FEDERAL COURT OF AUSTRALIA

Oztech Pty Ltd v Public Trustee of Queensland (No 6) [2016] FCA 391

ORDERS

THE COURT ORDERS THAT:

1.    By 4.00 pm on 26 April 2016, the parties bring in an agreed form of order giving effect to [21] of the reasons for judgment published today as Oztech Pty Ltd v Public Trustee of Queensland (No 6) [2016] FCA 391 (the reasons).

2.    Save in respect of the alleged Event of Default that occurred on 23 January 2008 and the alleged Event of Default that occurred on 31 January 2008, as particularised, paragraphs 92C.1 and 92I.3 of the amended statement of claimed filed on 29 January 2016 (the amended statement of claim) be struck out to the extent that each alleges that the respondent would have “formed the view that an Insolvency Event and an Event of Default had occurred and was continuing under the Terms of Issue in respect of OL and OIN”.

3.    Paragraph 92AD of the amended statement of claim be struck out to the extent that it alleges a breach of duty by the respondent based on the particulars identified in [61] of the reasons.

4.    Paragraphs 3, 4 and 5 of the respondent’s interlocutory application dated and filed on 9 March 2016 (the interlocutory application) be stood over to a date to be advised for further hearing, as may be necessary.

5.    For the purposes of Order 4, leave be granted to the respondent to re-list the interlocutory application for further hearing on reasonable notice.

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

REASONS FOR JUDGMENT

YATES J:

Introduction

1    There are two matters before the Court for present determination. The first concerns the scope of the trial to commence on 27 June 2016. The second is the respondent’s interlocutory application dated and filed on 9 March 2016, by which the respondent seeks an order that the amended statement of claim filed on 29 January 2016, or certain paragraphs of it, be struck out or, alternatively, that certain particulars be provided.

2    The case arises out of the respondent’s role as the trustee for noteholders in respect of senior unsecured notes issued by the company now called Octaviar Investment Notes Limited (in liquidation) (OIN). A company now called Octaviar Limited (receivers and managers appointed) (in liquidation) (OL) was a guarantor of OIN’s obligations under the notes. The applicant alleges that, following a sharp drop in OL’s share price in January 2008, and OL’s sale of a business (referred to in the amended statement of claim as Stella) which was completed on 29 February 2008, the respondent acted too slowly to protect the interests of noteholders, in particular by failing to apply to wind-up OIN and OL, and another company now called Octaviar Administration Pty Ltd (in liquidation) (OA), and to take other steps, by 29 February 2008, with the consequence that the respondent breached his statutory, contractual and general law duties to noteholders.

The scope of the trial

3    At a case management conference on 2 November 2015, the respondent raised the question of whether there should be a split trial, with the question of damages being deferred until there had been a determination on liability. At that time, the applicant expressed its desire to consider its position in relation to that matter. Nevertheless, the directions made on that day, and at subsequent directions hearings, have proceeded on the assumption that there will be a split trial, along those broad lines.

4    At a directions hearing on 11 February 2016, I reminded the parties of the need to make an appropriate order defining the issues which would fall for determination at the trial to commence on 27 June 2016: see, in that connection, the general observations of the Full Court in Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2009] FCAFC 26 in the context of representative proceedings. I expressed the view that the scope of the trial to commence on 27 June 2016 should be defined by reference to relevant paragraphs in the amended statement of claim. In the period 9 to 11 March 2016, correspondence passed between the parties on this matter. No agreement as to the appropriate form of the order was reached.

5    The issue that divides the parties is where the “split” should occur. This disagreement was first raised at a directions hearing on 16 March 2016. The disagreement is about whether the trial to commence on 27 June 2016 should resolve the question of whether the applicant suffered some loss or damage by reason of the respondent’s alleged breaches. The respondent says it should; the applicant says it should not.

6    The respondent now seeks an order to the effect that the trial to commence on 27 June 2016 should determine all of the issues raised by the pleadings, except for the quantum of any loss or damage suffered by the applicant and group members. More specifically, the respondent seeks an order that the issues to be determined shall not include paragraph 10 of the amended statement of claim or the quantum of the loss or damage alleged in paragraph 99.

7    The respondent advances three reasons why an order to this effect should be made.

8    First, leaving aside the applicant’s claims in relation to the respondent’s alleged breaches of equitable duties as a trustee (for which equitable compensation is claimed), the causes of action brought against the respondent for breach of s 283DA of the Corporations Act 2001 (Cth) and in negligence, require proof of damage as an element of the cause of action that is pleaded. Thus, a determination on liability in respect of these causes of action would require a finding of some loss or damage. The respondent submits that it “would be entirely unsatisfactory for weeks of Court time to be invested in resolving charges of misconduct that may go nowhere, because no attention was paid to whether any loss or damage flowed from the alleged misconduct”. The respondent submits that a trial at which loss and damage were excluded as issues would not resolve liability at all.

9    Secondly, the respondent has raised a number of limitation defences in its amended defence, filed 1 March 2016. This will require the Court to determine the date of accrual of any cause of action that is established. The respondent submits that a trial at which loss and damage were excluded as issues “would disable the Court from adjudicating the [respondent’s] limitation defences, and leave this key aspect of liability unresolved”.

10    Thirdly, the respondent submits that, at a practical level, the Court and the applicant would wish to know whether any material loss in fact flowed from any breaches that could be established. The respondent submits that a two to three week trial devoted to argument about what would be the return to group members in a hypothetical earlier liquidation makes no sense if the costs of that exercise dwarf any realistic increased return. Relatedly, the respondent submits that, as a general principle, no separate quantum trial will be ordered unless an applicant has first demonstrated a prima facie case of some material loss or damage.

11    I do not think that these considerations are determinative of the present issue. By its amended defence, the respondent advances a substantial case that he has not breached his duties, as alleged. If this is found to be so, the applicant’s claim will be dismissed, without the need to consider further issues on liability. But, whatever result ensues, it will be necessary to hear and determine the question of whether the respondent breached his duties, as alleged. I do not accept, therefore, that a split trial which does not determine, at the first stage, whether loss or damage has been suffered will mean that weeks of court time invested in resolving allegations of misconduct may go “nowhere”, in the sense that such court time could be avoided by adopting the respondent’s preferred approach. Certainly, the parties do not suggest that I should determine the question of the existence of loss or damage as a preliminary question which, if resolved in favour of the respondent, would avoid the need to determine whether the alleged breaches of duty had occurred.

12    Further, contrary to the respondent’s submission, a trial that is split so that, at the first stage, the question of loss or damage is not determined, would not “disable” the Court from determining the respondent’s limitation defences. It would only defer that question. Further, as events may transpire, it may not be necessary to decide the limitation defences at all.

13    As to the third matter, I accept that, in some cases, such as where an enquiry as to damages is sought, a court might not order such an enquiry unless the applicant has first demonstrated the existence of some loss or damage that would warrant further resources being committed to the enquiry: see, for example, McDonald’s Hamburgers Ltd v Burgerking (UK) Ltd [1987] FSR 112 at 117-118. I do not think, however, that this is a guiding consideration in the present case; nor do I think that, in the present case, other appropriate steps cannot be taken to ensure that a hearing to determine the quantum of any loss or damage is not a waste of time and resources.

14    I also accept the general proposition that it would be helpful to know now whether any material loss or damage did in fact flow from the alleged breaches. But, in order to gain a true appreciation of that fact, it would also be necessary to appreciate the likely quantum of the loss or damage that might have been suffered. The parties do not suggest that the first stage of a split trial in the present case should deal with that question. Indeed, the complexity of that question has led to the view that there should be a split trial, with the quantification of loss or damage as the last step.

15    The applicant raises other considerations in opposition. The applicant submits that the order sought is imprecise and would cause uncertainty. In this connection, the applicant submits that it is unclear as to what the respondent means when he says, in submissions, that the applicant should establish “some” or “prima facie” loss or damage. The applicant developed this submission in a number of ways that need not be summarised in these reasons. The applicant also submits that, by the respondent’s proposed order, there will be no clear delineation between what is proposed to be determined at each stage of the split trial, with the consequence that there may well be consequent possible procedural difficulties, including the duplication of evidence and hearing time, and the risk that findings made at the first stage of a split trial might disqualify me, as the trial judge, from presiding at a subsequent stage.

16    Further, the applicant submits, correctly in my view, that the question of loss or damage is inextricably connected with the contested issue in this proceeding concerning the date when a hypothetical liquidation would have commenced. The applicant submits, cogently, that this question should be determined first, before evidence is adduced as to the loss or damage that occurred on the applicant’s theory that the liquidation should have commenced earlier.

17    This submission is, in my view, determinative of the present issue. I am persuaded to the view that the question of whether loss or damage was suffered is inextricably linked with the debate about when a hypothetical liquidation would have commenced. That date cannot be known with any reasonable precision in advance of a finding that there has been a breach of duty as alleged and, if so, a further finding as to when that breach occurred. The applicant’s case is that, had the respondent not breached his duties, he would have applied for and obtained winding up orders against OL, OA and OIN by no later than 29 February 2008. So pleaded, this case covers a finding that such orders should have been applied for and made on or at some time before 29 February 2008.

18    Taking all these matters into consideration, I am not persuaded that the order sought by the respondent should be made.

19    The applicant advances an alternative order, as follows:

The hearing commencing on 27 June 2016 determine all issues in the proceedings except for paragraphs 10, 91, 92, 92E, 92F, 92K, 92L, 92R, 92S, 92U, 92Z, 92AA and 92AH of the Amended Statement of Claim and paragraphs 10, 147, 148, 148E, 148F, 148K, 148L, 148R, 148S, 148U, 148Z, 148AA, 148AG and 151 to 160 of the Amended Defence.

20    The applicant says that the effect of making such an order would be to postpone the question of damage and limitation periods to a subsequent hearing, assuming the applicant to be successful at the hearing commencing on 27 June 2016. Whilst not supporting such an order, the respondent has not challenged or commented on its form.

21    I am not satisfied that the applicant’s proposed order accurately reflects the matters that should be determined at the first stage of a split trial in this proceeding. For example, it seems to me that a reference to paragraph 92AG of the amended statement of claim should be included. Further, it seems to me that greater refinement might be necessary in relation to the identified paragraphs of the amended defence. I query, for example, the inclusion of paragraph 10 of the amended defence and the exclusion of paragraph 148AH. Thus, whilst I accept the general position advanced by the applicant, the parties should confer on the form of the order that is proposed by the applicant and bring in an agreed form of order by 4.00 pm on 26 April 2016.

22    The respondent seeks an additional order that the trial commencing on 27 June 2016 should determine the claim for relief of a group member who sold notes after 29 February 2008. The respondent argues that such an order could be made under s 33Q of the Federal Court of Australia Act 1976 (Cth).

23    I do not understand the utility of this proposed order, particularly in light of the applicant’s submission that group members who sold notes after 29 February 2008 would have done so at different times and in different circumstances. If this is so, and I have no reason to doubt what the applicant has said, then I can see no point in making such an order.

APPLICATION for strike out or further Particulars

Background

24    The respondent’s interlocutory application has two limbs.

25    First, on 23 December 2015, I gave judgment in relation to the applicant’s interlocutory application to amend its statement of claim: Oztech Pty Ltd v Public Trustee of Queensland (No 2) [2015] FCA 1485 (my earlier reasons). With respect to the amendments then proposed, I said (at [82]-[83]):

82    In paragraphs 92C.1 and 92I.3, the applicant alleges that if the respondent had taken certain “actions”, it would have formed the view that an Insolvency Event and an Event of Default had occurred and was continuing under the Terms of Issue in respect of OL and OIN, but does not state which particular Insolvency Event and Event of Default had occurred and when it/they occurred, or the circumstances that would have led the respondent to form the view that these events had occurred.

83    In paragraph 92AD, the applicant alleges that the respondent breached its alleged duty to provide accurate information to group members as to the state of the Octaviar Note Trust by failing to disclose the matters pleaded in paragraphs 48A to 48BL, but does not state whether the respondent knew or ought to have known (and, if the latter, on what basis the respondent ought to have known) the alleged facts, in particular those pleaded in paragraphs 48BF, 48BG and 48BH.

26    I made the following order:

2.    Leave be granted to the applicant to amend its statement of claim in the form of the proposed amended statement of claim annexed to the Amendment Application, save for the paragraphs thereof identified in [86]-[88] of the reasons for judgment published on 23 December 2015 (the reasons) and subject to the applicant also providing particulars of the matters identified in [80]-[84] of the reasons. This leave is to be exercised by 29 January 2016.

27    On 29 January 2016, the applicant filed its amended statement of claim, purportedly pursuant to the leave that had been granted. The respondent says that the applicant has not satisfied the conditions on which leave to amend was granted.

28    Secondly, the respondent says that the amended statement of claim is “defective” in a number of respects; that proper particulars of a number of other allegations of fact have not been provided. The respondent has annexed a 16 page request for particulars to its interlocutory application. The annexed document contains 64 paragraphs, with numerous subparagraphs, representing the individual requests made.

29    The applicant’s position is that it has satisfied the conditions on which leave to amend was granted. As to the respondent’s request for particulars in respect of other allegations, the applicant points to the following considerations, amongst others.

30    First, the respondent argues that the respondent has delayed in seeking further and better particulars of the allegations made in the statement of claim as originally filed on 16 September 2014. The respondent’s request for particulars covers, in total, 54 paragraphs of the amended statement of claim, of which 21 were in the statement of claim as originally filed. Further, as I have noted, the request for particulars contains 64 paragraphs, 24 of which relate to paragraphs pleaded in the statement of claim as originally filed.

31    Secondly, in an affidavit made on 11 April 2016, the applicant’s solicitor, Amanda Kim Banton, has deposed that if the applicant were required to provide every particular that is sought by the respondent, it would take the applicant between 14 to 21 days to do so.

32    Thirdly, the applicant submits that the degree of particularisation sought by the respondent is not necessary or required and, indeed, is nothing more than, in a number of respects, an attempt to request evidence.

33    Fourthly, the applicant has expressed a preparedness to provide further particulars to the respondent. However, the applicant has not identified the further particulars it is prepared to give. It says that it is not incumbent upon it to draw up a request for particulars that is appropriate and more limited than the request annexed to the interlocutory application.

34    Fifthly, and importantly, the applicant says that information corresponding to the particulars, necessary to guard against surprise at the trial, will be set out in its expert evidence. In this connection, the applicant has filed two expert reports and proposes to file three additional expert reports (from the same experts) by 22 April 2016. On 4 March 2016, prior to the filing of the respondent’s interlocutory application, the applicant’s solicitors wrote to the respondent’s solicitors suggesting that the respondent await the receipt of the applicant’s intended evidence before pursuing his (the respondent’s) request for further and better particulars.

Relevant rules and principles

35    Rule 16.41(1) of the Federal Court Rules 2011 (the Rules), provides:

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.

36    Rule 16.43 of the Rules provides:

(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.

37    Rule 16.45 of the Rules provides:

(1)    If a pleading does not give a party fair notice of the case to be made against that party at trial and, as a result, the party may be prejudiced in the conduct of the party’s case, the party may apply to the Court for an order that the party who filed the pleading serve on the party:

(a)    particulars of the claim, defence or other matter stated in the pleading; or

(b)    a statement of the nature of the case relied on; or

(c)    if there is a claim for damages — particulars of the damages claimed.

(2)    An application under subrule (1) may be made only if:

(a)    the particulars in the pleading are inadequate; and

(b)    the party seeking the order could not conduct the party’s case without further particulars.

(3)    A respondent who applies to the Court for an order under subrule (1) before filing the respondent’s defence must satisfy the Court that an order is necessary or desirable to enable the respondent to plead.

Note    The intent of the pleading rules is that a party should include all material facts in its pleadings as initially filed so that there is no unfairness to another party by any lack of particularity. If the party has not done so, the Court may at trial refuse to allow the party to present a case that is outside the terms of their pleading.

38    I should say something about the application of r 16.45(3) of the Rules in the present case. At a directions hearing on 4 February 2016, shortly after the amended statement of claim had been filed, the respondent raised the issue of whether, because of inadequate or incomplete particularisation, the conditions on which leave to amend had been granted, had been satisfied. Although perhaps not clear to me at that time, the respondent might also have had in mind that other allegations in the amended statement of claim had not been properly particularised. There was a debate about the sequence of steps that should then be taken to prepare the case for trial. For reasons then given, I was not satisfied that, at that stage, the respondent required further particulars in order to plead to the amended statement of claim. The respondent, quite properly, accepted that to be so. Indeed, because I anticipated that the respondent would be advancing a positive case in his defence, it seemed to me to be highly desirable that the respondent plead to the amended statement of claim as soon as possible and, in any event, before the applicant was required to file its expert evidence.

39    The present interlocutory application does not provide an appropriate occasion to embark on a detailed discussion concerning particulars. However, the parties did bring some cases to my attention, to which I should make brief reference.

40    In Goldsmith v Sandilands (2002) 190 ALR 370; [2002] HCA 31 (Goldsmith) at [2], Gleeson CJ said:

The facts in issue in a civil action case emerge from the pleadings, which, in turn, are framed in the light of the legal principles governing the case. Facts relevant to facts in issue emerge from the particulars and the evidence. The function of particulars is not to expand the issues defined by the pleadings, but “to fill in the picture of the plaintiff's cause of action with information sufficiently detailed to put the defendant on his guard as to the case he has to meet and to enable him to prepare for trial”. The function of evidence is to advance, or cut down, the case of a party in accordance with the rules of statute or common law that determine the nature of the information a court will receive. The primary rule of evidence is that a court will receive, and will only receive, evidence that is relevant to the issues as defined by the pleadings. Evidence is relevant if it could rationally affect, directly or indirectly, the assessment of the probability of the existence of a fact in issue in the proceeding. ...

41    The requirement of r 16.41(1) of the Rules is to provide “necessary” particulars. In Police & Nurses Credit Society Ltd v Burgess Rawson (WA) Pty Ltd [2006] FCA 1395 (Burgess Rawson), French J said (at [17]):

What are “necessary” particulars of any claim, defence or other matter pleaded is a matter of judgment. The underlying principle is that the case of each of the parties is adequately exposed to the other. It is important to maintain a sense of balance in the detail of particulars sought and ordered. The provision of particulars should not be allowed unduly to increase the cost and delay associated with litigation. In contemporary commercial litigation where, frequently, the court will direct the filing of witness statements or affidavits on either side subject to the right to cross examination, the necessity for elaborate particulars and lengthy debates about them is even more questionable.

42    The cases draw a distinction between the requirement to provide particulars and the provision of evidence: see, for example, Gleeson CJ’s observations in Goldsmith quoted above. In Burgess Rawson, French J (at [18]) said that he had no hesitation in rejecting a request for particulars which began with the words “… specify, every fact, matter, reason, inference and thing relied upon …”. His Honour said:

The immediate and apparent vice of such an ill-disciplined request is that it will seek to rope in the other party’s evidence.

43    In the same vein, Joske J said in Trade Practices Commission v Total Australia Ltd (1975) 24 FLR 413 at 417:

… While the defendant is entitled to know the case it is called upon to meet, it is not entitled to be told the evidence that will be called to prove the case. A defendant is entitled to ask for the material facts upon which the plaintiff will rely and he may make his request for the facts and matters relied on, which is taken to mean the same thing. When he asks for the facts and circumstances relied on he is going beyond the scope of particulars, and is probing for evidence. It may be that a somewhat loose and, with respect, incorrect practice has cropped up of particulars of “facts and circumstances” having in some cases been ordered, but that cannot extend the established rules with regard to particulars …

44    Nevertheless, as r 16.43(2) of the Rules makes clear, if a party pleads that another party ought to have known something, particulars must be given of the “facts and circumstances” from which it is said the asserted knowledge was acquired. Whilst I certainly do not think that the rule calls for the evidence to be relied upon, it does signify, by its terms, the relative degree of particularisation that must be given of such an allegation. The facts and circumstances must be stated. It can be taken that such particulars are “necessary” within the meaning of r 16.41(1) of the Rules. As I will come to explain, this consideration forms the basis for conditioning the leave to amend that was granted on 23 December 2015, as expressed by reference to [82] and [83] of my earlier reasons quoted at [25] above.

45    The requirements of r 16.45 of the Rules—dealing with an application for an order for particulars—represent a departure from the predecessor rule in O 12 r 5 of the Federal Court Rules 1979. Under the present rule, a party applying for an order for particulars may well demonstrate that the particulars given in an impugned pleading are inadequate. But this is not enough to obtain an order that further particulars be provided. The party must go on to show that it could not conduct its case without further particulars: see Perram J’s discussion of this aspect of the present rule in DP World Sydney Limited v Maritime Union of Australia (No 1) [2013] FCA 278 (DP World). Thus, in light of r 16.45(2)(b) of the Rules, and as a broad proposition, inadequate pleading because of inadequate particularisation is not, of itself, a sufficient justification for ordering further particulars.

46    However, in Palram Australia Pty Ltd v Rees [2013] FCA 649, Besanko J considered the application of r 16.45(2)(b) of the Rules in the context of the concurrent operation of r 16.43, dealing with the specific requirement for particulars of knowledge. After referring to DP World, his Honour observed (at [37]):

The content of the requirement in r 16.45(2)(b) and its operation is to be assessed in the context of the particular circumstances of the case before the Court. In this case, I would not refuse particulars by reference to that rule because the inadequacy results from an appreciable departure from a specific rule i.e., r 16.43 and because the allegations with respect to which particulars are sought are serious allegations.

47    Those observations are, with respect, apposite to the present case.

Have the conditions of leave to amend been satisfied?

48    This question focuses on two aspects of the amended statement of claim.

49    The first aspect concerns paragraphs 92C.1 and 92I.3. These paragraphs are materially the same. Paragraph 92I.3 makes the same allegation and repeats the particulars given with respect to paragraph 92C.1. It is convenient, therefore, to focus attention on the pleading of paragraph 92C.1.

50    In that paragraph, the applicant pleads that if the respondent had taken “any or all” of certain “actions”, said to be pleaded in paragraph 92B, it would have formed the view that an Insolvency Event and an Event of Default under the Terms of Issue of the notes had occurred, and was continuing, in respect of OL and OIN. The applicant provides particulars of 11 alleged events occurring in the period (on or about) 31 July 2007 to 12 February 2008, each of which is said to be an Event of Default. The respondent makes no complaint about the particularisation of two of those events. However, as to the balance, he says that the particulars do not identify the circumstances that would have led him to form the view that each event had occurred.

51    The applicant disagrees. It says that the circumstances are stated in paragraph 92B.

52    Paragraph 92B is a catalogue of “actions” which, it is said, the respondent, in breach of his duty, failed to do from the time he gave notice of his resignation as trustee (6 July 2007) until on or after 18 January 2008.

53    It is necessary to set out paragraph 92B:

92B.    The Respondent breached the said duty by failing to take any or all of the following actions from 6 July 2007 (the date of its notice of resignation as Trustee) until on or after 18 January 2008:

92B.1    failing to act on the advice in the Second PwC Report as more particularly pleaded at paragraph 48F.1 above (make inquiries as to how OL proposed to utilise the proceeds from assets held for sale);

92B.2    failing to act on the advice in the Second PwC Report as more particularly pleaded at paragraph 48F.2 above (request further analysis and explanations of OL’s cash flows and how the sale of assets currently held for sale will impact those cash flows);

92B.3    failing to properly respond to the Third PwC Report as more particularly pleaded at paragraph 48I above (PwC unable to form an opinion as to whether OL would have the ability to meet scheduled debt repayments);

Particulars

The Respondent failed to take the following steps:

(a)    request PwC to continue to provide regular reports on the ability of OL to meet the scheduled debt repayments and whether there had been any breach by OIN and/or the Guarantors of the Trust Deed, the Terms of Issue and/or the Act until after 18 January 2008;

(c)    appoint a delegate pursuant to clause 10.5 of the Trust Deed to carry out the Respondent’s duties as Trustee prior to its notice of resignation taking effect whilst the Respondent dedicated its efforts to finding a replacement trustee instead of performing its obligations as trustee;

(d)    notify Noteholders that PwC was unable to form an opinion as to whether OL would have the ability to meet scheduled debt repayments.

92B.4    failing to review and understand OL’s Financial Statement as more particularly pleaded at paragraphs 48V and 48W above;

92B.5    failing to exercise its rights under clauses 5.4(a), 6.2 and 6.6 of the Trust Deed to require OIN to provide information regarding the financial position and solvency of OIN;

92B.6    failing to exercise its rights under clause 7.3 of the Trust Deed to require OL and any Material Subsidiary to provide financial information regarding the financial position and solvency of OL and any Material Subsidiary;

92B.7    failing to assess whether the information provided by OIN to the Respondent was true and correct and was not (by omission or otherwise) misleading;

Particulars

The Respondent failed to assess the following information:

(a)    the quarterly report dated 31 July 2007;

(b)    the quarterly report dated 29 October 2007; and/or

(c)    the quarterly report dated 16 January 2008 (Quarterly Reports).

The Quarterly Reports were misleading because they failed to:

(a)    notify the Respondent of the fixed and floating charges as more particularly pleaded in paragraphs 48AX.2 and 48AX.3 above which were a breach of s 283CC of the Act and clauses 7.2 and 7.3 of the Trust Deed;

(b)    notify the Respondent of the following matters which were materially prejudicial:

(i)    the tax debt owing to the Australian Taxation Office as more particularly pleaded at paragraph 48BL above;

(ii)    the extension of the date for repayment under the Fortress Facility Agreement and the inability to repay the amounts owing as more particularly pleaded at paragraphs 48AV to 48BC and 48BI above;

(iii)    the difficulties in obtaining the Commercial Banking Facility and its ultimate cancellation and suspension as more particularly pleaded at paragraphs 48BD to 48BH above;

(iv)    the UBS loan facility as more particularly pleaded at paragraphs 48AN to 48AT above; and

(v)    the decision not to sell Stella as more particularly pleaded at paragraph 48AU above.

92B.8    failing to brief an independent expert to provide a report to the Respondent on the solvency of OL or OIN;

Particulars

The Respondent’s Claim in Supreme Court of Queensland Proceedings S 546 of 2014 at [159].

54    Thus, in terms of the current pleading, the applicant says that had the respondent taken “any or all” of these “actions” (that is, had the respondent not failed to do one or more of the things referred to in paragraph 92B), he would have formed the view that each of the events, identified in paragraph 92C, constituted an Event of Default

55    One of the difficulties presented by this pleading can be illustrated by the first alleged Event of Default particularised in paragraph 92C.1:

Particulars

An Event of Default occurred on or about 31 July 2007 and was continuing because of the breach of clause 6.5(b) of the Trust Deed by the provision of the quarterly report by OIN to the Respondent.

…

56    The reference in this particular to a breach of clause 6.5(b) of the Trust Deed is to the breach of a covenant by OIN to ensure that all information provided to the respondent (here, the quarterly report dated 31 July 2007) was true and correct and not (by omission or otherwise) misleading.

57    In paragraph 92B.7 of the amended statement of claim, the applicant pleads that the respondent failed to assess whether the information provided by OIN was true and correct and was not (by omission or otherwise) misleading. The particulars to paragraph 92B.7 state that the quarterly report dated 31 July 2007, amongst other quarterly reports provided by OIN, was misleading because it did not refer to certain particularised matters that are said to have been “materially prejudicial”. However, on further analysis (with reference to other paragraphs of the amended statement of claim), a number of these matters significantly post-date the quarterly report dated 31 July 2007, and, if correctly pleaded in other paragraphs of the amended statement of claim, cannot rationally have been circumstances that would have led the respondent to form the view that an Event of Default occurred on or about 31 July 2007. Further, one of the particularised matters said to be “materially prejudicial” is “the decision not to sell Stella as more particularly pleaded at paragraph 48AU above”. When one goes to paragraph 48AU, there is no allegation concerning a decision not to sell Stella. Moreover, paragraph 48AU pleads that, by the end of 2007, a sale of Stella had not occurred.

58    In light of these matters, one is left to conclude, by a process of elimination, that at least some of the alleged failures by the respondent to assess the information provided by OIN could not have led the respondent to conclude that the quarterly report dated 31 July 2007 was misleading and that an Event of Default had thereby occurred. But, after undertaking that process of elimination, one is left to ask what “action” or combination of “actions” in the pleaded catalogue of actions in paragraph 92B, if the respondent had not failed to do it or them, would have led the respondent to conclude that an Event of Default had occurred on 31 July 2007? The respondent is required to trawl through the catalogue and make guesses as to which subparagraphs of paragraph 92B might provide this answer. That, however, is only part of the problem. As is apparent, the catalogue of “failures” is expressed at a relatively high level of generality. When one reads paragraph 92C against the backdrop of paragraph 92B, one is not told what specific step or steps, if taken, would have avoided the more generally expressed failures catalogued in paragraph 92B. Without pleading the step or steps to be taken, it is impossible to know from the pleading how, then, the respondent would have formed the view that each particularised Event of Default had occurred at about the time the event is said to have occurred.

59    This example is illustrative of a general problem with the pleading of paragraph 92C.1 of the amended statement of claim. The same general problem exists with the pleading of paragraph 92I.3 read against the backdrop of paragraph 92H (which is pleaded in terms similar to paragraph 92B).

60    I am satisfied that in no true sense has the applicant given particulars of the circumstances that would have led the respondent to form the view that each event, pleaded as an Event of Default, had occurred, other than in respect of an Event of Default that is alleged to have occurred by 23 January 2008. The respondent accepts that the knowledge attributed to him of this Event of Default has been particularised in accordance with the leave granted on 23 December 2015. The respondent does not seek to impugn, for want of particulars, another alleged Event of Default identified in paragraph 92C.1, although I have reservations that the knowledge attributed to the respondent of this event has been properly particularised. Be that as it may, I am satisfied that the respondent has demonstrated that, save in these two respects, the applicant has not complied with the conditions on which leave to plead paragraphs 92C.1 and 92I.3 of the amended statement of claim was given.

61    The second aspect concerns paragraph 92AD of the amended statement of claim. In this paragraph, the applicant pleads that the respondent breached a duty to provide accurate information as to the state of the Trust by failing to disclose the matters identified in paragraphs 48A to 48BL of the amended statement of claim. The respondent points to the particulars in paragraph 92AD given with respect to the matters identified in paragraphs 48R and 48S, and paragraphs 48Z to 48BL. Those particulars are, respectively:

The Respondent knew or ought to have known of the matters pleaded in paragraphs 48R and 48S by reason of the UBS presentation given on or about 19 April 2007.

…

The Respondent ought to have known of the matters pleaded at paragraphs 48Z to 48BL by reason of paragraphs 92B and 92H.

62    With respect to paragraphs 48R and 48S, the respondent says that the particulars in paragraph 92AD only identify that OL made a presentation at the “UBS Emerging Companies Conference”. The particulars do not explain why the respondent ought to have known that this presentation had occurred or how he would have known the content of the presentation.

63    With respect to paragraphs 48Z to 48BL, the respondent says that the particulars in paragraph 92AD simply allege that he ought to have known each of these facts “by reason of paragraphs 92B and 92H”. However, as I have observed above, those paragraphs simply refer, at a relatively high level of generality, to “actions” which, it is alleged, the respondent failed to take. The respondent submits that the allegation that he failed to take “any or all” of certain “actions” simply does not provide the facts and circumstances from which he ought to have known each one of the large number of matters pleaded in paragraphs 48Z to 48BL. The respondent submits that the pleading is still deficient, even if the pleading were construed to mean that, if the respondent had done the things alleged in paragraphs 92B and 92H, he would have acquired knowledge of the matters referred to in paragraphs 48Z to 48BL. He says that this is so because he should be given the relevant facts and circumstances as to how and why, as a consequence, he ought to have acquired the knowledge attributed to him.

64    The applicant’s response is simply that the relevant particulars are given by paragraphs 92B and 92H.

65    I do not accept that the particulars quoted in [61] above are proper particulars of the knowledge sought to be attributed to the respondent by reference to paragraphs 48R and 48S, and paragraphs 48Z to 48BL, of the amended statement of claim. I accept the respondent’s submissions in this regard. Rule 16.43(2) of the Rules requires the applicant to give particulars of the facts and circumstances from which the respondent ought to have acquired the knowledge which the applicant alleges. I can see no reason why, in the present case, there should be any departure from this rule. It was one of the bases on which I was prepared to grant leave to the applicant to plead paragraph 92AD.

66    There has been a failure to comply with the grant of leave given on 23 December 2015, in the respects which the respondent has identified. The respondent argues that, as a consequence, the amended statement of claim, as a whole, should be struck out. I do not accept that this consequence should follow. However, in the absence of proper particulars having been given, which was a condition of the leave that was granted, the challenged parts of paragraphs 92C.1, 92I.3 and 92AD of the amended statement of claim should be struck out. In coming to this decision I wish to draw attention to the fact that, at the time that the applicant sought leave to amend the statement of claim by introducing paragraphs 92C.1, 92I.3 and 92AD, I had formed the view that those paragraphs had not been properly pleaded, for the reasons given in [82] and [83] of my earlier reasons, quoted at [25] above. One course open to me at that time was to simply refuse these amendments. However, it seemed to me that the better case management option was to permit these amendments, provided the identified particulars were given. The applicant has failed to provide those particulars. I do not regard that failure to be a matter of mere technicality.

The respondent’s request for particulars

67    I have reviewed the respondent’s request for particulars. I have been assisted in this task by a table of pleading references provided by the respondent which identifies paragraphs in his amended defence that plead that a particular paragraph or part(s) of a particular paragraph in the amended statement of claim is or are “defective”, and the reason(s) for that deficiency. A number of matters raised by the respondent concern the inadequate particularisation of paragraphs 92C.1, 92I.3 and 92AD of the amended statement of claim, and related paragraphs, with which I have dealt. There remain, however, a substantial number of other objections to the present pleading of the amended statement of claim. I would expect that a large number of the respondent’s complaints of inadequate particularisation concern matters that should appear in the expert reports on which the applicant proposes to rely. Indeed, as I have noted, the applicant submits that information corresponding to the particulars necessary to guard against surprise at trial will be set out in its expert reports. Thus, this is a case in which the respondent will have the applicant’s intended evidence well in advance of the trial. I should also record my expectation that the opinions to be expressed in these reports will conform to or fall within the applicant’s case as currently pleaded.

68    The respondent will have a fair opportunity to respond to that intended evidence. Furthermore, as I have already recorded, it is clear from the amended defence that the respondent proposes to advance a positive case that cuts across many of the allegations made in the amended statement of claim and that, whilst criticising the pleading of the amended statement of claim, the respondent is, nevertheless, in a position to advance his positive case.

69    I have also made directions for the parties’ corresponding experts to confer and produce a joint report which identifies the matters of disagreement between them and a statement of the reasons for that disagreement.

70    Thus, by the time the trial commences, the respondent should be well-seized of the case the applicant seeks to advance.

71    It is possible that, notwithstanding the steps to which I have referred, there may remain certain allegations in the amended statement of claim that require further or better particularisation. However, I would expect such allegations, if any, to be within a very limited scope.

72    For these reasons, the course I propose to adopt is to stand over the respondent’s interlocutory application in so far as it concerns the relief sought in paragraphs 3, 4 and 5, pending the respondent’s receipt and consideration of the balance of the applicant’s expert reports, which will be filed and served by 22 April 2016. I would urge the respondent to then give careful consideration to what further particulars, if any, he really needs. I draw attention, in particular, to the requirement of r 16.45(2)(b) of the Rules. I will grant leave to the respondent to relist the interlocutory application for further argument on reasonable notice.

73    Orders will be made accordingly.

Associate:

Dated:    19 April 2016