Phoenix Eagle Company Pty Ltd v Tom McArthur Pty Ltd [No 4] - [2021] WASC 244

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   PHOENIX EAGLE COMPANY PTY LTD -v- TOM McARTHUR PTY LTD [No 4] [2021] WASC 244
CORAM:   ALLANSON J
HEARD:   29 APRIL 2021
DELIVERED          :   23 JULY 2021
FILE NO/S:   CIV 1746 of 2016
BETWEEN:   PHOENIX EAGLE COMPANY PTY LTD
Plaintiff
AND
TOM McARTHUR PTY LTD
First Defendant
TREVOR HOWARD BRICKHILL
Second Defendant
LAURA COSTANTINA BRICKHILL
Third Defendant
LAURA COSTANTINA BRICKHILL ATF THE TLAJ TRUST
Fourth Defendant

Catchwords:

Practice and procedure – Where plaintiff/defendant by counterclaim applied to strike out two paragraphs of counterclaim – Where defendant/plaintiff by counterclaim applied to amend counterclaim to delete the challenged paragraphs – Whether paragraphs should be struck out or counterclaim amended

Costs – Where counterclaim amended after application to strike out – Where balance of counterclaim not challenged – Where plaintiff/defendant by counterclaim applied for 75% of costs attributable to counterclaim on an indemnity basis – Turns on facts

Practice and procedure – Pleading – Whether statement of claim sufficiently particularises claim – Turns on facts

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

On the plaintiff's application

Counterclaim amended to delete paragraphs 97 and 98
The plaintiff to have the costs of its application to strike out and any costs thrown away by reason of the amendment

On the defendants' application

The defendants have leave to bring the application
Paragraphs 87D and 97F of the statement of claim struck out with leave to replead
Defendants' application otherwise dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	Mr L A Warnick
First Defendant	:	Mr G D Cobby
Second Defendant	:	Mr G D Cobby
Third Defendant	:	Mr G D Cobby
Fourth Defendant	:	Mr G D Cobby

Solicitors:

Plaintiff	:	KD Legal
First Defendant	:	Roe Legal Services
Second Defendant	:	Roe Legal Services
Third Defendant	:	Roe Legal Services
Fourth Defendant	:	Roe Legal Services

Cases referred to in decision:

Banque Commerciale SA, en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279
Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302
English v Vantage Holdings Group Pty Ltd [2021] WASCA 47
Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563
One.Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548
Oshlack v Richmond River Company [1998] HCA 11; (1998) 193 CLR 72
Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622
Vantage Holdings Group Pty Ltd v Donnelly [No 4] [2019] WASC 398

ALLANSON J:

Introduction

The plaintiff (Phoenix Eagle Company Pty Ltd) and the defendants brought cross applications.
Phoenix Eagle applied for leave to apply for summary judgment on part of the counterclaim of the first defendant (Tom McArthur Pty Ltd); alternatively, it applied for an extension of time to apply to strike out two paragraphs of the counterclaim.[1]
[1] In these reasons I will refer to the first defendant/plaintiff by counterclaim as TMPL, to distinguish it from the person Tom McArthur.
The four defendants applied for leave to strike out specified paragraphs of the further amended substituted statement of claim for want of particularity.

The plaintiff's application

Before the hearing of the applications, TMPL applied to amend the counterclaim, in terms of an attached minute. In substance the amendment deleted the two paragraphs which Phoenix Eagle sought to strike out, and deleted the corresponding paragraphs in the prayer for relief. TMPL thereby abandoned its claim against Phoenix Eagle for damages for contravention of s 183 of the Corporations Act 2001 (Cth). It was that claim on which Phoenix Eagle sought summary judgment.
TMPL's application to amend the counterclaim and delete the two challenged paragraphs did not wholly resolve the controversy between the parties.
TMPL proposed orders that the plaintiff's application for summary judgment or to strike out be dismissed, with TMPL to pay the costs of the application to be taxed if not agreed.
Phoenix Eagle, however, proposed orders that it have judgment 'on that part of the Counterclaim that constitutes a claim for loss or damage suffered by [TMPL]'; that [97] and [98] of the counterclaim be struck out; and that TMPL pay 75% of all costs incurred by Phoenix Eagle that are attributable to the counterclaim, on an indemnity basis.
It is not in the interests of justice to require a party to maintain a cause of action that it wishes to abandon, simply to argue whether it should be struck out. TMPL should be permitted to amend its counterclaim to delete the challenged paragraphs. TMPL did not seek to avoid the obvious consequence of its late amendment, and agreed that it should pay Phoenix Eagle's costs of the application, as well as costs thrown away.
The substance of the remaining dispute on the counterclaim is Phoenix Eagle's contention that it should be paid part of the costs of the counterclaim to date. Phoenix Eagle submitted that it has incurred substantial costs in responding to the 'money part' of the counterclaim, and had been 'continually harassed with a series of intrusive discovery requests'. Those discovery applications were advanced as the justification for bringing the application when it did, rather than applying immediately for summary judgment or to strike out; and they were the reason for seeking the costs order it did.
Phoenix Eagle's applications were brought late. The defence and counterclaim were filed on 15 August 2017, and had not been amended since then. The substance of the counterclaim is the claim that Phoenix Eagle obtained confidential information of TMPL, that it is in possession of confidential information, and knew it was confidential when it received it.[2]
[2] Counterclaim [90] - [96].
Paragraphs 97 and 98 of the counterclaim alleged, further and in the alternative, that Tom McArthur and Janette McArthur engaged in conduct in contravention of s 183 of the Corporations Act, and that Phoenix Eagle aided and abetted or were party to that conduct. To establish that cause of action, TMPL needed to prove that it suffered damage, or that profit was made by another person.
Phoenix Eagle submitted that the 'money' aspect of the counterclaim is presented in two ways: the claim of breach of confidence (in [90], [92], [94] and [96]) and the claim for accessorial liability for contravention of the Corporations Act ([98], although relying on [88] to [90], [93] to [95], and [97]).
Phoenix Eagle submitted that the counterclaim is speculative. It accepts that there is a triable claim that it has TMPL's confidential information (the TMPL Process Information), and the counterclaim, as pleaded, might be sufficient to found an injunction restraining future use. But it submits:
use and loss/damage/profit [are] not pleaded; there is no evidence whatsoever that Phoenix Eagle ever used the TMPL Process Information, and therefore there is (and can be) no evidence that TMPL suffered loss, or that any person made a profit, by reason of the use of the information by Phoenix Eagle.[3]
[3] Plaintiff's submissions [12].
I accept the submission that the plea fails to disclose a reasonable cause of action, both in pleading contravention of s 183 of the Corporations Act, and in the plea of accessorial liability. It is not necessary to deal with the argument in any detail when TMPL does not seek to maintain those pleas or any relief based on them.
The deletion of the claim under the Corporations Act does not amend the allegations of material fact relied on by TMPL. The amendment does not affect the pleas regarding the position of Tom McArthur and Janette McArthur, and the manner in which Phoenix Eagle obtained TMPL's confidential information from them. TMPL still seeks relief including a permanent injunction restraining Phoenix Eagle from disclosing its confidential information, and an order that it deliver up documents and records relating to that information.

The delay in bring the applications

To explain the delay in bringing these applications, Phoenix Eagle relied on an affidavit of Mark Richardson, sworn 11 February 2021. Mr Richardson stated, in effect, that because of its limited resources, Phoenix Eagle had avoided bringing interlocutory applications. It agreed to provide discovery of some categories of documents, but TMPL pressed other discovery requests. Phoenix Eagle is 'now concerned' that the counterclaim may add significantly to the scope of the trial and preparation.
It is not necessary to decide whether Phoenix Eagle's explanation of the delay is sufficient. The matter is resolved by TMPL's amendment.
The delay is, however, relevant to Phoenix Eagle's application for indemnity costs over the three years in which it allowed the plea to stand unchallenged.

Costs

For the purposes of costs, the counterclaim may be treated as, in effect, a separate action. Three questions arise when considering costs: first, should an order for costs be made where TMPL has discontinued the claim under the Corporations Act and it was not determined on its merits; second, should there be a separate costs order for that cause of action that has been discontinued; third, should costs be awarded on an indemnity basis.
Where a claim is not determined on its merits, but is discontinued, the successful party will not always be entitled to costs. If it appears that both parties have acted reasonably in commencing and defending the claim which has now been abandoned, until the claim was challenged, the proper exercise of the costs discretion may result in no order being made as to costs of the proceedings.[4] However, if after litigating for some time, one party effectively surrenders to the other, then the court may make a costs order against that party.[5]
[4] Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 625.
[5] One.Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548, 552 ‑ 553 (Burchett J); Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302.
In the present matter, I accept the submissions on behalf of Phoenix Eagle that the claim under the Corporations Act could not have been sustained on the case pleaded. TMPL does not argue against it being required to pay the costs of the applications. It did not strongly contest that it should also pay the costs of that part of the counterclaim. Subject to the question of delay, I am satisfied that a costs order should be made in favour of Phoenix Eagle as to the costs of the application and the costs of the claim now abandoned.
The general rule, in the absence of any special order, is that where a plaintiff pleads more than one cause of action and succeeds on only one or more of them, costs shall be allowed to the plaintiff on the causes of action on which the plaintiff succeeds, and to the defendant on the causes on which the defendant succeeds, as if separate actions had been brought.[6]
[6] Rules of the Supreme Court 1971 (WA) O 66 r 2(a).
This is not a case for a special order. Phoenix Eagle, as the defendant to the counterclaim, should recover its costs of the counterclaim under s 183 of the Corporations Act.
It will be necessary to determine the proportion of the work which is attributable to the counterclaim, and the proportion of that work which is attributable to the cause of action which is now abandoned.
Many costs issues are described as involving elements of impression rather than strict proof. I am not satisfied that, even as a matter of impression, it will be possible to allocate costs reasonably between different issues and causes of action until all have been determined. For example, I cannot now say whether documents discovered by Phoenix Eagle might relate solely to the issue now abandoned or, on trial, prove of wider relevance.
Even if it were possible to estimate to what extent discovery was confined, or primarily directed to, the claim under the Corporations Act, I do not have evidence before me to justify an assessment of 75% of the costs of the counterclaim being so attributed, when the balance of the counterclaim (including all pleas of material facts) is not challenged. Determining the proportion of work attributable to the abandoned claim should be left to the taxing officer.
Finally, Phoenix Eagle seeks indemnity costs. An order for indemnity costs may be made to more fully or adequately compensate the successful party where there has been some 'relevant delinquency' by the unsuccessful party – that is, some delinquency relevant to the conduct of the case.[7] Examples of conduct giving rise to an order for indemnity costs include where a party persists in what should on proper consideration be seen to be a hopeless case; or where the inference may be drawn that proceedings constitute an abuse of process because they have been instituted or maintained for a collateral purpose.
[7] Oshlack v Richmond River Company [1998] HCA 11; (1998) 193 CLR 72 [44] (Gaudron & Gummow JJ).
I would not characterise the conduct of TMPL in bringing its counterclaim – including the Corporations Act claim – as unreasonable. The plea related to matters that were primarily within the knowledge of Phoenix Eagle. Had the pleading been challenged earlier, it might have been abandoned then or amended. But it was allowed to stand.
Further, the conduct of Phoenix Eagle contributed to the present situation. It may have wished to conserve resources and avoid interlocutory proceedings. But while the matters raised by the counterclaim were in issue between the parties, they determined the scope of discovery. TMPL did not act unreasonably in seeking discovery relevant to the pleaded issues. It would not be an appropriate exercise of discretion to order costs on an indemnity basis for the period of more than three years when the plaintiff did not challenge the counterclaim.
The proper order for costs is that Phoenix Eagle have the costs of the application, and any costs thrown away by reason of the amendment. Phoenix Eagle may ultimately be successful on the whole of the counterclaim. Even if it is not, it should be entitled to the costs up to the date of this judgment, attributable to the cause of action in the counterclaim on which it has now succeeded. The framing of the ultimate costs orders will necessarily have to take into account the number of causes of action, including the counterclaim. Questions of apportionment should await the final resolution of the action.

The defendants' application

The defendants apply for an order that [68A], [68B], [68E], [77A], [87A], [87D], [87F], [101(c)], [108F], and [108G] of the further amended substituted statement of claim filed 14 September 2020 be struck out.
The principles applied on an application to strike out are well settled, and were recently set out by Smith J in Vantage Holdings Group Pty Ltd v Donnelly [No 4] [2019] WASC 398 [60].[8] It is unnecessary to repeat them.
[8] See also English v Vantage Holdings Group Pty Ltd [2021] WASCA 47 [55].
Pleadings may be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the action because they fail to confine the issues or state the case of the pleading party with reasonable particularity, or they raise a case in terms which are simply too general.
What is needed to satisfy the requirement for a clear statement of the case will depend upon the nature of the allegations made. An allegation of fraud, or any other allegation of dishonesty, must be pleaded distinctly and with particularity.[9]
[9] Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486 [25] ‑ [26]; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563, 573; Banque Commerciale SA, en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279, 285, 295.
The basis of the defendants' strike out application is the contention that Phoenix Eagle has failed to plead its case with sufficient particularity, with the result that the pleaded case may prejudice, embarrass or delay the fair trial of the action.

An outline of the case pleaded in the statement of claim

Phoenix Eagle's case is that, in or about June 1999, Thomas McArthur formulated a process for making compositions derived from fruit or vegetables (the OPAL Process).[10]
[10] Statement of claim [8].
The OPAL Process comprises the following essential steps:
(a)mash the fruit or vegetable to create a pulp;
(b)heat the pulp to between 40°C and 100°C; and
(c)alkalise the heated pulp by adding between 1% ‑ 40% (by weight) of a mild base, such as sodium bicarbonate.[11]
[11] Statement of claim [9].
A pulp and a filtrate (the OPAL Filtrate) derived from the pulp were produced by the OPAL Process.[12]
[12] Statement of claim [11].
A filtrate known as OPAL A Filtrate is produced when pawpaw fruit flesh:
(a)is pulped;
(b)is heated to 55°C;
(c)is alkalised by the addition of 10% by weight of sodium bicarbonate to the heated pulp; and
(d)has undissolved solids removed.[13]
[13] Statement of claim [12].
Phoenix Eagle pleads that it is the owner of intellectual property relating to products based on the inventions of Mr McArthur.[14] After its incorporation, Phoenix Eagle undertook work to obtain patent protection for the OPAL Process, the OPAL Products and related intellectual property; investigate, test and develop the OPAL Process and the OPAL Products; and refine the manufacture of the OPAL Filtrates, focussing particularly on the OPAL A Filtrate, and establish methods of large‑scale production of OPAL Products.[15] Phoenix Eagle has been granted various patents.[16]
[14] Statement of claim [2].
[15] Statement of claim [41].
[16] Statement of claim [42].
In about June 2006, Phoenix Eagle caused a pilot manufacturing run to be carried out at the Queensland Institute of Medical Research by the company Q‑Gen Pty Ltd.[17] One of the Variant OPAL A Filtrates manufactured by Q‑Gen was manufactured by a process which excluded the heating step referred to in [9(b)] of the statement of claim (the Unheated Variant Process). The filtrate manufactured by the Unheated Variant Process was designated OPAL ANH Filtrate by Phoenix Eagle, but was designated OPAL A NHB by Q‑Gen.[18]
[17] Statement of claim [55].
[18] Statement of claim [55A].
From around early 2006, Phoenix Eagle began to investigate the effect of changes in the steps of the OPAL Process (OPAL Variant Studies). The information obtained from the OPAL Variant Studies or from experiments carried out by Mr McArthur is the confidential information of Phoenix Eagle.
On 26 June 2008, Phoenix Eagle executed a licence agreement with Health Focus Products Australia (HFPA), giving HFPA exclusive rights to market and sell in Australia products based on Phoenix Eagle's intellectual property.[19] HFPA began manufacturing and marketing cosmetic products containing OPAL A in 2009, and in about August 2010 formulated plans to launch a range of products containing OPAL A Filtrate.[20]
[19] Statement of claim [69] ‑ [70].
[20] Statement of claim [71] ‑ [72].
In or about August 2010, HFPA met with Tim Noonan, then a reporter for the television current affairs program, Today Tonight, and provided him with information about OPAL A, the background to its invention by Mr McArthur, and the products being or to be produced by HFPA using the OPAL Process.[21] Mr Noonan agreed to produce a story for Today Tonight on OPAL A and the HFPA products, and Mr McArthur.[22]
[21] Statement of claim [74].
[22] Statement of claim [76].
At the request of HFPA, Mr McArthur agreed to participate in the filming of the story.[23]
[23] Statement of claim [77].
On or about 10 September 2010 HFPA offered to engage Mr McArthur as a consultant to assist with the development of HFPA products containing OPAL A Filtrate, and Mr McArthur accepted the offer and agreed to fly to Brisbane to commence the consultancy assignment.[24]
[24] Statement of claim [77A].

Between 13 and 20 September 2010, Mr Noonan and a Today Tonight crew interviewed and filmed Mr McArthur and various persons who had been treated with OPAL A or OPAL ANH products.[25] For the purposes of the story, Mr McArthur provided Mr Noonan with information belonging to Phoenix Eagle.[26]
[25] Statement of claim [82].
[26] Statement of claim [83].
After filming had been completed for the story, and before 24 September 2010, Mr Brickhill advised Mr McArthur that the television story would create a commercial opportunity and convinced him to take advantage of that opportunity by starting his own company separate from Phoenix Eagle.[27]
[27] Statement of claim [87].
Between 20 and 24 September 2010, after consultation with Mr Brickhill, Mr McArthur informed HFPA that he was no longer prepared to accept the engagement as a consultant.[28]
[28] Statement of claim [87A].
On 24 September 2010, Mr Brickhill told Mr Noonan that Mr McArthur was using a pawpaw extract which was the invention of his wife, Lynda McArthur, and persons wishing to contact Mr McArthur after the broadcast should be directed to contact him at his own email address, as Mr McArthur was in dispute with Phoenix Eagle and was not employed or remunerated by HFPA.[29]
[29] Statement of claim [87B].
Phoenix Eagle pleads that the statement that the pawpaw extract was an invention of Mrs McArthur was false, in that:
(a)the pawpaw extract used by McArthur in the footage filmed by Noonan for the First Today Tonight Story was either OPAL A or OPAL ANH; and
(b)Mrs McArthur had not invented any process for manufacturing pawpaw compositions.[30]
[30] Statement of claim [87C].
Phoenix Eagle further pleads that, at the time of making the statement, Mr Brickhill knew that it was false in that:
(1)he knew that the First Today Tonight Story had been arranged by HFPA to assist in the promotion of HFPA products containing OPAL A; and
(2)he knew that Mrs McArthur had not invented any process for the manufacture of pawpaw compositions, and the story was a fiction invented by Mr McArthur and Mr Brickhill for the purpose of evading Mr McArthur’s contractual and fiduciary obligations to Phoenix Eagle.[31]
[31] Statement of claim [87D].
Phoenix Eagle pleads the facts in [68], and [68A] ‑ [68D] as the basis for the allegation of knowledge.
Phoenix Eagle pleads that the statement that persons wishing to contact Mr McArthur after the broadcast should be directed to contact him at his own email address, as Mr McArthur was in dispute with Phoenix Eagle and was not employed or remunerated by HFPA, was misleading.[32]
[32] Statement of claim [87E].
Phoenix Eagle further pleads that Mr Brickhill knew that the statement was misleading. In particulars, it pleads that from his involvement with Phoenix Eagle as a solicitor and investor, Mr Brickhill knew that Mr McArthur had assigned the intellectual property rights in OPAL Products to Phoenix Eagle, and Phoenix Eagle had granted a licence to HFPA to exercise those rights in Australia; and from his telephone discussions with Mr McArthur between 20 and 24 September 2010, he knew that Mr McArthur had been engaged as a consultant by HFPA and had cancelled that arrangement after consulting Mr Brickhill.[33]
[33] Statement of claim [87E], [87F].
On 4 and 5 October 2010, two television stories were broadcast on the program Today Tonight featuring the work of Mr McArthur and OPAL A.
On 6 October 2010, Mr Brickhill and Mr McArthur caused TMPL to be registered. Their purpose in incorporating and operating TMPL was to exploit the opportunity created by the television stories that had been broadcast on 4 and 5 October 2010.
Phoenix Eagle alleges that Mr Brickhill and Mr McArthur had the purpose of manufacturing and selling products containing a 'Variant OPAL A Filtrate' pawpaw composition that:
(a)was capable of being plausibly but falsely represented as possessing the same degree of scientific and anecdotal validity and producing the same therapeutic effects as the OPAL A Products Filtrate referred to in those stories; and
(b)would not infringe the Australian patent held by Phoenix Eagle; and
(c)would be manufactured by a process that:
i.was in substance the Unheated Variant Process trialled by Phoenix Eagle in the pilot manufacturing (bioengineering) run carried out by Q‑Gen (as pleaded in paragraph 55) and the experiments carried out by the University of the Sunshine Coast (as pleaded in paragraph 61A);
ii.was further developed by McArthur in 2008 while employed by Phoenix Eagle; and
iii.was to be described as the invention of Mrs McArthur, which description was false to the knowledge of both McArthur and Trevor Brickhill …[34]
[34] Statement of claim [101].
From around 31 October 2010, TMPL began marketing TMPL products, although by December 2010 no products had been manufactured.[35] From 1 November 2010, it published statement denying that the HFPA products were McArthur products, and asserting that TMPL products did not contain OPAL A.[36]
[35] Statement of claim [104].
[36] Statement of claim [105].
From 12 October 2010, Mr McArthur and Mr Brickhill, on behalf of TMPL, sought advice from a patent lawyer on whether certain compositions would breach one of the claims in Phoenix Eagle's Australian patent. On receiving that advice, Mr Brickhill requested Peter Proud, a retired pharmacist, to assist.[37]
[37] Statement of claim [108A] - [108E].
Phoenix Eagle pleads that, between 3 November 2010 and 10 November 2010, Mr Proud assisted Mr McArthur in modifying the Unheated Variant Process. Mr McArthur continued this work after Mr Proud's departure. In about January 2011, Mr McArthur finalised his work of experimenting with the Unheated Variant Process. The product of this work was a new process (the TMPL Process).[38]
[38] Statement of claim [108F] ‑ [108G].
Phoenix Eagle claims the TMPL Process and the filtrate manufactured by that process were:
(a)modifications or variations of the OPAL Process and OPAL A Filtrate:
(b)derived by inventive activity on the part of McArthur; and
(c)within the scope of the assignment of intellectual property by McArthur to Phoenix Eagle …[39]
[39] Statement of claim [108I].
Phoenix Eagle pleads further matters from 2011. It is not necessary to detail those claims for the purposes of this application, which related to specified paragraphs of the statement of claim. Relevantly, Phoenix Eagle pleads that, by that conduct, TMPL, Mr McArthur and Mr Brickhill
continued to act in a manner which conflicted with the interests of Phoenix Eagle and its shareholders, in that their conduct furthered the design pleaded in paragraph 101 of diverting for their own benefit, by means of representations which were misleading or false as pleaded above, an opportunity which belonged to Phoenix Eagle.[40]
Phoenix Eagle claims relief against the various defendants for breach of fiduciary duty, breach of s 183 of the Corporations Act, breach of confidence, and breach of contract.

The reply

[40] Statement of claim [127].

Phoenix Eagle also relied on a matter pleaded in the reply. In [11], it alleged that the process for producing pawpaw extract which the defendants proposed to produce and did produce was arrived at through commencing with the Unheated Variant Process tested by Phoenix Eagle in the presence of Mr and Mrs McArthur in the studies pleaded in [56] to [61] of the substituted statement of claim and further modifying the Unheated Variant Process through the work of Mr McArthur and Mr Proud.[41]
[41] Reply [11].
Phoenix Eagle also specifically pleaded that no process of producing pawpaw extract was produced by Mrs McArthur, and the defendants falsely represented that the Unheated Variant Process was invented by her.[42]
[42] Reply [11], see also [12] - [14].
Relevantly to the complaints now made by the defendants, Phoenix Eagle specifically pleads that Mr McArthur had been experimenting with the Unheated Variant Process 'in an attempt to produce a pawpaw composition that could be differentiated from OPAL A, because of the absence of heating in the process'.[43]

Paragraphs 68A, 68E, 108F and 108G

[43] Reply [17].

The defendants say that they do not know the case they have to meet because the plea against them does not give particulars of how the TMPL Process was created. Counsel submitted that, following the amendment to [9(b)] of the statement of claim, it is now uncertain whether the Unheated Variant Process excludes the heating process altogether, or is a process which can include heating otherwise than between 40℃ and 100℃.
One of the specific complaints is that [9(b)] of the statement of claim has been amended since the reply, so that there are now different definitions of the Unheated Variant Process in the two pleadings. The general rule is that a pleading may not make an allegation of fact inconsistent with a previous pleading.[44] The reply not having been amended, following the amendment of the statement of claim, the references to the Unheated Variant Process should be read together and consistently. If there is any ambiguity or uncertainty of meaning in the statement of claim when read alone, reading it with the reply resolves that ambiguity: the Unheated Variant Process must be read as referring to a process which does not have heating in the process. If that is not Phoenix Eagle's intention, the amendment to the statement of claim offends O 20, and it needs to be amended. But, on what is now pleaded, I do not believe there is either inconsistency or ambiguity.
[44] O 20 r 11(1).
Counsel for the defendants also submitted that the defendants should not be required to read through the statement of claim as a whole to identify which paragraphs would be relied on to support allegations like that in [68A]. There are occasions where the failure to include particulars within a specific paragraph may be regarded as embarrassing – I later make that finding with regard to [87D] and [87F]. But generally, it is surely not too demanding to ask the defendants to read the whole of the statement of claim.
Specifically, the paragraphs about which the defendants complain must be read with [55] to [58]. The allegations in [68A] and [68E] cannot properly be addressed outside the context of those earlier pleas. Read with the earlier statements of material facts, the pleas are sufficient.
The facts pleaded in [68A] and [69E] are also material, as submitted by the plaintiff, to the 'coincidence in time' between those facts and the facts pleaded in [64] and [67], regarding Mr McArthur's dispute with Phoenix Eagle and his resignation as a director.
I also accept the submission of Phoenix Eagle – in response to the challenge to [108F] and [108G] – that it does not have to set out as material facts what experimenting was done with the Unheated Variant Process to produce the TMPL Process.
Phoenix Eagle's plea is that the TMPL Process is not a new process, but a modification or variation of the OPAL Process and the OPAL A Filtrate.[45] The essential steps of the OPAL Process are described in [9] of the statement of claim; and the OPAL A Filtrate in [12]. The Unheated Variant Process is described in [55A], as a process which excluded the heating step referred to in [9(b)].
[45] Statement of claim [108I].
Phoenix Eagle pleads that the TMPL Process was the product of experimenting with the Unheated Variant Process.[46] It alleges that the TMPL Process, and the filtrate manufactured by it, are
(a)modifications or variations of the OPAL Process and OPAL A Filtrate:
(b)derived by inventive activity on the part of McArthur; and
(c)within the scope of the assignment of intellectual property by McArthur to Phoenix Eagle.[47]
[46] Statement of claim [108F] ‑ [108G].
[47] Statement of claim [108I].
The pleading states Phoenix Eagle's claim sufficiently clearly and with sufficient particularity for the defendants to know the case they are to meet.

Paragraph 68B

Phoenix Eagle alleges that, by no later than 11 June 2008, Mr McArthur began experimenting with manufacture using the Unheated Variant Process. Paragraph 68B alleges that, on or about 10 July 2008, Mr McArthur sought advice from Mr Brickhill about whether Mrs McArthur was subject to contractual obligations to Phoenix Eagle.
As Phoenix Eagle submits, the facts alleged in [68B] are part of those relied on to support an inference of knowledge on the part of Mr Brickhill, as pleaded in [87D].
Order 20 r 8(2) requires that the purport of any conversation referred to in a pleading, if material, be briefly stated. The plaintiff is unable to plead the terms of what Mr Brickhill said to Mr McArthur. But that fact, that Mr McArthur sought the advice alleged, is itself material to the allegation that Mr Brickhill knew that Mrs McArthur had not invented the process used by TMPL, and the purport of the conversation is sufficiently stated.

Paragraphs 77A and 87A

The facts here alleged, that HFPA offered Mr McArthur a consultancy and that, after consultation with Mr Brickhill, Mr McArthur said he was no longer prepared to accept the engagement, again have to be read in the context of [77A] to [87B]. It is material to the plaintiff's case that the engagement was offered and accepted, and after consultation with Mr Brickhill no longer accepted, and the timing of those events in relation to the production of the Today Tonight story.
Phoenix Eagle has sufficiently pleaded the purport of the conversations and those matters that are material to its case.

Paragraph 87D and 87F

These paragraphs plead, and give particulars of, the allegations that Mr Brickhill knew that his statement to Mr Noonan pleaded in [87B(a)] was false, and that pleaded in [87B(b)] was misleading.
In relation to these paragraphs, I accept the defendants' submission that the pleading of knowledge lacks necessary clarity.
Paragraph 87D alleges, that Mr Brickhill knew that his statement that Mr McArthur was using a pawpaw extract which was the invention of Mrs McArthur was false. In [87D(a)], it is alleged that Mr Brickhill knew that the Today Tonight story had been arranged by HFPA to assist in the promotion of HFPA products containing OPAL A (an invention of Mr McArthur). Phoenix Eagle does not set out the material facts from which it says Mr Brickhill had that knowledge.
In [87F(a)], Phoenix Eagle pleads that Mr Brickhill knew the facts pleaded in [87E(a)] 'from his involvement with Phoenix Eagle as solicitor and investor'.
Phoenix Eagle submitted, in effect, that [87F(a)] is intended to pick up the facts pleaded in other paragraphs of the statement of claim – including [38] and [66]. That is, the reference to Mr Brickhill as a 'solicitor and investor' was intended to pick up matters specifically pleaded as coming to his attention in those capacities. Extensive cross referencing to other paragraphs within a pleading can be frustrating and difficult to follow. But, in relation to this allegation of knowledge, Phoenix Eagle needs to either set out the particulars in full or cross reference to the specific allegations of fact on which it relies. To simply plead, as [87F(a)] does, that Mr Brickhill knew the specific facts pleaded 'from his involvement with Phoenix Eagle as solicitor and investor' is insufficient.
There is a similar, although less acute, problem with [87F(b)]. Phoenix Eagle pleads that Mr Brickhill knew the facts pleaded in [87E(b)] from his telephone discussions with Mr McArthur between 20 and 24 September 2010.
If, for example, the intention is to refer to the telephone discussions earlier pleaded, where the purport of those discussions is set out, that should be clearly stated.
Both [87D] and [87F] will be struck out. In each case, there will be leave to replead.

Paragraph 101(c)

The allegations in this paragraph are a summation of matters earlier pleaded. Paragraph 101(c) states those matters as relevant to the allegation of the purpose of Mr Brickhill and Mr McArthur in incorporating and operating TMPL.
The question on this application is how the case is pleaded. It is, in my opinion, sufficiently clear and particularised for the defendants to understand and respond to it.

Conclusion

The plaintiff does not object to the defendants having leave, or an extension of time, to bring the application. Having regard to the history of this matter, and in particular the conferral between the parties regard the provision of particulars, I will grant leave if it be required.
The defendants' application to strike out [87D] and [87F] will be allowed. The defendants' application is otherwise dismissed.

I certify that the preceding paragraphs comprise the reasons for decision of the Supreme Court of Western Australia.
MG
Associate to the Honourable Justice Allanson
23 JULY 2021