Holcon Australia Pty Ltd v Corporation of the Town of Walkerville - [2007] SASC 437

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
HOLCON AUSTRALIA PTY LTD & ORS v CORPORATION OF THE TOWN OF WALKERVILLE & ANOR
[2007] SASC 437
Reasons for Decision of The Honourable Justice White
13 December 2007
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS - GENERALLY
Application pursuant to r 104 of the Supreme Court Civil Rules 2006 to strike out whole or specified portions of statement of claim - whether statement of claim complies with rules concerning pleadings - whether alleged agreements pleaded with sufficient certainty and detail - whether evidence impermissibly pleaded - whether alleged deficiencies are such to prejudice proper conduct of the action.
Held: the statement of claim does not comply with the pleadings rules in several respects - power of the court to strike out statement of claim enlivened - deficiencies not such as to prejudice the proper conduct of the action - application for the statement of claim or portions of it to be struck out refused.
Supreme Court Civil Rules 2006 s 98, s 99, s 100, s 104; Fair Trading Act 1984 (SA) s 56; Trade Practices Act 1974 (Cth) s 52; Supreme Court Rules 1987 r 46A.05, r 46A.06, referred to.
H Stanke & Sons Pty Ltd v O'Meara [2007] SASC 246, applied.
Masters v Cameron (1954) 91 CLR 353, considered.

HOLCON AUSTRALIA PTY LTD & ORS v CORPORATION OF THE TOWN OF WALKERVILLE & ANOR
[2007] SASC 437
Civil

WHITE J: These proceedings arise out of a proposed redevelopment project at Walkerville. The plaintiffs are four companies which were involved in the redevelopment. The first defendant is the Corporation of the Town of Walkerville. The second defendant is the Commissioner of Highways.
The Council applied to strike out the whole of the plaintiffs’ statement of claim or, in the alternative, specified portions of it. The Commissioner supported the application. At the conclusion of the hearing, I made an order refusing the application. I said that I would publish reasons later. These are those reasons.
The application was brought under r 104 of the Supreme Court Civil Rules 2006 as it is those Rules which apply to the action. Rule 104 provides:
The Court may strike out a pleading in whole or part if the pleading—
(a) does not comply with these rules; and
(b)is an abuse of the process of the Court or prejudices the proper conduct of the action.
Example—
If a statement of claim discloses no reasonable cause of action, or a defence discloses no reasonable ground of defence, the Court may strike it out as an abuse of the process of the Court.
It can be seen that in order to obtain an order under r 104, a defendant must establish that a statement of claim does not comply with the pleading requirements of the rules and that, in addition, it is either an abuse of the process of the Court or prejudices the proper conduct of the action. The defendants submitted that the statement of claim does not comply with the pleading rules and that its content is such as to prejudice the proper conduct of the action. The Council also suggested that the pleadings may amount to an abuse of process but did not develop a submission to that effect.
The Redevelopment Project
It is necessary to give only a very simplified account of the background to these proceedings. The outline which follows is drawn from the statement of claim. It is therefore based on matters which, at this stage, are allegations only.
Commencing in 2001, the Council sought a redevelopment of land in Walkerville. The redevelopment was to include a village square with adjacent retail, commercial and café/restaurant premises. After seeking expressions of interest, it selected the first plaintiff, Holcon Australia, as the preferred developer. On 10 September 2003 the Council entered into a consultancy agreement with Holcon Australia and with the second plaintiff to create the project (entitled the “Revitalisation Project”).
As I understand it, the initial contemplation was that the Revitalisation Project would take place on land owned by the Council and on land which was to be acquired by Holcon Australia. The consultancy agreement provided for the transfer to Holcon Australia of certain land then owned by the Council. The Commissioner is the registered proprietor of land adjacent to the Council owned land. As the discussions for the Revitalisation Project developed, it was recognised that a portion of the Commissioner’s land could be included advantageously in the project. The Council negotiated with the Commissioner for the transfer to it of a portion of his land, with a view to the Council then transferring that land on to Holcon Australia.
The plaintiffs say that, pursuant to the consultancy agreement and their expectation that the Revitalisation Project would proceed, they carried out a considerable amount of work and expended large amounts of money. They allege that in December 2004 an in-principle agreement was reached for the Commissioner to transfer to the Council a portion of his land (described in the statement of claim as the “TSA Land”), and for the Council to on-sell that land to Holcon Australia. It was a condition of the Commissioner’s agreement that certain cottages with heritage value, known as the Rusk Cottages, on land owned by the Council should be retained. The Council and the plaintiffs agreed to this condition. The plaintiffs allege that an exchange of correspondence followed giving rise to an enforceable agreement between the Council and the Commissioner (described in the statement of claim as the “Principal Sale Agreement”) for the sale and purchase of the TSA Land, with a further agreement that that agreement would be encompassed in a formal document.
The plaintiffs allege that at the same time another agreement (“the Back-up Sales Agreement”) was made between the Council and Holcon Australia. The subject of this agreement was the on-sale of the TSA Land to Holcon Australia. The Back-up Sale Agreement too was to be encompassed in a formal document.
The plaintiffs then allege a number of actions taken by each of the parties in implementation of the consultancy agreement, the Principal Sale Agreement and the Back-up Sale Agreement. These included the execution of a Development Agreement between the Council, Holcon Australia and the second plaintiff, Holcon Investments Pty Ltd.
However, a change in the composition of the membership of the Council occurred as a result of elections held on 10 November 2006. A majority of persons opposed to the Revitalisation Project was elected. The plaintiffs allege that since that time the Council has not taken the remaining steps required to implement the various agreements. These include the finalisation of the outstanding issue with the Commissioner concerning the sale of the TSA Land. They allege that the Commissioner has withdrawn from his agreement to sell the TSA Land to the Council.
The Revitalisation Project has not proceeded.
The Plaintiffs’ Claims
The plaintiffs’ claims are both proprietary and monetary. They allege first that the Commissioner is bound by the Principal Sale Agreement to transfer the TSA Land to the Council or, in the alternative, that he is estopped by his conduct from denying an obligation to do so. Alternatively again, the plaintiffs say that the Commissioner’s conduct has been misleading and deceptive and/or unconscionable, and that orders should be made under the Fair Trading Act 1984 (SA) (the FTA) compelling the Commissioner to transfer the TSA Land to the Council.
In the alternative, the plaintiffs claim monetary relief. They allege that they have suffered significant financial losses in consequence of the conduct of the Council and the Commissioner. The plaintiffs seek equitable compensation and compensation under the FTA against the Commissioner. They also allege that the Commissioner has breached his obligation to execute formal documentation to implement the Principal Sale Agreement. As I understand the pleading, the plaintiffs claim damages in respect of that breach. As against the Council, the plaintiffs seek damages for breach of contract and damages under either the Trade Practices Act 1974 (Cth) (TPA) or the FTA. The agreements said to have been breached by the Council are the Development Agreement, the Back-up Sale Agreement and the Consultancy Agreement.
The Impugned Pleading
The statement of claim is a substantial document comprising (before the statement of the remedies sought) some 254 paragraphs, many of which have numerous sub-paragraphs. It commences with a number of paragraphs containing a dictionary of defined terms and allegations as to the identity of each of the parties. No complaint is made about those pleadings. There then follow 182 paragraphs containing for the most part allegations in a narrative chronological sequence. Then the plaintiffs allege the conduct which they undertook to avoid the demolition of the Rusk Cottages (paragraphs 200-207). The statement of claim then makes the allegations of loss and articulates the proprietary and monetary claims outlined above.
The Pleading Rules
The Court’s pleading rules are contained in Div 2 of Pt 2 of the 2006 Rules. Two of those rules are relevant to the present application. Sub-rule 98(2), which applies to all pleadings, provides:
A pleading—
(a)     must be as brief as the nature of the case allows; and
(b) must state only material facts relied on and not the evidence or arguments by which the facts are to be proved; and
(c)     must not contain matter that is—
(i)      scandalous; or
(ii)      evasive or ambiguous; or
(iii)     frivolous or vexatious; or
(iv)     an abuse of the process of the Court in some other respect.
(d)     must plead such facts as give fair notice of the party’s case at trial.
Rule 99 applies specifically to the pleading of a statement of claim. It provides:
(1)     A statement of claim—
(a)     must state each cause of action; and
(b)     must state the basis of each cause of action (including reference to any statutory provision on which the plaintiff relies); and
(c)     must contain a short statement of the material facts on which each cause of action is based; and
(d)     must state any remedy for which the plaintiff asks; and
(e)     if the plaintiff seeks an ancillary remedy (such as an extension of a period of limitation or a temporary injunction)—must state the nature of the remedy and the basis on which it is sought.
(2) If the plaintiff relies on separate causes of action, the statement of material facts must differentiate between—
(a)     facts that are common to both or all causes of action; and
(b)     facts that are relevant only to a particular cause of action.
(3)     …
The plaintiffs submitted that these rules effected some significant changes to the pleading regime which applied under the 1987 Rules.
In the 1987 Rules, the obligation to plead the facts necessary to give fair notice of the party’s case at trial appeared in the sub-rule governing the content of defences.[1] In the 2006 Rules, it appears in r 98 which applies to all pleadings. Further, sub-rule 98(2)(d) requires the pleading to contain such “facts” as give fair notice of the party’s case at trial whereas the 1987 Rules required a pleading of such further “material facts” as were necessary to give the opposing party fair notice of the defendant’s defence. Contrary to the plaintiffs’ submission, I doubt that these are significant differences. Sub-rules 98(2)(b) and (d) should be read together. A pleading must state the material facts relied upon and must give fair notice of a party’s case at trial but is not, in either case, to include evidence or argument. The observations of the Full Court in H Stanke & Sons Pty Ltd v O’Meara[2] concerning the obligation to plead only material facts and not evidence are, in my opinion, equally applicable to sub-rule 98(2)(b) of the 2006 Rules.
[1] The Supreme Court Rules 1987, rr 46A.05, 46A.06.
[2] [2007] SASC 246 at [78]-[80].
Ordinarily, one would expect that a statement of claim which complied with the requirements of sub-rules 98(2)(a)-(c) inclusive and r 99 would, without more, plead sufficient facts to give fair notice of the plaintiffs’ case at trial. It is likely to be a rare case in which a plaintiff will need to plead additional facts in a statement of claim in order to comply with sub-rule 98(2)(d). When it is necessary to plead an additional matter for the purpose of giving fair notice, it is a material fact, and not evidence, which is to be pleaded. Accordingly, insofar as the plaintiffs sought to justify some of the content of the statement of claim on the basis that it was a pleading of facts (not material facts) necessary to give the defendants fair notice of their claim, I indicate now that I do not accept the submission.
The Pleading of the Principal Sale Agreement
Paragraph 82 of the statement of claim provides:
In the context of the earlier negotiations and arrangements between the Commissioner and Council (as pleaded herein), including, without limitation:
82.1the Commissioner’s indication of a willingness to sell the TSA Land subject only to Cabinet and Ministerial approval, and the retention of the Rusk Cottages; and
82.2 the in-principle agreement reached on 9 December 2004;
Council’s Offer (which conveyed the effect of the Council’s resolution of 11 December 2004) and the Commissioner’s Acceptance (which conveyed Ministerial and Cabinet approval of the Commissioner’s Acceptance), gave rise to an enforceable agreement for the sale and purchase of the TSA Land (“Principal Sale Agreement”).
The Council was critical of this pleading of the Principal Sale Agreement. It was said that the introductory words “in the context of” introduced uncertainty into the pleading. This was because it incorporated some 75 paragraphs of the earlier pleading of the narrative sequence. The defendants were not told which particular aspects of the earlier negotiations were said to be relevant. The pleading did not identify the relevant terms of the Principal Sale Agreement. It made it difficult for the defendants, when addressing the earlier pleadings, to know the significance of the matters alleged. It was submitted that paragraph 82 revealed that much of the earlier paragraphs in the statement of claim amounted to a plea of evidence. The Council submitted that the method of pleading a lengthy narrative sequence, to which later allegations were then linked in a general way, was wholly inappropriate.
The plaintiffs defended the pleading submitting, amongst other things, that a contract had been sufficiently pleaded, that the earlier paragraphs in the statement of claim were necessary as pleadings of material facts supporting the intention of the parties to create legal relations, to give the defendants fair notice of their claims, and to plead the factual matrix in which the Principal Sale Agreement (if found to be a contract) is to be construed.
In my opinion, there is force in much of the defendants’ submissions. The statement of claim does not use the matters specified in sub-rule 99(1) to provide its structure, ie, by stating in turn each cause of action (sub-rule 99(1)(a)), the basis for each cause of action (sub-rule 99(1)(b)), the material facts upon which each cause of action is based (sub-rule 99(1)(c)), and the remedies sought (sub-rule 99(1)(d)). Those particular matters may be found somewhere in the statement of claim but they are not all readily apparent or easily identifiable. A statement of claim which follows the structure suggested by sub-rule 99(1) is likely to be coherent and easier to follow. If the plaintiffs had pleaded the statement of claim in the present case in that way, it is likely that they could have avoided many of the difficulties which the defendants’ submissions highlighted.
The narrative sequence in the plaintiffs’ pleading does, in my opinion, incorporate a reasonable amount of evidence. That pleading of evidence is not necessary or appropriate. Much of the matter pleaded is distinguishable from the material facts upon which the plaintiffs rely. I do not accept the submission of the plaintiffs that it was necessary to plead the earlier negotiations and arrangements in order to plead material facts supporting the existence of an intention to create legal relations. The existence of such an intention has not been pleaded at all. Further, the plaintiffs’ submission that the narrative sequence is a plea of the matrix of facts in which the Principal Sale Agreement is to be construed seems to confirm, rather than contradict, the defendants’ submission that evidence is being pleaded.
However, in my opinion, if the first five lines of paragraph 82 are ignored, it is an adequate pleading of the Principal Sale Agreement. It pleads clearly enough a contract constituted by the Council’s offer in its letter of 13 December 2004 and the Commissioner’s acceptance by his letter of 17 December 2004. The first five lines do, however, incorporate a pleading of evidence.
The defendants were also critical of paragraph 83. It pleads that, at the time of the Principal Sale Agreement, the Commissioner and the Council contemplated that formal documentation would be executed to effect the sale and purchase of the TSA Land and that they would resolve the ancillary matters to be reflected in that formal agreement. Paragraph 83 does not allege that that contemplation was incorporated in some way in the Principal Sale Agreement itself.
Although I do think that there is some force in the defendants’ criticisms of paragraph 83, I understand it to be simply an assertion of material facts to support the allegation of the plaintiffs of different forms of Masters v Cameron[3] agreement alleged in paragraph 85 of the statement of claim. In this respect, it does serve to put the defendants on notice of the plaintiffs’ case. Whether what is pleaded will be sufficient, if proved, to indicate that the Principal Sale Agreement was binding, although conditional upon the execution of a formal agreement, is not a matter which needs to be addressed presently.
[3] (1954) 91 CLR 353.
Although I do think that there is force in the defendants’ criticisms of paragraphs 82 and 83, I do not consider that the defects give rise to the kind of prejudice necessary for a striking-out of the statement of claim. I will give my reasons for that conclusion later.
The Pleading of the Back-up Sale Agreement
The pleading of the Back-up Sale Agreement in paragraphs 89-92 is materially in the same form as the pleading of the Principal Sale Agreement. The defendants made, in substance, the same criticisms as they did of the pleading in paragraphs 82-87. My conclusions are the same as those given in relation to those paragraphs.
The Pleading of the Breaches of Contract
As noted above, the plaintiffs allege breaches by the Council of the Development Agreement, the Back-up Sale Agreement and the Consultancy Agreement (paragraphs 235, 237 and 239). The plea in each of those paragraphs commences in the same way. Paragraph 235 can be used as an example.
235By reason of the matters referred to in paragraphs 152-199, on and from the execution of the Development Agreement on 31 August 2006, or in the alternative on and from the election of Whiting as Mayor and Councillors Cheesman, Wigg, Wilkins, Williams and Reade following the Council Elections in November 2006, Council …
The paragraphs 152-199 to which these pleas refer contain the plaintiffs’ pleading of the events since the Council elections in November 2006. Each of paragraphs 235, 237 and 239 then go on to plead actions which the Council failed to take. This is done with varying degrees of specificity ranging, for example, from a failure to finalise and execute the TSA Land sale contract to an allegation of acting “in bad faith”.

The defendants’ submissions focussed principally on the introductory words “by reason of the matters pleaded in paragraphs 152-199”. It was submitted that the pleading in that form failed to give them proper notice of the particular matters relied upon by the plaintiffs for the alleged breaches. It was also said that those pleas added nothing to the allegations of breach. At best they were pleas of evidence providing an explanation for the failures attributed to the Council.
Again, I consider that there is some merit in the submissions. The use of expressions such as “by reason of the matters …” is a well-recognised technique of linking certain pleaded matters to an alleged conclusion. The technique is often used when the pleader wishes to assert a particular legal characterisation or consequence of matters pleaded earlier in the pleading. However, the technique does have its limitations. It works best when the matters incorporated by reference are relatively confined, and less well when a large number of matters are incorporated. In the latter situation it can be productive of uncertainty, ie, as to the precise matters which are said to have the consequence for which the pleader contends. Further, when a large number of matters are incorporated by reference, it will often be seen that the plea amounts to a plea of evidence or of argument. In the days when the pleading rules required that a defence plead specifically to every allegation in a statement of claim, use of the technique often created difficulties and embarrassment for the defendant. Pleaders making use of the technique must be careful to ensure that any intermediate steps amounting themselves to material facts between the primary facts and the conclusion said to arise by reason of those facts are pleaded.
In the present case, it does seem to me that the incorporation of the matters in paragraphs 152-199 does amount to a plea of evidence. It would have been sufficient for the plaintiffs to plead the breaches of contract which they allege and the failures of the Council said to constitute the breaches. The remaining material appears to be in the nature of evidence. However, despite agreeing with the defendants in this respect, I do not consider that the pleading causes such prejudice that it ought to be struck out. The defendants’ uncertainty about the precise conduct said to amount to the pleaded breaches should be able to be addressed by the provision of particulars.
The Identification of the Losses Alleged by each Plaintiff
By paragraph 242 of the statement of claim the plaintiffs plead that, in the circumstances specified in that paragraph, “the Holcon Group” has suffered loss and damage. Paragraphs 243-244 and 251-254 contain similar pleas. The expression “Holcon Group” is defined in the statement of claim to mean each of the four plaintiffs. The defendants submitted that the statement of claim does not identify the particular losses alleged to have been suffered by each member of the Group. They contended that this prejudices the proper conduct of the action.
I do not accept this submission. Elsewhere in the statement of claim, the plaintiffs do provide some particularisation of the kinds of losses alleged to have been suffered by each member of the Holcon Group. See paragraphs 208-212 inclusive. Further, the statement of claim pleads that the plaintiffs are obtaining expert assistance in identifying and quantifying their losses. A number of paragraphs of the statement of claim provide expressly that particulars of loss will be provided upon the receipt of experts’ reports. In their oral submissions, the plaintiffs confirmed their intention to provide such particulars.
The defendants’ submissions on this aspect of the matter did not indicate to my satisfaction that they will suffer any material prejudice pending the receipt of the particulars from the plaintiffs.
The Pleading of the Representations
The defendants impugned the pleading in paragraph 246 of the statement of claim of representations by the Council said to amount to misleading and deceptive conduct. Paragraph 246 uses the technique of pleading that specified representations were made “by reason of” the course of conduct alleged in the narrative sequence earlier pleaded. The defendants submitted that this amounted to a pleading of evidence and, in addition, made it uncertain how precisely the representations were said to have been made.
I do not accept this submission, at least in whole. A representation for the purposes of s 52 of the TPA and s 56 of the FTA may arise from conduct as much as from the spoken and written word. It was incumbent upon the plaintiffs to plead the conduct said to constitute the representations they alleged. In a case like the present, a plea of the relevant material facts concerning such conduct merges into a plea of evidence. It is not always easy to distinguish between the pleading of a course of conduct said to give rise to actionable representations on the one hand, and the evidence by which that course of conduct is to be proved on the other. That appears to be so in the present case. I accept, however, that the form of the pleading means that the defendants may be left with some uncertainty as to the precise conduct said to give rise to the representations. That is a matter which, in my opinion, could be addressed by the provision of appropriate particulars.
Prejudice to the Proper Conduct of the Action
As previously noted, r 104 provides that (in the absence of abuse of process) the Court must be satisfied that a pleading’s non-compliance with the rules “prejudices the proper conduct of the action”. A prejudice of the relevant kind may exist in a range of circumstances including the filing of any answering pleading, the identification of the documents required to be disclosed, the proofing of witnesses and the conduct of the trial itself. Although I consider that there is some merit in the defendants’ submissions concerning deficiencies in the statement of claim, I do not consider that those deficiencies are such as to prejudice the proper conduct of the action.
My reasons for concluding that the deficiencies in the statement of claim do not prejudice the proper conduct of the action include the following matters. First, my present impression is that many of the principal issues in this case will not be factual. Instead, they will be the legal characterisation and consequences of events which are not significantly in dispute. I appreciate that it is very early to be forming such an impression and that it could turn out to be erroneous. Further, I accept that there may well be significant disputation about particular factual issues. The plaintiffs’ allegations that the Council has acted in bad faith may be one example. But overall, so far as one can tell at this stage, it seems that a major area of contest will be whether the arrangements between the parties concerning the Revitalisation Project had advanced to such a stage as to be binding or, at least, to a stage at which each of the Council and the Commissioner were precluded from withdrawing. If this impression be correct, the prejudice to the defendants will not be so great as it might have been had the issues been more factual.
Secondly, the prejudice to defendants arising from a plea of evidence is not now as great as it may once have been. Rule 100 of the 2006 Rules governs the content of defences. For present purposes it is significant that it does not require a defendant to plead to all allegations in a statement of claim. Instead, a defence must indicate which, if any, allegations of fact in the statement of claim are admitted by the defendant or which the defendant does not propose to challenge at the trial (sub-rule 100(1)(b)). Any remaining allegations will be taken to be denied (sub-rule 100(5)). That means that in the present case, if the defendants do not plead to the matters which they consider to be evidence, the plaintiffs will have to prove them. In the meantime, the defendants have the advantage of a formal pleading by the plaintiffs giving fair notice of their case.
Thirdly, in the circumstances of this case, I doubt that a more confined and precise pleading by the plaintiffs of the same matters would have much effect upon the extent of the parties’ document disclosure obligations. The Council submitted that these obligations were open to manipulation by the pleading of evidence. However, I did not understand the Council to submit that there had been manipulation of that kind in the present case. In any event, I do not see any basis upon which to conclude that the form of the plaintiffs’ statement of claim has been contrived so as to enlarge the ambit of documents required to be disclosed. As I have said, given the nature of the issues, it is likely that the parties will probably have to disclose most, if not all, of the documents relating to the Revitalisation Project in their possession in any event.
Fourthly, the plaintiffs have indicated a willingness to provide the defendants with further and better particulars of a number of aspects of the statement of claim. The provision of such particulars should overcome many of the defendants’ concerns.
Next, the first defendant submitted that imprecision in the pleadings would affect the operation of issue estoppel in respect of the matters decided in the trial. I doubt that that is so, but even if it is, I further doubt that it can be said to amount to prejudice to “the proper conduct of the action”. The difficulty, if it be a difficulty, would arise only after the conclusion of the matter.
I agree with the Council that the pleading of evidence can lead the parties into litigating false issues. That is a matter of concern in the present case. However, it is not sufficient to my mind to conclude that the defects in the pleading will prejudice the proper conduct of the action.
Conclusion
For the reasons given above, I dismissed the defendants’ application to strike out the whole or specified portions of the plaintiffs’ statement of claim.