Coonawarra Premium Vineyards Ltd v Nugan Group Pty Ltd - [2006] SASC 5

SUPREME COURT OF SOUTH AUSTRALIA
(Applications Under Various Acts or Rules: Civil)
COONAWARRA PREMIUM VINEYARDS LTD v NUGAN GROUP PTY LTD & ANOR
Reasons of Judge Lunn a Master of the Supreme Court
18 January 2006
PROCEDURE
Pleading under R 46A - effect of failing to plead with proper particularity - operation of R 46A.09(1) - particulars referring to other documents struck out as contrary to the rules of pleading.

COONAWARRA PREMIUM VINEYARDS LTD v NUGAN GROUP PTY LTD & ANOR
[2006] SASC 5
Reasons on Plaintiff’s Application to strike out various paragraphs of the Defences

JUDGE LUNN: The plaintiff has sued the defendants for damages for breaches of an alleged agreement for the supply of wine grapes. There is a dispute about whether the other contracting party was the first or the second defendant. The pleadings raise numerous issues between the parties, but these reasons are confined to the issues which are the subject of the present application by the plaintiff.
On 9 November 2005, the first defendant filed a further amended defence (“the defence”). On that day the second defendant filed an amended defence. On 24 November 2005 the plaintiff filed an application to strike out various paragraphs of the defence and of the amended defence of the second defendant or alternatively seeking that the defendants plead further material facts of those paragraphs. The application was brought under RR 46.18 and 46A.09. It is only necessary to give reasons for my ruling on the application relating to the defence as the issues relating to the defence of the second defendant are identical.
The obligations of the defendants in pleading their defences
R 46A made major changes to the previous law and practice on pleadings. Many of the authorities on the previous rules about pleadings, and many previously accepted practices in pleading, have been significantly changed by it.
R 46A.05 stipulates:
(2)the defence must plead, but plead only:
(a)what parts, if any, of the statement of claim are admitted;
(b)the material facts relied upon to constitute any grounds of defence on which the defendant bears an evidentiary or legal onus of proof;
(c)such further material facts as are necessary to give other parties fair notice of the defendant’s case which they will have to meet.
Subparagraphs (2)(b) and (2)(c) correspond to R 46A.03(a) and (b) which stipulate the similar requirements for statements of claim. (In these reasons references to (2)(b) and (2)(c) are also references to (a) and (b) and vice versa). Whether a pleading comes within subparagraphs (2)(b), or only within subparagraph (2)(c), is of considerable significance when considering the available remedies for breaches of these subparagraphs. In Irving v Starmaker (No 51) Pty Ltd 17 August 2005, Judgment number [2005] SASC 309, unreported, Layton J said:
The dividing line between the two categories may at times be fine, but the consequences of their non-provision are significantly different. The remedy in relation to a successful claim under the first category is that if “material facts” are not pleaded, their absence may result in the pleading being struck out. However, the remedy in relation to the second category of “further material facts” if not pleaded, is governed by Rule 46A.09 and is different. In those circumstances it would be inappropriate to strike out a pleading or part of a pleading; instead the court is required to consider whether an order for further material facts should be made if it is satisfied that the prerequisites to that Rule are fulfilled. Namely, the facts which are pleaded do not disclose sufficient facts to give the other party fair notice of the case that it will be required to meeting and further, that the party would be significantly prejudiced by reason of a failure to provide them.
In Marini v MLH Insurance Brokers Pty Ltd 2 December 2005, Judgment number [2004] SASC 400, unreported (“Marini’s case”) Besanko J said on the difference between the corresponding subparagraphs (a) and (b) of R 46A.03:
Rule 46A.03(a) deals with those material facts which are essential to the cause of action. In other words, without the pleading of those facts it is clear the action will fail. A failure to plead one or more such facts will ordinarily lead to the conclusion that the statement of claim discloses no reasonable cause of action and should be struck out. By contrast, R 46A.03(b) deals with those facts which in fairness should be pleaded in order to prevent surprise and therefore delay at trial. It is impossible to generalise about the nature of such facts because it will depend on the circumstances of the particular case.
Marini’s case is authority for the following propositions:
1      The dichotomy between (2)(b) and (2)(c) is the same as that under the old rules for the pleading of material facts and of particulars;
2      (2)(b) will be breached if the plea does not disclose a ground of defence, and that will ordinarily lead to the striking out of the pleading;
3 If (2)(c) is breached by not giving proper particulars, the pleading ordinarily should not be struck out and the Court should deal with the breach by considering what order should be made under R 46A.09(1);
4      “….. In assessing the question of what constitutes fair notice the Court is entitled to take into account the scope of the investigation and preparation a defendant will be required to undertake if further material facts are not provided” [14];
5 Significant prejudice under R 46A.09(1) can be inferred in some cases from the nature of the deficiencies, and then no evidence of significant prejudice is required.
I am bound by what was decided in Marini’s case. I raised with counsel the possibility of stating a case to the Full Court on the proper interpretation of R 46A, but no party was in favour of it. The practical effect of it is that the plaintiff cannot succeed on its application for striking out for want of particularity, and in those instances it will be confined to what remedy it can obtain under R 46A.09(1).
R 46A.09 provides:
(1)No order is to be made that any further material facts are to be pleaded other than where the material facts pleaded do not disclose facts sufficient to give the other parties fair notice of the case which they will have to meet and the party seeking them would be significantly prejudiced in the conduct of its case by not having them. (The intent of R 46A is that parties should include all material facts in their pleadings as initially filed so that there is no unfairness to another party by any lack of particularity and if they have not done so the trial Judge may refuse to allow that party to present a case which is outside the terms of its pleading).
(2)No pleading is embarrassing for want of particularity unless the missing particulars would be ordered under (1).
(3)Where an order is made under (1) the pleading is to be amended.
R 46A.09 is limited to breaches of subparagraph R 46A.05(2)(c). R46A.09(1) comprises a serious restriction on an opposing party’s ability to have a breach of subparagraph (c) remedied in that such party must establish that it would be “significantly prejudiced in the conduct of its case by not having the further facts pleaded”. The mischief R 46A.09(1) was designed to remedy was the considerable expense and delay which was regularly encountered under the old rules on arguments about additional particulars which had no importance in the overall conduct of the trial: Jones v Nuske (2003) 227 LSJS 331 at [6] and cited with apparent approval by the Full Court in Salena Estate Wines Pty Ltd v DevitoI [2005] SASC 274 at [49]. R 46A.09(1) sought to overcome this mischief in two ways: firstly, by making it clear that party was obliged to properly plead everything which should be pleaded in its initial pleading without having to be told by the Court what it should plead and, secondly, by giving the trial Judge power under R 46A.10(1) to exclude evidence which is outside the pleadings.
The party seeking an order for further material facts under R 46A.09(1) must satisfy both legs of a two-fold test, namely that the facts pleaded do not disclose facts sufficient to give it fair notice of the case which it will have to meet and in addition that it would be significantly prejudiced in the conduct of its case by not having them. Merely to show that the facts pleaded are not sufficient to give it fair notice of the case which it has to meet will not justify such an order. It must also establish that the absence of such pleaded material facts will cause it significant prejudice in the conduct of its case. Ordinary prejudice is not sufficient. Ordinary prejudice is presumably dealt with under the latter part of R 46A.10(1) by the trial Judge refusing to allow the party in default to present a case which is outside the terms of its pleadings.
I do not consider that R 46A.09(1) requires the Court to tell the party in default what further material facts it needs to plead, except perhaps in a very general fashion. Although it was sometimes the practice under the old rules for the Court to order a party to give particulars as if it was administering interrogatories, the thrust of R 46A is to require a party to plead properly, and, if it does not do so, to take the consequences of that at trial. An order under R 46A.09(1) will give the party the opportunity to plead further material facts, but ultimately it will be for the trial Judge to determine whether the facts pleaded entitle that party to adduce evidence at the trial where it is objected to by other parties.
Paragraphs 6.1-6.1D of the defence
These paragraphs plead:
6.1in order to induce the first defendant to enter into the Supply Agreement, CVMS ….. represented to the first defendant (and thereby warranted) that:
(a)the grapes would be grown in accordance with the best prevailing viticulture practices applying in the Coonawarra region and with all due skill, care and diligence; and
(b)the grapes would be of a quality at least equal to premium grapes grown in the Coonawarra region.
(hereinafter called “the said representations and warranties”).
6.1AThe representations referred to in paragraph 6.1 hereof were partly in writing and partly oral, and partly to be implied.
6.1BInsofar as the representations are in writing it refers to and relies upon the documents comprising items 20, 22, 23, 24, 25 and 27 from its First List of Documents filed on 10 September 2004.
6.1CInsofar as the representations were oral, those representations were made at the meetings attended by representatives of CBMS and the first defendant in march and April of 1999.
6.1DInsofar as the representations are to be implied, they are to be implied from the nature of the persons to whom the project was marketed, the way in which it was marketed, the involvement of Bill Brand and the emphasis upon the Coonawarra location of the vineyard.
Paragraph 6.1B is to be struck out as being contrary to the rules of pleading. It is not permissible to plead by cross-reference to discovered documents. R46A requires that the whole of the pleading should be in a single document which is filed at Court. I clarified in the course of argument that the documents referred to are not documents which are pleaded as being themselves part of a grounds of defence. They merely record what otherwise should have been incorporated into the defence. In any event if the documents themselves were relevant R 46A.13 requires their effect to be pleaded.
Paragraphs 6.1 and 6.1A satisfy subs (2)(b) in that they disclose a ground of defence. However, it is beyond my comprehension how the defendant on the very vague and general facts pleaded would be permitted at trial to lead evidence of representations in a sufficiently specific way to be able to establish misrepresentations or warranties. On what is pleaded the plaintiff cannot possibly prepare itself properly to meet such allegations at trial, and especially as it will be required to present its case on the topic before the defendants present their case. The lack of particularity is so gross that it is an instance of where the Court will infer significant prejudice to the plaintiff without express evidence of it.
The defendants’ counsel referred to R 46A.02(a) which requires a pleading “to be as brief as the nature of the case permits”. The nature of this case requires a much more specific pleading of the facts, and particularly as the claim here involves millions of dollars.
Paragraphs 6.3(a) and (b) and their particulars.
These paragraphs and their particulars state:
6.3it has discovered and the fact is that each of the said representations was untrue and the warranties broken in that:
(a)the grapes were not grown in accordance with the best prevailing viticulture practices applying in the Coonawarra region nor with al due still, care and diligence; and
(b)the grapes are not of a quality at least equal to premium grapes from the Coonawarra region.
Particulars
The first defendant refers to and relies upon:
1The letter from the first defendant to the plaintiff dated 10 March 2003.
2The report of Robert Paul dated 19 March 2003.
3The letter from the first defendant to the plaintiff dated 21 March 2003.
4The letter from the first defendant to the plaintiff dated 16 September 2003.
Again, the provision of particulars by reference to other documents is objectionable. I ascertained it was not the documents themselves which the defendant was seeking to plead. The plea is an unacceptable shorthand way of seeking to plead the contents of the documents. It is no answer that because of these documents the plaintiff is well aware of the case which the defendant is seeking to make out through the particulars. R 46A requires that the facts relied upon be pleaded, which means them being expressly incorporated into a form of pleading which is in accordance with the rules and filed at Court. The purpose of pleadings under R 46A is also to inform the Court the case of the party who files it. The Court does not have access to these other documents. The report of Robert Paul of 19 March 2003, which is referred to in the particulars, has no special status because it is an expert’s report to which R 38.01 applies. Although R 46A.10(b) refers to a trial Judge being able to refer to experts’ reports in determining whether a party has suffered prejudice or embarrassment from some matters contained in the expert’s report not being pleaded, that is not meant to be a substitute for a proper pleading of the issues under R 46A.05. The particulars 1-4 are to be struck out.
Paragraph 6.3 satisfies (2)(b) in that it discloses a ground of defence. It is clear in the absence of any particulars it does not give fair notice to the plaintiff of the case it will have to meet on the topic. Whether the pleading of further material facts under R 46A.09(1) is to be ordered should be left until the defendants have had the opportunity to re-plead the particulars which have been struck out.
Paragraphs 11.3 and 11.4 of the defence
These state:
11.3 says that Nugan Estate is not a company within the meaning of the term “PW” in the Supply Agreement.
11.4 says the second defendant was incorporated prior to the date of the Supply Agreement dated 21 April 1999 and further that it did not acquire shares in the second defendant for the purpose of the Supply Agreement.
It was agreed in the course of argument that the alleged vice in 11.3 could be overcome by re-pleading 11.3 as being a consequence of the matters pleaded in 11.4.
Subparagraphs 12.1 and 14.2 of the defence
These state:
12.1says that if there were dealings between the plaintiff and Nugan Estates (which is denied), in any such dealings Nugan Estate acted at agent of the first defendant.
…..
14.2says that insofar as Nugan Estate had any dealings with CPVL, it acted as agent of the first defendant.
The complaint was that it was not pleaded how any such agency had arisen. I am not sure that it is a plea of agency: it may be that the agent was acting without authority. Assuming that is a plea of agency, R 46A.05(2)(b) is satisfied. The plaintiff has not shown it would be “significantly prejudiced” under R46A.09(1) if the defendants are not required to plead further facts about the agency. However, if such agency is in issue at the trial, I do not understand how the defendants will be permitted under R 46A.10(1) to lead evidence to establish it, if they do not now plead more facts about its creation.
Paragraph 15.3(b) of the defence
This reads:
15.3 …..
(b)an implied term of the Supply Agreement that the grapes were of a quality at least equal to premium grapes grown in the Coonawarra region.
(c)says the terms is to be implied as the representations amounted to a warranty to the effect alleged;
(d)further or in the alternative, the terms is to implied as necessary to give business efficacy to the Supply Agreement and to give effect to the resumed intention of the parties.
The only issue can be whether the plaintiff is significantly prejudiced by not having further material facts pleaded upon which the implication is to be drawn. Subparagraph (c) is merely a cross-reference to representations pleaded elsewhere. Subparagraph (d) does not plead facts. While I accept that the plaintiff does not have fair notice of what will be relied upon for the implication I am not satisfied that it has been significantly prejudiced by this. I would expect the trial Judge to confine the defendants to relevant facts which they have pleaded for any inference which is to be drawn.
Paragraphs 15.4 and 15.10
These are in almost identical terms to paragraph 6.3. For similar reasons to those given for paragraph 6.3, they are to be dealt with in a similar fashion.
Paragraph 15.7(a)
This reads:
15.7in the further alternative to paragraph 7 hereof and in the alternative to paragraph 15.6 hereof, the first defendant says that if the plaintiff is a party to the Supply Agreement (which is denied);
(a)the plaintiff breached the Supply Agreement as alleged in paragraph 15.4 hereof.
This paragraph is consequent upon paragraph 15.4 and is to be dealt with in a similar fashion.
Paragraph 15.9B, 15.9C and 15.9D
These are identical to paragraph 6.1B, 6.1C and 6.1D. They are to be dealt with in a similar fashion.
The plaintiff’s counsel also contended that the pleading of the implied terms should be struck out because such implied terms were contrary to the express terms of the written agreement. I doubt whether this argument can be pursued under R 46.18 because it goes beyond the face of the pleading. This point is to be left until there has been any re-pleading about the basis of the implied terms.
I have today made the following orders:
1      Paragraph 6.1B, the particulars to paras 6.3, 15.4, 17.7 and 15.10 and paragraphs 15.4 and 15.9B of the further amended defence of the first defendant are struck out but the other strikings out sought in paragraph 1 of the plaintiff’s notice for specific directions filed on 18 November 2005 are refused.
2      The first defendant is to plead further material facts relating to paragraphs 6.1, 6.1A, 6.1C and 6.1D, 15.9C and 15.9D of the further amended defence.
3      Leave to the first defendant to amend paras 11.3 and 11.4.
4      Application for further material facts of paras 12.1, 14.2 and 15.3(b) refused.
5      Similar orders to those in paragraphs 1-4 are made in relation to the equivalent pleas in the amended defence of the second defendant.
6      Leave to the defendants to re-plead the paragraphs struck out and to amend as allowed by this order, by filing a single defence for both defendants by 15 February 2006.
7      The costs of the application of 18 November 2005 are to be paid by the defendants to the plaintiff.
8      Fit for counsel on 1 December 2005.
9      Liberty to apply before the adjourned directions hearing.
10     Adjourned to Directions Hearing on 2 March 2006 at 11 am