Frank Jasper Pty Ltd v Deloitte Touche Tohmatsu (A Firm)
[2004] WASC 54
FRANK JASPER PTY LTD & ANOR -v- DELOITTE TOUCHE TOHMATSU (A FIRM) & ORS [2004] WASC 54
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 54 | |
| Case No: | CIV:2454/2000 | 15 JANUARY 2004 | |
| Coram: | ACTING MASTER DIXON | 1/04/04 | |
| 20 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed in part | ||
| 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: | Application to amend Entitlement to particulars Particularisation of loss and damage Adequacy of particulars Particulars of loss of use of money |
Legislation: | Nil |
Case References: | Dare v Pulham (1982) 148 CLR 658 Dow Corning Australia Pty Ltd v Girys [2001] WASCA 361 Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 Hungerfords v Walker (1988) 84 ALR 119 Miller v Miller Auto Body Co Ltd (1922) 39 WN (NSW) 201 Pegrum v Fatharly (1996) 14 WAR 92 Perestrello e Companhia Limitada v United Paint Co Ltd (1969) 1 WLR 570 State Bank of NSW Ltd v Yee (1994) 33 NSWLR 618 Attorney-General v Guardian Newspapers Ltd [1987] 1 WLR 1248 Banque Commerciale SA, en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 Breen v Williams (1996) 186 CLR 71 Bruce v Odhams Press Ltd [1936] 1 KB 697 Buyquick.com Ltd v Foxgold Pty Ltd [2000] WASC 216 BWK Elders Australia Pty Ltd v Westgate Wool Company Pty Ltd & Ors (No 2) (2002) ATPR 41-860 Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 Deputy Commissioner of Taxation v Robinswood Pty Ltd [2001] WASC 191 Frank Jasper Pty Ltd v Deloitte Touche Tohmatsu (A Firm) [2001] WASC 117 Gold Coast City Council v Pioneer Concrete (QLD) Pty Ltd & Ors (1998) 157 ALR 135 Hooker Corporation Ltd v Commonwealth of Australia (1986) 65 ACTR 32 Johns v Australian Securities Commission (1993) 178 CLR 408 Knowles v Roberts (1888) 38 Ch D 263 MacDonald Estate v Martin (1990) 77 DLR (4th) 249 Meckiff v Simpson [1968] VR 62 Moody v Cox and Hatt [1917] 2 Ch 71 Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLTR 628 Nationwide News Pty Ltd v Wiese (1990) 4 WAR 263 Newman as Trustee for the Estates of Edward Alexander Littlejohn and Jennifer Lillian Littlejohn v Phillips Fox (A Firm) [1999] WASC 171 Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405 Pilmer v The Duke Group Ltd (In Liq) (2001) 207 CLR 165 Prince Jefri Bolkiah v KPMG (A Firm) [1999] 2 AC 222 Russell-Davison v Prosin, unreported; SCt of WA (Sanderson M); Library No 980277; 22 May 1998 State of Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41691 Turquand v Fearon (1879) 48 LJQB 703 Unioil International Pty Ltd v Deloitte Touche Tohmatsu (A Firm) (1997) 17 WAR 98 Wheatley v Bell [1982] 2 NSWLR 544 |
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:
Application to amend - Entitlement to particulars - Particularisation of loss and damage - Adequacy of particulars - Particulars of loss of use of money
Legislation:
Nil
Result:
Application allowed in part
Category: B
Representation:
Counsel:
First Plaintiff : Mr M A R Blundell
Second Plaintiff : Mr M A R Blundell
First Defendant : Mr J Gilmour QC
Second Defendant : Mr J Gilmour QC
Third Defendant : Mr J Gilmour QC
Third Party : Mr M A R Blundell
Solicitors:
First Plaintiff : Solomon Brothers
Second Plaintiff : Solomon Brothers
First Defendant : Freehills
Second Defendant : Freehills
Third Defendant : Freehills
Third Party : Solomon Brothers
Case(s) referred to in judgment(s):
Dare v Pulham (1982) 148 CLR 658
Dow Corning Australia Pty Ltd v Girys [2001] WASCA 361
Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358
(Page 3)
Hungerfords v Walker (1988) 84 ALR 119
Miller v Miller Auto Body Co Ltd (1922) 39 WN (NSW) 201
Pegrum v Fatharly (1996) 14 WAR 92
Perestrello e Companhia Limitada v United Paint Co Ltd (1969) 1 WLR 570
State Bank of NSW Ltd v Yee (1994) 33 NSWLR 618
Case(s) also cited:
Attorney-General v Guardian Newspapers Ltd [1987] 1 WLR 1248
Banque Commerciale SA, en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279
Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334
Breen v Williams (1996) 186 CLR 71
Bruce v Odhams Press Ltd [1936] 1 KB 697
Buyquick.com Ltd v Foxgold Pty Ltd [2000] WASC 216
BWK Elders Australia Pty Ltd v Westgate Wool Company Pty Ltd & Ors (No 2) (2002) ATPR 41-860
Commonwealth Bank of Australia v Smith (1991) 42 FCR 390
Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371
Deputy Commissioner of Taxation v Robinswood Pty Ltd [2001] WASC 191
Frank Jasper Pty Ltd v Deloitte Touche Tohmatsu (A Firm) [2001] WASC 117
Gold Coast City Council v Pioneer Concrete (QLD) Pty Ltd & Ors (1998) 157 ALR 135
Hooker Corporation Ltd v Commonwealth of Australia (1986) 65 ACTR 32
Johns v Australian Securities Commission (1993) 178 CLR 408
Knowles v Roberts (1888) 38 Ch D 263
MacDonald Estate v Martin (1990) 77 DLR (4th) 249
Meckiff v Simpson [1968] VR 62
Moody v Cox and Hatt [1917] 2 Ch 71
Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLTR 628
Nationwide News Pty Ltd v Wiese (1990) 4 WAR 263
Newman as Trustee for the Estates of Edward Alexander Littlejohn and Jennifer Lillian Littlejohn v Phillips Fox (A Firm) [1999] WASC 171
Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405
Pilmer v The Duke Group Ltd (In Liq) (2001) 207 CLR 165
Prince Jefri Bolkiah v KPMG (A Firm) [1999] 2 AC 222
Russell-Davison v Prosin, unreported; SCt of WA (Sanderson M); Library No 980277; 22 May 1998
State of Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41691
Turquand v Fearon (1879) 48 LJQB 703
(Page 4)
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (A Firm) (1997) 17 WAR 98
Wheatley v Bell [1982] 2 NSWLR 544
(Page 5)
1 ACTING MASTER DIXON: By way of an application dated 9 October 2003, the plaintiffs sought leave to amend their statement of claim in this action. The defendants have opposed the application. A number of minutes have been filed and served by the plaintiffs which set out the amendments sought to be made from time to time. When the matter came on for hearing the plaintiffs sought to amend in terms of a minute dated 12 December 2003. It is that minute that I refer to in these reasons.
2 Whilst the amendments sought to be made by the plaintiffs are substantial, by the time the matter came on for hearing the objections raised by the defendants were relatively few. I will deal with each paragraph to which objection is taken in turn.
Paragraph 8
3 Paragraph 8, with its proposed amendment, is in the following terms:
"8. At all material times the plaintiffs engaged Deloittes, for reward as, and Martino and Langford performed services for the plaintiffs as:-
8.1 accountants; and
8.2 investment advisers, including introducing, recommending, approving and arranging investments."
5 The defendants say that the plaintiffs ought not be entitled to make this amendment unless particulars are provided at the same time as to the terms of the retainer between Deloittes and the plaintiffs. They have in mind what were described by Anderson J in Pegrum v Fatharly (1996) 14 WAR 92 at 101 as "the usual particulars" as to how the retainer came into existence together with particulars as to its terms. They say that the requirement for the provision of such particulars would meet the test set out in authorities such as Dare v Pulham (1982) 148 CLR 658 at 664 as referred to by Kennedy J in Dow Corning Australia Pty Ltd v Girys [2001] WASCA 361 at 5.
6 As is apparent from the proposed amendment, the plea as to the existence of a retainer between Deloittes and the plaintiffs is not new. The defendants have not previously sought particulars of the retainer, however, and leaving aside the proposed amendments, would need leave
(Page 6)
- pursuant to O 20 r 13(6) of the Rules of the Supreme Court should they wish now to do so. The defendants' request for particulars dated 7 February 2001 did not deal with this aspect of par 8.
7 It is clear that "the amending of pleadings in a statement of claim does not entitle the defendant generally to re-open requests for particulars of pleadings which have not been amended" – see Kennedy J in Dow Corning at 18. Senior counsel for the defendants accepted this in the course of the hearing. The defendants say however that the matters raised in the proposed amendment to par 8 amount to a substantive amendment to that paragraph. The amendment is said to be substantial in that it introduces a number of discreet elements into the plea that Deloittes were engaged as investment advisers, namely, that they were engaged to introduce investments to the plaintiffs, to make recommendations in respect of investments, to approve investments and to arrange investments. It is then said that the particulars to par 8, both in their present form and in their proposed form, do not support such a plea. Conversely, the plaintiffs say that the proposed amendment does no more than expand upon an existing plea rather than introduce any fresh matters and that the defendants' objection amounts to a belated request for particulars of a long standing plea.
8 The particulars sought in relation to the retainer are particulars that could have been sought when the statement of claim was first filed and served. The reasons advanced by the defendants as to why such particulars are required are no different from the reasons which might have been advanced following service of the statement of claim. I do not consider that the proposed amendment, which sets out the functions carried out by the defendants as investment advisers, have changed matters significantly. It follows that in that sense, the need for particulars of the retainer do not arise out of the proposed amendment. For that reason I would not require the provision of the particulars as to the retainer between the plaintiffs and Deloittes prior to allowing the plaintiffs leave to amend par 8 and would allow the plaintiffs to amend in those terms.
Proposed Particulars E, G, H and I to Paragraph 8
9 The plaintiffs have also sought to amend the particulars to par 8. They are lengthy and so I will not set them out in these reasons.
10 The defendants object to the proposed particulars as they do not amount to particulars of the retainer and are irrelevant. The plaintiffs, on the other hand, say, in respect of proposed particular E, that it simply
(Page 7)
- fleshes out the history of the dealings between the parties as set out in particulars A to D and F. In respect of proposed particulars G to I, the plaintiffs say that they are simply particulars of instances where the second and third defendants introduced, recommended, approved and arranged investments.
11 I will allow the plaintiffs to amend so as to include particular E on the basis that it simply serves to assist in setting out the history of the dealings between the parties and the positions held by the second and third defendant in the course of those dealings, which matters are already the subject of particulars A to D and F.
12 As regards proposed particulars G to I, they purport to be particulars of the activities carried out by the defendants as investment advisers. As the pleading presently stands, particular E (which becomes particular F in the amended pleading), sets out that Frank Jasper, a director of the plaintiffs, sought the advice of the second and third defendants in respect of all investment decisions made by the plaintiffs from 1984 to 1987. Proposed particulars G to I then provide additional particulars in relation to that. I consider that on that basis the plaintiffs may amend in terms of particulars G to I.
Paragraph 8D
13 Paragraph 8D of the minute is in the following terms:
"8D. Pursuant to the engagement pleaded in paragraph 8B, Martino owed Robowash a duty of confidentiality, namely to keep confidential the knowledge pleaded in paragraph 8C, including an obligation not to disclose any of the matters so known, to either of the plaintiffs or Jasper."
14 The defendants had two difficulties with proposed par D. The first, which arose out of the use of the words "Pursuant to the engagement pleaded in paragraph 8B (sic 8A)" was resolved by the plaintiff replacing those words with:
"By reason of the knowledge pleaded in paragraph 8C, acquired in the performance pleaded in paragraph 8B of the engagement pleaded in paragraph 8A…"
- so that par 8D now reads as follows:
(Page 8)
- "8D. By reason of the knowledge pleaded in paragraph 8C, acquired in the performance pleaded in paragraph 8B of the engagement pleaded in paragraph 8A, Martino owed Robowash a duty of confidentiality, namely to keep confidential the knowledge pleaded in paragraph 8C, including an obligation not to disclose any of the matters so known, to either of the plaintiffs or Jasper."
- The plaintiffs may amend in those terms.
15 The second objection to par 8D, which was not pressed greatly by senior counsel for the defendants, arises by reason of a consideration of paragraphs 8D, 11, 12 and 13. By par 8D it is said, in effect, that by reason of having carried out certain work for Robowash Pty Ltd between November 1992 and March 1993 (as pleaded in par 8A) Martino, the third defendant, owed Robowash a duty to keep confidential knowledge as to Robowash's financial position acquired in carrying out that work which included an obligation not to disclose that knowledge to the plaintiffs or Jasper. In par 11 it is said that the plaintiffs instructed Deloittes, via Martino, in January or February 1995 to provide advice as to whether they should invest in Robowash and if so, on what terms. It is then pleaded in par 12 that in January and February 1995 Martino negotiated with one Bolto on behalf of Robowash as to the terms of a proposed investment in Robowash. Paragraph 13 then pleads, in effect, that following those negotiations, Martino became aware of various matters regarding Robowash's poor financial position. According to the defendants that information was far more significant than the information that Martino is pleaded as having acquired between November 1992 and March 1993. Finally, par 16B pleads, in effect, that Martino and/or Deloittes owed the plaintiffs a duty not to accept the engagement pleaded in par 11 unless they were no longer bound by the duty of confidentiality pleaded in par 8D.
16 As I understand it, the defendants say that in light of the fact that the Robowash financial information acquired by Martino as pleaded in par 13, was far more significant than that acquired earlier by Martino as pleaded in par 8D, it could not seriously be said by the plaintiffs that the knowledge pleaded in par 8D retained its confidential nature.
17 Whilst that may be the case, this does not seem to be a pleading point and nor does it bear upon whether the plaintiffs are entitled to amend the statement of claim in terms of par 8D to plead the existence of a duty to keep certain information confidential. I consider that the defendants are
(Page 9)
- entitled to amend to plead in terms of par 8D as further amended in the course of the hearing.
Paragraph 16A
18 The defendants do not make any objection to this paragraph save to the extent that it makes reference to par 8 and the particulars thereto. In light of the view that I have taken in respect of par 8 and the particulars thereto, the plaintiffs may amend in terms of the proposed amendments to par 16A.
Paragraph 20
19 The defendants object to the proposed amendment to par 20.2 of the statement claim. That paragraph, as it is proposed to be amended, is in the following terms:
"20. Further or alternatively, by reason of the matters pleaded:-
…
20.2 in paragraphs 4.2-4.5, at all material times Langford knew or ought reasonably to have known of the matters pleaded in paragraphs 8A-8C, 13, 14 and 16.
PARTICULARS
A director, further or alternatively a company secretary, in Langford's circumstances pleaded in paragraphs 4.1 and 8 and exercising a reasonable degree of care, skill and diligence would have informed himself of the matters pleaded in paragraphs 8A-8C, 13, 14 and 16."
(Page 10)
- raise finance for Robowash, and in so doing, came into possession of information regarding Robowash's financial position.
21 It is not clear why it is said that Langford, simply by virtue of being a director of both plaintiffs and a secretary of one, knew or ought to have known of matters arising out of dealings between Martino and Robowash which did not involve the plaintiffs. The position would appear to be different in respect of those other matters pleaded in the existing par 20.2 that Langford is said to have known of or that he should have known of. That is because they involve dealings between the plaintiffs and Robowash.
22 The particulars to par 20.2 provide in effect that a director and/or company secretary who was at all material times a partner in Deloittes and acting in that capacity and who performed services for the plaintiffs as an accountant and investment advisor exercising a reasonable degree of care, skill and diligence would have informed himself of the matters pleaded in paragraphs 8A to 8C. If what is being said is that Langford would have been aware of the Martino/Robowash dealings by reason of being a partner in Deloittes then that should be pleaded in the body of par 20.2 rather than being set out in the particulars.
23 I would not allow the proposed amendment to par 20.2.
Paragraph 29
24 The defendants object to the particulars sought to be provided in respect of par 29. Paragraph 28 pleads, in effect that the first and second plaintiffs invested $1,000,000 and $250,000 respectively in Robowash, purchasing 23,600 and 5,900 shares in Robowash respectively. The 5,900 shares held by the second plaintiff were then transferred to the first plaintiff for the sum of $250,000. It is then pleaded in par 29 that by reason of various breaches by the defendants, the first plaintiff has suffered loss and damage. That loss and damage is then sought to be particularised as follows:
"A. The sums of $1,000,000 pleaded in paragraph 28.1.1 and $250,000 pleaded in paragraphs 28A.3 were expended by the first plaintiff in acquisition of shares in Robowash which were of no, alternatively of limited, value, and all, alternatively part, of such sums was lost as at the respective times of acquisition of those shares.
(Page 11)
- B. Further or alternatively to A, the first plaintiff lost the use of the sums of $1,000,000 pleaded in paragraphs 28.1.1 and $250,000 pleaded in paragraph 28A.3."
25 The extent to which damages must be pleaded "is not dictated by any preconceived notions of what is general or special damage but by the circumstances of the particular case" – see Perestrello e Companhia Limitada v United Paint Co Ltd (1969) 1 WLR 570 per Lord Donovan at 485. This is against the background of the functions of pleadings and particulars in general as set out, for example, in Dare v Pulham at 664, namely that:
"they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it …; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial …; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court."
26 The defendants object to par A of the proposed particulars because they do not make it clear what loss and damage is said to have been suffered by the first plaintiff. It is clear enough that one limb of the plaintiffs' case in relation to damages is that the shares were worthless at the time of acquisition, thereby resulting in a loss of $1,250,000. It is the alternative limb that causes the defendants difficulties, namely, that the shares were "of limited value" as a result of which "part" of the amount paid of $1,250,000 was lost. If, as appears to be the case, the plaintiffs seek to prove in the alternative that the shares have some value which was less than the amount paid thereby giving rise to loss and damage of an amount less than $1,250,000, then the defendants say that proper particulars should set out the value of the shares and the resultant loss and damage.
27 I accept this. In my view the defendants are entitled to know what is the plaintiffs' alternative case in relation to damages so that they can meet it. It should be properly particularised by the plaintiffs setting out what they say is, in the alternative, the value of the shares and that portion of the sum said to have been lost.
28 The plaintiffs' opposition to pleading these additional details as to the first plaintiff's loss and damage is based in part on a concern that so doing could somehow prejudice them at trial in that they may be limited to the
(Page 12)
- particularised loss and damage. Reliance was placed in this respect on Dow Corning in which Kennedy J said at par 10: "A party who pleads with unnecessary particularity may, by doing so, fetter his hands at the trial …". In my view, the particulars in question are not unnecessary particulars and so the note of caution expressed in Dow Corning has no application. Further, the plaintiffs' concern as to being limited to the particularised damages does not seem to be consistent with the view of the High Court in Dare v Pulham at 664 that "where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence".
29 It follows that the defendants' objection has merit and that the proposed particular A to par 29 is inadequate. Leave to amend in those terms should not be given.
30 Paragraph B of the proposed particulars then sets out that the first plaintiff has lost the use of the amount of $1,250,000. I understand that to be a claim made pursuant to Hungerfords v Walker (1988) 84 ALR 119. No detail has been provided as to what damage may have been suffered by the first plaintiff by reason of its loss of use of that money and how that sum is arrived at. Counsel for the plaintiffs suggested at the hearing that the usual practice in such matters is simply to claim in the prayer for relief compound interest at commercial rates rather than particularising the loss. I note in this respect that there is such a claim in par A of the first plaintiff's prayer for relief.
31 According to Wilson and Deane JJ in Hungerfords at 135, damages for the loss of use of money may be assessed "wholly or partly by reference to the loss of interest which would have been earned by safe investment of the money or which was in fact paid upon borrowings which otherwise would have been unnecessary or retired".
32 Where there is a claim for damages arising out of the loss of use of money:
"It still remains necessary to undertake a factual investigation into the loss suffered through being held out of the money. At the end of the day it may be determined that market rates of interest are the appropriate measure of the loss but it is not necessarily so. Whether the plaintiff would have made a profit from the use of money withheld from it, and the amount of the profit, must be determined on the evidence, and there is not an
(Page 13)
- automatic allowance of interest upon the money withheld …The plaintiff's loss and its quantum are to be found as a fact and assessed on the evidence, not assumed from the withholding of the money and automatically assessed by the application of current market rates of interest."
- Giles J at 364 in Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358. See also Giles J in State Bank of NSW Ltd v Yee (1994) 33 NSWLR 618 at 636.
33 Once it is accepted that the plaintiffs' loss must be found as a fact and assessed on the evidence rather than simply by the automatic application of a rate of interest, I think it follows that the plaintiffs must provide sufficient particulars of that loss so that the defendants may understand fully the claim they have to meet. I do not think it sufficient to simply allege a loss of use of $1,250,000 and to claim compound interest at commercial rates in the prayer for relief. Again, I consider particular B to be inadequate and would not allow the plaintiffs to amend in those terms.
Paragraphs 59.2.2 and 59.2.4
34 Paragraph 59, relevantly, is in the following terms:
"59. By reason of the matters pleaded at paragraphs
59.2 Deloittes owed the first plaintiff duties of care and in contract, further or alternatively Martino owed the first plaintiff duties of care:-
…
59.2.2to exercise reasonable care to ensure that the first plaintiff did not execute and deliver the Completion Documents without the Clause 10.1.1 Condition and the Clause 10.1.2 Condition having been satisfied;
…
59.2.4to exercise reasonable care in ensuring that the first plaintiff received the Audited Accounts and advice on the Audited Accounts prior to the latest date stipulated in the Clause 10.1.2 Condition, 6 October 1995;"
(Page 14)
35 The defendants' complaint in relation to these paragraphs is that the plaintiffs have not, in the preceding paragraphs, set up any basis for asserting that such duties were owed by Deloittes and/or Martino.
36 These pleas are said to arise by reason of the matters pleaded in par 8, which sets out the general retainer, and in paragraphs 51 to 58A. Briefly, these paragraphs plead that in or about July 1995, Jasper approached Deloittes via Martino or Martino himself regarding the investing of further monies in Robowash. The first plaintiff then instructed Deloittes via Martino, pursuant to the general retainer pleaded in par 8, to provide advice as to the investment of further monies in Robowash, to negotiate the terms of any further investment and to perform a due diligence investigation before any further investment was made. Certain advice was then provided to the first plaintiff which included advice as to the borrowing of $4,000,000 by the first plaintiff and the investing of those monies in Robowash by way of the provision of a loan facility to Robowash. That advice is referred to as the "$4,000,000 advice". It is said that this advice was given in circumstances where it was known or should have been known that the first plaintiff would rely upon the advice without enquiry, that it was reasonable for the first plaintiff to rely upon the advice, and that if the advice was wrong, the first plaintiff would suffer loss pursuant to the engagement. Martino and/or Deloittes then instructed Irdi and Associates to do certain things including the drawing of a deed between the parties, a term of which would be that the deed was conditional upon the first plaintiff conducting and being satisfied with a due diligence investigation of Robowash and upon the first plaintiff receiving and being satisfied with Robowash's audited accounts for the 1994/1995 financial year. These conditions, which duly appeared in a deed of 28 September 1995, are described as the "Clause 10.1.1 Condition" and the "Clause 10.1.2 Condition" respectively. Irdi and Associates were also to prepare a loan facility document and a debenture (referred to as the "completion documents") which were to be prepared and executed only after the satisfaction of the cl 10.1.1 condition and the cl 10.1.2 condition. It is against this background that it is sought to be pleaded that Deloittes and/or Martino owed the first plaintiff duties to exercise reasonable care to ensure that the first plaintiff did not execute and deliver the completion documents without the cl 10.1.1 and 10.1.2 conditions having been satisfied (par 59.2.2) and to ensure that the first plaintiff received the audited Robowash accounts and advice thereon prior to 6 October 1995, being the latest date said to have been stipulated in the cl 10.1.2 condition (par 59.2.4).
(Page 15)
37 In my view the plaintiffs are entitled to plead the duty set out in par 59.2.2. It is arguable that such a duty would have existed bearing in mind the extensive role played by Deloittes and/or Martino in the transaction as set out in paragraphs 51 to 58A. As regards par 59.2.4, I would also let the plaintiffs amend so as to plead the existence of this duty. Clearly the provision of the 1994/1995 Robowash audited accounts was considered important hence Irdi and Associates being instructed to include the term regarding those accounts in the 28 September deed. I think it arguable that Deloittes and/or Martino, again by reason of their role in the transaction, were thereby under any duty to exercise reasonable care to ensure that those accounts came to hand and that advice was provided in respect thereof prior to 6 October 1995.
Paragraphs 59 to 63
38 The defendants make a general complaint as to the way in which these paragraphs are pleaded, saying that they are difficult to follow. I agree with that however this arises in large part from the complex nature of the claim. I would not refuse leave to the plaintiffs to amend on that basis.
Paragraph 60.2.4
39 Aside from the defendants' general complaint in respect of paragraphs 59 to 63, they have a specific complaint in relation to par 60.2.4. That paragraph, with the proposed amendments, is in the following terms:
"60. At all times from the engagement pleaded in paragraph 56.1 until the first plaintiff entered into the transactions and executed the agreements pleaded in paragraphs 72.1-72.4 below, Martino, further or alternatively Deloittes by Martino, further or alternatively Deloittes by Henderson:-
…
60.2 did not:-
…
60.2.4further or alternatively to paragraph 60.2.3.6:
(Page 16)
- 60.2.4.1prepare Audited Accounts until 13 November 1995:
60.2.4.2provide advice concerning the Audited Accounts to the first plaintiff at any time, including after Audited Accounts dated 13 November 1995 were prepared;
60.2.4.3advise the first plaintiff when or after the Audited Accounts dated 13 November 1995 were prepared that, as was the fact, the audit report in those accounts was qualified and stated in substance that Robowash was at that time a going concern only if Robowash could obtain substantial funding and that in the event it did not do so, a likely result was that it would have to liquidate its assets for less than the value attributed in the 1995 financial year accounts accompanying the audit report."
40 The defendants' objection in this respect arises from the fact that the plaintiffs do not plead that there was any obligation upon Deloittes or Martino to prepare those accounts nor to provide the advice in question. I accept this.
41 By pars 62.2 and 63.2 it is said, in effect, that the failure to do the things pleaded in par 60, which would include the failure to prepare the audited accounts until 13 November 1995 and then to advise upon them, amount to a breach of the duties pleaded in par 59.2 and/or a breach of the retainer pleaded in 56.3. That refers to the instruction to Deloittes to conduct the due diligence investigation of Robowash. However, the only reference to those accounts in par 59.2 appears in the proposed par 59.2.4 which does not plead that there was any obligation upon Deloittes to prepare those accounts prior to 13 November 1995 or at all. The only obligation upon Deloittes was to exercise reasonable care in ensuring that the first plaintiff received the accounts prior to 6 October 1995. Any
(Page 17)
- failure in this respect by Deloittes would be a failure to exercise reasonable care in ensuring that the accounts came to hand by the latest date, which should then be particularised, rather than simply a failure to prepare the accounts by a due date. Finally in this respect, the retainer pleaded in par 56.3 does not suggest any such obligation on Deloittes. In the circumstances I consider that the proposed par 60.2.4.1 is embarrassing and I would not give leave to amend in those terms.
42 As regards pars 60.2.4.2 and 3 and the failure of Deloittes to advise upon the audited accounts, I would not allow those amendments to be made for two reasons. Again, the only reference in par 59.2 to the provision of advice regarding the accounts appears in par 59.2.4 in terms of Deloittes being under a duty to take reasonable care to ensure that the first plaintiff received advice on the accounts prior to 6 October 1995. There is no plea to the effect that Deloittes were to provide that advice, for example, as part of the retainer pleaded in par 56. Further, the failure then put against Deloittes is that they failed to provide any advice regarding the audited accounts or to provide particular advice arising out of a consideration of the accounts. The relevant failure would be Deloittes' failure to exercise reasonable care in this respect, with necessary particulars, rather than simply a failure to advise. I would not give the plaintiffs leave to amend in terms of par 60.2.4.2. and 3.
Paragraph 72.2
43 Various amendments are sought to be made to par 72.2. The only objection made by the defendants relates to the particulars thereto.
44 Paragraph 72.2 pleads that in reliance on certain advice, the first plaintiff advanced various sums to Robowash by way of loans commencing on 11 October 1995 and without adequate security. Particulars of those advances and receipts from Robowash are said to be set out in the schedule filed with the minute. By par 74 it is then pleaded, in effect, that the first plaintiff has suffered loss and damage that includes the loss of "use of the sums referred to in … par 72.2 …". (Particular B) and further, that the "first plaintiff paid interest and charges to the Commonwealth Bank in respect of the various sums pleaded in par 72.2" (Particular C).
45 The schedule attached to the minute is headed "Robowash – Frank Jasper Pty Ltd Loan Account" and lists some 170 or so entries which show debits and credits to the loan account together with a running balance. Many of the entries are difficult to understand. For example, there is a debit entry on 31 March 1999 which appears as "the Fisheries
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- Dept – Frank" in the sum of $10,500. There are numerous entries in relation to management fees and the legal fees of Solomon Brothers. There is an entry on 30 June 1997 described as "loan from co-op" in an amount of $500,000 and an entry on 31 July 1998 described as "m/v traded in against Eron m/v".
46 The explanation given by counsel for the plaintiffs from the Bar table was that the schedule is the result of many hours accounting work spent in condensing dealings between Robowash and the first plaintiff into a manageable form. It was also said that in any event, Deloittes were instrumental in setting up the loan account and therefore have "sufficient knowledge to know the facts once the occasions from which the facts arise are brought to that party's notice" – see Miller v Miller Auto Body Co Ltd (1922) 39 WN (NSW) 201 at 203.
47 I have a number of difficulties with the schedule. On a general level, I have reservations as to whether it is consistent with the plaintiffs' pleaded case. By way of par 72.2 and 74 the plaintiffs plead that the first plaintiff, having loaned monies to Robowash, has lost the use of those monies. The provision of a schedule that sets out what is effectively a running account showing numerous debits and credits may not sit neatly with such a case. Aside from that, I do not think the schedule to be in a satisfactory form. I have already set out above the function of pleadings and particulars. It must also be the case that for particulars to be satisfactory they must be clear in their terms rather than causing confusion or uncertainty. In the present case I do not think the particulars are clear. There would be no difficulty in listing a series of payments to and from Robowash by date if those payments were simply in the form of payments by the first plaintiff to Robowash and payments by Robowash to the first plaintiff. Here however, the payments do not take that form. As evidenced by the examples set out above, it is not clear from the description of many of the payments what they are nor the basis upon which it is said that they amount to advances to Robowash from the first plaintiff or receipts from Robowash. The management fees that appear throughout the schedule are an example of the former and the legal fees paid to Solomon Brothers are an example of the latter. I am not persuaded that the fact that Deloittes were instrumental in setting up the account, and therefore may have a better understanding of the schedule than would be gained simply by considering the particulars, changes the position. This is particularly the case as many of the entries arise following the commencement of these proceedings and therefore may not be within the knowledge of the defendants.
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48 It is appropriate that particulars be provided in relation to par 72.2. The proposed particulars to par 72.2 are not adequate in my view however and so I will not allow the plaintiffs to amend in those terms.
Paragraphs 87.4 and 88.7
49 The defendants object to the use of the phrase "inter alia" in the particulars provided in relation to these paragraphs. Paragraph 87 pleads the circumstances surrounding the making of a loan to Scomac Mining Pty Ltd of $1,500,000. By par 87.4 it is pleaded that Deloittes by Langford and/or Martino, and/or Deloittes by Martino reached an agreement with one Phillips on behalf of Scomac as to the terms of that loan. The plaintiffs propose providing the following by way of particulars:
"The first plaintiff relies inter alia upon a letter prepared by Langford for Deloittes dated 1 November 1996 and addressed from Phillips on behalf of Scomac to Jasper care of Deloittes which letter Deloittes did not provide to Jasper."
50 By par 88.7 it is pleaded that Langford, Martino and/or Deloittes knew or ought to have known that:
"It was necessary and appropriate to make all proper investigations of Scomac including but not limited to conducting a due diligence analysis before giving the $1.5m Scomac Advice …".
51 By way of proposed particulars, it is said:
"The first plaintiff relies inter alia on Deloittes' letter by Langford to Phillips dated 4 October 1996 and Deloittes' fax by Langford addressed to Jasper dated 4 October 1996."
52 In both cases the defendants have no difficulty with the provision of particulars in the form of the plaintiff saying that they rely on a document or documents. They object, however, to the use of the words "inter alia" as suggesting that the plaintiffs may be relying upon other matters besides the letters referred to. The defendants say that they are embarrassed by the plaintiffs' failure to set out their position clearly.
53 I must say that I have some reservations as to whether it is appropriate to particularise such pleas simply by reference to items of correspondence. However, once the plaintiffs choose to particularise the pleas in these paragraphs in this manner, I think that the defendants can
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- legitimately say that they are embarrassed by reason of it not being clear whether, by use of the words "inter alia", the plaintiffs rely upon additional matters besides the particular letters referred to. It is necessary to bear in mind in this respect that it must be clear from the pleadings and the particulars the case that the defendants have to meet. In these circumstances I would not allow the plaintiff to amend in terms of the particulars to paragraphs 87.4 and 88.7.
Conclusion
54 As I said at the outset of these reasons, the defendants took no objection to the bulk of the amendments sought to be made by the plaintiffs. The only amendments that I would not allow are as set out in these reasons. It was suggested in the course of the hearing by senior counsel for the defendants that the appropriate course in the event that I took the view that the defendants' objections had merit would be to require the plaintiffs to bring in a fresh minute. Another possibility would be to allow the plaintiffs to amend in terms of the minute save in respect of those amendments referred to above that I have disallowed and to require the plaintiffs to provide further particulars in relation to par 29, par 72.2, par 87.4 and par 88.7. I will hear further from the parties in this respect.
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