Iasbet Limited v Worldgroup Consulting Pty Ltd (No 2)
[2003] VSC 233
•27 June 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7242 of 2002
| IASBET LIMITED (ACN 066 967 502) | Plaintiff |
| v | |
| WORLDGROUP CONSULTING PTY LIMITED (ACN 092 707 689) | Defendant |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 18 FEBRUARY 2003 | |
DATE OF JUDGMENT: | 27 JUNE 2003 | |
CASE MAY BE CITED AS: | IASBET LIMITED v WORLDGROUP CONSULTING PTY LTD (NO. 2) | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 233 | |
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Practice and Procedure – Pleading – Striking out statement of claim – Allegations shown to be false – Failure to plead material facts – Sections 51A and 52 of Trade Practices Act 1974 (Cth) – Rules of Supreme Court Chapter 1 Rules 13, 23 and 34.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M.R. Pearce | Baker & McKenzie |
| For the Defendant | Mr R.F. Margo SC and Mr P.G. Cawthorn | Middletons as town agents for Acuiti Legal |
HIS HONOUR:
The Application
By a summons filed on 11 February 2003, the defendant, WorldGroup Consulting Pty Ltd ("WorldGroup"), sought to strike out, with leave to replead in appropriately amended form, numerous paragraphs of, and schedules to, the Amended Statement of Claim filed by the plaintiff, Iasbet Ltd ("Iasbet"), on 7 February 2003. Alternatively, the defendant sought the provision of further and better particulars to many of those paragraphs in the Amended Statement of Claim.
The defendant twice amended its summons with the end result that the following parts of the Amended Statement of Claim were sought to be stayed or struck out – paragraphs 9 to 11, 14, 19, 20, 22, 25, 30, 31, 35, 37, 42, 47, 51, 53 to 70, 72 to 93, 96 to 98, 100 to 102, 105, 107 to 110 and Schedules 2 and 3. The defendant relied on r.23.01 and/or r.23.02 of the Supreme Court (General Civil Procedure) Rules 1996 ("the Supreme Court Rules") and/or the inherent jurisdiction of the Court. In respect of the alternative application concerning the provision of further and better particulars, the defendant relied on r.13.10(1), (2) and (3) and r.13.11. Finally, the defendant also relied on r.34.01 of the Supreme Court Rules.
Background
The plaintiff is a publicly listed company carrying on business in Australia as a bookmaker, taking bets by telephone and via the Internet on horse races and other sporting events principally in Australia, New Zealand and Asia. The defendant is a company which specialises in the production of complex computer software.
The plaintiff commenced this proceeding on 12 September 2002. It appears from the Statement of Claim and the documents tendered in the hearing before me that a Master Services Agreement was entered into between the plaintiff and the defendant on 1 July 2000. That Agreement provided that the defendant was in the business of supplying computer (IT) Internet related services, that the plaintiff wished to purchase these services, that the parties proposed to enter into Work Orders from time to time specifying exactly what services the plaintiff wished to purchase from the defendant and that the parties had agreed that the terms and conditions attached to this Agreement would apply to each Work Order. Some nine Work Orders were entered into by the parties between 1 July 2000 and 21 March 2001.
The plaintiff alleged that in April 2001, an attempted demonstration of the betting engine computer system ("the System") was abandoned because it lacked basic functionality and that despite the defendant performing further work on it, the System failed the user acceptance testing conducted on it by the plaintiff in August and September 2001 and in February 2002. By its Statement of Claim, the plaintiff alleged a number of false representations and sought damages for negligence, breach of contract and under s.82 of the Trade Practices Act 1974 (Cth) ("the TPA") and orders for restitution of about $2.3 million paid by the plaintiff to the defendant for work performed by the defendant. Not all of the invoiced amount had been paid by the plaintiff. Indeed, on 28 October 2002, WorldGroup commenced a proceeding against Iasbet in the Supreme Court of New South Wales claiming payment of the sum of $1,355,095.28, including an amount of $705,650 in respect of an invoice dated 16 October 2002.
According to an affidavit of the defendant's solicitor, Mr Richard Davis, sworn on 11 February 2003, on 1 October 2002, the defendant requested the plaintiff to supply copies of the documents referred to in the Statement of Claim and foreshadowed a request for particulars after the documents had been considered. Copies of most, but not all, of the documents referred to in the Statement of Claim were made available by the plaintiff on 8 October 2002. Correspondence between the parties then ensued concerning the necessity or otherwise of particulars before defence. On 29 October 2002, the defendant sent a letter advising that it would be serving a request for particulars and asking the plaintiff, if it saw any difficulty in answering the request, once it was received, to let the defendant know.
By a summons dated 29 October 2002, the defendant sought to have this proceeding transferred to the Supreme Court of New South Wales pursuant to s.5(2)(b) of the Jurisdiction of Courts (Cross-Vesting) Act 1987. On 20 December 2002, I gave judgment dismissing that application.
On 6 November 2002, the defendant served a 40 page request for further and better particulars of the Statement of Claim. It was said by the plaintiff that that document contained 251 separate requests, of which 66 contained multiple sub-questions, totalling 229 sub-questions within the 251 requests. The plaintiff objected to responding to such an oppressive request.
When the matter was before me on 20 December 2002, following the handing down of judgment on the cross-vesting application, in the course of discussing the future conduct of the action the plaintiff's counsel indicated that none of the requested particulars would be supplied. Following further correspondence on this issue, by letter dated 9 January 2003, the plaintiff's solicitors advised that the plaintiff would not agree to supply any particulars before defence and that it would not be amending the Statement of Claim. After further correspondence and discussion between counsel, on 5 February 2003 the plaintiff delivered a proposed Amended Statement of Claim. It was said by the plaintiff that in this Amended Statement of Claim, it dealt with five of the eleven points raised in a letter from the defendant's solicitors dated 31 January 2003 by making amendments to its pleading and that the other six points were responded to by the plaintiff providing, in a letter from its solicitors dated 5 February 2002, an explanation of why there was still disagreement between them. Because the defendant was not satisfied with the plaintiff's response to its criticisms of the pleading, it indicated at the hearing on 7 February 2003 that it wanted to apply to strike out either the Statement of Claim or the proposed Amended Statement of Claim, if the plaintiff wished to rely on that document. The current application followed.
Mr Margo, Senior Counsel, who appeared with Mr Cawthorn of counsel for the defendant, went through the various documents referred to by the plaintiff in its Amended Statement of Claim. He submitted that unless the claim was pleaded properly in accordance with the long established rules of pleading, the defendant would be unable to know the case it had to meet[1] and would not be in a position to do more than formally deny or not admit the vague allegations when what it wanted to do was to plead a sufficient and meaningful defence that would, hopefully, narrow the issues and accordingly save an enormous amount of costs.[2]
[1]Banque Commerciale SA, en Liquidation v Akhil HoldingsLtd (1990) 169 CLR 279 at 286 per Mason CJ and Gaudron J
[2]Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522 at 42,769 per Burchett J
Mr Pearce of counsel, who appeared for the plaintiff, submitted that this application was quite unnecessary and that the defendant had shown that it understood the case made against it. He submitted that the defendant should therefore be required to deliver its defence without further delay. Mr Pearce also recited the history of this dispute which, he submitted, showed that the plaintiff had not been obstructive in its approach to the defendant's requests for further information. The only refusal by the plaintiff was to respond to the 40 page request for particulars. Further, the plaintiff had satisfied some of the defendant's concerns by the delivery of the Amended Statement of Claim and had answered the others in correspondence. Mr Pearce also submitted that some of the matters now relied on by the defendant had not been raised in the defendant's solicitor's letter of 31 January 2003. If they had been raised earlier, he said, they would have been dealt with because Mr Pearce now accepted that, in respect of certain paragraphs, the defendant was entitled to proper particulars and indicated that they would be given. This concession rather weakened his attack on the necessity of this application. Although the point about lateness of notice may be relevant when I come to consider costs, it does not detract from the validity of the criticism themselves.
I turn then to a consideration of the various issues raised by the defendant. Fortunately, the defendant was able to group together many of the paragraphs under attack and I will deal with them in a similar way.
Paragraphs 9 and 10
Mr Margo submitted that paragraph 9 of the Amended Statement of Claim should be struck out or stayed because the particulars did not support the allegation in the paragraph and the pleading, as particularised, disclosed no cause of action against the defendant. It was said by the defendant that this paragraph was the pivot on which many other allegations in the Amended Statement of Claim turned. The defendant further submitted that no cause of action against it was disclosed by the facts pleaded in paragraph 10.
Paragraphs 9 and 10 of the Amended Statement of Claim read as follows:
"9.In reliance on the representations in the Strategy Implementation Blueprint Proposal, on or about 15 June 2000 the plaintiff retained the defendant to advise it and make recommendations with respect to the implementation of the recommendations in the Panopera Report.
PARTICULARS
The retainer (the 'Advice Retainer') was partly express and partly to be implied.
(a)To the extent it was express it was constituted by a resolution of the board of directors of the plaintiff on or about 15 June 2000 to the effect that the defendant would be retained as alleged.
(b)To the extent it was implied, it was to be implied from the course of conduct of the defendant providing advice and recommendations to the plaintiff and the plaintiff acting on that advice and that recommendation in the period between 15 June 2000 and about September 2001.
10.In reliance on the representations in the Strategy Implementation Blueprint Proposal, on or about 19 June 2000 the plaintiff entered into a master services agreement with the defendant.
PARTICULARS
The Agreement (the 'Master Services Agreement') is in writing dated 19 June 2000, a copy of which is held by the plaintiff's solicitors and may be inspected by appointment."
In order to succeed in the application with respect to these two paragraphs, the defendant has to rely on r.23.01 because its submission involved looking at the content of the various documents referred to in those paragraphs. Pursuant to r.23.04(2), no evidence is admissible insofar as the application is brought under r.23.02. Although, on one view, the relief sought was in reality the striking out of these paragraphs under r.23.02, with a right to replead, Mr Margo submitted that if I were to find that there was a defect in the pleading, then I could, pursuant to r.23.01, stay that part of the proceeding until the pleading was amended. Thus, he submitted, he was entitled to refer to the relevant evidence filed in support of the application. I allowed the defendant to rely on that material on that basis.
The point made by the defendant was that when one looked at the resolution of the board of directors of the plaintiff alleged in paragraph 9, it referred to SPL WorldGroup (Australia) Pty Ltd ("SPL") and made no mention of the defendant. The plaintiff had not pleaded any material facts linking the board resolution in any way to the defendant. Further, when one looked at the Master Services Agreement dated 19 June 2000, alleged in paragraph 10, it turned out to be an agreement between the plaintiff and SPL, not the defendant. No material facts had been pleaded to make the defendant a party to that contract.
In his oral submissions, Mr Pearce accepted, it seemed to me, the thrust of the defendant's main complaint in respect of paragraphs 9 and 10. He agreed that it appeared that initially the plaintiff had entered into the agreements with SPL and that subsequently SPL was replaced by the defendant. He said that it was not clear how that came about and that the plaintiff needed discovery before it could explain what had occurred. Mr Pearce said that the plaintiff did not know whether there was an assignment or a novation or whether SPL was acting as the defendant's agent. If amendment were required, it could be done later once it was clear what had happened, when the plaintiff was "in full possession of all the facts".
Mr Pearce submitted that this was not a strike out situation. There was no difficulty for the defendant in pleading to the allegations. It could deny them and plead what it says was the right agreement. This seems to me to be a rather unhelpful attitude for the plaintiff to take, particularly when it appears to be accepted by both sides that the plaintiff and the defendant did enter into a similar but slightly differently worded Master Services Agreement which was dated 1 July 2000. I cannot understand why, in these circumstances, the plaintiff did not plead that agreement and instead insisted on pleading in paragraph 10 that the defendant was a party to the written Master Services Agreement dated 19 June 2000, when a reading of the document shows this not to be the case. If the plaintiff, in its claim against the defendant, wants to rely on the earlier arrangement with SPL, then it should plead now how it says it is entitled to do so. Of course this allegation may have to be amended once discovery has been obtained. However, instead of setting out the best explanation it can presently give, the plaintiff has set up its claim on a completely false basis. I do not consider this to be an appropriate course to adopt.
In my opinion, as paragraphs 9 and 10 of the Amended Statement of Claim have been shown to be factually wrong, any claim based on these incorrect allegations should be stayed until repleaded. I consider that any claim based on paragraph 9 should be stayed until the reference to the Advice Retainer being constituted by the 15 June 2000 resolution of the plaintiff's board of directors retaining the defendant is removed, or some further material facts are pleaded to explain how by whatever means (assignment, novation, agency) the retention of SPL became a retention of the defendant. Any such stay carries with it a similar result in respect of paragraphs 14, 20, 22, 25, 31, 42 and 69 whilst there remains the reference to this Advice Retainer in those paragraphs. The same applies to paragraph 98 because of the reference to this Advice Retainer in the particulars to that paragraph.
Further, I consider that any claim based on paragraph 10 should be stayed until the reference to the Master Services Agreement dated 19 June 2000 is removed, or some further material facts are pleaded to explain how the defendant was linked to that Master Services Agreement. The defendant submitted that, in addition, until the pleading referred to the Master Services Agreement entered into with the defendant, all of the other references in the pleading to the Master Services Agreement should also be struck out. I agree that the claims arising from paragraphs 11, 55, 56, 59, 96, 97, 102 and 108 to 110 should also be stayed whilst they refer to the wrong Master Services Agreement. The defendant also sought to have paragraph 72 struck out as it had been particularised by reference to the Master Services Agreement. I accept that whilst there remains a reference to the wrong Master Services Agreement in the particulars to paragraph 72, it should be stayed.
Although the defendant did not seek to attack paragraphs 7 and 8 of the Amended Statement of Claim, it should be noted, before the new pleading is prepared, that the same difficulty about the change from SPL to the defendant also appears to exist with those paragraphs.
A secondary complaint was that the Advice Retainer alleged in paragraph 9 was said in the particulars to be implied from the course of conduct of the defendant "in the period between 15 June 2000 and about September 2001". Mr Pearce relied on the decision of Ormiston J, as his Honour then was, in Vroon BV v Foster's Brewing Group Ltd[3], in support of the proposition that:
"… agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances." [4]
[3][1994] 2 VR 32
[4][1994] 2 VR 32 at 81
However, the defendant submitted that although a contract can sometimes be inferred from conduct, at least where the conduct is consistent only with such a contract[5], no such contract could be inferred where as here during roughly the same 15 month period there was a Master Services Agreement between the parties which provided that any particular service required from the defendant would be the subject of an express written request or Work Order and there were nine separate Work Orders each of which specified the particular services to be provided under it, expressly excluded all implied terms except those not able by law to be excluded and provided that it could only be amended in writing. Moreover, the defendant further submitted that the course of conduct over a period of 15 months could not support the implication of a contract said to have been entered into by the parties "on or about" the first day of this 15 month period. There must be identified a point in time at which the parties can be said to have agreed on the elements of a contract with sufficient certainty to enable the contract to be enforced.
[5]Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 at 686 per Lord Hatherley
In my opinion, there is no strike out point in these submissions by the defendant. It will be a matter for trial whether a contract can be inferred from the conduct relied on by the plaintiff and the defendant has already indicated its defences to this allegation. Further, I do not accept that there must be identified a particular point at which the parties can be said to have entered into the contract. In Vroon, following the passage already quoted, Ormiston J cited with approval an extract from the Second Re-statement on Contacts which read:
"A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined."[6]
[6][1994] 2 VR 32 at 81
Paragraphs 19, 30, 35, 37, 47, 51, 53 to 55 and 98
The essence of the defendant's complaint about these paragraphs was set out in counsel's written outline.
"36.These paragraphs share a common form. Each of them pleads reliance on 'the representations' in a string of documents, which are identified by their titles only. None of them identifies the specific statements relied on in any of the documents listed. If the intention is to refer to representations specifically pleaded elsewhere, the paragraphs should be amended to say so. If these paragraphs remain in their present form, the Plaintiff will be left entirely at large as to this part of its case and will be able to rely at trial on any part of a large number of bulky documents. These paragraphs also allege reliance on each and every representation on each and every occasion, which is inherently unlikely and a further indication of a want of sufficient care in the pleading of these paragraphs. The Defendant is not told with clarity what case it has to meet and cannot be required to trawl through a pile of documents to try and find what that case might be: cf Pennon Publishing Pty Ltd v Main & Ors [2002] VSC 505 (Harper J) at para.16."
Mr Pearce characterised this criticism as "just nitpicking". He also pointed out that this complaint was new. It had not been raised in the letter dated 31 January 2003. Further, Mr Pearce submitted that the defendant had demonstrated that it understood what the plaintiff meant by its allegations in these paragraphs.
I do not agree. Reference to any number of documents each possibly containing a number of representations, without more, hardly defines the case that the defendant has to meet. This is particularly the case where the alleged representations refer to a variety of subject matters. In any event, Mr Pearce accepted that the pleading should be amended to specify precisely which representations were being relied on in respect of each Work Order. He denied that this would result in any of the previously relied on representations being abandoned. But even if this be the case, at least it should be clear exactly what the plaintiff is saying.
Paragraphs 56 to 60
Mr Margo submitted that paragraphs 56 to 60 led nowhere and that if they were not struck out they would prejudice, embarrass and delay the fair trial of the proceeding and cause unnecessary expense. These paragraphs plead that, in April 2001, the defendant delivered to the plaintiff a betting engine computer system ("the System") and unsuccessfully attempted to demonstrate the basic functionality of the System and that the defendant redelivered the System to the plaintiff in August 2001 following further work on it. The term "the System", which is defined in paragraph 56, is used thereafter in paragraphs 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 96 and 110 of the Amended Statement of Claim. The defendant submitted that what was delivered in April 2001 was, to the knowledge of the plaintiff, an incomplete part only of the betting engine and, as one would expect, errors were corrected and the betting engine software was further developed, throughout the period from April 2001 to February 2002. According to the defendant, both contract law and common sense suggested that the real issues in this case must be fought out over the betting engine in the most developed form it had reached before the parties discontinued commercial negotiations about its completion.
The defendant submitted that the defects in "the System" allegedly revealed by the April 2001 demonstration were not thereafter relied on by the plaintiff in any way as evidence of failures or defects in "the System". It drew attention to paragraphs 89 and 96, the particulars of which referred only to the alleged testing failures in August and September 2001 and February 2002, and to Schedule 2, which also made no mention of any errors that were allegedly revealed in April 2001.
The defendant further submitted that for the parties and the Court to have to deal with the "demonstration" in April 2001 would obviously lengthen the trial considerably and involve substantial additional time, effort and expense, to no discernible end. It was said that if these paragraphs were not struck out, the confusion they generated throughout the Amended Statement of Claim, through operation of the ill-considered definition of "the System", would prevent a "sufficient" or "meaningful" defence, delay the isolation and definition of the real issues, delay and prejudice the fair trial of the proceeding and cause additional unnecessary expense.
For all the above reasons, the defendant argued that paragraphs 56 to 60 should be struck out. It was submitted that considerable benefit was likely to result to both of the parties and to the Court if the plaintiff was compelled in consequence to consider and plead exactly which version of "the System" was really in issue in this case. It was suggested that it might also then become possible to identify a separate question or to frame an expert reference that would enable speedier and cheaper resolution of the litigation.
Mr Pearce responded by submitting that paragraphs 56 to 60 pleaded "a part of the narrative which sets the scene for the testing". He said that paragraphs 59 and 60 made it clear that the System which was tested in August and September 2001 and February 2002 was further developed from that which was delivered in April 2001. Mr Pearce denied the suggestion that retention of these paragraphs would lengthen the case. He said that the plaintiff regarded the demonstration as a significant event which would have to be addressed in the witness statements, whether or not there was reference to it in the pleading. Mr Pearce also relied on the fact that one of the particulars of negligence in the performance of the work by the defendant set out in paragraph 110 was the "failure to carry out any, or any adequate, testing before delivery of the System in April 2001." He also pointed out that this was another point not previously raised by the defendant.
Although I am of the view that the way in which the plaintiff uses the definition "the System" is likely to be confusing, I consider that Mr Pearce was correct in submitting that there is no strike out point in the defendant's argument. The plaintiff is entitled to plead its case in the way it sees fit, and it is no argument to say that it could have been pleaded differently or in a better way. I am not satisfied, at this early stage, that I should say that the reference to the demonstration in April 2001 is totally irrelevant and should be struck out.
However, there was a further argument raised by the defendant concerning paragraphs 56 to 60. The defendant noted that these paragraphs referred only to an "attempted demonstration" and emphasised that the demonstration was not characterised as any form of testing envisaged by any contractual term. It contrasted the references to "testing" in paragraphs 61 to 66. The defendant further submitted that it was not clear what contractual obligation, if any, there was to conduct a demonstration. Paragraph 56 alleged in the broadest possible way that the delivery was in purported compliance with the defendant's obligations under the Master Services Agreement, the Work Orders and the Change and Variation Requests. Nine Work Orders are referred to in the Amended Statement of Claim and only one of them, Work Order 6, was for building a betting engine. The Change and Variation Requests were defined in paragraph 55, where they were said to cover a period from 30 November to 5 July 2000. Neither paragraph 56 nor paragraph 59 identified which Work Orders or which Change and Variation Requests were relied on by the plaintiff. Nor did they identify any specific obligations in the Master Services Agreement, the Work Orders or the Change and Variation Requests which were relied on by the plaintiff.
In my opinion, the defendant is entitled to complain about this lack of identification or particularisation of the case it has to meet. The plaintiff should be required to provide particulars to paragraphs 56 and 59 of which Work Orders and which Change and Variation Requests it relies on and which specific obligations in the Master Services Agreement, the Work Orders and the Change and Variation Requests it relies on.
Paragraphs 62, 64 and 66 and Schedule 2
Paragraph 62 pleads that:
"The System failed the user acceptance testing conducted in August 2001.
PARTICULARS
Particulars of the failures are set out in Schedule 2 hereto."
Paragraphs 64 and 66 then plead that the System failed "the further testing" conducted in September 2001 and February 2002 respectively and the same particulars are repeated. The defendant submitted that each of these paragraphs should be struck out, with leave to replead, and that when repleading the plaintiff should plead its case about the alleged testing failures as a series of material facts and that it should supply particulars of the matters previously requested by the defendant. In addition, the defendant sought an order under r.34.01 that the plaintiff provide any reports to the plaintiff on any further testing carried out by the Ridley Group in September 2001 and February 2002. In Schedule 2 it was pleaded that in mid to late August 2001 the plaintiff had commissioned the Ridley Group "to perform a technical audit" of the System. That report had been provided to the defendant, which had quickly responded with its criticism of the approach taken by the Ridley Group. No subsequent reports had been provided by the plaintiff to the defendant.
The defendant's objection to each of these paragraphs was said to be that it pleaded a qualitative conclusion, in the most summary form, without pleading the material facts that must necessarily underlie it.[7] In developing this submission, Mr Margo argued that the material facts underlying the allegations of testing failure needed to be clarified at an early stage. For example, what precise performance and scalability criteria did the plaintiff allege that the System failed to meet and under what test conditions? Only by providing this information would the real issues in dispute be raised and clarified. Mr Margo went through much of Schedule 2 attempting to demonstrate the difficulties facing the defendant in grappling with the complaints made by the plaintiff. He argued that the highly general complaints of the plaintiff could only be understood by reference to the plaintiff stating what criteria the System had to perform to, what criteria were used in any testing, how any equipment used in the tests was set up, what the inputs were, what the outputs were, what the result was and how the plaintiff interpreted that result.
[7]Bruce v Odhams Press Limited [1936] 1 KB 697 at 705 per Green LJ
In the alternative, the defendant submitted that the plaintiff should be ordered to provide the particulars requested in paragraphs 101 to 115 of the defendant's request before the defendant was required to deliver its defence. The defendant also sought copies of any further Ridley Group testing reports, before defence, in exercise of the Court's powers under r.34.01, and for the purpose of bringing out as soon as possible the real issues in this case.[8]
[8]ASIC v Infomercial Management Group Pty Ltd [2001] VSC 181 at para.22 per Harper J
Much was made by Mr Pearce in his submission of the sense of not filling up the pleading with all of the complex technical information set out in Schedule 2. He submitted that it was sensible to deal with this aspect in the particulars given the modern tendency to blur the distinction between material facts and particulars.[9] Schedule 2 set out the date of the tests, the requirement tested, the source of that requirement and gave details of the failure. Mr Pearce therefore submitted that all of the required information was included and that, although it could be done, nothing at all would be gained by cutting and pasting the contents of Schedule 2 into the Amended Statement of Claim.
[9]Beach Petroleum NL v Johnson (1991) 105 ALR 456 at 466 per Von Doussa J
I consider that to a very real extent the argument about the form of the pleading was a non-issue. Although the defendant submitted that strictly all material facts should be pleaded in the Statement of Claim, and that particulars should not be used to fill the gaps in the pleading[10], it accepted the use of a schedule for the complex technical information so long as the necessary material facts were pleaded. Moreover, the plaintiff accepted that where the particulars in the schedule contained material facts, further particulars could be requested by the defendant. Nevertheless, the question remains whether the plaintiff has pleaded sufficient material facts or whether the plaintiff should be ordered to provide the particulars requested and whether the defendants could obtain copies of any further Ridley Group testing reports before it was required to deliver its defence.
[10]Bruce v Odhams Press Limited [1936] 1 KB 697 at 712-713 per Scott LJ; Collex Waste Management Pty Ltd v Waste Recycling and Processing Service of New South Wales [1999] FCA 213 at para. 43 per Lindgren J; Hong Kong Bank of Australia Ltd v BTPC Ltd (In Liq.) (1995) Aust Torts Reps 81-358 at 62,631 per Batt J, as his Honour then was.
I do not agree with Mr Pearce's submission that the plaintiff has provided all of the required information in Schedule 2. In my opinion, Mr Margo was correct in his submission that the material facts had to include much more information about the tests conducted by or on behalf of the plaintiff. Without definitely ruling on the issue at this stage, it seems to me that the plaintiff must provide the type of information outlined by Mr Margo and set out in paragraph 37 above. Only then can the plaintiff's complaints be understood and assessed. Accordingly, I accept the defendant's argument that each of paragraphs 62, 64 and 66 and Schedule 2 should be struck out, with leave to replead, and that when repleading the plaintiff should plead its case about the alleged testing failures as a series of material facts with appropriate particulars. Further, it seems to me that if there are any further Ridley Group testing reports they should be provided prior to the defendant being required to deliver its defence. Such a step should make it easier for the defendant to understand the case against it and to narrow the issues in dispute. In the circumstances, there seems to be no good reason to wait until discovery is made in the normal course.
Paragraphs 67 to 70
These paragraphs appear in the Amended Statement of Claim under the heading "Negligent Advice". The paragraphs allege that in making the recommendations referred to in paragraphs 15, 21, 23, 26 and 31 ("the Recommendations") the defendant owed the plaintiff a duty to exercise reasonable care, alternatively that it was an implied term of the Advice Retainer that the defendant would exercise reasonable care in making the Recommendations, and that the defendant was negligent and in breach of its duty or in breach of the implied term in making the Recommendations.
Mr Margo submitted that it was not clear what was alleged or intended to be alleged in these paragraphs. He said that it appeared that the cause of action intended to be pleaded in these paragraphs was negligent misstatement, which was also pleaded in paragraphs 98 to 103. Further, Mr Margo submitted that this cause of action required that the statement be inaccurate or misleading and there was no pleading that the Recommendations were inaccurate or misleading. The same was also said to apply to the cause of action based on the implied contractual term (paragraph 69). Accordingly, it was submitted that these paragraphs should be struck out, with leave to replead.
Mr Pearce responded by submitting that the defendant's criticism was simply that the issue might have been pleaded another way, as negligent misstatement rather than breach of duty to exercise reasonable care. That did not establish that it had been pleaded wrongly. Further, Mr Pearce submitted that where, as in this case, the alleged negligence consisted of silence or failure to give advice on a particular matter, a claim based on a pleading of negligent misstatement could be problematic. Finally, this issue was said to be another new point not previously raised in the letter dated 31 January 2003.
I see no reason to strike out these paragraphs. Whether or not it could have been pleaded better or in a different way is not really the point. The plaintiff is entitled to choose how it puts its case and the defendant knows the case it has to meet under these paragraphs.
Paragraphs 73 to 93
These paragraphs follow a common pattern. Three paragraphs deal with a particular Work Order (no reference is made to Work Orders 7 or 8). The first paragraph in respect of a particular Work Order alleges that pursuant to that Work Order the defendant promised to do certain work. The second paragraph alleges that in breach of its obligations under the Work Order, the defendant "failed to perform the work required by" the particular Work Order "or failed to perform it adequately". Particulars are given of the deficiencies in the defendant's work under each Work Order. The third paragraph then alleges that the plaintiff has suffered loss and damage as a result of the defendant's breach of its obligations under the particular Work Order. The particulars of the loss and damage refer to the amounts paid by the plaintiff in respect of that Work Order.
The defendant's complaint was that these paragraphs contained only very general allegations. In Schedule A to the defendant's Outline of Submissions, a number of criticisms are listed. No specific terms of the various Work Orders are pleaded. It is not said whether the "promise" was express or implied. There was no allegation that the work would be performed to a particular standard and therefore it could not be said that there was a failure to perform the work "adequately". The "promise" was too vague and general. The particulars of the alleged deficiencies did not correspond to the content of any obligation pleaded earlier. The defendant submitted that if these paragraphs were allowed to remain in their present rolled up form, the defendant had no way of knowing which part or parts of the work were alleged not to have been done or not to have been adequately done, or in what respects inadequacy was alleged.
Mr Pearce submitted that the point about the pleading of contractual terms was purely semantic. He submitted that to plead, for example, that the defendant promised pursuant to Work Order No. 4 to provide a risk register (as was done in paragraph 82) was the same as pleading that it was a term of Work Order No. 4 that the defendant would provide a risk register. The defendant clearly understood the allegation. He submitted that the pleading reflected what had occurred – a Work Order was sent and the Work Order constituted a request to do certain work, which was then undertaken. That was a contract under the umbrella of the Master Services Agreement. But it was only a promise by the defendant to do the work described by reference to documents in the Work Order.
The plaintiff once again made the point that new criticisms were being made in the hearing which had not been raised in the defendant's solicitors' letter of 31 January 2003. The complaint that the particulars of breach did not correspond with the contractual promise was new. In any event, Mr Pearce rejected the submission in respect of Work Orders Nos. 1, 3 to 6 and 9. He submitted that the breaches identified in paragraphs 74, 80, 83, 86, 89 and 92 sufficiently corresponded with the contractual promises alleged.
However, Mr Pearce did concede that in relation to Work Order No. 2, pursuant to which the defendant promised to second to the plaintiff Mr Martin Snowdon to act as the plaintiff's project manager, the particulars of breach in paragraph 77 did not correspond adequately to the tasks and responsibilities which it was alleged in paragraph 76 that Mr Snowdon had to perform. He stated that the plaintiff would have repleaded the particulars in paragraph 77 if the matter had been raised earlier. More relevantly, he indicated that the plaintiff was willing to provide further and better particulars under paragraph 77 and to do so before defence.
In respect of all of the relevant Work Orders, I accept the defendant's submission that the particulars of the alleged deficiencies do not correspond to the content of any obligation pleaded earlier. Whilst in a simple case it may be sufficient just to plead that the defendant promised to perform certain work, that is not the present case. In my opinion, the plaintiff should plead the specific terms of each contract on which it relies, with appropriate particulars, the breach of each term that is alleged to have been breached, with full particulars, and how loss was caused to the plaintiff as a consequence. If these matters are pleaded, the defendant will know which parts of the numerous and lengthy underlying documents relied on by the plaintiff are relevant to each Work Order and which terms the plaintiff alleges that the defendant breached and in what way. This conclusion applies equally to paragraphs 76 to 78, notwithstanding the plaintiff's concession that further and better particulars to paragraph 77 would be provided before defence.
Paragraphs 100, 101 and 105 and Schedule 3
These paragraphs appear under the general heading "Misrepresentations". Paragraphs 100 and 101 then appear under the sub-heading "Negligent misstatement" and paragraph 105 under the sub-heading "Misleading or deceptive conduct".
Paragraph 100 of the Amended Statement of Claim pleads that "each of the Representations was false". Paragraph 98 defines "Representations" as each of the Representations made in one or other of 13 specified documents and one presentation all of which had been previously referred to in the pleading. The particulars of the falsity of the Representations are said to be set out in Schedule 3. Paragraph 101 pleads that in making the Representations the defendant was negligent and in breach of its duty of care. The particulars given in paragraph 101 allege that the defendant, in relation to the Representations as to present matters, failed to take reasonable care to ensure the truthfulness of the Representations and failed appropriately to qualify or explain them, and in relation to the Representations as to future matters, did not have reasonable grounds to believe that the Representations would be true, as alleged in Schedule 3.
Paragraph 105 pleads that each of the Representations was false, alternatively, if or to the extent that it was with respect to a future matter it was made by the defendant without reasonable grounds for making it. The particulars refer to Schedule 3 for the particulars of the falsity and the lack of reasonable grounds.
Mr Margo submitted that the allegations in these paragraphs were too vague and general. It was said that they should be precisely pleaded in the form required for material facts, and not pleaded merely as particulars. It was pointed out that s.51A of the TPA was not relied on by the plaintiff. The defendant criticised the many references in Schedule 3 to "the experience of competent and qualified consultants", which it said did not bear at all on the state of mind of the defendant in making the alleged future representations. It was not alleged that it was the experience of the defendant. Finally, it was submitted that the pleading was deficient because it was not said when the defendant had the relevant knowledge.
Mr Pearce submitted that it was an appropriate expedient in this case that material facts were pleaded as particulars. He submitted that the detailed submissions made by the defendant about the particulars of falsity of each Representation indicated that it would not have any difficulty in pleading to them. Further, Mr Pearce disputed the suggestion that s.51A was not relied on by the plaintiff. He submitted that as the section was purely interpretative or evidentiary, it did not have to be specifically pleaded and was sufficiently invoked by the pleading of s.52 of the TPA and he referred to Cummings v Lewis[11], where the question was expressly left open, and to Adelaide Petroleum NL v Poseidon Ltd.[12] In any event the plaintiff had specifically pleaded that in relation to the Representations as to future matters, the defendant did not have reasonable grounds to believe that the Representation would be true. Moreover, the plaintiff had gone further and elaborated on the allegations of lack of reasonable grounds in Schedule 3. Mr Pearce further submitted that the references to "the experience of competent and qualified consultants" were evidentiary of what a reasonable IT consultant would have known. Finally, Mr Pearce submitted that it was well established that it is implied that the knowledge is at the time of the making of the representation. A passage in one of the authorities quoted in the defendant's own outline of submissions, Ting v Blanche[13], made this clear.
[11](1993) 41 FCR 559 at 567-568 per Sheppard and Neaves JJ
[12](1988) ATPR 40-491 at 49,700 per French J
[13](1993) 118 ALR 543 at 552 per Hill J
I have already expressed the view that, in the circumstances of this case, the dispute about whether the necessary material facts appear in the pleading itself or in a schedule to the pleading is a non-issue. The real question is whether the necessary material facts have been alleged. In my opinion, they have not. As Mr Margo submitted, in respect of most of the Representations alleged to be misleading or deceptive, the plaintiff's "particulars of falsity/lack of reasonable grounds" in Schedule 3 alleged that the defendant "knew or should have known" or "was or should have been aware" of certain matters which meant that the Representations were false. Yet, contrary to r.13.10(3) of the Supreme Court Rules, no material facts were pleaded to support the serious allegation that the defendant "knew" or "was aware" of those matters.
On the other hand, I consider that it is clear, from the reference to s.52 of the TPA and the allegation that in relation to Representations as to future matters the defendant did not have reasonable grounds to believe that the Representations would be true, that the plaintiff was relying on s.51A.[14] Secondly, I accept Mr Pearce's submission that with an allegation that a Representation as to a future matter was misleading or deceptive, it is implied that the relevant knowledge or state of mind is at the time of the making of the Representation. Thirdly, the reference to "the experience of competent and qualified consultants" seems to be the plaintiff's way of substantiating its allegations that the defendant did not have reasonable grounds to believe that the Representations would be true and should have known or been aware that the relevant matters were false. Insofar as this simply refers to evidence, it should not have been included.
[14]
Accordingly, in my opinion, paragraphs 100, 101 and 105 and Schedule 3 should be struck out with leave to replead these paragraphs containing all material facts relating to the allegations that the defendant knew or was aware of certain matters which rendered the Representations false.
Paragraph 102
This paragraph pleads that "each of the Representations induced the plaintiff to enter into the Master Services Agreement, the Work Orders and the Change Requests as alleged" in numerous earlier paragraphs. The defendant's complaint is that this paragraph is nonsense in that each of the Representations cannot have induced the plaintiff to enter into the Master Services Agreement, the Work Orders and the Change Requests. Representations made after the entry into the particular contract or variation of contract could not have induced the plaintiff to take that step. Whilst conceding that this was "a formalistic objection", Mr Margo nevertheless submitted that the paragraph was illogical and should be tidied up.
The plaintiff submitted that the defendant's argument was an improbable interpretation of the paragraph and that its meaning was plain. Emphasis was put on the words "as alleged". Mr Pearce submitted that when one went to each of the various paragraphs referred to in paragraph 102, it was clear which Representations were relied on in respect of the allegation of inducing the plaintiff to enter into a particular contract. (However, Mr Pearce did concede that a reference to the Advice Retainer had been omitted from paragraph 102. It was to this contract that the reference to paragraph 9 in paragraph 102 referred. Thus, an amendment to paragraph 102 was required.)
I agree with the plaintiff's submission. Although I consider that the paragraph could have been better worded, it seems to me that the defendant's reading of the paragraph was unduly technical. Read as a whole, the meaning is reasonably clear and certainly the defendant was under no misapprehension as to what the plaintiff was alleging. The particular Representations are tied to the particular contracts by reference back to the earlier paragraphs.
Paragraph 107
This paragraph was added as a last minute amendment. Mr Margo submitted that it was not sufficient in this case to allege that by reason of the defendant's misleading and deceptive conduct the plaintiff has suffered loss. He submitted that how each Representation caused loss had to be addressed as a material fact.
In my opinion, the defendant's submission is correct. At present, the defendant is left to guess how it is said by the plaintiff that each Representation caused the plaintiff to suffer loss and damage by incurring the costs of the project, the staff costs and the loss of profits after the date of that Representation. In Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd[15] French J held that the statement of claim in that case did not plead:
"the necessary material facts to establish the causal relationship between contravention and loss which is necessary to the cause of action. In the case of misleading and deceptive statements said to constitute a contravention of s52 … facts and circumstances should be set out leading to a reasonable inference that the conduct and the damage stood to each other in the relation of cause and effect."[16]
[15](1987) 14 FCR 215
[16](1987) 14 FCR 215 at 222. See also Mitanis v Pioneer Concrete (Vic) Pty Ltd (1997) ATPR 41-591 at 44,154 per Goldberg J
Accordingly, paragraph 107 should be struck out, with leave to replead this paragraph containing all material facts alleged about the causal relationship between contravention and loss.
Paragraphs 108 to 110
These paragraphs appear under the heading "Negligent Performance of Work". The defendant's complaint is that these paragraphs, including the particulars to paragraph 110, are vague and unclear and impermissibly general. Reference was made to some of the particulars of negligent performance:
"(a) Failure properly to manage the project.
(b) Failure to adhere to time frames.
(c) Failure to adhere to cost estimates.
(d)Failure to engage appropriately qualified and experienced personnel or sufficient numbers of personnel.
…
(g) Failure to provide training to the plaintiff's staff.
…"
It was submitted that these paragraphs would lead to endless discovery. They provided no guidance as to the case the defendant had to meet and should therefore be struck out, with leave to replead.
In the alternative, the defendant sought an order that further particulars be supplied of these paragraphs before defence, as requested in paragraphs 230 to 249 of the defendant's request.
The plaintiff made the point that once again this was a new criticism which had not previously been raised in the letter of 31 January 2003. Had it been, further particulars would have been provided. In any event, the plaintiff indicated that it was prepared to provide further particulars and that it would do so before defence. Mr Pearce submitted that generally speaking the allegations in the particulars to paragraph 110 summarised various allegations in other parts of the pleading and he indicated that the new particulars would bring together from the earlier parts of the Amended Statement of Claim the various allegations to give flesh to the more general allegations in the paragraph 110 particulars.
In my opinion, this is not a strike out point at this stage. I consider that the defendant's concerns should be able to be met by the provision of further particulars, as now offered by the plaintiff.
Paragraph 71
Mr Margo sought leave to further amend the defendant's summons to include paragraph 71. This paragraph pleads that the plaintiff suffered loss as a result of the defendant's negligent advice. Mr Margo submitted that the negligence claim had not been properly pleaded. No material facts had been pleaded to show how it was said that the defendant's negligence resulted in all of the large sums of money referred to in the particulars being lost by the plaintiff. I consider that there is nothing in the complaint about paragraph 71. As Mr Pearce submitted, in a claim based on negligence the plaintiff has the usual burden of making out that each of the items of loss referred to in the particulars was suffered as a consequence of the alleged negligence. It will be up to the plaintiff to establish the necessary causal connection. Leave to further amend the defendant's summons is therefore refused.
Conclusions
The result of the above is that there will have to be a further Amended Statement of Claim delivered by the plaintiff to take account of the following conclusions:
(a)paragraph 9 (and consequently paragraphs 14, 20, 22,25, 31, 42, 69 and 98) are stayed until paragraph 9 is repleaded without any reference to a resolution on 15 June 2000 of the board of directors of the plaintiff to retain the defendant or some further material facts are pleaded to explain how the retention of SPL became a retention of the defendant;
(b)paragraph 10 (and consequently paragraphs 11, 55, 56, 59, 96, 97, 102 and 108 to 110) are stayed until paragraph 10 is repleaded without any reference to a Master Services Agreement dated 19 June 2000 made between the plaintiff and the defendant or some further material facts are pleaded to explain how the defendant was linked to that Master Services Agreement;
(c)paragraphs 19, 30, 35, 37, 47, 51, 53 to 55 and 98 are struck out, with leave to replead these paragraphs specifying precisely which representations are relied on in respect of each Work Order;
(d)the plaintiff must give particulars to paragraphs 56 and 59 specifying which Work Orders and which Change and Variation Requests it relies on and which specific obligations in the Master Services Agreement (if properly pleaded), the Work Orders and the Change and Variation Requests it relies on;
(e)paragraphs 62, 64 and 66 and Schedule 2 are struck out, with leave to replead these paragraphs containing all material facts alleged about the testing failures together with appropriate particulars either in the pleading itself or by way of a schedule;
(f)paragraphs 73 to 93 are struck out, with leave to replead these paragraphs specifying the terms of each contract on which the plaintiff relies, with appropriate particulars, the breach of each term that it alleges has been breached, with full particulars, and how loss was caused to the plaintiff as a consequence;
(g)paragraphs 100, 101 and 105 and Schedule 3 are struck out, with leave to replead these paragraphs containing all material facts relating to the allegations that the defendant knew or was aware of certain matters which rendered the Representations false together with appropriate particulars either in the pleading itself or by way of a schedule;
(h)paragraph 107 is struck out, with leave to replead this paragraph containing all material facts alleged about the causal relationship between contravention and loss;
(i) the plaintiff must give appropriate particulars to paragraph 110; and
(j)the plaintiff must provide to the defendant copies of any reports to the plaintiff on any further testing of the System carried out by the Ridley Group in September 2001 and February 2002, before the defendant delivers its defence.
The amended pleading with appropriate particulars is to be delivered before the defendant delivers its defence. At this stage, all I am prepared to do is to require the plaintiff to give appropriate particulars, rather than require it to respond specifically to various paragraphs of the defendant's 40 page request for further and better particulars. The plaintiff knows the particulars the defendant is seeking in respect of the various paragraphs, and if it fails to provide appropriate particulars it will do so at its peril. Further, contrary to the defendant's submission, I do not consider it necessary at this stage to require the plaintiff to circulate its proposed pleading before leave is given. If the defendant considers that the amended pleading does not comply with these reasons, it can make further application to the Court.
After the parties have had an opportunity to consider these reasons, I will hear submissions concerning the form of order that should be made.
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Apart from the cases referred to in paragraph 56 above, see also Western Australia v Bond Corporation Holdings Ltd [1991] ATPR 41-081; Phoenix Court Pty Ltd v Melbourne Central Pty Ltd (1997) ATPR (Digest) 46-179; Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Ltd (1998) ATPR
41-633 and O'Neill v Medical Benefits Fund of Australia Ltd (2002) ATPR 41-882.
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