James, Kingsley Frederick David v Australian and New Zealand Banking Group Ltd

Re: KINGSLEY FREDERICK DAVID JAMES; JILL MAXINE JAMES; DAVID MAXWELL JAMES;
PETER NORMAN JAMES; ANGUS KINGSLEY JAMES and YALLAMBEE PTY LTD
And: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED; MARKET SECURITIES and
JOHN WELLS
No. WA G106 of 1984
Practice and Procedure
(1985) ATPR para 40 - 504

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTIRCT REGISTRY
GENERAL DIVISION
Toohey J.

CATCHWORDS

Practice and Procedure - application to strike out paragraphs of statement of claim - whether pleading has tendency to cause prejudice embarrassment or delay - whether pleading prolix - whether material facts or evidence pleaded - allegeations of unconscionable conduct, duress and fiduciary relationship - disclosure of reasonable cause of action

Trade Practices Act 1974 s.52

Federal Court Rules 0.11 r1, 0.11 r.16, 0.13 r.3

HEARING

PERTH

#DATE 5:12:1984

ORDER

Paragraphs 5, 10 (as to the second sentence), 22 and 30 (as to the particulars therein) of the statement of claim be struck out.
The applicants have leave to file and serve an amended statement of claim within 14 days.
The applicants pay the first respondent's costs of the motion.

JUDGE1

The first respondent ("the Bank") seeks, by motion, to strike out a number of paragraphs of the statement of claim in these proceedings.

It relies upon Order 11 Rule 16 of the Federal Court Rules, in particular para. (b) which empowers the Court to order that a pleading which "has a tendency to cause prejudice, embarrassment or delay in the proceeding" be struck out. In amplification, the Bank submits that the offending paragraphs are prolix, do not comply with the provisions of Order 11 Rule 1 (which provides that where a pleading alleges several matters, each matter shall be put in a separate paragraph), contain evidence and not facts (in breach of Order 11 Rule 1) and contain irrelevant material. In regard to three of the paragraphs there is a further submission that they should be struck out as not disclosing a reasonable cause of action.
The statement of claim is lengthy and the matters to which it relates are complex, both in fact and in law. Some reference to those facts and to that law is necessary but I do not propose to refer to the statement of claim in any detail, except in respect of the paragraphs which the Bank seeks to have struck out.
There are in fact three respondents but the present motion concerns only the first respondent and the applicants.
The applicants claim damages under s.52 of the Trade Practices Act 1974. In addition to allegations of misleading or deceptive conduct, they have joined claims in negligence, unconscionable conduct, duress and breach of fiduciary duty. It is not easy to distil from the statement of claim the particular allegations relating to each cause of action.
The applicants are farmers and for nearly 40 years have dealt with the Bank through its Katanning branch. In 1980 they had substantial assets, mainly in farming land, valued at some $3,500,000. In 1980, it is alleged, they sought the advice of the Bank in connection with a proposal that they purchase a farm known as "Bibiking" for a price just in excess of $1,000,000. The Bank advised them that they should obtain a loan through the second respondent, Market Securities, and that the second respondent could procure the necessary loan for them. The Bank informed the applicants that it would guarantee an overseas loan.
The applicants proceeded to enter into a contract to buy Bibiking and over a period of some months the Bank assured them that a loan was forthcoming from Market Securities.
In or about October 1980 the Bank advised the applicants to apply to it for a loan of $1.5 million pending the procurement of a loan by Market Securities through its managing director, the third respondent. Pursuant to this arrangement the applicants executed mortgages in favour of the Bank over a range of properties including one of their farms, Avondale.
The statement of claim then pleads that by "its conduct as aforesaid" the Bank engaged in conduct in trade or commerce which was misleading and deceptive or likely to mislead or deceive contrary to sub-s.52(1) of the Trade Practices Act. This allegation is accompanied by lengthy particulars relating to the failure by Market Securities to obtain the proposed loan and to representations by the Bank regarding Market Securities' qualifications and competency as a finance broker. This brief summary hardly does justice to the scope of the particulars but it is enough for present purposes. It is then said that, in consequence of the Bank's conduct, the applicants agreed to buy Bibiking; that in connection with that purchase they entered into onerous short term borrowing commitments they were unable to service; and that at the demand of the Bank they provided the securities already mentioned. By reason of the Bank's actions, it is said, the applicants have lost a substantial part of their business and their interest in various properties with the exception of Avondale which the Bank now proposes to sell as mortgagee.
The statement of claim makes further allegations of loss said to arise from the Bank's failure to exercise due skill and diligence and in negligently advising the applicants. There follows an allegation that the terms of the loan entered into by the applicants with the Bank were "harsh, unreasonable and unconscionable in the circumstances and were accepted by the Applicants under duress ...". It is then pleaded that the Bank was in a fiduciary relationship to the applicants and that in breach of that duty it failed, in a number of respects, to advise the applicants in regard to their financial arrangements.
The statement of claim concludes with particulars of loss, formulated largely by reference to the present indebtedness of the applicants under the mortgage of Avondale and the Bank's intention to enforce its powers as mortgagee. The applicants say:

"As a direct consequence of entering the contract to purchase to Bibiking property and entering the borrowing commitments with the Bank the net worth of the Applicants ... has been reduced from approximately $3,500,000 to approximately $236,000".

That brief sketch must serve as the background against which to consider the present motion.
Counsel for the Bank made two broad attacks on the statement of claim. The first was to say that on a reading of the 30 paragraphs comprising the pleading, many of which paragraphs are themselves lengthy, it was not possible to say with any certainty which allegations relate to the particular causes of action. A further criticism was that the individual paragraphs of the statement of claim are unduly long and extend beyond material facts into matters of evidence, thus infringing the rules and making the task of preparing a defence to the statement of claim unnecessarily difficult.
While there is force in both criticisms, it is unnecessary to spend time on the first. The motion is concerned only with particular paragraphs of the statement of claim and does not seek to strike out the entire pleading. Even though certain paragraphs are said to disclose no reasonable cause of action, counsel for the bank acknowledged that if the motion were successful the applicants should have leave to file amended paragraphs.
The complaint that the statement of claim contains evidence as well as material facts is bound up with the complaint of prolixity. In Written Pleadings (1975) 12 UWAL Rev. 33 at p 36 Mr. F.G. Brennan Q.C. (as he then was) referred to "The pleading which says too much", a description which is apt in the present case. In Davy v. Garrett (1878) 7 Ch D 473 at p 486 James L.J. said:

"But a Defendant may claim ex debito justitiae to have the Plaintiffs' case presented in an intelligible form, so that he may not be embarrassed in meeting it; and the Court ought to be strict even to severity in taking care to prevent pleadings from degenerating into the old oppressive pleadings in the Court of Chancery. If pleadings such as this are to be allowed, the gentleman who took such pains in the preparation of the rules may say, as Oliver Cromwell did after an unsuccessful attempt to reform abuses, 'The sons of Zeruiah be too hard for me'".

Counsel for the applicants suggested that in a matter concerned with pleadings this Court should be slow to attach too much weight to a decision given more than 100 years ago. While I have not made a close comparison of the rules in operation in 1878 with those applicable in this Court, the philosophy underlying them is much the same. In any event, the Bank brings this motion in express reliance upon the rules of the Federal Court and, to succeed, must do so by reason of those rules.
I shall now deal with each paragraph under attack.

Paragraph 5
The criticism of this paragraph is that, although it is part of a pleading relating to misleading or deceptive conduct and although the events said to give rise to a breach of s.52 of the Trade Practices Act took place in 1980 and thereafter, the paragraph refers to the period between 1947 and 1982. During that period, it is said, the Bank advised the applicants on financial matters relating to their farming activities and investments and at all material times the applicant "relied solely on the advice and guidance of the bank in all such matters as aforesaid".
In my view there are two objections to this paragraph as formulated. The first is that, while the matters referred to may have some evidentiary value when the case comes to trial, it is not material facts that are pleaded. The second objection is that because a period of nearly 40 years is referred to, problems of discovery are certain to arise and the Bank may find itself in the position of having to discover documents over many years, which documents are likely to prove of no relevance in the end.
The applicants sought to justify the paragraph on the ground, among others, that it must be read with para. 23 which pleads that "the Applicants were long standing customers of the bank and the Bank was in a fiduciary relationship with the Applicants ...". But the two paragraphs are concerned with different causes of action and, as formulated, para. 23 is unlikely to require a discovery that is oppressive.
This paragraph should be struck out.

Paragraphs 6 and 7
Neither of these paragraphs can be accused of prolixity; each is constituted by one sentence only.
The criticism of these paragraphs is that the first pleads that the Bank knew or ought to have known that the applicants relied upon its skill and judgment "in all such matters as aforesaid" and that the second pleads a duty owed by the Bank to the applicants to exercise skill care and diligence in providing advice "in the manner aforesaid". In consequence, it is said, both paragraphs are tainted by the same vice as the paragraph preceding them.
It may be that when para 5 is reformulated, paras 6 and 7 will need amendment but that is a matter for the pleader. Both paragraphs should stand.

Paragraph 9
In the context of the statement of claim, this paragraph must be taken to relate to the cause of action based on misleading or deceptive conduct.
The Bank complains that this paragraph consists of six sentences, each of which is a "matter" and therefore should be put in a separate paragraph; that the paragraph contains evidence; and that it does not plead anything that could be said to be misleading or deceptive conduct.
The paragraph is concerned with advice given by the Bank to the applicants concerning the purchase of Bibiking and the manner in which the purchase could be financed. I am not persuaded that the paragraph deals with more than one "matter". The matter in question is the advice given by the Bank to the applicants at the time pleaded. Having said that, it will undoubtedly make it easier to plead to the paragraph if the sentences appear as sub-paragraphs.
The fact that the allegations in para 9 of the statement of claim are not themselves of misleading or deceptive conduct does not make the paragraph objectionable. The facts pleaded therein may be material and in my view, when they are read with para 19 in which particulars of misleading and deceptive conduct are given, they are sufficiently material to stand.

Paragraph 10
This paragraph is mainly concerned with an interview between two of the applicants and the manager of the Katanning branch of the Bank on 8 or 9 July 1980. It contains four sentences but they relate to one matter. What I have said in relation to para 9 is applicable to this paragraph.
However there is one sentence in which it is said that the applicants attended upon the Bank and told its manager "that the vendor of the 'Bibiking' property would not reduce the asking price below $1,065,750.00". In my view this is a matter of evidence, if indeed it is relevant at all, and is not a material fact. I am reluctant to descend to such particularity but, since an analysis of various paragraphs is inevitable, that sentence should be struck out. Some reformulation of the paragraph may be necessary.

Paragraph 11
This paragraph is concerned with execution of a contract for the purchase of Bibiking and arrangements made by the Bank to fund the deposit.
It might well be said that this paragraph falls into the category of the pleading which says too much but I do not think that it pleads immaterial facts or evidence. The paragraph should stand.

Paragraph 12
In this paragraph it is pleaded that in July 1980 and thereafter the applicants met with and conducted telephone calls with the Bank "on numerous occasions" and that on those occasions the Bank's manager told the applicants that Market Securities was confident that it would procure the proposed loan.
Counsel for the Bank attacked this paragraph on the ground that it pleaded evidence and not material facts.
I do not agree. The case against the Bank under s.52 of the Trade Practices Act relates to the financing of the purchase of Bibiking and in particular the loan to be obtained by Market Securities. Occasions on which the Bank said that it was confident that the loan would be procured are, or at any rate, may be, material to this cause of action. I am not prepared to strike out this paragraph though the reference to "numerous occasions" must inevitably produce a request for particulars.

Paragraph 13
This lengthy paragraph is made up of five sentences. It would certainly benefit from sub-paragraphing. The paragraph is concerned with circumstances surrounding the payment of an instalment of purchase price under the Bibiking contract and an attendance by some of the applicants on the Bank on or about 27 and 28 August 1980. On that occasion more was said by the Bank about obtaining the proposed loan and what the applicants should do in the meantime.
This paragraph, is, I think, a borderline case in terms of material facts and evidence. But on balance I am satisfied that it relates to the former rather than the latter. There is no difficulty in pleading to it and I do not propose to strike it out.

Paragraph 20
This paragraph contains only one sentence though it is of considerable length. It recites that "In consequence of the aforesaid conduct of the Bank and guided and induced thereby" the applicants entered into a contract to purchase Bibiking, being a contract they were unable to complete; entered onerous short term borrowing commitments they were unable to service; and at the demand of the Bank provided securities as a result of which they have lost a substantial part of their farming business and the whole of their beneficial interests in Bibiking and other properties.
This paragraph does not go to a cause of action against the Bank; it pleads the consequences of the Bank's misleading and deceptive conduct.
In support of the motion to strike out this paragraph as disclosing no reasonable cause of action, counsel for the Bank submitted that the length of time over which negotiations had been conducted had nothing to do with any duty of care owed by the Bank to the applicants. That may be so but, as I have said, para 20 is concerned with s.52 of the Trade Practices Act. What "the aforesaid conduct" amounts to will depend upon the form of the preceding paragraphs when the statement of claim is finally settled. But as the paragraph is not intended to do more than plead consequences of the Bank's conduct, I am not persuaded that it should be struck out.

Paragraph 22
This paragraph pleads that the terms of the loan from the Bank to the applicants, pending the loan to be obtained by Market Securities, were "harsh, unreasonable and unconscionable in the circumstances and were accepted by the Applicants under duress ...". The Bank says that this paragraph discloses no cause of action and in any event is difficult to plead to.
As I understand it, the paragraph does not seek relief under any of the provisions of the Trade Practices Act by reason of an agreement which was the result of misleading or deceptive conduct on the part of the Bank. It pleads common law causes of action and relies upon the pendent jurisdiction of the Federal Court to include them in these proceedings.
The courts have declined to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct. In The Commercial Bank of Australia v. Amadio (1983) 57 ALJR 358 at p 363 Mason J. said:

"... the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis-a-vis another or unfair or unconscientious advantage is then taken of the opportunity thereby created".

As a matter of pleading, it is necessary to make allegations that bring the particular case within the general principle. Paragraph 22 fails to do this except to say that the terms of the loan were unconscionable "in the circumstances". It is not enough to say that the Bank can seek particulars of those circumstances; it is for the applicants to plead their case with sufficient particularity. The consequences of not doing so must be viewed in connection with the rest of the attack on para 22.
As to the plea of duress, the Bank submits that there is nothing in para 22 that pleads a threat or unlawful demand, hence that the paragraph fails to disclose a cause of action on that account. In Universe Tankships Inc of Monrovia v. International Transport Workers Federation (1983) 1 AC 366 at p 400 Lord Scarman spoke of the two elements in the role of duress as "(1)pressure amounting to complusion of the will of the victim; and (2) the illegitimacy of the pressure exerted".
In my view para 22 does not plead, or at any rate does not plead adequately, that there was pressure on the part of the Bank amounting to compulsion of the will of the applicants and that the pressure so exerted was illegitimate.
I do not think that the paragraph can be cured by piecemeal amendment. In my view it should be struck out in its entirety, the applicants having the opportunity to plead again.

Paragraph 23
This paragraph recites that the applicants were long standing customers of the Bank and that the Bank was in a fiduciary relationship to them "in that it received and continued to receive advantages from the Applicants custom". In a number of sub-paragraphs the statement of claim pleads various breaches of that duty.
Whether there was a fiduciary relationship by reason of the applicants' custom is debatable but there is an allegation of a long standing association between the applicants and the Bank and, on the basis of authority, it would be open to the Court to spell out such a relationship from that fact. See Lloyds Bank Ltd v. Bundy (1975) 1 QB 326 at p 345.

The pleading should stand.

Paragraph 30
In this paragraph the applicants plead particulars of the loss and damage suffered by them. The loss and damage is particularised and it is those particulars that the Bank seeks to strike out under Order 11 Rule 16.
The applicants' loss and damage is dealt with in a somewhat curious way. The particulars recite the present indebtedness of the applicants to the Bank and the Bank's intention to sell Avondale. It then continues by assserting that as a direct consequence of entering into the Bibiking contract and the borrowing commitments associated with it, the net worth of the applicants has been reduced from approximately $3,5000,000 to approximately $236,000. There follows a prayer for relief in which the applicants claim, inter alia, "Damages and exemplary damages".
While the Bank is not required to plead specifically to particulars of damages, it is entitled to know with some certainty what is being claimed and the basis of the claim. The indebtedness of the applicants under the mortgage of Avondale is not of itself an item of damage, particularly as the applicants seek an injunction restraining the sale of that property and a declaration that the mortgage is void. Nor, on a reading of the particulars, is it at all apparent that the applicants are claiming the difference between $3,500,000 and $236,000 and, if so, on what basis. I do not think the particulars should be allowed to stand in their present form; they should be struck out and matters of loss and damage pleaded with particularity.
In summary then, paras 5, 10 (as to the second sentence), 22 and 30 (as to the particulars therein) should be struck out. Having regard to the provisions of Order 13 Rule 3, the applicant may not need leave to file an amended statement of claim. But I shall make orders to give effect to these reasons for judgment.

[1984] FCA 415

05 DECEMBER 1984