Westgate Wool Co Pty Ltd (in liq) v Hammond & Ors
[2009] VSC 299
•24 July 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No 7216 of 2007
| WESTGATE WOOL CO PTY LTD (IN LIQ) (ACN 007 387 902) | Plaintiff |
| v | |
| JACK DAVID HAMMOND, NOEL RUSSELL AND ANDREW WOOLFE | Defendants |
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JUDGE: | Robson J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 May 2009 | |
DATE OF JUDGMENT: | 24 July 2009 | |
CASE MAY BE CITED AS: | Westgate Wool Co Pty Ltd (in liq) v Hammond | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 299 | |
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PRACTICE AND PROCEDURE – Appeal from associate justice – Whether pleading discloses a good cause of action – Whether failure to plead material facts – Material facts included as particulars – Pleadings replete with pleading errors – Pleading struck out with liberty to replead – Order 13 and rr 23.01 and 23.02 of the Supreme Court (General Civil Procedure) Rules 2005.
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APPEARANCES: | Counsel | Solicitors |
| For the Second Plaintiff | D M B Derham QC with Mr P Agardy | Moray & Agnew |
| For the Defendant | Mr M Hoffman QC | Kelly & Co |
HIS HONOUR:
INTRODUCTION
Noel Russell appeals against a decision of an associate justice refusing, inter alia, his application to strike out the statement of claim in this proceeding.
Westgate Wool Co Pty Limited (in liq) has instituted this proceeding against Jack Hammond of counsel, Noel Russell of counsel and Andrew Woolfe solicitor, alleging in substance that Mr Woolfe was retained as solicitor who in turn retained Mr Hammond and Mr Russell as counsel to act on Westgate’s behalf in proceedings brought against Westgate and three of its directors by BWK Elders (Australia) Pty Limited in the Federal Court of Australia.
In the Federal Court proceedings, Elders claimed that Westgate and three of its directors had engaged in misleading and deceptive conduct in relation to the sale of wool by Westgate as a wool broker and that as result, Elders suffered loss and damage. The claims against Westgate and its directors in the Federal Court were initially defended. Subsequently, Westgate went into administration and the proceedings against it were stayed. The proceedings in the Federal Court continued against the three directors. Ultimately, Elders recovered unopposed $1,833,600.09 inclusive of interest and costs against the three directors.
The claims against the defendants in these proceedings allege breaches of duties allegedly owed to Westgate in acting for Westgate in the Federal Court proceedings.
For the following reasons, I allow the appeal and order that the amended statement of claim be struck out with liberty to Westgate to replead its claim against Mr Russell.
THE APPLICATION
On 28 November 2008, Westgate delivered an amended statement of claim. On 12 December 2008, Mr Russell applied for orders:
1.That the proceeding against Mr Russell be stayed or there be judgment for Mr Russell or the proceeding against Mr Russell be dismissed under Rule 23.01 of the Supreme Court (General Civil Procedure) Rules 2005, or pursuant to the inherent jurisdiction of the court, on the grounds that it:
(a)does not disclose a cause of action;
(b)is scandalous, frivolous or vexatious;
(c)is an abuse of the process of the court.
2.Alternatively, to paragraph 1, that the amended statement of claim dated 28 November 2008 as against Mr Russell be struck out, or paragraphs 26, 27, 30, 31 and 32 of that amended statement of claim be struck out or amended, under Rule 23.02 of the Rules on the grounds that the statement of claim, or those paragraphs (as the case requires):
(a)does not disclose a cause of action;
(b)is or are scandalous, frivolous or vexations;
(c)may prejudice, embarrass or delay the fair trial of the proceeding; or
(d)is or are otherwise an abuse of the process of the court.
On 17 April 2009, Associate Justice Daly made orders on Mr Russell’s application and on similar applications filed by the first and third defendants as follows:
(a)Subject to the following paragraph of these orders Mr Russell’s application pursuant to Rule 32.02 is dismissed.
(b)By 4.00 pm on 15 May 2009 the plaintiff file and serve an amended statement of claim and/or provide particulars to the following paragraphs of the amended statement of claim: paragraphs 18, 25.3, 26, 26.2, 28 and 30.05.
(c)Mr Russell’s costs of his summons be reserved with liberty to him to make an application in respect of cost.
(d)Mr Russell’s summons be otherwise dismissed.
Mr Russell has appealed from these orders. The appeal is a hearing de novo.
THE PLEADED CASE
It is convenient to summarise Westgate’s case against Mr Russell. The pleading draws no distinction between the cases pleaded against each of the defendants. In substance Westgate alleges against Mr Russell that:
(a)Mr Russell was retained as counsel to act for Elders and its directors in the Federal Court proceedings.
(b)In the Federal Court proceedings Elders alleged that:
(1)wool supplied by Westgate was a different standard and quality to that which Elders had agreed to purchase and Woolgate had misdescribed the wool sold and supplied to Elders.
(2)the directors of Elders had made representations as to the standard and quality of the wool and had knowingly been involved in contraventions of the Trade Practices Act.[1]
[1][21]
(c)In the course of the Federal Court proceedings, Mansfield J had made Anton Piller and Mareeva orders preventing Westgate from dissipating any of its assets save that it was permitted to pay its reasonable legal and expert fees and disbursements.[2]
[2][22]
(d)Elders offered to Westgate to resolve the proceedings but the offer was rejected.[3]
[3][22.5]
(e)Westgate went into administration and the proceedings against it were stayed.[4]
[4][22.10]
(f)The trial proceeded against the directors unopposed and Elders obtained judgement for $1,833,600.09 against them.[5]
[5][22.12]
(g)Elders has since lodged a proof of debt in the liquidation of Westgate for $3,247,876.[6]
[6][23]
(h)Prior to the offer to settle, Westgate instructed Mr Russell that the wool sold to Elders had been amalgamated from lots of wool purchased from different properties and therefore did not correspond with the description by which it had been sold to Elders as P Category wool.[7]
[7][24]
(i)As a consequence of the instructions to Mr Russell, he was, or ought to have been, aware that:
(1)Westgate’s defence was hopeless;
(2)it was therefore in the best interests of Westgate to either resolve the proceedings or admit liability in the proceedings as soon as possible; and
(3)the actual or perceived interests of the directors diverged from the interests of Westgate in that it was in Westgate’s interest to resolve the proceedings as quickly as possible given the defence was hopeless and it was in the directors’ perceived personal interests to delay the proceedings for as long as possible to avoid any findings being made against them personally.[8]
[8][25]
(j)In breach of his duty of care as counsel, Mr Russell was negligent:
(1)in failing to advise Westgate that its defence of the proceedings was hopeless;[9] and
[9][26.1]
(2)in failing to provide proper advice to Westgate as to the effect of the Mareva order that Westgate funds could only be used to meet its legal fees.[10]
[10][26.2]
The particulars allege that:
(1)Westgate’s moneys were used to pay the directors’ fees in breach of the Mareva order.
(2)Mr Russell failed to properly advise Westgate that that was in breach of the Mareva order and would render the company liable for contempt.[11]
[11][26.2.2]
(3)The payment by Westgate was contrary to Westgate’s interests and in the perceived interests of the directors.[12]]
[12][26.2.3]
(k)In breach of Mr Russell’s fiduciary duty to Westgate, he failed to act in the best interests of Westgate as:
(1)Mr Russell continued to act for both Westgate and the directors notwithstanding the conflict between Westgate and the directors.[13]
[13][27.1]
[The particulars allege that the directors were seeking to delay the proceedings for as long as possible to avoid any findings of personal liability notwithstanding that the defence was hopeless.][14]
[14][27.1.2]
(2)Mr Russell had actual knowledge of the conflict by reason that Mr Russell knew the defence filed, which he had prepared and settled, did not accord with Westgate’s and the directors’ instructions and pleaded matters which Mr Russell knew to be inconsistent with the true position.[15]
[15][27.2.2]
(3)Mr Russell did not advise Westgate or the directors that by reason of the conflict Westgate and the directors should be separately represented and advised.[16]
[16][27.3]
(l)Mr Russell continued to act for Westgate in circumstances where he knew that there was a conflict between the interest of Westgate and the interests of the directors and when he knew that the defence of the proceedings was hopeless and thus incurred a consequential liability for further costs in respect of Westgate’s legal costs and the legal costs of Elders and deprived Westgate of the opportunity to obtain independent legal advice to resolve the proceedings.[17]
[17][28]
(m)The directors were involved in breaches of the Corporations Act.[18]
[18][30]
(n)Mr Russell was involved in the contraventions by the directors of the Corporations Act.[19]
[19][30.5]
(o)In breach of the contract Mr Russell had with Westgate, Mr Russell:
(1)failed to advise Westgate that its defence was hopeless;[20]
[20][29.1]
(2)continued to act for both Westgate and the directors notwithstanding knowledge of the conflict between them;
(3)[an impediment did exist to hinder Mr Russell from acting on behalf of both Westgate and the directors;] (sic)
(4)did not make full and frank disclosure to Westgate of any matter which could reasonably be regarded by Westgate as raising a conflict of interest on the part of the directors.[21]
[21][29.5]
(p)As a consequence of the breach of contract, breach of duty and breach of fiduciary duty and contraventions of the Corporations Act, Westgate has suffered loss and damage:[22]
[22][31]
(1)by reason of the failure to advise of the conflict of interest, Westgate did not obtain separate representation or advice which would have resulted in Westgate resolving the proceedings and not paying the directors’ legal costs and disbursements and avoided the total failure of the business of Westgate;[23]
(2)by reason of the failure to provide proper advice on the Mareva order Westgate paid the legal fees of the directors which it would not have otherwise paid.[24]
(q)Westgate has suffered loss and damage:
(1)Westgate has incurred liability to Elders of $3,247,876.
(2)Westgate has suffered a total loss of its business due to its protracted involvement in the proceedings and payment of fees and disbursements in the proceedings;
(3)Westgate has inappropriately paid legal fees which were not incurred in the interests of Westgate but in furtherance of the perceived/actual interests of the directors.[25]
[23][31.1]
[24][31.2]
[25][32]
RELEVANT RULES OF PLEADING
The relevant pleading rules may be found in order 13 of the Supreme Court (General Civil Procedure) Rules 2005 as follows:
Order 13
PLEADINGS
13.01 Formal requirements
….
(2) A pleading shall be divided into paragraphs numbered consecutively, and each allegation so far as practicable shall be contained in a separate paragraph.
….
13.02 Content of pleading
(1) Every pleading shall—
(a) contain in a summary form a statement of all the material facts on which the party relies, but not the evidence by which those facts are to be proved;
(b) where any claim, defence or answer of the party arises by or under any Act, identify the specific provision relied on;
(c) state specifically any relief or remedy claimed.
….
13.03 Document or conversation
The effect of any document or the purport of any conversation, if material, shall be pleaded as briefly as possible, and the precise words of the document or conversation shall not be pleaded unless those words are themselves material.
13.06 Implied contract or relation
Where it is alleged that a contract or relation between any persons is to be implied from a series of letters or conversations or other circumstances, it shall be sufficient to allege the contract or relation as a fact, and to refer generally to the letters, conversations or circumstances without setting them out in detail.
13.10 Particulars of pleading
(1) Every pleading shall contain the necessary particulars of any fact or matter pleaded.
(2) Without limiting paragraph (1), particulars shall be given if they are necessary—
(a) to enable the opposite party to plead; or
(b) to define the questions for trial; or
(c) to avoid surprise at trial.
(3) Without limiting paragraph (1), every pleading shall contain particulars of any—
(a) misrepresentation, fraud, breach of trust, wilful default or undue influence; or
(b) disorder or disability of the mind, malice, fraudulent intention or other condition of the mind, including knowledge or notice—
which is alleged.
THE ALLEGATIONS IN THE FEDERAL COURT PROCEEDINGS
Mr Russell’s submits that the amended statement of claim does not disclose a viable cause of action in alleging negligent breach of contract and breach of duty on the part of Mr Russell in allegedly failing to advise Westgate that the defence of the proceeding “was hopeless”.
This objection relies on r 23.01 or alternatively r23.02 which provide, respectively:
23.01 Stay or judgment in proceeding
(1) Where a proceeding generally or any claim in a proceeding—
(a) does not disclose a cause of action;
(b) is scandalous, frivolous or vexatious; or
(c) is an abuse of the process of the Court—
the Court may stay the proceeding generally or in relation to any claim or give judgment in the proceeding generally or in relation to any claim.
23.02 Striking out pleading
Where an indorsement of claim on a writ or originating motion or a pleading or any part of an indorsement of claim or pleading—
(a) does not disclose a cause of action or defence;
(b) is scandalous, frivolous or vexatious;
(c) may prejudice, embarrass or delay the fair trial of the proceeding; or
(d) is otherwise an abuse of the process of the Court—
the Court may order that the whole or part of the indorsement or pleading be struck out or amended.
The amended statement of claim alleges that Westgate misdescribed the wool it sold to Elders. The amended statement of claim alleges that Westgate instructed Mr Russell and the other defendants that Westgate did misdescribe the wool it sold and that accordingly Mr Russell and the other defendants ought to have been aware that Westgate’s defence was “hopeless” and it was therefore in the best interests of Westgate to resolve the proceedings on the best possible terms or admit liability as soon as possible.
Mr Russell contends that this claim does not disclose a viable cause of action as the Federal Court proceedings also alleged that Westgate had substituted inferior wool for the wool it had sold. Mr Russell submits there is no allegation in Westgate’s claim that Westgate gave instructions to Mr Russell that it did substitute inferior wool for the wool it sold Elders. Mr Russell submits that therefore it was not open to Westgate to allege that the defence to the proceeding as a whole was hopeless. Accordingly, Mr Russell submits that the basis of Westgate’s case that its defence to the Federal Court claim was hopeless is without foundation and ought to be struck out.
Westgate alleges the Federal Court proceedings alleged that:
(a)the wool supplied by Westgate was of a different standard and quality to that which Elders had agreed to purchase;
(b)the plaintiff had misdescribed the wool sold and supplied to Elders;
(c)the name on the wool did not represent a property name; and
(d)that the stencils on the wool had been affixed by, or at the direction of the directors. [26]
[26][21.1]
The particulars to the plea refers to and quotes from the statement of claim, the amended statement of claim and the further amended statement of claim in the Federal Court proceedings. Only the further amended statement of claim was tendered in evidence to me.
The further amended statement of claim in the Federal Court alleges as follows:
(a)That Westgate offered for sale to Elders, wool that was represented to come from a particular property or “P category” or “Class Grower Lots “.
(b)P category wool was more likely to be uniform than a bale of wool made up of an amalgam of wool from more than one property.
(c)Elders would only buy P category wool.
(d)Westgate put forward to Elders “grab samples” of wool represented to be P category wool.
(e)The samples were represented to be from bales which had stencilled on them the name of a property indicating the wool in the bales was P category wool.
(f)The wool in the bales was not P category wool but an amalgam of wool from more than one property.
Mr Russell says that paragraph 14.6 of the further amended statement of claim in the Federal Court makes a substitution claim. It alleges that the wool delivered by Westgate to Elders was not the wool which Elders agreed to buy.
In the context of this case, I understand a misdescription claim to be that the buyer is informed that the wool in bale A is category P wool when it is not. On the other hand, I understand a substitution claim is that the buyer agrees to buy bale A which contains category P wool and is delivered bale B which contains amalgam wool. I do not construe the claim in paragraph 14.6 as a substitution claim. Rather, I construe it as a misdescription claim: that is Elders agreed to buy wool falsely described as P category wool.
Mr Russell says the fact that a substitution claim was made in the Federal Court proceedings is made clear in North J’s decision. In his reasons, North J adopts submissions prepared on behalf of Elders. In those submission Elders says that the wool delivered by Westgate was found to be coarser wool of greater mean fibre diameter which had been substituted for the wool Elders had agreed to purchase.
The submission is dated 24 June 2004, well after the defendants received the instructions alleged from Westgate. At that stage, the claim was proceeding undefended. In my view, the submission provides no basis for the contention that Elders were making a separate substitution claim in addition to its misdescription claim at the time that the counsel were acting for Westgate.
Secondly, the submissions to North J amplify on the general statement relied on. To my mind the submissions make it clear that the complaint is that the samples were not samples of what was in the bales delivered. In my view, that is equally consistent with the samples not being samples of the wool in the bale they were purportedly a sample of. In other words, the sample itself constituted a misdescription of what was in the bale.
In any event, Westgate contends that at paragraph 24 of the amended statement of claim Westgate pleads that the defendants were instructed that the wool subject of the pleadings in the Elder’ proceeding had been amalgamated from lots of wool purchased from different properties and therefore did not correspond with the description by which it had been sold to Elders namely as category P wool.
It submits that that of itself was sufficient to entitle Elders to relief and damages pursuant to the Trade Practices Act. Westgate contends that accordingly, as is alleged in paragraph 25, Westgate’s defence to the proceedings was hopeless and the defendants were or ought to have been aware of this. As a consequence, the pleading in this action, by reference to salient paragraphs of the statements of claim in the Elders proceeding, is appropriate. I accept these submissions.
If I am wrong on my construction of the Federal Court claim then the point raised by Mr Russell may be pleaded in defence. The current plea is such that it could not be said that it is incapable of succeeding. The question of what was alleged in the Federal Court proceedings is a matter of fact that must be proved by Elders at the trial. As the pleading rules dictate, the precise words of the claim in the Federal Court should not be pleaded unless those words are themselves material, but the effect of the document constituting the relevant statement of claim should be pleaded.[27]
[27]Rule 13.03
In my opinion, the objection to the hopeless plea, based on the substitution point, is not sustained.
LOSS AND DAMAGE
Mr Russell contends that para 31 should be struck out. He submits that it is alleged in para 29 that the defendants in breach of their contract failed to advise Westgate that its defence of the proceedings was hopeless. This argument is premised on the proposition that the plea that the defence was hopeless does not disclose a viable cause of action. I have ruled against Mr Russell on this argument and this objection to paragraph 31 must also fail.
In para 31 it is alleged that by reason of the defendants’ failure to advise Westgate of the conflict of interest between Westgate and the directors, Westgate suffered loss. Mr Russell contends that the damages do not follow from the alleged breach of contract. Mr Russell contends that Westgate is attempting to fasten its claim for loss and damage on an alleged failure to advise as to a conflict of interests – not on an alleged failure to advise that the defence “of the Proceeding” was hopeless.
Paragraph 31.1 seeks damages arising out of the failure to advise on the conflict. It pleads those damages as a consequence of the breach of contract, breach of duty and breach of fiduciary duty. The alleged breaches of contract in paragraph [29] and allegations of negligence in paragraph [26] do not allege a failure to advise on conflict. Only the alleged breach of fiduciary duty does so in paragraph [27]. Paragraph 27 does not disclose a cause of action in any event. The amended statement of claim does not allege that Mr Russell was under a fiduciary duty to advise Westgate on the alleged conflict of interest between Westgate and the directors.[28] I uphold the objection.
[28]See [19]
Paragraph 31.2 alleges damages by reason of Mr Russell’s failure to advise in respect of the terms of the Mareva order. There is no allegation that he was asked to advise on the Mareva order or otherwise under a duty to do so. Paragraph 31.2 does not disclose a viable cause of action.
Paragraph 31 ought to be struck out.
FIDUCIARY DUTY
Mr Russell contends that the pleaded cause of action of a breach of fiduciary duty does not disclose a viable claim.[29] The allegation is based on the alleged conflict of interest. He contends that the allegation of the existence of a conflict of interest is first made in paragraph 25, as arising from the instructions pleaded in paragraph 24. He says those instructions are incapable of supporting the allegation that a conflict existed.
[29][27]
Paragraph 25 alleges Mr Russell was aware or ought to have been aware of the actual or perceived divergence of the directors from the interests of Westgate. No such divergence has been pleaded but was sought to be pleaded in paragraph 25 itself in paragraph 25.3. Mr Russell submits that the allegation in paragraph 25.3, in particular, has been acknowledged to be deficient[30] and contends that further particulars cannot cure the deficiency. In particular, Mr Russell alleges that paragraph 25.3 states a conclusion from facts that are not stated.
[30]Westgate’s submission of 16 March 2009, paragraph 39
It is not alleged that the interests of the directors and Westgate in fact diverged but only a perception that they did, what ever that means. It is not alleged that the directors informed Mr Russell that they wished to delay the proceedings for as long as possible to avoid any findings being made against them personally with respect to their involvement in contravening or aiding and abetting a contravention of the Trade Practices Act or any potential criminal consequences of their conduct or Mr Russell otherwise knew this to be the case.
In my view, paragraph 27 does not disclose a viable cause of action and should be struck out along with paragraph 25.3.
INVOLVEMENT IN THE CORPORATIONS ACT CONTRAVENTIONS
Mr Russell submits that the whole of paragraph 31 ought to be struck out. Mr Russell contends the basis upon which it is alleged that the directors failed to exercise their powers and discharge their duties should be pleaded as material facts. He submits it is not alleged the directors knew the defence was hopeless.
The allegation of Mr Russell’s alleged involvement in the directors’ contraventions does not disclose a cause of action. There is no allegation sufficient to meet the requirements of s 79 of the Corporations Act 2001. In particular there is not allegation that Mr Russell intentionally was involved knowing the essential elements of the contravention.[31]
[31]York v Lucas (1985) 158 CLR 661 at 669-670
The plea does not disclose a viable cause of action against Mr Russell and ought to be struck out.
LACK OF CLARITY ETC
Essentially, these objections are based on a failure to observe order 13. Under this heading Mr Russell objects to the following paragraphs.
Paragraph 14
Pleads particulars as material facts. I agree.
Paragraph 17
Pleads particulars as material facts. I agree.
Paragraph 21
The particulars give excerpts from the statement of claim and the amended statement of claim. The particulars are not true particulars of the matters alleged. The particulars should have defined with clarity the documents which are alleged to have conveyed the matters alleged.
Paragraph 22
The findings of Justice North do not appear to disclose any cause of action. The relevant matters are the facts, not what his Honour found. The allegation of the defences filed is not pleaded correctly. The effect of the defence should be pleaded. The particulars should identify the documents said to convey the defence alleged. Paragraph 22.4 does not comply with r 13.03.
Paragraph 24
The paragraph pleads particulars as material facts. The plea ought to plead the material fact: that is what it is alleged Mr Russell was instructed and not the various conversations in which Mr Russell was instructed.
Paragraph 25
Paragraph 25 pleads matters of opinion or views as facts. This criticism is even more apposite to paragraph 25.2 which pleads a matter of opinion or assessment rather than an objective fact. Paragraph 25.3 is a conclusion which can only be pleaded if the facts giving rise to it are properly pleaded as material facts. The facts supporting the conclusion should be separately pleaded so that Mr Russell can properly respond to them.
Paragraph 26
Mr Russell contends that it is unclear whether paragraph 26 is a pleading related to the alleged duty of care (in the broad) referred to in paragraph 18, or a reference to the duties alleged to be implied in the retainer and counsel retainer as set out in paragraphs 13 and 16, respectively. Mr Russell contends the reference to “pursuant to their respective retainers” might indicate that it is the duties allegedly implied in the counsel retainer, but the later reference in paragraph 29 to ‘breach of the contract’ might indicate that paragraph 26 applies only to the tortious duty. I agree with this criticism.
Mr Russell contends that paragraph 26.1.1 alleges as a subset of 26.1 that Mr Russell knew or ought to have known that Westgate’s defence to the proceeding was hopeless. Mr Russell submits that this should be separately and distinctly pleaded and not included as a dependant sub-clause to an allegation of breach. I agree.
As to paragraph 26.2. Mr Russell submits that there is no allegation that advice was sought from Mr Russell or given by Mr Russell in relation to the effect of the Mareva Order. There is no prior pleaded allegation that Mr Russell did not advise Westgate as to the effect of the Mareva order.
In my opinion, the pleading should set out the advice given or, if it was not given, clearly allege that no advice was given and plead the facts that are necessary to underpin an allegation of duty to advise and a failure to do so.
Mr Russell submits that the paragraph involves an implicit but unstated assumption that he knew that Westgate’s funds were being used to meet the directors’ legal fees. This is nowhere alleged.
The pleading fails to properly distinguish between material facts and particulars. For example, paragraph 26.1.2 pleads as a material fact that Mr Russell settled the responses to the section 155 notice. That plea does not disclose a cause of action. The material fact is what he is alleged to have known. Also there is no need to plead that piece of knowledge several times.
Paragraph 27
Mr Russell submits that paragraph 27 should be struck out. It relies on the “conflict between the plaintiff and the directors” which is alleged in paragraph 25.3.
Mr Russell contends that paragraph 27.1 is objectionable as it asserts a breach of duty based not on Mr Russell’s knowledge but an alleged conflict of interest.
Mr Russell contends that the allegations contained in the particulars of conflict ought to be pleaded as material facts not included as particulars. I agree.
Mr Russell contends the particulars to paragraph 27.2 (27.2.2) do not provide any basis for the allegation that Mr Russell had knowledge of the ‘conflict’. Mr Russell submits that at best they assert that Mr Russell knew there were possible criminal consequences for the respondents in the proceeding arising from the allegations made. Mr Russell submits that buried in the particulars are more allegations of material facts and statements of conclusion from unstated facts (such as 27.2.5 “when that issue was not a matter of concern to the plaintiff but was to the directors”; and 27.2.3 “when such tests would not assist the plaintiff in its defence”).
Mr Russell submits that the allegation in 27.2 that Mr Russell had knowledge of the so called conflict depends on knowledge of the intention or motive of the directors to delay the proceedings so as to avoid personal liability. I agree. The conflict is said to be conflict between the interests of Westgate to resolve the matter quickly and the desire of the directors to delay the resolution of the matter. Westgate have not pleaded that Mr Russell knew or ought to have know of this state of mind of the directors.
Paragraph 27.3 does not make out a breach of any alleged fiduciary duty. It is not alleged that Mr Russell was aware that the retesting would not help Westgate in its defence.
Paragraph 27 contains numerous allegations and fails to comply with rule 13.01.
Paragraph 28
Mr Russell contends this paragraph alleges a bundle of different things. He submits that it again alleges knowledge of the ‘conflict’, adding nothing to paragraph 27.2. It again alleges knowledge that the defence was hopeless, adding nothing to the earlier allegations (see for example 26.1.1, 26.1.2, and the particulars to paragraph 27.1). It then proceeds to make new and separate allegations that Mr Russell:
(i)“incurred consequential liability for further costs in respect of Westgate’s legal costs, the directors’ legal costs and Elder’s legal costs”; and
(ii)Deprived Westgate of the opportunity to obtain independent legal advise to revolve (sic) proceedings (sic).
These allegations must be separately pleaded in accordance with r 13.01.
Paragraph 29
Paragraph 29.1 merely repeats what is earlier pleaded in paragraph 26.1. Paragraph 29.3 repeats 28. The material facts do not need to be pleaded more than once. The particulars to paragraph 29.2 incorporate pleas of material facts in paragraph 26. The pleading does not comply with r 13.01.
Paragraph 30
Paragraph 30 does not comply with r 13.01. As indicated above, paragraph 30.5 fails to disclose a good cause of action. It pleads material facts as particulars.
Paragraph 31
Paragraph 31 fails to comply with r 13.01. It pleads conclusions which are not based on pleaded material facts.
SHOULD THE STATEMENT OF CLAIM BE STRUCK OUT?
Mr Russell asserts the claims are serious allegations of breach of professional duty against practitioners of the Court whose defences include the complete defence of advocates’ immunity, where it is applicable.
He contends the clear definition of the claimed breaches of duty is therefore important to both the defendants and the Court to enable the issue of advocates’ immunity to be clearly and squarely raised where it applies. He says that because the application of the immunity is dependant on the ‘intimate connection’ test, it is necessary to have crystal clear allegations of the facts that give rise to the alleged breaches, so that Mr Russell can be under no misapprehension about the case put against him and the manner in which the claim translates into loss and damage.
Mr Russell submits that the whole of the statement of claim should be struck out.
I have read the submissions of Westgate on the purpose and requirements of pleadings. In particular I have noted the observations of Mansfield J in BWK Elders (Australia) Pty Ltd v Westgate Wool Co Pty Ltd (No 2)[32] and Martin CJ in Barclay Mowlem Construction Ltd v Dampier Port Authority.[33]I have no issue with anything there said. But in this instance the statement of claim is replete with pleading errors and is embarrassing and unfair to Mr Russell to plead to. In many instances it fails to plead a viable cause of action. In my opinion, the proper course is for the pleader to start again and plead viable causes of action in accordance with the rules: pleading material facts, and if possible only once, separating out the particulars and where possible observing the rule to plead each material allegation in a separate paragraph.
[32][202] FCA 87 at [20] and [21]
[33](2006) 33 WAR 82
For these reasons, I propose to order that the statement of claim be struck out with leave to the plaintiff to re-plead its claims in accordance with the rules.
I allow the appeal. The orders of the associate justice are set aside. I order that the plaintiff pay the second defendant’s costs of the appeal and of the application.
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