Cadoroll Pty Ltd v Allegra Corporation Ltd
[1994] FCA 9
•17 Jan 1994
9 ,W-
JUDGMENT No. ........ ........ ,. ......., ,..
IN THE FEDERAL COURT OF AUSTRALIA ) I AUSTRALIAN CAPITAL TERRITORY )
) No. ACT G 18 of 1992 DISTRICT REGISTRY
GENERAL DIVISION
BETWEEN:
AND: ALLEGRA CORPORATION LIMITED
First Respondent
ALLEGRA INVESTMENTS LIMITED
Second Respondent
Fifth Respondents MAUNTILL PTY LIMITED
Third Respondent
PEGASUS LEASING LIMITED
Fourth Respondent
MICHAEL GEORGE SINCLAIR. MARUTA PEARSON and MICHAEL MARK0 ZIVKOVIC trading as FARNHAM SINCLAIR & ASSOCIATES
MINUTE OF ORDER
JUDGE MAKING ORDER : Neaves J. DATE OF ORDER 17 January 1994 WHERE MADE Canberra THE COURT ORDERS THAT:
1. The amended statement of claim filed herein be struck out.
2. The applicants, other than Gostrent Pty Limited, Gary Alexander Crispe and Rosalie Crispe, have liberty to file and serve a further amended statement of claim within 45 days after the date of this order.
3. In the event that a further amended statement of claim is not filed and served wlthin that period of 45 days, the substantive application as against the third and fourth respondents and the first and third named fifth respondents stand dismissed, with costs including reserved costs.
4. The applicants, other than Gostrent Pty Limited, Gary Alexander Crispe and Rosalie Crispe, pay the costs of the third respondent and the first and third named fifth respondents of and incidental to
the motion notice of whlch was filed on 12 February 1993 and of the fourth respondent of and incidental to the motion notice of which was filed on 8 March 1993.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) I AUSTRALIAN CAPITAL TERRITORY 1
) No. ACT G 18 of 1 9 9 2 DISTRICT REGISTRY
) )
GENERAL DIVISION )
BETWEEN: CADOROLL PTY LIMITED, CADOSHARE PTY LIMITED. BALESCOPE PTY LIMITED, EKANI CONSULTANCY & MANAGEMENT PTY LIMITED, SOUTHERN PLUMBING SUPPLIES PTY
Applicants
AND: ALLEGRA CORPORATION LIMITED
First Respondent
ALLEGRA INVESTMENTS LIMITED
Second Respondent MAUNTILL PTY LIMITED
Third Respondent
PEGASUS LEASING LIMITED
Fourth Respondent
MICHAEL GEORGE SINCLAIR, MARUTA PEARSON and MICHAEL MARK0 ZIVKOVIC trading as FARNHAM SINCLAIR & ASSOCIATES
Fifth Respondents
CORAM: Neaves J.
m: 17 January 1 9 9 4
REASONS FOR JUDGMENT
Before the Court are two motions each seeking orders that the amended statement of claim filed on behalf of the applicants, or alternatively a number of paragraphs of that amended statement of claim, be struck out and for consequential orders. The first of the two motions, notice of which was filed on 12 February 1993, is made by the third respondent to the proceeding, Mauntill Pty Limited, and by the first and third named fifth respondents, Michael George Sinclair and Michael Marko Zivkovic trading, with Maruta Pearson, as Farnham Sinclair & Associates. The second of the two motions, notice of which was filed on 8 March 1993, is made by the fourth respondent, Pegasus Leasing Limited. The motions are made under 0.11, r.16 of the Federal Court Rules.
The motions are made in a proceeding, numbered ACT G
18 of 1992, pending in this Court, that proceeding having been
commenced by application filed on 15 May 1992. The
application, as amended, names 29 applicants, being 15
corporations and 14 individuals. On 15 December 1993, that is
to say after the hearing of the motions, a notice of discontinuance was filed on behalf of 1 corporation and 2 individuals, namely Gostrent Pty Limited, Gary Alexander Crispe and Rosalie Crispe. In addition to the respondents already identified, the application as amended names Allegra Corporation Limited as first respondent, Allegra Investments Limited as second respondent and Maruta Pearson as the second
named fifth respondent. The proceeding is stayed so far as
Maruta Pearson is concerned by reason of her bankruptcy.
As appears from the application as amended, the applicants claim the following relief:
"1. An order pursuant to section 87 of the T r a d e P r a c t i c e s A c t 1974 (C'th) ('the Act') and/or section 72 of the F a i r T r a d i n g A c t (1987) (NSW) declaring the agreements and each of them referred to in paragraph 16 of the statement of claim void.
2. An order pursuant to section 87 of the Trade
P r a c t i c e s A c t 1974 (C'th) ('the Actf) and/or section 72 of the F a i r T r a d i n g A c t (1987) (NSW) declaring the guarantees and each of them referred to in paragraph 17 of the statement of claim void.
3. Damages pursuant to section 82 of the Act and/or
section 68 of the F a i r T r a d i n g A c t (1987) (NSW). 4. A declaration that the agreements and each of them referred to in paragraph 16 of the statement of claim are illegal and unenforceable being in breach of the provisions of sections 169, 170 and 171 of the Companies (NSW) Code or the equivalent provisions if [sic] the Companies Code in such other State or Territory as may be relevant.
5. A declaration that the guarantees and each of them referred to in paragraph 17 of the statement of
of the provisions of sections 169, 170 and 171 of claim are illegal and unenforceable being in breach the Companies (NSW) Code or the equivalent provisions if [slc] the Companies Code in such other
State or Territory as may be relevant.
6. Damages.
7. A declaration that the respondents and each of them
are liable to pay equitable compensation to each of the Applicants in respect of any loss or damage suffered by them by reason of their entering into the agreements referred to in paragraph 16 of the statement of claim.
8. A declaration that the respondents and each of them
are liable to pay equitable compensation to each of the Applicants in respect of any loss or damage suffered by them by reason of their enterlng lnto
the guarantees referred to in paragraph 17 of the
statement of claim.9. A declaration that the agreements and each of them referred to in paragraph 16 of the statement of claim were voidable for breach of fiduciary duty and have been avoided by the Applicants by the commencement of these proceedings.
10. A declaration that the guarantees and each of them referred to in paragraph 17 of the statement of claim were voidable for breach of fiduciary duty and have been avoided by the Applicants by the commencement of these proceedings.
11. An order declaring the guarantees and each of them entered into by the personal guarantors referred to in paragraph 32 of the statement of claim void pursuant to the provisions of the Contracts Review Act (1980) (NSW).
12. Interest.
13. Costs.14. Such further or other orders as this Honourable Court deems fit."
The agreements and guarantees referred to in the claim for relief are said to be agreements and guarantees relating to a thoroughbred bloodstock breeding partnership known as the
Park No.2 Breeding Syndicate". I shall refer to it as "the "Capricorn Park No.2 Breeding Partnership" or the "Capricorn syndicate".
In summary, the grounds upon which rellef is sought
are -
(a)
that the amended statement of clam discloses no reasonable cause of action appropriate to the nature of the pleading and the relief sought;
(b)
that the amended statement of claim has a tendency to cause prejudice, embarrassment or delay insofar as it -
(i) fails to plead all material facts upon which the relevant allegations are based and upon which the claims for relief are based;
(ii) fails to plead material facts and allegations with specificity sufficient to permit the respondents to plead in defence;
(iii) fails to plead material facts and allegations with specif icity sufficient to inform the respondents of the case each will be required to meet at any hearing.
Paragraphs 1 to 7 inclusive of the amended statement of claim are formal. It is, however, necessary to note that par.2 identifies, by reference to Schedule B, those of the applicants, being 6 corporations (including Gostrent Pty Limited) and 3 individuals, who are referred to elsewhere in the amended statement of claim as "the partners" and that par.3 identifies, by reference to Schedule C, those of the applicants, being 9 corporations and 11 individuals (including
Gary Alexander Crispe and Rosalie Crispe) who are referred to as "the guarantors". Paragraph 8 of the amended statement of clam alleges that the fifth respondents "were retained to act and did act as accountants and financial advisers" to each of the applicants other than certain identified partners and guarantors. The allegation lacks specificity. For example it is not alleged that the retainers related to the syndicate. Nor are material facts pleaded to found the conclusion that a retainer existed between the fifth respondents and each of the applicants other than those named in the paragraph. While, no doubt, it would be appropriate, as counsel for the applicants submitted, that details of the varlous retainers be provided by particulars, paragraph 8, because of its generality, is likely to present some difficulty in formulating an appropriate defence.
Paragraph 9 alleges:
"At all material times, and in particular prior to, during and after March 1989 the Respondents were engaged for their joint advantage -
(a) in a partnership or alternatively;
(b) in an association,
for the purpose of the devising, setting up, financing, administration and/or promotion of, inter alia, thoroughbred bloodstock breeding partnerships."
No material facts are pleaded to support either of the alternative conclusions which are alleged. Further, to say
make an extremely vague and obscure allegation, the relevance
that the respondents were engaged "in an association" is to
to any cause of action relied upon being left as a matter of speculation. For example, is the allegation intended to found a contention that by reason of the association, one or other of the respondents is made liable for the consequences of a false or misleading or deceptive representation found to have been made by another respondent. The respondents are, I
think, entitled to know what it is that the applicants allege.
Paragraph 9 also uses the unsatisfactory and, forpleading purposes, embarrassing expression "and/orU.
Paragraph 10 commences as follows:
"In or about and after March 1989 the Respondents, or one or more of them, pursuant to the purpose and in the course of the actlvlties referred to in paragraph 9 hereof, represented to the Applicants and each of them, inter alia ..."
Then follow 18 lettered paragraphs setting out the matters alleged to have been represented. Particulars are appended to the paragraph reading as follows:
"The representations were express and were contained in the undated document entitled 'Capricorn Park No.2 Breeding Partnership' ('the offer document')".
Paragraph 10 fails to identify which of the
respondents is or are alleged to have made the various
representations set out in the lettered paragraphs. Further,
material facts, the matters on which the applicants rely to
and even more importantly, the paragraph does not allege, as
establish that the respondents, or any of them, made the representations alleged. That deficiency is not cured by the particulars but, in any event, the particulars do not connect any of the respondents with the document referred to therein. I note also that the paragraph, by the use of the words "inter alia" suggests that other unidentified representations were made, representations which presumably are irrelevant to any
case which the applicants seek to make. The inclusion of those words is improper for pleading purposes. They also appear elsewhere in the amended statement of claim.
As appears from later paragraphs of the amended statement of claim, par.10 alleges immaterial facts in that it is only some of the lettered paragraphs that allege representations by the making of which the respondents, or some of them, are said to have engaged in conduct that was misleading or deceptive or was likely to mislead or deceive within the meaning of s.52 of the Trade Practices Act 1974 (Cth) or, in the case of the fifth respondents, within the meaning of s.42 of the Fair Trading Act 1987 (NSW). The following lettered paragraphs of par.10, namely pars (a), (b), (C), (e), (h), (k) and, except so far as it may be necessary to explain par.(r), (q), are, therefore, irrelevant to any cause of action on which the applicants seek to rely.
Paragraph 11 is introduced by the words:
Respondents or one or more of them, pursuant to the "Further, in or about and after March 1989 the purpose and in the course of the activities referred to in paragraph 9 hereof represented to the Applicants and each of them, inter alia ..."
Then follow 6 lettered paragraphs setting out the matters alleged to have been represented. Then follow the following particulars:
"The representations were implied, such implication
arising from, lnter alia, the following circumstances:(i) the nature and content of the offer document; and
(ii) the Respondents knew or ought to have known that the Applicants relied upon the expertise of the Respondents in respect of the devising, setting up, financing, administration and promotion of the partnership and that the Applicants would rely upon their representations in respect thereof."
Paragraph 11 is defective in that it fails to
identify which of the respondents is or are alleged to have
made the various representations set out in the lettered paragraphs. Further, the paragraph does not allege, as material facts, the matters on which the applicants rely to establish that the respondents, or any of them, made the representations alleged. That deficiency is not cured by the particulars. In any event, if an allegation is to be made that the respondents knew or ought to have known the matters set out in par. (11) of the particulars, the matters relied on should be specifically pleaded so that the respondents will be
able to formulate a defence in relation to that allegation.
Paragraph 12 alleges that representations were made by Michael George Sinclair, one of the fifth respondents, to certain of the applicants, some being "partners" and some "guarantors". Mr Sinclair is alleged to have made the representations "on his own behalf and on behalf of the other respondents pursuant to the purpose referred to in paragraph 9 hereof" but no facts are stated to show the basis of the allegation that Mr Slnclalr was speaking for all the respondents. In particular, no basis is shown for the assertion that the respondents other than Mr Sinclair adopted the opinions said to have been expressed by Mr Sinclair - see sub-pars (a)(ii), (b)(iii) and (b)(iv). Sub-paragraph (a) of par.12 sets out the representations alleged to have been made orally to Cadoroll Pty Limited, Cadoshare Pty Limited, Hamerleen Pty Limited, Lester Firth Associates Pty Limited, Alfred Nathan Lester and John William Firth. Sub-paragraph (b) sets out the representations alleged to have been made orally to Southern Plumbing Supplies Pty Limited and Adolphe Frederick Beutler. Sub-paragraph (c) refers to the applicants on whose behalf notice of discontinuance has been filed so that that sub-paragraph is no longer material. Sub-paragraph (d) sets out the representations alleged to have been made to Balescope Pty Limited, Modoc Pty Limited, Roy William Ellis, Hilltrate Pty Limited, Kenneth James Callaughan, Ridge Consolidated Pty Limited and Brian David Backhouse. Sub- paragraph (e) refers to Anthony Wllliam Griffin, Roentgen Pty
par.(d) nor sub-par.(e) state how the representations are
Limited and Anthony W. Griffin Pty Limited. Neither sub-
alleged to have been made by Mr Sinclair. Where the representations are said to have been made to a corporation, it does not appear to whom the representation is alleged to have been made. Paragraph 12 also uses the phrase "inter
alia" . It may be added that pars 10, 11 and 12 cannot stand in their present form if par.9 is struck out, as I think it should be.
Paragraphs 13 and 14 read as follows:
"13. The representations referred to in subparagraphs and (r) and in paragraphs 11 and 12 hereof and the lo(d), (f), (g), (i), (j), (l), (m), (n), (01, (P)
promotion of the partnership by means of the offer document constituted conduct by the First, Second, Third and Fourth Respondents in trade or commerce which was misleading or deceptive or was likely to mislead or deceive within the meaning of Section 52 of the Trade Practices Act 1974 (Cth) ('the Act') and by the Fifth Respondents in trade or commence [sic] which was misleading or deceptive or was likely to mislead or deceive within the meaning of Section 42 of the Fair Trading Act (1987) (NSW).
14. Insofar as the representations referred to in paragraph 13 hereof were representations with respect to future matters, the Respondents did not have reasonable grounds for the making of the said representations."
It may be noted that nowhere in the amended statement of claim is it alleged that the applicants that are corporations are
the Commonwealth. It is also necessary to look elsewhere in trading or financial corporations formed within the limits of the amended statement of claim to see whether the material facts on which the conclusions stated in par.13 are based have been pleaded and I shall return to that aspect. Paragraph 14 is objectionable as it does not identify those representations which are alleged to be representations as to "future matters". The respondents are, in my view, entitled to have identified those representations which the applicants say fall into this category so that the respondents are aware of the
representations as to which they will bear the onus of showing
reasonable grounds for their having been made.Following pars 13 and 14 are what are referred to as "Particulars in respect of paragraphs 13 and 14". BY combining the particulars in that way, without identifying to which of the two paragraphs any particular relates, the applicants have compounded the difficulties facing the respondents in pleading to the amended statement of claim. In my opinion, such a form of pleading cannot be allowed to stand.
The amended statement of claim should set out in substantive paragraphs the material facts from which the conclusion is sought to be drawn that each of the representations as to an existing fact was false or misleading or deceptive at the time it was made. It does not do so and the defect cannot be cured by inserting in the document what
appropriate to set out such facts in the form of particulars, are referred to as particulars. Moreover, even if it were the matters set out under the heading "Particulars in respect of paragraphs 13 and 14" do not fulfll the pleader's obligation in that regard. To take an example, par.lO(d) alleges that a representation was made "that the broodmares were valued at $390,000.00". It is not sufficient to sustain an allegation that that representation was false or misleading or deceptive to simply allege, in the words of the particulars
in respect of that paragraph, that "the true value of the broodmares was very much less than $390,000.00". The representation in par.lO(d) will only be false or misleading or deceptive if it be shown that the broodmares had not, in fact, been valued at $390,000. Further, in respect of a number of the other sub-paragraphs of par.10, there is a lack of coincidence between the representation alleged and the language used in the particulars to found the conclusion that the representation was false or misleading or deceptive. It is, I think, unnecessary to refer to each of the particulars seriatim to demonstrate that, even if they were to be regarded as substantive statements of material facts, they are not sufficient to support the conclusions wh~ch the applicants seek to draw from them. This is particularly so in those cases in which one or other of the respondents is alleged to have represented that it held a specified opinion or belief.
Similar comments are appropriate in relation to the
particulars furnished in respect of the representations
alleged in pars 11 and 12 of the amended statement of claim. For example, in the absence of greater specificity, it is difficult to see how what is stated in the particulars in relation to sub-par.ll(a) could support a conclusion that the representation set out in that sub-paragraph was false or misleading or deceptive at the time it was made. The particulars given in respect of sub-par.ll(c) refer to "the particulars to paragraph 13 hereof" yet no particulars are given as being specifically related to that paragraph. The
same comment can be made in respect of the particulars given in relation to sub-par.ll(d). It is unnecessary for present purposes to multiply examples or to detail each and every deficiency.
Paragraph 15 of the amended statement of claim "15. Insofar as any one or more of the representations and the promotion referred to in paragraph 13 hereof constituted conduct by any one or more of the Respondents in contravention of Section 52 of the Act or of Section 42 of the Falr Trading Act (1987) (NSW), the remaining Respondents:
reads :
(a)
aided, abetted, counselled or procured the said contraventions; and/or
(b)
were, directly or indirectly, knowingly concerned in or party to such contraventions;
within the meaning of Section 75B of the Act or of
section 61 of the Fair Trading Act (1987) (NSW)."
A mere reading of this paragraph demonstrates beyond question that it is embarrassing to plead to and that it cannot be
material facts on which they rely to show, for example, which allowed to stand. The applicants must formulate and state the of the respondents is or are alleged to have contravened the relevant statutory provision and which of them is or are alleged to have been accessories to the contraventions, stating, in relation to the latter, the facts forming the basis for the conclusion asserted.
Paragraph 16 alleges that, induced by the representations pleaded and the promotion of the syndicate and in reliance thereon, the partners and each of them entered into certain agreements, one of which is said to be dated 17 May 1989. This paragraph seems to overlook that the earlier paragraphs of the amended statement of claim have alleged that representations in different terms were made to various of the partners. Paragraph 16, expressed in the global way in which it is, is embarrassing from a pleading point of view. It may be added that the reference to the promotion of the syndicate is vague in the extreme. The material facts, if any, on which the applicants rely are not stated.
Paragraph 17, which relates to the guarantors, has
the same vices as par.16.
In the light of what has already been said, the amended statement of claim needs complete redrafting so far as
it alleges causes of action under s.52 of the Trade P r a c t i c e s
A c t 1974 (Cth) and s.42 of the F a i r T r a d i n g Act 1987 ( N S W ) .
Many other deficiencies in that part of the amended statement of claim as alleges causes of action under those statutes were adverted to during the course of the hearlng. The fact that I have not dealt with each of them seriatim is not to be taken as indicating that, in my view, the objection raised is without foundation. Clearly, the preparation of a further amended statement of claim in the present case wlll require very careful attention to be given to all the matters that were debated on the hearing of the motions. I have taken that aspect of the matter into account in fixing the period within which the applicants may file and serve a further amended statement of claim if they wish to take advantage of the liberty to do so which I propose to reserve to them.
The amended statement of claim goes on to allege various causes of action, some of which are alleged against all the respondents and some as against the fifth respondents only. As against all the respondents, allegations are made of breaches of fiduciary duty, breaches of the Companies Code and breaches of s.52A of the Trade Practices Act and s.43 of the Fair Trading Act. An allegation is also made based upon
s.7(1) of the Contracts Review Act 1990 (NSW). As against the
fifth respondents, allegations are made of breach of an implied term of their retainer by certain of the applicants and breach of the duties alleged to be owed by them to the partners.
I do not propose to set out in detail, and comment upon, the criticisms which have been levelled at the paragraphs of the amended statement of claim directed to those causes of action. I am satisfied, however, that there are deficiencies in almost all of those paragraphs. The comment must be made that many of the paragraphs state conclusions in the absence of the material facts on which those conclusions are alleged to be based. The further comment must be made that there is an absence of the material facts relied upon to establish the relevance of the statutory provisions on which the applicants purport to rely. Again, matters have been included as particulars which should have been the subject of substantive paragraphs in the document so that a proper defence may be pleaded to them. Particular reference should also be made to par.22 which reads:
The respective interests of each of the partners in the partnership are 'prescribed interests' within the meaning of that expression in Division 6 of Part IV of the Companies (NSW) Code ('the Code'), or the equivalent provision of the Companies Code in such other State or Territory as may be relevant."
Clearly, the pleader must be prepared to nominate which are the relevant statutory provisions on which the applicants rely. It is not appropriate to plead the matter in such a way as to leave the respondents in doubt upon this point. Paragraph 27 requires amendment in that it refers to all the applicants and is not limited to those who are alleged to have
retained the fifth respondents (see par.8(b)).
The deficiencies to which I have shortly referred are sufficiently serious to warrant the paragraphs of the amended statement of claim directed to the causes of action referred to above belng struck out.
For the reasons set out above, the amended statement of claim is struck out. The applicants, other than Gostrent Pty Limited, Gary Alexander Crispe and Rosalie Crispe, are to have liberty to file and serve a further amended statement of
claim within 45 days after the date of this order. In the event that a further amended statement of claim is not filed and served within that period of 45 days, the substantive application as against the third and fourth respondents and the first and third named fifth respondents is to stand dismissed, with costs including reserved costs. The applicants, other than Gostrent Pty Limited, Gary Alexander Crispe and Rosalie Crispe, must pay the costs of the third respondent and the first and third named fifth respondents of and incidental to the motion notlce of which was filed on 12 February 1993 and of the fourth respondent of and incidental to the motion notice of which was filed on 8 March 1993. I am not prepared to accede to the respondents' submission that I should order those costs to be taxed and paid forthwith.
I certify that this and the preceding 17 pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justice
Neaves .
U
Associate
Dated: 17 January 1994
Counsel for the applicants Mr S. Finch Solicitors for the applicants : Minter Ellison Morris
FletcherCounsel for the third
respondent and the flrst and
third named fifth respondents: Mr B. Walker
Solicitors for the third
respondent and the first and
third named fifth respondents: Blake Dawson waldron
Counsel for the fourth
respondent Mr P. McNamara
Solicitors for the fourth
respondent Macphillamy Cumins & Gibson Date of hearing 19 March 1993
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