Falkenhagen v West (No 3)

Case [2021] FCA 1176

FEDERAL COURT OF AUSTRALIA

Falkenhagen v West (No 3) [2021] FCA 1176  

File number(s): QUD 508 of 2019
Judgment of: DOWNES J
Date of judgment: 29 September 2021
Catchwords: PRACTICE AND PROCEDURE – application for leave to file an amended statement of claim – where proposed amended statement of claim liable to be struck out under rule 16.21 of the Federal Court Rules 2011 (Cth) – leave refused.
Legislation:

Competition and Consumer Act 2010 (Cth) Sch 2 ss 18, 20

Federal Court Rules 2011 (Cth) rr 16.02, 16.03, 16.04, 16.21

Federal Court of Australia Act 1976 (Cth) s 37M

Patents Act 1990 (Cth) s 22
Cases cited:

Chandrasekaran v Commonwealth of Australia (No 3) [2020] FCA 1629

Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2017] FCAFC 50

Falkenhagen v West [2021] FCA 575

Gall v Domino’s Pizza Enterprises Ltd (No 2) (2021) 150 ACSR 387; [2021] FCA 345

Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41; [2008] FCA 1920

Richards v Han [2020] FCA 1886

Takemoto v Moody’s Investors Service Pty Limited [2014] FCA 1081
Division: General Division
Registry: Queensland
National Practice Area: Intellectual Property
Sub-area: Patents and Associated Statutes
Number of paragraphs: 99
Date of hearing: 16 September 2021
Counsel for the Applicant: Mr A Wrenn
Solicitor for the Applicant: Arnell & Cooper Lawyers
Counsel for the Respondents: Mr M Doyle
Solicitor for the Respondents: B & G Law

ORDERS

QUD 508 of 2019
BETWEEN:

ERIC ALAN FALKENHAGEN

Applicant
AND:

DAVE ARTHUR MICHAEL WEST

First Respondent

POLEMASTER PTY LTD ACN 621 808 106

Second Respondent

ORDER MADE BY:

DOWNES J

DATE OF ORDER:

29 SEPTEMBER 2021

THE COURT ORDERS THAT:

1.The application for leave to amend the statement of claim in the form of the document which is annexure “CPB-1” to the affidavit of Christopher Phillip Blishen sworn 15 September 2021, as further amended by proposed changes to paragraphs 37 and 42 of annexure “CPB-1”, is dismissed.

2.The applicant pay the respondents’ costs of and incidental to the application referred to in order 1.

3.The proceeding be referred to Registrar Schmidt for a mediation to be held prior to 31 October 2021.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

DOWNES J:

INTRODUCTION

  1. This proceeding was commenced by Originating Application filed on 19 August 2019.  A Statement of Claim was also filed on 19 August 2019.  Following a strike out application brought by the respondents earlier this year, the applicant disavowed reliance on the original statement of claim filed in 2019: see Falkenhagen v West [2021] FCA 575 (Falkenhagen) at [3] and, in particular, order 4 made by Greenwood J.

  2. In the face of that strike out application, the applicant applied for leave to amend his Statement of Claim (and Originating Application).  That application was heard by Greenwood J.  By the time of the hearing of that application, the applicant had proffered three different versions…

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AGLC
Falkenhagen v West (No 3) [2021] FCA 1176
Case
[2021] FCA 1176
Decision Date

CaseChat Overview and Summary

The application in Falkenhagen v West (No 3) was brought by the plaintiff, Falkenhagen, who sought leave to amend their statement of claim in accordance with a proposed amended statement of claim (ASOC) in relation to an intellectual property dispute. The application was opposed by the defendants, West, who argued that the proposed ASOC would be liable to be struck out under rule 16.21 of the Federal Court Rules 2011 (Cth). The matter was heard by the Federal Court, which had to determine whether leave should be granted to Falkenhagen to file the proposed ASOC.

The court needed to decide whether the proposed ASOC was likely to be struck out under rule 16.21 of the Rules, which permits the striking out of pleadings on several grounds, including if the pleading contains scandalous, frivolous, vexatious, evasive, ambiguous, or otherwise abusive material, or if it is likely to cause prejudice, embarrassment, or delay in the proceeding, or fails to disclose a reasonable cause of action or defence. The court also had to consider whether the proposed ASOC provided the respondents with fair notice of the case to be made against them at trial, in accordance with rule 16.02 of the Rules.

The court held that the proposed ASOC did not plead the material facts necessary to give the respondents fair notice of the case to be made against them at trial, in accordance with rule 16.02(1)(d) of the Rules. It was also found that the proposed ASOC contained numerous ambiguous or irrelevant allegations that were likely to prejudice or delay the proceeding and cause embarrassment. Legal conclusions were pleaded without the necessary material facts, leading to the prospect of the respondents being taken by surprise at trial or the applicant being shut out from advancing part of its case. The court also noted that there appeared to be a gap between the applicant’s case as represented by the applicant’s counsel during the hearing of the application and what had been pleaded, indicating that the applicant’s case was not exposed in the proposed ASOC in a way that provided fair notice to the respondents of the case alleged against them. For these reasons, if the proposed ASOC was filed, substantial parts of it would be struck out and the residue which was not struck out would be confusing, making it liable to be struck out in its entirety. The application for leave to file and serve the proposed ASOC was therefore refused.

ORDERS:
1. The application for leave to amend the statement of claim in the form of the document which is annexure “CPB-1” to the affidavit of Christopher Phillip Blishen sworn 15 September 2021, as further amended by proposed changes to paragraphs 37 and 42 of annexure “CPB-1”, is dismissed.
2. The applicant pay the respondents’ costs of and incidental to the application referred to in order 1.
3. The proceeding be referred to Registrar Schmidt for a mediation to be held prior to 31 October 2021.

Orders

Orders of the court

1. The application for leave to amend the statement of claim in the form of the document which is annexure “CPB-1” to the affidavit of Christopher Phillip Blishen sworn 15 September 2021, as further amended by proposed changes to paragraphs 37 and 42 of annexure “CPB-1”, is dismissed.

2. The applicant pay the respondents’ costs of and incidental to the application referred to in order 1.

3. The proceeding be referred to Registrar Schmidt for a mediation to be held prior to 31 October 2021.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Rule 16.03 provides that:16.03 Pleading of facts(1) A party must plead a fact if:(a)it is necessary to plead it to meet an express denial of the fact pleaded by another party; or(b) failure to plead the fact may take another party by surprise.(2) However, a party need not plead a fact if the burden of proving the fact does not lie on that party. Rule 16.04 provides that:16.04 References to documents or spoken words(1)A pleading that refers to a document or spoken words need only state the effect of the document or words without including the terms of the document or the words themselves.(2)However, if the words are material to the pleading, the pleading must include the words. The respondents oppose leave being given to file the proposed ASOC on the basis that it would be liable to be struck out pursuant to r 16.21 of the Rules. Rule 16.21 of the Rules provides:16.21 Application to strike out pleadings(1) A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:(a) contains scandalous material; or(b) contains frivolous or vexatious material; or(c) is evasive or ambiguous; or(d) is likely to cause prejudice, embarrassment or delay in the proceeding; or(e) fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or(f) is otherwise an abuse of the process of the Court.(2) A party may apply for an order that the pleading be removed from the Court file if the pleading contains material of a kind mentioned in paragraph (1)(a), (b) or (c) or is otherwise an abuse of the process of the Court. It was stated by Wigney J in Chandrasekaran v Commonwealth of Australia (No 3) [2020] FCA 1629 that:[105] A pleading is likely to cause prejudice or embarrassment, for the purposes of r 16.21(1)(d) of the Rules, if it is susceptible to various meanings, contains inconsistent allegations, includes various alternatives which are confusingly intermixed, contains irrelevant allegations or includes defects which result in it being unintelligible, ambiguous, vague or too general: …. Such a pleading could equally be characterised as evasive or ambiguous for the purposes of r 16.21(1)(c) of the Rules.[106] A pleading may be considered to be embarrassing if it suffers from narrative, prolixity or irrelevancies to the point that it is not a pleading to which the other party can reasonably be expected to plead to:…. A party cannot be expected to respond to mere context, commentary, history, narrative material or material of a general evidentiary nature: …. …[108] A “reasonable cause of action”, for the purposes of r 16.21(1)(e) of the Rules, is a cause of action that has some chance of success having regard to the allegations pleaded: …. A cause of action cannot be struck out merely on the basis that it appears to be weak: ….[109] If substantial parts of a pleading are struck out, the Court may strike out the entire pleading on the basis that the residue would be confusing: ….(Citations omitted)

Evidence

Evidence Before The Court

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Decision

Reasons for decision

As liability will be the subject of a separate hearing and determination, a detailed analysis of the relief sought in the prayer for relief is not necessary at this stage and can be deferred. I note that Greenwood J adopted a similar approach in Falkenhagen at [100]. CONCLUSION For the reasons stated above, the proposed ASOC does not plead the material facts that are necessary to give the respondents fair notice of the case to be made against them at trial, in accordance with r 16.02(1)(d) of the Rules. I refer in particular to the allegations surrounding the alleged illicit creation of the Deed or the facts relied upon to allege that it is “void or voidable”. Further, the proposed ASOC contains numerous ambiguous or irrelevant allegations which are likely to prejudice or delay the proceeding and cause embarrassment. Further, legal conclusions are pleaded (such as alleged breaches of the agreement or alleged breaches of the ACL) but without the material facts having been pleaded to sustain the legal conclusions, which leads to the prospect of the respondents being taken by surprise at trial or the applicant being shut out from advancing part of its case. In any event, such a pleading would be deficient in that it fails to disclose a reasonable cause of action as required by r 16.02(2)(e) of the Rules. Further, there appears to be a gap between the applicant’s case as represented by the applicant’s counsel during the hearing of the application (being, for example, that the assignment of the IP Rights was limited in scope) and what has been pleaded. This indicates that the applicant’s case is either not exposed in the proposed ASOC in a way which provides fair notice to the respondents of the case alleged against them, that aspects of the applicant’s case are only contained in affidavits filed in the proceeding or something else. For these reasons, if the proposed ASOC was filed, substantial parts of it would be struck out and the residue which was not struck out would be confusing. It follows from this that it would be liable to be struck out in its entirety. The application for leave to file and serve the proposed ASOC is therefore refused. Costs of the application should follow the event.

Ratio Decidendi

Legal Principle Established

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