IMPUTATION OF KNOWLEDGE
18 Concerning Westpac's knowledge, the applicants rely primarily upon the knowledge of certain employees, such knowledge having allegedly been derived at meetings with Storm personnel and seminars conducted by Storm. The alleged knowledge is both as to facts, and as to risk said to emerge from those facts. Westpac complains of the absence of any pleaded factual basis for imputing such knowledge to it. The proposed pleading identifies 11 employees who attended Storm meetings and/or seminars. The applicants have taken a somewhat equivocal approach to the relevance of the knowledge of these employees. At para 3 of their summary of submissions they submitted that the relevant knowledge was that of three employees, each of whom had dealings with the applicants. They were Ms Barrie, Mr MacDonald and Mr Kelk. However, in subsequent paragraphs, the applicants clearly indicate reliance on the fact that other employees attended the meetings and seminars. Similar equivocation appears at ts 43. For present purposes it may not matter. Westpac's criticisms of the proposed pleading are applicable to the larger group as well as to the three named employees.
19 Concerning the imputation to a company of knowledge, or means of knowledge, the majority of the High Court said in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 582-3:
As Bright J said in Brambles Holdings Ltd v Carey:
"Always, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company. This process is often necessary in cases in which companies are charged with offences such as conspiracy to defraud."
A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them.
(Footnote references have been omitted.)
20 In Australian Competition and Consumer Commission v Radio Rentals Ltd (2005) 146 FCR 292 Finn J said at [176]:
… The [ACCC's] submission does not suggest that any individual operator had or ought to have had the knowledge that the ACCC ascribes to Radio Rentals, although that operator did have at least the knowledge of what was entered at the time of its entry. Rather it seems to be based on an aggregation of what was so known by each individual call centre operator, with Radio Rentals being ascribed such knowledge about Mr Groth as that aggregated information might reveal.
In support of this somewhat startling proposition, the ACCC relies upon the observation made in the joint judgment of the High Court in Krakowski … .
21 His Honour then cited the passage in Krakowski which is set out above, and continued at [178] and [179]:
178 I would note a like submission in the Victorian Court of Appeal in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 in reliance on the above passage to aggregate certain facts known to various company servants and agents so as to give rise to a factual totality from which a dishonest intent, held by none of the individuals, might be inferred. The submission was rejected. In the words of Tadgell JA (at 145); see also Ashley AJA (at 160-161):
Neither that passage in Krakowski nor any other principle justifies the simple aggregation of the knowledge of a number of persons individually unaware of fraud, or facts which ought to disclose it, to create a notional person with a dishonest intent. The High Court in Krakowski was not purporting in the passage relied on to lay down any such principle but to authorise a consideration of the knowledge and circumstances of all relevant persons - including what may properly be inferred - in order to ascertain the mind of the corporation.
179 In my view the situation is no different where the aggregated knowledge to be attributed to a company is a prerequisite to a finding that it engaged in unconscionable conduct (or an equitable fraud). The present submission cannot properly be characterised as one in which the individual operators who recorded entries etc were involved in "different aspects of one transaction".
22 The reference to "different aspects of one transaction" reflects the final paragraph of the above extract from Krakowski. That paragraph deals with the circumstances in which the combined knowledge of more than one employee may be imputed to the employer company. That process is commonly described as "aggregation" of knowledge. Finn J then discussed the evidence in the case under consideration, in my view demonstrating the proper approach to be adopted in giving effect to the principles which his Honour had previously identified. Finn J then continued:
181 If the ACCC's submission were to be accepted to its full extent as put, it would have potentially alarming consequences for large, multi-function, corporations. It could also raise, potentially, rather significant privacy issues.
182 In rejecting the submission in the circumstances of this matter I am not suggesting that in no circumstances can or should disaggregated information be aggregated. While I express no concluded view on this matter, I incline as have others to the view that separate information held by an officer or agent of a corporation can be aggregated with information held by another at least where the first such person has "the duty and the opportunity to communicate it to the other": Re Chisum Services Pty Ltd (1982) 7 ACLR 641 at 649-650; see also Macquarie Bank Ltd at 161-162.
183 The final comment I would make is this. The contexts can vary widely in which the question of attribution of knowledge to a corporation can arise in virtue of knowledge possessed by one or more of its officers and agents: cf eg Beach Petroleum NL v Johnson (1993) 43 FCR 1 at 22-23; Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 446 at 484-485; Elliott v Nanda (2001) 111 FCR 240. Here I confine myself to circumstances in which what is sought by the aggregation of the knowledge is to alter the character of that knowledge when it is attributed to the employer corporation where no justification for the aggregation (eg participation by several employees in the same transaction) has been made out.
23 The decision in Krakowski effectively provides that, in considering whether a person's state of mind may be attributed to a company, reference must be had to the connection between them. Such connection must be so "close" and "relevant" that the person can be treated as being "identified with the company", so that his or her state of mind may be treated as "the state of mind of the company". The words "close" and "relevant" no doubt involve questions of degree, but those circumstances must be proven if a particular state of mind is to be imputed to the company. It follows that a party seeking to assert such imputation must plead the factual basis upon which it seeks so to do, but not the evidence which it proposes to lead in order to establish those facts. "Closeness" is presumably to be measured by reference to the relevant decision-making process and/or functional unit of the company. "Relevance" is presumably to be measured by reference to the transaction or conduct in issue in the proceedings. No doubt the two concepts will frequently overlap.
24 In Radio Rentals, Finn J accepted that the relevant enquiry was as to the knowledge and circumstances of all relevant persons. By reference to Krakowski, his Honour proceeded on the basis that in order to aggregate knowledge, the relevant persons must be involved in "different aspects of one transaction". Presumably, the transaction must be that in issue in the relevant proceedings. It may be, however, that the word "transaction" should be given a fairly broad, and protean meaning.
25 It follows that a party pleading the imputed knowledge of a company must identify in its pleadings:
any agent, officer, employee or other person whose relevant knowledge the pleader seeks to attribute to the company, identifying such knowledge and otherwise complying with the requirements of r 16.43 of the Rules;
the basis for imputing such knowledge to the company by reference to each person's "closeness" and "relevance" to the company in question, again complying with r 16.43; and
if the party seeks to aggregate the knowledge of two or more employees, the basis for so doing.
26 The questions of closeness and relevance will frequently involve an examination of the relevant person's duties and functions within and/or on behalf of the company, including reporting and supervisory responsibilities and inter-relationships with other agents, officers or employees and, possibly, with external persons or entities. Such an enquiry may be further complicated by informal variations of formal arrangements.
27 As I have observed, the applicants propose to plead, not only that factual knowledge of certain employees should be imputed to Westpac, but also that Westpac should be treated as knowing of any transactional risk which those facts may demonstrate, at least to people with relevant expertise. However the duty to report information may arise out of an appreciation of a risk which emerges from that information. In the absence of such an appreciation of the risk, there may be no reason to report the information, it being, in the relevant employee's view, quite innocuous.
28 Clearly, a party who seeks to plead imputed knowledge undertakes a substantial task. In this case the task is further complicated by the very large number of factual matters including risk of which, as the applicants plead, Westpac was, or should have been aware. Further, Westpac's knowledge is said to be attributable to the knowledge of Ms Barrie and Mr MacDonald, and that of at least one other Westpac employee, Mr Kelk, the business manager at Westpac's Lutwyche branch. There is also the alleged knowledge of other employees who attended the Storm meetings and seminars.
29 The applicants respond to criticism of their proposed pleadings as to knowledge by reference to generalized statements in relatively recent cases which suggest a "more robust approach" to pleadings. They submit that deficiencies, according to established pleading rules, may be overlooked if such deficiencies can be remedied in the course of case management. Reference is also made to statements to the effect that pleadings should not become burdensome. I accept that such sentiments are widely held and have merit. However it does not follow that where a party has elected to pursue a cause of action which necessarily involves a careful analysis of the facts, the Court may abandon the requirement that the other party be given adequate notice of the case to be met. The applicants seek to impute to Westpac, knowledge obtained by Ms Barrie and Mr MacDonald (and perhaps other employees) at numerous meetings and seminars, without identifying any particular aspect of such knowledge which is attributable to each such person, or the occasion or occasions on which such knowledge was acquired. Quite apart from anything else, Westpac is entitled to know these matters in order to respond to any request for discovery, and in order to proof its own witnesses. Further, the applicants assert the aggregation of the knowledge of numerous employees, but plead no express basis for such aggregation.
30 The applicants also seek to avoid the pleading complications inherent in their case by reference to three decisions. In Three Rivers District Council v Bank of England (No 3) [2001] 2 All ER 513 Lord Hutton said, at [126]:
Mr Stadlen QC, for the Bank, submitted that the pleadings were defective because they did not allege that identified or identifiable bank officials took conscious decisions to do acts or to refrain from doing acts with the requisite guilty state of mind. I do not accept that submission. It is clear from the authorities that a plaintiff can allege misfeasance in public office against a body such as a local authority or a government ministry (see Dunlop v Woollahra Municipal Council [1981] 1 All ER 1202, [1982] AC 158 and Bourgoin SA v Ministry of Agriculture Fisheries and Food [1985] 3 All ER 585, [1986] QB 716). Therefore I consider that the plaintiffs are entitled in their pleadings to allege in the manner they have done misfeasance in public office against the Bank without having to give particulars of the individual officials whose decisions and actions they claim combined to bring about the misfeasance alleged.
31 The point under consideration was whether, in order to establish misfeasance in office against a public body (the Bank of England), it was necessary to identify a particular official who, took a conscious decision to do acts or refrain from doing acts with the requisite guilty state of mind. As I understand it, his Lordship was simply pointing out that the plaintiff had not sought to establish a case against the relevant corporation upon the basis of the actions and knowledge of any particular officer. In the present case, the applicants expressly base their case upon the knowledge of Westpac's employees and their actions.
32 The applicants also refer to Leinenga v Logan City Council [2006] QSC 294. In that case, the plaintiff sought to establish a cause of action against a local authority by virtue of the actions and states of mind of its officers. The relevant vice in the pleading was a failure to plead a basis for aggregation of such states of mind. The applicants then refer to Australia Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd [2007] ATPR ¶42-210. In that case Bennett J was concerned with proceedings in which it was alleged that four corporations had, as part of a larger group, contravened the relevant legislation. The other members of the group were not identified by name, but by reference to their participation in its activities. Her Honour held that the pleading need only link the relevant conduct to the named respondents. Provided that the pleading alleged material facts which identified the conduct of the unnamed parties, it would not be deficient in that regard. These cases have no relevance for present purposes.
33 The applicants seem to submit that there are circumstances in which an employee's knowledge may be imputed to a company other than those identified in Krakowski and Radio Rentals. In my view Krakowski prescribes the basis upon which such imputation may occur. The word "necessary", in the extract from the judgment of Bright J, leaves no room for any other approach. The various means of knowledge identified by the applicants are merely examples of the general principle expressed in those cases. The applicants also submit that references by Westpac's counsel in its submissions to s 84(1) of the TP Act and s 12GH(1) of the ASIC Act are in some way misconceived. Broadly speaking, those provisions deal with statutory bases for attribution of knowledge. As I understand Westpac's submissions, these provisions are referred to only in the course of discussing the attribution of knowledge as discussed in Krakowski and Radio Rentals. In oral submissions the applicants referred to the same provisions (ts 47 - 48). I do not understand the point which the applicants make.
34 In my view, the efficient conduct of this case will depend heavily upon precise pleading of all matters relating to the imputation of knowledge to Westpac.