Dorajay Pty Ltd v Aristocrat Leisure Limited

[2004] FCA 634

FEDERAL COURT OF AUSTRALIA

Dorajay Pty Ltd v Aristocrat Leisure Limited [2004] FCA 634

DORAJAY PTY LTD v ARISTOCRAT LEISURE LIMITED
N 362 OF 2004

STONE J
20 MAY 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 362 OF 2004

BETWEEN:	DORAJAY PTY LIMITED APPLICANT
AND:	ARISTOCRAT LEISURE LTD RESPONDENT
JUDGE:	STONE J
DATE OF ORDER:	20 MAY 2004
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.Paragraphs 12(b), 15(c), 17(c), 19(c), 24(b), 28(b) and 38 of the statement of claim be struck out.

2.The applicant has leave to file and serve an amended statement of claim by 1 June 2004.

3.The orders made on 11 May 2004 be vacated.

4.The respondent file its defence to the statement of claim by 18 June 2004.

5.The applicant file any reply to the defence by 2 July 2004.

6.Any application in relation to discovery categories by either party to be filed by 2 July 2004.

7.The parties have liberty to apply on 3 days notice.

8.Costs of the notice of motion be reserved.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 362 OF 2004

BETWEEN:	DORAJAY PTY LIMITED APPLICANT
AND:	ARISTOCRAT LEISURE LTD RESPONDENT

JUDGE:	STONE J
DATE:	20 MAY 2004
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. This proceeding was commenced as a group proceeding pursuant to Part 4A of the Supreme Court Act (Vic) 1986.  It was transferred to this Court by order of the Supreme Court of Victoria and continues as a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth).

2. By notice of motion filed on 5 May 2004, the respondent seeks orders striking out certain paragraphs of the statement of claim.  The statement of claim refers, inter alia, to after-tax profit forecasts publicly made by the respondent in 2002.  It alleges that when, to the respondent’s knowledge, there was a real risk that the actual profits were likely to be significantly less than forecast, the respondent “took no or no adequate step to inform the public”.  Specifically, in paragraphs 12(b), 15(c), 17(c), 19(c), 24(b) and 28(b) of the statement of claim, it is alleged that the respondent failed to inform the public of,

   “any additional material matters of which Aristocrat had become aware which members of the public ought to take into account in deciding whether to acquire an interest in shares in Aristocrat”.

3. On 16 March 2004, the respondent’s solicitor requested further and better particulars from the applicant and specifically asked the applicant to identify the additional material matters referred to in the paragraphs listed above.  In its reply dated 6 May 2004 (annexed to the Affidavit of David Stewart Niven sworn 17 May 2004) the applicant’s solicitor stated that the applicant is “not presently able to give these particulars but will do so after discovery”.

4. The fundamental purpose of a statement of claim is to advise the respondent of the case that is to be made against it.  To that end it must define the issues and set out the material facts with sufficient particularity to enable the respondent to formulate its defence; see generally Dare v Pulham (1982) 148 CLR 658 at 664; Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd (1998) 157 ALR 135. It is not the purpose of the statement of claim to put the respondent in the position of having to make the applicant’s case before it can make its defence.

5. Dr Hanscombe, senior counsel for the applicant, argues that where, as here, misrepresentation by silence is alleged, there are special considerations.  She submits that if these paragraphs are struck out the applicant would be precluded from discovering material relevant to the applicant’s case.  Whether or not this is so, it does not obviate the need for the statement of claim to meet the criteria outlined above.

6. The problem can be shown by considering what the respondent would have to do if it was required to give discovery in relation to the claim made in the relevant paragraphs.  It would either have to admit the allegation by saying, in effect, “these are the documents that contain the information we ought to have disclosed”, or it would have to give the respondent access to all its records so they could make the decision.  The latter course would clearly be a fishing expedition and the former is untenable for obvious reasons.  It is for the applicant to solve the difficulties in making its case.  It is not entitled to make the respondent do it.

7. Under O11 r16(b) of the Federal Court Rules the Court may strike out the whole or any part of a pleading that is prejudicial, embarrassing or likely to cause delay.  That power should only be exercised in clear cases; it must be used sparingly; General Steel Industries Inc vCommissioner for Railways (NSW) (1964) 112 CLR 125; Murex Diagnostics Australia Pty Limited v Chiron Corporation (1995) 55 FCR 194.

8. In my view this is a clear case and accordingly the paragraphs listed in [2] above should be struck out.

9. The respondent’s notice of motion also requests the Court to order the applicant to provide particulars to paragraph 38 of the statement of claim or, alternatively, to strike it out.  Paragraph 38 is as follows:

   ‘Further or in the alternative, by:

   (a)the 20 September 2002 forecast;

   (b)the 2002 profit forecast silence;

   (c)the 7 February 2003 announcement;

   (d)the 7 February 2003 announcement silence;

   (e)the 10 February 2003 announcement;

   (f)the 10 February 2003 announcement silence;

   (g)the 11 February 2003 announcement;

   (h)the 11 February announcement silence;

   (i)the 2002 Annual Report release of 13 March 2003;

   (j)the 4 April 2003 announcement;

   (k)the 4 April 2003 announcement silence;

   (l)the Chairman’s 15 April 2003 address;

   (m)the first 2003 profit forecast;

   (n)the second 2003 profit forecast; and

   (o)the 2003 profit forecast silence;

   individually and cumulatively, Aristocrat engaged in a course of conduct throughout the period by which it impliedly represented to the public that:

   (i)Aristocrat was achieving and would achieve its profit forecasts as made from time to time;

   (ii)Aristocrat was profitable and would remain so in the first half of 2003;

   (iii)Aristocrat had implemented adequate management, operational, financial, and risk assessment systems and controls;

   (iv)Aristocrat had undertaken all necessary and reasonable investigations before making public statements as to the state of its business and had satisfied itself on reasonable grounds following those investigations that its public statements were substantially accurate and not misleading or deceptive in any respect;

   (v)Aristocrat had disclosed to the public, as it became aware of them within the meaning of the ASX Listing Rules, all material matters regarding its profitability which members of the public ought take into account in deciding whether to acquire or retain an interest in shares in Aristocrat; and

   (vi)There was no risk that Aristocrat’s public statements as to the state of its business were substantially inaccurate or, if there was such risk, it was so insignificant that members of the public could safely ignore it and not take it into account in deciding whether to acquire or retain an interest in shares in Aristocrat.’

10. In requesting further particulars the respondent asked the applicant, in relation to each of the six representations, to identify (a) which of the alleged statements or silences in paragraphs 38(a) to (o) were alleged to give rise to the representations; and (b) the time at which the representations arose.  In its response, the applicant said that question (a) was misconceived as the allegation was that the misrepresentation arose from a course of conduct.  In each case the answer to question (b) was that “the implied representation arose on 20 September 2002 and continued until 26 May 2003”.

11. The pleading gives rise to a number of conflicting interpretations and the applicant’s response is confusing.  If each representation arose on 20 September 2002 then the course of conduct said to give rise to it is not pleaded.  In fact the response seems to suggest that the representations arose from individual instances of conduct.  If the representations were complete on 20 September 2002, is the real complaint that they were not corrected on subsequent occasions when there was an opportunity to do so?  Alternatively, is it being claimed that they were made anew on each of the occasions mentioned in paragraph 38?  If the representations were made by a course of conduct, when was that course of conduct complete?  If the date is the date of the last-mentioned conduct in paragraph 38 it would seem to follow that the representations were not made, that is they were not complete, until that date.

12. In my view, the paragraph is internally inconsistent and further particulars will not assist.  The appropriate course is for the paragraph to be struck out and the applicant be given leave to replead.  In doing so the applicant also has the opportunity to amend the statement of claim to reflect the fact that the proceeding is now governed by Part IVA of the Federal Court of Australia Act 1976 (Cth) rather than by the Victorian legislation.

13. Given that leave has been granted to amend the statement of claim, and it can be safely assumed that the applicant will avail itself of this opportunity, it is necessary to vacate the orders made on 11 May 2004 and set down a new timetable.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone .

Associate:

Dated:             20 May 2004

Counsel for the Applicant:	Dr K Hanscombe SC with Mr L Armstrong
Solicitor for the Applicant:	Maurice Blackburn Cashman
Counsel for the Respondent:	Mr P Durack with Mr M Darke
Solicitor for the Respondent:	Allens Arthur Robinson
Date of Hearing:	19 May 2004
Date of Judgment:	20 May 2004