World Express (SA) P/L (in Liq) v CT Lampard & ANR No. Scgrg-94-1500 Judgment No. S6965

WORLD EXPRESS (SA) PTY LTD (IN LIQUIDATION) V CT LAMPARD & ASSOCIATES PTY LTD & ANOR

[1998] SASC S6965

JUDGE BURLEY.The defendants have applied to strike out certain paragraphs of the second further amended statement of claim filed by the plaintiff on 20 February 1998 pursuant to leave given on 8 January 1998.
In order to understand this application it is necessary to say something about the history of the plaintiff’s attempts to file an effective statement of claim in this matter. By application dated 26 August 1997 the plaintiff sought to file an amended statement of claim and that application was heard on 18 September 1997 by Judge Anderson, who was then sitting as a Master of the Supreme Court. The application was heard in conjunction with an application by the defendants dated 22 January 1997 which requested that certain paragraphs of the then statement of claim be struck out. His Honour therefore had before him an attack on the existing statement of claim and a request for leave to file an amended statement of claim. Many of the points to be pursued on each of the two applications overlapped and consequently his Honour heard both applications together. He refused the plaintiff’s application for leave to file the proposed statement of claim which was the subject of the plaintiff’s application of 26 August 1997.
It appears that no order was made on the defendants’ application to strike out the existing statement of claim and this was presumably so because an order was made giving the plaintiff leave to file an amended statement of claim (not the statement of claim propounded by the plaintiff on the application for leave to amend) in the context where it was clearly anticipated that the defendants were to be in a position to attack the new statement of claim. As I have said, an amended statement of claim was filed on 20 February 1998 pursuant to the leave given by Judge Anderson on 8 January 1998. The defendant’s current application seeks to have a number of paragraphs of that document struck out.
It has been accepted by both parties that the arguments put before Judge Anderson in criticism of the then statement of claim, were the same arguments advanced by the defendants on the application before me.
The plaintiff contends that it is not now open to the defendants to attack the statement of claim on the same basis as the attack mounted by the defendants on their application dated 22 January 1997 which was heard before Judge Anderson. It was contended that by reason of the principles relating to res judicata, issue estoppel and abuse of the Court’s processes, the defendants could not renew its attack on the adequacy of the plaintiff’s pleading. Reliance was placed on a number of cases including R v Governor of Brixton Prison, ex parte Osman (No 1) [1992] 1 All ER 108. That case dealt with whether or not an issue estoppel arose in respect of a determination made on an interlocutory application. The Court of Appeal held that it could. Mann LJ said at 118j:-
“That it was a decision on an interlocutory application does not, in my judgment, disable it from an ability to give rise to an issue estoppel. I can see no reason in principle why a final decision upon an interlocutory application should not be in this regard treated as any other decision ...
I am comforted by that in taking, as I would in any event have taken, the passage in Diplock LJ’s judgment in Mills v Cooper [1967] 2 All ER 100 at 104, [1967] 2 QB 459 at 468, where he said:
‘This doctrine, so far as it affects civil proceedings, may be stated thus: a party to civil proceedings is not entitled to make, as against the other party, an assertion, whether of fact or of the legal consequences of facts, the correctness of which is an essential element in his cause of action or defence, if the same assertion was an essential element in his previous cause of action or defence in previous civil proceedings between the same parties or their predecessors in title and was found by a court of competent jurisdiction in such previous civil proceedings to be incorrect, unless further material which is relevant to the correctness or incorrectness of the assertion and could not by reasonable diligence have been adduced by that party in the previous proceedings has since become available to him.’ ”
With great respect, I agree with those principles. However, it seems to me that the plaintiff’s argument, whether it be by reference to res judicata or issue estoppel, overlooks the fact that there has been no order made by the Court in respect of the defendants’ previous strike out application which was dated 22 January 1997. Nor did Judge Anderson in his reasons published on 8 January 1998 attempt to canvass all of the arguments that were put by the defendants in criticism of the statement of claim to which their application applied. At best it could be said that arguments put before Judge Anderson related not only to the strike out application but also to the amendment application. The only occasion on which Judge Anderson in his reasons rejected an argument of the defendants related to a cause of action which the plaintiff by the present statement of claim, has not pursued. I take his decision to have been that the document put forward by the plaintiff on its application for leave to amend was not a sufficient document and, accordingly, leave to file that document was refused. However, liberty was given to the plaintiff to file a further amended statement of claim. He said (at page 3):-
“I have deliberately given leave to file rather than keep the plaintiff at the application for leave gate because the Statement of Claim, as it exists, is generally adequate as to related entity losses and should some part of the future document be shown to be inadequate and struck out, that which is good should at least be on the Court file at the earliest possible time.”
His Honour clearly contemplated that the defendants might make an attack on the statement of claim filed pursuant to leave. They have done so by their application dated 7 April 1998 which has been heard by me. There has, in my view, been no final decision on the defendants’ previous application to strike out parts of the then statement of claim. To that extent, I would distinguish Douglas v Adelaide Women’s and Children’s Hospital, an unreported decision of Prior J delivered on 3 December 1996, No S5925, relied upon by the plaintiff.
Judge Anderson held the defendants to have succeeded generally on their strike out application and on their opposition to the plaintiff’s application for leave to file an amended statement of claim. But he did not, as I have said, in his reasons deal in detail with all of the submissions advanced by the defendants. In those circumstances I cannot see that there has been a final determination on a previous application of the matters which were argued on the application before me. The fact that the arguments by the defendants have been the same on both occasions does not mean that an issue estoppel arises. There must be a determination of the validity or otherwise of the arguments advanced on the previous occasion for an issue estoppel to arise. That has not occurred in this case and, consequently, I reject the plaintiff’s submission that the defendants are now precluded from advancing the arguments which they did on the application before me. If an issue estoppel has not arisen it is certainly the case that the principles of res judicata do not apply and if there exists neither res judicata nor issue estoppel, it cannot be said that the present application constitutes an abuse of process.
I propose to deal with the defendants’ complaint about the second further amended statement of claim (“the statement of claim”) by reference to the paragraph numbers referred to in written submissions handed up by the defendants’ counsel on 3 July 1998 as responded to by the plaintiff’s written submissions filed on 4 August 1998.
In his reasons published on 8 January 1998 Judge Anderson described the substance of the action as then pleaded as follows:-
“This action claims damages from the accountants of a company now in liquidation for negligence in the preparation of accounts said to misstate the real financial position of the company. It is alleged that such misstatement allowed the company to continue to trade and make loans to related entities (and to unit holders) which loans are now uncollectable. Without this, it is alleged, the company would not have accrued losses and would have continued to be solvent.
The causes of action, in addition to negligence, allege breach of contractual obligation and misleading and deceptive conduct within the meaning of Section 56 of the Fair Trading Act 1984, and the plaintiff seeks damages as quantified and for loss of the use of the money and interest.”
Under the current statement of claim there is now no claim in relation to the unit holders and Walker v Hungerford damages are not sought.
In paragraph 28 of the statement of claim a number of allegations are made to the effect that the first and second defendants knew certain things or ought to have known those things. The allegations are made in both the main part of the paragraph and under the heading “Particulars”. SCR 46.04(1)(f)(iii) (A) requires particulars to be given of the facts upon which the plaintiff relies to support the allegation that the defendants had the knowledge referred to. These particulars have not been given. Nothing put by Mr Ross-Smith, counsel for the plaintiff, convinces me that the particulars sought are not required to be given. Since this is a strike out application, I propose to strike out paragraph 28 of the statement of claim. However, I also propose to give the plaintiff leave to apply to amend to cure the defect if the appropriate particulars can be provided. Upon publication of these reasons I will hear submissions from the parties as to the time within which any further application for leave to amend is to be made on the basis that if the further application for leave to amend is not made within the stipulated time paragraph 28 remains struck out of the pleading.
To the extent that elsewhere in these reasons I consider it appropriate to give the plaintiff leave to make a further application for leave to amend, such leave will be given on the basis just stated unless I state to the contrary.
Reference is made in paragraph 28.2 to the business name “Adelaide Tramcar Restaurant”. It is apparent from paragraph 28.2 that a business was conducted by the plaintiff under that business name until 12 June 1990 when a company called “Adelaide Tramcar Restaurant Pty Ltd” was incorporated. The defendants complain that reference to a loan to Adelaide Tramcar Restaurant prior to 12 June 1990 is wrong in that the plaintiff cannot make a loan to itself. Even if it is assumed, as was alleged by Mr Ross-Smith that the defendants, in preparing the accounts the subject of the proceedings, treated advances to the Adelaide Tramcar Restaurant (prior to incorporation) as a loan by the plaintiff to another entity, that does not permit the plaintiff to repeat in the pleading what is an erroneous description of a transaction. I agree with the defendants that references to loans to the business Adelaide Tramcar Restaurant (as opposed to the company) wherever they occur in the statement of claim should be struck out.
The defendants also complain that paragraph 28 of the statement of claim is lacking in particularity in that there has been a failure to provide the dates of the loans or advances referred to in that paragraph. Mr McNamara argued that because reliance on the actions of the defendants was pleaded in paragraph 29 of the statement of claim, it was necessary for the dates of the loans or advances referred to in paragraph 28 to be given so that the allegations as to reliance in paragraph 29 could be cross-checked with the allegations made in paragraph 28 as to loans or advances. It was also submitted that the provision of the dates of the loans or advances referred to in paragraph 28 would enable the defendants to ascertain whether or not the plaintiff was “double dipping” in its claim.
I do not agree that these particulars should be given. The loans referred to in paragraph 28 are set out by reference to financial years as are the audited accounts and financial reports. Although it is reasonable to assume that the audited accounts will not be available for several months after the expiry of the financial year, there is, in my view, sufficient correlation between the alleged loans and the reliance on accounts as pleaded in paragraph 29. The essence of the plaintiff’s statement of claim is that over four successive years the defendants allegedly failed adequately to audit the accounts which resulted in favourable accounts being submitted to the licensing authority which in turn brought about the renewal of the plaintiff’s licence to continue to trade as a travel agent. The plaintiff says that if the accounts had been audited properly, the plaintiff would not have been able to continue to trade for an additional four years because the audited accounts for the first of the years in question would have revealed to the licensing authority that the plaintiff’s financial position was poor. Looked at in that light, no legitimate pleading purpose is served by requiring the plaintiff to provide the date of each of the loans or advances resulting in a loss made over the four year period.
The defendants complain about paragraph 31 which is as follows:-
“31... The first and second defendants knew that the Fund permitted the questionnaires to be included as a component of the Annual Financial Returns required by the Fund as part of the requirements of the Fund.
PARTICULARS
This fact came to the knowledge of the first and second defendants during the course of the retainers. The plaintiff will better particularise the said knowledge during the course of the trial of this action.”
It is not open to a party to give particulars of a matter which should be included in a pleading during the course of the trial. Paragraph 31 will be struck out but leave to apply to amend to cure the defect will be given.
The defendants complain that the plaintiff has used the term “not collectable” frequently throughout paragraph 34 of the statement of claim. In a former pleading that term was defined as meaning that “the borrowers were insolvent in that they had insufficient assets to repay the loans”. That definition has been omitted from the statement of claim the subject of this application. I agree that this term ought to be defined because, in the absence of a definition, the defendants cannot have a proper understanding of the case they have to meet. In addition, I agree that the use of such a term, even where defined, states a conclusion and to that extent it will be necessary to plead the material facts upon which the plaintiff relies to support the conclusion.
The term is also used in paragraphs 36 and 39. I would strike out the relevant parts of paragraph 34, 36 and 39, but as the defect may be capable of being cured by amendment, I propose to give leave to the plaintiff to apply to amend in order to attempt to cure the defect.
The next complaint made by the defendants is centred upon allegations made by the plaintiff in paragraph 34 about a failure to make provision in the accounts for what might be described as “bad loans”. The defendants complain that the allegation of “failure to make provision” is not supported by any factual foundation in the statement of claim. The plaintiff replied that the pleading is appropriate but, in any event, the information the defendants seek has been supplied in the plaintiff’s expert accounting report. I agree with the defendants’ submission that there is no adequate setting out in the statement of claim of the material facts said to support this contention by the plaintiff. A response that the information sought is contained in an expert report is no answer to the defendants’ complaint. The report no doubt constitutes the evidence by which the plaintiff will seek to prove the material facts which support the plaintiff’s contention, but that still leaves an absence of pleading of the material facts in the statement of claim. I agree with Mr McNamara that the plaintiff should say in the pleading what provision was required and what qualification to the accounts should have been made as a result. Those parts of paragraph 34 which refer to lack of provision must be struck out, but I propose to give leave to the plaintiff to apply to amend to cure the defect.
The defendants next attacked paragraph 34.2 of the statement of claim which dealt with the accounts for the year ended 30 June 1998 - unit holders’ capital. The essence of the complaint is that it is not clear from the pleading how the allegations in relation to unit holders’ capital relate to the overall claim of the plaintiff. However, I think a fair reading of paragraph 34.2 reveals that the plaintiff thereby alleges that the audited accounts disclosed amounts totalling nearly $256,000 from various persons as capital of unit holders in the trust, where the transaction should have been characterised as loans by those persons to the plaintiff. Subject to my ruling earlier in relation to paragraph 34.2.4 relating to the allegation that the plaintiff’s directors failed to make any provision in the accounts with respect to those loans, I think that paragraph 34.2 should stand.
As to paragraph 34.3 of the statement of claim, this deals with loans for the year ended 30 June 1989. As I understand the complaint of the defendants, it is that in relation to most of the sub-paragraphs, the pleading fails to specify what was contained in the accounts year that is said to be wrong and what steps the defendants should have taken to ensure that the erroneous inclusions in the accounts and report were not included. I take paragraph 34.3.1 as an example. It alleges that the defendants “failed to carry out any or sufficient and appropriate enquiries as would enable a reasonable and competent auditor to certify that the loan by the plaintiff to Adelaide Inbound in the sum of $50,068.15 recorded in the accounts was collectable”. I have already dealt with the use of the term “collectable”. If the assertion in paragraph 34.3.1 is to remain, it must be taken to mean that the sum of $50,068.15 was recorded in the accounts as an asset of the plaintiff, being a loan by the plaintiff to Adelaide Inbound and that such sum should not have been included as an asset because it could not be recovered (for whatever reason) from Adelaide Inbound and that had the defendants made the appropriate enquiries, this would have been evident to them. Such a technique was used in paragraph 34.2 of the statement of claim but particulars given in paragraph 34.2.2. No such particulars have been given in relation to paragraph 34.3, either by setting out such particulars or by cross-referencing to other parts of the statement of claim (if that were to be appropriate). The failure to provide the relevant material facts is fatal to the retention of paragraph 34.3 of the statement of claim. I would strike it out but give leave to the plaintiff to apply to amend to cure the defect.
The defendants allege that paragraph 34.4.2 is defective because it fails to plead the material facts upon which the assertions in the paragraph are based. However, I disagree with this contention. Particulars are given and I think those particulars may be used to support the allegations made in paragraph 34.4.2. The plaintiff is unable to go beyond those particulars in evidence at trial and, consequently, I think that the defendants have proper notice of what has been alleged against them to that extent.
The same complaint has been made in relation to paragraph 34.6 but in paragraph 34.6.1 reference is made to paragraph 34.5. In addition, particulars are given under paragraph 34.6.2 in relation to the allegations made in that paragraph which I think are sufficient. Accordingly, I think paragraph 34.6 should stand.

The defendants contended that paragraphs 44 and 45 of the statement of claim were mutually inconsistent but I disagree with this. In my view, they state the same thing from two different view points. They are, first, the consequence of alleged breaches by the defendants, and the second, what would have occurred had the breaches not occurred. The paragraph should stand.
In relation to paragraphs 41.5, 42, 44 and 45 the defendants contend that the allegations made in those paragraphs are meaningless and insupportable because the plaintiff was trading as a trustee and was not therefore the beneficial owner of any assets. The plaintiff’s response is that the trustee may sue to recover losses sustained (if there is a cause of action available to it) during its trading as a trustee. I agree with this. If the defendants’ contention is that the losses have been sustained by the unit holders and that only they have the standing to sue, this is quite wrong. Indeed, the primary obligation is upon the trustee to take the appropriate proceedings rather than the beneficiaries. These paragraphs should stand.
The defendants also complain that “investments” referred to in paragraph 42.2 are not particularised. In my view the use of that word is probably otiose, because it is only another reference to the assets of the company, and does not need to be particularised.
Complaints were also made about paragraphs 47 and 54 of the statement of claim but these do not appear to have been pursued in the oral submissions advanced by Mr McNamara.
Upon publication of these reasons I will hear submissions from counsel as to the time within which the plaintiff may be at liberty to apply for leave to amend as referred to in these reasons. I will also hear submissions as to the extent to which (if any) the parties wish to put further submissions on the application by the defendants relating to a notice to admit administered by the plaintiff in light of the above reasons relating to the sufficiency of the present statement of claim.

[1998] SASC 6965

24 November 1998