Idoport Pty Ltd & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Ltd & Market Holdings Pty Ltd v Donald Robert Argus; Idoport Pty Ltd "JMG" v National Australia Bank Limited

Supreme Court of NSW|2001-06-12|Before: Einstein J, Mr JJ

CITATION : Idoport Pty Ltd & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Ltd & Market Holdings Pty Ltd v Donald Robert Argus; Idoport Pty Ltd "JMG" v National Australia Bank Limited [25] [2001] NSWSC 485 FILE NUMBER(S) : SC 50113/98; 50026/99; 3991/00 HEARING DATE(S) : 04/06/2001 JUDGMENT DATE : 12 June 2001

Idoport Pty Ltd (Plaintiff) PARTIES : Market Holdings Pty Ltd (Plaintiff) National Australia Bank Limited (Defendant) Donald Robert Argus (Defendant) JUDGMENT OF : Einstein J

COUNSEL : Mr JJ Garnsey QC, Mr M Dicker (Plaintiffs) Mr T Bathurst QC, (Defendants) SOLICITORS : Withnell Hetherington (Plaintiffs) Freehills (Defendants) CATCHWORDS : Practice and Procedure - Application for leave to amend - Leave to plead contractual obligations - Inappropriateness of pleading contractual obligations within particulars as a matter of form - Particulars cannot replace formal pleading of a material allegation of substance - Separation of pleadings and particulars LEGISLATION CITED : Corporations Law (1990 - 1999) Idoport Pty Ltd & Anor v National Australia Bank Ltd & 8 Ors [2001] NSWSC 328 CASES CITED : Idoport Pty Ltd & Anor v National Australia Bank Ltd & 8 Ors [2001] NSWSC 142 Liverpool City Council v Irwin (1977) AC 239 DECISION : Leave to amend to plead tort of inducing breaches of contract against Messrs Courtney and McKimm. Further submissions sought on other pleading issues.

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION - COMMERCIAL LIST

50113/98 IDOPORT PTY LIMITED & ANOR v NATIONAL AUSTRALIA BANK LIMITED & 8 ORS

50026/99 IDOPORT PTY LIMITED & ANOR v DONALD ROBERT ARGUS

3991/00 IDOPORT PTY LIMITED ("JMG") v NATIONAL AUSTRALIA BANK LIMITED

JUDGMENT - On Pleadings Issues 1 A number of disparate pleading issues remain outstanding for decision.

Causes of action against Messrs Courtney and McKimm for inducing breaches of contract 2 On 2 May 2001 a judgment was delivered on the second tranche amendments sought by the plaintiffs in the proposed Fourth Amended Statement of Claim. Idoport Pty Ltd & Anor v National Australia Bank Ltd & 8 Ors [2001] NSWSC 328. For the reasons given in the judgment leave to plead the causes of action against Messrs Krasnostein, Cicutto, Barnes and Argus for inducing breaches of contract was refused. The position of Messrs Courtney and McKimm was reserved for further submission. 3 Each party has now addressed further submissions in relation to the position of Messrs Courtney and McKimm. 4 It appears that the only material change to the form of the pleading as against Messrs Courtney and McKimm which had been propounded at the time when the 2 May judgment was handed down is to delete the word "not" in subparagraph (a) of the "particulars of liability as individual" so that the subparagraph would in each case read: "Mr Courtney/Mr McKimm] in fact acted at all material times substantially in the interests of NAB and the NAB Group and without any, or any sufficient substantial regard to the interests of NMG and the NMG Group companies of which [each of them were directors]. As such [each of them] at all times [were] and acted at all times as in substance [strangers] to NMG, the NMG Group and their interests and [were] in the position of [third parties] in relation to NMG and the NMG Group, whether or not [they] purported to act as [officers] of NMG and the NMG Group companies]" 5 The remaining particulars which are common are in the following terms: "(b) Further, Mr Courtney, by the conduct pleaded in paragraphs [the relevant paragraphs are set out] to the extent he purported to act as an officer of NMG and the NMG Group companies has not acted and continues to fail to act bona fide within the scope of his authority as an officer of NMG and of companies within the NMG Group of which he is an officer. (A) at general law, he has failed to act honestly in the interests of and for the benefit of NMG and the NMG Group companies; and not to act in the interests of or for the benefit of persons other than NMG and the NMG Group companies; and not to act capriciously or wholly unreasonably; and not to act so as to place himself in a position of conflict with its duties and obligations as a fiduciary; and (B) he has acted in breach of his obligations as an officer of NMG and of companies within the NMG Group under and in contravention of section 232 of the Corporations Law (1990 - 1999) and (a) failed to act honestly in the exercise of his powers and in the discharge of the duties of his office, and (b) in the exercise of his powers and in the discharge of his duties, he has failed to exercise the degree of care and diligence that a reasonable person in a like position would exercise in the circumstances of NMG and of the companies within the NMG Group of which he was an officer, and (c) he has made improper use of his position to gain directly and indirectly an advantage for NAB and to cause detriment to NMG and of companies within the NMG Group of which he was an officer; and (C) he continues to act in breach of his obligations as an officer of NMG and of companies within the NMG Group under and in contravention of sections 180, 181 and 182 of the Corporations Law (1999) by (a) in the exercise of his powers and in the discharge of his duties, failing to exercise the degree of care and diligence that a reasonable person in a like position would exercise in the circumstances of NMG and of companies within the NMG Group of which he is an officer occupying his office with the same responsibilities, and (b) failing to exercise his powers and discharge of the duties of his office in good faith in the best interests of the corporation and for a proper purpose; and (c) improperly using of his position to gain directly and indirectly an advantage for NAB and to cause detriment to NMG and of companies within the NMG Group of which he was an officer. (c) Further, in the circumstances, the dominating concern of Mr Courtney was to carry out acts which in the light of his knowledge he knew to have the natural and probable consequences of depriving JMG of its contractual rights and benefits as asserted by JMG." 6 In my view it is inappropriate on a pleading issue to go beyond the approach taken in the earlier judgment and in particular to go beyond the reasoning in paragraphs 65 and 66 of the judgment. The position of their Messrs Courtney and McKimm differs from that other personal defendants for the reasons given in paragraph 67 of the judgment. The appropriate exercise of the Courts discretion is to allow leave to amend to plead the cause of action against Messrs Courtney and McKimm. The principles were set out in paragraphs 12 and 13 of the judgment delivered on the first tranche amendments [2001] NSWSC 142. The questions of principle raised by both parties in their written and oral submissions are appropriate for decision as part of the final judgment.

Paragraph 30 (2) of the presently proposed version of the Fourth Further Amended Statement of Claim 7 A degree of complexity surrounds the manner in which the plaintiffs come to presently seek to furnish particulars of the proposed paragraph 30 (2) of the present version of the fourth further amended statement of claim now sought to be propounded. 8 The judgment on the first tranche amendments was delivered following receipt of written and oral submissions by the parties. 9 Originally the plaintiffs had sought leave to plead an implied term [referred to during argument as "paragraph 18.6 (ii)"] asserting that: "NMG would, and NAB would procure that NMG would, do everything technically possible (and would enhance, modify or add to the Ausmaq Service to the extent necessary) to exploit fully the existing, actual and potential functionality of the Ausmaq service with the following: (a) Tax Advantaged Accounts (General Superannuation); and/or (b) Share Trading; and/or (c) Foreign Currency Trading; and/or (d) Fixed Interest securities; and/or (e) Debenture market products; and/or (f) Insurance Products; and/or (g) Martin Lending Particulars see the matters referred to in MFI P71" 10 Following the defendants address on the application, the plaintiffs withdrew the application for leave to amend to plead this implied term. 11 Precisely the same situation arose with respect to a further term which the plaintiffs had originally sought to pursue and then determined not to press. In this case the relevant implied term (referred to during argument as "paragraph 18.6 (iii)"] had asserted in the alternative to paragraph 18.6 (ii) that: "NAB and NMG would take all reasonable steps to exploit fully the existing, actual and potential functionality of the Ausmaq Service with the following functionality (and enhance, modify or add to the Ausmaq Service to the extent necessary) so as to provide: (a) Tax Advantaged Accounts (General Superannuation); and/or (b) Share Trading; and/or (c) Foreign Currency Trading; and/or (d) Fixed Interest securities; and/or (e) Debenture market products; and/or (f) Insurance Products; and/or (g) Martin Lending Particulars see the matters referred to in MFI P71" 12 A close examination of the respective submissions advanced on the occasion in question throws up the difficulties which on the defendants' then submissions, were thrown up by these claims for leave to amend. The defendants also relied upon evidence given by Mr Lovell on affidavit and in the witness box going to suggested prejudice to the defendants were the subject amendments to be allowed in the terms then pressed. 13 The particular difficulty with the proposed paragraph 18.6 (ii) was the width and imprecision of the alleged obligation. In answer to the defendants request for particulars by way of an identification by the plaintiffs of those things which were "technically possible" to exploit fully the functionality of the Ausmaq System, the answer given was "… this is a matter for evidence and includes any reasonable enhancement, modification or addition (such as increased access paths to the Ausmaq Service by Market Participants including the Internet) necessary to provide: (a) Tax Advantaged Accounts (General Superannuation) and/or

(g) Margin Lending" [See MFI D71 paragraph 20 (a)] 14 As the defendants put in earlier submissions, the inclusion in this particular of the word "reasonable" altered the sense of the pleaded implied term. 15 A further request for particulars sought identification of the enhancements, modification or additions which the plaintiffs alleged were necessary to exploit fully the functionality of the Ausmaq Service. The answer given was that the request did not arise from the pleading and further: "Without prejudice to this answer... some of the additional services are those referred to in paragraph 18.6 (second appearing). Others include the 4 NAB Services". [See MFI D71 paragraph 21] 16 The defendants had submitted that the only basis upon which leave could be given to plead paragraphs 18.6 (ii) and (iii) was if the defendants were given an appropriate opportunity to deal with what was suggested as a new and greatly expanded case and as a case which would entitle the defendants to investigate a myriad of technical issues going to matters which it was suggested had not yet been addressed by experts [transcript 6452]. The proposition for which the defendants contended was that an unlimited claim to contractual obligations for NMG to do everything technically possible to exploit fully the existing actual and potential functionality of the Ausmaq service, would require a universe of attention not previously addressed by experts. And even to the extent that the exercise was necessarily required to be focused on the seven matters identified in paragraph 18.6 (ii) and (iii), the defendants submission was that extensive additional evidence would be necessary to permit the defendants to treat with these issues. 17 In the result the plaintiffs as I have already said, elected not to pursue the application for leave to amend to include these paragraphs. It therefore became unnecessary for the court to determine whether these amendments should be allowed and if so, upon what terms. However the judgment on the second tranche amendments did take into account certain aspects of Mr Lovell's evidence going to prejudice with respect to new causes of action then allowed. 18 A different area of discourse was opened in relation to paragraph 30 (1) and (2) of the form of statement of claim which had been sought to be propounded in the following terms: "The Gateway Service is and will be a service within the definition of the Ausmaq Service (as defined in the Consulting Agreement) being a service with equivalent or similar functionality to: (1) the service of providing an automated securities trading system and related services being the Ausmaq Service (by any name anywhere) as it was in fact at the relevant date (6 November 1996), and/or

(2) the service of providing an automated securities trading system and related services being the Ausmaq Service (by any name anywhere), as it was in fact at the relevant date (6 November 1996) and as it is or should be or should have been enhanced or modified or added to (for the duration of the Consulting Agreement)" 19 It will be immediately apparent that the above paragraph raises only a question of the proper construction of the definition of the Ausmaq Service to be found in the Consulting Agreement. 20 The judgment on the first tranche amendments dealt at the same time with the proposed amendment to paragraphs 18.6 (iv) and 27.4A, these amendments raising common issues. Paragraph 18.6 (iv) had sought to plead an implied term that NAB and/or NMG "would not act as a competitor to the Ausmaq Service". Paragraph 27.4A had sought to plead a fiduciary obligation on NAB and NMG "not to act or conduct itself [sic] as a competitor to Ausmaq Systems or Ausmaq Service". 21 The judgment relevantly included the following: " Dealing with the proposed amendment to paragraphs 18.6 (iv) and 27.4A 70 Insofar as the existence of any fiduciary obligation along lines sought to be pleaded in paragraph 27.4A is concerned, I already indicated that the defendants do not submit that the existence of such a fiduciary obligation is unarguable. The defendants case in relation to the fiduciary obligation was said to depend upon the court's ruling in relation to the 18.6 (iv) amendment.

71 For the reasons earlier given it does not seem to me appropriate that the court now embark upon the detailed examination of the underlying contractual documents, by way of construction and parameters relevant to the suggested implication, which examination would be necessary in order to determine the defendants submission that the term sought to be implied as propounded in paragraph 18.6 (iv) could never be implied. The matter should be considered as part of the final judgment after full argument and in the light of all relevant evidence. Additionally the defendants have now indicated that provided the plaintiffs no longer press as particulars to paragraph 50.19 (being the factual allegation to support breach), certain of the bullet point sub-paragraphs to be found on pages 19 - 21 of MFI D71, the defendants as I understand it, did not suggest prejudice in terms of paragraphs 18.6 (iv) being allowed to be propounded. If one regards the bullet points as notionally numbered, the defendants have no difficulty with the plaintiffs pressing bullet points numbered 1, 2, 3, 5, 6, 8, or 12. As to bullet point numbered 4, the defendants problem was that this reverted back to the claim to amend paragraph 18.6 (i) and should thus not be permitted. I have already dealt with that paragraph so that this bullet point will require to remain in the particulars.

72 As to bullet point numbered 10, the defendants problem was in two parts. The first part was again that the reference to NAFM reverted back to the claim to amend paragraph 18.6 (i) and should thus not be permitted. As I have said, I have already dealt with this aspect. However the second part is of more significance and affect the whole of the plaintiffs entitlement to press bullet point 10. The second part of the defendants objection goes to an important matter which relates to the lack of transparent reasoning in identifying in paragraph 30 (2), what, as a matter of an alleged legal obligation, is the obligation for which the [plaintiffs] contend to support the allegation that there was a binding obligation on any of the defendants to enhance, modify or add to the Ausmaq Service in the terms stipulated for in the last two or so lines of paragraph 30 (2). As the transcript will record Mr Bathurst took the court carefully through the steps which the plaintiffs previously sought to take and now seek to take, in moving from paragraphs 29 to paragraph 33.3. The defendants assert that they are entitled to require the plaintiffs to identify exactly where the contractual obligation is . The plaintiffs are obliged to identify with precision whether they assert that there was an obligation to enhance Ausmaq so that it became Gateway, if that is what is claimed, or alternatively to identify with precision whether they assert that there was an obligation, once the Gateway Service was envisaged, to use Ausmaq to supply it, if that is what be claimed. The claim is apparently put outside of the existing reference in paragraph 33.12 to a breach of clause 7 of the Consulting Agreement . To my mind this certainly requires to be clarified and I direct the plaintiffs make the position clear before being content to allow so much of paragraph 30 as includes within sub-paragraph (2) the words following the reference to the date 6 November 1996. Outside of this aspect, the balance of the claimed amendment to paragraph 30 is apparently not opposed and therefore ought be allowed. [Emphasis added] 73 Once this issue of a further form of words by way of clarification in the pleading is worked through and depending upon it, it may well be that the inclusion of the ninth bullet point on page 20 of the landscape particulars MFI D71 will not be opposed by the defendants. 22 The central problem which has now been raised concerns the particulars which the plaintiffs have produced in an attempt to comply with those sections of the judgment which I have emphasised in the above extract . 23 The particulars now sought to be provided are in the following terms: '(1) The [Gateway Service etc] is a service with equivalent or similar functionality to the Ausmaq Service within the definition of "Ausmaq Service " in clause 1.1 of the Consulting Agreement as the Ausmaq Service was in fact as at 6 November 1996. (2) Further, and alternatively to (1), Ausmaq system as it existed at 6 November 1996, 2 August 1997 and April 1999, could, if necessary, have been enhanced, modified or added to so as to support and include most of the features of the Gateway Service and the Gateway Service then would have equivalent or similar functionality to the Ausmaq Service. The respects in which it could, if necessary, have been enhanced, modified or added to so as to support and include most of the features of the Gateway Service and the Gateway Service are set out in and the Plaintiffs rely upon the contents of Mr Martin's 10 July 2000 statement. (3) Further, and alternatively to (1), there is a contractual obligation under the Consulting Agreement for the Ausmaq Service as it was at 6 November 1996 to have technical and systems development after 6 November 1996 which would result in enhancements, modifications and additions to the Ausmaq Service. This obligation reflected the common commercial objectives of the parties to the Consulting Agreement pre-contract: see MFI P76 Schedule A paragraphs 3 and 9. The obligation arises: A) as a matter of contractual inference and/or necessary implication from the following parts of the Consulting Agreement: (i) the last two lines of the definition of "Ausmaq Service" in clause 1.1; (ii) the definition of "Business Plan" in clause 1.1; (iii) the definition of "JMG Software" in clause 1.1; (iv) the definition of "System IP Rights" in clause 1.1; (v) clause 3.1(b); (vi) clause 4.1(a); (vii) clause 4.2(a); (viii) clause 7; (ix) clause 11.1; (x) clause 11.4(d); (xi) Schedule 1 clauses 4.1 and 4.2; and (xi) Schedule 1 clause 4.6. B) in the alternative to A), the Plaintiffs rely on the matters in A) and, in addition, on the terms of the Consulting Agreement pleaded in the following paragraphs of the 4FASC: 13.1, 13.2, 13.3, 13.4, 14, 15.1, 15.2, 15.3, 15.6, 15.7, 15.8, 18.1, 18.2, 18.3, 18.4, 18.5 and 18.7. (4) Further, the Consulting Agreement upon its proper construction does not permit NMG and NAB, alternatively NMG, to make decisions which have the effect of starving NMG and Ausmaq Systems of the necessary funding and resources (including staffing) so that the Ausmaq Service is not enhanced, modified or added to so that the Ausmaq Service is not equivalent or similar to a service developed or proposed to be developed by an Operating Entity within the meaning of that term in clause 1.1 of the Consulting Agreement. In other words, the result of the Ausmaq Service being not equivalent or similar to a new service cannot be achieved through NMG being starved of funds and resources for the purpose of enhancing, modifying and adding to the Ausmaq Service. The Plaintiffs say this construction is supported by the matters referred to in the previous paragraph. (5) Further, it follows from the above matters and particulars that when the decision was made by NAB and NAFM to develop the Gateway Service the contractual obligation lay on NAB and NMG, alternatively, NMG to: (a) regard the Gateway Service as a service which was equivalent or similar to Ausmaq Service for the purposes of the Consulting Agreement; (b) to the extent they regarded the Gateway Service as not being equivalent or similar to the Ausmaq Service, to determine whether the Ausmaq Service could be enhanced, modified or added to, to include the functionality in substance of the Gateway Service; (c) to the extent it could be so enhanced, modified or added to, to proceed to take such steps except where it was unreasonable so to do; and (ed) not act or conduct themselves in relation to the Gateway Service as a competitor of the Ausmaq Service.' 24 Before turning to examine these particulars it should be noted that the last sentence of paragraph 72 of the first tranche amendment judgment made plain that subject to clarification of the matters earlier stipulated in the same paragraph as requiring to be clarified, "the claimed amendment to paragraph 30….ought be allowed". 25 It seemingly tolerably plain that sub-paragraphs (1) and (2) of the new particulars constitute factual assertions although raising of course questions of construction of the subject definition. To this extent they seem unexceptional as proper particulars of paragraph 30 (2) of the pleading sought to be propounded. Mr Martin has given evidence on the matters the subject of sub-paragraph (2) of the new particulars to paragraph 30 (2). 26 The particular difficulty which arises concerns sub-paragraphs (3), (4) and (5). 27 Sub-paragraph (3) clearly seeks to plead a contractual obligation. It so happens that the obligation sought to be pleaded is in very similar terms to that which the plaintiffs had previously sought to press (but following argument had determined not to press) as paragraph 18.6(ii). 28 Sub-paragraph (4) in the first sentence uses the words "the Consulting Agreement upon its proper construction" but fails to make plain precisely what the ambit of those words is intended to be. No particular form of wording is given to identify any further claimed contractual term (be it express, implied or partly express and partly implied) upon which the claimed proper construction is said to rest. The second sentence is likewise difficult to categorise. Arguably it simply amounts to a particular of breach of an innominate allegation of contractual term. Arguably it is put forward as amounting to a particular of breach of some earlier pleaded contractual term which is not here identified. The third sentence seeks to pray in aid the contractual obligation asserted in sub-paragraph (3). 29 Sub-paragraph (5) seems to clearly raise allegations of contractual obligation. 30 Leaving aside for the moment the question of whether or not the plaintiffs at this stage in the proceedings should be given leave to plead these contractual obligations, it is quite clear to my mind that as a matter of form the plaintiffs should be obliged to plead the allegations in paragraphs of the statement of claim proper and should not be permitted to rely upon the subject allegations under the guise of particulars to a paragraph in the pleading raising the construction of a definitional issue. 31 Particulars simply cannot replace a formal pleading of a material allegation of substance. The clear risk which arises were the court to permit this mode of proceeding is that extensive argument would be likely to arise later in terms of what were the pleaded issues. At this stage in these proceedings for obvious reasons it is inappropriate for that lack of clarity. 32 As the above extract from paragraph 72 of the first tranche amendment judgment made plain, the plaintiffs were obliged: (a) to identify with precision whether they assert that there was an obligation to enhance Ausmaq so that it became Gateway and/or (b) to identify with precision whether they assert that there was an obligation, once the Gateway Service was envisaged, to use Ausmaq to supply it 33 In response the plaintiffs appear, as I understand MFI P162 (5), to be asserting that when the decision was made by NAB and NAFM to develop the Gateway Service, there was indeed a contractual obligation upon NAB and NMG, or alternatively, upon NMG: (1) to take certain unstated steps in terms of an assessment or examination of the Gateway Service [whilst not expressly pleaded, the need to take such steps would seem necessary as a matter of commonsense as a logical precursor to NAB/NMG being required "to regard" &c.] (2) if those steps resulted in the conclusion [the word 'regard' is presumably used in this sense] that the Gateway Service was a service which was equivalent or similar to the Ausmaq Service for the purposes of the Consulting Agreement, presumably to oblige the defendants to proceed to apply the relevant Performance Bonus provisions of that agreement on that basis [the last mentioned matter is not stated expressly - the reader is left to infer this] (3) to the extent that those steps resulted in a determination that the Gateway Service was not a service which was equivalent or similar to the Ausmaq Service, to determine whether the Ausmaq Service could be enhanced, modified or added to, to include the functionality in substance of the Gateway Service (4) to the extent that the Ausmaq Service (in the circumstances referred to in (3) above) could be so enhanced, modified or added to, to proceed to take such steps except where it was unreasonable so to do (5) not to act or conduct themselves in relation to the Gateway Service as a competitor of the Ausmaq Service. 34 This combination of alleged contractual obligations, whilst to a certain extent making clear the matters which the first tranche amendment judgment required to be made clear, would require to be pleaded in separate paragraphs of the pleading sought to be propounded, with attendant particulars. 35 How then is the court to deal with the new proposed particulars to paragraph 30 (2)? 36 Presently as I have said, the particulars in sub-paragraphs (1) and (2) seem unexceptional 37 Clearly sub-paragraph (4) is objectionable in form and further was not the subject of earlier examination during the argument which preceded the first and second tranche amendment judgments. Hence it is clear in my view that the plaintiffs ought also be required to plead this allegation as a part of the pleading proper and to transform the wording so that the pleaded allegation and the particulars to it are separated out. Following that exercise I would be disposed to permit argument on whether leave should be granted to so amend. It may be that the existing pleadings and particulars go a distance towards supporting the proposition that parameters of what is now sought to be put have already been pleaded or particularised. The fact remains that in its present form, sub-paragraph (4) cannot be allowed as a particular. Arguably following the plaintiffs pleading the allegation and the particulars to it in separate paragraphs of the statement of claim, they may be permitted to cross-reference paragraph 30 (2) to the new paragraphs. 38 I turn then to sub-paragraph (3). 39 The defendants submitted at the time when the plaintiffs sought to plead the paragraphs referred to during argument as 18.6 (ii) and 18.6 (iii), as implied terms, that the terms unarguably would not be implied as a matter of necessary implication from the express terms of the agreement. The submission was that they unarguably would not be implied in fact. The submission was that the terms were not necessary to give business efficacy to the contract, nor so obvious that they went without saying. 40 The submission in relation to paragraph 18.6 (ii) was that to impose an absolute obligation to carry out development regardless of the difficulty, cost and ultimate benefit was neither reasonable nor equitable. The submission was the courts have consistently refused to impose absolute obligations of that nature and that the plaintiffs had implicitly recognised the difficulty in their particulars [MFI D71 paragraph 20(a)] where contrary to the implied term pleaded, they had limited the requirement by reference to a reasonableness criterion. 41 Submissions were also advanced that the terms in the proposed paragraphs 18.6 (ii) and (iii) were incapable of clear expression and that they were inconsistent with the express provisions of the agreement. 42 The same submissions are now relied upon in the defendants opposition to the plaintiffs present attempt to plead the contractual obligation identified in particular (3) of the proposed particulars to paragraph 30 (2). 43 The defendants written submissions in MFI D72 put the matter as follows:- "8.1 The second paragraph numbered 18.6 (ii) also unarguably will not be implied.

8.2 The implied term alleged is that apparently subject only to technical constraints which existed from time to time NMG was obliged and NAB was obliged to procure NMG to enhance the System by adding the services listed in paragraph 18.6. The plaintiffs in their particulars have declined to specify what was technically possible at the time (paragraph 20(a) of the Particulars).

8.3 For the same reasons as those set out for the first paragraph numbered 18.6 such a provision does not arise from the express words of the agreement. The agreement is silent as to the mode of development except for those clauses relating to the provision of business plans which do not oblige NMG to agree to any particular business plan or mode of development and do not impose any obligation whatsoever on NAB .

8.4 The provision will not be implied in fact. It is not necessary to give business efficacy to the contract, it is not so obvious it goes without saying and to impose an absolute obligation to carry out development regardless of the difficulty, cost and ultimate benefit is neither reasonable nor equitable. Courts have consistently refused to impose absolute obligations of this nature (see Liverpool City Council v Irwin (1977) AC 239 at 256; Hospital Products (supra) at 91-92). The plaintiffs implicitly recognise the difficulty in their particulars where contrary to the implied term pleaded they limit the requirement by reference to a reasonableness criteria (see paragraph 20 of the Particulars). The Particulars also make it clear that the content of the obligation is quite undefined.

8.5 Reliance is also placed as a particular on the matters referred to in MFI P71. This document produced during the course of the plaintiffs' opening simply asserts the existence of the term and does not provide any further basis for its implication. Similarly to the extent that reliance is placed on paragraphs 109-128 of the Particulars these seem to make no reference to this issue.

9.1 The alternative pleaded in the third paragraph numbered 18.6 also will not be implied for similar reasons. As with the earlier implied terms it does not arise as a matter of necessary implication from the express terms of the agreement. Further it is not necessary to give business efficacy to the agreement. It forms no part of the plaintiffs' case that the System was worthless without the addition of any one or all of these features and that that fact was objectively known to the parties. (See for example paragraph 12A of the proposed Statement of Claim). Once this is accepted it is plain that the agreement had business efficacy without the implied term. Even if the assumption was made that it was worthless without those features it would still have business efficacy having regard to the ongoing obligations to make the payments under the agreement.

9.2 The term is also inconsistent with the express provisions of the agreement. This is because the power of NMG to amend the business plan is a power that can be exercised in its absolute discretion.

9.3 It is also incapable of clear expression. It is by no means clear having regard to the use of the expression "and/or" whether the obligation is to provide one or all of these services. Further there is no objective criteria by which what is reasonable is to be gauged. The particulars supplied paragraphs 27-30) provide no assistance on this issue." 44 I am not disposed in the exercise of the court's discretion, on the basis of the claim that the terms are unarguably incapable of being implied, to refuse leave to plead the contractual obligation sought to be pressed as outlined in particular (3) of the particulars to paragraph 30 (2). 45 The separate and substantive matter raises the question of prejudice to the defendants in terms of permitting this contractual obligation to be now pleaded as proposed. It is important in this regard to recall that on two occasions the plaintiffs have made clear that the reach of the alleged obligation is proscribed by a 'reasonableness criterion': (i) As Mr Bathurst pointed out at transcript 6445.27 on 5 March 2001, in answer to the request that the plaintiffs identify those things which were technically possible to exploit fully the functionality of the Ausmaq system, the plaintiffs in paragraph 20(a) of the particulars summarised in MFI D71 at page 10 stated that whilst this was a matter for evidence, it included any reasonable enhancement, modification or addition (such as increased access paths to the Ausmaq service by market participants using the Internet) necessary to provide the seven named items. (ii) When Mr Garnsey addressed the court on 4 June 2001 in answer to the Court's question as to the full reach of the contractual obligation identified in sub-paragraph (3) of the particulars to paragraph 30 (2) where the sentence seems incomplete: (a) in failing to identify which enhancements, modifications and additions were being referred to and (b) in failing to furnish a criterion to which regard might be had in understanding the reach of the claimed obligation, his answer was that the claimed contractual obligation required the relevant defendants " to take reasonable steps to enhance or modify or develop…. That is the obligation with which we've contended in various parts of the fourth amended statement of claim, indeed the statement of claim all along". [Transcript 9816.7] 46 As I then understand the position, the plaintiffs now seek to add words to this effect into the present formulation of the first sentence to particular (3). 47 It remains necessary for the plaintiffs to propound the precise words of their proposed new formulation. It then remains necessary for the court to hear any further submissions from the defendants as to possible prejudice in the court permitting leave to so amend. 48 Sub-paragraph 5 seems to be based upon 'the above matters and particulars'. The fate of this sub-paragraph would seem to rest upon the fate of the plaintiffs being permitted or denied leave to formally plead the alleged contractual obligations presently reflected in sub-paragraphs 3 and 4. 49 To this extent the matter remains inchoate at this stage. This is, of course, singularly unfortunate when a witness is being cross-examined. The MLC proceedings 50 The relevant form of the pleading in the MLC proceedings is the further amended statement of claim to be found annexed to the plaintiffs notice of motion of 28 November 2000. 51 The first point which the defendants raise is the submission that the whole of the statement of claim should be struck out as simply unarguable on General Steel bases. The defendants at the same time concede that the matter can be argued in final submissions. [Transcript 9811]. 52 The defendants position in this regard is one going to the proper construction of clause 7 of the Consulting Agreement. I am not disposed at this time in these proceedings to summarily dismiss the MLC proceedings on bases going to the proper construction of the Consulting Agreement which is to be construed against the admissible evidentiary matrix capable of being taken into account once all the evidence is completed. The several sets of proceedings are being heard together and the Court could not construe aspects of one set of provisions without treating with the entirety of the contractual construction issues raised in all the proceedings. 53 On a more limited basis, the defendants submit that a considerable portion of the pleading includes otiose material and further that the pleading should be updated to make it consistent with the pleading in the main proceedings. Clearly consistency is appropriate where the same allegations are made in the MLC proceedings as are made in the main proceedings. The problem is the lack of specificity of complaint made by the defendants in this regard. 54 Rulings in relation to pleadings issues treated with in relation to the statement of claim in the main proceedings are required to be regarded as extending also to the statement of claim in the MLC proceedings. It is for the parties to make clear to the court where the pleadings in the MLC proceedings required to be amended so as to comply with any such rulings.

Further Submissions 55 For the reasons earlier given the proceedings are fixed for the taking of further submissions on Friday next 15 June 2001

I certify that paragraphs 1 - 55 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 12 June 2001

  Susan Piggott
  Associate
  12 June 2001

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