Geneva Finance Ltd (Receiver and Manager Appointed) v Boys
[2001] WASC 269
GENEVA FINANCE LTD (Receiver and Manager Appointed) -v- BOYS & ORS [2001] WASC 269
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASC 269 | |
| Case No: | CIV:1765/1993 | 25 SEPTEMBER 2001 | |
| Coram: | HASLUCK J | 5/10/01 | |
| 15 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed in part | ||
| B | |||
| PDF Version |
| Parties: | GENEVA FINANCE LTD (Receiver and Manager Appointed) ALAN HAROLD BOYS RONALD GEORGE HOWARD DESMOND FRANK CRAWLEY ANTHONY HAYES DOUGLAS-BROWN ANTHONY HOWARD LEIBOWITZ KEVIN ERNEST JUDGE |
Catchwords: | Pleadings Rule concerning inconsistent pleadings Statement of claim alleging breaches of audit contract Defendants pleading alternative version of contract in counterclaim Whether defendants can approbate and reprobate Counterclaim generally held to be not embarrassing |
Legislation: | Fair Trading Act 1987 Supreme Court Rules, O 20 r 11, O 21 r 9(1) Trade Practices Act 1974 |
Case References: | Banque des Marchands de Moscou (Koupetschesky) v Kindersley & Anor [1951] Ch 112 Express Newspapers PLC v News (UK) Ltd & Ors [1990] 1 WLR 1320 Geneva Finance Ltd (Receiver and Manager Appointed) v Boys & Ors [2001] WASC 167 Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 Northern Territory Housing Commission v Territory Bricks Pty Ltd (1983) 71 FLR 273 Peninsular and Oriental Steam Navigation Co v Britnell & Ors (1892) 18 VLR 580 Sangora Holdings Pty Ltd v Dunstan & Anor (1996) 16 WAR 552 Birmingham Estates Co v Smith (1880) 13 Ch D 506 Commonweatlth of Australia v Verwayen (1990) 170 CLR 394 Edwards v Culcairn Shire Council [1964] NSWR 873 Gaston v United Newspapers (Ltd) & Ors (1915) 32 TLR 143 Grundy & Anor v Lewis & Ors (1995) 62 FCR 567 Household Financial Services Ltd v Braybrook & Ors [1991] 2 VR 577 James C Pitman v Alexander Crum Ewing & Ors [1911] AC 217 Karabotsos v Plastex Industries Pty Ltd [1981] VR 675 Lissenden v CAV Bosch Ltd [1940] AC 412 (HL) Millington v Loring (1880) 6 QB 190 Mutual Life & Citizens Assurance Co Ltd & Anor v Evatt (1970) 122 CLR 628 Ron Hodgson (Trading) Pty Ltd v Belvedere Motors (Hurstville) Pty Ltd & Ors [1971] 1 NSWLR 472 Turner v The Bulletin Newspaper Co Pty Ltd (1973) 131 CLR 69 Winterton Constructions Pty Ltd v Hambros Australia Ltd & Anor (1991) 101 ALR 363 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ALAN HAROLD BOYS
RONALD GEORGE HOWARD
DESMOND FRANK CRAWLEY
ANTHONY HAYES DOUGLAS-BROWN
First Defendant
ANTHONY HOWARD LEIBOWITZ
Second Defendant
KEVIN ERNEST JUDGE
Third Defendant
Catchwords:
Pleadings - Rule concerning inconsistent pleadings - Statement of claim alleging breaches of audit contract - Defendants pleading alternative version of contract in counterclaim - Whether defendants can approbate and reprobate - Counterclaim generally held to be not embarrassing
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Legislation:
Fair Trading Act 1987
Supreme Court Rules, O 20 r 11, O 21 r 9(1)
Trade Practices Act 1974
Result:
Application allowed in part
Category: B
Representation:
Counsel:
Plaintiff : Mr P G Clifford
First Defendant : Mr M J Buss QC & Mr J Garas
Second Defendant : Mr M J Buss QC & Mr J Garas
Third Defendant : Mr M J Buss QC & Mr J Garas
Solicitors:
Plaintiff : Tottle Christensen
First Defendant : Mallesons Stephen Jaques
Second Defendant : Mallesons Stephen Jaques
Third Defendant : Mallesons Stephen Jaques
Case(s) referred to in judgment(s):
Banque des Marchands de Moscou (Koupetschesky) v Kindersley & Anor [1951] Ch 112
Express Newspapers PLC v News (UK) Ltd & Ors [1990] 1 WLR 1320
Geneva Finance Ltd (Receiver and Manager Appointed) v Boys & Ors [2001] WASC 167
Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70
Northern Territory Housing Commission v Territory Bricks Pty Ltd (1983) 71 FLR 273
Peninsular and Oriental Steam Navigation Co v Britnell & Ors (1892) 18 VLR 580
Sangora Holdings Pty Ltd v Dunstan & Anor (1996) 16 WAR 552
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Case(s) also cited:
Birmingham Estates Co v Smith (1880) 13 Ch D 506
Commonweatlth of Australia v Verwayen (1990) 170 CLR 394
Edwards v Culcairn Shire Council [1964] NSWR 873
Gaston v United Newspapers (Ltd) & Ors (1915) 32 TLR 143
Grundy & Anor v Lewis & Ors (1995) 62 FCR 567
Household Financial Services Ltd v Braybrook & Ors [1991] 2 VR 577
James C Pitman v Alexander Crum Ewing & Ors [1911] AC 217
Karabotsos v Plastex Industries Pty Ltd [1981] VR 675
Lissenden v CAV Bosch Ltd [1940] AC 412 (HL)
Millington v Loring (1880) 6 QB 190
Mutual Life & Citizens Assurance Co Ltd & Anor v Evatt (1970) 122 CLR 628
Ron Hodgson (Trading) Pty Ltd v Belvedere Motors (Hurstville) Pty Ltd & Ors [1971] 1 NSWLR 472
Turner v The Bulletin Newspaper Co Pty Ltd (1973) 131 CLR 69
Winterton Constructions Pty Ltd v Hambros Australia Ltd & Anor (1991) 101 ALR 363
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1 HASLUCK J: This is a further application by the plaintiff, Geneva Finance Ltd (Receiver and Manager Appointed), to strike out the defendants' counterclaim.
2 The present application follows upon an earlier application to strike out which was the subject of my ruling in Geneva Finance Ltd (Receiver and Manager Appointed) v Boys & Ors [2001] WASC 167.
3 I described the nature of the dispute between the parties in the course of my earlier ruling and I do not intend to repeat what I said on that occasion at length.
4 Put shortly, the plaintiff in this action pleads in its substituted amended statement of claim that it was a "borrowing corporation" for the purposes of the Companies Code in that it was engaged in the business of raising money by the issue of debenture stock and lending the money so raised to borrowers.
5 It appears from the statement of claim and further and better particulars of the claim provided on 30 November 2000 and 22 March 2001 that by an audit contract allegedly concluded in or about April 1986 the plaintiff agreed to appoint the defendants' firm, Horwath and Horwath, as its auditors. For ease of reference, I will call the version of the audit contract contended for by the plaintiff the "plaintiff's audit contract".
6 The plaintiff says that the plaintiff's audit contract was partly in writing, partly oral and partly implied. Particulars have been provided as to the writings and conversations relied upon in that regard. The plaintiff alleges that there were express, or alternatively implied, terms of the audit contract that the defendants would conduct audits pursuant to and in accordance with the provisions of a trust deed entered into between the plaintiff and Perpetual Trustees, various provisions of the Companies Code and reasonable standards of care, skill and diligence.
7 The plaintiff goes on to advance a claim for breach of the audit contract on the grounds that the auditors failed to identify that inadequate provision had been made for doubtful and bad debts. The plaintiff says also that the defendant firm was in breach of its duty of care and engaged in conduct which was misleading or deceptive, contrary to provisions of the Fair Trading Act 1987 (WA).
8 By their reamended defence and counterclaim dated 12 December 2000, the defendants did not admit entry into the audit contract and denied
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- that they were liable to the plaintiff as alleged. I will call this the "December defence and counterclaim".
9 The defendants went on to assert three causes of action in their counterclaim against the plaintiff. First, if (which was denied) there was an audit contract, the plaintiff was in breach of certain terms contended for by the defendants. Second, the plaintiff was in breach of an alleged duty of care concerning the provision of reliable information and accounts to the defendants. Third, the provision to the defendants of unreliable information amounted to misleading and deceptive conduct contrary to the provisions of the Trade Practices Act 1974.
10 In seeking to strike out the December defence and counterclaim, the plaintiff relied upon O 20 r 11 of the Supreme Court Rules which provides that a party shall not in any pleading make any allegation of fact, or raise any new ground of claim, inconsistent with a previous pleading of his. Counsel also placed some reliance upon the reasoning of Browne-Wilkinson VC in Express Newspapers PLC v News (UK) Ltd & Ors [1990] 1 WLR 1320 to the effect that as a principle of law of general application a party cannot approbate and reprobate, that is to say, a party to legal proceedings is not allowed to blow hot and cold and adopt two inconsistent stances.
11 In the course of ruling upon the application to strike out, I noted that a counterclaim must be regarded as a separate and independent cause of action. If the defendants were not prepared to admit that an audit contract of the kind contended for by the plaintiff was made as alleged, then they were obliged to plead as material facts the circumstances relevant to the making of some other contract, including reference to when the contract in question was entered into, the identity of the relevant parties, the nature of the consideration and the terms of the contract.
12 I said that the defendants were also obliged to plead the material facts that allegedly constituted a breach of the contract contended for by the defendants, including reference to the manner in which the internal systems of the plaintiff were said to be inadequate. I ruled that the counterclaim presented in the December pleading should be struck out as embarrassing, with leave to replead because these matters were not made clear.
13 As a consequence of that ruling, the defendants filed and served a reamended defence and counterclaim on 18 July 2001. The July defence and counterclaim represents the fruits of the repleading. Looked at in
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- overview, it is apparent that the defendants have taken account of the matters referred to in the ruling against them.
14 The defendants continue to "not admit" certain of the allegations in the statement of claim, such as the allegation that the plaintiff was a borrowing corporation for the purposes of the Companies Code (per par 1(c) of the July defence) and the allegation in par 3.1 of the claim that in or about April 1986 the plaintiff appointed the defendants as its auditors pursuant to arrangements described by the plaintiff as the "audit contract" (per par 3 of the July defence).
15 However, on this occasion, having regard apparently to the previous ruling against them, the defendants by their counterclaim (which is reflected in par 165 to par 284 of the July defence and counterclaim), the defendants set out various facts and matters which are said to give rise to an enforceable counterclaim against the plaintiff.
16 I will not traverse the full particularity of the July defence and counterclaim. At this stage, however, I note in passing that in par 166(a) the defendants plead that the plaintiff was at all material times a borrowing corporation within the meaning of s 5 of the Companies Code. The explicit reference to a particular provision of the Companies Code makes the allegation slightly different from the plaintiff's allegation that it was a borrowing corporation.
17 At par 167 of the July defence and counterclaim, the defendants plead that by a contract made in or around April 1986 between the plaintiff and the defendants, it was agreed that the plaintiff would appoint the defendants and the defendants would act as the plaintiff's auditors, in consideration of the plaintiff paying to the defendants the reasonable fees and expenses of the defendants. This contract is described as the "audit contract". I will call the audit contract contended for by the defendants "the defendants' audit contract".
18 The defendants plead that insofar as the defendants' audit contract was oral, it was allegedly comprised of conversations that took place in or around March 1986 between certain named persons. Insofar as it was in writing, it is said to have been contained in or evidenced by certain documents being a letter dated 24 March 1986, minutes of a meeting held on 3 April 1986, a proposed trust deed between the plaintiff and Perpetual Trustees and an undated letter of engagement, allegedly provided to the plaintiff in or around April 1986.
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19 It is immediately apparent that the plaintiff's audit contract, being the version of the audit contract contended for by the plaintiff, is similar in its general effect to the defendants' audit contract. However, upon closer inspection of the respective pleadings, namely, the plaintiff's substituted amended statement of claim and the defendants' July defence and counterclaim, it emerges that the contracts are different in various material respects.
20 The documents and conversations relied upon by the defendants differ from those relied upon by the plaintiff. For example, the plaintiff places no reliance upon a letter dated 24 March 1986 or the so-called "letter of engagement". Further, when one looks at the terms of the defendants' audit contract as they are pleaded at considerable length in subpars (a) to (q) of par 168, it is quite apparent that the defendants contend that the operative contractual arrangement between the parties included terms and conditions that do not form any part of the plaintiff's case.
21 The plaintiff submits that the July defence and counterclaim should be struck out on the ground that it may prejudice, embarrass or delay the fair trial of the action. Counsel for the plaintiff echoes a line of argument advanced at the former hearing and submits that the contentions advanced by the defendants in their counterclaim are inconsistent with the stance adopted in its defence. He submits that the counterclaim or certain portions of it should be struck out as embarrassing because the defendants are approbating and reprobating. Counsel for the plaintiff also advances a number of other criticisms of the July defence and counterclaim.
22 Before turning to particular issues, it will be useful to make a number of general observations.
23 In Banque des Marchands de Moscou (Koupetschesky) v Kindersley & Anor [1951] Ch 112, Evershed MR noted that the phrases "approbating and reprobating" must be defined with care. He said that the phrase must be taken to express, first, that the party in question is to be treated as having made an election from which he cannot resile and, second, that he will not be regarded as having so elected unless he has taken a benefit under or arising out of the course of conduct which he has first pursued and with which his present action is inconsistent.
24 I do not find it to be necessary for present purposes to make any final determination as to whether such a principle is applicable to circumstances in which a litigant sets up alternative pleas. In my view,
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- various factors weigh against such a conclusion, including the notion that a party cannot be said to have derived a benefit from the advancement of two seemingly contradictory positions until he has elected to enter judgment pursuant to a particular line of argument. This was the position in Express Newspapers PLC v News (UK) Ltd & Ors (supra), where judgment had been entered pursuant to one of the lines of argument, but it is not the position here where the pleadings have not yet been finalised or the matter entered for trial. The effect of the pleadings is simply this: at the trial of the action, the Court will be left to weigh up the evidence and competing contentions as to the formation of the audit contract, and as to what it consists of, and to make a finding. Thus, at the pre-trial stage of the pleadings it cannot be said, to use the language of Evershed MR in Banque des Marchands de Moscou, that the defendants have made an election and/or taken a benefit from the course pursued.
25 Accordingly, I am not persuaded that I should attempt to resolve the question of whether the July defence and counterclaim is embarrassing by the application of a general principle of approbation and reprobation. As I indicated on the occasion of my previous ruling, such a principle may be useful in a general sense in illuminating the debate as to whether the expression of two contradictory positions is embarrassing for the opposing party, but, to my mind, the crucial question is whether, contrary to O 20 r 11, a party is advancing an allegation or ground of claim inconsistent with a previous pleading.
26 In the context of the present case, and bearing in mind the general precept that a counterclaim must be regarded as a separate and independent action, I am not persuaded that the stance adopted by the defendants in regard to the making of the audit contract gives rise to embarrassment. The defendants do not admit the plaintiff's audit contract and thereby put the plaintiff to proof of its formation and its terms and conditions. Further, the defendants, by their counterclaim, contend for a contract of a slightly different kind, particulars of which are provided to the plaintiff.
27 It is important to keep in mind that pleadings are not to be treated as positive allegations of the truth of what they contain, but only as a statement of the case of the party pleading, to be admitted or denied by the other party and, if denied, to be proved to the satisfaction of the Court. Assertions in pleadings do not amount to admissions. Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 85 and 86, per Mason CJ and Brennan J and at 98, per Gaudron and McHugh JJ. Also see Sangora Holdings Pty Ltd v Dunstan & Anor (1996) 16 WAR 552.
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28 I noted in my previous ruling in this matter that the rule against departure does not operate to prevent a defendant from pleading in a counterclaim matter inconsistent with what he has pleaded in his defence. Accordingly, a defendant may in his defence deny an agreement by the plaintiff and, by counterclaim, allege that if there was such an agreement, the plaintiff committed a breach of it. Peninsular and Oriental Steam Navigation Co v Britnell & Ors (1892) 18 VLR 580; Northern Territory Housing Commission v Territory Bricks Pty Ltd (1983) 71 FLR 273.
29 I went on to observe, however, as I have already indicated, that in such circumstances it was nonetheless important to set out the nature of the contract being contended for. Accordingly, in the present case, if the defendants were not prepared to admit that an audit contract of the kind contended for by the plaintiff was made as alleged, either initially or as a clearly formulated plea in the alternative, then they were obliged to plead as material facts the circumstances relevant to the making of some other contract, including reference to the details of the contract in question.
30 In the present case, as a consequence of the repleading manifested in the July defence and counterclaim, I consider that the defendants have now set out with particularity the nature of the audit contract they contend for, with the result that the plaintiff has been informed of the case it has to meet.
31 These general observations influence my response to a number of the issues raised by the present application to strike out. It follows from what I have said that I do not regard the repleading manifested in the July defence and counterclaim as misconceived or embarrassing in any fundamental sense as a pleading that arguably approbates and reprobates, and I am therefore not minded to strike out the pleading in its entirety. Instead, I will deal in turn with each of the specific objections raised by the plaintiff. I am referring now to the grounds of objection numbered 1 to 9 in the plaintiff's chamber summons.
32 By ground 1, the plaintiff contended that the July pleading in general fails to comply with O 21 r 9(1) in that the amendments to the counterclaim appear in a form that makes it difficult or inconvenient to read and appears to omit the original contents of the counterclaim contrary to the requirements of O 21 r 9(1).
33 I am not prepared to strike out the counterclaim on this ground. As a consequence of the previous ruling, the defendants were not ordered to amend the counterclaim. They were given leave to replead. Accordingly,
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- in my view, the provisions of O 21 r 9 of the Rules relating to amendment do not apply to the repleaded counterclaim.
34 By ground 2, the plaintiff contends that par 166(a) of the counterclaim is embarrassing in that when read with par 1(c) of the defence, the defendants approbate and reprobate as to whether the plaintiff is a borrowing corporation for the purposes of the Companies Code.
35 It follows from earlier discussion that I do not accept that the general principle concerning approbation and reprobation is applicable to a situation in which a litigant seeks to advance alternative pleas. The crucial question is whether the rule against departure from a previous pleading has been infringed in a manner that gives rise to embarrassment. I am not satisfied that the paragraphs in question are embarrassing. The plaintiff is put to proof of its allegation that it is a borrowing corporation. The defendants will, in any event, seek to establish that it is a borrowing corporation in seeking to make out the independent cause of action the subject of their counterclaim. They plead their case in a slightly different form.
36 By ground 3, the plaintiff submits that par 167 of the counterclaim is embarrassing in that par 3(a) of the defence does not admit the plaintiff's audit contract when par 167 of the counterclaim appears, in substance, to repeat the material facts pleaded in par 3.1 of the substituted amended statement of claim.
37 I am not satisfied that par 167 should be struck out. It follows from earlier discussion that, in my view, there are significant differences between the material facts which are said by the plaintiff to bear upon the formation and contents of the audit contract and those relied upon by the defendants. By declining to admit the plaintiff's plea, the defendants put the plaintiff to proof of the audit contract contended for. The defendants by their counterclaim are clearly contending for an alternative form of audit contract and I therefore cannot see that the plaintiff is caused any real embarrassment or is subject to any prejudice.
38 By ground 4(a), par 168 of the counterclaim is said to be embarrassing in that reference is made to "term" in the singular when the presence of many terms suggests that the plural should have been used. Strictly speaking, this is correct, but as the necessary amendment is very small and easily made, I doubt that it causes any real embarrassment and am not persuaded that I should strike out par 168 upon this ground. I
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- presume that this matter of detail will be attended to when a clean copy of the pleading is provided.
39 By ground 4(b), the plaintiff submits that pars 168(a) and (b) approbate and reprobate in that the substantive contention that it was a term of the audit contract that the audit be conducted in accordance with s 285 and s 158(13) of the Companies Code is directly inconsistent with the denial in par 5(a) of the July defence and counterclaim that the plaintiff's audit contract included such a term. This is said to be compounded by the denial in par 7(b) of the defence that the plaintiff's auditor was to report upon the plaintiff's accounting records and other records as alleged in par 7.1(b) of the statement of claim.
40 It follows from earlier discussion that I am not persuaded that the approbation and reprobation principle applies. I am not prepared to strike out par 168 as embarrassing on this ground. For the same reason, I am not prepared to strike out the other subparagraphs of par 168 in regard to which the plaintiff relies upon the approbation and reprobation principle, that is to say, subpars 168(c), (d), (e) and (j).
41 By ground 4(f), the plaintiff submits that par 168(i) is ambiguous and unclear as a term of a contract. It is said to be embarrassing in that it does not lead to anything. Similarly, subpar 168(k) is said to be irrelevant.
42 These subparagraphs are not expressed in a normative form and it is therefore difficult to see in what manner they could be thought to reflect or embody contractual obligations. Accordingly, in my view, they should be struck out as embarrassing. I will, however, grant leave to replead.
43 By ground 4(i), the plaintiff challenges one facet of the particulars provided by the defendants in par 168 in support of the plea that the defendants' audit contract was subject to various terms and conditions. One finds in particulars (c)(ii)(B) and (C) an assertion by the defendants that insofar as the terms pleaded in subpars 168(l) to 168(q) were in writing, they were contained in not only the letter of engagement, but also in the statements of directors of the plaintiff accompanying periodical accounts and letters from the plaintiff at the time of the audits containing assurances that all appropriate inquiries had been made.
44 The plaintiff submits that statements and letters of this kind are statements made after April 1986 and without more cannot be used to justify the terms of the audit contract.
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45 The defendants say in answer that the plea is prefaced by an assertion that insofar as the contract was in writing, it was contained in or evidenced by the document specified in the pleading. It is generally true that a pleading should be confined to a statement of material facts without reference to the evidence by which those facts are to be proved: see O 20 r 8(1). The defendants say that some latitude should be allowed in the application of this rule in the context of the plea concerning the formation of a contract. Further, there is no real embarrassment in the circumstances of the present case.
46 I am conscious that the distinction between the facts which must be established at trial to constitute a cause of action and the evidence by which they will be proved is easier to understand than to explain. It seems also that the relevant rule of pleading will be applied in a more flexible way than would have been the case in earlier times in view of the principles of positive case flow management. I cannot see that the plaintiff is subjected to any significant embarrassment by the plea in its present form. The plaintiff is clearly put on notice that some use will be made of the documents in question. Accordingly, I am not satisfied that these subparagraphs of the particulars to par 168 should be struck out.
47 By ground 5, the plaintiff submits that par 169 of the July defence and counterclaim is embarrassing in that when read with pars 5(a) and 6(b) of the defence, it approbates and reprobates as to the trust deed and the effect of the trust deed.
48 It follows from earlier discussion that I am not persuaded that the approbation and reprobation principle applies. I am not prepared to strike out par 169 as embarrassing.
49 By ground 6, the plaintiff submits that pars 174, 175 and 178 are embarrassing. In these paragraphs, the defendants are dealing with performance of the defendants' audit contract in respect of period A, that is to say, the period ending 31 December 1987. The defendants plead that in answer to inquiries made of the plaintiff, the defendants were informed that there were few or doubtful debts because the plaintiff held sufficient security.
50 The plaintiff submits that the paragraphs in question fail to plead material facts from which the plaintiff is able to see the connection between the allegations of breach on the part of the plaintiff and the allegations of loss on the part of the defendants. There is no plea of what tests and inquiries the defendants did undertake and what those inquiries
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- revealed or what tests and inquiries the defendants would have undertaken or what they would have revealed.
51 The defendants say in answer that the material facts bearing upon causation and loss are pleaded in pars 183 and 184 of the counterclaim.
52 One finds a plea in par 183 that if the defendants are held liable to the plaintiff in the original action for breach of contractual or tortious duties, then those breaches were caused or induced by the plaintiff's conduct in contravention of s 52 of the Trade Practices Act 1974, or s 10 of the Fair Trading Act, in that had the plaintiff not made the period A representations, the defendants would have taken remedial action, such as investigating further as to whether the debts were bad or doubtful and whether sufficient provision had been made for the same. The defendants say that the questions of what further inquiries or investigations would have been undertaken will be the subject of expert evidence.
53 In my view, in contrast to the stance reflected in the December defence and counterclaim, the defendants have now set out sufficient facts and matters bearing upon the issue of causation. It is true that at this stage particulars have not been provided by the defendants as to what exactly the defendants would have done by way of further investigation. However, in my view, this is a matter that can be dealt with by the plaintiff delivering to the defendants a request for further and better particulars of the counterclaim. Accordingly, I am not persuaded that the paragraphs in question should be struck out as embarrassing.
54 The objections to the July defence and counterclaim just mentioned were repeated in respect of various other paragraphs concerning different audit periods, that is to say, pars 197, 198, 201, 220, 221, 224, 243, 244, 247, 266, 267 and 270. For the reasons just given, I am not prepared to strike out these later paragraphs.
55 By ground 7, the plaintiff submits that par 183 is embarrassing. As indicated earlier, in that paragraph the defendants say that if they are held liable to the plaintiff for breaches of duty, then the breaches were caused by the plaintiff's conduct in that had the plaintiff not made the period A representations, the defendants would have investigated further. The paragraph is said to be embarrassing in that it appears to approbate and reprobate certain paragraphs in the defence and no material facts are pleaded which establish what further tests and inquiries the defendants would have undertaken and as to what those tests and inquiries would have revealed as to the plaintiff's accounts and procedures.
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56 It follows from earlier discussion that I am not persuaded that par 183 should be struck out on such grounds. If the plaintiff requires further definition of the case to be met at trial, this can be dealt with by a request for further and better particulars. I arrive at the same conclusion in respect of the challenges to pars 206, 229, 252 and 275 concerning other audit periods.
57 By ground 8, the defendants submit that pars 185 to 190 of the July counterclaim are embarrassing. In those paragraphs in respect of period A the defendants advance a claim in negligence to the effect that the defendants were adversely affected by negligent misstatements made by officers of the plaintiff concerning bad and doubtful debts and provision for the same. The plaintiff submits that the defendants fail to plead the necessary material facts to establish the alleged breach of duty by the plaintiff and then to establish the connection between the alleged breach and the loss. It is said further that the defendants do not plead the facts which establish what investigations the defendants did undertake, what further investigations they would have undertaken and what, in fact, those further investigations would have revealed.
58 The defendants say in answer that they are only required to plead the relevant facts in summary form. They draw attention to that part of the pleading whereby the facts contained in pars 22 to 32 of the statement of claim have been incorporated by reference. They say that the question of what further tests and inquiries the defendants would have undertaken is a matter for expert evidence. They say further that any alleged lack of particularity can be dealt with by way of a further and better request for particulars of the counterclaim.
59 In my view, the matters objected to are matters that can be dealt with by a request for further and better particulars of the counterclaim. I am therefore not persuaded to strike out pars 185 to 190 or the other paragraphs to which similar objections are made, that is to say, pars 208 to 213, 231 to 236, 254 to 259 and 277 to 282.
60 By ground 9, the plaintiff submits that pars 191 and 192 should be struck out as embarrassing. In those paragraphs, the defendants set up a claim for relief based upon breach of the defendants' audit contract, with reference being made to a number of specific terms such as, for example, that in breach of the defendants' audit contract the plaintiff's accounting records did not correctly record and explain the financial position of the plaintiff in relation to bad and doubtful debts (per 191(a)(ii)) and the plaintiff did not, by its directors, take reasonable steps to ascertain what
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- action had been taken in relation to the writing-off of bad debts (per 191(vi)). The plaintiff says that these paragraphs are embarrassing in that they fail to plead the necessary material facts to establish the alleged breach of contract by the plaintiff and then to establish the connection between the alleged breach and the loss.
61 The defendants say in answer that relevant material facts are pleaded in summary form. Again, they note that pars 22 to 32 of the statement of claim have been incorporated by reference and indicate that the consequence of such incorporation is to provide a framework within which the counterclaim for breach of contract should be considered.
62 I am not satisfied that these paragraphs should be struck out as embarrassing. I consider that the nature of the counterclaim based upon breach of contract is sufficiently expressed in summary form and that any lack of detail can be addressed by a request for further and better particulars of the counterclaim. I arrive at the same conclusion in respect of those paragraphs of the counterclaim which are objected to on similar grounds, namely, pars 214 and 215, 237 and 238, 260 and 261, and 283 and 284.
63 In summary, then, the plaintiff's application to strike out various paragraphs of the July defence and counterclaim will be dismissed, save for the application to strike out pars 168(i) and (k). The defendants will be allowed leave to replead in respect of those paragraphs. I will hear from the parties as to whether any further orders are required, including any order directed to the provision of a clean copy of the pleadings.
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