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[1998] FCA 953
Federal Court of Australia
1998-07-24
Adam P, O'Loughlin J, Goldberg J, Mansfield J, Goldberg JJ
Original judgment source is linked above.
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."
I am not satisfied that the decision of the primary judge is attended with sufficient doubt or discloses such an error of principle that it ought to be the subject of appeal nor am I satisfied that a substantial injustice will be caused to the respondents if leave is not granted; nor do the demands of justice require an appeal to be taken from the decision of the primary judge. The primary judge was exercising a discretion in considering whether the relevant paragraphs of the amended statement of claim should be struck out. Accordingly it is not for an appellate court to form its own view upon the matter but rather to determine whether the primary judge's discretion miscarried: House v The King (1936) 55 CLR 499 at 505; Lovell v Lovell (1950) 81 CLR 513, 532 ‑ 534; Bomanite Pty Ltd v Slatex Corporation Aust Pty Ltd (1991) 32 FCR 379, 386 ‑ 387. I cannot discern any error of principle in the manner in which the primary judge approached the matter before him and I do not consider that his discretion miscarried consistently with the authorities to which I have referred. The respondents seek leave to appeal on the grounds that: (a) there are errors of principle identified in the draft notice of appeal; and (b) the orders made by the primary judge were to impose a substantial injustice on the respondent. I am not satisfied that what is said to be the errors of principle identified in the draft notice of appeal were in fact errors of principle committed by the primary judge. In any event I am not satisfied that the orders work a substantial injustice on the respondent. It is not suggested that irreparable harm will be done to the respondents if the orders are allowed to stand or that they will be prejudiced in an irremediable way in the manner in which they are able to conduct the trial. The orders made by the primary judge do not affect the substantive rights of the respondents. It is said that discovery will be more extensive than if the paragraphs under challenge were not in the amended statement of claim and that the respondents are likely to spend considerably more time and expense than they would have otherwise have expended in the discovery process. I am not satisfied that such matters fall within the category of the substantial injustice in the authorities dealing with the circumstances in which leave to appeal should be granted. In any event the ground is put as a matter of assertion and I am not satisfied that it will in fact eventuate. At the present time on the material before the Court the ground is merely speculative. It is also submitted that the respondents "may also be prejudiced" by being required to discover documents which would not otherwise have to be discovered if the appeal was successful. It is not suggested that such documents are commercially confidential or that the respondents would not be protected by the usual implied obligation imposed on parties obtaining discovery only to use discovered documents for the purpose of the proceeding. It is not said what the nature of the prejudice would be. Again the assertion is speculative. It is then submitted that the respondents will be required to prepare witness statements or affidavits based on issues raised by the amended statement of claim which will result in the witnesses being proofed on irrelevant or speculative issues. It is then said that the final hearing will be more lengthy than would otherwise be the case. I am not satisfied that this will be the case on the material before the Court. Properly analysed the amended statement of claim identifies sufficiently the matters to which the respondents' witnesses should have regard. However, the case will be managed by the trial judge consistently with the Court's case management principles and it will be a matter for the trial judge as to how the witness statements or affidavits will be prepared and used at the trial. The respondents say they "may also be required" to prepare expert reports based on lay evidence and that if this occurs they will be put to unnecessary time and expense. If that be true, and again it is presently a matter for speculation, it is a matter that can be dealt with by an order for costs if it turns out that there was no need for the expert reports to be prepared. It is then submitted that the respondents' capacity to cross‑examine witnesses in relation to the issue of reliance on the representations will be severely impaired if the content of the representations has not been pleaded. If this in fact be the case it is a matter that will either be cured by witness statements or affidavits or in examination‑in‑chief. However I consider that the content of the material upon which the applicant relies for its case of non‑disclosure is sufficiently addressed in the amended statement of claim albeit in a discursive manner. The respondents say that in order to prepare their defence to the proceeding they will need to know the material facts which are alleged to establish the falsity of each of the representations. Although the amended statement of claim is somewhat discursive and narrative the primary judge was satisfied that the nature of the applicant's case was laid out. I do not consider he erred in this respect although I am prepared to accept that the amended statement of claim could have been drawn more precisely. The applicant has sufficiently identified, as the primary judge found, that the applicant's case is that statements made and information provided, initially truthful and correct, changed their character as a result of information which was withheld which the respondents were obliged to disclose. The statements and information are identified as are the supervening events which are said to render them false. If, as the respondents submit, the burden of proof shifts to them to establish that there were reasonable grounds for the making of any representation by virtue of the effect of s 51A of the Trade Practices Act 1974 (Cth) then that is a matter which follows from the nature of the proceedings. I do not regard that as prejudice within the principles to which I have referred sufficient to require leave to appeal to be granted. It is submitted by the applicant that leave should not be granted to serve the notice of motion seeking leave to appeal out of time. Although the notice of motion was filed within time it was not served within time and having regard to the reasons advanced by the solicitor for the respondents I am satisfied that leave should be granted to serve the notice of motion out of time. In my opinion the order of the Court should be that the respondents be granted leave to extend the time for the serving of the notice of motion to 22 April 1998, that leave to appeal be refused and that the respondents pay the applicant's costs of the motion.
I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg
Counsel for the Applicant: Mr T A Gray QC & Mr R Ross-Smith
Adam P Brown Male Fashions Pty Ltd
Philip Morris Inc
(1981) 148 CLR 170
(1991) 33 FCR 397
(1992) 27 NSWLR 91
(1985) 7 FCR 109
(1990) 92 ALR 395
(1979) 30 ALR 181
(1990) 169 CLR 279
(1936) 55 CLR 499
(1950) 81 CLR 513
(1991) 32 FCR 379