Allstate Life Insurance v Australia and New Zealand Banking Group Ltd

[1995] FCA 191

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )    No.  G381 of 1994
  )
GENERAL DIVISION                 )

BETWEEN:ALLSTATE LIFE INSURANCE CO. & OTHERS

Applicant

ANDAUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED & OTHERS

Respondent

CORAM:    Beaumont J.

DATE:     22 March 1995

REASONS FOR JUDGMENT (No.8)
    (On motion to strike out part of statement of claim)

Before the court is a notice of motion by Freehill Hollingdale & Page ("Freehills") seeking to strike out para.62 and, to a limited extent, paras.63 and 64 of the further amended statement of claim filed on 16 December 1994.

In order to understand the context in which those paragraphs appear in the pleading it is necessary to refer, inter alia, to paras.58 and 60 of the pleading.  Paragraphs 58, 60 and 62-64 of the further amended statement of claim are now annexed.

There is a limited challenge made to para.62, that is, it is sought to strike out para.62 insofar as it relates to paras.63 and 64.  

As has been indicated in previous reasons for judgment the applicants plead in their statement of claim a number of causes of action.  For present purposes it is sufficient to note that the causes of action include claims of fraud and misleading conduct.  In those circumstances, the general principles which govern this application are clear.  They are conveniently found in the judgment of the Court of Appeal of the Supreme Court of New South Wales in the Minister Administering the Crown Lands (Consolidation) Act and Western Lands Act v Tweed Byron Aboriginal Land Council (1990) 71 LGRA 201 at 204-5. This matter is also discussed in Bullen and Leake Precedents of Pleadings (1990) 13th ed. at pp.427-429 where the principles, all of which are well established, are set out as follows:

"Where fraud is intended to be charged, there must be a clear and distinct allegation of fraud upon the pleadings, and though it is not necessary that the word fraud should be used, the facts must be so stated as to show distinctly that fraud is charged (Wallingford v. Mutual Society (1880) 5 App.Cas. 685 at 697, 701, 709, Garden Neptune v. Occidental [1989] 1 Lloyd's Rep. 305, 308).

The statement of claim must contain precise and full allegations of facts and circumstances leading to the reasonable inference that the fraud was the cause of the loss complained of (see Lawrance v. Lord Norreys (1890) 15 App. Cas. 210 at 221).  It is not allowable to leave fraud to be inferred from the facts pleaded and accordingly, fraudulent conduct must be distinctly alleged and as distinctly proved (Davy v. Garrett (1878) 7 Ch.D. 473 at 489).  'General allegations, however strong may be the words in which they are stated, are insufficient to amount to an averment of fraud of which any court ought to take notice' (Wallingford v. Mutual Society ante, at 697, see the remarks of Lords Hatherley and Blackburn at 701, 704;  Re Whitworth [1919] 1 Ch.
320; affirmed sub nom. O'Rourke v Darbishire (1920) A.C. 581;  in order to displace the privilege of communication between solicitor and client a real prima facie case of definite fraud must be found in the pleadings and particulars (ibid at 622).

Where misrepresentation was not pleaded unilateral mistake could not be relied on for the purposes of rectification or rescission (Blay v. Pollard [1930] 1 K.B. 638;  L'Estrange v. Graucob [1934] 2 K.B. 394 at 403).  An amendment introducing a charge of fraud for the first time will not be allowed at the trial (see Bentley & Co. Ltd. v. Black (1893) 9 T.L.R. 580, per Lord Esher M.R.;  Behn v. Bloom (1911) 132 L.T.J. 87), except in the most exceptional circumstances, though usually an adjournment would be granted at the cost of the party applying (see Riding v. Hawkins (1889) 14 P.D. 56).  There is, however, no rule of practice that allegations of fraud have to be pleaded at the outset and could not be added by amendment, for amendments alleging fraud are no different from other amendments (Atkinson v. Fitzwalter [1987] 1 W.L.R. 201 C.A. (amendment allowed to add a plea of justification in a libel action, even though fraud was the gist of the plea.)  Such an amendment will not be allowed by the Court of Appeal (Bradford Third Equitable Benefit Building Society v. Borders [1942] 2 All E.R. 205, H.L.).

It is the duty of counsel not to put a plea of fraud on the record 'unless he has clear and sufficient evidence to support it' (Associated Leisure Ltd. v. Associated Newspapers Ltd. (1970) 2 Q.B. 450, per Lord Denning M.R. at 456).

The extension of liability for misrepresentation to innocent misstatements under section 2 of the Misrepresentation Act 1967 and to negligent misstatements under the doctrine of Hedley v. Byrne may well mean that, in many cases, the plaintiff need not and perhaps should not undertake the heavier burden of pleading and proving a charge of fraud, and that the misrepresentation relied on was made fraudulently.  Where charges of fraud are made which are not sustained, the judge has power to order the party making such charges to pay the costs occasioned thereby (Parker v. McKenna (1874) L.R. 10 Ch. 96).

The proper method of impeaching a completed judgment on the ground of fraud is by action, or in special cases by motion for a new trial;  in either case exact particulars of the fraud must be given (Jonesco v. Beard [1930] A.C. 298).

Particulars.  Full particulars of any misrepresentation relied on must be given in the pleading (R.S.C., Ord. 18, r. 12(1)(a)).  Any charge of fraud or misrepresentation must be pleaded with the utmost particularity (Garden Neptune v. Occidental, above).  The statement of claim must show the nature and extent of each alleged misrepresentation (Newport Dry Dock & Engineering Co. v. Paynter (1886) 34 Ch.D. 88) and contain particulars showing by whom and to whom it was made, and whether orally or in writing, and if in writing, identifying the relevant document (Seligmann v. Young (1884) W.N. 93). Where the plaintiff alleged that the entries made by the defendant in certain books were false, he was ordered in the first place to give particulars of those entries, and subsequently to give further particulars showing in what respects each of these entries was false (Newport Dry Dock & Engineering Co. V. Paynter, above); 'all the accounts rendered to the plaintiff are untrue' did not comply with an order for further particulars of fraud (Harbord v. Monk (1878) 38 L.T. 411).

Moreover, the necessary particulars of the fruadulent intention relied on must also be contained in the pleading (R.S.C., Ord. 18, r.12(1)(b)), and accordingly, the pleading must set out the facts, matters and circumstances relied on to show that the party charged had or was activated by a fraudulent intention."

None of those particulars are, or could be, contested in the present application.  The real issue for resolution is their application.

As the pleading indicates, there are a number of transactions relied upon.  Particulars of some of those transactions have been provided by the applicants to Freehills in letters written by the applicants' solicitor dated 21 March 1995 and are MFI "66".  It is apparent from that correspondence, which Freehills are prepared to accept for the
purposes of this application, that the position in respect of each of the transactions requires individual consideration.

For instance, in some cases, the applicant's solicitors have indicated that they are prepared to provide an outline of evidence which they believe will provide full particulars of the fraud that is charged. It is not necessary to say anything about that matter at this stage, save so far as to indicate that, in my view, if those particulars are available to the applicants they should be supplied and if it is necessary to supervise that process the Court will do it.  I would not expect that it would be necessary.

In respect of at least one original debenture holder, American Income, the applicants' solicitors, in their letter dated 21 March 1995, have indicated that this entity has formally advised those solicitors that it does not wish to provide any statement or to participate in the litigation.

In this instance, and there may be others, it is clear that the applicants do not intend to provide any further particulars of the allegations of fraud.  In my opinion, the crucial allegation for present purposes is that made in para.62(a) of the pleading.  It is there alleged that the parties in question, described as the original debenture holders, were induced by, and relied upon, the truth of the representations alleged to have been made in the statement of
claim.  As previous reasons for judgment indicate, the representations alleged arise out of the issue of the prospectus referred to in the statement of claim.  In my view, it is clearly charged in para.62(a) of the pleading that each of the original debenture holders, and for present purposes the matter can be confined to the position of American Income, relied upon and were induced by the truth of those representations.  That is an obvious reading of the pleading and is therefore the charge that is made. 

It is submitted on behalf of Freehills that the applicants should go further and provide particulars of the circumstances in which the actual subscription for the debentures occurred.  In my view, it is not necessary that those particulars be provided in order that the applicants comply with the established rules with particularity of their pleading.  The essential case sought to be made in this respect is that stated in para.62(a) of the pleading and it is a matter of evidence rather than fact to go further as Freehills would now seek.

For this purpose reference should be made to the statement of Gibbs J. in Ritter v North Side Enterprises Pty Ltd (1975) 132 CLR 301 at 303-4 where his Honour draws the distinction between setting out the material facts relied upon as distinct from the evidence required to establish those facts in the present type of context. None of this is to say
that as a matter of case management the Court should not give appropriate directions to ensure that a respondent receives adequate notice of the case sought to be made.  That is a different question.

The application before the Court is an application to strike out a pleading on the basis that it is an abuse of process and should not be allowed to proceed.  I do not think that, taking the case of American Income as a representative example, Freehills have established that there is here an abuse of process.  However, as a matter of case management, it would be appropriate to direct that the applicants provide the respondents with all material in their possession, usually in the form of a statement of evidence which describes the circumstances in which the transaction took place.

In the case, for instance, of Grandchester and Co, which is also mentioned in the applicants' solicitor's letter dated 21 March 1995, the applicants have already indicated that they propose to provide such a statement.

In those circumstances I propose to refuse the notice of motion and the formal order of the court is that the notice of motion is dismissed.

I hereby certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment of his Honour Justice Beaumont.

Associate:

Date:     22 March 1995