Grant v Monitor Money Corporation Pty Ltd

REASONS FOR JUDGMENT 1 The applicants are retired school teachers. In July 1992, the applicants consulted the respondents to obtain financial and investment advice about their future retirement. At all material times, the first respondent was a licensed securities dealer and securities adviser, and the second respondent acted as its representative. The applicants say they told the second respondent that they wanted to be in a position of having, during their retirement, an annual income of $40 000 indexed for inflation. The respondents provided financial and investment advice to the applicants over a period of 11 years. A central part of the advice given to the applicants was that they should enter into margin loans and use the money so borrowed to build up their investment portfolios. Relying on that advice, the applicants borrowed money on margin loans and made investments. 2 In 2002, the applicants were required to dispose of a substantial portion of their investment portfolios to meet margin calls which were made on the margin loans. In 2003, the applicants terminated their relationship with the respondents.

3 In November 2004, the applicants commenced their application in this Court against the respondents. In March 2005, the applicants filed an amended statement of claim. By April 2005, each of the respondents had filed defences to the applicants' amended statement of claim. However, in October 2005, the respondents' solicitors raised concerns regarding the pleading of the applicants' amended statement of claim. In December 2005, the applicants filed and served a re‑amended statement of claim, their witness statements and the expert evidence upon which they relied. 4 On 3 February 2006, being the date on which the respondents' amended defences was due, the respondents sought an extension of time within which to file and serve amended defences. Shortly thereafter the respondents sent the applicants a notice complaining about the terms of the re‑amended statement of claim. On 12 June 2006, the applicants, pursuant to leave, filed and served a substituted statement of claim, with the object of accommodating the complaints of the respondents. The substituted statement of claim is 108 pages, and consists of 194 paragraphs. This document did not satisfy the respondents. 5 By the notice of motion now before the Court, the respondents seek to strike out the whole of this substituted statement of claim, alternatively, 124 of its 194 paragraphs. I will refer to the substituted statement of claim as the statement of claim from now on. 6 The causes of action relied upon by the applicants in the statement of claim, are: (a) breach of contract; (b) negligence; (c) breach of fiduciary duty; (d) misleading or deceptive conduct in breach of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) ('the ASIC Act'); and (e) the making of securities recommendations without a reasonable basis in respect of which relief is sought under s 817 and s 852 of the Corporations Law (Cth) and s 1402 of the Corporations Act 2001 (Cth). 7 In the statement of claim, the applicants identify a number of different alleged breaches of duty by the respondents, relating to advice given to the applicants in 1999, 2001 and 2002. These are referred to in the statement of claim as the 1999 breaches, the May 2001 breaches and the January 2002 breaches. 8 In addition, the applicants rely upon other causes of action, which are referred to, in the statement of claim, as the '2001 securities recommendations' and the 'margin call breaches'. 9 I have distinguished between the first set of alleged breaches, identified in [7] above, and the causes of action, identified in [8] above, because in respect of the first set of breaches the pleader has adopted a 'templated' approach to the manner in which the causes of action in contract, tort and breaches of fiduciary duty are pleaded in the statement of claim. This is relevant because many of the objections, which are taken to the pleading of the causes of action comprising the 1999 breaches, apply equally to the equivalent 'templated' paragraphs in respect of the May 2001 and January 2002 breaches. 10 At the hearing, counsel for the respondents withdrew objections to 13 of the paragraphs of the statement of claim. 11 The objections made by the respondents to the statement of claim are grouped in three main categories. Firstly, it is said that the applicants have failed to plead the implied term which arises by law in a contract for provision of professional services to exercise reasonable care and skill in the provision of the services, which it is said, has consequential effects for a number of other paragraphs. Secondly, it is submitted that in a large number of paragraphs the applicants have pleaded material facts as particulars, or failed to plead essential material facts. Thirdly, it is said that in a number of paragraphs the applicants have pleaded conclusions rather than materials facts. 12 The applicants submitted that I should dismiss the respondents' strike out application on the basis that it was an abuse of process. Counsel for the applicants said that the respondents' defence was being conducted by insurers, and I should infer from the oppressive nature of the application that it was brought for the purpose of causing delay and expense to the applicants, and that it was an instance of an abuse of position by parties whose defence was backed by substantial resources vis-à-vis parties with limited resources. Counsel for the applicants said that this inference was open because of the large number of objections which were made, and also the 'technical' nature of the objections that were made - this not being a case where legitimate complaint could be made that the respondents were unable to know what the case was that they would have to meet at trial. 13 I agree that the respondents have made a large number of 'technical' objections. However, I am unable to infer the application has been brought by the respondents in bad faith as an abuse of process with the purpose of stifling the litigation. Other inferences are also open and, in some instances, the respondents have established good grounds for the objections made. 14 The relevant principles on what comprise proper pleadings are, with respect, well summarised by Young J in Cadence Asset Management Pty Ltd v Concept Sports Ltd [2006] FCA 944 at [34]‑[37] where he said: 'I do not read Finkelstein J's reasons for decision as departing from the application of the correct legal principles. Pleadings are a means to an end, and not an end in themselves: Banque Commerciale S.A., En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 ('Akhil') at 293 per Dawson J. Their essential function is to state with sufficient clarity the case that must be met, so as to ensure the basic requirement of procedural fairness: Akhil at 286 per Mason CJ and Gaudron J. In Dare v Pulham (1982) 148 CLR 658 at 664, the High Court said that pleadings and particulars have a number of functions: they furnish a statement of the case that is sufficiently clear to allow the other party a fair opportunity to meet it; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. The authorities do not lay down a standard of perfection in pleadings. In Akhil, Dawson J referred, with approval, to the statement by Isaacs and Rich JJ in Gould & Birbeck & Bacon v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490 at 517 that the function of pleadings is discharged when the case is presented with reasonable clearness, and any want of clearness can be cured by amendment or by particulars. These propositions are not inconsistent with the authorities that state that particulars cannot be used to fill gaps in the material facts that must be alleged: Bruce v Odhams Press Ltd [1936] 1 KB 697 at 712 per Scott LJ; H 1976 Nominees Pty Ltd v Galli (1979) 40 FLR 242 at 246; Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109; and Charlie Carter Pty Ltd v Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413 ("Charlie Carter") at 419. That proposition is directed towards material facts that must be alleged to constitute a complete cause of action. It can be difficult to distinguish between a material fact and a particular: Charlie Carter at 417 per French J. The difference often turns upon the level of generality at which the material facts are alleged in a particular pleading. Consistently with the rules of pleading, a cause of action can be pleaded at different levels of generality, depending upon the nature of the case and the subject matter in question. A pleader is not compelled to plead primary or evidentiary facts. Most pleadings will set forth the material facts at a level which involves some element of conclusion concerning the factual ingredients of the cause of action. But, whatever level of generality is adopted in the statement of claim, it must adhere to the basic principle that the purpose of pleadings is to define the issues and thereby inform the parties in advance of the case they have to meet and so enable them to take steps to deal with it: Charlie Carter at 417. On the other hand, a pleading will infringe the applicable practice rules if it contains nothing more than broad conclusions asserted at such a high level of generality that the opposite party cannot understand the case it has to meet: see, eg, Trade Practices Commission v David Jones (Australia) Pty Ltd, supra, at 113-115. In Charlie Carter, French J summed up the applicable principles at 417 by saying that: "The sufficiency of the pleading may be judged first by reference to the necessary condition that it disclose a reasonable cause of action and secondly, by reference to the requirement for sufficient particularity that the respondents know in advance the case they have to meet." I am not satisfied that Finkelstein J departed, or intended to depart, from this principle.' 15 The courts have, particularly since the introduction of case management and the use of witness statements filed in advance of the hearing, tended to view strike out applications with disfavour. In Subsea International Australia Inc v West Australian Petroleum Pty Ltd (unreported, Supreme Court of Western Australia, 7 May 1996, SCL 960281) Malcolm CJ observed at 3: 'It is, of course, correct that since the amendments to the Rules introducing various provisions designed to reduce delay in civil litigation and to pave the way for case management, applications to strike out pleadings have been viewed by the court with some degree of disfavour. This has two consequences. The first is that it casts an additional onus on those who are responsible for the preparation of pleadings to ensure that all of the requirements of pleadings are appropriately met. Secondly, it casts an onus on those who receive the pleadings and evaluate them only to resort to a string out application where that is absolutely necessary and it has not proved possible, by reason of negotiation between the parties, to overcome any deficiencies in the pleadings.' 16 Further, in Gardiner v Ray [1999] WASC 140, Steytler J said at 13, at [33]: 'Applications to strike out pleadings are, in my opinion, overused. They are always productive of delay and expense, sometimes substantially so, and often produce no sufficient countervailing benefit, particularly when they are brought at a late stage of the proceedings…Those who wish to bring an application of this kind…should consider…what benefit will be derived by bringing the application and then weigh against that the inevitable consequences of delay and expense.' 17 French J in Police & Nurses Credit Society Ltd v Burgess Rawson (WA) Pty Ltd [2006] FCA 1395 said at [17]: 'What are "necessary" particulars of any claim, defence or other matter pleaded is a matter of judgment. The underlying principle is that the case of each of the parties is adequately exposed to the other. It is important to maintain a sense of balance in the detail of particulars sought and ordered. The provision of particulars should not be allowed unduly to increase the cost and delay associated with litigation. In contemporary commercial litigation where, frequently, the court will direct the filing of witness statements or affidavits on either side subject to the right to cross examination, the necessity for elaborate particulars and lengthy debates about them is even more questionable.' 18 I now deal with the objections to the statement of claim. 19 As mentioned, previously the applicants have applied a 'templated' approach to the pleading of a number of the causes of action. Accordingly, the objections raised to one of the templated paragraphs also apply to the other equivalent templated paragraphs in the statement of claim. In those instances, I will deal with those objections by reference to the first paragraph in respect of which the objection is raised. The heading will indicate the related paragraphs to which the reasons apply. Paragraph 15 20 In para 15 it is pleaded that by no later than 15 October 1992 the applicants accepted the first respondent's offer as alleged in para 8 (mistakenly referred to in the pleading as para 7), and an agreement was concluded between the applicants and the first and second respondents ‑ pursuant to which the first respondent and the second respondent each agreed to provide financial planning and investment advice to the applicants on a continuing basis. 21 The respondents seek to strike out para 15 because it contains an allegation that two contracts came into being on the acceptance of the offer pleaded in para 8, whereas the offer in para 8 is alleged only to have been made by the second respondent as agent for the first respondent. Therefore, say the respondents, the offer could, on acceptance, only give rise to the making of a contract with the first respondent. 22 In my view, there is merit in the respondents' argument. The applicants accept this and say they will amend para 8 of the statement of claim, to allege that the offer was made by the second respondent, on his own behalf, and as agent for the first respondent. 23 I will strike out para 15 of the statement of claim, but give leave to the applicants to amend para 8 of the statement of claim as anticipated. Paragraph 16 24 Paragraph 16 is sought to be struck out on the basis that the express terms of the agreement do not identify when the first respondent was required to perform the obligations. The paragraph should not be struck out because there is no issue in relation to the question of when the respondents should be required to comply. Paragraph 17 (21, 30, 31, 39, 40, 47(c), 50, 53, 66, 69(d), 75, 78, 121, 124(g), 127(c), 130, 133, 139(a), 139(d), 140, 149(a), 153(a), 153(d), 164, 167(d), 170(c), 173, 176) 25 Paragraph 17 pleads that it was an implied term of the agreement that the respondents would render their financial planning and investment advice services 'with the care and skill expected of a reasonably competent financial planning and investment adviser'. 26 The respondents complain that the applicants have not accurately pleaded the implied term to exercise reasonable care and skill which is implied by law as part of a contract to provide professional services. The implied term, say the respondents, can only be pleaded as being 'to exercise reasonable care and skill'. Counsel for the respondents submitted that the vice, in the way that the applicants have pleaded the term, is that it permits an expert witness to assert what he or she would have done in a specific situation, and that this introduces a false issue. Accordingly, say the respondents, the numerous references in the pleading to what a competent financial planning and investment adviser would have done or advised, should all be struck out as raising false issues. 27 Although it is common practice to plead the duty in the terms contended for by the respondents, it cannot be said that pleading the duty in terms of an obligation to exercise the care and skill of a reasonably competent member of the relevant profession, as the applicants have done in this case, is so untenable that it should be struck out (see, for example, Yates Property Corp v Boland (1997) 145 ALR 169 at 198; Boland v Yates Property Corporation (1999) 167 ALR 575 at 588, at [47]; Heydon v NRMA Ltd (2000) 51 NSWLR 1 at 54‑56, at [149]‑[155] and at 78, at [228] ('Heydon')). Further, as the applicants point out, the implied term is pleaded in those terms in a precedent in Bullen & Leake & Jacob's, Precedents of Pleadings, 15th edn, vol 2, Sweet & Maxwell, London, 2004, p 1280. 28 Expert evidence on the standards of care and skill that would be applied by a competent professional has been held to be admissible (Heydon at 55, at [152]). The question of whether the witness statement of the expert witness, whom the applicants intend to call at trial, is in an admissible form, is a matter for trial, and is a separate question to whether it is untenable to plead the implied term in the terms pleaded by the applicants. 29 Accordingly, para 17 and all the other related paragraphs to which the objection has been taken, should not be struck out. Paragraph 18 30 In para 18, the applicants plead a number of implied terms of the agreement and give particulars which, inter alia, cite the requirements for an implied term established in the case of Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 ('Codelfa'), namely, that the terms are obvious, reasonable, capable of clear expression, consistent with the express terms of the agreement and necessary to give business efficacy to the agreement. Reference is also made in the particulars to certain facts relied upon in support of the terms alleged. 31 The respondents seek to strike out para 18 on the basis that the implied terms there pleaded are conclusions from material facts that have not been pleaded. The respondents object that it is not sufficient to plead these facts as particulars. The respondents also say that the facts and matters relied upon in support of the elements of the test in Codelfa should be pleaded in the body of the statement of claim as material facts. 32 In my view, it is not necessary to plead as material facts, in the body of the statement of claim, each of the facts relied upon for the implication of the term. It is sufficient if particulars of those facts and matters are given, so long as the respondents know the case they have to meet. The particulars appended to para 18 do, in fact, refer to certain facts relied upon in support of the implied terms, which are pleaded in the body of the statement of claim, but it is not necessary for all such facts to be pleaded in the body of the statement of claim. The applicants, also, refer in the particulars to the fact that the respondents held themselves out as members of the Financial Planning Association. Any further clarification of the applicants' case as may be necessary can be obtained by a request for further and better particulars. Paragraph 19(c) 33 Paragraph 19 of the statement of claim pleads: 'By reason of: (a) … (b) … (c) the fact that persons, who suffer a reduction in their standard of living frequently suffer personal distress, stress and anxiety, at or about the time the Agreement was made it may reasonably be supposed to have been in the contemplation of the Applicants and the Respondents that in the event of a breach of the Agreement causing loss the Applicants would suffer personal distress, stress and anxiety.' 34 In para 19(a) and para 19(b), the applicants pleaded that the respondents had knowledge of certain facts relating to the applicants at the time of the making of the agreement. 35 However, the respondents complain that para 19(c) does not, as is the case with para 19(a) and para 19(b), allege that the respondents knew of the fact pleaded in para 19(c). 36 The applicants say they will amend the statement of claim to make it clear that it is alleged that the respondents knew of the fact pleaded at para 19(c). Paragraph 30 (60, 86, 109, 160) 37 Paragraph 30 pleads the applicants' circumstances as at June 1999 which it is alleged in para 31, would be relevant to an investment adviser's assessment of the risk profile of the applicants. Among the circumstances pleaded are: '… (f) the Applicants required an income from their investment portfolios; (g) the only source of income that would be available to the Applicants in their retirement would be income from their investment portfolios; (h) taking into account the investment mortgage on the applicants' Roleystone property the loan to valuation ratio in respect of the applicants' investment portfolios was 72.60% at the end of May 1999 and 83.19% at the end of June 1999.' 38 Counsel for the respondents submitted that para 30(f) and para 30(h) were conclusions from material facts that were not pleaded. In my view, whilst the allegations made in para 30(f) and para 30(h) are conclusions, they also plead material facts, and they are not objectionable conclusions in the sense referred to in Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 ('David Jones'), in that the conclusions do not obscure the essential factual elements of the cause of action, so that the respondents do not know the essence of the case they have to meet. 39 As to para 30(g), counsel submitted that the paragraph was vague and embarrassing. It was said to be inconsistent with another plea in para 30, that in June 1999 the applicants had an income earning capacity as teachers or self‑employed writers, and so it was not sufficiently clear that the source of income being referred to in para 30(g), was the only source of income that would be available during their retirement. In my view, para 30(g) makes it tolerably clear that the pleader is referring to the position of the applicants during their retirement from all income earning activity. Accordingly, I would not strike out the impugned parts of para 30. Paragraph 31 (61, 87, 110, 161) 40 Paragraph 31 pleads that 'by reason of matters alleged in paras 26, 28 and 30' of the statement of claim, an assessment of the applicants' risk profiles by a competent financial planning and investment adviser would have resulted in the applicants being classified as 'balanced investors'. The respondents complain that the applicants have not pleaded any facts in support of an allegation that the applicants should have been classified by such a financial planning and investment adviser, as 'balanced investors'. In my view, the facts relied on are sufficiently identified by reference to the allegations made in paras 26, 28 and 30 in para 31. The paragraph should not be struck out. Paragraph 32 (62, 88, 111, 162) 41 The respondents' objection is that there are no facts pleaded in support of the allegation that the applicants 'needed' a financial plan and investment strategy having the characteristics which are identified in the paragraph. 42 In my view, the necessary facts are provided by the pleader referring in that paragraph to the need arising, 'having regard to matters alleged in paras 28 to 31' - which identify the applicants' financial circumstances and risk profiles. The paragraph should not be struck out.