Morgan v Roberts - [2006] SASC 15

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
MORGAN v ROBERTS & ORS
Judgment of Judge Lunn a Master of the Supreme Court
27 January 2006
PROCEDURE
Particularity required for a statement of claim - R 46A.09(1) - respective roles of Masters on interlocutory applications and Judges at trials in determining inadequate particularity and its consequences - plaintiff not to be required to give particulars of a case he does not seek to run at trial.

MORGAN v ROBERTS & ORS
[2006] SASC 15
Reasons on the Plaintiff’s application for leave to file a third statement of claim.

JUDGE LUNN: The plaintiff as the liquidator of NPC Manufacturing Pty Ltd (“the Company”) commenced this action on 30 October 2000, claiming substantial compensation from each of the three defendants as former directors of the Company for insolvent trading under s 588G of the Corporations Act. The plaintiff has had some difficulty in formulating his statement of claim. On 12 November 2004 another Master struck out part of his second statement of claim. Nothing further occurred until 10 October 2005 when the third defendant applied to strike out the action for want of prosecution. On 20 October 2005 the plaintiff applied for leave to file a third proposed statement of claim which was exhibited to an affidavit of his solicitor. The document, with its supporting schedules, is well over 100 pages in length. The third defendant opposed leave being granted on the basis that there was insufficient particularity pleaded on some issues. The first defendant also opposed the leave, but merely adopted the submissions made by counsel for the third defendant. The second defendant, who has recently filed a notice of acting in person, did not attend. It was not disputed that leave to file the proposed third statement of claim should only be granted if the Court would not order further material facts of it to be pleaded pursuant to R 46A.09(1).
The following rules are relevant to what particularity is to be required in the plaintiff’s statement of claim:
R 46A.03 ….. the Statement of Claim must plead, but plead only:
(a)the material facts relied upon to constitute any cause of action …..or other relief sought;
(b)such further material facts as are necessary to give other parties fair notice of the case which they will have to answer …..;
R 46A.09:
(1)No order is to be made that any further material facts are to be pleaded other than where the material facts pleaded do not disclose facts sufficient to give the other parties fair notice of the case which they will have to meet and the party seeking them would be significantly prejudiced in the conduct of its case by not having them. (The intent of R 46A is that parties should include all material facts in their pleadings as initially filed so that there is no unfairness to another party by any lack of particularity and if they have not done so the trial Judge may refuse to allow that party to present a case which is outside the terms of its pleading).
(2)No pleading is embarrassing for want of particularity unless the missing particulars would be ordered under (1).
(3)Where an order is made under (1) the pleading is to be amended.
R 46A.10:
(1)At trial a party is not without leave of the Court to cross examine witnesses (other than on credit) or to adduce evidence about matters not properly raised on the pleadings where that course would be likely to prejudice or embarrass other parties in the conduct of their cases.
(2)In determining what issues are properly raised on the pleadings the trial Judge:
(a)will act without undue technicality and with regard to the substantial merits of the case so that no party suffers any injustice; and
(b)in considering whether another party is likely to suffer prejudice or to be embarrassed may have regard to the contents of any Affidavit of Loss, experts’ reports or discovered documents, but they are not to be treated as if they were pleadings.
What further material facts will be ordered under R 46A.09(1) will depend upon the circumstances of the particular case, and the Court is entitled to take into account the scope of the investigation and preparation another party will be required to undertake if further material facts are not provided: Marini v MLH Insurance Brokers Pty Ltd Besanko J, 2 December 2004, Judgment No [2004] SASC 400, unreported.
In the recent decision of Coonawarra Premium Vineyards Pty Ltd v Nugan Group Pty Ltd Judgment No [2006] SASC 5 I said the following about the operation of R 46A.09:
R 46A.09 is limited to breaches of subparagraph R 46A.05(2)(c). R46A.09(1) comprises a serious restriction on an opposing party’s ability to have a breach of subparagraph (c) remedied in that such party must establish that it would be “significantly prejudiced in the conduct of its case by not having the further facts pleaded”. The mischief R 46A.09(1) was designed to remedy was the considerable expense and delay which was regularly encountered under the old rules on arguments about additional particulars which had no importance in the overall conduct of the trial: Jones v Nuske (2003) 227 LSJS 331 at [6] and cited with apparent approval by the Full Court in Salena Estate Wines Pty Ltd v DevitoI [2005] SASC 274 at [49]. R 46A.09(1) sought to overcome this mischief in two ways: firstly, by making it clear that party was obliged to properly plead everything which should be pleaded in its initial pleading without having to be told by the Court what it should plead and, secondly, by giving the trial Judge power under R 46A.10(1) to exclude evidence which is outside the pleadings.
The party seeking an order for further material facts under R 46A.09(1) must satisfy both legs of a two-fold test, namely that the facts pleaded do not disclose facts sufficient to give it fair notice of the case which it will have to meet and in addition that it would be significantly prejudiced in the conduct of its case by not having them. Merely to show that the facts pleaded are not sufficient to give it fair notice of the case which it has to meet will not justify such an order. It must also establish that the absence of such pleaded material facts will cause it significant prejudice in the conduct of its case. Ordinary prejudice is not sufficient. Ordinary prejudice is presumably dealt with under the latter part of R 46A.10(1) by the trial Judge refusing to allow the party in default to present a case which is outside the terms of its pleadings.
I do not consider that R 46A.09(1) requires the Court to tell the party in default what further material facts it needs to plead, except perhaps in a very general fashion. Although it was sometimes the practice under the old rules for the Court to order a party to give particulars as if it was administering interrogatories, the thrust of R 46A is to require a party to plead properly, and, if it does not do so, to take the consequences of that at trial. An order under R 46A.09(1) will give the party the opportunity to plead further material facts, but ultimately it will be for the trial Judge to determine whether the facts pleaded entitle that party to adduce evidence at the trial where it is objected to by other parties. (R 46A.05 referred to there is similar to R 46A.03 as quoted above).
One of the changes made by R 46A to the former pleading rules was to recognise that Masters or Judges on interlocutory applications are often in a poor position to assess what is required for fair notice to another party in the context of a future trial. This is recognised by the sentences in parentheses in R 46A.09(1). The trial Judge is the best person to assess whether parties have discharged their obligations under R 46A to give fair notice to opposing parties of the case which they seek to make out at trial. That Judge has much more material available to him or her about what are the real issues between the parties which need to be determined at the trial. Thus RR 46A.09 and 46A.10 make it clear that a party will not be permitted to present a case at trial if there is unfairness to other parties in not having had proper notice of evidence and contentions to be led against them and in being prejudiced by not having had a reasonable opportunity to prepare their case to answer such contentions and evidence. The primary remedy provided by RR 46A.09 and 46A.10 against a party not pleading with sufficient particularity is the disallowance of its evidence at the trial. While R 46A.09(1) envisages that some orders for particulars will be made at an interlocutory stage of the action it is not, because of the pre-condition of significant prejudice, a complete remedy for all breaches, and it is not intended to fetter the control to be exercised by the trial Judge over the admissibility of evidence. Thus the old practice in which a Master at an interlocutory stage of the action was required to decide as best could then be done on what fairness required has been substantially changed. Under R 46A.09(1) a Master will make an order where on the material then before the Court the criteria in sub R46A.09(1) is satisfied, but there will be many instances where the issue will be left to the trial Judge. The trial Judge can then disallow evidence where a lack of particularity causes at least ordinary prejudice to another party.
RR 46A.03(b) and 46A.09(1) place the obligation on the pleader to ensure that opposing parties are given fair notice of the pleader’s case. It is not for the Court on interlocutory processes to ensure that parties have necessarily complied with their obligations to give fair notice to the other parties. R 46A.09(1) allows the Court to intervene in some cases at an interlocutory stage, but ultimately the intent of RR 46A.09(1) and 46A.10 is that the parties will have to take the consequences at trial if their pleadings have not discharged their obligations to give fair notice to the other parties. Unlike the former practice, a party can no longer necessarily expect to be rescued by the Court from a breach of its obligations to plead properly by the Court determining at an interlocutory stage whether it has given sufficient particulars.
Usually on an application under R 46A.09(1) the Court should not be required to adjudicate upon questions of law about exactly what a party has to prove to establish a cause of action or a ground of defence. These questions are to be resolved by the trial Judge. It is not for a Master on an interlocutory application to order particulars be given based on a view of the law put forward by an opposing party about what will be relevant and admissible evidence at the trial. Provided a view of the law about a cause of action or a ground of defence on which a pleading is based appears reasonably arguable the Court should not order particulars which are outside that view of the law. If a party runs its case on a particular view of the law, and elects not to present a factual case which would enable it to succeed if its opponent’s view of the law is correct, it is entitled to do so, and it cannot be required to give particulars based on its opponent’s view of the law it being correct.
I now deal with the particular complaints made by the third defendant about the proposed third statement of claim. They all relate to contents of schedules to the statement of claim. I will refer to them by their schedule and paragraph numbers. I deal with the objections as they were set out in the third defendant’s outline of argument.
Schedule 1A paras 1-4. These relate to debts for Sales Tax, Group Tax, Payroll Tax and Workers Compensation Levies. The objections broadly are that details are not set out of the individual sales on which the liability for Sales Tax arose, the names of each of the employees and payments made to them upon which the Group Tax and Payroll Tax was payable and the names of each of the employees and the payments made to them upon which the WorkCover Levies were based. The plaintiff’s counsel contended that each of these liabilities could be proved by tendering the assessments made by the taxing authorities. The third defendant’s counsel argued that it would be necessary for the plaintiff also to prove the facts on which the assessments and levies were based. This is a matter for the trial Judge. If the plaintiff’s view of the law is correct, he does not need to give these particulars. If the third defendant’s view of the law is correct, the plaintiff’s counsel contended that it would be merely the pleading of evidence. Whether the plaintiff will be allowed to lead evidence of individual sales and payments to employees at the trial, if he seeks to do so, will be ruled upon by the trial Judge, and in the light of the plaintiff having declined to give the particulars requested.
Schedule 1B paragraphs 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15. These paragraphs relate to creditors for goods and services supplied to the Company. The date on which the debt to each creditor was incurred is important because the plaintiff can only succeed in his claim where he proves that the Company was insolvent and the director knew, or should have known, of its insolvency on that date. In relation to each of these creditors there is a particular given that payment was due to the creditor under an arrangement for payment at a future date, eg paragraph 5 states: “3 Waterbed supplied NPC on the basis that payment was to be made within 30 days from the date of delivery on the invoice”. There was some debate between counsel about the law as to when such debts were incurred by the Company for the purpose of s 588G. The plaintiff’s counsel relied on authorities to the effect that the debt could be incurred for this purpose other than at the precise time at which it became due for payment in law, but the third defendant’s counsel submitted that proof of the actual time for payment in law is required: Powell v Fryer (2001) 37 ACSR 589; ASIC v Plymin (2003) 46 ACSR 126. The third defendant sought particulars of the contracts with each of the creditors which established the terms for payment alleged. The plaintiff’s counsel submitted that he could prove his case by tendering the Company’s business records showing the terms of payment as alleged and he did not need to prove the contracts under which those terms of payment had been set up. I accept that the view of the law put forward by the plaintiff is reasonably arguable. If the plaintiff is held to be required to prove the individual contracts setting up the terms of payment, and does not do so, his claim may fail. If at trial the plaintiff does seek to lead evidence beyond the Company’s business records to prove these contracts, then it will be for the trial Judge to decide whether that evidence should be excluded as being outside the plaintiff’s pleadings, and in light of the plaintiff having been requested to give such particulars and not having done so.
Schedule 1E paragraphs 31, 32, 33, 34, 35. These items relate to creditors who were allegedly sales agents for the Company for their unpaid commissions. In each instance the particulars given allege that there was an oral agency agreement under which the Company was to pay a commission of 5% on sales of the Company’s products. The third defendant sought particulars of the oral agencies. The plaintiff’s counsel conceded that such particulars need to be given. If they are not given, it is difficult to see how a trial Judge would allow evidence of the establishment of such oral agencies. In each instance there is also a sub-particular that the Company’s indebtedness to the agent “was incurred in Period A at the time of the sales of (the Company’s) product ….. were made”. “Period A” is defined elsewhere in the pleading. The plaintiff has given other particulars of sales made by the agents and for similar reasons given in relation to 1A and 1B I do not consider further particulars should be ordered here.
Schedule 1H paragraph 46. This relates to superannuation contributions which the Company was to make to Zurich Financial Services Australia Ltd on behalf of its employees under the Commonwealth Superannuation Guarantee (Administration) Act 1992. The defendant seeks particulars of the names of each of the employees and the sums payable for each. For similar reasons to those given in relation to Schedule 1A I do not consider that such particulars should be ordered.
Schedule1I paragraph 62. This relates to a creditor, NED Promotions Pty Ltd, which conducted a travel booking service, for debts incurred for travel on behalf of the Company. The third defendant contends that the date on which the liability was incurred had not been sufficiently particularised, and says that he should be given particulars of some oral agreement which lies behind the particulars given. I repeat what I said in relation to Schedule 1B above. No further particulars are to be ordered, but the plaintiff is likely to be confined in his evidence to the particulars which he has given.
Schedule 1I paragraph 64. This relates to a debt for the hire of a conference room. Again no particulars are given of any oral agreement which lies behind the particulars of the alleged indebtedness. As the plaintiff’s case does not extend to proving any such oral agreement, no further particulars will be ordered.
Schedule1I paragraph 65. This relates to a creditor, Champion Travel, for a debt for travel to New Zealand. I repeat what I have said for Schedule 1I64. No further particulars will be ordered.
Schedule 1I paragraphs 67 and 69. The particulars given in relation to these creditors include in several places “shortly prior to” in the specified date of the services provided to the Company. In view of the importance of the date of the incurring of the liability in establishing a cause of action it is an embarrassing pleading for the relevant dates only to be specified as “shortly prior to”. The plaintiff’s counsel did not oppose better particularity being required of these dates.
As the only further particulars which will be required were not ultimately opposed by the plaintiff’s counsel it is not strictly necessary to go in to the issue of whether the third defendant has established significant prejudice for the purpose of R 46A.09(1). He asserted that without the particulars which were sought he had insufficient information to be able to admit, or otherwise plead to, the schedules about the creditors of the Company. He says that he has tried unsuccessfully to get information from other sources about a number of the transactions in question. However, it is not the function of particulars to give information about transactions and circumstances which are outside the case which the plaintiff will seek to make out at trial. If the information which the defendant seeks cannot be obtained through discovery, it may be able to be sought by interrogatories. Apart from the concessions mentioned I do not consider that in the circumstances of this matter that the third defendant has shown he is significantly prejudiced by any failure of the plaintiff to give particulars of matters of which he is otherwise obliged to give particulars.
The plaintiff should now prepare an amendment to the proposed third statement of claim to give the further material facts required in Schedules 1E and 1I paragraphs 67 and 69. I will hear any further submissions on Monday 6 February 2006 at 9.15 am on whether leave should be given to file a revised third statement of claim and on the issue of costs.