Freehouse Pty Ltd v Middletons Moore & Bevins

Supreme Court of Victoria|2001-05-29|Before: BEACH, J.

This is an appeal by the third party G.I.O. Insurance Ltd. from the order of a Master of the Court made on 11 April 2001 whereby the Master ordered that the third party provide further particulars of the material facts upon which it states that the second named defendant Paul Gronsbell Luntz had actual knowledge of certain matters as alleged in paragraphs 20(a) and 20(b) of the defence of the third party dated 2 October 2000.

The following is a short summary of the background to the appeal.

Prior to April 1995 certain members of the Jordan and Avram families and companies associated with them, together with a company named Millgreen Pty. Ltd. were engaged in litigation concerning the ownership and operation of the Bundoora Hotel (the Millgreen proceedings).

The Millgreen proceedings were settled as between the Jordan and Avram families by written terms of settlement entered into on 7 April 1995.

It is alleged that the second defendant in this proceeding Luntz, who is an accountant, instructed the first defendant, in this proceeding Middletons Moore & Bevins (Middletons) which is a firm of solicitors, to prepare company and trust documentation to give effect to the settlement. This it did.

The documentation in question provided for the incorporation of a new company to act as trustee of a unit trust through which the business of the Bundoora Hotel was to be owned and operated. The present plaintiff Freehouse Pty. Ltd. was incorporated for the purpose.

Subsequently disputes arose between the Jordan and Avram families over the terms of the documentation prepared by Middletons.

Freehouse instituted proceedings in this Court in respect of the disputes.

In 1997 Gillard, J. found that the Jordan interests were entitled to rectification of the company and trust documentation such that the documentation provided effective control of the joint venture to the Jordan family in accordance with the terms of the Millgreen terms of settlement. See Re Freehouse Pty. Ltd.[1]

Freehouse and others associated with the matter now bring this proceeding against Middletons and Luntz in relation to the deficiencies in the preparation of the documentation and against Luntz in respect of the role he played in its preparation.

In essence Freehouse and its co-plaintiffs allege that Middletons was retained by Luntz on behalf of both the Jordan and Avram families to act in the interests of both in the preparation of the documents. They further allege that it failed to so act.

Middletons on the other hand allege against Luntz that he failed to disclose to it that he was acting on behalf of both families.

As against Luntz the plaintiffs allege that he was similarly retained to act in the interests of both parties and that if Middletons' allegations are true that he failed to do so.

The third party is the professional indemnity insurer of Luntz. It has denied liability to indemnify Luntz under the policy on the ground that any liability Luntz has to the plaintiffs or Middletons arises from acts of dishonesty on his part and is excluded from indemnity under the policy.

By paragraphs 20(a) and (b) of its defence the third party alleges that Luntz knew of a number of matters in relation to the preparation of the documentation by Middletons which he failed to disclose to the Jordan interests and that his failure in that regard amounts to an act of dishonesty on his part; further that knowing that the joint venture documentation did not conform to the terms and the spirit of the Millgreen settlement, he instructed a member of Middletons to inform the solicitors acting for the Jordan family that a member of the Avram family John Avram, considered that the joint venture documentation did conform to the terms and spirit of the terms of settlement and in so doing again acted dishonestly.

On 18 December 2000 the second defendant served a request for further and better particulars of the third party's defence to the second defendant's statement of claim endorsed on his third party notice. Paragraph A of the request reads:

"A. Where you are asked to give the 'usual particulars' of any contract, agreement, transaction, arrangement, request, instruction, matter or thing you are required to state whether the same was wholly or partly in writing, in computer readable form, oral or to be implied, and: (a) Insofar as it was in writing, identify sufficiently each document or paper constituting any part of it and say where a copy of it may be inspected and if it has been lost or destroyed, say where a copy of it may be inspected and if there be no copy, give the material substance of it; (b) Insofar as it is contained in any computer readable form (for example, a disk, tape, random access memory, or the like) identify that form, say where and in whose possession it now is, when, and where it may be inspected, and, if it has been lost or destroyed, say where a copy of it may be inspected and if there be no copy give the material substance of it; (c) Insofar as it was oral, say when, where and between what actual persons, the conversation or conversations constituting part of it took place and give the material substance of each conversation; (d) Insofar as it was to be implied, state the acts, facts, matters, circumstances and things, and where they occurred or arose, from which the implication is to be drawn - and if contract, agreement, transaction, arrangement, information, request, instruction, matter or thing (as the case may be) was made, entered into, carried out or done by a person acting, or purporting to act, on behalf or with the authority of another, give the like particulars as are sought of the authority (express, implied or ostensible) of that person to act on behalf of that other."

"1. Pursuant to paragraph 20(a): (a) Give the usual particulars of the knowledge alleged therein. (b) State the acts, facts, matters and circumstances upon which you will rely in asserting the knowledge referred to therein. 2. Pursuant to paragraph 20(b): (a) Give the usual particulars of the knowledge referred to therein. (b) State the acts, facts, matters and circumstances upon which you will rely in asserting the knowledge referred to therein."

Paragraphs 1 and 2 of the third party's further and better particulars filed in the Court on 25 February 2001 read:

"1. Under paragraph 1 thereof (paragraph 20(a) of the defence): (a) The Second Defendant's knowledge was neither in writing, oral nor implied. Save to say that the Second Defendant had actual knowledge of the matters therein referred to, the Third Party is unable to provide the particulars requested. (b) The Third Party objects to provide the particulars requested on the ground that the request is directed solely towards ascertaining the evidence proposed to be adduced by the Third Party. 2. Under paragraph 2 thereof (paragraph 20(b) of the defence): (a) The Second Defendant's knowledge was neither in writing, oral nor implied. Save to say that the Second Defendant had actual knowledge of the matters therein referred to, the Third Party is unable to provide the particulars requested. (b) The Third Party objects to provide the particulars requested on the ground that the request is directed solely towards ascertaining the evidence proposed to be adduced by the Third Party."

On 3 April 2001 the second defendant filed a summons in the Court seeking (inter alia) an order that "the third party provide further and better particulars pursuant to a request from the second defendant 27 February 2001".

The latter date is clearly wrong. The second defendant's request is dated 18 December 2000. It is the third party's further particulars which were filed on 27 February 2001.

However, it was the summons of 3 April 2001 which was before the Master at the time the Master made the orders which are now the subject of this appeal.

In my view a preliminary matter to note about paragraph A of the second defendant's request is that on a strict reading of it, it may well be said that it cannot apply to "knowledge".

Paragraph A is specified to apply to "contract, agreement, transaction, arrangement, request, instruction, thing". In my opinion "knowledge" cannot be said to fall into any of those categories.

The paragraph is also said to apply to "matter". In my opinion it is highly debatable that "knowledge" is a "matter". My own opinion is that it is not.

The Australian Concise Oxford Dictionary defines "matter" as (inter alia) "a physical substance in general as distinct from mind and spirit, that which has mass and occupies space, a particular substance, material for thought or expression".

"Knowledge" on the other hand is defined as "awareness or familiarity gained by experience, a person's range of information, a theoretical or practical understanding of a subject, language etc., the sum of what is known, true justified belief, certain understanding as opposed to opinion".

In my opinion the request of the second defendant did not relate to knowledge and could well have been objected to on that ground.

Paragraphs 1(a) and 2(a) of the third party's further and better particulars state that the third party is unable to provide the particulars requested. In that situation it cannot be required to do something which it cannot do.

However, what the Master ordered is that the third party provide further particulars of the material facts upon which it states that the second named defendant had actual knowledge, which of course is something entirely different.

The order might well have read what evidence do you have available to establish that the second named defendant had the knowledge that you allege he had, for that is clearly the practical consequence of the order.

The issue for me to determine, therefore, is whether that is a legitimate requirement.

Rule 13.02(a) requires that every pleading shall contain in a summary form a statement of all the material facts on which the party relies, but not the evidence by which those facts are to be proved.

If there was nothing more, then the Master erred in making the order the subject of this appeal.

The material fact upon which the third party relies in this case is the fact that the second defendant possessed the knowledge in question.

It is argued on behalf of the second defendant, however, that the order is properly formulated, because Rule 13.10(3)(b) provides that every pleading shall contain particulars of any disorder of the mind, malice, fraudulent intention or other condition of the mind including knowledge or notice.

Before Rule 13.10(3)(b) was introduced into the rules there could be no doubt about the matter.

Rule 22 which then dealt with the question of particulars stated that wherever it was material to allege malice, fraudulent intention, knowledge, or other condition of the mind of any person, it would be sufficient to allege the same as a fact without setting out the circumstances from which the same is to be inferred.

I do not consider that it has. In my opinion when one is required to give particulars of the knowledge which one alleges a person has, one is required to detail the matters of which it is alleged that that person had knowledge. One is not required to identify the evidence which is to be called to establish that the party in question did have the knowledge.

If it were to be contended that Rule 13.02(a) is contradicted by Rule 13.10(3)(b) in my opinion Rule 13.02(a) is the "primary" rule and would prevail.

Paragraphs 2 and 7 of the Master's order of 11 April 2001 are set aside.

In lieu thereof the application made in paragraph 2 of the second defendant's summons dated 3 April 2001 is dismissed.

I order that the second defendant pay the third party's costs of the summons and its costs of the appeal.

I grant to the second defendant the appropriate certificate pursuant to the provisions of the Appeal Costs Act in respect of his costs of the appeal and the costs of the appeal he is required to pay to the third party.

At a glance

Court

Decision date

Before

Source

Judgment (46 paragraphs)

Parties