Arthur Young v Tieco International

[1995] SASC 5173

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA LANDER J

CWDS
Practice - Pleadings - Appeal pursuant to Rule 97.03 of Supreme Court Rules against the order of a Master, granting leave for the plaintiffs to amend their statement of claim - consideration of principles relating to pleadings - amended pleadings contain alternative pleas of failure to do something at all - or failure properly to do something - instances Of failure identified but no indication of what would have been a proper discharge of obligation - held - status and standing of opposing party irrelevant to appropriateness of pleading - pleading embarrassing and so lacking in particularity that pleas cannot stand.

Supreme Court Rules r97.03, referred to. Williams v Telecommunications (CMN)
(1988) 52 SASR 215; Banque Commerciale SA, In Liquidation v Akhil Holdings Ltd
(1990) 92 ALR, applied.

HRNG ADELAIDE, 30 January 1995 #DATE 19:7:1995 #ADD 7:9:1995

Counsel for appellants:     Mr J Mansfield QC

Solicitors for appellants:    Finlaysons

Counsel for respondents:     Mr S Milazzo

Solicitors for respondents: Piper Alderman

ORDER
Appeal allowed.

JUDGE1 LANDER J This is an appeal pursuant to Rule 97.03 of the Supreme Court Rules against the order of a Master.

2. The plaintiff brought an action against the defendants arising out of the purchase by the defendants of certain units in a thoroughbred breeding venture known as Zenith Breeding Venture No. 1.

3. The claim by the plaintiff against the defendants was in relation to the sale and purchase of those units, the borrowing of moneys sufficient to finance the acquisition of the units and in relation to the entering into of management agreements and bloodstock leases.

4. I am told from the bar table that those proceedings have been compromised.

5. The defendants, however, have brought proceedings by way of counterclaim against the defendants by counterclaim, which defendants by counterclaim, include the plaintiff in the original proceedings. For the ease of reference I shall refer to the defendants (who are the plaintiffs by counterclaim) as simply the plaintiffs and the defendants by counterclaim as simply the defendants.

6. There have been a number of applications and orders made in relation to the counterclaim in these proceedings. An application was taken out on 31 October 1994 by the plaintiffs for leave to amend the counterclaim. That application overtook an earlier application by the first and second defendants who were seeking an order with leave, nunc pro tunc, to file and serve a Rule 46.20 notice dated 24 March 1994, which notice required a more explicit statement of claim. That application, i.e. for the Rule 46.20 notice was taken out on 20th July 1994 and was argued in part before the Master on 12 September 1994.

7. In an endeavour apparently to simplify the matter the plaintiffs took out the application of 31 October 1994 so that the whole of the plaintiffs' pleadings could be considered afresh.

8. The Master acceded to that proposition and the earlier applications were put aside and the Master was asked to consider whether leave ought to be granted for the plaintiffs to amend their Statement of Claim in the terms of the Statement of Claim which was annexed to the affidavit of Leo Gerard Walsh sworn on 31 October 1994.

9. I understand the argument went forward at least with these principles in mind :
    1. There was no objection to the granting of leave provided
    that leave ought not to be granted if the amendment could
    have been struck out as a plea bad in law on some other
    ground if pleaded initially.

2. If the plea was wanting in particularity the amendment
    ought not to be allowed until proper particulars have been
    brought into court. See Duke Group v Arthur Young (No.4)
(1991) 55 SASR 24.

10. It was argued before the Master and indeed before me that, although it might be appropriate to give leave to the plaintiffs to amend the counterclaim, such leave ought not to be granted in the circumstances of this case because firstly the proposed amendment was of a kind which if it had been pleaded initially would have been struck out as bad in law and, secondly, the amendments sought to be made failed to give sufficient particularity to comply with the pleading rules. Therefore it was put to the Master and again on appeal that the amendments ought not to be allowed.

11. The Master in fact allowed the proposed amended statement of claim together with two minor amendments which do not matter for the purpose of this argument, and the document which now contains the defence to the initial proceedings (which is now irrelevant) and the counterclaim between the plaintiffs and the defendants was filed on 16 November pursuant to the order of the Master made on 14 November 1994. It is that document that the defendants seek to attack.

12. The appeal is by way of re-hearing. The defendants accepted an obligation upon them to identify errors in the exercise of the discretion which has been exercised by the Master.

13. I will not set out here the said to be errors but shall first address the principles relating to pleadings and, secondly, give consideration to those principles relating to these pleadings and thus determine whether or not there has been an appropriate exercise of discretion.

14. In Williams v Telecommunications (CMN) (1988) 52 SASR 215 King CJ said at 216 :
    "The fundamental purpose of pleadings is to provide a
    structural framework for the litigation designed to promote
    a just outcome. Pleadings achieve this purpose by
    performing two basic functions. The first is to define the
    issues between the parties thereby providing the basis for
    the determination of questions as to discovery before trial
    and admissibility of evidence at trial and of questions as
    to what the litigation has decided for the purpose of the
    rules as to res judicata and issue estoppel. The second
    function is to give to the parties fair notice of the case
    to be made against them at trial thereby minimising the risk
    of injustice resulting from surprise. These fundamentals
    remain unaltered by the new rules. Moreover, that general
    principle which governs the application of all procedural
    rules, namely that `rules and forms of procedure are not
    ends in themselves, but means to an end, which is the
    attainment of justice', Union Bank of Australia v Harrison
Jones and Devlin Ltd (1910) 11 CLR 492 per Griffith CJ at
    504, applies with undiminished force to the new rules as to
    pleadings".

15. Similar expressions were used in Banque Commerciale SA, In Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at p286, and particularly in the joint judgement of Mason CJ and Gaudron J where their Honours said :
    "The function of pleadings is to state with sufficient
    clarity the case that must be met: Gould and Birbeck and
    Bacon v Mount Oxide Mines Ltd (In Liquidation) (1916) 22 CLR
    490 per Isaacs and Rich JJ at 517. In this way, pleadings
    serve to ensure the basic requirement of procedural fairness
    but a party should have the opportunity of meeting the case
    against him or her and, incidentally, to define the issues
    for decision. The rule that, in general, relief is confined
    to that available on the pleadings secures a party's right
    to this basic requirement of procedural fairness.
    Accordingly, the circumstances in which a case may be
    decided on a basis different from that disclosed by the
    pleadings are limited to those in which the parties have
    deliberately chosen some different basis for the
    determination of their respective rights and liabilities.
    See, for example, Brown v Dunn at 76; Mount Oxide Mines at
    517-18."

16. In the same case, after a consideration of the rules, Dawson J said at p292:
    "However, that rule is merely a rule of pleading which must
    give way to considerations of a more fundamental kind if the
    justice of the case requires it. Pleadings are but a means
    to an end not an end in themselves and, as was pointed out
in Pirie v Richardson (1927) 1 KB 448 at 453, the rule
    prescribes no consequence for the failure to observe it."

17. Although the purpose of pleadings is clear, the pleadings themselves must not become a burden. Whilst recognizing the due importance of pleadings and their role in the litigation process, they are not to be understood to be any more than statements of the case of the party; statements made with sufficient particularity to identify that case. The rules of procedure do not require a party to include particulars of any more than the case to be made. The rules require the pleader to be as brief as the nature of the case permits and further require that the material facts ought to be pleaded but specifically preclude the pleading of the evidence upon which those facts are to be proved. It is therefore necessary, as only the material facts are to be pleaded, that some judgment has to be made in respect of any particular pleading as to whether or not the facts which are said to be omitted are material facts for the purpose of the party against whom the pleading is directed understanding the case, which is identified against that party. It follows that having regard to the injunction that the pleadings be as brief as possible and that only material facts be pleaded, the law recognizes that some facts will not be pleaded because those facts do not identify the case that is raised against the party against whom the allegation is made, or further do not identify any issues or sub-issues to which that party ought to apply that party's mind.

18. The rules do require that the pleading will contain particulars of the claim, and particulars under the Rules must be understood to be part of the pleadings. However, the rules make it plain that what is required is that there be sufficient particulars of the claim. It follows therefore, as well, that the rules contemplate that not all particulars which may be identified by a party need be pleaded.

19. In essence therefore it seems to me that a proper pleading will contain the material but not all facts and will contain sufficient particulars.

20. Whether the material facts and whether sufficient particulars have been pleaded must depend upon the cause of action, the complexities of the case and the whole of the circumstances of the case. None of those matters can be considered in isolation any more than each of the paragraphs of the pleading can be considered in isolation.

21. When the Court considers a pleading it will not consider the pleading with the same degree of scrutiny which the courts are required to give to an Act of Parliament. With the complexities of modern litigation, a pleader can usually point to some deficiency in the opponent's pleadings. One can usually, if one approaches the matter with a critical eye, identify some failing in a pleading. But that is not the approach that in this age ought to be adopted. A court would not sit down in the manner of a nineteenth century pleader seeking to find an error capable of sending a party away to re-plead his claim or defence. Such a technical approach is inconsistent with modern litigation and inconsistent with the court's function which is to try to arrive at a just result. A successful result, if arrived at, after too great an expense may not be considered by even the successful party to be a just result. A court ought to approach a consideration of the adequacy of a pleading seeking to answer the ultimate question; does the pleading give fair notice of the case to be made against the other party at trial, thereby minimising the risk of injustice resulting from surprise.

22. The first defendant carried on business as a chartered accountant until 1 July 1989. The second defendant has carried on business since that date as the successor to the first defendant and has assumed all of the assets and liabilities of the first defendant. I shall refer to the first and second defendant, collectively, as Arthur Young. The third defendant was the plaintiff in the original proceedings.

23. The plaintiffs' claim is that in or about April 1989 they retained the first defendant to act on their behalf and to give the plaintiffs advice in relation to the minimization of the plaintiffs' taxable income and tax liability.

24. The terms of the retainer (and some duties) are pleaded in paragraph 8 of the more explicit and amended counterclaim and they are in essence:-
    (1) Arthur Young would give taxation advice to the
    plaintiffs.

(2) Arthur Young would give advice to the plaintiffs on the
    manner in which the plaintiffs could legitimately reduce the
    incidence of taxation for the 1988/89 year.

(3) Arthur Young, in carrying out its retainer would act
    (a) in a reasonable and competent manner, and
    (b) with reasonable skill, care and diligence,
    and further or in the alternative, they were under a duty to
    do so.

(4) Arthur Young, in advising the plaintiffs would apply the
    special expertise of skill it claimed to have in tax
    effective investments and in particular in the thoroughbred
    horse breeding industry, and in the alternative, they were
    under duty to do so.

(5) Arthur Young would comply with the code of professional
    conduct of the Australian Society of Certified Practising
    Accountants and further or in the alternative, they were
    under a duty to do so.

(6) Arthur Young would be impartial and objective and avoid
    conflicts of interest and further or in the alternative they
    were under a duty to do so.

(7) Arthur Young would always act in the best interests of
    the plaintiffs and further or in the alternative, they were
    under a duty to do so.

(8) Arthur Young would fully advise the plaintiffs of the
    risks associated with any investment recommended by them and
    further or in the alternative, they were under a duty to do
    so.

25. Next it is pleaded that Arthur Young gave to the plaintiffs a memorandum entitled Zenith Breeding Venture No. 1 Private Offering Memorandum No. 149 (the Memorandum). It is said that that document, which Arthur Young was involved in preparing, was given to the plaintiffs in order to induce the plaintiffs to purchase units in the venture. It is said that the Memorandum itself or in the alternative by the delivery of the Memorandum, Arthur Young made representations ("the first representations") to the plaintiffs. It is not necessary to identify the particulars of these representations other than to notice that they relate to the bloodstock industry and to its potential.

26. The plaintiffs' claim that at a meeting in 1989 they were advised by Arthur Young to purchase units in the venture, in order to minimize their taxable income and to minimize their taxation liability. In giving this advice, it is said Arthur Young made further representations and warranties which are set out in paragraph 12. Again, they do not need to be identified in these reasons with any particularity.

27. The plaintiffs' claim that at the time the first representations were made Arthur Young and Pegasus Leasing had special knowledge of the matters, the subject of the first representations and warranties and of the facts upon which the advice to purchase units and the first representations and warranties were based. Arthur Young had also had special knowledge in relation to the second representations and warranties. It is claimed that at the time these representations and warranties were made, Arthur Young intended, and well knew, or ought reasonably to have known, that the plaintiffs would rely upon the contents of the Memorandum, the representations and warranties and the advice given to them and that the plaintiffs would purchase units in the venture.

28. Therefore, it is claimed, Arthur Young and Pegasus Leasing had a duty, in making those representations and warranties, to ensure that they were accurate and based upon a reasonable analysis of the bloodstock market and its future.

29. As a result of the representations, warranties and advice, the plaintiffs entered into a series of agreements as pleaded in paragraph 16, as a result of which Arthur Young received a direct or indirect consideration or material advantage.

30. It is claimed that Arthur Young breached the terms of the retainer by failing to make proper inquiries or to exercise reasonable skill and care in carrying out its duties to the plaintiffs. Similarly, it is claimed that Arthur Young and Pegasus Leasing failed to take reasonable care in the making and giving of the first representations.

31. It is claimed that each of the first representations were false, untrue, inaccurate and misleading and that each of the first warranties were broken. It is pleaded by the plaintiffs that Arthur Young also failed to take reasonable care in the giving of the advice to purchase units in the venture and in making the second representations and warranties. The advice given by Arthur Young, it is claimed, was incorrect and the second representations were false, untrue, inaccurate and misleading, and as a result, each of the second warranties were broken.

32. It is claimed that in relation to the representation and warranties which related to future events or acts, Arthur Young and Pegasus Leasing were in breach of s54 of the Fair Trading Act (1985), in that at the time of making these representations and giving these warranties; there was no factual basis upon which the said representations and warranties could have been made; and there was no reasonable grounds for Arthur Young and Pegasus Leasing holding the belief that the representations and warranties were true.

33. The pleading then claims that in making each of the representations and warranties, the first and third defendants were engaged in trade or commerce in Australia, and the representations and warranties were misleading or deceptive or likely to mislead or deceive in contravention of s52 of the Trade Practices Act 1974 (Pegasus) and/or s11 of the Fair Trading Act 1985 (Victoria) and/or s56 of the Fair Trading Act, 1987 (South Australia) (Arthur Young and Pegasus).

34. Further, and in the alternative, it is claimed that Arthur Young breached fiduciary duties owed to the plaintiffs, arising out of the relationship of professional adviser and client.

35. The pleading claims that Arthur Young was guilty of a breach of the Securities Commissions Act 1905, and therefore liable to account to the plaintiffs for any profit.

36. The plaintiffs have claimed damages, declarations, orders and other remedies against Arthur Young, as well as the third defendant.

37. Arthur Young attacked paragraphs 17 to 20 of the defence case and counterclaim and in particular argued:-
    (1) those paragraphs do not plead material facts or
    particulars in relation to each of the sub-paragraphs of the
    matters which (it is alleged) ought to have been taken into
    account, and the pleading asserts generalities and
    conclusions rather than facts, and

(2) those paragraphs do not plead as against the appellants
    what it is the appellants ought to have done in relation to
    those several assertions of fact.

38. I set out paragraphs 17 to 20:
    "17. In breach of the terms of the retainer and further, or
    in the alternative, in breach of the duties identified in
    paragraph 8:

17.1 Arthur young did not act:
    17.1.1 in a reasonable and competent manner; or
    17.1.2 with reasonable skill, care and diligence.

PARTICULARS
    (a) Arthur Young did not enquire or properly enquire as to
    the availability and suitability of any other tax effective
    proposals for the plaintiffs by counterclaim.
    (b) In properly carrying out its retainer, Arthur Young
    should have, but in the current circumstances failed to,
    take into account or failed to properly take into account
    that:
     (i) the bloodstock market fluctuates with the economy;

     (ii) the bloodstock market is cyclical;
     (iii) the Australian bloodstock market follows the
     overseas bloodstock markets;
     (iv) that there had been an unprecedented and massive
     injection of equity into the bloodstock market from 1986
     to 1989 causing massive growth in that period;
     (v) that the market had become overheated;
     (vi) other breeding syndicate ventures were having
     difficulty in attracting investors;
     (vii) the New Zealand bloodstock market was declining;
     (viii) historically investments in the bloodstock industry
     were highly speculative and a gamble;
     (ix) Twig Moss, a horse which was leased and was a
     stallion comprising 20/32 of the stallions in the
     syndicate was nearly 17 years old at the time of the
     commencement of the lease agreement and would be nearly 17
     years old at the time of the commencement of the lease
     agreement and would be nearly 20 years old when they
     expired;
     (x) the capacity of a stallion to service mares generally
     declines after the age of 15 years;
     (xi) there was a substantial risk that Twig Moss would be
     unable to service mares of its capacity to service such
     mares would decline during the term of the venture;
     (xii) there was a significant risk that Twig Moss would be
     dead by the conclusion of the venture;
     (xiii) there was a significant risk that Twig Moss would
     have no value, or no substantial value at the conclusion
     of the venture;
     (xiv) there was a substantial risk that service fees for
     Twig Moss would not increase during the period of the
     venture. Indeed there was a significant risk that service
     fees would decline;
     (xv) the success of the whole venture was dependent or
     significantly dependent upon the success of Twig Moss;
     (xvi) the shares in Twig Moss that were acquired by the
     venture at substantially over-value.

PARTICULARS
    The 20 shares in Twig Moss were over-valued by some $780,000
    (that is in excess of $39,000 per share).

(xvii) no independent valuation had been obtained for Twig
     Moss.
     (xviii) Twig Moss had veterinary problems in the form of:
        (a) a heart murmur;
        (b) an injury to the hind leg;
     (xix) no standing rights were obtained by Twig Moss which,
     in the circumstances of 20 shares being acquired, should
     reasonably have also been acquired by the venture;
     (xx) the broodmares, Fantan, Unrocel Lass, Look Sharp and
     Cardiff Heights were, by virtue of their age, unlikely to
     maintain their value and indeed there was a substantial
     risk their value would decline by the conclusion of the
     venture.
    (c) Arthur Young failed to advise, or properly advise, the
    plaintiffs by counterclaim that an investment in the
    thoroughbred breeding industry and in the Zenith Breeding
    Venture No 1 was risky and one where there was a significant
    risk that the capital investment may be lost.
    (d) Arthur Young failed to advise and warn or properly
    advise and warn the plaintiffs by counterclaim of the risks
    associated with an investment in the venture.

PARTICULARS
    In properly carrying out its retainer Arthur Young should
    have, but in the current circumstances failed to, advise or
    warn or properly advise and warn the plaintiffs by
    counterclaim of each of the matters set out in paragraph
    17.1(b).

17.2 Arthur Young in carrying out its retainer failed to
    exercise any special expertise and skill in advising on tax
    effective investments and in particular investments in the
    thoroughbred horse breeding industry.

PARTICULARS
    (a) In properly carrying out its retainer Arthur Young
    should have, but in the current circumstances failed to,
    take into account, or properly take into account each of the
    matters set out in paragraph 17.1(b).
    (b) Those members and professional employees of Arthur Young
    who were specially charged with providing the plaintiffs by
    counterclaim with tax advice, and in particular Andrew
    Binns, relied upon the recommendations and advice of
    O'Connor. This was in circumstances where O'Connor was
    charged with the preparation, publication, promotion and
    approval of the venture. It was improper and/or
    unreasonable for Arthur Young, in carrying out the terms of
    the retainer from the plaintiffs by counterclaim, to rely in
    whole, or substantially rely upon the recommendations and
    advice of O'Connor without independently verifying,
    assessing and appraising the suitability of that investment
    for the plaintiffs by counterclaim.

17.3 Arthur Young failed to comply with the code of
    professional conduct of the Australian Society of Certified
    Practising Accountants and, in particular:
    (a) Arthur young did not safeguard the interests of the
    plaintiffs by counterclaim, in breach of section B.1 of the
    Code of Professional Conduct.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars set
    out in paragraphs 17.1, 17.2 and 32.

(b) Arthur Young were not objective, impartial and free of
    conflicts of interest in breach of Section B.3 of the Code
    of Professional Conduct.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars set
    out in paragraph 32.

17.4 Arthur Young failed to act impartially, objectively and
    to avoid conflicts of interest.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars set
    out in paragraph 32.

18. Further, or in the alternative, Arthur Young in breach
    of the duties referred to in paragraph 15(a), in making of
    the first representations:

18.1 Failed to take into account or to properly take into
    account the matters set out in paragraph 17.1(b).

18.2 Notwithstanding the matters set out in paragraph 18.1,
    Arthur Young provided financial projections in the
    memorandum which were inaccurate, unreasonable and were not
    a fair presentation of the reasonably anticipated financial
    performance of the venture.

PARTICULARS
    (a) The shares in Twig Moss were over-valued.

FURTHER PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 17.1(b)(xvi).

(b) The anticipated net proceeds from the sale of Twig Moss
    were over-valued.

FURTHER PARTICULARS
    The anticipated net proceeds of sale of Twig Moss at the
    conclusion of the venture should have been estimated at nil.

(c) The income by way of service fees to be earned by Twig
    Moss was over-valued.

FURTHER PARTICULARS
    The anticipated income by way of service fees should have
    been calculated on a reducing scale over the term of the
    venture.

(d) The income by way of service fees to be earned other
    than by Twig Moss was over-valued.

PARTICULARS
    It was inappropriate to anticipate an increase in service
    fees over the term of the venture.

(e) The value of the brood mares was over-valued.

PARTICULARS
    The value of Fantan, Unrocel Lass, Look Sharp and Cardiff
    Heights should have been substantially discounted by virtue
    of their age.

(f) The anticipated net proceeds from the sale of the
    broodmares was over-valued.

PARTICULARS
    The value of Fantan, Unrocel Lass, Look Sharp and Cardiff
    Heights should have been anticipated as nil at the
    conclusion of the venture.

(g) The anticipated prices to be paid for yearlings over the
    period of the venture was over-valued.

PARTICULARS
    The financial projections anticipated yearling prices rising
    10% per annum compounding. There should not have been any
    assumption made in this regard.

(h) By virtue of the matters set out above the
    representations as to the investor's tax position per unit,
    the investors (sic) cash flow per unit and the net benefit
    (outlay) were inaccurate.

19. Each of the first representations were false, inaccurate
    and misleading and deceptive, or likely to mislead and
    deceive in that:

19.1 The financial projections which provided for
    significant profits and the return to investors were
    inaccurate for the reasons set out in paragraph 18.

19.2 The financial projections which provided for the
    realisation of sufficient funds to repay loan finance were
    inaccurate for the reasons outlined in paragraph 18.

19.3 The financial projections in the brochure were not
    reasonably based, for the reasons outlined in paragraph 18.

19.4 The thoroughbred breeding industry was not fast
    growing.

PARTICULARS
    The industry went into decline following the Easter yearling
    sales in 1989.

Further, the plaintiffs by counterclaim rely upon paragraph
    17.1(b)(i) to (viii).

19.5 The Australian thoroughbred industry did not have a
    sound basis for growth.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4.

19.6 The venture did not provide an opportunity to invest in
    outstanding proven stallions and premium quality broodmares.

PARTICULARS
    The venture's success was heavily dependent upon Twig Moss.
    Twig Moss could not be considered to be outstanding for the
    reasons particularised in paragraph 17.1(b)(x) to (xix).

The broodmares Fantan, Unrocel Lass, Look Sharp and Cardiff
    Heights could not, for the reasons outlined in paragraph
    17.1(b)(xx) be considered as premium quality.

19.7 The horses and interests in the venture did not consist
    of a balanced portfolio.

PARTICULARS
    The success of the venture was substantially dependent on
    Twig Moss in that it consisted of 20 of the 32 stallion
    interests in the venture.

19.8 The comments and opinions expressed in Appendix A to
    the memorandum were not reasonably based.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4.

19.9 The thoroughbred horse breeding industry was very
    healthy.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4.

19.10 There did not remain strong demand for horses,
    particularly in the $50,000 to $150,000 bracket.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4.

19.11 It was not premature to state that the Australian
    Easter yearling sales for 1989 were out of control.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4.

19.12 Australian bloodstock was not under-valued.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4.

19.13 The prices paid at the Easter yearling sales for 1989
    were not sustainable.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4.

19.14 The Australian thoroughbred industry was not one of
    the stronger growth industries in Australia.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4.

19.15 The Easter yearling sales in 1989 exceeded the growth
    in the industry.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4.

19.16 The growth in the industry did not continue.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4 and the subsequent decline in sales in the
    industry in the period through to June 1993 (the conclusion
    of the venture).

19.17 The growth in the industry was speculative and was not
    soundly based on prize money available.

PARTICULARS
    The plaintiffs by counterclaim rely upon the particulars in
    paragraph 19.4

Further, the growth in the industry had been generated
    through the acquisition of horses to be placed in
    syndications and in particular in syndicates associates
    (sic) with Tommy Smith and Bart Cummings.

20. Further and in the alternative, in breach of the duty
    referred to in paragraph 15(b) hereof, the defendant Arthur
    Young, in making the second representations and warranties:

20.1 Failed to take into account or to properly take into
    account the matters set out in paragraph 17.1(b).

20.2 The plaintiffs by counterclaim repeat the allegations
    set out in paragraphs 17.1(a), 17.2, 17.3 and 17.4."

39. The thrust of the complaint in relation to those pleadings is the use of the word `properly', which appears a number of times without the pleading indicating what it was the defendant ought to have done, or what it is said the defendant did not properly do.

40. In paragraph 17.1(a), for example, the pleader alleges Arthur Young did not enquire into the matter alleged. There is no ambiguity about that. However, the pleading also complains by way of alternative that Arthur Young did not properly enquire into the same matter. That, it is claimed, is impermissible unless the pleader indicates by way of particularity what it was that ought to have been done, so as to allow Arthur Young to know what it is that must be answered.

41. The pleading is a true alternative. On the one hand the allegation is that nothing was done at all. Alternatively, it is alleged that something was done, but not properly in the sense of not sufficiently. Arthur Young says that if the pleader insists on making a claim of that kind, the pleader must identify, with sufficient particularity, what it is that Arthur Young did and how it is, that that is, in the case of 17.1(a), for example, "not to properly enquire".

42. The same type of plea is used throughout paragraphs 17.1, 17.2, 18.1 and 20.1, and in so far as paragraph 20.2 repeats 17.1 and 17.2, also in that paragraph.

43. I was referred in particular to paragraph 17.1(b) as a prime example of the embarrassment that is caused to Arthur Young by the pleas. In that paragraph there is again the alternative pleas of failed to do something at all, or failed properly to do something, and then twenty instances of that failure are identified. In none of them does the pleader indicate what would have been a proper discharge of the obligation, and how it is that Arthur Young failed to meet that proper discharge, which allows it to be said that something was not properly taken into account.

44. Mr Mansfield, QC, directed me specifically by way of example to paragraph 17.1(b)(i). He submitted that that pleading demonstrated the lack of particularity by failing to identify either the fluctuations or the economy. He argued that the plea becomes embarrassing because of clear lack of particularity.

45. The plaintiffs' answer was that the defendants were professional people, who have been referred to specific matters and were therefore in a position to instruct to defend. In any event, it was said that the plaintiffs could give no better particulars. I do not think that it is an answer to a pleading that lacks sufficient particularity to have regard to the business of, or the resources of the defendant. A pleading is either appropriate or not so. It does not come within the Rules or the principles of pleading because the opposing party has the expertise and resources available to investigate the allegations, and it does not become an appropriate pleading because of the status and standing of that opposing party.

46. The plaintiffs' case must be, in relation to those matters, either nothing was done, or something, but something less than appropriate was done. It would not allege the alternative, i.e. that something less than appropriate was done, unless it had some reason to do so. The plaintiffs must be able to give particulars of what would have been appropriate action and particulars of what was done, which would show the inappropriateness of the action, because unless it can do so, the plaintiffs have no case.

47. I have reached the conclusion that the pleading, in so far as it alleges a failure to properly do or not do something, is embarrassing and so lacking in particularity that the pleas cannot stand.

48. The Master allowed the pleas to stand because he accepted that no further particulars could be given and that to give further particulars would be to descend into evidence.

49. I think, with respect, that is not so. I think no particulars at all have been given of what is meant by 'properly', wherever it is pleaded. In those circumstances an answer that no more can be given is proof positive that the plea should not stand.

50. The Master also believed that experts' reports would in due course cure the deficiency, if there was a deficiency. Again with respect, I would disagree. Experts' reports contain, or should contain, two matters. They contain assumptions of fact, spelt out with sufficient clarity so that the opinion which is expressed in the report can be understood for the premises it relies upon.

51. Arthur Young can rightly say that an experts' report will give them, in truth, nothing by way of amplification of the pleadings. Moreover, Arthur Young can also say it is not able to properly instruct its experts without knowing the premises upon which the opinion is sought.

52. I therefore think that paragraphs 17.1, 17.2, 18.1, 20.1 and 20.2 do suffer from a want of particularity. The paragraphs can only stand if any reference to a failure to properly do something is deleted.

53. I think also that paragraph 18.2 is somewhat laconic. I think paragraphs 18.2(a) and (b) do not want for particulars. However 18.2(c) ought to indicate the extent of the over valuation and how it is calculated. So, also, particulars ought to be given in paragraphs 18.2(d), 18.2(e) and 18.2(g), again of the precise calculation of over-valuation. I think paragraph 18.2(h) should indicate with particularity the extent of the inaccuracy.

54. In so far as paragraphs 19 to 20 adopt or include the deficient paragraphs I have identified, then, of course, those paragraphs have the same deficiency.

55. It is not for me to plead the action for the plaintiffs, but if they are not able to give any particularity of what it was the defendants did, in not properly carrying out the defendants' duty, then the plaintiffs may best advance their case by deleting any reference to the alternative plea.

56. For those reasons I would allow the appeal, but I shall hear the parties as to appropriate orders.