Kochergen, Jacob Jack & Anor Bell, Geoffrey York
[1997] FCA 322
•5 May 1997
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 87 of 1995
)
GENERAL DIVISION )
BETWEEN:
JACOB JACK KOCHERGEN and
JOAQUIN INVESTMENTS PTY LTD
(ACN 008 165 197)
Applicants
- and -
GEOFFREY Y0RK BELL
BRUCE RAYMOND SPANGLER,
C W PTY LTD (ACN 007 901 546),
NICHOLAS JOHN STORER,
CHRISTOPHER MARTIN GARRETT and
BENTLEYS SERVICES PTY LTD
(ACN 007 534 643)
Respondents
- and -
GEOFFREY Y0RK BELL
BRUCE RAYMOND SPANGLER,
C W PTY LTD (ACN 007 901 546),
NICHOLAS JOHN STORER,
CHRISTOPHER MARTIN GARRETT,
BENTLEYS SERVICES PTY LTD
(ACN 007 534 643), and
ENVIROWASTE ENTERPRISES PTY LTD
(ACN 008 046 562)
Cross-Claimants
- and -
JACOB JACK KOCHERGEN,
JOAQUIN INVESTMENTS PTY LTD
(ACN 008 165 197),
JACKIE BILLIE KOCHERGEN and
ELAINE ANN KOCHERGEN
Cross-Respondents
REASONS FOR DECISION
CORAM: Mansfield J
PLACE: Adelaide
DATE: 5 May 1997
This matter has involved prolonged pleading struggles. It was commenced by application on 15 November 1995 accompanied by a statement of claim, the current version of which as amended was filed on 12 July 1996. The respondents then, on 18 September 1996, pursuant to leave filed and served a cross-claim against the applicants and others. In turn, the adequacy of the cross-claim was challenged, on 6 December 1996 the cross-respondents by notice of motion applied to strike out parts of the cross-claim. The cross-claimants as a result of those objections have given notice of certain proposed amendments to the cross-claim, in the form of a proposed amended cross-claim (which I shall hereinafter call "the cross-claim") and the cross-claimants have indicated that they will further amend the cross-claim to cater for some additional objections of the cross-respondents. There are, however, some matters still in issue. After some eighteen months since the proceedings were instituted, the pleadings have not yet closed.
I am now asked to rule on the extant objections made by the cross-respondents to the cross-claim, the subject of the motion of 6 December 1996. In particular, those objections are to pars21, 22, 30 and 31 of the cross-claim. It is an anticipatory process, only in the sense that the cross-claim in its final form will then be the subject of an application for leave to have it filed and served. Sensibly, the parties are focussing on that document.
There is one other matter in issue, namely how long the cross-claimants should have to provide particulars of certain of the claimed loss presently insufficiently particularised in pars26(d) and (e) and 27(b), (f), (g), (h) and (i) of the cross-claim. They have agreed to provide those particulars. The cross-claimants are procuring expert advice to particularise those losses, but want some time after discovery and inspection before having to provide them. Strictly speaking, the claim should be capable of being properly particularised by this time, but I am reluctant to force that position and then have the pleading process further complicated by any later need to further amend those particulars after discovery and inspection, and after the expert or experts have reviewed the discovered documents. In a practical sense, the matter will not be able to proceed towards trial in any event until those steps have been taken, and it will be necessary for the cross-claimants to have inspected the discovered documents before finalising their statements including any experts reports, and before finally preparing documentary material for trial. On the basis that, in the meantime, the cross-claimants will be proceeding in other respects on those matters so far as possible, I am therefore disposed to allow the cross-claimants some time to provide the particulars after discovery and inspection. For reasons which appear below in relation to the directions I am giving, I therefore direct that such particulars be provided no later than 27 June 1997. The cross-claimants can not expect that they should be inactive in other respects in preparation of this matter for trial prior to the provision of those particulars. Directions given after that
date to have the matter ready for trial will reflect the fact that, but for that aspect of particulars, the pleadings will shortly have been closed.
I turn to consider the particular objections.
The application is made under O11 r16(b) of the Federal Court Rules ("the Rules") partly on the basis that, if the pleadings objected to are allowed to stand, it will be embarrassing to the cross-respondents because they will not know to what end the matters alleged are intended to go, and if alternatively, they have no work to do in the pleading then they should be struck out for that reason. As Carr J said in Bartlett v Swan Television & Radio Broadcasters Pty Ltd (4 August 1995, unreported), that expression includes circumstances where a pleading is "susceptible to various meanings, or contains inconsistent allegations, or ... in which irrelevant allegations are made tending to increase expense." In respect of pars30 and 31 the motion is also pursued on the basis that they disclose no sustainable cause of action, and so should be struck out under that Rule. In the light of that submission, it is convenient first to refer to submissions put on behalf of the cross-claimants to justify those paragraphs.
The objections to pars21 and 22 of the cross-claim is that they do not give rise to, or support, any cause of action otherwise relied upon except, possibly, one based upon a breach of s52 of the Trade Practices Act 1974 ("the Act"). The cross-claimants can not rely upon any breach of s52 of the Act as it is irretrievably out of time. In the course of submissions, the cross-claimants acknowledge that position, and expressly eschew any intention to do so.
Paragraph 21 of the cross-claim reads as follows:
"The representations were false, misleading and/or deceptive. Further and in the alternative, the representations constituted conduct that was misleading or deceptive or likely to mislead or deceive.
Particulars"
[There follows a series of particulars, some of which relate to existing facts, and some of which relate to projections or forecasts of cash flow, profitability and the prospects of the business in the future].
"22.Further and in the alternative, insofar as any of the representations were representations as to future matters:
(a)The representor did not have reasonable grounds for making them;
(b)There were no existing facts which justified them being made."
Objection was taken to the second sentence of par21 and the whole of par22.
The cross-claimants put that the alternative assertion in par21 that the representations constituted conduct that was misleading or deceptive or likely to mislead or deceive had the function of enhancing or informing the nature of the claimed breach of warranty referred to in pars17-19, and in particular in pars18(b)
and (c), of the cross-claim. The issue generally in the proceedings, both on the part of the applicants and on the part of the cross-claimants arises out of the sale on or about 16 November 1992 by the applicants to the cross-claimants of a certain waste disposal and recycling business, and its assets, including in particular certain bins. It is unnecessary to identify particular roles of particular applicants or cross-claimants for present purposes, or to discriminate between them. Suffice to say that, from the applicants' point of view, that transaction was effected by the sale to the cross-claimants of that business and of those assets, who, it is alleged, had been providing the applicants with financial accounting and management advice up to and including the time of the sale and in relation to it, so that the applicants did not otherwise procure independent advice; they claim that they sold the assets of the business at an under value, and provided vendor finance in support of the sale of the business on unfavourable interest and other terms. The cross-claimants as respondents are alleged to have been in breach of various duties and to have made various misrepresentations to enable that to have occurred. The cross-claimants deny any impropriety, and assert that the applicants were being otherwise professionally advised at material times. For their part, the cross-claimants complain that the business and assets were acquired at too high a price, based upon representations made to them as to the value of assets and as to the prospects of the business which they acquired. It is a somewhat curious circumstance that the parties on each side of the transaction both apparently regret having entered into the
transaction but are restricting their respective claims arising out of it to damages. There may be good reasons for that. However, that is a matter for the parties.
I refer to the general nature of the proceedings simply to put into context the allegations particularly made by the cross-claimants that it was part of the arrangement that there was a warranty and representation by the cross-respondents to them that the information provided during negotiations and at settlement was "true and accurate in all respects" and that "no such information was or would be misleading in any material particular". That is the gist of the allegations in pars18(b) and (c) of the cross-claim. Given that primary allegation, and that there is no complaint about the first sentence of par21 of the cross-claim, I fail to see that the part of that paragraph objected to can be a relevant pleading. It is not sought to provide the basis of a claim for breach of s52 of the Act. Expressly, it is not sought to provide the basis of the claim for damages for innocent misrepresentation (even assuming one in those terms was tenable). The first part of par21 ties adequately to pars18(b) and (c) of the cross-claim. I do not understand that classifying the representations not seriatim but collectively as "conduct that was misleading or deceptive or likely to mislead or deceive" does, or can, add a legitimate dimension to the primary allegation. In my view, it does fall under the penumbra of the operation of O11 r16(b) of the Rules. Accordingly, I disallow the second sentence of par21 of the cross-claim.
The justification for par22 of the cross-claim is simply that it is a particular of the alternative claim in par23 of the cross-claim that the representations by the cross-respondents (again, for present purposes I do not need to discriminate between them) were made "fraudulently and/or with reckless indifference to their truth". The primary allegation is that one of the cross-respondents, on behalf of the others, was aware of the matters referred to in par21 at the time the representations were made. As explained, by par22, it is in effect sought to make out a claim for fraudulent misrepresentation on the basis or alternative basis that that person had no reasonable grounds for making the representations as to future matters and that there were no existing facts which justified them being made. I agree with the submission for the cross-respondents that, such an assertion could not, even if proven, establish itself on the claimed cause of action for fraudulent misrepresentation. It is, I think, a conclusion reached simply by the comparison of the expressions in the two paragraphs. Accordingly, I also disallow par22 of the cross-claim. It does not follow that the matters asserted in par22 may not be sought to be proved as facts at the trial. Evidence of those matters, or a finding on those matters, may provide part of the factual foundation for a finding of fraudulent misrepresentations. But those facts, if established, are not themselves material facts or particulars of material facts such as to lead to the conclusion of fraudulent misrepresentation. By way of contrast, it is specifically asserted in par23, by reference to the particulars in par21, that the representor on behalf of the cross-respondents was in fact
aware of each of the representations being false or misleading or deceptive. The matters in par22 can do no more than describe how, or at least in part how, that is sought to be proved.
The complaint of the cross-respondents about pars30 and 31 of the cross-claim involves firstly that, as those paragraphs are part of the cross-claim seeking to establish an actionable claim for breach of duty of care by the cross-respondents (again, it is unnecessary to distinguish between them) it is necessary to allege an intention on the part of the cross-respondents to induce, by their conduct, the cross-claimants into entering into the transaction: Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) (1997) 142 ALR 750. The cross-claimants, in the course of submissions, accepted that point. They intend to amend the cross-claim to include such an allegation, as it reflects accurately what it is that they wish to make out. It is not simply a response based on the exigent problem. I propose to allow the cross-claim to be amended to add a paragraph on that matter.
The cross-respondents next assert that the cross-claim is untenable in this respect because, at material times, the cross-claimants were their professional advisers. The fact of that relationship was said to be acknowledged by specific pleadings in their defence as respondents. Whether or not the alleged duty of care could arise in such circumstances, I do not think the defence so clearly acknowledges that relationship as asserted; it asserts the role of the cross-claimants quâ the cross-respondents was a limited one, and that there were during 1992 other independent professional advisers to the cross-respondents in relation to the then proposed transaction. I refer to pars 2(a)-(c) and (g) of the defence, particularly subpars(g)(iii) and (iv) and (m), in response to par2.7 of the applicant's statement of claim. I do not regard the matter as so clear cut as to disallow pars30 and 31 of the cross-claim on that basis.
Finally there is the complaint that par31 pleads matters which are not legally sustainable, in that
(a)the duty of care alleged was "to ensure" their accuracy and that they were not misleading, rather than a duty to take reasonable care to ensure those matters; and
(b)the duty of care is somehow, in subclause (d), tied to "good conscience" without any proper foundation for doing so having been laid.
The cross-claimants accept that par31 should assert a duty to take reasonable care, rather than an absolute obligation, to ensure the alleged representations are accurate. The cross-claim will have to be amended accordingly. They did not identify any facts pleaded to give rise to any duty beyond a duty to take care, nor suggest a legal foundation for any greater or different duty created by "good conscience". I think therefore that that expression is embarrassing in the relevant sense and should not be allowed. I disallow the words in par31(d) of the cross-claim "alternatively in good conscience".
Accordingly, I now give leave to the cross-claimants to file and serve an amended cross-claim in terms of the cross-claim (as defined above) but also incorporating the amendments to it which have been acknowledged as appropriate in communications between solicitors for the cross-claimants and the cross-respondents, and also reflecting my rulings above. That amended cross-claim should be filed and served within 7 days of the date of publication of this ruling. That amended cross-claim will not need to contain particulars of pars26(d) and (e) or of pars27(b), (f), (g), (h) and (i) of the cross-claim. I direct that particulars of those paragraphs of the amended cross-claim be filed and served in a separate document on or before 27 June 1997: O12 rr4 and 5 of the Rules. As that document will be only of particulars, the cross-respondents will not need to plead to it, although they are given leave to file and serve any amended defence prompted by those particulars when received, to the extent necessary to assert any material facts which otherwise they have not so then needed to assert (O11 r10), such further amended defence to be filed and served within 14 days of receipt of those particulars. I do not presently anticipate that any such further amended defence will be necessary, but that is of course a matter for the cross-respondents.
As otherwise agreed between the parties, I direct that
1.within 21 days of service of the amended cross-claim upon them, the cross-respondents do file and serve their defence to the amended cross-claim
2.within 7 days of service of the cross-respondents' defence to the cross-claim, the cross-claimants do file and serve their reply, if any, to the defence
3.within 28 days of the filing and service of the amended cross-claim, the parties do each give discovery of, and take inspection of, documents in accordance with the Rules
and
4.this matter be listed for further directions at 9.00 am on 20 June 1997.
The parties are given liberty to apply in the meantime.
I note that the cross-respondents seek costs of the notice of motion, and including of a number of attendances when the motion was adjourned whilst discussions between the parties were
ongoing. I reserve that question for determination at that next directions hearing on 20 June 1997.
I certify that this and the preceding pages are a true copy of the Reasons for Decision of the Honourable Justice Mansfield.
Associate:
Dated:
Counsel for the Applicants : Mr C Brohier
and Cross-Respondents
Solicitors for the Applicants : Thomsons
and Cross-Respondents
Counsel for the Respondents : Mr P Heinrich
and Cross-Claimants
Solicitors for the Respondents : Minter Ellison
and Cross-Claimants
Hearing Date : 24 April 1997
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