Asahi v WR Grace

[1991] FCA 530

Re: MAGENTA HOLDINGS LTD and AMPERSAND INTERNATIONAL LTD
And: BANK OF NEW ZEALAND LTD; EIE-INTERNATIONAL CORPORATION; AXIS LIMITED;
ESSINGTON DEVELOPMENTS LTD; GRYLIS PTY LTD; ESSINGTON LIMITED; MALCOLM LESLIE
EDWARDS and ROBERT BUNGO ISHIZAKI
No. QLD G138 of 1990
FED No. 530
Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Spender J.(1)

CATCHWORDS

Practice - whether applicants ought to have the benefit of discovery before supplying particulars of claim.

Federal Court Rules O 12 rr 1, 2, 3 and 5.

HEARING

BRISBANE

#DATE 3:6:1991

Counsel for the applicants: Mr Keane QC and Mr McKenna

instructed by

Coors Chambers Westgarth

Counsel for the second, third
and eighth respondents: Mr S. Doyle instructed by Mallesons

Solicitor for the fourth, sixth
and seventh respondents: Mr Hancock of Cannan and Peterson

For the first and fifth
respondents: Nil

ORDER

The second, third and eighth respondents make discovery within 21 days of today's date and inspection occur within a further 14 days.

The application by the second, third and eighth respondents for further and better particulars of the statement of claim is adjourned, to be brought on on five working days' notice.

The costs of the motion by the applicants and by the second, third and eighth respondents as between those parties be those respective parties' costs in the principal proceedings.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

There are two notices of motion before me which raise the perennial question of whether the applicants in the principal proceedings should have the benefit of discovery before supplying particulars of their claim.

1. On 9 April 1991 the second, third and eighth respondents in these proceedings, namely E.I.E. International Corporation, Axis Limited and Robert Ishizaki filed a notice of motion seeking orders that the applicants file and serve on those respondents particulars of paragraphs 10(c), 11(d) and 14(c) of the statement of claim and that if the applicants do not file and serve on the solicitors for those respondents the particulars as required by that order, the proceedings be stayed or dismissed as to those respondents, or alternatively that the paragraphs be struck out.

2. By notice of motion filed on 21 May, the applicants in the principal proceedings, Magenta Holdings Ltd ("Magenta") and Ampersand International Ltd ("Ampersand") sought, inter alia, orders that the second, third and eighth respondents file and serve verified lists of documents in compliance with an order that was made on 4 February 1991 that each party make discovery by 4 March 1991.

3. As the prayer for relief in the applicant's motion indicates, the issues for determination on the motion have to be considered in the context of the litigation as it has progressed so far. The general rule is canvassed in some detail in the judgment of Fitzgerald J. in Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 70 FLR 135, in which a central issue was the respondent's state of mind. His Honour said at 145:
   

" The applicants' allegation that the respondents have no reasonable expectation may, at this stage of the proceedings, be taken as not relevantly dissimilar from an allegation of reckless indifference and the respondents did not suggest to the contrary. Relevant considerations may include not only belief, knowledge and intention, but the matters and/or lack of them, upon which such mental conditions were based. The respondents submitted that it was an abuse of process for the applicants to have made allegations that the respondents did not have any reasonable expectation that the statements were true without any evidentiary basis and merely in the hope of obtaining material which would assist them by discovery. The applicant's made the usual response that the requisite information is peculiarly within the knowledge of the respondents and also sought to contend that an inference could be drawn from the fact that the forecasts proved inaccurate. "

1. Order 12 rr. 1, 2, 3 and 5 of the Federal Court Rules provide:
   

" 1(1) A party pleading shall state in the pleading or in a document filed and served with it the necessary particulars of any claim, defence or other matter pleaded by him. 1(2) Rules 2 to 4 do not affect the generality of sub-rule (1). 2 A party pleading shall give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which he relies.

3(1) A party pleading any condition of mind shall give particulars of the facts on which he relies. 3(2) In sub-rule (1) "condition of mind" includes any disorder or disability of mind, any malice and any fraudulent intention, but does not include knowledge. 5(1) The Court may order a party to file and serve on any other party -

(a) particulars of any claim, defence or other matter stated in his pleading, or in any affidavit ordered to stand as his pleading; or

(b) a statement of the nature of the case on which he relies; or

(c) where he claims damages, particulars relating to general or other damages.

5(2) Without limiting the generality of sub-rule (1), where a party alleges as a fact that a person had knowledge or notice of some fact, matter or thing, the Court may order that party to file and serve on any other party -

(a) where he alleges knowledge, particulars of the facts on which he relies; and

(b) where he alleges notice, particulars of the notice. 5(3) The Court shall not make an order under this rule before the filing of the defence unless, in the opinion of the Court, the order is necessary or desirable to enable the respondent to plead or for some other special reason. "

1. Of these Fitzgerald J. said, at 146:
   

"These rules like the modern English rules involve a departure from the previous practice under which no more was or could be required of a party than that he alleged a condition of mind which was an ingredient of a cause of action as a fact in his pleading. Particulars were not required and should not be ordered: Burgess v Beethoven Electrical Equipment Limited

(1943) 1 KB 96 (C.A.). Now, under the rules, particulars are required in the first instance of any condition of mind alleged other than knowledge, and particulars of knowledge may be ordered, although only after the defence is filed unless the court is of the opinion that it is necessary or desirable that particulars be delivered in order to enable the respondent to plead or for some other special reason."

1. His Honour quoted a passage from Feeney v Rix (1968) 1 Ch 693, in which Cross J., after stating that the modern English rules had altered the previous position completely, said:
   

"It follows, therefore, that if a party alleges that the other party intended on some occasion to make a gift of some item of property he must plead the facts on which he relies in support of the allegation. Further, if he alleges the other party did not intend on some occasion to make a gift of some item of property he must plead the fact on which he relies in support of that allegation, for to say that someone did not intend to do something is just as much an allegation of a condition of mind as to say that he intended to do something."

1. Fitzgerald J. concluded on the facts of Lyons v Kern Konstructions (Townsville) Pty Ltd (supra) at 147 that:
   

"In my opinion, the applicants were required by the rules to particularise the facts upon which they rely in support of their allegations that the respondents had no reasonable expectation that the shops would be fully tenanted when the shopping centre opened or that a walkway would be constructed from the City Council carpark within the period nominated."

Fitzgerald J. also concluded at 148, in a passage which I respectfully adopt:

"The proper approach, as it seems to me, is to see this aspect of the present dispute as involving a contest, as so often occurs, between the respondents' entitlement to particulars from the applicants and the applicants' claim to have the delivery of particulars postponed until after they obtain discovery from the respondents. The applicants' inability to provide particulars is well established in the form of a statement of claim, their affidavits, and the concession candidly made by their counsel. However, proceedings lacking particularity through want of information cannot be described as vexatious, frivolous, or an abuse of the process of the court if the applicants can show that the circumstances are such that the respondents should be ordered to make discovery in advance of the applicants providing particulars."

His Honour cited a number of cases which are manifestations of the exercise of the discretion in this area and at 150 stated the general rule that:

" ..discovery before particulars plainly is not available as a matter of course. It is the exception rather than the rule."

1. In Zierenberg v Labouchere (1893) 2 QB 183, Lord Esher M.R., in a judgment with which Bowen L.J. expressed entire agreement, said at 188:
   

"Such discovery has never been allowed in the absence of some relationship between the parties to the action, except under exceptional circumstances, such as one party keeping back something which the other was entitled to know."

1. Perhaps an extension of that statement are the observations by Brennan J. in W.A. Pines Pty Ltd v Bannerman (1980) 41 FLR 175, with whose judgment Bowen C.J. and Lockhart J. agreed. Brennan J. said at 181:
   

"Though the power to require discovery be acknowledged, how should it be exercised? It depends upon the nature of the case and the stage of the proceedings at which the discovery is sought. In the present case, discovery is sought before there is a title of evidence to suggest that the Chairman did not have the requisite cause to believe which par. 6 of the statement of claim would put in issue. Some assistance was sought to be derived from cases where discovery had been given to a party before he was required to give particulars of his claim: cases such as Ross v Blakes Motors Ltd (1951) 2 All ER 689 but in cases of that kind there is either an anterior relationship between the parties which entitles one to obtain information from the other, or sufficient is shown to ground a suspicion that the party applying for discovery has a good case proof of which is likely to be aided by discovery. This is not such a case. This is a case where a bare allegation is made by par. 6 of the statement of claim and, the paragraph being denied, the applicant seeks to interrogate the Chairman and ransack his documents in the hope of making a case. That is mere fishing. As Smithers J. said in Melbourne Home of Ford Pty Ltd v Trade Practices Commission: (1979) 36 FLR at 460; 'In the absence of such evidence the proceeding is essentially speculative in nature. In such circumstances for the court to assist the applicants by making available to them the processes of interrogatories and discovery would be to assist them in an essentially fishing exercise and from this the court on established principles should refrain'. His Honour's refusal for discovery was right and it ought not be disturbed. "

1. As that passage notes, the power to require discovery depends upon the nature of the case and the stage of the proceedings at which the discovery is sought. It also makes it plain that discovery before particulars should not be ordered in favour of an applicant who has made a bare allegation involving a state of mind so as to further the hope that a case might be made out after discovery has been obtained. It is, however, otherwise where, in the words of Brennan J.:
   

"...sufficient is shown to ground a suspicion that the party applying for discovery has a good case proof of which is likely to be aided by discovery."

1. The state of the proceedings in the present case is significant. The particulars sought by the second, third and eighth respondents are not necessary for them to plead to the statement of claim, for their defence has been filed.

2. The statement of claim, filed on 2 November 1990, and the particulars of it, other than those in respect of paragraphs 10(c), 11(d) and 14(c), make reference to a number of corporate entities and intertwined activities of those corporations.

3. For present purposes it is sufficient to note that the statement of claim alleges that EIE-International Corporation ("EIE") made an irrevocable offer in writing, dated 15 March 1988, to Magenta for finance to the extent of $50,000,000, subject to certain events. One of those events was the acquisition by EIE from Ariadne Australia Ltd of all the issued share capital of Kerema Pty Ltd, which in turn held all the issued share capital in Discovery Bay Developments Pty Ltd. It is alleged in the statement of claim that the irrevocable offer by EIE induced Magenta to agree to purchase just under 20 per cent of the shares in FAI which were owned by Ariadne.
   

4. Paragraphs 10, 11 and 12 of the Statement of Claim allege:
   

"10. The making of the Irrevocable Offer was conduct in which Ishizaki, BNZ, Essington Developments, Essington and Edwards were, in addition to EIE, persons involved, in that:-

(a) Ishizaki signed the Irrevocable Offer;

(b) The Irrevocable Offer was sent by EIE to Edwards and was delivered to Magenta on 16 August 1988 by Edwards on behalf of EIE, Essington Developments, Essington and Ishizaki;

(c) BNZ had agreed with the other respondents to give effect to the intention referred to in paragraph 11(d) hereof by the conduct referred to in paragraph 12 hereof;

knowing and intending that Magenta would be induced thereby to enter into the agreement to purchase the FAI Parcel.

11. The making of the Irrevocable Offer was conduct which was misleading and deceptive in that, to the knowledge of all the parties involved therein:-

(a) EIE did not have reasonable grounds for making the representation;

(b) EIE did not intend to lend $50,000,000.00 to Magenta to enable Magenta to purchase the FAI Parcel either upon the occurrence of the events referred to in the Irrevocable Offer or at all;

(c) EIE was not, and had no reasonable grounds for representing that it was able to lend $50,000,000.00 to Magenta to enable Magenta to purchase the FAI Parcel;

(d) it was made with the intention common to them:-

(i) that BNZ by its Chief Executive in Australia, Leigh Scott-Kemmis, would request the National Companies and Securities Commission ("the NCSC") to take steps to vest the FAI Parcel in the NCSC on the ground of an alleged contravention of the Companies (Acquisition of Shares) (Queensland) Code by reason of the association of Bruce Raymond Judge with Magenta (as purchaser of the FAI Parcel) and with Judge Corporation (as holder of the Grylis Parcel);

(ii) that the rights attaching to the FAI Parcel including the right to vote at general meetings of Ariadne, should be sterilised as a result of such action by the NCSC;

(iii) that, in consequence, the value of the Grylis Parcel would be enhanced in that its owner could then exercise effective control of Ariadne; and

(iv) that, upon BNZ or Essington obtaining control of Ariadne it would procure the completion of Ariadne of the sale of all the issued share capital of Kerema Pty Ltd, the holding company of Discovery Bay Developments Pty Ltd.

12. In accordance with and to give effect to that intention, on or about 30 August 1988, BNZ, by its Chief Executive in Australia, Leigh Scott-Kemmis, requested the NCSC to join with BNZ in taking steps to vest the FAI Parcel in the NCSC on the ground that the agreement between FAI and Magenta involved the contravention of the Companies (Acquisition of Shares)

(Queensland) Code by reason of the association of Bruce Raymond Judge with Magenta (as purchaser of the FAI Parcel) and with Judge Corporation and its wholly owned subsidiaries (as holder of the Grylis Parcel)."

1. A request for further and better particulars of the statement of claim was filed on behalf of the second, third and eighth respondents on 30 November 1990. So far as paragraph 10(c) is concerned it sought:
   

"As to the agreement BNZ is alleged to have had with each of the secondnamed, thirdnamed and eighthnamed respondents, give the following particulars:

(1) state whether the agreement is wholly or partly in writing and if so identify the writing and produce a copy for inspection by the solicitors for the secondnamed, thirdnamed and eighthnamed respondents;

(2) state whether the agreement is wholly or partly oral, if so identify the parties to the material conversations, the dates and places of the material conversations and the effect of what was said;

(3) state whether the agreement in whole or in part is said to arise from conduct, and if so particularise that conduct."

And in respect of paragraph 11(d) the request sought:

"As to the common intention therein referred to:

(1) state which natural person or persons (either as respondents or on behalf of respondents as the case may be) entered into or held the common intention;

(2) state whether the common intention was stated wholly or partly in writing and if so identify the writing and produce a copy for inspection by the solicitors for the secondnamed, thirdnamed and eighthnamed respondents;

(3) state whether the common intention was stated wholly or partly orally and if so identify the parties to the material conversations, the dates and places of the material conversations and the effect of what was said;

(4) state whether the common intention in whole or in part is said to arise from conduct and if so particularise that conduct."

1. On 18 December 1990, the applicant filed particulars in response to that request and in respect of the particulars sought of paragraph 10(c) the applicant said:
   

"The Applicants cannot, until discovery and interrogation herein, particularise whether the agreement was wholly or partly in writing. The agreement is to be inferred from the conduct of the parties alleged in paragraph 12 of the Statement of Claim."

1. I emphasise the assertion that only paragraph 12 of the statement of claim was relied on as the source of any inference from conduct.

2. As to paragraph 11(d), the applicant said:
   

"(1) The natural person which held the common intention on behalf of the respondents was as follows: . The First Respondent - Leigh Scott-Kemmis; . Second, Third and Eighth Respondents - Robert Bungo Ishizaki;

. Fourth, Fifth, Sixth and Seventh Respondents - Malcolm Leslie Edwards;

(2), (3) and (4)

The Applicants cannot until discovery herein, particularise whether the request referred to therein was wholly or partly in writing, but say that, insofar as it was oral, or partly oral, it consisted of a request made by Leigh Scott-Kemmis to Ray Schoer on behalf of the NCSC."

1. On 1 February 1991 Mr Hugh Scott-Mackenzie, a solicitor of Mallesons Stephen Jaques, solicitors for the second, third and eighth respondents, wrote to the solicitors for the applicants, referring to the particulars delivered on 18 December and complaining that a number of aspects of the particulars were, in the view of those respondents, deficient. In respect of paragraph 10(c) the letter said:
   

"Paragraph 10(c) of the Statement of Claim alleges an agreement between BNZ and each of the other respondents. Our request sought particulars of each such agreement. The response to that request is wholly inadequate. The only particular which your clients are able to give is to say that the agreement is to be inferred from conduct referred to in paragraph 12. The only conduct, however, referred to in paragraph 12 is conduct by BNZ itself."

As to paragraph 11 (d), the letter said:

"Your clients have provided particulars of paragraph 11(d) in response to request number (1). They have not, however, responded to requests numbered (2), (3), or (4). The particulars which appear under the headings (2), (3) and (4) at the top of page 5 would appear to relate to our request with respect to paragraph 12 of the statement of claim. We would therefore ask you to urgently provide particulars in response to requests paragraphs (2), (3) and (4) with respect of paragraphs 11(d) of the statement of claim."

1. On 4 February 1991 I made certain orders. In particular I ordered that the parties make discovery by 4 March 1991, with inspection within a further 14 days. In the making of those directions there was no suggestion made on behalf of the respondents that they were to be read as subject to the provision of the requested particulars, and Mr Doyle, counsel for the respondents, who also appeared for the second, third and eighth respondents on 4 February, informed the Court that it was the assumption of his clients that the request of 1 February would be satisfactorily complied with.

2. In an affidavit filed this morning, Mr Scott-Mackenzie says that he had a conversation on 7 March 1991 with Mr King of Corrs Chambers Westgarth, solicitors for the applicants, concerning the further and better particulars of the statement of claim.

3. While the precise agreement reached during that conversation is a matter of dispute, Mr Scott-Mackenzie asserts that it was agreed that the applicants would provide further and better particulars of the paragraphs of the statement of claim sought and that the applicants would not insist on the second, third and eighth respondents making discovery prior to the provision of those further and better particulars. On the other hand, it is said by Corrs Chambers Westgarth that the agreement was that the applicants would not press for the completion of discovery until they had provided such of the further and better particulars which the respondents required and the applicants were at that stage able to provide. It was said on the applicants' behalf that it had always been their position that it was not possible to provide some of the particulars prior to discovery.

4. On 18 March, after these dealings, Corrs Chambers Westgarth wrote saying, in respect of paragraph 10(c):
   

"We believe that the applicants are not required to provide further particulars since the particulars requested are peculiarly within the knowledge of parties other than the applicants."

And in respect of paragraph 11(d) the letter said:

"In relation to the particulars of paragraph 11 (d) requested by you, the applicants have given particulars of the natural persons who it is alleged held a common intention on behalf of the respondents and is unable to give the further particulars requested by you, since these particulars are peculiarly within the knowledge of the respondents."

1. It has to be said that those answers are unsatisfactory and deficient.

2. On 25 March, Mallesons Stephen Jaques wrote in response to that letter again claiming failure to supply adequate particulars of those paragraphs, and saying:
   

"Please provide adequate particulars immediately. Otherwise, we are instructed to make application to the Court for the appropriate orders."

The final paragraph may be of some significance. It said:

"We are preparing our client's list of documents. However, given your client's failure to provide adequate particulars of the paragraphs of the statement of claim specified, your demand that our clients file and serve the list is premature."

1. Whatever may have been the assumption of the parties on 4 February 1991, the Court made an order for discovery on that day to be completed by 4 March 1991.

2. Orders of the Court, particularly in relation to complicated litigation of this sort, are not to be unilaterally treated as optional or to be qualified by some imposition of a qualification by one party or another. If a matter arises, the consequence of which is that compliance with the orders of the Court are not possible either within the time contemplated or at all, the proper course is to have the matter relisted within time so that the orders can be vacated or varied.

3. On the following day, 26 March 1991, the solicitors for the applicants wrote:
   

"In response to your objection to the particulars that we have provided, we advise that we have given the best particulars that we are able to give prior to discovery in this matter. We do not propose to debate the sufficiency of those particulars."

The letter referred to the orders made by the Court and sought the provision of the respondents' list of documents.

1. So far as the complaint concerning paragraph 14(c) of the Statement of Claim is concerned, the Statement of Claim and the particulars in that respect are somewhat enigmatic, but the controversy between the parties has been clarified from statements made on behalf of the applicants from the bar table. Nothing further is required in that regard but the resolution of the matter seems to me to be of some significance in the general question of the costs of the various motions.

2. As to the remaining matters of dispute, notwithstanding the terms of the particulars supplied, it was asserted by Mr Keane QC, senior counsel for the applicants, that the agreement referred to in paragraph 10(c) of the Statement of Claim and the common intention referred to in paragraph 11(c) are to be inferred not only from the matters which were specified in the nominated paragraph of the Statement of Claim, but from the other circumstances and relationships which are set out in the Statement of Claim. This seems to be at once an acknowledgment of the insufficiency of the matters presently particularised, but also to an assertion that there is sufficient in the Statement of Claim and the Particulars to take this case into that category referred to by Brennan J. in Pines v Bannerman (supra).

3. It seems to me that sufficient does appear from that Statement of Claim to permit discovery before requiring full particulars of the agreement in paragraph 10(c) and the common intention in paragraph 11(d).

4. I propose to require the second, third and eighth respondents to make discovery within a nominated time and to adjourn the application by them for further and better particulars of the Statement of Claim, such further consideration to be brought on on five working days' notice. I have had regard to the chronology of events including the correspondence which I have set out and also to the stage at which the proceedings have progressed, which includes delivery of the defence of the second, third and eighth respondents.

5. My purpose in making the orders that I have indicated is to enable the first and second applicants to provide the requested particulars after discovery and inspection are complete. I do not regard the order for discovery as imposing an impossible burden or one which is inconsistent with justice as between the parties.

6. As to costs, I propose to order that the costs of both motions as between the first and second applicants and the second, third and eighth respondents to be those respective parties' costs in the proceedings. I make these orders because: first, the matter of the pleading in paragraph 14(c) and its resolution, which I have referred to; second, my view that the particulars as supplied are insufficient insofar as they allege knowledge on the other party as being a sufficient basis to discharge the obligation to provide particulars; and third, having regard to the stage of the proceedings and the totality of the circumstances set out in the Statement of Claim from which inferences may be drawn, it seems to me to be appropriate to permit discovery before requiring the applicant fully to particularise the agreement asserted in paragraph 10(c) and the common intention asserted in paragraph 11(d).

7. In the light of those reasons there are a number of matters about which I want to hear the parties.

8. Having heard counsel, the orders that I make are that the second, third and eighth respondents make discovery within 21 days of today's date and that inspection occur within a further 14 days.

9. I adjourn the application by the second, third and eighth respondents for further and better particulars of the Statement of Claim to be brought on on five working days' notice. I anticipate that that would not happen until after discovery and inspection and a reasonable time after that to permit provision of proper particulars.

10. I order that the costs of the motion by the applicants and by the second, third and eighth respondents as between those parties be those respective parties' costs in the principal proceedings.