Stolair Pty Ltd & Anor v Friends United International Pty Ltd & Ors [1998] FCA 29

NOT FOR DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY SG 105 of 1996

BETWEEN: stolair pty ltd

acn 008 288 024

First Applicant

pharmalliance pty ltd

acn 074 186 548

Second Applicant

AND: friends united international pty ltd

acn 070 101 156

First Respondent

betty joan allen

Second Respondent

barry jones

Third Respondent

JUDGE: MANSFIELD J

DATE: 28 January 1998

PLACE: ADELAIDE

REASONS FOR DECISION

This application was listed for hearing on 16 January 1998. At a pre-trial directions hearing on 16 December 1997 the respondents were given leave to file and serve an amended defence, then intended largely to be responsive to relatively minor amendments made by the amended statement of claim filed by leave on 1 July 1997. The respondents had not to then filed any amended defence to that amended pleading. I then indicated that, to the extent that the proposed defence was not simply responsive to the amended statement of claim and might unfairly prejudice the applicants at the trial, liberty to apply was reserved to the applicants to apply to have any amended defence or parts of it disallowed. At that time, no leave was sought or given to institute any cross claim, although such leave was necessary if a cross claim was proposed: O 5 r 9(2) Federal Court Rules. A document entitled Amended Defence Cross Claim of the Second and Third Defendants was filed and served purportedly pursuant to that leave on 23 December 1997. In exercise of the leave granted to them, the applicants on 16 January 1998 applied to have significant parts of that document disallowed. It is common ground that that document raised for the first time issues which previously it would not have been necessary to ventilate at the trial. It is also common ground that, if a document in that form were allowed to stand, the applicants could not fairly be ready for trial on the date fixed. Furthermore, the parties were agreed that even if the document in that form were disallowed, the respondents could in any event claim independently of these proceedings and raise the issues therein raised. The parties were also agreed that it was in the interests of all that all issues between them, including those now raised by the proposed cross claim, should be heard together. In those circumstances, in fairness to all parties, it was sensible to vacate the trial date. I ordered accordingly. The proposed amended defence and cross-claim raised issues as to whether an agreement between the first applicant and the second and third respondents for the formation of a "neutral venture" company was procured by misrepresentation by or on behalf of the first applicant. It was not in issue that a company Allied International (World Wide) Pty Ltd ("Allied") was incorporated on 15 or 18 August 1995 pursuant to such an agreement. The proposed cross claim also alleged that it was by reason of such misrepresentations that the second respondent and the third respondent applied substantive funds totalling $280,000 to Allied and to a third party for the manufacture and marketing of certain products. It is clear that the venture failed. Allied was wound up on 30 August 1996. Although it is not self evident from the proposed cross claim, to sustain the cross claim it will be necessary for the second respondent and the third respondent also as cross claimants to show that the payments allegedly made by them resulted in loss to them by reason of the misrepresentations alleged. It is not necessary to refer in detail to the proposed amended defence and cross claim. The applicants, by letters from their solicitors of 16 and 19 January 1998 indicated to the respondents a significant number of respects in which the proposed amended defence and cross claim was deficient, and sought further and better particulars of that document in any event. The respondents, by letter from their solicitors of 21 January 1998, acknowledged in some respects those complaints and referred to additional particulars to be provided. Ultimately, the respondents filed a further document on 21 January 1998 also headed Amended Defence Cross Claim of the Second and Third Defendants incorporating such particulars as the respondents considered they were obliged to provide. There are still a number of issues as to particulars outstanding. The parties have agreed that I should rule on those outstanding matters after consideration of their respective letters to which I have referred, and without further oral submissions. The main point of dispute seems to be that many of the particulars sought relate to matters of evidence rather than matters of particulars. That is not the only response where there is an ongoing dispute, but it is a recurrent one. I now address the requests for further and better particulars in the light of the document as filed on 21 January 1998. It is convenient to do so by reference to paragraph numbers from that document, as the parties in their correspondence have each addressed it on that basis. PARAGRAPH 3.2 The application to register the mark "OXICHEL" was made on 29 March 1995, and Allied was not incorporated until some months later. In those circumstances, I think it is appropriate that the respondents should specify the following: the date of the payment by Allied; the amount of the payment by Allied; and to whom Allied made the payment. PARAGRAPH 5.3 This is the critical new paragraph. It is said that the first applicant made certain oral representations to the second and third respondents in about March 1996 in Adelaide. It does not indicate whether those representations were made on one or more than one occasion. If they were made on more than one occasion, it is unclear (although I suspect) that the respondents cannot now separately describe each such occasion. Given the gravity of the allegations to the claim, in my view it is appropriate firstly that the respondents should indicate on how many occasions the representations were made, and if on more than one occasion then they should also indicate as best they can separately with respect to each occasion which representation or representations were made. The correspondence from the respondents' solicitors now makes it clear what the representations are, and the respondents will be limited in their evidence to leading evidence of such representations. PARAGRAPH 5.4 This paragraph also contains significant new allegations. In particular, it provides detail of the action allegedly taken by the second respondent and the third respondent relying upon misrepresentations alleged. Although the letter from the respondents' solicitors of 21 January 1998 indicates that each of the payments was made by reason of an oral arrangement between the director of the first applicant and the second respondent and the third respondent, in my view further particularity is necessary. In respect of each payment, I think the respondents should indicate the basis of the payment as a result of the arrangement, that is whether it was a payment made by way of loan in effect to Allied or on behalf of Allied, or in the case of the payment to Allied by way of a capital investment, or some other basis. If the discussions referred to did not deal with the basis of the payment, then some detail as to the discussions themselves is necessary. The applicants are entitled to know the legal nature of the payment, in so far as it effects Allied. In addition, in my view, it is necessary that the applicants be informed as to when each of the payments referred to was made, precisely to whom the payment was made, and how the payment was made. PARAGRAPH 5.5 This paragraph purports to quantify the claimed losses of the second respondent and the third respondent. I do not think it does so sufficiently. Paragraph 5.4 asserts the consideration for the two payments. It is not clear whether the respondents allege that the consideration failed, or that the consideration which was received was of lesser value and if so why that is related in any way to the alleged misrepresentation. Furthermore, as the claim for interest on the total sum paid of $280,000 is itself in the nature of "loss of use" damages, it is necessary for the respondents to indicate the source of the funds so applied, and how they would otherwise have been applied had they not been used in the way indicated, and what benefit for saving would have enured to the respondents in that event. Finally, even though the third component of the claim may be relatively small, in my view the applicant is entitled to details of each of the expenses, including the amount, the payee, and the date of payment, together with an explanation as to why the incurring of those expenses in providing packaging for the product is an irrecoverable loss to the respondents by reason of the misrepresentations alleged. I have assumed that there is no difference in the respective claims of the second respondent and of the third respondent, and that their claims are in fact one joint claim. If that is not correct, particulars of their several claims should separately be given. I note that the particulars so ordered refer also to the particulars requested of par 28, which I shall not separately deal with. I note also that similar particulars should be provided in respect of par 5.6, and again I shall not separately deal with that paragraph. As pleaded, and as I have directed it to be particularised, it will be in the same terms as the particulars to be provided at par 5.5. PARAGRAPH 7 If the agreement alleged by the applicants is not the entire agreement, as par 7.2 asserts, in my view the respondents should specify what does constitute the entire agreement in the usual terms, ie. identifying the document or documents, or properly detailing the oral component including the terms and circumstances giving rise to those terms, or the facts giving rise to the implied term and the detail of those terms. It may be that the current par 7.2 of the document does not contain any allegations which the respondents wish to maintain at the trial and accordingly that they may wish to abandon that allegation. However, if additional material terms of the licensing agreement are asserted, proper particulars of them should be given. PARAGRAPH 10 The letter from the respondents' solicitors of 21 January 1998 indicates that the arrangements whereby Mr Raymont provided all administration services to Allied by reason of discussions between him for the applicants and the second respondent and the third respondent. In my view that is sufficient particularity of that aspect of those allegations. It is, however, unclear what is meant by the "challenge" to the credibility of Mr Raymont. As the pleading stands, I read it simply to mean that the issue was raised by the second respondent and the third respondent with Mr Raymont, and that following that issue having been raised, Mr Raymont procured the first applicant to make no further payments. If any other material facts or matters are sought to be proved at trial on that aspect, proper particulars of them should be given. If not, the present particulars are adequate. The respondents would be aware of whether or not that is the case. PARAGRAPH 27.3 In my view the applicants are entitled to know the facts or matters which make the formulation of the two products significantly different. I direct particulars of those differences to be given. If there is commercial confidentiality on that score, and the parties through their solicitors cannot agree as to how that particularity can properly be provided whilst reflecting that commercial confidentiality, I permit the particulars to be given by filing them at Court in a sealed envelope, so that the issue may be the subject of further submissions at the next directions hearing. GENERAL I have not dealt with those requests for particulars where the document as filed on 21 January 1998 provides, in my view, adequate particularity or where I have decided that it is not necessary for the particulars sought to be provided. I accordingly direct that particulars of the amended defence and cross claim of the second and third defendants filed on 21 January 1998 and in respect of which leave was given to file that document in those terms on 23 January 1998 be given by the respondents to the applicants in accordance with these reasons. I direct that such particulars be filed and served within seven days of the publication of these reasons to the parties. I certify that this and the preceding six (6) pages are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield.