Pleadings - Particulars - Request for particulars by defendants after filing holding defences - Request out of time

Dalecoast Pty Ltd v Monisse & Ors [1999] WASCA 103

Lewkowski v Bergalin Pty Ltd, unreported; FCt SCt of WA; Library No 7675; 26 May 1989

Robowash Pty Ltd v Robowash Finance Pty Ltd [2000] WASCA 409

Simpson v Midalco, unreported; SCt of WA; Library No 6637; 19 March 1987

Verdell Pty Ltd v F & G Nominees Pty Ltd [2000] WASC 143

1 MASTER BREDMEYER: This is an application by the defendants for further and better particulars of the statement of claim. The defendants also seek an order to extend the time limit imposed by O 20 r 13(6) within which to request particulars of a pleading to 14 February 2001.

2 The statement of claim was attached to the writ and the writ was served on 26 October 2000. The request for particulars should have been served by about 25 November 2000. It was prepared about 7 February 2001 and first seen by the plaintiffs' solicitor about 14 February. So it is about two months three weeks late. What is the explanation for the delay? Between 8 and 27 November 2000 the defendants' solicitor thought that his clients were negotiating directly with the plaintiffs, when in fact they were not. The solicitor got that information from his clients. The clients were to blame for the wrong information, so that does not afford a good excuse for that part of the delay. The lateness of the request is a factor, and I think a strong one, against granting the extension of time.

3 As Mr Van Hattem said, in argument for the defendants, that case management has two parts to it. It is designed to speed up the interlocutory processes; not to see actions languish which, I add, brings the court and its processes into disrepute. At the same time the interlocutory processes should provide for the "fair and just termination of issues bona fide in dispute" needed "to prepare the case for trial", and here I quote from parts of O 1 r 4A.

4 I therefore turn now to look at the request for particulars on its merits. If the request is of high merit that would be a strong factor in overlooking the lateness. If it is of low merit, that would be a strong factor in refusing the application for an extension. I make the following preliminary points:

1. The statement of claim is detailed, 52 pages long.

2. The defences filed of 17 January 2001 - one for each defendant - are holding defences. I am told that is because the plaintiff would not grant a further extension of time so they had to go in. But it is May now and they have not yet been fleshed out, although I am told amendments are coming. I note from Mr Henderson's affidavit that the defendants' solicitors obtained a statement from Mr Langford regarding the statement of claim in early December and took a statement from Mr Martino, who lives in Sydney, in late December 2000. The solicitors also got 31 files from their accountant clients on 3 January 2001. Because the defences are holding defences, some matters which are presently denied, or not admitted, may in fact later be admitted. The greater the number of admissions in the defences, the fewer issues in the case and the lesser need for the defendants to seek particulars of the statement of claim.

3. The requests are lengthy, 15 pages long and 71 questions, some of which are divided into several parts.

4. I would expect the defendants to have an extensive knowledge of the plaintiffs' affairs and of the events referred to in the statement of claim. In the relevant period 1995 - 1997 Langford and Martino were the joint company secretaries and/or directors of the corporate plaintiffs. Although it is not admitted, it is highly likely that they were the accountants for the plaintiffs in this period, as the statement of claim alleges, and that they were involved in the discussions leading to the plaintiffs' investments in the companies Robowash and Scomac.

5 Counsel for the defendants has conveniently divided the requests into 15 categories and I propose to adopt that approach.

6 I consider none of these requests are necessary to inform the defendants of the case they have to meet. I take request 4 as an example. It relates to par 4.1 of the statement of claim. Langford would know when he was a partner of Deloittes.

7 It is not necessary to give answers to these requests to inform the defendants of the case they have to meet.

8 This relates to pleas that the defendants knew or ought to have known the plaintiffs would rely on their advice - for example par 16 of the statement of claim. I consider the answer to this request is not necessary. The pleads in par 16 are matters of inference, for example that Martino knew or ought to have known that if the February 1995 advice was incorrect - to invest $1.25 million in Robowash - the plaintiffs would suffer loss and damage. The defendants and the court are able to draw those inferences. It is not necessary for the plaintiffs to answer these requests to inform the defendants of the case they have to meet.

9 This relates to pleas that Langford, as a partner of Martino, knew of the financial position of Robowash and Scomac. Earlier pleas plead that Martino had a detailed knowledge of these matters. These pleas relate to Langford's knowledge - for example, request 25, which relates to par 38.1 of the claim. The plea is that Langford had actual or imputed knowledge of certain matters pleaded by reference to earlier paragraphs which refer to Martino's knowledge. The plea in par 38.1 is that by reason of matters pleaded in par 4.1 and par 4.8 Langford had "actual ... knowledge" of matters pleaded in pars 13, 14 and 16. When I read these five paragraphs it is clear that this actual knowledge is to be inferred from the various matters pleaded there. For example, Langford was a partner of Martino. Martino was told of certain matters about Robowash by its director Bolto in January or February 1995. Martino was given two documents about Robowash. Langford was a director and secretary of the first plaintiff at that time. The first plaintiff invested $1.25 million in Robowash in April and May 1995. It is reasonable to infer from all that that he would know about the investment, about why it was being invested and the circumstances.

10 The requests in this category relate to pars 38, 64.1, 93.1 and 110.1 of the claim. They all refer to actual or imputed knowledge. In each case particulars are given. They refer to both kinds of knowledge. They, in effect, tell the defendants that the plaintiffs are relying on certain inferences to prove actual knowledge. If, contrary to my view on the pleading, at trial the plaintiffs lead evidence of an instance of actual knowledge, for example, where Jasper told Martino something on a certain day, then the defendants will get some notice of that in Jasper's witness' statement. The plea is satisfactory. The defendants do not need particulars.

11 This covers requests which relate to pleas that the defendants knew or ought to have known that the financial condition and prospects of Robowash and Scomac because they were officers of the plaintiff companies. The requests seek particulars of actual knowledge and in two cases - requests 50(c) and 55 - also of imputed knowledge. The paragraphs of the statement of claim are 38.2, 42, 88.1 and 93.2.

12 I consider the particulars given in pars 38.2, 42, 87.2 (which is referred to in par 88) and 93.2 are adequate to inform the defendants of the case they have to meet. The plaintiffs are relying on inferences that a company director and secretary such as Langford exercising a reasonable degree of care, skill and diligence would have informed himself of the financial position of Robowash and Scomac which companies were receiving large investments from the plaintiff. No further particulars are necessary.

13 These requests relate to pleas about Robowash's and Scomac's financial condition and prospects of success. Request 11 relates to par 9 of the statement of claim:

"In January 1995 Robowash required an injection of $2,150,000 to continue trading beyond early March 1995."

14 No particulars are given at par 9 but they are given elsewhere, for example, at par 13 of the claim. It is there stated that Bolto, the director of Robowash, told Martino that the company needed an injection of $2,150,000 to continue trading beyond early March 1995. He also told Martino that his company needed a loan of $2,150,000 but the bank would not give it without a personal guarantee from him which he was not willing to give. It is also stated in par 13 that the company incurred a trading loss of $468,379 for six months to December 1994, and, as at December 1994, its liabilities exceeded its assets by $584,674.

15 These particulars are adequate to support the plea in par 9 of the statement of claim.

16 Request 32 relates to par 50 of the statement of claim:

"From July 1995 Robowash was unable to raise further funds from any party other than the plaintiffs".

"State every fact, matter and circumstance relied on to support the allegation that from July 1995 Robowash was unable to raise further funds from any party other than the plaintiff and, in particular, what attempts did Robowash make to raise funds from other parties?"

17 It is not necessary to give particulars of this. No doubt the plaintiff will call Mr Bolto to give brief evidence on this. Some idea of the company's poor financial prospects is given in par 13 which I have summarised briefly above. The defendants will see the discovered documents in due course. Mr Bolto is an independent witness. The defendants can speak to him and ask him questions about his attempts to raise funds other than from the bank and the plaintiffs, if they want to.

18 Requests 63 - 65 relate to pleas 123.1, 123.4.1 and 123.4.2 of the statement of claim. These pleas relate to the financial state of Scomac. They start by saying that as at 14 August 1997 Scomac was insolvent. That bold statement is followed up by supporting information. Scomac was the contractor doing the mining for a listed company, Goldmines of Australia Ltd ("GMA"). The extra information is that Scomac had failed to produce the required tonnage of the required grade of ore. GMA said it was in breach of the contract and owed it $400,000. GMA had demanded payment of that sum. Scomac had failed to meet the development requirements of the contract since November 1996 and this was because of extensive granite intrusions. Particulars given include two letters and some company minutes, all of which the defendants have seen.

19 I make the same comments as before. The information supplied is sufficient. Scomac is not the plaintiffs' company. It is a third person. If the defendants want to explore the plaintiffs' allegations about Scomac further they can contact Scomac and interview its directors.

21 Requests 13, 14, 19 and 50(b) are said to relate to the defendants' knowledge that these two companies, Robowash and Scomac, were in a poor financial position. These requests relate to pleas 14.3, 14.4, 32.3 and 88.1. On 14.3 and 14.4, the particulars given in the plea are adequate. From various matters stated there the court is being asked to infer that Martino, and through him Deloittes, knew certain matters. For example, in the first two pleas, that:

"- Robowash had insufficient management skills to meet its growth projections, and

- insufficient assets to raise further finance."

22 The particulars given in par 14 of the claim are adequate, namely, that Martino was told certain matters about Robowash's finances and given two documents referred to in par 13.

23 The plea in 32.3 is that Robowash's future expansion plans were not supported by adequate market research or financial estimations. The request is: What would have supported adequate market research or financial estimations? This request need not be answered. It is a red herring. It is a theoretical question. The two reports on Robowash's future are pleaded. Whether they show evidence of adequate market research etc is a matter for argument, or possibly evidence evaluating those reports.

24 Request 50 (I think it is 50(c) and not 50(b) as stated in the defendants' outline) relates to par 88.1 of the claim. The request relates to how Langford and Martino knew, or ought reasonably to have known, that Scomac's financial position was insecure. Sufficient detail is given in the plea to show that Scomac's financial position was insecure. How did Langford and Martino know that? One must look to other parts of the pleading. Langford was a director of the first plaintiff. Paragraphs 84, 85, 86 and 87 relates to his knowledge of Scomac's affairs and his role in the $1.5 million loan to it. Martino was his partner and co-secretary with him of the company. It is reasonable to infer that he knew of Scomac's plight.

25 This relates to one request and one paragraph of the statement of claim. The request is request 12 and the paragraph is par 12 of the claim. This plea, in summary, is that Martino negotiated on behalf of the plaintiffs with Eric Lindsay Bolto, a director of Robowash, the terms of the plaintiffs' proposed investment in Robowash. The requests asked are not relevant. It was not a binding agreement. It was a proposed agreement. The plaintiffs are not trying to hold the defendants or Robowash to a binding agreement, so the question of Martino's authority to negotiate is not relevant.

26 The requests ask the names of the parties. The names are given: Martino and Bolto. The dates are given: January and February 1995. No more precise date is necessary for this. Paragraph 12 is an introductory paragraph to be covered in a sentence or two of evidence at the trial. Mr Martino would know if he was there or not and if par 12 is an accurate statement of what happened. These requests for particulars are truly unnecessary.

27 Requests 15, 20, 38 and 48 relate to pleas that the defendants advised the plaintiffs to invest in the two companies. The requests seek usual particulars of the advice, whether the advice was written or oral etc. These requests need not be answered in this case. Interlocutory processes must be confined to matters essential to the fair and just determination of issues bona fide in dispute and it should be done in a timely way at a cost affordable to the parties. I am, here, using phrases from O 1 r 4A and r 4B. In a statement of claim of this length and precision, where numerous particulars are given, and a number of documents are mentioned, the defendants can assume that all advice was oral unless otherwise stated. The defendants can assume that, if it was written advice, the plaintiffs would have pleaded it. Elsewhere, where the plaintiffs have a relevant document, they have pleaded it. The plaintiffs promise possible further particulars after discovery and interrogatories. That is satisfactory.

28 Requests 31, 33, 34, 35 and 37 relate to pleas 46, 51, 52, 53 and 56. They use phrases Jasper "informed" Martino and Jasper "instructed" Martino. For example, Jasper instructed Martino to invest the plaintiffs' money in Robowash. I am told that all those instructions were oral. The plea should have said "orally informed" or "orally advised". I make the same comment here as in category 9. The defendants can assume it was oral. In a plea of this length and precision, where what documents the plaintiffs have, are carefully pleaded, the defendants can assume the advice was oral.

29 This relates to requests 17, 18, 22, 23, 27, 28, 40, 41, 43 and 44. These requests relate to pleas that the defendants owed duties to the plaintiffs. Particulars are sought to support the allegations.

30 The duties of an accountant to take reasonable care in advising a client about investing in a company, are spelt out in par 17 of the claim, for example, to make all "proper investigations of Robowash including a due diligence analysis". I know that the plaintiffs have given only one particular of "proper investigations", namely a due diligence analysis, but I consider that a sufficient particular. Request 18 relates to the plea that Martino owed a duty to advise the plaintiffs that Robowash needed an investment of more than $1,250,000 to continue operating. The answer to the request is found elsewhere in the pleading. Its director, Bolto, considered it needed $2,150,000 to continue trading. It was given $1.25 million by the plaintiffs but very soon after needed to ask for more to keep trading. Those two matters imply that $1.25 million was not enough.

31 Requests 22 and 23 relate to paras 35.2.3 and 35.2.4 of the plea. Request 22 relates to the plea that the investment was a high risk. What are the facts, matters and circumstances that support that allegation? They are found elsewhere in the pleading, especially in par 13.

32 Request 23 is similar and my comment is similar.

33 Request 27 and 28 relate to paras 39.1.1 and 39.1.2 of the statement of claim. These relate to fiduciary duties. The plea in 39 is that Langford owed to the plaintiffs fiduciary duties:

"- not to prefer his interest to the plaintiffs' interests, and

- not to prefer Deloitte and Martino's interests to that of the plaintiffs."

Paragraphs 40 and 41 of the claim plead the breach of those duties.

34 Requests 27 and 28 ask particulars of par 39.1.2, for example:

"Which interests of Langford should not have been preferred above which interests of the plaintiff?"

I do not consider the defendants can ask those questions. The plea in par 69 is one of law - a fiduciary owes a duty not to prefer his own interest to that of the plaintiff. There is no need for particulars of that. Whether such a duty is owed or not is to be ascertained by reference to cases and text books. The particulars sought in par 27 and 28 should have been asked of the plea in par 41, which is the plea of the breach of those fiduciary duties. They are not properly sought of par 39. But, in any event, even if the requests related to par 41 of the plea, the answer to the requests is given later in the pleading. I know from par 55 that at this time, July 1995, Robowash wrote to Deloittes saying that if the plaintiffs advanced further moneys to it, it would engage Deloittes as its accountants and both events happened.

35 Requests 40 and 41 relate to pleas 59.2.4 and 59.2.5. These requests are identical to requests 22 and 23 - the failure to advise that the investment was high risk and not an acceptable trustee investment. I give the same comment, the pleas are adequate. Requests 43 and 44 relate to pleas 69.1.1 and 69.1.2 and the accountant's conflict of interest. These are identical to requests 27 and 28. The earlier pleas 39, 40 and 41 refers to Langford and this plea, in pars 69, 70 and 71, refers to Martino. I give the same rulings. The requests are bad. They are not necessary to the simple legal plea of fiduciary duties - not to prefer your interest to that of your client. These requests could have been asked of par 71, the plea of breach of those duties. But again I ask, what is the point of it? It is pleaded in par 55 that on 8 July 1995, in a letter, Robowash wrote to Deloittes and said: "If we get the further finance from the first plaintiff you can be our accountants." It is pleaded that these two events happened. They got the finance and Deloittes became their accountants and the plaintiffs paid professional fees to that firm.

36 Requests 24, 30, 53, 56, 60, 61, 67, 68 and 69 relate to the defendants' failure to do certain things. The relevant pleas are 36.3, 44.3, 91.1, 95.3, 112.3, 116.3, 131.2, 131.3 and 135.2. The questions are in this form: "Precisely what enquiries should have been made." I repeat my view expressed on a similar point above. The plea is adequate. One detail of proper investigation is given - the failure to do a due diligence study of Robowash. That is sufficient. If the defendants want to plead that they carried out an enquiry, other than a due diligence enquiry, then they can plead that, and the plaintiffs can plead in their reply, if they want to, that that was not a proper or competent investigation.

37 Requests 45, 57 and 71 relate to the plea: "In reliance on advice given by the defendants the plaintiffs invested money ... ". Request 45 asks: "Precisely what is meant by 'without adequate security'?". The plea is clear enough. The three words mean what they say. Businessmen, company directors, accountants, lawyers, bankers and intelligent laymen know what those words mean.

38 Request 57 relates to plea 101.1.1 - was the Scomac loan agreement for $1.5 million oral, written, partly oral and partly written etc? That is a fair request. The information should have been given. Nevertheless, the words "entered into a loan agreement with Scomac on or about 1 November 1996 to advance $1.5 million to Scomac "suggest a written agreement. The amount also suggests a written agreement. It is a large sum and it is usual for a company lending such a large sum to another company, the two companies being unrelated, to make a written agreement. If the wording had been "the first plaintiff agreed to lend to Scomac ... " that might suggest an oral agreement.

39 It is a fair request. At the same time the defendants should not be acutely prejudiced by this lack of information. The two men were joint secretaries of the plaintiff company and one was a director. They would surely know about the agreement to lend $1.5 million to another company. But, because of the holding nature of the defence, they are not admitting anything.

40 Request 71 relates to plea 137. It, too, is a fair question. It asks if the loan of $500,000 to Scomac was written or oral etc. I suspect the agreement was written because of the wording used:

"The first plaintiff entered into a loan agreement with Scomac on or about 21 August 1997 to advance $500,000 to Scomac."

Also, the amount suggests a written agreement. It would be usual practice between arm's length parties to document a loan of this size in a written agreement. I suspect, too, that the defendants know the answers to this question as a director and secretary of the company making the loan. They have just not yet instructed their solicitors, or, if the instructions have been given, they have not yet got into the defences. They could admit, for example, that the plaintiff entered into the loan agreement, obtained the charge mentioned and advanced the $500,000, but deny that it was in reliance on any advice they gave. Then the form of the loan agreement would not matter.

41 Requests 46 and 47 relate to pars 81.1 and 81.2 of the pleas. To go back a bit, it is pleaded in par 55 that if further finance was given by the plaintiffs to Robowash, then the latter would engage Deloittes as its accountants. In par 79 it is pleaded that this happened and, in par 80, that Robowash paid Deloittes' professional fees. Paragraph 81 pleads that this was in breach of the fiduciary duties not to prefer Deloittes' interest to those of the plaintiffs. That is a clear plea - the breach of duty is in recommending a loan which got the accountants a new client. These requests are bad.

42 Request 49 relates to plea 85. This request asks about the parties to the conversation, when and where the conversation took place and the substance of the conversation. The plea is that the conversation was between Langford and Jasper. That is clear identification of the parties. The date from other paragraphs is approximately September 1996. The substance of the conversation is given. The place is not given. That is not important. The conversation is one Langford might remember. It related to a $2 million loan to Scomac.

43 With a few exceptions, namely the failure to say that certain advice was oral or written, and a failure to state whether an agreement was oral or written, the requests are all bad and not necessary for the fair and just determination of an interlocutory issue at a cost affordable to the parties. Taken as a whole, I consider the requests are not necessary to inform the defendants of the precise case they have to meet. Accordingly, the extension of time will be refused and the application for an order for particulars will be refused. I will consider an application for a special costs order.