BETWEEN : GOLDACE HOLDINGS PTY LTD (ACN 082 875 134)

CASH CONVERTERS INTERNATIONAL LTD (ACN 069 141 546)

Practice and procedure - Application to strike out parts of amended statement of claim - Turns on its own facts

Rules of the Supreme Court, O 20 r 19(1), O 20 r 19(3)

Trade Practices Act 1974, s 51A, s 52

Application to strike out parts of statement of claim successful

Adelaide Petroleum NL v Poseidon Ltd (1988) ATPR 40-901

Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd [1987] FCA 84; (1987) 14 FCR 215

Butler v Crowley & Greenhalgh [2000] QSC 120

Coco v A N Clark (Engineers) Ltd (1969) RPC No 2, 41

Coe v Commonwealth of Australia [1979] HCA 68; [1979] 53 ALJR 403

Colbeam Palmer v Stock Affiliates Pty Ltd [1968] HCA 50; (1970) 122 CLR 25

Commercial Banking Co of Sydney Ltd v R H Brown & Co [1972] HCA 24; (1972) 126 CLR 337

Dalgety Australia Ltd v Rubin (1984), unreported; SCt of WA; Library No 5485; 24 August 1984

Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658

Day v William Hill (Park Lane) Ltd [1949] 1 KB 632

Deta Nominees v Viscount Plastic Products [1979] VicRp 17; [1979] VR 167

Dover Fisheries Pty Ltd v Bottrill Research Pty Ltd (1994) 30 IPR 360

Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) [1997] HCA 8; (1997) 71 ALJR 448

Farrell v Secretary of State for Defence [1980] 1 WLR 172

Fluor Australia Pty Ltd v State Energy Commission of WA, unreported; SCt of WA; Library No 6682; 10 April 1987

General Steel Industries Inc v Commissioner for Railways NSW [1964] HCA 69; (1964) 112 CLR 125

Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [1992] FCA 437; (1992) 109 ALR 638

Kabwand Pty Ltd v NAB (1989) ATPR 40-950

Kimberley Downs Pty Ltd v State of Western Australia, unreported; Library No 6414; 25 August 1986

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Madden v Kirkegard Ellwood & Partners [1975] Qd R 363

March v Stramare (E & M H) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506

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Pulham v Dare [1982] VicRp 67; [1982] VR 648

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"TR" v Australian Red Cross Society (1989) 1 WAR 335

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Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491

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Wheatley & Ors v Bell & Ors (1982) 2 NSWLR 544

Wimborne & Ors v Brien (1997) 15 ACLC 793

1 MASTER SANDERSON: This is the first defendant's application to strike out certain paragraphs of the plaintiff's amended statement of claim. The matter has a somewhat chequered history. Counsel for the plaintiff submitted that the first defendant's application was not properly before the court and did not comply with the letter, or at least the spirit, of the Rules regarding strike-out applications. In light of that submission I will begin these reasons by dealing with the events that led to the application and the plaintiff's submission that the application is incompetent.

2 On 6 June 2000 the plaintiff filed a chamber summons for leave to amend its statement of claim. This chamber summons was accompanied by a minute of proposed amended statement of claim also dated 6 June 2000. When the chamber summons was brought to the attention of a Case Management Registrar he ordered that it not issue but would be dealt with at a case management status conference listed for 22 June 2000. At the status conference Registrar Johnston made the following order:

"The plaintiff have leave to amend the statement of claim in terms of the proposed amended statement of claim dated 6 June 2000 and filed herein subject to obtaining leave to amend the indorsement of claim on the writ to include the causes of action relating to misuse of confidential information and misleading and deceptive conduct by 22 July 2000 upon which the minute shall stand as the statement of claim and further service thereof shall be dispensed with".

3 During the course of his submissions counsel for the plaintiff explained that prior to the status conference on 22 June none of the defendants had raised any objection to the plaintiff amending its statement of claim in terms of the minute. However, during the course of the status conference counsel for one of the defendants pointed out that the proposed amendments to the statement of claim were not covered by the original indorsement on the writ. While neither of the defendants wished to make an issue of this fact, they thought it appropriate to draw it to the attention of the plaintiff to allow the necessary steps to be taken. That explains the nature of the order made by the learned Registrar.

4 On 18 July 2000 the plaintiff issued an application to the Case Management Registrar seeking leave to amend the indorsement of claim and the statement of claim. Strictly speaking, in light of the orders made by Registrar Johnston on 22 June, the second of these two orders was unnecessary. The terms of the learned Registrar's order meant that once the indorsement on the writ was amended the statement of claim would automatically be amended. The matter came on before me in chambers on 31 July 2000. The orders made read, relevantly:

"(1) The plaintiff have leave to amend its Indorsement of Claim in accordance with the Minute filed herewith and for leave to amend the Statement of Claim in accordance with the Minute dated 6 June 2000."

5 Both defendants were represented when the orders were made and neither raised any objection either to the application to amend the indorsement on the writ or to the form of the amended statement of claim. However, subsequent to these orders being made, the solicitors for the first defendant wrote to the plaintiff outlining their concerns about a number of the paragraphs of the amended statement of claim. The plaintiff declined to act upon the first defendant's solicitor's concerns and on 21 August 2000 the first defendant issued the chamber summons presently before the court. The matter came on in chambers on 4 September and was programmed through to this hearing. It was the plaintiff's submission that in consenting to, or at least not opposing, the amendment of the statement of claim either before the Registrar on 22 June or in Master's chambers on 31 July, the first defendant was now precluded from bringing this application.

6 The application itself is brought under O 20 r 19(1) which allows the court to strike out any pleading "at any stage of the proceedings". Subrule (1) is conditioned by subr (3). This subrule reads as follows:

"Subject to paragraph (4) an application for an order under paragraph (1) must -

(a) be made within 21 days of the service of any pleading, or amended pleading, or writ to which the application refers;

(b) where the application is to strike out certain pleadings, specify -

(i) the subparagraph of paragraph (1) under which the application is made; and

(ii) those parts of the pleadings which the applicant seeks to have struck out;

(c) where the application is to strike out the entire pleading, clearly indicate that intention in the application."

7 These two subrules clearly indicate that an application can be made to strike out an amended pleading provided the application is made within 21 days of the service of any amended pleading. When leave was given to amend the statement of claim on 31 July 2000 service of the amended pleading was dispensed with. It is not entirely clear how r 19(3) is to operate in these circumstances. However, it would seem reasonable to assume that the 21 days limited for making a strike-out application is to run from the date the order granting leave was made. In that case the application to strike out was brought within time and is competent.

8 Having said that, the approach adopted by the first defendant was unfortunate in the extreme. Prior to 6 June 2000, the date upon which the plaintiff made application for leave to amend the statement of claim and filed the amended statement of claim, no indication had been given by the first defendant that it opposed leave to amend in terms of the minute being granted. When the matter came on before Registrar Johnston on 22 June 2000 there was still no indication that the first defendant objected to the amendment. If the Registrar had been advised at this status conference that the amendment was opposed, he could have programmed the matter through to a special appointment. Instead, it was not until 4 September that the matter was programmed, meaning the loss of something over 10 weeks. The first defendant's delay is unexplained and is a matter I will take into account when making orders as to costs on this application.

9 For the purposes of this application it is unnecessary for me to go into detail as to the nature of the plaintiff's claim. In previous reasons for judgment in this case, Goldace Holdings Pty Ltd v Vodafone Network Pty Ltd & Ors [1999] WASC 184, I dealt with an application for security for costs. In the course of those reasons I summarised the plaintiff's claim in the following way (par 3):

"... The first defendant is a company which is conveniently described as a 'service provider for mobile telephones'. The two-named second defendants operate retail outlets which sell, among other things, mobile phones. The plaintiff pleads that on or about 10 January 1998 it entered into an agreement with the three-named defendants, pursuant to which the plaintiff would have the exclusive right to sell the first defendant's mobile phones through the second defendant's stores. The agreement was said to be for five years with two further options for five years each. There were certain refinements to this agreement, largely to do with the fact that the second defendants operate stores through franchisees, which are not presently relevant. It is alleged by the plaintiff that by letter dated 26 March 1999 the first defendant repudiated its agreement with the plaintiff. It is also alleged that the second defendants also repudiated their agreement with the plaintiff on the same day. The statement of claim goes on to allege that there was, in effect, a conspiracy between the defendants which led to the repudiation by both defendants of their respective agreements with the plaintiff. Although it is not specifically pleaded, it would appear that the plaintiff has accepted the repudiation of the agreements by the defendants and it sues for damages for breach of contract and in relation to the alleged conspiracy ..."

10 By the amendment to its statement of claim the plaintiff seeks to add two additional causes of action. The first relates to alleged misuse of confidential information. The second relates to alleged misleading and deceptive conduct. The first defendant objects to the way in which both additional causes of action are pleaded in the amended statement of claim. It is said either that the pleading discloses no reasonable cause of action or, alternatively, is embarrassing and would delay a fair trial of the action. The plaintiff for its part says that both causes of action are properly pleaded and any difficulty which arises, arises only as a consequence of the complex nature of the claim being made. Counsel did not concede that the pleading required any amendment.

11 Turning first to the claim for misuse of confidential information, this is pleaded in par 25. The paragraph reads as follows:

"25. During negotiations in 1997 and 1998, it was agreed on behalf of Audiocom Pty Ltd (and/or a company which may be arranged instead of Audiocom, including Goldace) and the Vodafone group of companies, including VNPL ('the Confidentiality Agreement') in effect, as follows:-

25.1 That Mr George Karageorge, Mr Nick Karageorge, Mr Peter Karageorge, and Mr Angelo Petrelis and representatives of the Vodafone group of companies including VNPL would have discussions with a view to exploring the potential business opportunities relating to contractual arrangements for the provision of mobile phone services by Audiocom and/or another company to be arranged for that purpose ('the Project').

25.2 That in the course of discussing the Project the Karageorges and Mr Petrelis may disclose confidential information to the representatives of the Vodafone group, including VNPL.

25.3 That VNPL and the Vodafone group would protect the confidentiality of the confidential information.

25.4 That VNPL and the Vodafone group would not make use of or cause or permit to be made use of the confidential information other than for the purpose of the Project.

25.5 That VNPL and the Vodafone group would not make use of the confidential information to contract direct with another party or parties to the exclusion of Audiocom or the company which may be arranged instead of Audiocom (including Goldace)."

12 It is quite clear in broad terms what the plaintiff says occurred during the negotiations in 1997 and 1998. Certain parties came together to discuss a business proposal. On the one side there were three members of the Karageorge family and Mr Petrelis and on the other side there were representatives of the "Vodafone group". At the time the discussions took place the plaintiff was not in existence and the parties had, in all probability, not turned their mind to the entities which would conduct the business should any agreement be reached. However, the Karageorges and Mr Petrelis realised that during the course of negotiations it was possible they would pass confidential information onto the Vodafone group. They wanted to protect this confidential information and an agreement was reached to that effect.

13 While it may be clear from par 25 what actually happened, the pleading in its present form is clearly inadequate. If the process proceeded as I have suggested above, then it is first necessary for the plaintiff to plead that agreement was reached. How the plaintiff and the first defendant became parties to that agreement or became entitled to enforce rights under any agreement is clearly a material fact and is not addressed in the present par 25. Without such a plea par 25 must fail and should be struck out.

14 The amended statement of claim does contain what are described as "Particulars of the Making of the Confidentiality Agreement" as particulars to par 25. It is well settled that particulars cannot make good a pleading from which material facts are omitted: see Bruce v Odhams Press Ltd [1936] 1 KB 697; H 1976 Nominees Pty Ltd v Galli & Anor [1979] FCA 74; (1979) 30 ALR 181. It may be that matters which are raised in the particulars if reformulated could amount to a plea of material fact which, if established, would provide the basis of an agreement the plaintiff could enforce against the first defendant. However, this cannot be done by simply redescribing paragraphs which presently appear as particulars as material facts. Paragraph 25 requires a complete redraft.

15 Furthermore, there are certain matters which appear in the particulars to par 25 which would not in any circumstances be regarded as particulars. Once the plaintiff pleads the agreement it must plead as a material fact that confidential information was passed to the first defendant. That is a necessary element of the claim the plaintiff seeks to make out. Having pleaded the material fact the plaintiff must then particularise the confidential information allegedly given to the first defendant. Matters presently appearing in the particulars as par 25(g) seem to be a mix of material fact and particulars. This issue must be addressed.

16 Throughout par 25 there is reference to the "Vodafone group of companies", the "Cash Converters group" and the "Karageorge family". None of these terms is defined. The result is confusing - it is not clear on a reading of the pleading just who the plaintiff is referring to and what their connection is to the parties to the proceedings. If these terms are to be used they ought be defined. This is particularly the case with respect to the "Karageorge family" or as they are referred to elsewhere in par 25, the "Karageorges". It appears that from time to time George, Nick and Peter Karageorge were involved in negotiations. On occasions it is expressly stated which of the three was present at the negotiations. At other times they are referred to collectively but it is not clear whether all three are being referred to or just two or perhaps even one. This confusion can be relatively simply cured and it would assist the flow of the pleading.

17 The first defendant also attacked the pleading in par 26 of the alleged breach of the confidentiality agreement. The first defendant's complaints can be illustrated by reference to par 26.1 of the amended statement of claim. It is in the following terms:

"26.1 In or about 1998, 1999 and 2000, VNPL caused and/or permitted VNPL and other companies associated with the Vodafone group to use the information and to enter into direct negotiations and contractual relations with the Cash Converters group for the supply of mobile phone products to franchised stores outside Australia, to the exclusion of Goldace."

18 The first defendant says this plea is vague and embarrassing. At first it is said that it is not pleaded that the first defendant agreed not to share any confidential information with "other companies associated with the Vodafone group". In my view that criticism is well-founded. Secondly, it is said that no foundation is provided for a claim against the first defendant in relation to information used by other parties, even if those other parties are in some way associated with the first defendant. In my view, this point too is well made. It is a matter which requires attention in an amended pleading.

19 Paragraph 27 seeks, as a remedy for the alleged breach of the confidentiality agreement, an account and payment to the plaintiff "of all benefits which VNPL and other companies associated with the Vodafone group have gained from the aforesaid misuse of confidential information". Excepting that the remedy of account is open if the plaintiff is able to establish breach of the confidentiality agreement, it is still difficult to see how the first defendant can be liable to repay benefits which have passed to other companies even if these companies are related to the first defendant. This too is a matter which requires further consideration.

20 In all the circumstances I am satisfied that par 25, par 26 and par 27 of the amended statement of claim ought be struck out. Paragraph 28 makes a claim for damages for breach of contract and while it cannot stand as a result of the three preceding paragraphs being struck out, it is not in its terms objectionable. It would be open to the plaintiff to leave par 28 in its present form in any amended pleading.

21 The plea of misleading and deceptive conduct is to be found in par 29 through to par 39. About these paragraphs the first defendant has a number of specific complaints. First it is said that it is nowhere pleaded that representations said to be misleading and deceptive were relied upon by the plaintiff. In answer the plaintiff refers to par 38 of the amended statement of claim. Even allowing for par 38 it seems to me that the pleading is inadequate. Reliance is an element of any claim brought under either s 51A or s 52 of the Trade Practices Act. To found a cause of action the plaintiff must allege that it relied upon the representations and if required to do so, must particularise that reliance. Paragraph 38 falls some way short of being a proper plea.

22 There were a number of other concerns raised by the first defendant which were of a rather more minor nature. For instance, it was submitted that if reliance was to be placed on s 51A, it was necessary for the plaintiff to plead that the first defendant did not have reasonable grounds for making representations as to future matters. To this extent it was said that the present par 36 is inadequate. Strictly speaking, the first defendant is correct. While the deficiencies in par 36 would not, in and of themselves, justify the paragraph being struck out, it is a matter which, in my view, deserves further attention. The same can be said of a number of other complaints made by the first defendant. For instance, in par 34 there is a reference to "confidential information". It is not entirely clear what the plaintiff is referring to. It would assist if reference was made to particular subparagraphs of par 32 or if confidential information was defined. Once again, while confusing, these defects would not justify if they stood alone, the pleading being struck out. But they should be attended to in any amended pleading.

23 There is one further difficulty with the misleading and deceptive conduct plea which was not referred to by the first defendant. Paragraph 34 pleads inducement and reliance to central elements of the Trade Practices Act claim. It pleads first that relying upon pleaded representations the plaintiff "continued to disclose confidential information" and secondly, that the plaintiff "concluded the VNPL Agreement". This is a rolled-up plea. It is by its nature confusing and embarrassing. The continued disclosure of confidential information if induced by misleading and deceptive conduct, might give rise to certain relief. If the plaintiff entered into the VNPL agreement consequent upon misleading and deceptive conduct, that would give rise to relief of an entirely different nature. On that basis par 34 is not a proper plea and should not stand.

24 With respect to par 29 through to par 39, I am of the view that the best course would be to strike them out in their entirety and to give leave to replead. That is not to suggest that all the paragraphs are bad. Rather, it seems to me that the pleading requires a rethink and that would be best done adopting a holistic approach.

25 I will hear the parties as to the precise form of the orders.