(ii) Is the employment relationship properly pleaded?
36 The next question is whether the applicant has in any event properly pleaded material facts to sustain its allegation that there was employment by one or more of the respondents. It is not in dispute that the claims in the proceedings are dependent upon the existence of an employment relationship. The respondents submit in summary:
In the statement of claim the applicant makes an assertion, namely that the relevant employees were employed by the first respondent (paragraphs 7, 8), the first second and third respondents (paragraph 9), or the second and third respondents (paragraph 10). However the applicant never pleads the material facts to sustain its allegation that there was employment by one or more of the respondents, for example the elements of the relevant contract of employment.
Although the particulars to paragraph 8 contain some material facts which might assist in supporting the conclusion of law pleaded in that paragraph, on a question as crucial to the case as this the particulars do not cure the defect.
A number of inconsistent legal conclusions are pleaded in paragraphs 8, 9 and 10. This emphasises the importance of the underlying material facts being pleaded.
If the applicant alleges that the legal arrangements of the first, second and third respondents were a sham, the material facts which give rise to such a conclusion ought be pleaded.
37 The applicant submits in summary:
each paragraph contains sufficient facts stating with clarity the case which must be met by the respondents.
there is no vice in pleading a conclusion of law supported by material facts and particulars.
the FASC addresses the factual elements required to prove the existence of an employment contract, for example in the particulars to paragraph 8 which are also incorporated into paragraphs 9 and 10.
The particulars relied upon at paragraphs 8, 9 and 10 of the FASC clearly establish in each instance the factors that point to an employment relationship being in existence between the first respondent and the employees, or alternatively the first, second and third respondents and the employees or lastly the second and third respondents and the employees.
38 In respect of this issue, a number of principles are clear.
39 First, as a general rule, a statement of claim which pleads a conclusion without pleading material facts is, to that extent, bad.
40 Although the pleading of a conclusion may, in some circumstances, constitute a material fact, nevertheless the pleading will be embarrassing if allegations are made at such a level of generality that the defendant does not know in advance the case it has to meet: McGuirk v The University of New South Wales [2009] NSWSC 1424 at [33], Charlie Carter Pty Limited v Shop Distributive and Allied Employees Association (1987) 13 FCR 413 at 417-418. As Weinberg J observed in McKellar v Container Terminal Management Services (1999) 165 ALR 409 at 418:
[23] A number of authorities support the proposition that a statement of claim must contain material facts, being the facts necessary for the purpose of formulating a complete cause of action, and that it is not sufficient simply to plead a conclusion drawn from unstated facts: see, for example, Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 114-15 per Fisher J; H 1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181; 40 FLR 242 at 246-7 per Northrop J; Pioneer Electronics Australia Pty Ltd v Edge Technology Pty Ltd [1999] FCA 142 at [7] per Kenny J. A statement of claim which simply repeats the language of a provision of the Act, and then baldly asserts a contravention of that provision, without more, will be struck out.
41 Similar observations were also made in CFMEU v Able Demolitions & Excavations Pty Ltd [2001] FCA 1748 at [10], Seven Network Limited v News Limited [2003] FCA 388 at [21], Porter v OAMPS Ltd [2005] FCA 232 at [67], Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd [2007] FCA 2024 at [41].
42 However second, in recent times there has been some relaxation of this rule to take into account the complexities of modern litigation. In McKellar, Weinberg J also quoted, with approval, comments of Drummond J in Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41-691 at paras 42,828-9 where his Honour said:
In any event, that a pleading alleges conclusions does not mean it is necessarily bad. The requirement of O 11 r 2 to plead the material facts, is subject to the established qualification to rules in this form that allows, in appropriate cases, pleading at a level of generality which excuses the failure to plead every fact material to the cause of action sued upon: Charlie Carter Pty Ltd v SDAEA (WA) (1987) 13 FCR 413 at 417; ATPR (Digest) 46-021. In Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (Fed C of A, 3 September 1991, unreported) French J, in dealing with a complaint that a statement of claim alleging contraventions of s 45 of the Act pleaded conclusions in terms of the section, rather than the material facts underlying them, said:
"I do not accept that the pleading of something which can be described as a conclusion cannot also be a pleading of a material fact. The real issue in a case where such an objection is raised is whether the facts are pleaded at too great a level of generality. In my opinion, the level of generality of the statement of claim in this case is too great for Rothmans to know with any precision what case it has to meet."
The modern approach to litigation in this court is not to strike out or order further particulars of a conclusionary pleading, if it appears that that is unnecessary in the circumstances of the particular case to achieve the object of pleadings: see also Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522 at 42,679.
It is, in my opinion, a legitimate and necessary exercise of the controlling discretion the court has over pleadings to utilise that power to ensure that a party is not required to incur the expense of providing masses of information in its pleadings that can be seen to be unnecessary for the proper disposition of the case, even though the prima facie obligation of a party to plead all material facts necessary to make out its cause of action could be said to require that. This is not to suggest that clarity in pleading is not important. The need to focus on pleadings being used to identify the matters really in issue is particularly pressing in a complex case. But the rules of pleading do not now provide the only means for achieving this. And above all, those rules are not now intended to be an arsenal for litigation by attrition.
43 This principle was received with some caution by the Full Court in Philip Morris (Australia) Ltd v Nixon [2000] FCA 229 where Sackville J (with whom Spender and Hill JJ agreed) said:
Thus it is a well established rule that the permitted level of generality of a pleading must depend on the general subject matter and on what is required to convey to the opposite party the case that is to be met: Ratcliffe v Evans [1892] 2 QB 524 (CA). For example, in some circumstances, it may be permissible to plead a conclusion rather than the material facts underlying the conclusion: Kernel Holdings Pty Ltd v Rothmans of Pall Mall Australia Pty Ltd (French J, 3 September 1991, unreported); Queensland v Pioneer Concrete (Qld) Pty Ltd [1999] FCA 499; (1999) ATPR 41-691 (Drummond J), at 42,829. [132]
…
Whether pleadings at a relatively high level of generality are permissible will depend on the circumstances of the particular case and the stage it has reached. The facts material to the claims of each member of the represented group might not be necessary to ensure that the respondent adequately understands the case made on behalf of the represented class and has a fair opportunity to meet that case. This may be the position, for example, where representative proceedings are brought in order to provide a mechanism to enable one or more common issues of law or fact to be resolved in a manner that binds the respondent and all class members, rather than to determine finally the claims of each class member: see Federal Court Act ss 33Q, 33R. [136]
(emphasis added)
44 The comments of the Full Court in Philip Morris were considered by Lehane J in Bright v Femcare Ltd [2000] FCA 742 where his Honour observed:
It seems to me that the Full Court clearly contemplated that allegations made on behalf of group members may initially be pleaded (in an appropriate case) at a high level of generality, and that amendment of the pleading (or, possibly, successive amendments) made during the course of the proceeding will introduce greater particularity. [53]
45 Third, as a general proposition the inclusion of particulars is not a panacea for failure to plead material facts. The position was comprehensively explained by Fisher J in Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 112-114 where his Honour said:
Relevant authorities establish the difference between pleadings and particulars and especially establish that it is not the function of particulars to take the place of the necessary averments in a statement of claim. As Lord Justice Scott said in Pinson v Lloyds and National Provincial Foreign Bank Ltd [1941] 2 KB 72 at 75:
It is a well-recognised canon of pleading that the defendant need not, and, indeed, ought not to, plead to "particulars", whether contained in or delivered with the statement of claim. The reason for that canon is plain. All the material facts constituting the cause of action ought already to have been plainly stated in the pleading itself, as required by Order XIX, r 4, the plainest and most fundamental of all the rules of pleading. The proper function of particulars is not to state the material facts omitted from the statement of claim in order, by filling the gaps, to make good an inherently bad pleading, however common that pernicious practice may have become. On this topic I made some observations in Bruce v Odhams Press, Ltd and will not repeat them beyond saying that I still hold the opinion that it is not the function of particulars to take the place of necessary averments in the pleading. Their function is to put the opposite party on his guard and prevent him being taken by surprise at the trial of an action, the "material facts" of which should have been already averred. Nor have mere statements of evidence as such a place in particulars, any more than in the pleading, although the dividing line between statements which contain sufficient indication to prepare the opponent's mind for what he will have to meet at the trial and mere statements of evidence is sometimes hard to draw and should not invite meticulous criticism. The essential rules of modern pleading embody a common-sense view of litigation, and, if complied with substantially and in accordance with their real intention, are well calculated to keep the cost of litigation down.
Likewise in Chapple v Electrical Trades Union [1961] 3 All ER 612; 1 WLR 1290 Pennywick J said at 1292:
As regards the first ground, it is a well recognised canon of pleading that the defendant need not and, indeed, ought not to plead to particulars, whether contained in or delivered with the statement of claim. ... It seems to me that a defendant should not be required to plead to particulars merely because, on analysis, it turns out that the particulars could equally or more appropriately have been included in the body of the statement of claim.
An application to strike out a statement of claim in circumstances very similar to the present was made to Northrop J in H 1976 Nominees Pty Ltd v Galli and Apex Quarries (1979) 40 FLR 242. In that matter no material facts were pleaded in the relevant paragraph of the statement of claim which only contained conclusions of law. At 246-247 he said:
Paragraph 17 contains a conclusion drawn from facts which are not contained in the statement of claim. In order to disclose a reasonable cause of action, a statement of claim must contain statements of material facts which support the claims made. Particulars are not statements of material facts; particulars perform a different purpose. The distinction is made clear in Bruce v Odhams Press Ltd [1936] 1 KB 697, per Scott LJ at 712-713:
The cardinal provision in r 4 is that the statement of claim must state the material facts. The word "material" means necessary for the purpose of formulating a complete cause of action; and if any one "material" fact is omitted, the statement of claim is bad; it is "demurrable" in the old phraseology, and in the new is liable to be "struck out" under O XXV, r 4: see Philipps v Philipps (1878) 4 QBD 127; or "a further and better statement of claim" may be ordered under O XIX, r 7.
The function of "particulars" under r 6 is quite different. They are not to be used in order to fill material gaps in a demurrable statement of claim - gaps which ought to have been filled by appropriate statement of the various material facts which together constitute the plaintiff's cause of action. The use of particulars is intended to meet a further and quite separate requirement of pleading, imposed in fairness and justice to the defendant. Their function is to fill in the picture of the plaintiff's cause of action with information sufficiently detailed to put the defendant on his guard as to the case he has to meet and to enable him to prepare for trial. Consequently, in strictness, particulars cannot cure a bad statement of claim. But in practice it is often difficult to distinguish between a "material fact" and a "particular" piece of information which it is reasonable to give the defendant in order to tell him the case he has to meet; hence in the nature of the things there is often overlapping. And the practice of sometimes putting particulars into the statement of claim and sometimes delivering them afterwards either voluntarily, or upon request or order, without any reflection as to the true legal ground upon which they are to be given has become so common that it has tended to obscure the very real distinction between them.
The particulars to par 17 of the statement of claim cannot cure the defects contained in the statement of claim. With respect, I would agree with what was said by Adam J in Rubenstein v Truth and Sportsman Ltd [1960] VR 473 at 476.
The dicta of Adam J in Rubenstein's case approved by Northrop J was as follows:
Where, as in the present case, there has been a clear infringement of the rule as to stating all material facts and not merely a failure to give sufficient particulars of facts which have been pleaded (a distinction made clear by Scott, LJ, in Bruce v Odhams Press Ltd [1936] 1 KB 697, at 712-13) the preferable course, I consider, in the interests of proper pleading is to strike out the offending pleading, with liberty to amend, rather than to order particulars. As Scott, LJ, said, at p 173 of the judgment, the whole of which will repay study in this age of lax pleadings, "in strictness, particulars cannot cure a bad statement of claim".
46 Taking these principles into consideration, it is clear that the applicant has failed to plead material facts in paragraphs 7, 8, 9, 10, 37 and 38 of the FASC. The respondents are not in a position to know what case will be advanced against them, and accordingly paragraphs 7, 8, 9, 10, 37 and 38 ought be struck out. I have formed this view because:
• Where the applicant is required to establish the existence of an employment relationship, a bare claim that the employment relationship existed as alleged in paragraphs 7, 8, 9 and 10 is inadequate. The various iterations of employment relationships alleged in these paragraphs were merely conclusions, unsupported by pleaded material facts.
• In the circumstances of this case, in order to support the contention that the employees were employed by the first respondent, the second respondent, the third respondent, or any combination of one or the other, the respondents are entitled to know the applicant's allegations as to each of the necessary factual elements required to prove the existence of an employment contract, for example:
o when and how the offer of employment was made;
o by whom the offer of employment was made;
o whether the person making the offer had actual or ostensible authority to bind the person on whose behalf the offer was made;
o when the offer of employment was accepted; and
o the material terms of the contract.
• It would be appropriate for such facts to be pleaded in the FASC. They are not pleaded in any of paragraphs 7, 8, 9, 10, 37 or 38.
• This is not a case where the pleadings can tolerate a level of generality in respect of the alleged employment relationship(s). This position is underlined when one has regard to paragraphs 37 and 38, where the applicant pleads the existence of "the Employment Structure". To the extent that the existence of the Employment Structure is an integral part of the applicant's case, it is incumbent on the applicant to properly plead material facts relevant to that claim.
• Even assuming that particulars could address the failure of the applicant to plead material facts, such particulars as support the pleadings in paragraphs 7, 8, 9, and 10 are woefully inadequate, inconsistent and confusing. I have already given numerous examples of the inconsistency inherent in the attempted application of the particulars to paragraph 8 to paragraphs 7, 9 and 10, as well as the internal contradictions within paragraph 8 itself. By way of further example:
o in the particulars to paragraph 8 the applicant pleads that the relevant employees were employed by the first respondent, and that the fourth respondent (or her husband) offered the relevant employees employment with the first respondent; however
o in paragraph 9 the applicant pleads an alternative allegation that the relevant employees were employed by the first, second and third respondents. In so doing the applicant relies, inter alia, upon particulars provided in paragraph 8 as well as further particulars to paragraph 9 which are inconsistent with the particulars in paragraph 8 (for example, paragraphs 8(p) and (q), and paragraph 9(e));
o in paragraph 10 the applicant pleads the further alternative allegation that the employees were employed by the second and third respondents, to the exclusion of the first respondent, while relying on particulars which are inconsistent with that plea (for instance, particulars to paragraph 8).
• In light of clear inconsistencies, particulars of paragraph 8 cannot be applicable mutatis mutandis to paragraphs 9 and 10. Attempts to do so in paragraphs 9 and 10 render those paragraphs ambiguous to the point of nonsense.