FEDERAL COURT OF AUSTRALIA YO RIA, | DISTRICT REGISTRY SENGRAL. prvisrow No, of Action "V& , Sf of @29, peter oO EES PY £70 Y £ORENZO Gotten; TITLE OF action ,%, (776 Mommee! ' ® © # @ © 28 e @ © © © ¢ Ana APEX QuARares Aiminp . * © ££ @ © 8 ££ bp e &@ © @ ©» © © © & € § 8 Date(s) of hearing , 43.10.77, + + e Judgment Delivered At? , Counsel and (Ay Meowd, Arcot 4, Kurd, Her cutis oe ( ( Solicitors for (, doe rr . . ( ( ad (A Aap et Poe ERA MA ae # aad Mercfert Counsel and Solicitors for (an by lore bith stom Brot Keurry ol Rag'e !, bor bemsrow pe ; ts Gfereeney lint uctio by Coaserngd Stop vamp "cep, Signed ,., (Associate) Date 5g 5 pM VIG , , e © 2 g$ © 8 © (NOTE: To be despatched to Principal Registry, Sydney for on-forwarding to law publishers), s ' IN THE FEDERAL COURT OF AUSTRALIA ss GENERAL DIVISION VG No, 38 of 1979 VICTORIA DISTRICT REGISTRY BETWEEN; H 1976 NOMINEES PTY.-LTD, Vv. LORENZO GALLI and APEX QUARRIES LIMITED Northrop J. 2 November 1979 Melbourne CATCHWORDS Practice and Procedure - statement of claim - Trade Practices - misleading and deceptive conduct - motions to strike out statement of claim alternatively to dismiss proceedings - no reasonable cause of action, prejudice, embarrassment or delay, abuse of process - distinction between "material facts" and "particulars" - prolix and confusing particulars - circumstances in which proceedings may be dismissed. Trade Practices Act 1974 Section 52 ; Federal Court of Australia Rules 0.20 r.2; 0.4 r.1, r.2; O.11; 0.12; 0.19. O.11 1.16. ne ee ee Oe ee eg ee rear ttarvasesbeeary nineties beetle a A nana tata f ARNE RE nt te ee Ai nS NU nt Oe eee ween cee meee me nen ee Bn on, IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION BETWEEN: VG No, 38 of 1979 H 1976 NOMINEES PTY, LTD, Applicant —<_—. and LORENZO GALLI and APEX QUARRIES LIMITED Respondents JUDGE MAKING ORDER; DATE OF ORDER: WHERE MADE: ORDER: ORDER Northrop J, 2 November 1979 Melbourne a, that the whole of the statement of claim be struck out. that the applicant have leave to file and serve a further statement of claim on or before Friday 23 November, 1979. that the directions hearing be adjourned to Monday 10 December, 1979 at 10.15 a.m. at Melbourne. that the applicant pay the respondents' costs of the notices of motion including the costs of today. ae Bue a IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG No, 38 of 1979 GENERAL DIVISION BETWEEN: H_ 1976 NOMINEES PTY. LTD, Applicant and LORENZO GALLI and APEX QUARRIES LIMITED Respondents NORTHROP J. REASONS FOR JUDGMENT 2 November 1979 These proceedings were commenced by application dated 19 September 1979 and are before the Court on the directions hearing, see 0.4 r.8 Federal Court Rules which come into operation on 1 August 1979. The applicant is claiming the following relief:- "1. A Declaration that the Respondents have alternatively one or other of them have violated the provisions of Section 52 of the Trade Practices Act 1974 (as amended) of Australia, 2. The taking of accounts. 3. The appointment of a Court Expert to enquire into and examine all and every of the books of account and all other papers documents writings records and things of the second- named Respondent ("Apex") and each and every of its subsidiary companies and to report on all personal benefits profits and advantages had taken and received by the first-named Respondent from Apex to the exclusion of its shareholders from time to time including the Applicant and from each and every of Apex's wholly owned subsidiary companies and further to enquire into and examine the true and correct amount which should have been paid to the Applicant on the take over of Apex by Pioneer Concrete Services Limited and further and in addition to make all and any necessary enquiries and examinations of officers servants agents and directors of Apex and each and every of its subsidiary companies at all material times and to report on all of such to This Honourable Court in accordance with its Rules. Exemplary and punitive damages alternatively damages, Such further or other Orders or Directions as to the Court may deem meet, Interest. Costs." The applicant filed and served with the application a statement of claim. Under 0.4 r.6(2) the statement of claim is required to show:- ~"(a) (b) the nature of the applicant's claim; and the material facts on which it is based." Each of the respondents, pursuant to 0.19, gave notice of motion returnable before the Court at the same time as the directions hearing. called "Galli", i sought the following orders:- That the whole or part of the Statement of Claim insofar as it contains allegations in relation to a cause of action against the Firstnamed Respondent be struck out. That the proceedings herein be stayed or dismissed. Such further or other Orders or Directions as the Judge may seem fit." The second-named respondent, hereinafter called "Apex", sought the following orders:- The first-named respondent, hereinafter ne een rn eee wn eee 3, "1. That the proceeding herein be stayed or dismissed on the grounds that: (a) (b) (c) no reasonable cause of action is disclosed; the proceeding is frivolous and vexatious; the proceeding is an abuse of the process of the Court: or alternatively:- 2. That the Statement of Claim herein be struck out on the grounds that it: discloses no reasonable cause of action; has a tendency to cause prejudice, embarrassment or delay in the proceeding; is otherwise an abuse of the process of the Court. 3. Such further or other orders or directions as to the Judge may seem fit," The motions were based upon 0,11 r.16 and 0.20 r.2. At the directions hearing, the motions were heard together and before any directions were given, see 0.4 and in particular 0.10 r.4. 0.11 r.16. r.6. -I propose to consider first the motions based on That rule provides as follows:- "Where a pleading - (a) (b) (c) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; has a tendency to cause prejudice, embarrassment or delay in the proceeding; or is otherwise an abuse of the process of the Court, the Court may at any state of the proceeding order that the whole or any part of the pleading be struck out." Reference has been made already to the terms of 0.4 Order 11 deals generally with pleadings. Under r.1, where a pleading alleges several matters, the pleading must be divided into paragraphs which are to be numbered consecutively and each matter must, as far as convenient, be put 1n a separate paragraph. ee ee Under r.2 a pleading shall contain, and contain only, a statement ina summary form, of the material facts on which the party relies but not the evidence by which those facts are to be proved. Order 12 deals generally with particulars and under r.1l a party pleading must state in the pleading or in a document filed and served with the pleading the necessary particulars of any claim pleaded by him. It is necessary to give a summary of the matters appearing in the statement of claim filed and served by the applicant. Paragraph 1 alleges that the proceedings are brought under the Trade Practices Act 1974, as amended, hereinafter called "the Act" and are within the jurisdiction of the Court by virtue of s.86 of the Act. Reference may be made also to s.19 Federal Court of Australia Act 1976 as amended. Paragraph 2 alleges the incorporation of the applicant. Paragraph 3 alleges that Galli at all times was the managing director of Apex and a director of a number of wholly owned subsidiary companies of Apex and "is and was a person covered by and bound to abide by the provisions" of the Act. Paragraph 4 alleges the incorporation of Apex and that it is a corporation under the Act. Paragraphs 5 to 16 allege a number of facts but from a reading of the statement of claim as a whole it is not possible to decide at present whether they are material to the clain made by the applicant. Paragraph 17 is as follows:- "The Fidiciary (defined by the pleading to mean Salli) and Apex, inter alios, did, in trade or commerce, engage in conduct that was misleading or deceptive or alternatively engage in conduct that was likely to and did mislead or deceive; and each of the Fidiciary and Apex did so in collusion with the said Michael Galli, the said Truesdale, the said Gray, one Osea Bruni (herein- after called "the said Bruni"), the said Raslingham, and the said Hawkey or some or others of them and various other non-defendant persons the identity of whom are presently unknown to the Applicant. PARTICULARS Particulars exceed three (3) folios and are delivered herewith by being annexed hereto," 5. Fo The particulars consist of paragraphs numbered (1) to (xxi) but in fact there are 19 paragraphs only, Each paragraph is extremely long and conyoluted Some of the particulars may apply to each respondent but others appear to apply to Galli only. <=t is not necessary to set out a summary of the particulars, it is sufficient to say that they appear to relate to duties and obligations imposed upon directors of companies, to alleged breaches of those duties and obligations, the abuse of powers of directors of companies, the failure to comply with the requirements of State Companies Acts and similar matters internal to companies. In substance the particulars relate to complaints of the misuse of company assets and the breach of fiduciary duties and obligations imposed upon directors of companies. Paragraph 18 of the statement of claim alleges that as a result of the matters pleaded, the applicant has suffered loss and damage. Under paragraph 19 the applicant "claims exemplary and punitive damages for the oppressive, arbitrary and unconstitutional and ultra vires acts of the Fidiciary and Apex and each of them alternatively one or other of them . and were the conduct of the Fidiciary and Apex and each of them alternatively one or other of them was calculated to make a profit which may well exceed the compensation payable to the Applicant and further and in addition for the misconduct of the Fidiciary and Apex and each of them alternatively one or other of them and further and in addition to vindicate the distinction between a wilful and an innocent wrong doer AND further and in particular and in addition to deter Managing Directors, Directors, and majority shareholders of public companies listed on the Melbourne Stock Exchange or any other Stock Exchange in Australia from misleading and deceiving its shareholders and other members of the public who may purchase shares in its issued capital." A number of particulars are then set out, The claim is based on s.52 of the Act, Subsection (1) of that section is as follows:- ¥, 6, "52(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." Prior to 1 July 1977, the subsection was as follows:- "52(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive." Section 82(1) of the Act is as follows:- "82(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention." Prior to 1 July 1977, the subsection was as follows;- "82(1) A person who suffers loss or damage by an act of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person." Section 52 of the Act is within Part V of the Act. At the outset it is noted that the statement of claim does not allege the time at which it is alleged the respondents acted in contravention of s.52 of the Act. The wording of paragraph 17 suggests that the conduct complained of occurred after 1 July 1977 but from what appears in the particulars to that paragraph the applicant appears to be relying upon matters occurring before that date. It is not clear whether the applicant is relying upon matters arising before 1 February 1975 being the date the substantive provisions of the Act prior to its amendment came into operation. Normally the absence of dates could be cured by the giving of particulars but having regard to the form of the pleading and the amendments to the Act which came into operation on 1 July 1977, the absence of dates is a relevant matter to en Oe Pn wa nae 7. be taken into accout when considering whether the statement of claim should be struck out under 0.11 r,16, It is clear that Galli is not a corporation within the meaning of that word as defined in s.4 of the Act. The allegation in paragraph 3 of the statement of claim that Galli "is and was a person covered by and bound to abide by the provisions of" the Act is a conclusion drawn from facts which are not contained in the statement of claim. The statement of claim does not contain a statement of the material facts on which that conclusion can be drawn, see 0.4 r.6 and O.11 r.2. In this respect the statement of claim does not disclose a reasonable cause of action against Galli. The respondents made their main attack upon paragraph 17 of the statement of claim. Neither that paragraph nor any other paragraph of the statement of claim contains any statement of material facts which constitute or would constitute a contravention of s.52(1) of the Act by the respondents or one or the other of them, Paragraph 17 contains a conclusion drawn from facts which are not contained in the statement of claim. In order to disclose a reasonable cause of action, a statement of claim must contain statements of material facts which support the claims made. Particulars are not statements of material facts; particulars perform a different purpose. The distinction 1s made clear in Bruce V. Odhams Press Ltd. [1936] 1 K.B. 697 per Scott L.J. at pp 712-3:- "The cardinal provision in r.4 is that the statement of claim must state the material facts. The word "material" means necessary for the purpose of formulating a complete cause of action; and if any one "material" fact is omitted, the statement of claim is bad; it is "demurrable"" in the old phraseology, and in the new is liable to be "struck out" under Order XXV,, r.4: see Philipps V. Philipps 4 Q.B.D. 127; or "a further and better statement of claim" may be ordered under Order XIX., r.7. The function of "particulars" under r.6 is quite different. They are not to be used in order to fill material gaps in a demurrable statement of claim - gaps which ought to have been filled by appropriate statements of the various material a ee 8. ' facts which together constitute the plaintiff's cause of action, The use of particulars is : intended to meet a further and quite separate requirement of pleading, imposed in fairness and justice to the defendant. Their function is 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, Consequently in strictness particulars cannot cure a bad statement of claim. But in practice it is often difficult to distinguish between a "Material fact" and a "particular" piece of information which it is reasonable to give the defendant in order to tell him the case he has to meet; hence in the nature of the things there is often overlapping. And the practice of sometimes putting particulars into the statement of claim and sometimes delivering them afterwards either voluntarily, or upon request or order, without any reflection as to the true legal ground upon which they are to be given has become so common that it has tended to obscure the very real distinction between them," The particulars to paragraph 17 of the statement of claim cannot cure the defects contained in the statement of claim. With respect, I would agree with what was said by Adam J. in Rubenstein V. Truth and Sportsman Ltd. [1960] V.R. 473 at p. 476. ' Ir reject the argument that the particulars given ' to paragraph 17 of the statement of claim should be treated as statements of material facts for the purpose of the Federal Court Rules. In themselves they are prolix and cannot be said to comply with 0.11 r,3. They are confusing, It cannot be said that in themselves they contain statements of material facts which show the nature of the applicant's claim based on s.52 of the Act, If the particulars were allowed to perform that function, they would have a tendency to cause prejudice, embarrassment or delay in the proceeding and would constitute an abuse of the process of the Court, Accordingly, I find that the statement of claim ' discloses no reasonable cause of action to support the claims by the applicant against either of the respondents. in et ee eR A 9, - It is necessary to determine therefore, whether under 0.11 r.16 the Court should order that the whole of the statement of claim or parts only thereof namely paragraphs 3 and 17 should be struck out. Having regard to the form of ' the whole of the statement of claim, in my opinion, the whole of the statement of claim should be struck out, The facts alleged in paragraphs 5 to 16 do not appear to be material : to the claim made under s.52(1) of the Act, the statement of claim does not state when the facts which constitute the alleged contravention of the section occurred and it is questionable whether the claim in paragraph 19 1s open to be made, but I express no view on these matters, I am conscious of the warning given in Turner V. Bulletin Newspaper Pty. Ltd. (1973] 131 C.L.R. 69 per Jacobs J, at p, 97:- "Where the form of pleading is defective the Court can certainly strike it out entirely and is not bound to reframe it for the plaintiff's benefit." In the present case it may not be necessary for the applicant to obtain leave to amend the statement of claim, see 0.13 r.3(1). At the conclusion of the hearing on the ; motions, the Court ordered that the directions hearing be adjourned to a day to be fixed and that no further steps be taken in the proceedings without an order of the Court. In all the circumstances, it is appropriate that the Court order that the statement of claim be struck out and that the applicant have leave to file and serve a further statement of claim on or before Friday, 23 November 1979 and that the directions hearing be adjourned to Monday 10 December 1979 at 10.15 a.m. The motions under 0.20 r.2(1) remain for consideration. That rule provides as follows:- "Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to anv claim for ' relief in the proceeding - (a) no reasonable cause of action is disclosed; (b) the proceeding is frivolous or vexatious; or (c) the proceeding is an abuse of the process of the Court, i eens at na ha a 10, the Court may order that the proceeding he stayed ' or dismissed generally or in relation to any claim for relief in the proceeding," This power should be exercised sparingly. Having i regard to what has been saud in General Steel Industries Inc, V. Commissioner for Railways N.S.W. [1964] 112 C.L.R. 125 ' and L. Grollo Darwin Management Pty. Ltd. V,> Victor Plaster Products Pty. Ltd. [1978] 19 A.L.R, 621 it is not appropriate : that an order should be made under 0,20 r.2{1) at this stage of the proceedings. It is important that the applicant be given the opportunity of putting its pleading into proper form. This would then enable the respondents to move pursuant to 0,20 r.2(1) if so advised, Accordingly, the Court refuses to make an order under 0,20 r.2(1), The applicant should pay the applicants costs of the notices of motion including the costs of today. I certify that this and the 9 preceding pages are a true copy of the : 7" Reasons for Judgment herein of the Honourable Mr. Justice Moed-ep . 'Accosfate