Bitekiteku & Ors v P & ND & Ors

FIRST & SECOND APPLICANTS / RESPONDENTS ON NOTICE OF MOTION Mr K Solari Solicitor: Kevin Solari Solicitor

LEGAL REPRESENTATIVES: THIRD RESPONDENT / APPLICANT ON NOTICE OF MOTION Mr I Faulkner of counsel Solicitor: Mr D Chew Herbert Geer & Rundle

JUDGMENT: - 13 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: BOLAND J Wednesday 24 April, 2002 Matter No IRC 779 of 2000 BITEKITEKU PTY LTD & ORS v P & ND PTY LIMITED & ORS Notice of Motion - Application under s 106 of the Industrial Relations Act 1996

1 In February 2000, Bitekiteku Pty Limited ("first applicant") and Stephen James Colwell and Kim Joy Colwell ("second applicants") filed for relief pursuant to s 106 of the Industrial Relations Act 1996. By leave, the summons was subsequently amended in February 2002. The respondents named in the amended summons were: P & ND Pty Limited ("first respondent"); P & NA Pty Limited ("second respondent"); and, Pure and Natural Australia Pty Ltd ("third respondent").

2 The background to the amended summons is that in October 1996 the applicants entered into a franchise agreement and Deed of Guarantee and Indemnity with the first respondent and a licence agreement with the second respondent. It was alleged that in September 1997 the third respondent had acquired the business of the second respondent and in the same month that "the Third Respondent purported to obtain the rights of the First and Second Respondents by way of assignment in respect of the contract [franchise agreement], the guarantee and licence."

3 In or about November 1999 the second applicants signed a Deed of Variation proposed by the third respondent. In late 1999 and early 2000 disagreements arose between the applicants and the third respondent regarding the sale of the franchise business. In their amended summons for relief the applicants alleged at par 40: . . . . . . (h) the Third Respondent falsely represented that it was effectively the Franchisor pursuant to the contract, guarantee and licence when in fact there was no effective assignment;

(i) the Third Respondent falsely represented that it in fact was the appropriate party to enter into the variation and to receive or sue in relation to any moneys purportedly due by the Applicants pursuant to the contract, the guarantee, the licence and the variation after 1 September, 1997;

(j) the Third respondent falsely represented that it in fact was the appropriate party to grant consent to the transfer of the business and the associated Franchise after 1 September, 1997.

4 By way of notice of motion filed on 7 March 2002 the third respondent sought further and better particulars from the applicants. The third respondent's complaint in seeking the particulars was the failure of the applicants to identify with reasonable precision the representations that were alleged to have been made by the third respondent and the open ended nature of some of the allegations in the amended summons.

5 There had been a series of communications between the parties with respect to particulars. The third respondent's original solicitor wrote to the applicants on 4 April 2000 and a reply was made on 23 May 2000. On 12 November 2001 a further request for particulars was sent to the applicants by the third respondent's new solicitor and the applicants' new solicitor replied to that request on 21 December 2001. The third respondent's solicitor sent a third request for particulars on 4 February 2002 and a reply was made on 14 February 2002.

6 The third respondent remained dissatisfied with the responses to its various requests for further particulars, hence the notice of motion.

7 Part 9 of the Industrial Relations Commission Rules 1996 deals with particulars. Rule 57(1) provides that a party filing any process must give the necessary particulars of any claim or other matter raised by that party in such process. Rule 59 provides that a party must give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which the party relies. Rule 64 provides the power to order further particulars: 64. Order for particulars (1) A tribunal may, on terms, order a party to file and serve on any other party: (a) further particulars of any claim or other matter stated in any process, or in any affidavit filed by that party, or (b) a statement of the nature of the case on which the party relies, or (c) where the party claims damages, particulars of those damages. (2) Without limiting the generality of subrule (1), where a party alleges as a fact that a person had knowledge or notice of some fact, matter or thing, the tribunal may, on terms, order that party to file and serve on any other party: (a) where knowledge is alleged, particulars of the facts on which the party relies, and where notice is alleged, particulars of that notice.

8 In Deemah Marble & Granite Pty Ltd v Sutherland [2001] NSWSC 829 Young CJ in Eq set out the basic principles with respect to particulars:

(1) The basal function of particulars is to reduce costs by alerting the opponent to the scope of the real case being made so the opponent is not caught by surprise, nor does the opponent waste time and money in preparing to meet issues that the other party does not intend to raise: see eg Sims v Wran [1984] 1 NSWLR 317, 321 and Banque Commerciale SA (In Liquidation) v Akhil Holdings Limited (1990) 169 CLR 279 at 286. (2) Particulars are supplied of the material facts pleaded as P.E. Joske J said in Trade Practices Commission v Total Australia (1975) 24 FLR 413, 417:

"While the defendant is entitled to know the case it is called upon to meet, it is not entitled to be told the evidence that will be called to prove the case. A defendant is entitled to ask for the material facts upon which the plaintiff will rely and he may make his request for the facts and matters relied on, which is taken to mean the same thing. When he asks for the facts and circumstances relied on he is going beyond the scope of particulars, and is probing for evidence." (3) However, every litigation lawyer knows it may be appropriate, in order to carry out the aim which I have stated in (1), it will almost be inevitable to disclose some of the evidence, and that if this happens, it is no answer that evidence must be disclosed by the giving of the particulars. See Sims v Wran at 321 and Wilson v Wilson (1952) 69 WN 358. (4) The party's obligation is only to supply the best particulars he or she can supply, provided that after discovery those particulars are supplemented, if possible; see Marshall v Inter-Oceanic Steam Yachting Co (1885) 1 TLR 394. (5) When one party has the means of knowing the real facts, ordinarily the opponent will not be ordered to supply particulars until after discovery: Millar v Harper (1888) 38 Ch D 110; TPC v CC (NSW) Pty Limited (1995) 131 ALR 581, 593. (6) The degree of particularity depends upon the nature of the case: American Flange and Manufacturing Co Inc v Rheem Australia Pty Limited [1963] NSWR 1121, 1126. (7) In equity, because other remedies may seem appropriate, and because evidence is filed by affidavit, the Court is less likely to order particulars and will not permit parties to slow down proceedings unjustifiably in their preparation for trial. This proposition is partly derived from the American Flange case and partly from the tactic used up to about 1980 by large firms acting for defendants, who created delays by constant requests for copious particulars, a worldwide phenomenon, as shown by the judgment of Wessels JA in the Appellate Division of the Supreme Court of South Africa in Moaki v Reckitt & Colman (Africa) Limited (1968) 3 SA 98, 102. (8) The order for particulars is discretionary, the object being to ensure the efficient process of the Court.

9 In the American Flange case the "other remedies" to which Young CJ referred were striking out the offending parts of the statement of claim, allowing an amendment to the statement of claim, and interrogatories.

10 Proceedings under s 106 are, like Equity, conducted by way of affidavit. The opportunity is similarly available to strike out, in whole or part and allow amendment of, a summons for relief. In my opinion, the principles outlined by Young CJ ought to be applied in assessing whether to order further particulars in this case.

11 In Aussie Home Security Pty Ltd v Sales Systems Australia Pty Ltd [1999] FCA 1458 Katz J considered whether it was necessary to particularise precise terms of alleged representations. In that case, Katz J had to make his decision in the context of the Federal Court Rules. O 11, r 4 of those Rules provides that "Where any document or spoken words are referred to in a pleading, it is permissible to state the effect of the document or spoken words without setting out the precise terms thereof." Katz J said that it follows from that rule that where a party chooses to plead only the effect of any alleged written or oral representation made to that party, rather than pleading the precise terms of that alleged representation, such a pleading is an adequate one for the purpose of the Federal Court Rules. He went on to say that he accepted that in some cases "fairness may dictate that the opposing party be entitled to particulars of such a plea, like the time and place of the making of the alleged representation, the identity of the alleged participants in the communication and the medium by which the alleged representation was communicated." Katz J further said at [27]: The Aussie parties, having chosen to plead what they claim to be the effect of the alleged representations, rather than pleading their precise terms, will have to bear whatever adverse consequences might flow from the acceptance by the Court of such an argument.

12 Before turning to each of the matters in the amended summons in respect of which the third respondent seeks further and better particulars, I should say that if more care had been taken in drafting the summons it may have been unnecessary for the third respondent to move the Court to order further and better particulars. I had considered whether I should order an amendment of the pleadings. However, I do not propose to do so. I should also say that the degree of particularity sought by the third respondent was, in some instances, well beyond what is necessary for the third respondent to understand the nature of the case it has to meet.

13 Paragraph B.15 of the amended summons states: The Applicants entered into the purchase referred to in ground 10 above and the contract and the guarantee with the First Respondent and the licence with the Second Respondent in reliance upon the representations made by the First and/or Second Respondents that they would comply with their obligations pursuant to the contract, a disclosure document dated October, 1996 and the Franchising Code of Conduct and that the representations contained therein were true.

14 The third respondent seeks precise specification of the representations alleged to have been made, who allegedly made the representations, the circumstances in which it is alleged the representations were made and to whom precisely it is alleged the representations were made. I note, firstly, that par B.15 refers only to the first and second respondent. Nevertheless, the applicants had responded with further particulars and had indicated that "in the event of any further information coming to hand that requires an addition to those particulars, you will be appropriately notified." I consider that the further particulars provided to the third respondent are too open-ended and it will be necessary for the applicants to be more precise. For example, it was said by the applicants that: The representations include, but are not limited to , that the First and/or Second Respondent:

(ii) would provide management and/or sales and/or administrative advice; …

(x) would provide stock and/or product and/or replenishments; …

15 It seems to me that it would be a simple matter for the applicants to refine the alleged representations in order that the third respondent is not put to the unnecessary cost of preparing to meet issues that ultimately the applicants do not intend to raise. However, it may be that the applicants can only give limited particulars at this time. Following interrogatories and discovery the applicants shall, if it is available, provide the third respondent with more precise information regarding the alleged representations referred to in par B.15.

16 Paragraph B.28 states: On or about 5 November, 1999 the Third Respondent produced a document entitled "Deed of Variation" and made representations to the Applicants concerning the obligations of the Applicants and each of them pursuant to the contract, the guarantee and the licence.

17 The third respondent submitted that par B.28 is vague and ambiguous and fails to particularise the substance of the alleged representations. Given the allegations cited later in the amended summons against the third respondent that it "falsely represented" certain matters relating to the contract, the guarantee and the licence, the third respondent is entitled to know the substance or effect of the representations referred to in B.28, the time and place of the making of the alleged representations, the identity of the alleged participants in the communication and the medium by which the alleged representations were communicated.

18 Paragraph B.31 states: The First Applicant sought the approval of the Third Respondent to the assignment of its interest in the business pursuant to the contract and the Third Respondent unreasonably purported to impose conditions which frustrated the sale.

19 The applicants have provided further particulars in relation to the third respondent's request and, subject to the applicants' undertaking to provide further particulars following discovery, in my opinion these are sufficient to enable the third respondent to understand the nature of the applicants' case.

20 Paragraph B.32 states: On or about 15 December, 1999 the First Applicant advised the Third Respondent in writing of another prospective purchaser of the business and the Third Respondent again purported to impose conditions which were unreasonable for its approval of the assignment and thereby frustrated the sale of the business. 21 The applicants have already provided further particulars in relation to the par B.32. I do not see any basis upon which further particulars should be ordered.

22 Paragraph B.36 states: On or about 25 January, 2000 the First Applicant vacated the premises of the business at Shop 461, Westfield Shoppingtown Hurstville and left in the premises all plant and equipment for the Third Respondent.

23 In response to the request that the applicants state precisely what plant and equipment it is alleged was left in the premises, the applicants provided a list of assets of the franchise business. One assumes, therefore, that the applicants left all of the plant and equipment in the premises. If that was not the case the third respondent is entitled to know what plant and equipment was not left in the premises.

24 Paragraph B.39(d) states: During the period 30 October, 1996 until 1 February, 2000:

… (d) the net balance of $202,523.00 was loaned by the Second Applicants to the First Applicant to pay the moneys referred to in ground 39(c) above and in relation to the business;

25 The third respondent sought to identify precisely what is meant by "and in relation to the business." The applicants provided further particulars stating that the phrase meant "Every other expense in relation to the business in addition to the matters referred to in ground 39(c)." The applicants' response is vague. The third respondent is entitled to know, with greater particularity, what are the expenses in relation to the business. The applicants shall provide this information to the extent it is within their knowledge.

26 Paragraphs B.40(c) and (d) alleged that the applicants relied upon "the representations of the Respondents" in purchasing the business and in entering into the "contract, guarantee, licence and variation" and that the "representations of the Respondents were untrue". This is an example of the deficiency in drafting I referred to earlier. There is no delineation between the respondents as to which of them it was alleged was responsible for making the representation and in respect of which instrument the representation was allegedly made.

27 Nevertheless, in answer to a request for further particulars the applicants indicated that in relation to the third respondent the alleged untrue representations referred to in par B.40(d) related to the Deed of Variation. The applicants identified such representations as being the same as those referred to in par B.15 of the amended summons. I make the same observation I made in respect of par B.15: the further particulars provided to the third respondent are too open-ended and it will be necessary for the applicants to be more precise. However, it may be that the applicants can only give limited particulars at this time. Following interrogatories and discovery the applicants shall, if it is available, provide the third respondent with more specific information regarding the substance of the alleged representations referred to in par B.40(c) as well as the time and place of the making of the alleged representations, the identity of the alleged participants in the communication and the medium by which the alleged representations were communicated.

28 Paragraph B.40(f) states: 40 The said contract, guarantee, licence and variation are unfair for reasons including: … (f) the Applicants were encouraged to encumber their major assets to raise the funds for the purchase of the business; …

29 The third respondent initially sought particulars as to which of the respondents it was alleged had encouraged the applicants to encumber their major assets. The response was: "The First and Second Respondents initially and in furtherance of those encumbrances (sic) as a result of the encouragement of all of the Respondents." The third respondent then sought particulars as to how each of the respondents, including the third respondent, was alleged to have encouraged the applicants to encumber their major assets. The applicants' response to this request for further particulars is difficult to follow but it seems to say that the applicants were encouraged by the respondents to encumber their major assets to raise the funds for the purchase of the business by untrue representations made by the "First and/or Second Respondents", which "encouraged the Applicants to purchase the business and enter into the agreements with them…" This is another example of deficient drafting. There is not sufficient delineation between the allegations made against each of the respondents. Further, the response by the applicants to the request for further particulars is almost circular, leaving the third respondent none the wiser. If par B.40(f) is an allegation against the third respondent - and it is difficult to see how that could be so given the third respondent does not appear to have made representations to the applicants regarding the initial purchase of the franchise - the applicants are to provide particulars as to how it was that the third respondent encouraged the applicants to "encumber their major assets to raise the funds for the purchase of the business."

30 Paragraph B.40(g) alleged that the respondents failed to comply with their "represented obligations pursuant to the contract, the disclosure document and the Franchising Code" and proceeded to list some 18 alleged obligations. These obligations were the same as the representations that the applicants alleged were made by the respondents in par B.15 of the amended summons. Again, I make the same observation as I did in relation to par B.15: The further particulars provided to the third respondent are too open-ended and it will be necessary for the applicants to be more precise. However, it may be that the applicants can only give limited particulars at this time. Following interrogatories and discovery the applicants shall, if it is available, provide the third respondent with more precise information regarding the alleged failure to comply with the "represented obligations" referred to in par B.40(g).

31 Paragraphs B.40(h), (i) and (j) were not referred to in the third respondent's notice of motion as allegations in respect of which it sought further particulars. However, in oral submissions counsel for the third respondent submitted that further particulars were necessary. Paragraphs B.40(h), (i) and (j) alleged that the third respondent "falsely represented" a number of matters. The applicant shall provide particulars of the time and place of the making of the alleged false representations, the identity of the alleged participants in the communication and the medium by which the alleged representations were communicated. It may be that the applicants can only give limited particulars at this time. Following interrogatories and discovery the applicants shall provide the third respondent with the specifics I have identified in relation to the alleged false representations.

32 In providing the further particulars referred to in this judgment, it will not be sufficient for the applicants to refer to responses already provided to the third respondent. The correspondence between the parties relating to particulars was a veritable maze and I found it difficult to follow. The applicants will set out their responses to the particulars I have identified as being necessary to provide, in discrete terms. Of course, the applicants' obligation is only to supply the best particulars they are able to and it may be, as I have already noted, that the applicants will need to supplement any particulars after discovery.

33 Subject to the need to supplement any particulars following discovery, the applicants shall provide the further particulars required by this judgment to the third respondent within 14 days of today. I so order.

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