Takemoto v Moody's Investors Service Pty Limited

REASONS FOR JUDGMENT 1 On 17 June 2009 the Applicant filed an Application and a Statement of Claim. 2 The causes of action relied upon are alleged breaches of s 52 or, in the alternative,s 53B of the Trade Practices Act 1974 (Cth) ("Trade Practices Act") and breach of contract. Damages are sought under s 82 of the Trade Practices Act. 3 Notwithstanding the apparent simplicity of the claims being advanced, the proceeding has not progressed far beyond the filing of a Defence. The pace at which the proceeding has progressed may be attributable to negotiations between the parties to settle the claims being made. Indeed, on 25 November 2009 the Court was advised by letter that "the Applicant accepted an offer of settlement made by the Respondent to settle his claim". This settlement was noted as being subject to the preparation, approval and execution of a Deed of Release. 4 There is now (perhaps) inexplicably a Notice of Motion before the Court seeking an order pursuant to O 11 r 16 of the Federal Court Rules that those allegations made in reliance upon the Trade Practices Act, namely those contained within paragraphs [6] to [12] of the Statement of Claim, be struck out. The Motion was filed by the Respondent on 8 February 2010.Presumably the "settlement" did not come to fruition. There has been no attempt that the Court is aware of to enforce the "settlement" reached in November 2009. A satisfactory Deed of Release apparently could not be drafted. There is also before the Court a Notice of Motion filed by the Applicant on 16 November 2009 seeking leave to amend the Statement of Claim. Submissions proceeded upon the basis of the proposed amendments, the new provisions being found within paragraphs [6] to [12C]. 5 The claims being made by the Applicant arise out of the termination of his employment in 2006 and a failure on the part of his employer to pay moneys "in lieu of notice or in regard to any other entitlement". He maintains that "certain representations" were made to him as to "employment benefits". These are the "representations" which are said to be misleading or deceptive for the purposes of s 52 of the Trade Practices Act. 6 The allegation of particular importance is outlined in paragraph [7]. That paragraph sets forth the "certain representations" sought to be thereafter relied upon, and takes the following form in the version containing the proposed amendments: During discussion with Senior Executives of Moody's during his employment in Japan those executives made certain representations to the Applicant regarding employment benefits available to him. Particulars of representations (i) At a meeting in Puerto Rico organised for executives by the Respondent in the year 2000 Mr Scott Douglas, Managing Director, Global Marketing told the Applicant that Moody's was planning to list on the share market and that the value of shares in the Company will increase very substantially. Consequently the value of stock options available to employees under the Moody's Corporation Key Employees' Stock Incentive Plan will also increase commensurately. The Applicant informed Mr Douglas that the share options were very important to him. (ii) In about December 2002 Mr Thomas Keller, the executive in the Moody's Group responsible for the oversight of the Asian operations of the Group discussed with the Applicant the prospect of his moving to Australia. Mr Keller held out to the Applicant the prospect of spending more time with his family. Mr Keller further told the Applicant that in Australia the same programs that applied throughout the world would apply to him and that this included stock option programsand the Career Transition Program. (iii) In the year 2000 the Respondent held a conference of Managing Directors within the Moody's Group of companies at the Dural Country Club in Miami, Florida. The conference was attended by Mr Paul Ramley, Director, Human Resources who told the Applicant that Moody's employment benefit programs applied to people worldwide because the Group would have to move people around a lot. Further, he said that if Moody's did not apply the programs throughout the world people would not be as willing to move around. (iv) In the year 2000 the Respondent held a conference of Managing Directors within the Moody's Group of companies at the Dural Country Club in Miami, Florida. The conference was attended by Mr Paul Ramley, Director, Human Resources who told the Applicant that Moody's employment benefit programs applied to people worldwide because the Group would have to move people around a lot. Further, he said that if Moody's did not apply the programs throughout the world people would not be as willing to move around.The Applicant observed that policy documents relevant to the Career Transition Program were posted on the Group intranet and as such were promulgated as part of the employment policies of each part of the Moodys Group on a world-wide basis. (v) Moody's Investors Service Pty Ltd and Moody's Australia Pty Ltd represent themselves through the internet as being part of one integrated group of companies known as Moodys. Particulars See: http://www.moodys.com/australiamdcsPage.aspx?mdcsID=G&6template=about (vi) In about 1999 or 2000 Mr Edward Young, the predecessor of Mr Thomas Keller, told the Applicant that he would be able to cash in his stock options if he retired at 55. The Applicant was then 45 years. 7 The Applicant on the 8 February 2010 Motion, the Respondent to the proceeding, takes issue with both the existing Statement of Claim and the proposed amendments. The proposed amendments, it is contended, still expose such deficiencies that leave to amend should be refused and the existing paragraphs [6] to [12] should be struck out pursuant to O 11 r 16 of the Federal Court Rules. That rule provides as follows: Embarrassment etc Where a pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; (b) has a tendency to cause prejudice, embarrassment or delay in the proceeding; or (c) is otherwise an abuse of the process of the Court; the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out No order is sought that the Statement of Claim, or a part of the Statement of Claim, be dismissed pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth). Orders for summary judgment are fundamentally different to the order now sought: cf. Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920 at [3] to [8], 252 ALR 41 at 43 to 45 per Finkelstein J; White Industries Aust Ltd v Federal Commissioner of Taxation [2007] FCA 511 at [47] to [48], 160 FCR 298 at 309 per Lindgren J. 8 In the present proceeding, the Respondent places primary reliance upon O 11 r 16(b) of the Federal Court Rules, contending that paragraphs [6] to [12] of the existing Statement of Claim have a "tendency to cause prejudice, embarrassment or delay in the proceeding". In Shelton v National Roads and Motorists' Association Ltd [2004] FCA 1393, (2004) 51 ACSR 278 Tamberlin J discussed the term "embarrassment" and said: [18] … "Embarrassment" in this context refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense. This is not an exhaustive list of situations in which a pleading may be embarrassing: see Bartlett v Swan Television & Radio Broadcasters Pty Ltd (1995) ATPR 41-434. An example of an embarrassing pleading is where the pleading simply pleads a conclusion. … See also: Fleet v Royal Society for the Prevention of Cruelty to Animals (NSW) (RSPCA) [2005] NSWSC 926 at [52]; McGuirk v University of New South Wales [2009] NSWSC 1424 at [209]. A pleading will be embarrassing, it has been said, "where it is unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him": Priest v New South Wales [2006] NSWSC 12 at [34].

The Trade Practices Claim 9 The Respondent places at the forefront of the deficiencies of the trade practices claim sought to be advanced the fundamental contention that neither the existing Statement of Claim nor the proposed amendments plead the "representations" said to amount to "misleading or deceptive" conduct for the purposes of s 52 of the Trade Practices Act. 10 It was common ground that the function of any pleading, be it a pleading as to a contravention of the Trade Practices Act or of any other cause of action, is "to state with sufficient clarity the case that must be met": Banque Commerciale S.A., en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 to 287. Mason CJ and Gaudron J there stated that: The function of pleadings is to state with sufficient clarity the case that must be met: … In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. … (citations omitted) See also: Peter Hanne & Associates Pty Ltd v Village Life Ltd [2008] FCA 719 at [33] to [42] per Jacobson J. And, in the context of a claim founded upon s 52 of the Trade Practices Act, it has been said to be "imperative that the factual basis upon which the section is alleged to be brought into play must be stated with appropriate clarity in a statement of claim. That is, of course, a fundamental principle of pleading": Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (1999) 42 IPR 1 at 3 per Foster J. Merkel J also made reference to the manner in which a claim should be pleaded for contravention of s 52 in Johnson Tiles Pty Ltd v Esso Australia Ltd (Unreported, Federal Court of Australia, Merkel J, 1 March 1999) as follows: [18] Criticism was also made by Esso of the misleading and deceptive conduct claims. As has been pointed out on a number of occasions, the central allegation in any claim based upon s52 of the Trade Practices Act 1974 (Cth) must carefully and precisely identify the conduct of the respondent which is alleged to have been misleading and deceptive in contravention of s52. In my view the pleading in its present form fails to do so. An initial problem is that in para14 the conduct which is the central allegation is pleaded by way of particulars. Plainly, the conduct complained of is a material fact and must be pleaded as such. Further, the particulars themselves are not confined, as they ought to be, to the conduct of Esso said to be misleading or deceptive. … [19] ... The paragraph also suffers the further deficiency that it extends beyond conduct and impermissibly relies upon the fact that events occurred, which were contrary to that which was assumed (or represented) to occur, as a particular of misleading conduct. It is well established that that is not a proper way for a claim for misleading and deceptive conduct to be pleaded. The situation is analogous to that considered in Bill Acceptance Corporation Ltd v GWA Ltd (1983) 78 FLR 171 where Lockhart J observed that conduct must be misleading or deceptive at the time it was engaged in; the mere fact that a representation as to future conduct did not come to pass did not make the representation, as such, misleading or deceptive. These are but some of the many cases which address the requirements to be met when a contravention of s 52 is being advanced for resolution. 11 If a statement as to the "material facts" relied upon is deficient, gaps in a statement of claim cannot be cured by the provision of particulars: Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413 at 419 per French J. 12 The strictness of the requirement imposed by O 11 r 2(a) for a "pleading … [to] … contain only, a statement in a summary form of the material facts on which the party relies", as opposed to "necessary particulars of any claim" separately addressed in O 12 r 1(1), has perhaps been viewed differently in recent years. Thus, for example, in Australian Automotive Repairers' Association (Political Action Committee) Inc v NRMA Insurance Limited [2002] FCA 1568, Lindgren J referred to the distinction between material facts and particulars and continued: [15] The requirement that material facts be stated has two purposes: the natural justice purpose of adequately informing the other party of the nature of the case alleged against that party; and the purpose of providing a basis for determining whether that alleged case, so exposed, constitutes a cause of action cognisable at law. Particulars serve only the former purpose. Consistently with the distinction, a respondent is required to plead to a statement of material facts, but not to particulars … Particulars have a role to play where all the material facts have been pleaded but leave the other party inadequately informed of the case to be met; … [17] Notwithstanding the well established distinction between material facts and particulars to which I have referred, a less strict view may be taken of that distinction now than was taken previously; … According to this view, the particulars contained in a statement of claim may be taken into account for the purpose of determining whether the statement of claim amounts to a statement of all the material facts. But even this more flexible view of pleading does not countenance the omission of material facts from the statement of claim regarded as a whole. … (citations omitted) After considering these comments, Hely J in Australian Wool Innovation Ltd v Newkirk [2005] FCA 290 at [22], (2005) ATPR 42-053 at 42,669, again cautioned that "even this more flexible view of pleading does not countenance the omission of material facts from the statement of claim regarded as a whole". His Honour went on to conclude that "if the pleading regarded as a whole does not contain a clear statement of all the material facts on which the applicant relies, it is no answer that the respondent can request the provision of further particulars". See also: Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd [2007] FCA 2024 at [41], (2007) ATPR 42-210 per Bennett J. 13 But whatever latitude may now be acceptable even on "this more flexible view", the boundary in the present case has unquestionably been crossed by the draftsman of the Statement of Claim and the proposed Amended Statement of Claim. 14 In the present proceeding, the Statement of Claim seeks to set forth the material facts upon which reliance is to be placed primarily (if not exclusively) by way of "particulars". The "representations" that the Respondent is called upon to meet are not exposed even at the most basic level in any statement of material facts. This difficulty confronting the Respondent is only compounded when each of the "particulars", in both the Statement of Claim and the proposed Amended Statement of Claim, is examined. If reference is made, by way of example, to the first "particular" set forth in paragraph [7], that "particular" is susceptible of being construed as setting forth a representation that: · "Moody's was planning to list on the share market"; · "the value of shares in the Company" would "increase very substantially"; and · the "value of stock options available to employees under the Moody's Corporation Key Employees' Stock Incentive Plan" would also "increase commensurately". A similar dissection of the remaining "particulars" proposed to be set forth in the new paragraph [7] may be undertaken with ever increasing possible "representations" emerging. Left to one side are the difficulties which may be exposed by the correct identification of the corporation which conducted itself in the way alleged - be it one or other of the proposed two corporate Respondents or some other entity within the "Moody's Group". Also left to one side is any question as to whether any of the possible representations were false or misleading at the time they were made or whether they were a statement of facts which may not have later come to fruition. A question of more immediate concern is whether the draftsman seeks to elevate each of these possible "representations" contained within the "particulars" to the status of "representations" which are said to be "false or misleading". 15 An identification of the "representations" to be relied upon self-evidently at a later stage also impacts upon the discovery that may be ordered and the evidence to be adduced. 16 Of particular concern is the uncertainty forced upon the Respondent of having todiscern for itself which of the possible "representations" proposed in the new paragraph [7] are likely to be advanced at the final hearing. Moreover, during oral submissions, Counsel for Mr Takemoto contended that no case was sought to be advanced in respect to the "Moody's Corporation Key Employees' Stock Incentive Plan" ("the Plan") but rather reliance was to be placed upon such entitlements as may be conferred by the "Career Transition Program". If sole reliance is to be placed on such entitlements possible representations that may have been made in respect to the Plan are either irrelevant or misleading. So much was also made apparent from the proposed amendment to the Application by the deletion of any order sought pursuant to s 87(b) of the Trade Practices Act in respect to the Plan. Counsel also contended that the justification for setting forth as "particulars" such facts as may be contained thereinwas to set forth the "course of conduct" which it was contended was of relevance. 17 But it is a further "embarrassment" for a respondent to have to discern for itself which of the facts particularised amount to a statement of "material facts" relevant to an unidentified "representation" and which of the facts are intended by a draftsman to be relegated to the category of background "conduct". And, whatever else may be the deficiencies in the Statement of Claim or proposed Amended Statement of Claim, the case sought to be advanced is a case that "representations" were made which were "misleading or deceptive". Any case founded upon "conduct" which is said to be "misleading or deceptive" is not readily apparent. If such a case is to be advanced, there is a need to clearly identify the "conduct" which is said to fall within s 52 and to clearly articulate a claim founded upon "conduct" as well as a claim founded upon the making of "representations". 18 Paragraphs [7A] to [7C] and [10A] of the proposed Amended Statement of Claim expressly seek to incorporate one or other of the particulars set forth in paragraph [7]. The fate of those new paragraphs cannot be separated from that of paragraph [7]. It should perhaps be briefly noted that paragraphs [7A] to [7C] also suffer from further difficulties. Paragraph [7A] states in part as follows: The representations referred to in 7(i)-(vi) above were made on behalf of Moody's Investors Service Pty Limited by Messrs Scott Douglas, Thomas Keller and Paul Ramley and the Moody's Group generally. … Reference is thereafter made in [7A] to s 84 of the Trade Practices Act. 19 Section 84(2), it may be noted, provides as follows: Any conduct engaged in on behalf of a body corporate: (a) by a director, employee or agent of the body corporate within the scope of the person's actual or apparent authority; or (b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent; shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate. Section 84(2) is said to be "an enlarging provision of general application" and a provision "designed to eliminate the necessity to apply the various and at times divergent tests of the common law relating to a corporation's responsibility for the acts of its servants or agents": Walplan Pty Ltd v Wallace (1985) 8 FCR 27 at 38 per Lockhart J (Neaves J agreeing). Earlier, in Fencott v Muller (1983) 152 CLR 570 at 618 Dawson J had said of s 84: … Section 84 is concerned with the connexion which will make the conduct of an individual that of a corporation. The section is an evident attempt to clarify for the purposes of the Act the circumstances in which a corporation must bear liability for the acts of others done on its behalf. Although it has always been obvious that a corporation can act only through the agency of individuals, the law has not always identified precisely the limits to corporate liability, particularly criminal liability, for wrongs committed by individuals who are also servants or agents of the corporation. Such comments were made in the context of an argument as to whether s 82, a provision the validity or invalidity of which was said to depend on the invocation of s 84(2), fell within the constitutional competence of the Commonwealth Parliament pursuant to the corporation power conferred by s 51(xx) of the Commonwealth of Australia Constitution Act. See also: Houghton v Arms [2006] HCA 59 at [37] to [38], 225 CLR 553 at 566 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ. 20 But where s 84(2) is invoked, the corporation which is sought to be made responsible for the conduct of a "director, employee or agent" must be clearly identified. Which entities are sought to be embraced by "the Moody's Group generally" in paragraph [7A] remains unanswered. If paragraph [7A] is intended to make other entities also responsible for the representations made by Messrs Douglas, Keller and Ramley, those other entities should be expressly identified and joined as parties to the proceeding. 21 The proposed paragraph [10A] suffers both the deficiency of uncertainty and an additional deficiency. That paragraph is expressed as follows: 10A. Further, each of the representations in 7(i)-(vi) are with respect to future matters within s.51A of the Trade Practices Act. Particulars (i) The Respondents represented to the Applicant that they would manage his employment so that if and when he left his employment he would be eligible for and would be paid, benefits under the Career Transition Program. (ii) Further, the Respondents represented to the Applicant that they would manage his employment so that at 55 years of age he would receive the full benefit of the stock option program. It is unclear whether the "particulars" provided in respect to this paragraph are provided in an attempt to identify why certain statements are statements as to "future matters" or whether the "particulars" seek to set forth "representations" in addition to - and perhaps different from - those provided in paragraph [7]. 22 Section 51A of the Trade Practices Act provides as follows: Interpretation (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. (3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead. Notwithstanding some divergence as to the manner of operation of s 51A(2) (cf. Readymix Holdings International Pte Ltd v Wieland Process Equipment Pty Ltd (No 2) [2008] FCA 1480 at [95] to [99]), it is considered that the provision is to be interpreted and applied in the manner explained by Allsop JJ (Emmett J agreeing) in McGrath v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2, 165 FCR 230. 23 Where reliance is to be placed upon s 51A, it may presently be accepted that a party is entitled to be informed of such reliance "either expressly or by clear implication": cf. O'Neill v Medical Benefits Fund of Australia Ltd [2002] FCAFC 188 at [16], 122 FCR 455 at 462 per Carr, Moore and Marshall JJ. The draftsman in the present case has made his reliance upon s 51A expressly known. But there is the same need for specificity when identifying the representation as to a future matter: Liberty USA Pty Ltd v Telstra Corp Ltd (Unreported, Federal Court of Australia, Branson J, 24 August 1994). Branson J there observed: … Where an applicant seeks to rely upon s51A it is incumbent on it to plead explicitly the alleged representation with respect to a future matter. The respondent should not be required to guess as to the precise representation alleged against it … The provision of particulars in the proposed paragraph [10A] only renders more uncertain that which was already rendered uncertain by paragraph [7]. 24 Even if a "less strict view" may now be taken as to the distinction between the purpose to be served by a statement of "material facts" and the discrete purpose sought to be served by "particulars" no course should be countenanced whereby: · most if not all of the "material facts" are to be found within "particulars"; · the facts which are or may be "material" to the case sought to be advanced are indiscriminately intermixed with statements of other facts upon which no reliance is apparently to be placed; · the identification of those facts which are or may be "material" to the case sought to be advanced are not objectively capable of discernment and are only capable of identification by reference to an unexpressed "course of conduct" known only to the draftsman; and · such particulars as are provided in respect to "certain representations" are only confused by the provision of further and different particulars in respect to "future matters", which are in turn susceptible of being construed as further particulars of "representations". Not only would such a course occasion "embarrassment" to the Respondent, but it would also confront the Court with uncertainty as to the case which the Applicant wants resolved. A number of articles were relied upon by Counsel for the Applicant in oral submissions in support of a contention that the Statement of Claim adequately pleads a cause of action for contravention of s 52: R. French, "The Action for Misleading or Deceptive Conduct: Future Directions" in Lockhart (ed), Misleading and Deceptive Conduct: Issues and Trends (1996) 279 to 305; A.I. Tonking, "Pitfalls in Pleading Section 52" (Paper presented at the Commercial Association of Australia Ltd Seminar, NSW State Library, 19 February 2010); and P. Gillies, "Misrepresentations as to Future Matters - Current Issues in Interpretation" (2009) 17 TPLJ 25, 25 to 35. But these articles, it is respectfully considered, provide no support for the manner in which the present claim is sought to be advanced. 25 In Harris v Cigna Insurance Australia Limited (1995) ATPR 41-445, Kiefel J concluded on the pleading then before her: The jurisdiction to strike out a pleading or part of it, is exercised only in a clear case: General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125, 128-9 and conscious of the fact that a plaintiff or applicant might be deprived of the opportunity of a determination on the claim: General Steel 130. The claim based upon s.52 as presently pleaded is however so confusing and unclear as to how it is said any conduct which could be described as causative was misleading or deceptive, as to be embarrassing and should be struck out. The proposed amendments, save for paragraph 18D, standing alone, worsen the position. … The same conclusions may also be drawn in the present proceeding. 26 These conclusions are sufficient to form the view that the relief sought in the Notice of Motion as filed on 8 February 2010 should be granted. It is unnecessary to resolve further submissions advanced on behalf of the Applicant on the Motion. Paragraphs [6] to [12] of the Statement of Claim as filed on 17 June 2009, namely the trade practices claim, should be struck out. The proposed amendments to that Statement of Claim do not cure the deficiencies. Leave to amend in the form proposed is refused.

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