FEDERAL COURT OF AUSTRALIA

Lion-Dairy & Drinks Pty Limited v Sinclair Knight Merz Pty Limited [2013] FCA 869

THE COURT ORDERS THAT:

1.    Any references in the statement of claim to the phrase “one or more other companies in the NFL group” or words to similar effect be struck out.

2.    Leave be granted to the applicants to re-plead the relevant paragraphs by 10 September 2013.

3.    Any request for further and better particulars be made by the respondent by 24 September 2013.

4.    The applicants respond to any such request for further and better particulars by 8 October 2013.

5.    The respondent file and serve a defence by 29 October 2013.

6.    There be no order as to costs.

7.    Liberty to apply on the giving of 72 hours’ notice.

8.    The matter be listed for directions at 9:30 am on Tuesday, 5 November 2013.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction

1        The respondent moves by way of interlocutory application to strike out a statement of claim which was filed on 5 July 2013. On the same day the applicants filed an originating application. The three applicants are all members of a group of companies which are ultimately owned by the first applicant Lion-Dairy Drinks Pty Limited (formerly known as National Food Limited or NFL). It is convenient if I continue to refer to the group of companies as the NFL group.

2        Part of the NFL group’s business is producing blended and bottled fruit juice products. The group operates a juice extraction plant for that purpose in Smithfield in New South Wales. In the originating application, the three applicants seek various relief including declarations, damages under the Trade Practices Act 1974 (Cth) (TPA), damages generally, costs and interest. The relief is claimed against the respondent, Sinclair Knight Merz (SKM), who provide engineering consulting services. The claims relate to various work and advice which were carried out by SKM in relation to regulatory requirements affecting the discharge of industrial trade wastewater from the applicants’ Smithfield plant into Sydney’s sewerage system.

3        The regulatory requirements and appropriate standards pertaining to the discharge of such wastewater are administered by Sydney Water Corporation. In broad terms the applicants complain that SKM’s advice and actions in terms of the matters that it had advised on led to a design underbuild of the Smithfield plant.

4        The statement of claim pleads various causes of action against SKM relating to events which date back to May 2007 when SKM was engaged apparently by one or other of the three applicants to provide advice on appropriate wastewater processing at the Smithfield plant. In general terms, the pleaded causes of action relate to breach of two agreements which are referred to in the statement of claim as the SKM agreement to advise on wastewater processing and the SKM agreement to administer the wastewater treatment facility construction contract. Another cause of action is pleaded under s 52 of the TPA relating to misrepresentations as to various future matters. There is also a cause of action in tort for breach of an alleged duty to exercise reasonable skill and care in preparing various reports and providing certain advice concerning the upgrading of the Smithfield plant.

5        It is evident from a schedule to the statement of claim that there are 51 companies in the NFL group, most of which (but apparently not all) are wholly owned subsidiaries of the first applicant. In various paragraphs of the statement of claim material facts are pleaded in respect not only of the three nominated applicants but also in the further or alternative to “one or more other companies in the NFL group”. Those companies in the NFL group are referred to globally in the statement of claim as the NFL Entities. These unparticularised references to the NFL Entities (apart, of course, from the three applicants who are individually identified) figure prominently in SKM’s challenge to the adequacy of the statement of claim.

6        By way of background it is to be noted that on 19 August 2013 (and shortly before the first directions hearing in this matter) SKM’s solicitor wrote to the applicants’ solicitor claiming that the statement of claim failed to comply with r 16.02 of the Federal Court Rules 2011. The letter claimed that the statement of claim was evasive or ambiguous in multiple respects and/or likely to cause prejudice, embarrassment or delay in the proceedings. The letter identified many alleged deficiencies in the statement of claim and it was asserted that the pleadings were liable to be struck out either in whole or in part under r 16.21 of the rules. The applicants were invited to replead the statement of claim and SKM indicated that, in the interim, it saw no utility in preparing a defence.

7        The letter was followed shortly thereafter by the interlocutory application which is the subject of today’s hearing. The parties have filed outlines of written submissions in respect of the interlocutory application and have also supplemented those submissions orally before me today.

8        Before dealing with SKM’s criticisms of the pleading it is convenient briefly to state the relevant principles guiding an application of this kind. It is unnecessary to state the relevant principles at length. They are generally well established and are set out in recent cases such as Mulhern’s Properties Inc v Bank of Queensland [2013] FCA 401 per Flick J and Burrup Fertilisers Pty Limited (Receivers and Managers Appointed) v Oswal (No 2) [2011] FCA 731 per McKerracher J.

9        The primary relevant principles for the purposes of determining SKM’s interlocutory application are as follows. First, the relevant rules in the Federal Court Rules 2011 are to be found in rr 16.02, 16.21, 16.41 and 16.43. Those rules are in the following terms:

16.02    Content of pleadings — general

(1)    A pleading must:

(a)    be divided into consecutively numbered paragraphs, each, as far as practicable, dealing with a separate matter; and

    (b)    be as brief as the nature of the case permits; and

    (c)    identify the issues that the party wants the Court to resolve; and

(d)    state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial, but not the evidence by which the material facts are to be proved; and

    (e)    state the provisions of any statute relied on; and

    (f)    state the specific relief sought or claimed.

(2)    A pleading must not:

    (a)    contain any scandalous material; or

    (b)    contain any frivolous or vexatious material;

    (c)    be evasive or ambiguous; or

(d)    be likely to cause prejudice, embarrassment or delay in the proceeding; or

(e)    fail to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or

    (f)    otherwise be an abuse of the process of the Court.

 (3)    A pleading may raise a point of law.

(4)    A party is not entitled to seek any additional relief to the relief that is claimed in the originating application.

(5)    A party may plead a fact or matter that has occurred or arisen since the proceeding started.

16.21    Application to strike out pleadings

(1)    A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:

   (a)    contains scandalous material; or

   (b)    contains frivolous or vexatious material; or

   (c)    is evasive or ambiguous; or

(d)    is likely to cause prejudice, embarrassment or delay in the proceeding; or

(e)    fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or

    (f)    is otherwise an abuse of the process of the Court.

   (2)    A party may apply for an order that the pleading be removed from the Court file if the pleading contains material of a kind mentioned in paragraph (1) (a), (b) or (c) or is otherwise an abuse of the process of the Court.

16.41    General

(1)    A party must state in a pleading, or in a document filed and served with the pleading, the necessary particulars of each claim, defence or other matter pleaded by the party.

Note See rule 16.45.

 (2)    Nothing in rules 16.42 to 16.45 is intended to limit subrule (1).

Note 1 The object of particulars is to limit the generality of the pleadings by:

(a)    informing an opposing party of the nature of the case the party has to meet; and

   (b)    preventing an opposing party being taken by surprise at the trial; and

(c)    enabling the opposing party to collect whatever evidence is necessary and available.

Note 2 The function of particulars is not to fill a gap in a pleading by providing the material facts that the pleading must contain.

Note 3 A party does not plead to the opposite party’s particulars.

Note 4 Particulars should, if they are necessary, be contained in the pleading but they may be separately stated if sought by the opposite party or ordered by the Court.

16.43    Conditions of mind

(1)    A party who pleads a condition of mind must state in the pleading particulars of the facts on which the party relies.

(2)    If a party pleads that another party ought to have known something, the party must give particulars of the facts and circumstances from which the other party ought to have acquired the knowledge.

 (3)    In this rule:

condition of mind, for a party, means:

(a)    knowledge; and

(b)    any disorder or disability of the party’s mind; and

(c)    any fraudulent intention of the party.

10        The second principle is that a pleading is embarrassing 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, or if the pleading 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 expenses”.

11        Thirdly, the function of a pleading is to state with sufficient clarity the case that must be met, i.e., the pleading fulfils a basic procedural fairness requirement that a party should have the opportunity of knowing and be able to meet the case against them.

12        Fourthly, a statement of claim must plead all the material facts necessary for the purpose of formulating a complete cause of action.

13        Fifthly, it is insufficient to state conclusions drawn from unstated facts.

14        Sixthly, the discretion to strike out a pleading should be exercised with “great” or “exceptional” caution.

15        Seventhly, in some cases the power to strike out pleadings will not be exercised notwithstanding a failure to plead all material facts. Such restraint will be appropriate where the deficiency causes no confusion and does not raise issues of substantive principle and where deficiencies can be overcome by ordering the provision of particulars, or the furnishing of affidavits (see Tracey J’s observations to that effect in Wright Rubber Products Pty Limited v Bayer AG [2008] FCA 1510 at [5]).

16        Finally, it is inappropriate to adopt a pedantic approach in determining whether or not to strike out pleadings, as observed by Logan J in Australian Competition and Consumer Commission v Craftmatic Pty Limited [2009] FCA 972 at [14].

17        Turning now to outline SKM’s arguments, in broad terms they may be summarised as follows. SKM argues that the pleading fails to state the material facts on which the applicants rely that are necessary to give SKM fair notice of the case to be met against it at trial. It also says that the pleading is evasive or ambiguous and is likely to cause prejudice, embarrassment or delay in the proceedings. It says further that it fails in respect of some claims to disclose a reasonable cause of action. SKM claims that the pleading fails to identify with sufficient clarity the parties to the various contractual agreements alleged and the material facts necessary to constitute a complete cause of action in contract. It also criticises the adequacy of the material facts pleaded as grounding the misleading and deceptive conduct claim. Finally, SKM complains about various matters concerning the applicants’ claim of loss or damage.

18        Reliance is placed by SKM on the requirement imposed by r 16.41 which requires a party to set out in its pleading all the necessary particulars. As mentioned above, prominent among SKM’s complaints relating to the pleading is the difficulty presented by the references to the NFL Entities, which comprise no less than 51 separate corporations.

19        The applicants’ argument in response can be summarised in very broad terms as follows. First, there is no deficiency in the identification of the parties to the alleged agreements because it is said that the three applicants which are pleaded as being parties to those agreements are pleaded in the alternative.

20        Secondly, it is said that to the extent that there are deficiencies in the pleadings concerning issues such as the identification of the terms of the two contracts which are relied upon, it is open to SKM to request further and better particulars. The opportunity for SKM to make a request for further and better particulars is also relied upon by the applicants as providing an adequate solution to most of the difficulties which have been identified by SKM in respect of the statement of claim.

21        As to SKM’s complaint concerning the unparticularised references to the NFL Entities, the applicants say that each of them is a wholly owned subsidiary of NFL and that they are each involved in NFL’s business. Furthermore, they say that the dealings between SKM and the NFL Entities have apparently proceeded with a minimum of formal documentation, but that does not make the current pleading uncertain. They also emphasise that the only parties who actually seek damages or any other relief in the proceedings are the three applicants and not any of the other 48 members of the NFL group.

22        I turn now to consider the primary matters that are complained of by SKM. The first matter relates to a complaint that in paragraphs 57 and 58 of the statement of claim there is a rolled up pleading in respect of both the contract and tortious claims. That is true and it may well be that ideally the two causes of action ought to have been pleaded separately. But in my view, there is no confusion created by the drafting method that has been adopted in those paragraphs. It seems to me clear that, on a reasonable reading of the relevant paragraphs and the statement of claim as a whole, the references in paragraphs 57 and 58 to a failure to use reasonable skill and care insofar as the contract claims are concerned are plainly references back to paragraphs 14(d) and 29(c) of the pleading.

23        There is a separate complaint about the particulars to paragraphs 57 and 58 which adopt and repeat particulars that are set out in paragraph 56(a) to (j). These are particulars of why it is said there has been certain conduct which is misleading or deceptive. SKM complains that it should not be left in the dark as to whether each of those 10 particulars relates to one or other of the agreements which are said to have been breached. In my view, if there is uncertainty on SKM’s part, the matter ought sensibly to be advanced by a request for further and better particulars and clarification sought as to whether all of the particulars relate to both breaches of contract or only to some of them.

24        The next matter that was raised in respect of the contract claim (but it also has a wider application) has given me most concern. It relates to the references in various paragraphs in the statement of claim to one or other companies in the NFL group, without any particularisation or identification of those individual companies, other than by a global reference to the companies in the Schedule.

25        In my view, SKM is entitled, in accordance with fundamental pleading requirements, to know the case which it has to meet so that it can be ready for trial. In circumstances where the NFL Entities are pleaded in the further or in the alternative as including companies who entered into agreements with SKM, as an alternative to the pleading that the agreements were reached with one or other of the three applicants, I believe that the global reference is embarrassing, is capable of causing confusion and, furthermore, is likely to add unacceptable cost to the future conduct of the proceedings in terms of difficulties that will be presented for interlocutory processes, including discovery, subpoenas, etcetera.

26        In those circumstances, I would accede to SKM’s application that references to the phrase “one or more other companies in the NFL group” (or words to similar effect) which appear, for example, in paragraphs 28, 47 and 66, but also in other paragraphs of the statement of claim, be struck out. I am also prepared to accede to the request made by Mr Pike SC, who appeared on the interlocutory application for the three applicants, to grant leave to re-plead those paragraphs.

27        As I have already indicated, there are many other matters raised by way of complaint by Mr Margetts SC, who appeared with Mr Connolly on behalf of the respondent. In my respectful view, each of those matters is capable of being progressed and resolved by way of the making of a request for further and better particulars.

28        There are a number of other matters which were also raised which, in my view, do not warrant striking out in accordance with the principles I have described above. They include, for example, a complaint that the pleading is deficient because there is no pleading of actual reliance as part of the negligent misrepresentation case. I accept the submission made by Mr Pike SC that this pleading relies upon the concept of known reliance, as discussed by Ferguson J in the decision of the Supreme Court of Victoria in Taylor v Lederman [2013] VSC 99 and, in particular, at [31], where her Honour sets out the reasoning of Gaudron J in the High Court’s decision in Perre v Apand Pty Limited (1999) 198 CLR 180.

29        Returning now to deal with the issue of further and better particulars, in my respectful view that is the proper course to adopt to address the complaints which are raised by SKM on such matters as the fact that there is an inadequate identification of what are said to be the terms of the two relevant agreements. The process of requesting and providing further and better particulars will clarify the extent to which terms which are pleaded in the statement of claim are pleaded for the sole purpose of providing a broader factual matrix or context in which to understand the pleaded claims of breach.

30        Various criticisms were also levelled at parts of the pleading which relate to misrepresentations in breach of s 52 of the TPA. In my view, each of those criticisms can adequately be addressed by requesting further and better particulars.

31        A separate complaint was made by Mr Margetts SC relating to the fact that the pleading fails to identify what actions or steps the applicants say SKM should have done, in terms of avoiding the design underbuild which the applicants say resulted from SKM’s involvement. My attention was drawn to comments of Nicholas J in Rivercity Motorway Finance Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) v AECOM Australia Pty Limited [2012] FCA 1304 and, in particular, to what his Honour had to say at [21] concerning the distinction which is to be drawn between matters of this sort being dealt with by way of evidence, including possibly expert evidence, as opposed to setting them out in pleadings. I respectfully agree with and adopt what his Honour has to say at [21] and believe that the observations there are apposite to the circumstances here.

32        A separate complaint is raised by SKM as to the adequacy of the pleading in terms of quantification of the loss or damages which it is said have been suffered by one or other of the three applicants. Mr Pike clarified in oral address that the particulars of loss or damage are to be found in paragraphs 66 through to 71 of the statement of claim. To the extent that SKM is dissatisfied with the adequacy of that indication, it remains open to SKM to seek further and better particulars.

33        For those reasons, I would order that:

1.    Any references in the statement of claim to the phrase “one or more other companies in the NFL group” or words to similar effect be struck out.

2.    Leave be granted to the applicants to re-plead the relevant paragraphs by 10 September 2013.

3.    Any request for further and better particulars be made by the respondent by 24 September 2013.

4.    The applicants respond to any such request for further and better particulars by 8 October 2013.

5.    The respondent file and serve a defence by 29 October 2013.

6.    There be no order as to costs.

7.    Liberty to apply on the giving of 72 hours’ notice.

8.    The matter be listed for directions at 9:30 am on Tuesday, 5 November 2013.

Associate:

Dated:    27 August 2013