Frank Jasper Pty Ltd & Anor v Deloitte Touche Tohmatsu (a firm) & Ors
[2006] WASC 24
FRANK JASPER PTY LTD & ANOR -v- DELOITTE TOUCHE TOHMATSU (A FIRM) & ORS [2006] WASC 24
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 24 | |
| Case No: | CIV:2454/2000 | 1 DECEMBER 2005 | |
| Coram: | MASTER NEWNES | 17/02/06 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application to amend allowed | ||
| B | |||
| PDF Version |
| Parties: | FRANK JASPER PTY LTD EROM PTY LTD DELOITTE TOUCHE TOHMATSU (A FIRM) JOHN RICHARD LANGFORD DOMENIC VINCENT MARTINO FRANK JASPER |
Catchwords: | Practice and procedure Application to amend defence in third party proceedings Whether proposed amendment embarrassing Principles to be applied on application opposing amendment of a pleading |
Legislation: | Law Reform (Contributory Negligence and Tortfeasers Contribution) Act 1947 (WA), s 7(1)(c) Rules of the Supreme Court 1971, O 1 r 4B, O 20 Trade Practices Act 1974 (Cth), s 45 |
Case References: | Atkinson v Fitzwater [1987] 1 WLR 201 Australian Competition and Consumer Commission v Golden West Network Pty Ltd & Geraldton Telecasters Pty Ltd [1997] FCA 792 Banque Commerciale SA en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 Dare v Pulham (1982) 148 CLR 658 Fox v H Wood (Harrow) Ltd [1963] 2 QB 601 Gould & Birbeck & Bacon v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 Hooker Corporation Ltd v Commonwealth (1986) 65 ACTR 32 Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (1991) 217 ALR 171 Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405 Smith v Littlemore (1996) 15 WAR 289 Bruce v Odhams Press Ltd [1936] 1 KB 697 BWK Elders Australia Pty Ltd v Westgate Wool Company Pty Ltd & Ors (No 2) (2002) ATPR 41860 Council for the City of the Gold Coast v Pioneer Concrete (QLD) Pty Ltd and Others (1998) 157 ALR 135 Jeans West Corporation Pty Ltd v Archer [2004] WASCA 132 Meckiff v Simpson [1968] VR 62 Mutual Life & Citizens Assurance Co Ltd v Evatt (1970) 122 CLR 628 O'Brien v Komesaroff (1982) 150 CLR 310 Robinson's Settlement; Re Gant v Hobbs [1912] 1 Ch 717 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
EROM PTY LTD
Second Plaintiff
AND
DELOITTE TOUCHE TOHMATSU (A FIRM)
First Defendant
JOHN RICHARD LANGFORD
Second Defendant
DOMENIC VINCENT MARTINO
Third Defendant
FRANK JASPER
Third Party
(Page 2)
Catchwords:
Practice and procedure - Application to amend defence in third party proceedings - Whether proposed amendment embarrassing - Principles to be applied on application opposing amendment of a pleading
Legislation:
Law Reform (Contributory Negligence and Tortfeasers Contribution) Act 1947 (WA), s 7(1)(c)
Rules of the Supreme Court 1971, O 1 r 4B, O 20
Trade Practices Act 1974 (Cth), s 45
Result:
Application to amend allowed
Category: B
Representation:
Counsel:
First Plaintiff : Mr D H Solomon
Second Plaintiff : Mr D H Solomon
First Defendant : Mr P G McGowan
Second Defendant : Mr P G McGowan
Third Defendant : Mr P G McGowan
Third Party : Mr D H Solomon
Solicitors:
First Plaintiff : Solomon Brothers
Second Plaintiff : Solomon Brothers
First Defendant : Freehills
Second Defendant : Freehills
Third Defendant : Freehills
Third Party : Solomon Brothers
(Page 3)
Case(s) referred to in judgment(s):
Atkinson v Fitzwater [1987] 1 WLR 201
Australian Competition and Consumer Commission v Golden West Network Pty Ltd & Geraldton Telecasters Pty Ltd [1997] FCA 792
Banque Commerciale SA en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279
Dare v Pulham (1982) 148 CLR 658
Fox v H Wood (Harrow) Ltd [1963] 2 QB 601
Gould & Birbeck & Bacon v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490
Hooker Corporation Ltd v Commonwealth (1986) 65 ACTR 32
Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (1991) 217 ALR 171
Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405
Smith v Littlemore (1996) 15 WAR 289
Case(s) also cited:
Bruce v Odhams Press Ltd [1936] 1 KB 697
BWK Elders Australia Pty Ltd v Westgate Wool Company Pty Ltd & Ors (No 2) (2002) ATPR 41860
Council for the City of the Gold Coast v Pioneer Concrete (QLD) Pty Ltd and Others (1998) 157 ALR 135
Jeans West Corporation Pty Ltd v Archer [2004] WASCA 132
Meckiff v Simpson [1968] VR 62
Mutual Life & Citizens Assurance Co Ltd v Evatt (1970) 122 CLR 628
O'Brien v Komesaroff (1982) 150 CLR 310
Robinson's Settlement; Re Gant v Hobbs [1912] 1 Ch 717
(Page 4)
1 MASTER NEWNES: This is an application by the third party for leave to amend his defence in the third party proceedings. The application is opposed by the defendants on the ground that the defence is embarrassing because it does not adequately inform the defendants of the third party's case.
2 The pleadings in the action are extensive, and it is unnecessary for present purposes to canvass them in any detail. Suffice it to say that, in essence, the plaintiffs plead that the defendants were accountants and, in some respects, investment advisers for the plaintiffs. The plaintiffs plead that from about 1995 to 1997 the defendants advised the plaintiffs to make certain investments and to enter into certain loan transactions and, in reliance upon that advice, the plaintiffs did so and ultimately suffered substantial losses. The plaintiffs claim that the defendants were in each case, in a number of respects, in breach of duties of care and contractual duties they respectively owed to the plaintiffs and, in a number of instances, in breach of fiduciary duties owed to the plaintiffs.
3 The defendants deny they were in breach of any of the duties alleged and, among other things, say that the decisions to enter into the investments and loans in question were made by the third party as a director and the company secretary of the plaintiffs, without reliance upon the defendants.
4 The defendants have commenced third party proceedings against the third party claiming a contribution or indemnity in respect of any amounts for which they may be liable to the plaintiffs. The defendants say that in making the decisions to make the investments and loans the third party, as a director or the company secretary of the plaintiffs, was in breach of his duties, both statutory and under the general law, including by not obtaining advice from the defendants before doing so. It is pleaded that the losses suffered by the plaintiffs were caused by the third party's breach of the duties he owed to the plaintiffs.
5 In the third party's defence in the third party proceedings, the third party denies that he was in breach of any duty owed to the plaintiffs but says, among other things, that if he was in breach of any such duty then that was caused by the failure of the defendants to advise the third party of his obligations and to ensure that he acted in accordance with them.
6 The proposed amendment to the third party's defence which is the subject of this application relates to a plea under s 7(1)(c) of the Law
(Page 5)
- Reform (Contributory Negligence and Tortfeasers Contribution) Act 1947 (WA) ("the Act") in the following terms:
"37A. Further:
37A.1 each of the defendants' acts and omissions as pleaded in the plaintiffs' re-amended statement of claim dated 9 November 2004, was not clearly illegal or tortious in itself;
37A.2 when each such breach of duty to the plaintiffs or either of them was committed by the defendants, the third party had no knowledge of the true legal character of the act or acts constituting each such breach of duty;
37A.3 accordingly, and pursuant to s 7(1)(c) Law Reform (Contributory Negligence and Tortfeasers Contribution) Act 1947 ('the Act') the third party is entitled to be indemnified by the defendants in respect of the alleged liability of the third party for which the defendants claim contribution in paragraph 53 of the Statement of Claim and the defendants are thereby not entitled to recover such contribution."
"(1) Subject to Part 1F of the Civil Liability Act 2002, where damage is suffered by any person as the result of a tort -
…
(c) any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is or would if sued have been liable in respect of the same damage whether as a joint tortfeasor or otherwise but so that no person shall be entitled to recover contribution under this section from any person entitled to be
(Page 6)
- indemnified by him in respect of the liability for which contribution is sought.
- A person shall be entitled to be indemnified within the meaning of this paragraph -
…
(ii) where the act was not clearly illegal or tortious in itself and the person seeking indemnity had no knowledge when the tort was committed of the true legal character of the act …"
8 I should mention that as the proposed amendment in par 37A.1 was originally framed it referred to "each of the defendants' breaches of duty owed to the plaintiffs or either of them as pleaded in the plaintiffs' re-amended statement of claim", but in the course of argument counsel for the third party amended that by omitting "breaches of duty owed to the plaintiffs or either of them" and inserting in its place "acts and omissions".
9 It was submitted on behalf of the defendants that the proposed plea does no more than repeat the words of the statute and is defective in that it does not plead the underlying material facts for the conclusions effectively embedded in it.
10 It was submitted on behalf of the third party that the amendment properly pleads the only material facts necessary for the defence, namely, that the acts or omissions pleaded by the plaintiffs were not clearly illegal or tortious in themselves and that when each breach of duty was committed the third party did not know the true legal character of it. It was submitted that whether or not an act was clearly illegal or tortious in itself was to be judged objectively and there were no further material facts necessary to that plea. It was also submitted that no further particulars were necessary of the plea that the third party had no knowledge of the character of the acts, there being no affirmative allegation pleaded. A plea of a lack of knowledge, unlike a plea that a person ought to have known something, does not imply any underlying facts or circumstances of which particulars should be given: Fox v H Wood (Harrow) Ltd [1963] 2 QB 601 at 604, applied in Smith v Littlemore (1996) 15 WAR 289 at 300.
11 The general principles to be applied on an application of this sort were not in issue between the parties and are well established. A Court
(Page 7)
- will not grant leave to amend a pleading into a form which is liable to be struck out: Hooker Corporation Ltd v Commonwealth (1986) 65 ACTR 32 at 38; Atkinson v Fitzwater [1987] 1 WLR 201 at 214 - 215. In determining the adequacy of a pleading it is fundamental that a party is entitled to a statement of the opponent's case sufficiently clear to allow the party a fair opportunity to meet it: Gould & Birbeck & Bacon v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 at 517; Dare v Pulham (1982) 148 CLR 658 at 664. A pleading may therefore be struck out where it is vague, ambiguous or pleaded at too great a level of generality so as to leave the other party in doubt as to how to respond to the pleading: Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405 at 413; Banque Commerciale SA en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 per Mason CJ and Gaudron J.
12 The application of those principles, and the rules as to pleading contained in O 20 of the Rules of the Supreme Court 1971, in any particular case invariably involves matters of judgment and degree. The approach to be taken to objections to pleadings, or proposed pleadings, must be directed to the attainment of the objectives set out in O 1 r 4B. Such an approach requires a degree of flexibility that may not always be consistent with the practices of earlier times. In that connection, in my respectful view, the comments of Lockhart J in Australian Competition and Consumer Commission v Golden West Network Pty Ltd & Geraldton Telecasters Pty Ltd [1997] FCA 792 are apposite. His Honour said:
"It is important that I say something about motions to strike out statements of claim in the conduct of modern litigation. Today, courts are playing an increasingly active role in case management. Motions to strike out pleadings are matters of practice and procedure. In its role of case management, courts devise various procedures to overcome deficiencies in pleadings other than by simply ordering that the offending paragraphs be struck out. Sometimes it is appropriate to strike them out, sometimes not. On some occasions it is better for the court to direct the applicant, whose statement of claim is under challenge, to furnish particulars or to file and serve affidavits to show that there really are facts which can be proved and which, if proved, would support the general statements made in the statement of claim. This was the course which I took in Trade Practices Commission v Australian Iron and Steel Pty Ltd (1990) 22 FCR 305, a practice which other judges adopt from
(Page 8)
- time to time. This is not, of course, intended to be a substitute for a defective pleading in every case because, as is well known, pleadings must assert basic or constitutive facts, not the evidence by which they are to be proved. But case management is a sensible and flexible thing. It must not be unduly circumscribed."
13 The question of whether a pleading is so defective that it should be struck out is not, therefore, to be answered by any mechanical application of the rules of pleading. It is generally to be answered by whether or not the pleading serves the fundamental objective of pleadings and whether any significant deficiencies in it can adequately be overcome by the provision of particulars or by some other means. While it is necessary that a pleading set out with reasonable clarity and detail the case that the other party must meet, the focus must be on whether the pleading is sufficient for the fair and proper disposition of the case, not whether it complies meticulously with the rules of pleading.
14 It is against that background that I turn to the issues that arise on the current application.
15 It was common ground that s 7(1)(c) of the Act is far from easy to understand. In the course of argument, counsel for the defendants submitted that, under s 7(1)(c), the act which was said to be not clearly illegal or tortious in itself must be the act of the third party, not the defendants, and a plea in relation to the act of the defendants discloses no arguable defence. That, however, was not a matter raised on this application, the defendants' complaint being rather that the terms of the plea were not sufficiently clear, and I did not understand counsel for the defendants to seek to pursue it at this stage. It is, I think, apparent from the pleading that the third party contends that the focus is on the defendants' acts, not the acts of the third party. Whether or not that is capable of giving rise to a defence on the part of the third party was not in contention on this application and, if it is sought to be raised, is a matter for another time. I should say, however, that unless there is substantial prejudice to the defendants in doing so, I would have thought that the proper course, given the long history of this matter and the stage it has now reached, is to allow the action to proceed to trial and to debate whether or not the pleading discloses a defence at that time.
16 I do not consider that the defendant's objection that the proposed defence is defective because it simply pleads conclusions rather than material facts is made out. The fact that a pleading alleges conclusions
(Page 9)
- does not of itself necessarily render the pleading defective. In Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (1991) 217 ALR 171, French J dealt with a complaint that a pleading alleging contraventions of s 45 of the Trade Practices Act 1974 (Cth) pleaded conclusions in terms of the section, rather than the material facts underlying them. His Honour said (at 173):
"I do not accept that the pleading of something which can be described as a conclusion cannot also be a pleading of a material fact. The real issue in a case where such an objection is raised is whether the facts are pleaded at too great a level of generality. In my opinion, the level of generality of the statement of claim in this case is too great for Rothmans to know with any precision what case it has to meet."
18 I accept the third party's submissions that further material facts or particulars in support of the lack of knowledge of the defendants are not required. It seems to me that the plea of lack of knowledge does not imply any underlying fact or circumstances of which particulars should be given or otherwise require further particulars.
19 I would therefore allow the amendment, but would require the third party to provide the particulars to which I have referred. I will hear the parties on the form of orders and on the question of costs.
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