Wilson Pateras Accounting Pty Ltd v Farmer

The proposed amended statement of claim 15 The structure of the proposed amended statement of claim is that there are allegations made in the main body of the document comprising 37 pages, with which there is associated a separate document titled "Schedule of Particulars to the Amended Statement of Claim" comprising 67 pages plus annexures. The particulars are largely narrative, and are organised by topic under headings. The various paragraphs of the particulars are picked up and referred to in the body of the proposed amended statement of claim where relevant. This style of pleading has its advantages, but also its vices. One key advantage is the exposition of all the material facts that are relied on by the applicants to support their largely circumstantial case on key issues in an organised way that presents a picture. One of the vices is that if the material facts are alleged in this way, care must be taken to plead clearly the legal consequences, and the court and the respondents should not be left in the position of having to speculate what facts are relied on to support key elements of the causes of action alleged in the main body of the proposed amended statement of claim. 16 I will now turn to the topics of dispute that were addressed by the parties' submissions.

Loss and damage 17 Counsel for the respondents made a number of complaints about the way in which loss and damage was alleged in the proposed amended statement of claim. Amongst other things, counsel submitted that it was not clear on the proposed pleading what respondents were liable for what losses. 18 It is convenient to say now that there is no doubt that the particulars of loss and damage are insufficient. That is not necessarily a criticism of the applicants at this point in time having regard to the nature of the claims, and the way the applicants' allegations have evolved following discovery and the production of documents. However, before the matter is allowed to proceed to trial the applicants will need to file and serve a coherent set of particulars of loss and damage, which identifies what damages are claimed against what respondents, how the loss is calculated or made up, and any other necessary material facts to give the respondents fair notice of the case that is to be met, and to identify for the court what claims for damages are to be advanced, and the foundations for them. However, the imprecision in the particulars of loss and damage that currently exists is not a reason to refuse leave to file the proposed amended statement of claim.

"Sibaca Services Conduct" - Paragraphs 33, 76, 76B, 90 19 By paragraph 33 of the proposed amended statement of claim, the applicants allege that in the period between 2015 and 9 October 2020, Mr Farmer and BSCT operated the business of Sibaca with Mrs Farmer for their joint profit, and provided accounting and related services to the clients of Sibaca, and to the clients of a bookkeeping business operated by Mrs Farmer. The particulars of these allegations are in Section B of the schedule of particulars, comprising paragraphs numbered 3 to 11. The particulars allege that at various relevant points in time Mr Farmer provided services to clients of the WP Business through Sibaca, and derived income therefrom. The particulars in Schedule B incorporate the particulars in Section D "to the extent they demonstrate Mr Farmer providing accounting and related services to clients of Sibaca and Mrs Farmer's bookkeeping business in the period up to 9 October 2020". There are several allegations in Schedule D of Mr Farmer providing services to named clients through Sibaca: 38(p), 41(o), 42(bb), 44(b), 45(h), 51(e), 52(j) and (q), 53(s) and (w), 55(l), 57(q), 58(a) and (d), and 60(e). 20 The conduct of Mr Farmer and BSCT alleged in paragraph 33 of the proposed amended statement of claim is defined as the "Sibaca Services Conduct". That defined term is picked up in paragraphs 76 and 76A as the basis for alleging breaches of contractual obligations by Mr Farmer and BSCT. In paragraph 76B it is alleged that if Mr Farmer and BSCT had complied with their obligations under the Unitholder's Deed, then they would have directed clients that were serviced by Sibaca and Mrs Farmer's bookkeeping business to the WP Business. The conduct alleged in paragraph 33 is also picked up in paragraph 90 as the foundation for the allegations that Mrs Farmer and Sibaca induced Mr Farmer's and BSCT's breaches of their contractual obligations. 21 Counsel for the respondents submitted that the use of the defined term "Sibaca Services Conduct" was problematic when one had regard to the particulars that were incorporated, which included the allegation in paragraph 7 of the particulars that during the period 11 October 2017 to 16 June 2020, Mr Farmer, BSCT and Mrs Farmer derived income from Sibaca and Mrs Farmer's bookkeeping business of approximately $100,000 each year as a result of servicing clients, or client groups that included many clients that were also serviced by the WP Business. Counsel for the respondents submitted that it was embarrassing to include an allegation that Mrs Farmer derived income from servicing the clients. Allied to this objection was an objection to paragraph 76B to the extent that it refers to clients of Mrs Farmer's bookkeeping business. 22 It was further submitted with reference to the allegations of inducing breach of contract in paragraph 90 that there was no conduct of Mrs Farmer or Sibaca alleged in paragraph 33, which was picked up by paragraph 90. 23 In response, counsel for the applicants accepted that paragraph 33 of the proposed amended statement of claim could be framed with greater clarity. Counsel stated that the substance of the applicants' case against Mr and Mrs Farmer is that Mr Farmer worked with Mrs Farmer and through Sibaca to, effectively, set up a business that was run by them where Mr Farmer diverted clients that, pursuant to his contractual obligations, he should have serviced within the WP Business, or in the case of new clients, should have brought into the WP Business. 24 I accept the criticisms of paragraph 33 that were advanced on behalf of the respondents, and the consequences for other allegations, in particular those in paragraph 90 which are embarrassing as a result. If paragraph 33 was intended to capture the applicants' case that was put in the way described by counsel for the applicants during the hearing, then the terms of at least paragraph 33 of the proposed amended statement of claim should be revised. If they are revised to reflect the case that counsel for the applicants described in argument, then in my judgment the respondents' objections under this topic will be addressed. 25 In due course, the applicants will have to identify, including as part of their particulars of loss and damage, what clients they allege were diverted in the way alleged.

Identity of clients alleged to have been serviced by OMW Partners - Paragraphs 70(c), 80A, 82A, 84(b) and 85 26 Counsel for the respondents objected to the rolled-up nature of the allegations in paragraph 80A, the substance of which is that had Mr Farmer and BSCT complied with their contractual obligations, then during the period since 9 October 2020: (1) Mr Cuff would have been unlikely to have been successful in diverting clients; and (2) that the WP Business would have provided the accounting and related services to the clients to which Sibaca, Beehive Accounting, Beehive Finance and OMW Partners provided services. Sensibly, in oral argument counsel for the respondents focussed the objection on the absence of any particulars that OMW Partners had provided accountancy services to any client of the WP Business. 27 In response, counsel for the applicants proposed amendments to paragraphs 78A(d), 78D(d), and 82A(d) of the proposed amended statement of claim to add references to OMW Partners so as to make the series of allegations in those paragraphs coherent. As for the absence of any particulars of the servicing of clients by OMW Partners, counsel for the applicants pointed to references in the schedule of particulars to two clients: Extendahand, and Tetris. Counsel submitted that the facts alleged in relation to these clients in paragraphs 41(r) and 47(zz) of the schedule of particulars give rise to an inference that they were serviced by OMW Partners. The allegation in paragraph 41(r) is of a text message to Mr Farmer from a client requesting his new email address and Mr Farmer's response providing his OMW email address, and the allegation in 47(zz) is of a reference to some documents relating to a client being couriered to the address of OMW Partners. 28 I do not accept that the allegations in the particulars on which counsel for the applicants relied are expressed as particulars of an allegation that OMW Partners serviced the two clients referred to. This is an example of one of the vices of the style of the applicants' pleading to which I referred. It is not for the respondents, or the court, to have to trawl through the voluminous particulars that have been given and to guess at their significance to the main allegations that are made in the body of the proposed amended statement of claim. 29 In my judgment, having regard to the nature of the applicants' case as being largely circumstantial, the particulars to which counsel for the applicants referred, in combination with other facts that are alleged, may be capable at a pleading level of supporting a tenable allegation that OMW Partners was servicing the two clients. However, if the applicants wish to advance that allegation, then they should do so expressly, and not by implication. I understood counsel for the applicants to accept this. The proposed amended statement of claim should be revised accordingly if the allegation is to be pursued. And at some point before trial, the applicants will have to close off some of the allegations that are left open pending completion of discovery and other investigations.

Ms Chambers and Sur Mon Chemin inducing breach of contract - Paragraphs 41, 55, 86 and 87 30 In paragraphs 86 and 87 of the proposed amended statement of claim the applicants allege that Ms Chambers and Sur Mon Chemin induced breaches of contract by Mr Farmer, BSCT, and Mr Cuff. The conduct alleged to give rise to the inducement and knowledge is alleged in paragraph 41 and Section J of the proposed amended statement of claim. That conduct is alleged to be an agreement reached no later than August 2019 between Mr Farmer, Mr Cuff, and Ms Chambers that a new accountancy business that was proposed would also be conducted by Ms Chambers and some directors of her employer, Rose Partners. The allegations against Ms Chambers and Sur Mon Chemin are based upon inferences that would arguably arise from the detailed facts alleged in paragraphs 54 to 68, which are within Section J. Those facts are not to be assessed individually, because in a circumstantial case it is the combination of them that is significant. At the pleading stage, those allegations give rise to triable issues. 31 Counsel for the respondents submitted that there was no allegation that any clients of the WP Business were actually brought across to OMW Partners. This submission was made in the context that loss is a necessary component of the tort of inducing breach of contract. As I have already indicated, the absence of any express allegation that clients of the WP Business were brought across to OMW Partners as a result of breaches of contract induced by Ms Chambers and Sur Mon Chemin is capable of remedy by making that allegation clearly, and specifying the clients to the extent that the applicants are currently able. And the applicants will have to provide particulars of the loss and damage claimed against Ms Chambers and Sur Mon Chemin. At present, it appears to be alleged by paragraphs 86 and 87 of the proposed amended statement of claim that Ms Chambers and Sur Mon Chemin are liable for all the losses arising as a result of Mr Farmer, BSCT, and Mr Cuff breaching their contractual restraints.

OMW Partners inducing breach of contract - Paragraphs 88 and 89 32 The applicants allege that OMW Partners induced Mr Farmer, BSCT, and Mr Cuff to breach their contractual restraints. Part of the context is that it is alleged that OMW Partners was incorporated on 14 August 2020, that Mr Cuff is alleged to have been a director of OMW Partners since 14 August 2020, and BSCT, Cuff Investments, and Sur Mon Chemin are alleged to have been shareholders, together with others, of OMW Partners. 33 Paragraph 68 of the proposed amended statement of claim alleges an agreement or a shareholding structure, the existence of which is alleged to arise by inference from certain text messages, email communications and conduct, that Mr Farmer's and Mr Cuff's remuneration and/or the financial benefit that they would receive from their involvement in OMW Partners would be determined at least in part by reference to the clients that they brought to OMW Partners. Counsel for the respondents submitted that this allegation is insufficient to sustain an allegation of an inducement of a breach of contract. That was because, counsel submitted, such a term was an ordinary commercial term that would apply to any clients that Mr Farmer and Mr Cuff brought to OMW Partners, whether in breach of their restraints or not. 34 I do not accept the respondents' submissions that the pleading does not sustain a cause of action against OMW Partners for inducing breach of contract. The terms of the shareholding arrangement and the other agreement alleged in paragraph 68 of the proposed amended statement of claim are only part of the picture. The inducements are alleged in the particulars of paragraphs 88 and 89, and go beyond the terms of the arrangements alleged in paragraph 68. The particulars of paragraph 88 are in the following terms - OMW Partners induced Mr Farmer to breach the Farmer Restraints (which Mr Farmer breached by soliciting clients of the Farmer Division to obtain accounting and related services from Sibaca, Beehive Accounting, Beehive Finance and OMW Partners) by encouraging those breaches by agreeing to establish and operate a new accounting business with Mr Farmer and Mr Cuff, to which the clients of Sibaca and Beehive Accounting would be transferred, with the result that Mr Farmer would obtain a profit from his breaches. 35 Corresponding particulars are given under paragraph 89 in relation to the allegation of inducing Mr Cuff to breach his restraints. In my view, the proposed pleadings are adequate to raise the basic elements of the claims of inducing breach of contract. To what extent any loss to the applicants was caused by OMW Partners will have to be the subject of particulars, and will invite scrutiny given that loss is a necessary element of the cause of action: see, Daebo Shipping Company Ltd v The Ship Go Star [2012] FCAFC 156; 207 FCR 220 at [88(5)] (Keane CJ, Rares and Besanko JJ).

Misleading and deceptive conduct - Paragraphs 34(a), 36(a), 38(a), 93A, 94, and paragraph 7 of the schedule of particulars 36 In paragraphs 34, 36, and 38 of the proposed amended statement of claim, the applicants allege that by written declarations for the years 2018, 2019, and 2020 Mr Farmer made representations about the fees that he received for tax agent work or tax returns outside his engagement with the WP Business, and in relation to outside business relationships for financial gain with clients of the WP Business, and in relation to the extent of bookkeeping work undertaken by Mrs Farmer for clients of the WP Business. In paragraphs 35, 37, and 39 the applicants allege that contrary to the representations for each year respectively Mr Farmer received fees for tax agent work and tax returns that substantially exceeded what had been disclosed, that he received a director's fee of $10,000 in each of the three years that was not disclosed, and that in the relevant years Mrs Farmer undertook bookkeeping work for clients of the WP Business beyond what was disclosed. 37 By way of particulars of these allegations, the applicants refer to different paragraphs of the schedule to the proposed amended statement of claim. Otherwise, in respect of each of the three years the applicants foreshadow further particulars upon the completion of discovery and the return of subpoenas. One of the paragraphs of the schedule that is picked up by the particulars is paragraph 6, which includes allegations as to contemporaneous projections by Mr Farmer of his income from named sources as at 26 November 2018. Another paragraph that is picked up is paragraph 7, which contains an allegation that "[f]rom 11 October 2017 to 16 June 2020, Mr Farmer, BSCT and Mrs Farmer had derived income from Sibaca and Mrs Farmer's bookkeeping business of approximately $100,000 each year" as a result of providing services to 77 named individuals, companies, or groups. The applicants also refer in paragraph 7(zzz) of the schedule to, "other clients of which the applicants are not presently aware". 38 By paragraphs 92A to 94 of the proposed amended statement of claim the applicants allege that Mr Farmer's conduct in making the representations in the declarations was in trade or commerce, and was misleading or deceptive in contravention of s 18 of the ACL. It is alleged that had Mr Farmer disclosed the true extent of the services that he and Mrs Farmer had provided to clients, including to clients of the WP Business, then the applicants would have demanded that Mr Farmer cease providing services outside the WP Business, that Mr Farmer would likely have provided the services within the WP Business, and as a result the applicants would have profited from the provision of those services. 39 The respondents object to these paragraphs on the grounds that when the individual paragraphs of the particulars in the schedule are examined, they do not sustain the allegations that the remuneration disclosed in the declarations was understated, or mis-stated, for reasons including that the particulars do not specify how much Mr Farmer received for tax agent work and tax returns with the result that, to that extent, the particulars did not support the falsity of the allegations. As for the allegations of loss, counsel for the respondents submitted that there were insufficient material allegations to link the conduct to the loss, and that there were otherwise insufficient particulars of loss and damage to enable the respondents or the court to quantify it. Counsel also objected to the inclusion in paragraph 7(zzz) of the schedule alleging "other clients of which the Applicants are not presently aware". 40 In response, counsel for the applicants submitted that the particulars that had been provided were the best that the applicants were able to give at the present time. 41 In my judgment, the applicants will have to give better particulars of the allegations in paragraphs 35, 37, and 39 of the proposed amended statement of claim. The incorporation of the various paragraphs of the schedule do no more than give a flavour of the type of case that the applicants might present at trial, but they do not sufficiently engage with the terms of the representations that are alleged. It appears that the applicants recognise that the particulars are not yet sufficient because they acknowledge that they are the best particulars that they are able to give form the time being. 42 I will allow the claims of misleading and deceptive conduct at this time, but upon completion of discovery and other investigations the applicants will have to give more precise particulars of paragraphs 35, 37, and 39, and the material facts alleged to give rise to their misleading or deceptive character. 43 I will not allow paragraph 7(zzz) of the schedule in its current form. It is open to the applicants to foreshadow further particulars of clients following discovery and subpoenas, but as I have mentioned, before the case proceeds to trial, the applicants will have to close-off any open-ended allegations. 44 Finally, in due course, and as with all the other causes of action, the applicants will have to give adequate particulars of loss and damage in relation to these causes of action.

Infringement of copyright - Paragraph 101 45 The applicants allege infringement of copyright in two types of documents. The first is a receptionist procedure manual of the WP Business that the applicants allege in paragraph 57 of the proposed amended statement of claim Mr Farmer downloaded on 7 August 2020 for the purpose of providing it to Ms Chambers and for OMW Partners to use in the course of its accounting and related services business. The second are client work papers of the WP Business that are particularised in nominated paragraphs of the schedule to the proposed amended statement of claim. By those particulars, the applicants allege that Mr Farmer downloaded and emailed the work papers to his private Gmail account, or sent them to Mr Cuff, or to his own OMW Partners email account. In each instance, the applicant has identified the client to whom the work papers relate. 46 Paragraph 101 of the proposed amended statement of claim is in the following terms - 101. On a date which is presently unknown to the Applicants and for the purpose of the Cuff Restraint Period Conduct and the Farmer Restraint Period Conduct, the Respondents (or any of them) have without the licence of WP Accounting, reproduced in a material form the whole or a substantial part of the WP Documents and thereby infringed WP Accounting's copyright in the WP Documents pursuant to section 36 of the Copyright Act. Particulars It may be inferred from the Cuff Restraint Period Conduct and the Farmer Restraint Period Conduct that a whole or substantial part of the WP Documents were reproduced in a material form in order to perform accounting, taxation, business advisory and associated services for former Farmer Division clients. 47 Counsel for the respondents submitted that there was no basis for the allegations in paragraph 101 in such wide terms. 48 Paragraph 101 alleges that on unknown occasions every respondent, including the proposed respondents Mrs Farmer and Sibaca, has reproduced every document that is the subject of the infringement of copyright claims. I am not satisfied that there is a proper basis to make allegations of this breadth. Having regard to the purpose for which it is alleged Mr Farmer downloaded the receptionist procedure manual, I am not satisfied that the pleading as a whole, or the particulars, or the affidavit evidence relied on by the applicants for the purposes of their application, disclose a proper basis to allege that Mrs Farmer or Sibaca reproduced the receptionist procedure manual. The position of Ms Chambers, Mr Cuff, Mr Farmer, their related companies, and OMW Partners is different. 49 I have a similar view in relation to the client work papers. Because the names of the clients are alleged, there would have to be some basis to think that Mrs Farmer or Sibaca or Ms Chambers, or Sur Mon Chemin had some interest in the work papers of the named clients for there to be a proper basis to make the infringement of copyright claims against them. 50 For the foregoing reasons on the material before the court I am of the view that the infringement of copyright claims are broader than the material would properly permit, and I am not persuaded to allow any of those claims to be made against Mrs Farmer or Sibaca, or to allow the claims for infringement of copyright in the work papers to be made against Ms Chambers or Sur Mon Chemin.

Conclusions 51 I will give leave to the applicants to join Sharee Irene Farmer and Sibaca Business Solutions Pty Ltd ACN 130 124 051 as additional respondents to the proceeding and to file a second further amended originating application substantially in the form of the draft proposed. 52 I will give leave to the applicants to file an amended statement of claim substantially in the form proposed, but with the important qualification that it be revised so as to comply with the rulings in these reasons. In summary, at a minimum those revisions will require - (a) rectification of the deficiencies in paragraphs 33 and 90, and any paragraphs affected by the allegations made therein; (b) identification in the relevant paragraphs of the clients of the WP Business which the applicants allege were serviced by OMW Partners; (c) removal of paragraph 7(zzz) of the schedule in its current form; and (d) narrowing of the allegations of infringement of copyright in paragraph 101, and any paragraphs affected by the allegations made therein. 53 Following the completion of discovery, the applicants should give more precise particulars in respect of paragraphs 35, 37 and 39. In addition, before the matter proceeds to trial, the applicants will need to close off the open-ended allegations which are currently pleaded, including those addressed in these reasons in respect of OMW Partners. And as I have mentioned a few times, before the matter proceeds to trial the applicants will need to give adequate particulars of loss and damage. 54 It is not desirable that the court scrutinise the applicants' pleading for compliance with the qualification to this leave. The court will rely upon counsel for the applicants to ensure that any pleading as filed will comply with these reasons. If the respondents wish to submit that the pleading as filed does not comply with my rulings, then I will relist the matter at short notice and deal with the objections. 55 I will direct counsel to confer and to submit draft orders to give effect to these reasons, and also as to the disposition of the balance of the applicants' interlocutory application filed 20 August 2021. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wheelahan.

SCHEDULE OF PARTIES VID 680 of 2020 Respondents Fourth Respondent: CUFF INVESTMENTS PTY LTD ACN 644 242 482 Fifth Respondent: OMW PARTNERS PTY LTD ACN 643 502 827 Sixth Respondent: NATASHA CHAMBERS Seventh Respondent: SUR MON CHEMIN PTY LTD ACN 644 217 934