State of Western Australia v Bond Corporation Holdings Ltd

Re: STATE OF WESTERN AUSTRALIA
And: BOND CORPORATION HOLDINGS LTD; WARDLEY AUSTRALIA LTD; LAWRENCE ROBERT
CONNELL; WARDLEY AUSTRALIA SECURITIES LTD; ROTHWELLS LTD (In Liquidation) and
JAMES PHILLIP YONGE
Nos. WA G115, 116 and 118 of 1990
FED No. 182
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Practice and Procedure - pleading - reamended statement of claim - pleading of misleading or deceptive conduct - fraud - adequacy.

Trade Practices Act 1974

Wheeler Grace and Pierruci Pty Ltd v Wright (1989) ATPR 40-940

HEARING

PERTH

#DATE 6:4:1992

Counsel for the Applicant: Mr E.M. Heenan QC and J. Young

Solicitors for the Applicant: State Crown Solicitor

Counsel for the Second and
Fourth Respondents: Mr C.J.L. Pullin QC

Solicitors for the Second and
Fourth Respondents: Northmore Hale Davy and Leake

Counsel for the Third Respondent: Mr M.J. Stevenson

Solicitors for the Third Respondent: Jackson McDonald

Counsel for the Fifth Respondent: Ms E. Frayne

Solicitors for the Fifth Respondent: Blake Dawson Waldron

Counsel for the Sixth Respondent: Mr G. Dean

Solicitors for the Sixth Respondent: Bennett and Co.

ORDER

THE COURT ORDERS THAT:

A. On the second and fourth respondents' motion filed 27 March

1992:

1. The motion is dismissed.

2. The second and fourth respondents are to pay the applicant's costs of the motion.

B. On the third respondent's motion filed 10 March 1992:

1. Paragraph 50, the reference to paras. 15 and 16 in para.55, sub-paras.(d), (g), (i), (j), (l), (n), (o), (p), (q), (r) and

(s) of para. 60 and the last two sentences of para 60 are struck out.

2. The costs of the third respondent's motion be in the cause provided that the parties may apply within 7 days by written submission to vary the order.

Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The interlocutory history of this matter to 10 February 1992 was set out in the judgment of that date in which orders were made striking out certain parts of a consolidated and further amended statement of claim which was filed on 1 November 1991. Leave was given to the applicant to further amend the pleading in accordance with those reasons. I commented at that time that although the statement of claim was complex and its various parts interdependent, the deficiencies were not enough to undermine its essential integrity. They could, for the most part, be cured by amendment. I was satisfied that subject to appropriate amendment the issues raised by the applicant against the various respondents were adequately defined.

On 25 February 1992 an amended statement of claim was filed pursuant to the leave given on 10 February. Motions were filed by the third respondent on 4 March and the second and fourth respondents on 27 March to strike out the statement of claim. Pursuant to directions given on 23 March, the parties have filed written submissions in support of their motions. Written submissions have also been filed by the sixth respondent in support of the second and fourth respondents' motion. I indicated to the parties that I would not hear oral argument on these motions but would decide them on the papers. While accepting that the case is one of some legal complexity and acknowledging that the High Court has reserved its decision on the question of a limitation point taken in respect of some of the applicant's claims, it is desirable that the protracted skirmishing over the statement of claim in its various forms should now be concluded. I propose to deal shortly with various of the points taken in the latest round of strike out motions. These reasons do not expressly canvass every point made in the written submissions filed.
The Second and Fourth Respondents' Motion
The second and fourth respondents move to strike out the amended statement of claim in its entirety on the grounds that it will "embarrass or delay the fair trial of the action". They do not seek orders in respect of individual paragraphs but submit that the statement of claim as a whole is "prolix, unnecessarily convoluted and therefore is oppressive". The submissions that follow are set up in the form of a series of questions as to the utility, intelligibility or purpose of various paragraphs in the amended pleading. It is said in the written submissions that:

"If the interlocutory Judge finds no difficulty in

finding the answers to the questions, then Wardley

would accept that the Statement of Claim should not be struck out. If however, the interlocutory Judge finds it unreasonably difficult to find answers, or if the

interlocutory Judge cannot find answers to some of the questions, then it would fairly indicate that the

Statement of Claim should be struck out."

The test suggested is not appropriate to determine whether the whole of the pleading should be struck out.

A number of the questions that follow in the written submissions relate to paragraphs unaffected by the amendments made pursuant to the leave of 10 February 1992. Paragraphs 16 and 43 which are unaltered by the amendments and which were unsuccessfully attacked by the second and fourth respondents on the last strike out motion, are revisited. It is appreciated of course, that the motion brought by the second and fourth respondents seeks to strike out the statement of claim as a whole and that it should be regarded as a whole. But the second and fourth respondents sought to have it struck out as a whole on the previous motion. Having regard to my findings on 10 February and the conclusions reached on the pleadings taken as a whole, the question to be addressed on the second and fourth respondents' motion is whether the amendments have altered the position to the extent that the entire statement of claim must fall.
The Third Respondent's Motion
The third respondent supports the second and fourth respondents' motion to strike out the statement of claim as a whole, but in its own motion seeks to strike out individual elements of the amended paragraphs of the pleading. The convenient course in my view is to deal severally with the criticisms of the amended paragraphs raised by each of these respondents and to also consider their impact on the statement of claim as a whole.
The Amendments to the Statement of Claim
Paragraph 14 and Connections in Paragraphs 15, 16, 18, 19, 20, 22, 26, 28, 29, 30, 31, 33, 55 and 76(b)
As it stood prior to the orders made on 10 February, para.14 pleaded that various persons were present at the meeting held on Saturday, 24 October 1987. They were said to be Connell, Bond, Beckwith, Yonge and others named and identified as officers of Rothwells, Bond Corporation, Wardley and Wardley Securities. Reference to all other persons was struck out on the basis that the statement of claim did not indicate how their conduct constituted material facts supporting any cause of action against the named respondents.
Paragraph 14 is now repleaded in the same form as prior to the strike out order but with a further plea characterising various of the persons named in addition to Connell, Bond, Beckwith and Yonge as either a director or senior executive or officer of Rothwells, Bond Corporation, Wardley or Wardley Securities and, in the case of Vrisakis, as a solicitor or adviser. The paragraph ends as follows:

"Each acted in that capacity and within his respective authority as a director and senior executive or

solicitor and adviser of those companies in relation

to all that occurred at the Saturday Meeting."

The amendment then reinstated parts of paras.15, 18, 19, 20 and 22 referring to these various persons and which had been struck out by the order made on 10 February.
The third respondent contends that the only persons in attendance at the Saturday meeting who are relevant to the cause of action are Bond, Connell and Yonge. The catalogue of additional names is said to be simply embarrassing surplusage. The second and fourth respondents challenge the relevance of the plea of the attendance of Vrisakis as "solicitor and adviser for Wardley and Wardley Securities". As a solicitor and adviser to Wardley and Wardley Securities, no basis is pleaded upon which his conduct could be attributed to them. I accept that the reference to Vrisakis in the pleading does appear to raise a false issue and ought not to stand. Otherwise I consider the repleaded para.14 can stand along with the consequential repleading of paras 15, 18, 19, 20 and 22.
An objection to para 76(b) is linked by the third respondent to the repleaded para 14. The objection, however, seems to confuse involvement by a natural person in a contravention of the Trade Practices Act with conduct of a natural person attributable to a corporation as a primary contravention. There is no necessary linkage between the two although it is often the case that an officer of a company whose conduct is treated as a contravention on the part of the company will also be treated as involved in the contravention - Wheeler Grace and Pierruci Pty Ltd v Wright (1989) ATPR 40-940 at 50,255- 50,256.
Objection is also taken by the third respondent to para.28 which pleads the persons present at the meeting held on Sunday, 25 October 1987. The meeting is said to have been attended "inter alios" by various Ministers and others who are named. The words "inter alios" are attacked as embarrassing, but in my opinion they simply indicate that those named as attending the meeting were not the only people present.
A number of objections are taken by the third respondent on the assumption that paras 15 and 16 of the statement of claim plead substantive misrepresentations. My view, previously expressed in the reasons for judgment published on 10 February, was that they did not plead substantive misrepresentations but provided a context for the representations that followed by indicating that it is the State's case that the representations were made in support of a proposal for the financial rescue of Rothwells which included a number of elements among which was the provision by the State of an indemnity to support the credit line facility which was proposed the National Australia Bank should provide to Rothwells. There is nothing in the amended statement of claim to alter my conclusion. Further, the applicant in its submission confirms that the matters in paras.15 and 16 are not relied upon as substantive representations.
The alternative objection is taken that the reference in paras 15 and 16 to the persons mentioned in para.14 is irrelevant if these paragraphs are not being relied upon to plead substantive misrepresentations. In my opinion, even if it could be said that these words are unnecessary, they do not disclose a strike out point. This objection is not accepted.
The objection to references to paras 15 and 16 in paras.19, 26, 29, 30, implicitly in para.31, and para.16 alone in para.33, cannot be sustained having regard to what a reasonable reading of the pleading discloses and what the applicant confirms is the contextual nature of the statements pleaded in those paragraphs. The communication of that context as a background to various representations is, in the circumstances, a fair pleading of the case. And I do not accept that the incorporation of those paragraphs either expressly or by reference in other paragraphs of the pleading is thereby objectionable.
There is however at para.55 a plea that Yonge was knowingly concerned in the conduct of Bond and Rothwells, being that referred to in paras 15, 16, 18, 21, 30, 34 and 35. The reference to paras 15 and 16 is embarrassing as they do not allege conduct which is said to involve any misrepresentation or which is said to have been misleading or deceptive. The express reference to these paragraphs cannot stand.
Paragraph 46
Objection is taken by the third respondent to para.46 and in particular sub-paras.(a), (b), (c), (d) and (h). This paragraph was the subject of objections which were rejected in the judgment given on 10 February. It has not been amended and I will not entertain further objection to it.
Paragraph 50
This paragraph as it previously stood alleged that the statements and representations of each of the respondents at the Saturday and Sunday meetings referred to in paras 18, 20, 22, 30, 32, 35 and 45 each and alternatively in combination, constituted the implied representations that the respondents and each of them had disclosed all facts and circumstances material to a consideration by the State of the request to grant the NAB indemnity. The paragraph was struck out upon the basis that it required the respondents to face a case of an implied representation of full disclosure on a constellation of individual representations which cast the net of potential argument so widely that they could have no real way of knowing the basis upon which the implication would be made.
The new paragraph 50 raises a new plea that the statements and representations of each of the respondents at the Saturday and Sunday meetings were made in order to induce the State to provide a government guarantee or indemnity as alleged in para 16. There was no practicable opportunity, it was said, for the State to conduct any other or further investigation into the affairs of Rothwells and in the premises the respondents and each of them were under a duty to disclose to the State any unusual facts or circumstances affecting the position of Rothwells and any fact or circumstances which the State as a potential guarantor or indemnifier would expect not to exist. The paragraph then went on to say that the combined effect of various statements and representations referred to in other paragraphs or any combination of some of them constituted implied representations to the representatives of the State which are set out. So far as that limb of that paragraph is concerned, it leaves the respondents to guess the bases of the implication by reference to various combinations of statements. The pleading is as objectionable as it was before in that respect. It is not apparent that the purpose of inducement and the duty of disclosure referred to in the paragraph have any role to play in supporting the implication. If they do, they do not cure the general difficulty to which I have referred. If they do not, then they have no place in that paragraph. In my opinion, the whole of para.50 should be struck out as embarrassing along with consequential reference to it in other paragraphs of the amended statement of claim.
Paragraph 51
As previously pleaded, this paragraph alleged that each of the statements or representations made by or on behalf of or endorsed by the various corporate respondents and referred to in nominated paragraphs of the pleading constituted misleading or deceptive conduct contrary to s.52 of the Trade Practices Act 1974. It was struck out on the basis that it did not give to the respondents a clear indication of the way in which each of the various representations to which it referred could be said to be misleading or deceptive. The new para.51 repeats the former paragraph but adds a series of particulars setting out for each of the pleaded statements or representations the way in which it is said to be false. Not included in the list of particulars of misleading or deceptive conduct is any reference to paras.35(c) and (d). However, I accept the contention of the applicant that the nature of the conduct pleaded in those paragraphs is such that its characterisation as misleading or deceptive is dependent upon the characterisation of statements of Beckwith, Yonge and Connell respectively pleaded in those sub-paragraphs. The further complaint is that para.51(w) raises an implication upon an implication. That appears to be the case but it does not, in my opinion, constitute a strike out point or one which vitiates the entire statement of claim.
Sub-Paragraphs 54(b) and (c)
The third respondent seeks to amend its motion to strike out sub-paras 54(b) and (c). These allege the third respondent's knowing concern in the conduct of Wardley and Wardley Securities by reason of his presence at and participation in the Saturday and Sunday meetings, his failure to disclose various matters and his pleaded fraud. In my opinion the question whether this plea can sustain the conclusion it offers can be argued in light of the evidence. The issue was dealt with previously at p 51 of my judgment of 10 February 1992. Leave to amend the motion is refused.
Paragraph 60
Paragraph 60 previously set out various statements or representations said to have been made by or on behalf of the third respondent or endorsed by him which were allegedly "false and fraudulent". Further, it was alleged that at the time each of the statements or representations was made or endorsed, the third respondent knew it to be false and untrue or made or endorsed each such statement or representation recklessly not caring if it were true or false. The paragraph concluded with an allegation that his failure to disclose each of the matters referred to in para.46 was fraudulent in the light of his duty to disclose those matters. Further, or alternatively, it was said, his failure to make disclosure as alleged in para.66 was fraudulent in the light of the matters therein pleaded. In giving judgment on 10 February 1992, I noted that there were statements among those relied upon in para.60 that were statements of opinion or prediction not falsified by reference to the third respondent's state of mind or his knowledge of the non-existence of any basis for the opinion or prediction made or endorsed by him. Falsification by reference to a contrary view was insufficient for that purpose. On that basis I held that the pleas made in sub-paras. 60(d), (g), (i), (j) and (l) could not stand. In addition, the closing sentences of para.60 alleging the commission of a fraudulent non-disclosure were struck out in the absence of the attribution of some positive and fraudulent mis-statement arising from those non-disclosures.
Paragraphs 60(d), (g), (i), (j) and (l) have been repleaded in the amended statement of claim in identical form. The third respondent says the re-pleading is an abuse of process. In reply, the applicant says that the various representations were representations of fact falsified by the matters pleaded in para.65. Paragraph 65 was present in the statement of claim as previously pleaded. It expressed the negative of the various propositions set out in the paragraphs referred to. This element of the applicant's submissions recanvasses my previous decision. However, the repleaded representations are said also to have been falsified by the matters alleged in the newly introduced sub-paras.(o), (p), (q), (r) and (s). Those sub-paragraphs, referring severally to sub-paragraphs (d), (g), (i), (j) and (l), plead that to the extent "if any" that the statements and representations made in them were expressions of opinion, they were false and fraudulent in that the third respondent did not hold that opinion and had no grounds to support it. The plea leaves open to debate the question whether the representations said to be falsified are opinions or predictions. To that extent it leaves open for debate the finding made on 10 February at p 42 of the reasons for judgment. It does not properly plead a case of fraud against the third respondent. Sub-paragraphs 60(d), (g), (i), (j), (l), (o), (p), (q), (r) and (s) of para 60 will therefore be struck out.
Sub-paragraph 60(n) refers to representations allegedly made by or on behalf of the third respondent or endorsed by him to the effect that no unusual or unexpected facts or circumstances affecting the position of Rothwells existed or were known to the respondents or any of them and that they had disclosed all unusual facts and circumstances affecting the position of Rothwells and all facts or circumstances known to any of them that the State as a potential guarantor or indemnifier would expect not to exist or to have occurred. The paragraph concludes with the words "(as pleaded in paragraphs 46, 47 and 50)". But para 50, as I have observed, is to be struck out and paras 46 and 47 plead no representation. In the circumstances sub-para 60(n) cannot stand.

The second last sentence of para.60 alleges that implied representations by the third respondent referred to in paras 48 and 50 were false and fraudulent. Having regard to my conclusion on para 50 this sentence could only rely upon para 48. The implied representations pleaded in that paragraph are to the effect that no matter or circumstance existed of the kind pleaded in para.47 which broadly speaking related to the financial soundness of Rothwells. These implied representations are said to have been false and fraudulent on the part of the third respondent. That bald assertion is not elaborated. Nor is that in the last sentence of para.60 relating to an implied representation that no fee would be payable to Bond Corporation. In my opinion, this also is inadequate as a plea of fraud as it does not set out the basis upon which the representation pleaded was made fraudulently. The last sentence of para.60 will therefore be struck out.
CONCLUSION
Having regard to the views I have expressed concerning the amended statement of claim, there will be orders striking out certain parts of the pleading, but taken as a whole it may nevertheless stand. The second and fourth respondents' motion seeking to strike out the statement of claim in its entirety will be dismissed.
The second and fourth respondents also submitted that the present statement of claim should be struck out and separate statements of claim lodged against each respondent. That submission was put previously. I did not refer to it expressly in my reasons for judgment on 10 February, but it follows from my general conclusions on that occasion that I did not accept it then and I do not accept it now. The pleading is complex and falls short of perfection. It nevertheless, in my opinion, adequately defines the case made by the applicant against each of the respondents. To require it to be repleaded in the form of separate statements of claim against each respondent would involve unnecessary duplication and delay. I should add that I do not propose to give leave to amend the statement of claim in the light of these reasons. That will not preclude an application for leave to make specified amendments at some future date. But what may be described as the basic refining process is now into its second year. It has gone on for long enough and must stop here.
I do not accept the submission put by the third respondent that particulars be delivered prior to defence. I will therefore be making directions requiring the filing of defences, cross-claims, if any, and replies and providing for requests for particulars and replies to those requests thereafter. Discovery is likely to be a matter of complexity and contention and I will bring the action back for further directions on that point when pleadings are closed.

[1992] FCA 182

06 APRIL 1992