context, I do not think that the remaining limbs of the particulars of breach add much.  The allegations in relation to the 60 customers in the KPMG report, and the seven customers to whom offers were made, are not allegations of any particular identified breaches.  As explained, there are difficulties with these allegations.  But even if made out, they do little more than provide a basis to think that there might have been some (as yet unidentified) breaches at some point during the relevant period.

32. The remaining matters pleaded by way of particulars of breach are even more general again.  They amount to no more than a pleading of circumstances that might provide a commercial setting or opportunity for breaches to have occurred, rather than an allegation of any particular breach or breaches.

33. Ultimately, I am satisfied that the pleading does not disclose a proper basis for Hallett’s allegation of widespread breaches.  The particulars of breach that have been pleaded do not provide a reasonable basis for an allegation of the breadth made by Hallett in its counterclaim.  Properly understood, and even when considered cumulatively, they are not reasonably capable of sustaining an inference of widespread breaches throughout the almost six year period covered by the counterclaim.  It follows, in my view, that the pleading of widespread breaches is no more than an attempt to trawl for a case of breaches throughout the relevant period.  Consistently with the objects of the Uniform Civil Rules, I do not think that the Court should lightly permit a party without a proper basis for believing in widespread breaches to make an allegation to this effect with a view to generating a significant discovery obligation that might reveal some basis for a case.  It follows, in my view, that the case as presently pleaded by Hallett in its counterclaim is not reasonably sustainable.  It should be struck out as either an abuse of process or on the basis that the pleading does not disclose a reasonable cause of action.

1. Given my acceptance that there is a reasonable basis for an allegation of at least some breaches of the CSA, I do not think it would be appropriate for me to enter summary judgment in respect of the allegation of widespread breaches.  And because it may well be possible to recast the case so as to confine it to those breaches for which there is presently a reasonable basis, I also do not think it would be appropriate for me to summarily dismiss the allegation of widespread breaches.

2. For all of these reasons, I will make an order striking out Hallett’s counterclaim.  I am inclined to think that Hallett should have leave to replead, should it wish to plead a more narrow counterclaim consistently with these reasons; however, I will hear further from the parties in light of these reasons as to the appropriateness and terms of any order for leave to replead.