IN THE FEDERAL COURT ) NOT INTENDED FOR GENERAL DISTRIBUTION OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) GENERAL DIVISION ) NO. WAG 155 of 1987 BETWEEN: KEVIN EDWARD CLARKE Applicant and JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 3 FEBRUARY 1988 WHERE MADE: PERTH THE COURT ORDERS THAT:- COMMONWEALTH BANK OF AUSTRALIA First Respondent and - BIRDS (a firm) Second Respondent MINUTE OF ORDER Paragraph 19 of the amended statement of claim be struck out to the extent that it alleges conduct by Stofer attributable to the First Respondent. Paragraph 20 be struck out. The applicant to pay half the costs of the First Respondent occasioned by the amended motion. 2. On the second respondent's motion of 1 February 1988:- 1. Sub-paragraph 22(11) and 23(iii) be struck out. 2. No order as to costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. ™u IN THE FEDERAL COURT OF AUSTRALIA }) NOT INTENDED FOR GENERAL DISTRIBUTION ) WESTERN AUSTRALIA ) ) ) DISTRICT REGISTRY GENERAL DIVISION NO. WAG 155 of 1987 BETWEEN: KEVIN EDWARD CLARKE Applicant and COMMONWEALTH BANK OF AUSTRALIA First Respondent and BIRDS (a firm) Second Respondent CORAM: FRENCH J. 3 FEBRUARY 1988 EX TEMPORE REASONS FOR JUDGMENT This is a claim in which the applicant, who is a farmer, seeks relief against his bankers and his accountants pursuant to ss.52 and 82 of the Trade Practices Act and for negligence, undue influence and unconscionable conduct. His complaint is that he was led into signing documents which put him under an obligation to his bank in order to support borrowings sought by his younger brother and his younger brother's wife who were trading in partnership as farmers. The central allegation is that he was told by both his banker and his accountant that he would be "lending his name" to loans sought by his brother and sister-in-law and would be giving them something called "borrowing power". It is alleged in effect 2. that the terminology used in describing the proposed transactions and the failure to explain their true nature was misleading and deceptive conduct on the part of the bank and a breach of duties of care and fiduciary duties owed to him by both these advisers. It is also said, that both the bank and the accountants were ina position of influence with respect to the applicant and that they procured his execution of disadvantageous loan contracts. It is further pleaded that their conduct was unconscionable. Both respondents seek, by motion, to strike out various elements of the re-amended statement of claim. The motions were filed prior to the most recent amendment and that amendment was made by leave today before argument. The process of re-~amendment evidently reflects a reaction by the applicant to matters put to him, or his advisers, by the respondents in connection with the pleading, so to some extent the area of debate was narrowed and, indeed, the first respondent amended its notice of motion to narrow the attack. When it is sought to strike out all or part of any statement of claim or defence, the court is enjoined by the weight of authority to take a robust approach. It will not strike out any pleading unless it can be shown to be manifestly unreasonable or untenable. To put it another way, 1t must be satisfied that if all the facts alleged were proven, the applicant could not succeed in respect of the particular point which is under attack. There is a good policy reason for curial reluctance to become 3. involved in detailed surgery upon pleadings however inelegant or unattractive they may be in certain respects. The process of progress toward trial, which 1s the ultimate objective of proceedings, subject, of course, to the desirability of settlement on the way, 1S impeded if the court has to take time to consider nice points of law and logic which may arise in the course of the formulation of the issues and the material facts that, necessarily, make up a case as pleaded. There is a burden imposed on the judiciary and on litigants in debates about the formulation of issues, the cost of which is not always reflected in a corresponding benefit at trial. Nevertheless, the motions presently before me are not trivial ones and I would not wish in any way to reflect upon the arguments that I have heard today. They raise intriguing and interesting points of law which would reward further exploration. However the overall rubric under which the court must operate in determining these motions is the primary factor and that is that the case for striking out all or part of a pleading must be plain and demonstrable and, in the end, although it may be even after long argument, unarguable, before the court will take such drastic action. In the present case, the first respondent complains of four paragraphs of the statement of claim, that is, 10, 11, 12 and 19, which set out the cause of action under s.52 in relation to misleading and deceptive conduct. It 1s said that the attributes of the conduct which make it misleading are not pleaded. 4. There is a plea, in para.19, of the creation of a false impression on the part of the applicant as to the nature of the banking forms that he was signing. It may well be said that that is a statement of his' subjective reaction to the conduct complained of which, of itself, does not establish necessarily that the conduct is misleading or deceptive. In my view, so far as that aspect of the argument is concerned, the applicant has not satisfied me that the facts as pleaded in 10, 11, 12 and 19 taken together, do not arguably support a case for an allegation of misleading and deceptive conduct. It may be that they could have been pleaded more elegantly. It may well be that the issues would be better defined 1f the applicant had set out seriatim the express or implied representations which, he says, emerged from the conduct complained of, but in the end I think that is a matter of style and precision of statement, rather than a flaw which should lead me to strike out these paragraphs. There is, however, one point in respect of which they give rise to a genuine difficulty and that is insofar as para. 11 pleads that the representative of the accountants, Mr Stofer, approached the applicant and informed him that Malcolm and Delores, his brother and sister-in-law, needed "borrowing power". Now Stofer, on the pleadings, was on a mission for Walsh, an officer of the bank, in which he was to approach the 5. applicant to request him to become a party to the loan as principal debtor, and so it is pleaded in para.10. In para.ll it 1s pleaded that he did something different, that is, he informed the applicant that his brother and sister-in-law needed "borrowing power". Now, 10 ,11 and 12 are relied upon not only in support of the s.52 claim, but also, it seems to me, in support of other causes of action and in particular the cause of action tin negligence to which they are linked through para.17. Having regard to that linkage, I would not strike out the plea in relation to Stofer's conduct as set out in para. 11 because 1t seems to do a job 1n the pleading which is not limited to the s.52 claim. However, the difficulty becomes manifest in para.19 where it is said:- "The conduct of the First Respondent by Walsh and/or Stofer pleaded at paragraphs 10, 11 and 12 was misleading conduct and/or conduct likely to mislead or deceive..." As they presently stand, paras. 10, 11 and 12 do not disclose any allegation of conduct by Stofer attributable to the first respondent and insofar as para.19 makes that allegation, it is unsustainable and should be struck out. So, in respect of para.19 I will order that it be struck out to the extent that it alleges conduct by Stofer attributable to the first respondent. That simply covers the words "and/or Stofer" as they appear in para.19. 6. As to para.20 1t was conceded, and, I think, correctly, by the applicant to be defective and it will also be struck out although it will be open to the applicant to amend. However, I might say that in the absence of any apparent assertion by the bank that the applicant is indebted to it pursuant to the allegedly unauthorised account mentioned in para. 9, there does not seem any point in raising that issue at this time. If there is a cross-claim then the issue might be raised by way of defence. Paragraphs 22 and 23 allege negligence but do not specifically plead conduct pursuant to those negligent acts. In para. 24 it is said that as a consequence of those breaches of duty, the applicant has suffered loss and damage but how 1s not made clear, save by way of the particulars. There is a necessary linkage back to para.17 of the statement of claim where it is said that:- "In or about August 1982, un reliance upon the Respondent's descriptions of the proposed transaction pleaded at paragraphs 11 and 12, and in the belief that he was creating no liability to the First Respondent the Applicant signed at the request of the First Respondent and at the request of the Second Respondent a number of the First Respondent's standard banking forms by which the Applicant entered contracts of loan and personal covenants..." That may be sufficient to establish, as a matter of pleading, the necessary causal linkage between the breach of duty and the pleaded loss. I have already commented that it is a somewhat awkward way of doing it. Paragraph 17 seems to be pleaded in such a position in the statement of claim that it was drafted with a different task in mind other than that of FRR Dg 2 eT PN EF EY TYE PTL A ROI TO TENT IE NFL TN TT ETT OY SU LT POE NE TTI TE ILS 7 rhe ee ene? 7. supporting the claim of negligence. But to strike out the negligence claim because it relies upon a pleading in an inappropriate part of the statement of claim would be going beyond the limits which have been set for the court in applications of this kind. It is however a matter which counsel has said may be taken into account 1n amendments, that will follow from my orders and it may well be that a more readable document will emerge if consideration is given to that aspect. However, I am not otherwise disposed to strike out paras.22 and 23. So far as the undue influence and unconscionable conduct pleas are concerned, I have reservations about the plea of the first and second respondents' respective states of mind and knowledge but that 1s a reservation which I expressed in the course of argument and which was not foreshadowed on the first respondent's motion, and I think that I should say no more about that than the comments which I made to counsel in the course of argument. The consequence of the position of influence that the respective parties had with respect to the applicant and their use of their influence is not expressly pleaded. It 1s said in 25C that:- "The First Respondent and/or the Second Respondent procured the Applicant to make the contracts of loan in the manner pleaded in paragraphs 11, 12 and 17 hereof." It is not pleaded that they did so by reason of, or in reliance upon, their position of influence but having regard to 8. the onus of proof it may not be necessary and I am not sufficiently satisfied that that 1s such a vital element that the plea should be struck out on that basis. I query the possibility contemplated by para.25C that the second respondent alone may have procured the applicant to make the contracts of loan, and how and to what extent that would support the relief sought by the applicant which is the setting aside of the relevant contracts. That may, of course, depend upon the state of awareness by the first respondent of the second respondent's influence with respect to the applicant, and reference 1s made to Amadeo''s case in that respect. So, again, whilst one might have drawn the pleading differently, I do not think that such defects as appear are of a kind which would justify a striking out order and I make the same observation in respect of para.26. I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment of his Honour Mr Justice French. Associate: Dover Worn Date: 3 odomrors \8k. 9. Counsel for the Applicant: Ms. C. McLure Solicitors for the Applicant: Keall Brinsden Counsel for the First Respondent: Mr D. Stone Solicitors for the First Respondent: Northmore Hale Davy & Leake Counsel for the Second Respondent: Mr T. Whittingham Solicitors for the Second Respondent: Hammond King & Co. Date of Hearing: 3 February 1988 Date of Judgment: 3 February 1988