LEUCADIA NATIONAL CORPORATION -v- CHICHESTER METALS PTY LTD (FORMERLY FMG CHICHESTER PTY LTD) [2011] WASC 297 (31 October 2011)

3 There is a broadly analogous plea under par 40 framed around the second plaintiff, Baldwin Enterprises Inc (Baldwin).

4 The defence filed on behalf of the defendants on 22 December 2010 responds to par 39 and par 40 in a broadly similar fashion. I only need to deal with par 39 of the defence:

As to paragraph 39 of the statement of claim, the defendants say:

(a) They deny the allegations therein contained.

(b) At all material times, the parties were in agreement, and it was their common intention, that their rights and obligations in relation to payment of interest and otherwise should be governed by the terms of the Subscription Agreement, Note Deed Poll and Note Conditions.

5 This plea in the defence gave rise to a request for further and better particulars from the plaintiff on 7 February 2011 (folio 16). Under par 10, seven subquestions seeking further answers were asked of the defendant. The plaintiffs' requests were prefaced:

Provide full particulars of the alleged agreement and full particulars of the alleged common intention of the parties at all material times that their rights and obligations in relation to payment of interest and otherwise would be governed by the terms of the Subscription Agreement, Note Deed Poll.

6 Of relevance now to this application to compel better answers are subrequests 10(f) and (g) in these terms:

(f) In respect of each such period, say whether the agreement and/or common intention was an agreement and/or common intention that Chichester was entitled to issue further Notes under the terms of the Note Deed Poll and the Note Conditions;

(g) In respect of each such period, say whether the agreement and/or common intention was an agreement and/or common intention that Chichester was entitled to issue further Notes under the terms of the Note Deed Poll and the Note Conditions notwithstanding that the issue of further notes would have the consequence of reducing the amount of interest that would be payable to Leucadia or Leucadia's nominee or Baldwin (as the case may be).

7 There followed a qualified answer and objection on 21 February 2011 from the defendant relevant to the application for better answers which are now pressed:

The parties' agreement and common intention is recorded and manifest by the terms of the Subscription Agreement, annexed Note Deed Poll and Note Conditions, in particular, those terms pleaded at paragraphs 12, 12A, 12B, 12C, 13A and 13B of the Defence and their execution of that agreement on 15 July 2006.

The agreement and common intention was held by the parties to the Subscription Agreement. The agreement and intention of the second plaintiff can be inferred by reason of its nomination by Leucadia as the entity which would subscribe for the shares and the notes under the Subscription Agreement, and the fact that the second plaintiff did subscribe for the shares and the notes.

The defendants otherwise object to answering this request on the basis that sufficient particulars of the defendants' allegations have been provided and it is a request as to evidence and not particulars. Further, in the case of requests 10(f) and 10(g), the requests are in the nature of interrogatories.

That response by the defendant is the background for the plaintiffs' application of 14 June 2011 seeking that better answers be provided to pars 10(f), 10(g), 11(f) and 11(g).

9 The application has been assisted by a written outline of submissions filed on behalf of the plaintiffs on 22 September 2011, which was responded to by the defendants on 27 September 2011. In addition I have had the assistance today of oral augmentations to those written arguments by senior counsel.

10 The framework for the pressed request for better answers in respect of a response to the rectification plea is tied to the use of the terminology 'common intention'. Therefore it is helpful at the outset to explore the proper meaning of that phrase in context. I do so having regard to some helpful observations by Campbell JA in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603.

11 His Honour made observations about types of intention relevant to contract formation or contractual construction by way of contrast to the intention relevant to a rectification situation (see at [258] [268]). Relevantly, Campbell JA said this as to the somewhat protean nature of the expression 'common intention' in contract:

Thus, both for the purpose of deciding whether a contract has been entered and construing it, and for the purpose of deciding whether to grant rectification of a contract already entered, a court seeks to ascertain the common intention of the parties to the contract. However, the use of the single expression 'common intention' masks two quite different concepts - what counts as a 'common intention' for one of these purposes is significantly different to what counts as a 'common intention' for the other of these purposes [261].

12 The plaintiffs have sought to press for more details about the common intention which is pleaded by the defendants in par 39(b) of their defence. As Campbell JA's observations in Ryledar make clear, there is a vital distinction between an objectively assessed common intention relevant to the diverse constructions posited by each side for written instruments in this case and the required assessment of subjectively common held intentions of those individuals acting on behalf of corporations, in a context of an equitable claim for rectification pursued on the basis that words used in the respective instruments do not accord with the true subjective common intentions of the parties.

13 In seeking to further probe the defendants' pleaded response under par 39(b), the request for further and better particulars issued by the plaintiffs under 10(f) and 10(g) can be framed by reference to a question posed by the plaintiffs as to whether the agreement and/or the common intention reflect an interpretation which is set out in that request, essentially by way of interpretive hypothesis on the plaintiffs' part.

14 The same interrogative technique is used by the plaintiffs in the request under 10(g), save that the hypothesis in respect of which the defendants' response is sought is predicated on a more complicated premise with the augmentation of the phrase that follows 'notwithstanding the issue'.

15 On that structural basis I agree with the defendants' objections to these requests for further and better particulars. The defendants essentially object on the basis that the nature of what is asked under those requests goes beyond a proper request for amplification or clarification of a plea of material fact. The character of the requests are found to be interrogatories. They essentially pose questions to the defendant about a subjective common intention. They seek responses to the hypothesis as posed in each request. This is not a permissible request for particulars of a pleading.

16 On analysis, the fact that a request goes too far conceptually so as to rise to the level of an interrogatory is highly relevant. The parties have been, until today, at odds over whether the plaintiff should be granted leave to interrogate upon certain matters arising in the litigation. However, that controversy has just today been resolved. The action will now proceed on the basis that the defendants accept that the plaintiff may be granted leave today to administer a set of interrogatories to the defendants and which, after receipt, the defendants will then consider and provide responses, by way of either answer or objection, in orthodox fashion.

17 In those prevailing circumstances, it seems that the preferable approach to what otherwise presents as a reasonable forensic inquiry into whether there really is or is not a defence plea of a common subjective intention that is affirmatively sought to be articulated by the defendants, is best pursued within a framework of what is now the accepted process of interrogation which will proceed under my grant of leave today.

18 Had the circumstances been otherwise, I would accept that the court's case management powers could extend, in a proper case, to overlooking a technical deficiency in the framing of a request for particulars in the overall interests of fairness, expedition and efficiency. Where there is no prejudice to a defendant, then a limited request for relevant further information to clarify a pleading or its implications for a trial may be allowed.

19 However, given that I assess the defendants' objections to be formally correct and the pending interrogation exercise that is foreshadowed, the appropriate way of proceeding is to 'play it by the book' at this time. A path now foreshadowed by which the plaintiff will administer interrogatories by leave should be allowed to unfold, then evaluated in terms of the responses or objections received by the defendants in due course.

20 I make two ancillary points. First, I do not detect the defendants raising any counterclaim pursuing alternative arguments predicated upon a position that effectively argues that if the constructions advocated by the plaintiffs are ultimately accepted as correct, the defendants themselves would then be articulating their claim for rectification of the instruments, thereby seeking to establish outcomes they will then seek to reach by rectification.

21 The second ancillary observation I render is that there is no doubt that witness statements will be exchanged prior to trial. On that basis, from those statements an insight should emerge as to whether or not the defendants, through corporate representatives, are actually articulating an affirmative case of a commonly held subjective intention in its representatives. That situation stands in contrast to the lesser position under the present defence whereby the defendants' stance as I presently assess it is simply along the lines, 'the agreements properly read manifest what are the exclusive terms of the bargain between the parties'.

22 As I have said, the proper path at this time is to dismiss the request for further and better particulars in 10(f) and (g) and to allow the clarification of the issue under interrogatories to be administered. I dismiss the application.