Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc

REASONS FOR JUDGMENT GOLDBERG J: The respondents apply for leave to appeal from the orders of O'Loughlin J on 31 March 1998 whereby he dismissed the respondents' motion that certain paragraphs of the applicant's amended statement of claim and formulation of damages be struck out, gave the applicant leave to file and serve a further amended statement of claim consistent with the reasons for his decision and ordered the respondents to pay 90% of the applicant's costs of the motion. The respondents also seek leave pursuant to O 52 r10(b) of the Federal Court Rules for leave to extend the time for serving the notice of motion to 22 April 1998. The proceeding arises out of the purchase by the applicant from the first respondent of the whole of the issued capital in three companies Cowells Pty Ltd, Cowells Investments Ltd and Cowells Group Ltd (collectively "the Cowell Group") on 29 June 1995. Prior to the purchase the Cowell Group were wholly owned subsidiaries of the first respondent which in turn was a wholly owned subsidiary of the second respondent. By its initiating Application the applicant seeks rescission of the sale and purchase agreement dated 29 June 1995, restitution pursuant to s 87 of the Trade Practices Act 1974 (Cth) and in the alternative, damages, exemplary damages and other relief. The amended statement of claim is extremely comprehensive in its subject matter although in a number of respects it is in a narrative and discursive form and does not strictly comply with the rules of pleading in the sense of only pleading material allegations of fact: O 11 r2(a) Federal Court Rules; Bruce v Odhams Press Limited [1936] 1 KB 697, 712; Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109, 112 ‑ 114; Trade Practices Commission v Australian Iron & Steel Pty Ltd (1990) 92 ALR 395; H 1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181, 186‑ 187. The primary judge analysed the amended statement of claim in seven groups of paragraphs. In respect of the first group his Honour concluded that, in general terms, the paragraphs set out information given to the applicant, albeit defined as "representations", prior to the making of the sale agreement. His Honour pointed out that it was not the applicant's case that the representations were false but rather that the information was relied upon and that there were subsequent material changes in the circumstances of the Cowell Group and in the information given to the applicant which the respondents were under an obligation to disclose to the applicant but failed to do so. His Honour was satisfied that the applicant was entitled, as a matter of principle, to allege a cause of action in the terms set out in the amended statement of claim. Accordingly he refused to strike out the first group of paragraphs being paragraphs between paragraphs 5 and 51. In relation to the second group his Honour was satisfied that the reference in paragraph 76 to the representations being false and untrue "as herein described" was a reference to the extent described in paragraphs 74 and 75. The applicant conceded that the paragraphs in the third group needed to be amended and leave was granted. Although his Honour identified difficulties in some of the paragraphs in the fourth group he was satisfied, subject to paragraph 91 being struck out, that the case sought to be made by the applicant was apparent. His Honour concluded that certain paragraphs in the fifth group should be struck out with leave granted to re‑plead. Although his Honour concluded that there was a laxity in the pleading of the paragraphs in the sixth group he was satisfied that there was a sufficient statement of material facts upon which the applicant could rely and he exercised his discretion to allow this group to stand, referring to Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 3) [1970] Ch 506; Hampshire County Council v Shonleigh Nominees Ltd [1970] 1 WLR 865. Although the seventh group was not the subject of complaint his Honour concluded that they were repetitious and should be struck out. It is apparent from an overview of the pleading that the applicant's case is not that the primary information was untrue but rather that further information became available to the respondents prior to the execution of the sale agreement, that they had an obligation to disclose it to the applicant, that they failed to do so with the result that the initial information provided became untrue or resulted in misrepresentations. It is said amongst other things, that relevant information was fraudulently withheld. In part due to supervening events, information upon which the applicant relied in entering into the agreement became false. Notwithstanding the discursive and narrative nature of the pleading I am satisfied that the case the respondents have to meet is identified with sufficient clarity to enable them to meet it: Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279, 286. It is true that matters of evidence are pleaded but the end result of the pleading is that the respondents are more fully informed than if only bare material facts, properly particularised, were provided. The orders from which leave to appeal is sought are interlocutory in nature and are also matters relating to practice and procedure. The orders do not affect the substantive rights of the parties. As the majority of the High Court pointed out in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177: "... appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure". (Cf In re the Will of F B Gilbert (dec) (1946) 46 SR (NSW) 318 at 323). In such circumstances leave to appeal should not be granted unless the decision the subject of the leave is attended with such sufficient doubt that there is shown an error of principle and a substantial injustice will be caused to the applicant if leave is not granted: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (supra) at 177; Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397, 400. A similar approach has been taken in the New South Wales Court of Appeal where in Bank of New Zealand v Spedley Securities Ltd (in liq) (1992) 27 NSWLR 91, Kirby P said at 95: "This Court should conserve its intervention in interlocutory orders made in such cases to instances where legal principle or the urgent demands of justice require intervention. Otherwise, the Court of Appeal will become an obstacle to proper management of such litigation and its determination according to law."