Matthews v Shaw

[2014] SASC 74

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

MATTHEWS & ANOR v SHAW & ORS

[2014] SASC 74

Judgment of The Honourable Justice Stanley

17 June 2014

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS - GENERALLY

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - AMENDMENT

Interlocutory application.

This is an application by the sixth and seventh defendants to strike out parts of the plaintiffs’ third statement of claim.  In the alternative, the sixth and seventh defendants seek orders for the provision of further and better particulars.

The application also included a request for further and better disclosure of documents in the possession of the plaintiffs.  This was not pursued on the hearing of the application. 

The sixth and seventh defendants pursued their application in relation to the pleas in paragraphs 22, 22A, 23 and 63.3 of the third statement of claim. 

The application was argued on the basis that the present pleading lacked sufficient particularity.  On the hearing of the application, the sixth and seventh defendants did not press the application to strike out the pleading, except in relation to paragraph 63.3.

Held:

1.  The pleadings in their current form in paragraphs 22, 22A and 23 do not provide fair notice of the plaintiffs’ case (at [11] - [14]).

2.  The pleading in paragraph 63.3.3 does not cause the applicants substantial prejudice (at [16] - [22]).

Supreme Court Civil Rules 2006 (SA) r 98, r 102, referred to.
Davies v Chicago Boot Co Pty Ltd [No 3] [2007] SASC 399, discussed.
Lucas-Box v News Group Newspapers Ltd [1986] 1 All ER 177; Rupcic v AW Baulderstone Pty Ltd (1987) 46 SASR 99; H Stanke & Sons Pty Ltd v O'Meara (2007) 98 SASR 450, considered.

WORDS AND PHRASES CONSIDERED/DEFINED

"substantial prejudice"

MATTHEWS & ANOR v SHAW & ORS
[2014] SASC 74

Civil

1. STANLEY J:         This is an application by the sixth and seventh defendants, Robert Brook Pty Ltd and Robert Neil Brook, to strike out parts of the plaintiffs’ third statement of claim.  In the alternative, the sixth and seventh defendants are seeking orders for the provision of further and better particulars.

2. The application also included a request for further and better disclosure of documents in the possession of the plaintiffs.  This was not pursued on the hearing.  The applicants reserved their position as to costs. 

3. The sixth and seventh defendants pursued their application in relation to the pleas in paragraphs 22, 22A, 23 and 63.3 of the third statement of claim. 

4. The application was argued on the basis that the present pleading lacked sufficient particularity.  On the hearing of the application, the sixth and seventh defendants did not press the application to strike out the pleading, except in relation to paragraph 63.3, but again reserved their position as to costs. 

5. The background to this application is the sale of a business by the second plaintiff, Be Shaw Pty Ltd (In Liquidation).  Subsequently, the second plaintiff is alleged to have made various loans to related entities in consideration for allegedly worthless shares. 

   Supreme Court Rules

6. Rule 102 of the Supreme Court Civil Rules 2006 provides:

   Power to order further particulars of party's case

   (1) The Court may, on its own initiative or on application, order a party to file further particulars of its case.

   (2) The further particulars are, however, to be confined to facts that are material to the party's action.

   (3) The Court will only make an order for further particulars if satisfied that—

   (a)     the pleadings do not give fair notice of the party's case; and

   (b)     the order is necessary to avoid substantial prejudice to the party in whose favour the order is to be made.

   (4) Unless the Court directs to the contrary, the further particulars are to be provided by substituting for an existing pleading a new pleading incorporating the further particulars required by the Court.

   (5) No pleading is defective for want of particularity unless the missing particulars would be ordered under this rule.

7. 6SCR 102(3) provides a two-limb test. A party is required to provide particulars sufficient to give fair notice of its case to the other party. The Court will only order further particulars if the current pleading does not give fair notice of a party’s case and a party making the application would suffer substantial prejudice without further particulars of the facts material to the other party’s case.

8. In order to give fair notice of a party’s case, the particulars must be explicit about the case which the party pleading intends to make out at trial.[1]  They must be sufficient in scope and content to meet the circumstances of the case.[2]

   [1]    Lucas-Box v New Group Newspapers Ltd [1986] 1 All ER 177.

   [2]    Rupcic v AW Baulderstone Pty Ltd (1987) 46 SASR 99.

9. In Davies v Chicago Boot Co Pty Ltd (No 3), Judge Lunn addressed the substantial prejudice limb of the test in the following terms:[3]

   ...where a party complains that it will be significantly prejudiced in obtaining or giving discovery, or in other interlocutory processes, because of a lack of particularity that can be a basis for more particularity being required from the opposing party at an interlocutory stage.

   [Substantial] prejudice... can be established either by evidence or by proper inferences which the Court is prepared to draw about prejudice from the evidence which is properly before it on the interlocutory application.

   [3] [2007] SASC 399 at 9 – 10.

   The application

10. Paragraphs 22, 22A and 23 of the third statement of claim provide:

    22.     Between approximately 2006 and 2009:

    22.1. Be Shaw loaned to the Fifth Defendant the sum of approximately $11,325,704; and

    22.2. Be Shaw gave a guarantee to St. George Bank Limited in respect of the liabilities of the Fifth Defendant to St George Bank Limited in connection with a loan to the Fifth Defendant and, in connection therewith Be Shaw deposited the sum of approximately $4 million to stand as security in respect of that loan

    collectively (“the Waterfront Villas Loans”).

    22ABetween approximately 2006 and 2007 Be Shaw loaned to the Second Defendant the sum of approximately $4,230.324 (“To Be Shaw Loan”).

    23.The purported consideration for the repayment, satisfaction or extinguishment of the Waterfront Villas Loans and the To Be Shaw Loan was a number of transactions between Be Shaw, the Fifth Defendant and the Second Defendant, whereby:-

    23.1. Be Shaw was to subscribe to 15,556,028 shares or alternatively 15,558,223 shares in the Second Defendant; and

    23.2.  the Second Defendant was to subscribe for 15,556,028 or alternatively 11,325,550 shares in the Fifth Defendant.

    Particulars

    23.3.  The agreement to subscribe to the shares referred to in paragraphs 23.1 and 23.2 are contained in a letter from the Seventh Defendant to Mr Ron Berry dated 22 June 2009.

    23.4.  By Share Certificate dated 30 June 2009 the Second Defendant received 11,325,550 G class shares in the Fifth Defendant;.

    23.5.  By Share Certificate dated 30 June 2009 the Second Defendant issued to Be Shaw 4,232,673 G class shares in the Second Defendant.

    23.6.  By Share Certificate dated 30 June 2009 the Second Defendant issued to Be Shaw 11,325,550 G class shares.;

    23.7.  Draft Director’s Minutes of Be Shaw;

    23.8.  Draft Director’s Minutes of the Second Defendant;

    23.9.  Draft Director’s Minutes of the Fifth Defendant.

    ...

11. It is apparent on the pleading that the plaintiffs’ case is that the second plaintiff loaned substantial sums to the second and fifth defendants.  Subsequently these loans were repaid or satisfied by the issue of certain G class shares in those defendants that had no value.  It is pleaded that the G class shares did not provide voting rights, an entitlement to receive a dividend nor a right to participate in a distribution of the capital of either defendant.  The plaintiffs plead that but for the extinguishment of the liability to repay these loans, they could have been recovered by the plaintiffs.  It is pleaded the transactions by which the liability to repay were extinguished were undertaken on the advice of the sixth and seventh defendants.  They were the second plaintiff’s solicitors. 

12. Ms Adamson, counsel for the sixth and seventh defendants, submits that the terms of the present pleading occasion her clients substantial prejudice.  They submit that there is an issue whether the plaintiffs have suffered any loss as a result of the making of the loans.  The existing pleading does not disclose by way of particulars the circumstances of the formation of the loan agreements or their terms.  The applicants submit these are relevant to the question of whether the loans were able to be recovered.  They submit they are unable adequately to prepare a defence to the plaintiffs’ plea that the loans could have been recovered without these further particulars.  This is material to the issue of loss.  Mr Roberts, counsel for the plaintiffs, submits the existing pleading does give fair notice of their case.  He set out the basis of those claims in some detail that went beyond the face of the pleading. 

13. I am satisfied that the pleadings in their current form in paragraphs 22, 22A and 23 do not provide fair notice of the plaintiffs’ case.[4]   Counsel’s reference to the recording in the books of the second plaintiff of the loans and their repayment or extinguishment discloses further particulars of the plaintiffs’ case of which the applicants are entitled to be put on notice.  The existing pleading does not descend into the material facts of the mechanism articulated by Mr Roberts on the hearing of the application by which the loans are alleged to have been made and the liability to repay them satisfied.  The plaintiffs should plead the facts as set out by their counsel at the hearing of the application.  The sixth and seventh defendants are entitled to know the plaintiffs’ claim in sufficient particularity to allow them to adequately formulate a defence.  In the absence of such particularity I am satisfied the applicants will suffer substantial prejudice in the preparation of their defence at the trial. 

    [4] Supreme Court Civil Rules 2006, r 102(3)(a).

14. Accordingly, I am satisfied that an order should be made that the plaintiffs provide further particulars in relation to their claim in paragraphs 22, 22A and 23. 

15. Paragraph 63 of the third statement of claim provides:

    63.In performance of the General Retainer, and further or alternatively in performance of the Crane Distribution Retainer, the Sixth Defendant:-

    63.1.  ascertained that Crane Distribution Limited was claiming throughout 2008 and 2009 an entitlement to be paid amounts pursuant to the terms of the agreement referred to in paragraph 11.1, and that such amounts were asserted to run to many hundreds of thousands of dollars;

    63.2.  ascertained that Be Shaw and its advisers were not in a position throughout 2009 to refute such claims;

    63.3.  ascertained that Be Shaw did not intend to retain any sum from the assets that it was distributing to related entities:

    63.3.1. to satisfy the amount claimed by Crane Distribution Limited;

    or

    63.3.2. alternatively, pending resolution of the dispute with Crane Distribution Limited.

    Particulars

    63.3.3.The Plaintiffs rely upon the evidence of the Seventh Defendant in the Federal Court of Australia Action No. SAD 196 of 2010 at pages 28 to 62 of the transcript. 

    ...

16. The applicants seek an order that paragraph 63.3.3 be struck out, or in the alternative, that further particulars be provided. 

17. The plaintiffs plead in paragraph 63.3 that the sixth defendant knew the second plaintiff undertook distributions to related entitles without retaining any amount to satisfy a debt.  Sub-paragraph 63.3.3 pleads the particulars of that knowledge.  The applicants submit that paragraph 63.3.3 should be struck out because it is a pleading of evidence rather than a material fact.

18. 6SCR 98(2)(b) provides that pleadings must contain only material facts relied on to prove a cause of action and not evidence by which facts are to be proved. However, the dividing line between material facts and evidence is not always clear.[5]  A party’s obligation to give fair notice of its case may permit a party legitimately to plead evidence in confined circumstances. 

    [5]    H Stanke & Sons Pty Ltd v O’Meara [2007] SASC 246 at [80], (2007) 98 SASR 450 at 467.

19. On the hearing of the application it is apparent that the plaintiffs’ claim the Federal Court transcript contains evidence of the knowledge of the seventh defendant, and hence the sixth defendant, regarding the whole of the plea in paragraph 63.  The particulars refer to 34 pages of transcript.  The applicants submit they are placed in the prejudicial position of having to trawl through the transcript to identify evidence, given by Mr Brook on examination, which might constitute evidence of knowledge or an admission of knowledge at a time subsequent to the plea of ascertainment of the fact. 

20. In my view the applicants are not substantially prejudiced by the terms of the pleading.  Paragraph 63 is a plea that the sixth defendant ascertained certain facts.  Those facts necessarily had to be ascertained by Mr Brook.  For the purposes of pleading to the allegation in paragraph 63, and in preparing for trial, the solicitors for the applicants can readily obtain instructions from Mr Brook as to whether he ascertained those facts, and if so, when, and in what circumstances.  The pleading in paragraph 63.3.3 does not cause the applicants substantial prejudice.  If anything, they are advantaged by having their attention drawn to evidence given by Mr Brook in the Federal Court. The existing pleading puts the sixth and seventh defendants on fair notice of the plaintiffs’ claim.  Accordingly, the pleading in paragraph 63.3.3 is not contrary to the rules. 

21. In the circumstances, I would neither strike out the pleading in sub-paragraph 63.3.3 nor order the provision of further particulars. 

22. There is some ambiguity in the manner in which the plea has been framed so that it is not clear whether the particulars in sub-paragraph 63.3.3 are intended to provide particularity of the plea in sub-paragraph 63.3.2 only, or the facts pleaded in sub-paragraphs 63.1 - 63.3.  As I say, I understand from Mr Roberts that it is the latter.  I consider this is now clear, but the plaintiffs may wish to give some consideration to clarifying the plea formally.  In the circumstances, however, I am not prepared to make an order in those terms.  Substantial prejudice is not occasioned to the sixth and seventh defendants by the form of the existing plea. 

    Conclusion

23. I would order the plaintiffs to provide a new pleading incorporating further particulars of the facts material to the allegations in paragraphs 22, 22A and 23 of the third statement of claim concerning how the Waterfront Villas loans and the To Be Shaw loan were made and the liability to repay was extinguished.