FEDERAL COURT OF AUSTRALIA The University of Western Australia v Gray [2005] FCA 277 PRACTICE AND PROCEDURE – pleadings – sufficiency of pleadings – strike out motions – failure to link material facts to claimed causes of action – misleading or deceptive conduct – necessity to make causal connection to loss or damage claimed – allegations of dishonesty – need for precise pleading – time limitations – inappropriateness of striking out causes of action as statute barred except in clear cases – various pleading deficiencies – statement of claim struck out as a whole – leave to replead Corporations Act 2001 (Cth) s 175(2) Associations Incorporation Act 1987 (WA) University of Western Australia Act 1911 (WA) Trade Practices Act 1974 (Cth) s 52 Federal Court Rules O 11 r 16 THE UNIVERSITY OF WESTERN AUSTRALIA v BRUCE NATHANIEL GRAY, SIRTEX MEDICAL LIMITED and CANCER RESEARCH INSTITUTE INC WAD 292 OF 2004 FRENCH J 17 MARCH 2005 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 292 OF 2004 BETWEEN: THE UNIVERSITY OF WESTERN AUSTRALIA APPLICANT AND: BRUCE NATHANIEL GRAY FIRST RESPONDENT SIRTEX MEDICAL LIMITED SECOND RESPONDENT CANCER RESEARCH INSTITUTE INC THIRD RESPONDENT JUDGE: PERTH DATE OF ORDER: 17 MARCH 2005 WHERE MADE: PERTH THE COURT ORDERS THAT: On the respondents' motions: 1. The statement of claim is struck out. 2. The applicant has leave to file and serve a new statement of claim and application. 3. The applicant is to pay the respondents' costs of the motions. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 292 OF 2004 BETWEEN: THE UNIVERSITY OF WESTERN AUSTRALIA APPLICANT AND: BRUCE NATHANIEL GRAY FIRST RESPONDENT SIRTEX MEDICAL LIMITED SECOND RESPONDENT CANCER RESEARCH INSTITUTE INC THIRD RESPONDENT JUDGE: PERTH DATE: 17 MARCH 2005 PLACE: PERTH REASONS FOR JUDGMENT ON MOTIONS TO STRIKE OUT FURTHER SUBSTITUTED STATEMENT OF CLAIM AND APPLICATION Introduction 1 Dr Bruce Gray, formerly a Professor of Medicine and Head of the Department of Surgery at the University of Western Australia (the University) has undertaken, over the past two decades, the development of new technologies for fighting cancer. The development of those technologies has involved two organisations with which he is associated, a company called Sirtex Medical Ltd (Sirtex) and an incorporated association known as the Cancer Research Institute Inc (CRI). 2 The University alleges that Dr Gray has developed the technologies on University time, while a member of the University staff. It alleges, in essence, that he has obtained intellectual property rights and benefits flowing from them in breach of his contractual and fiduciary duties to the University. The acquisition of the rights by Sirtex and the issue of shares in that company to Dr Gray and to CRI have drawn those two bodies into the dispute between Dr Gray and the University. The University now sues him, Sirtex and CRI. 3 The University's statement of claim is long and complex. Each of the respondents has moved to strike it out in whole or in part. They have made out a significant number of their objections which go to the form and drafting of various parts of the statement of claim. They do not indicate that the University does not have a viable cause of action against the respondents which can be properly pleaded. 4 In my opinion, for the reasons that follow, the statement of claim requires comprehensive reworking. I propose to order that it be struck out with leave to file a new statement of claim and application. The University will have to pay the respondents' costs of the strike out motions. Procedural history 5 On 21 December 2004, the University instituted proceedings against Dr Bruce Gray. It also sued Sirtex of which he is Chairman, Chief Executive Officer and a shareholder. The substance of the claims against Dr Gray was that while an employee of the University he had developed technologies for the treatment of cancer, lodged patent applications in respect of them and assigned to Sirtex his rights in relation to them. The assignments were said to have been done without the knowledge or consent of the University and to have taken place during Dr Gray's period of employment with the University and in breach of his Employment Conditions. In August 2000, Sirtex was admitted to the official list of the Australian Stock Exchange and Dr Gray is said to have received in excess of 19 million shares and 114,000 options in the company. 6 It was alleged in the statement of claim that Dr Gray had failed to comply with the Patents Regulations of the University and their successors, the University's Intellectual Property Regulations. The University asserted that it was entitled to the initial shares and options issued to him and to any consideration received by him flowing from the sale of any of them. It claimed to be entitled to have Sirtex rectify its Share Register and the Register of Options. Alternatively, it was said that Sirtex held the patents assigned to it on trust for the University. The University was said to have suffered damage by reason of the conduct of Dr Gray and Sirtex. Orders were sought for the transfer of shares in Sirtex, rectification of the Sirtex Registers, declarations of trust, an account of profits, the appointment of a receiver to Sirtex, damages pursuant to s 175(2) of the Corporations Act 2001 (Cth), and damages generally, including equitable damages. There was also a claim for interlocutory relief to restrain the disposal by Dr Gray of his shares and options in Sirtex. 7 On 21 December 2004, an urgent motion for interlocutory relief filed and returnable on that day was heard ex parte and an interlocutory injunction, effective until 11 January 2005, was awarded against Dr Gray in respect of shares and options held by him in Sirtex. Directions were also given for service of the motion, the application, the statement of claim and various supporting affidavits. 8 The matter came before the Court again on 11 January 2005. The interlocutory injunction expired on that date. Instead of a renewal of the injunction Dr Gray gave an undertaking to the Court that he would, until 5pm on 8 February 2005 or further order, not deal with the shares or options in Sirtex. The University gave a cross undertaking as to damages. The University was directed to file and serve any substituted application and statement of claim by 1 February 2005. A substituted application and statement of claim were filed on 1 February 2005. CRI was joined as a third respondent by that substituted application. 9 On 8 February 2005, directions were given requiring delivery of objections to the substituted statement of claim by 11 February 2005. The University was required to file and serve any further substituted statement of claim and application by 21 February 2005. This order was made to enable the University to respond to and make necessary adjustments to the application and statement of claim in light of objections advanced by the respondents. A direction was also given that any motion to strike out the substituted application and statement of claim or the further substituted statement of claim were to be filed and served with written submissions by 28 February 2005 and reply submissions to be filed and served by 8 March 2005. It was directed that the strike out motions would be decided on the papers. On 17 February 2005, CRI gave an undertaking not to deal with shares or options which it held in Sirtex without giving the University's solicitors fourteen days written notice. This was supported by a cross-undertaking as to damages on the part of the University. The undertakings previously given by Dr Gray and Sirtex were renewed. 10 A further substituted statement of claim was filed on 23 February 2005 and motions to strike it out were filed by each of the respondents together with written submissions to which the University responded in writing. It is convenient before turning to consider the motions to set out an overview of the further substituted statement of claim. It will be designated for ease of reference as 'the statement of claim'. This summary does not involve any findings of fact. In parts, for convenience of expression, it is set out in a narrative form. The statement of claim 11 The statement of claim begins by identifying the parties and other entities (sc 1-6) and alleges that Dr Gray was employed by the University between 11 February 1985 and 21 November 1999. He was a Professor in the Division of Medicine and Dentistry and was Head of the Department of Surgery from 1 October 1988 to 31 December 1989. He was the Director of the Centre for Applied Cancer Studies (CACS) from its establishment by the University in March 1996 (sc 2). 12 Dr Gray was a Director and shareholder of a company called Australian Surgical Products Ltd (ASPL) from about April 1995 when it was incorporated until its deregistration in September 1999 (sc 7(a)). He was the Chairman of Directors and Chief Executive Officer and a shareholder in Sirtex from its incorporation. He was also the Chairman and a member of the Board of Management of CRI which was incorporated under the Associations Incorporation Act 1987 (WA) in January 1991 (sc 6 and 7(d)). He was a Director of the Lions Cancer Institute (LCI) which was also incorporated in 1991 under the Associations Incorporation Act. He is said to have been the Medical Director of LCI from at least after 19 January 1993. 13 CRI was required by its objects to support the work of LCI and to establish a public fund or funds for any charitable purposes as CRI may decide and otherwise to assist the aims of LCI and activities recommended by its Medical and Scientific Advisory Committee (sc 8). 14 The University alleges that at all material times since about April 1997 Sirtex was engaged in trade and commerce in Australia and elsewhere in relation to the commercialisation of technologies for the treatment of liver cancer and for the acquisition of intellectual property (sc 9). 15 Despite its formation under the Associations Incorporation Act and the requirement in its objects to support the work of LCI, CRI also engaged in trade and commerce in Australia in relation to the provision of scientific research staff for reward in the field of research into the treatment of liver cancer (sc 10). It also engaged in trade or commerce in the purported sponsorship of the University's employees for reward and entering into agreements, arrangements and/or understandings with Sirtex connected with its purported assignment of intellectual property to Sirtex. 16 The statement of claim sets out the regulatory framework established by the University for dealing with intellectual property rights generated by staff activities. It pleads the making of Patents Regulations in December 1971 which were binding upon Dr Gray and all deans, professors, lecturers, examiners and other officers and servants of the University and all students attending the University (sc 11 and 12). It was a requirement of the Patent Regulations that anyone bound by them must inform the Vice Chancellor of any patentable invention made or developed in the course of that person's duty or while using the University's research facilities. No offer of financial support from any outside organisation which could claim rights in any invention made or developed in the course of work undertaken with such support, could be accepted without the prior consent of the Vice Chancellor. There was a requirement for any person authorised to do so to assign to the University such rights as might be necessary to enable the University to exercise the inventor's rights in any invention made or developed with outside support. 17 The Patents Regulations subsisted from December 1971 until about 22 July 1996 when the University enacted Intellectual Property Regulations. Relevant provisions of the Intellectual Property Regulations imposed similar restrictions upon University staff in relation to intellectual property rights arising out of work done while in the employment of, or supported by, the University (sc 14). 18 The statement of claim sets out the conditions governing Dr Gray's appointment to the University. These included a condition that he would be subject to the University of Western Australia Act 1911 (WA), the Statutes of the University and the Regulations made by it from time to time. It is said that under his Employment Conditions he owed a duty of fidelity and good faith to the University during the period of his employment. He was not to undertake any activity incompatible with or which would otherwise impede the faithful performance of his duties to the University. He would not put himself in a position where his personal interests and obligations to the University would be in conflict or where there would be a significant possibility of such conflict (sc 16). 19 From about 27 October 1995, CRI agreed with the University that Dr Gray and other persons appointed to positions funded by CRI or LCI would be employees of the University and subject to its Employment Conditions (sc 17). 20 The statement of claim sets out the facilities provided to Dr Gray during the period of his employment. These included equipment, facilities, staff and monetary support for research purposes and other forms of research support (sc 18). It is pleaded that from about March 1985 the University administered research funding granted by the National Health and Medical Research Council and other funding sources in relation to Dr Gray's research areas which concerned the treatment of colorectal cancer and/or liver cancer and gastrointestinal surgery (sc 19). At various times during the period of his employment the University says it appointed and administered research positions for the purpose of assisting research in these areas. Dr Steven Jones was appointed as a research assistant for various periods between March 1988 and January 1997 and Dr Yan Chen as a research associate from 14 February 1989 (sc 20). Other facilities provided to Dr Gray are set out (sc 21). 21 The statement of claim identifies particular technologies included in the research areas covered by Dr Gray. These technologies are known as: (a) SIR-Spheres (b) DOX-Spheres (being a controlled release preparation which uses an ionic polymer matrix); and/or (c) Thermo-Spheres (being Spheres which effect hysteresis). The statement of claim then turns to allegations about the conduct of the respondents and the University's asserted entitlements to relief. These allegations are organised under the following headings: Activities in relation to patents and patent applications (sc 23-69) Patenting activity following the Employment Period (sc 70-79) Assignment to Sirtex (sc 80-87) Approaching and Negotiating with Nomura Jafco (sc 88-93) Application by Sirtex for a Start Grant (sc 94-99) Application by ASPL for Assistance under the Western Australian Innovation Support Scheme (WAISS) (sc 100-110) Dr Gray's Corporate Activities (sc 111-116) Diversion of Staff and Resources (sc 117-120) Taking Steps towards the Initial Public Offering of Sirtex (sc 121-131) The Float of Sirtex (sc 132-137) The CRI Letter of 17 January 1997 (sc 138 -142) Non-compliance by Dr Gray with the Patents Regulations, the Intellectual Property Regulations and the Employment Conditions (sc 143-146) The University is Entitled to Initial Gray Shares and Initial Gray Options (sc 147-149) The University is Entitled to Initial CRI Shares (sc 150-152) The University is Entitled to the Patents (sc 153-154) Knowledge of Sirtex and CRI (sc 155-157) 22 Dr Gray is said to have applied for Australian patents in respect of the three named technologies. The statement of claim sets out the dates upon which he filed his Australian Patent Applications: 21 January 1994 – SIR-Spheres (sc 23) 18 November 1993 – DOX-Spheres (sc 39) 10 May 1996 – Thermo-Spheres (sc 57) It alleges that applications were made for, or patents obtained, in other countries including Canada, Europe, Japan, the Peoples Republic of China, the United States and Hong Kong (sc 29, 45 and 63). Patent rights are said to have been lost in some jurisdictions because they were not pursued or were allowed to lapse (sc 30 – 31, 46 – 47 and 64). 23 The University alleges that contrary to the matters set out in the applications deriving priority from the Australian Patent Applications, the inventions were discovered by Dr Gray during his Employment Period with the assistance of persons bound by the Patent Regulations or the Intellectual Property Regulations of the University (sc 32, 48 and 68). The University says it was entitled to the inventions embodied in the applications and the patents deriving priority from the Australian application. It says that it has suffered loss and/or damage which is described as the ability to exploit the inventions in the various territories for reward and the loss of chance to prosecute the patent application in each of the territories and to obtain the relevant monopoly therein (sc 33, 49 and 69). 24 The assignment of the Australian Patents relating to the SIR-Spheres and the DOX-Spheres to Sirtex without the knowledge or consent of the University is alleged (sc 34-35 and 50-51). 25 Sirtex is said to have represented to the Australian Patent Office, on or about 27 January 1998, that it was entitled to claim the invention relating to the Sir-Spheres, that Dr Gray was the inventor and that he was entitled to assign his rights to Sirtex. These representations are said to have been made by a Notice of Entitlement dated 27 January 1998 lodged on behalf of Sirtex, then known as Paragon Medical Ltd (sc 36). The representations pleaded are said to have been misleading or deceptive in trade or commerce. As a result the University claims to have suffered loss or damage being its loss of the opportunity to exploit the invention and loss of the opportunity to share in the Initial Public Offering of Sirtex (sc 37-38). 26 CRI is alleged to have taken an assignment of the rights in the DOX-Spheres provisional application and/or the Patent Cooperation Treaty (PCT) application from Drs Gray and Chen without the knowledge or consent of the University in or about 10 November 1996. It is then said to have purported to assign its rights to Sirtex between 1 May 1997 and 10 December 1997. The latter assignment involved a representation by CRI to Sirtex that it was entitled to claim the invention, that Dr Chen and Dr Gray were the inventors, that they were entitled to assign the invention embodied in the applications to CRI, and that CRI was entitled to assign the invention to Sirtex (sc 54). Then it is said that Sirtex made various representations to the Australian Patents Office in 1998 as to its entitlement to claim the invention and the roots of that entitlement by reference to the standing of Drs Gray and Chen as inventors who were entitled to assign the invention and who had done so (sc 55). The representations alleged against both CRI and Sirtex are said to have been misleading or deceptive in contravention of s 52 of the Trade Practices Act 1974 (Cth). No loss or damage on the part of the University is pleaded in respect of this element of misleading or deceptive conduct. 27 In relation to Thermo-Spheres a further Australian Provisional Patent Application was filed in October 1997 entitled 'Improved Targeted Hysteresis Hyperthermia as a method for treating diseased tissue' (sc 65). It is referred to in the pleading as the 'Fourth Application'. It is said to have been filed without the knowledge, approval or authority of the University (sc 66). Dr Gray, Dr Jones and/or Sirtex applied for and/or obtained patents in Canada, Europe, Japan, the Peoples Republic of China, South Korea, Taiwan and the United States of America in relation to that invention (sc 67). Contrary to the matters asserted in the applications deriving priority from the hyperthermia provisional application the invention is said to have been discovered by Dr Jones with the assistance of Dr Gray and other persons bound by the University's Patent Regulations and Intellectual Property Regulations. It was discovered during Dr Gray's Employment Period and initially claimed during that period. It is said to have been discovered in the course of carrying out activities for which each of the relevant persons was employed or remunerated by the University. If the University is entitled to that invention as alleged then it claims to have suffered loss in terms of the loss of the ability to exploit the inventions, obtain the monopoly and rewards deriving there from (sc 69). 28 The statement of claim then turns to patenting activity following the Employment Period. Sirtex is said to have filed an Australian Provisional Patent Application on or about 3 March 1999 entitled 'Magnetic Material' (sc 70). This was filed without the knowledge, approval or authority of the University and was filed during the Employment Period. It was discovered during the period that Dr Jones and/or others were bound by the Patent and/or Intellectual Property Regulations and was made while Dr Gray was a Director of Sirtex (sc 71 and 72). A PCT filed by Sirtex on 3 March 2000 was entitled 'Heating of Magnetic Material by Hysteresis Effects' (sc 73). Drs Gray, Jones and Cammarano were listed as inventors (sc 74). The Magnetic Material Patent Co-operation Treaty is said to have claimed priority from the Magnetic Material Provisional Application (sc 75) and was allegedly filed without the knowledge, approval or authority of the University (sc 76). 29 Consequential patent applications in Canada, Europe, Japan and the United States are pleaded (sc 77). Any further applications made on behalf of Dr Gray, Sirtex and/or CRI are said to have been made without the knowledge, approval or authority of the University (sc 78). Contrary to the matters asserted in the applications it is said that the invention the subject of the Magnetic Material PCT was discovered by Drs Gray, Jones and Cammarano during Dr Gray's employment with the University and during the period in which Drs Jones and Cammarano were or should have been bound by the Patent and/or Intellectual Property Regulations (sc 79). 30 The question of assignments to Sirtex is then raised. It is said that, in or about 1997, Dr Gray, other persons bound by the University's Regulations, and CRI purported to transfer to Sirtex their rights and entitlements to the technologies. Each of these transfers was made without the knowledge or consent of the University and in the case of Dr Gray took place during the time of his employment by the University (sc 80-82). In Dr Gray's case they are said to have been in breach of his Employment Conditions and his fiduciary obligations to the University (sc 83). In the case of the other persons bound by the University's Regulations it was in breach of their Employment Conditions. In the case of CRI it was in breach of an agreement between CRI and the University pleaded in par 17 of the statement of claim (sc 83). 31 It is said that the transfers were not effective to give Sirtex any beneficial right, title or interest in relation to the technologies (sc 84). By making the transfers Dr Gray intended Sirtex to gain a benefit otherwise available to the University (sc 85). Similarly, CRI by effecting transfers to Sirtex intended Sirtex to gain a benefit that would otherwise have been available to the University (s 86). In the premises Sirtex is said to hold each of the rights in the technologies on trust constructively for the benefit of the University (s 87). 32 In late 1996 or early 1997, Dr Gray is said to have entered into negotiations with Nomura Jafco Investment (Asia) Ltd (Nomura Jafco) to obtain capital and assistance in commercialising the technologies (sc 88). He is said to have done this on behalf of ASPL, Sirtex and/or CRI (sc 88). The negotiations took place without the knowledge or consent of the University and during the Employment Period and were in breach of the Employment Conditions (sc 89-92). It is said that Dr Gray intended Sirtex to gain a benefit that would otherwise have been available to the University (sc 93). 33 The application by Sirtex for a Start Grant is then pleaded. It is said that on or about 8 November 1997, Dr Gray on behalf of Sirtex made an application for about $950,000 from AusIndustry. The application was successful and Sirtex obtained funding of about $950,000. The application was made without the knowledge or consent of the University. The Start Grant application was made during the Employment Period and in breach of the Employment Conditions (sc 94-98). By making the Start Grant application it is said that Dr Gray intended ASPL to gain a benefit (and thereafter gained a benefit) that would otherwise have been available to a venture sponsored or supported by the University (sc 99). 34 In February 1996 it is alleged that Dr Gray on behalf of ASPL made an application for funding from the Western Australian Innovation Support Scheme (WAISS). The application was for about $546,855 (sc 100). This was made without the knowledge or consent of the University, during the Employment Period and in breach of the Employment Conditions (sc 101). Representations were made by ASPL as to its acquisition of the relevant intellectual property, its immediate access to extensive and dedicated laboratory facilities and its intention to float in two years time to obtain subsequent funding for its commercialisation (sc 102). The representations are said to have been misleading or deceptive in that they did not disclose the University's interests in the Thermo-Spheres (sc 104). This is said to have amounted to a contravention of s 52 of the Trade Practices Act (sc 105). Dr Gray is alleged to have been knowingly involved in ASPL's conduct (sc 106 and 107). 35 The WAISS application was successful and Sirtex and/or ASPL received about $50,000 (sc 108). By reason of these matters, the University says it has suffered loss and damage and a loss of an opportunity to obtain funding for the benefit of the University and loss of the opportunity for the University to sponsor the early stage commercialisation of the Thermo-Spheres technology. 36 The statement of claim then turns to Dr Gray's corporate activities. It alleges that he has been a Director of Sirtex, ASPL, Pine Ridge Holdings Pty Ltd (Pine Ridge), LCI and CRI at the various times pleaded (sc 111). Each appointment is said to have first occurred during the Employment Period and without the approval of the University. By reason of the appointments Dr Gray is said to have been in breach of his Employment Conditions (SC 111-113). It is also said that because Sirtex, ASPL and/or CRI engaged in certain activities which conflicted with the interests of the University in relation to research areas, Dr Gray was in breach of the Employment Conditions (sc 114). Furthermore Dr Gray has been a shareholder of Sirtex since 21 April 1997 and of ASPL since 19 April 1995. CRI has been a shareholder of Sirtex since about April 1997 and Pine Ridge has been a shareholder of Sirtex since at least 16 June 2000 (sc 115). By reason of the matters pleaded in pars 111 and 115 it is alleged that Dr Gray had a pecuniary interest in the activities of Sirtex and ASPL during the Employment Period and that he was in breach of his Employment Conditions. 37 Under the heading 'Diversion of Staff and Resources' it is alleged that during the Employment Period and without the authority of the University Dr Gray made arrangements for persons engaged in research into the Technologies to be employed by entities other than the University when they should have been employed by the University (sc 117). He is also said to have made arrangements for staff providing support services to persons engaged in research into the Technologies to be employed by entities other than the University (sc 118). These activities are said to have been in breach of his Employment Conditions and his fiduciary obligations to the University (sc 119). By reason of them the University claims to have lost the opportunity to employ and/or retain persons engaged in the research area. 38 Then reference is made to Sirtex entering into an agreement in May 1997 to acquire intellectual property for a deemed total purchase price of about $3,606,658 (sc 121). This is called the Intellectual Property Acquisition Agreement. It is said to have been made during the Employment Period at a time when Dr Gray was a Director of Sirtex and a Director or board member of CRI. Sirtex is said to have knowledge that Dr Gray was an employee and had breached obligations of his Employment Conditions and was engaged by the University to conduct research in their research areas. CRI was not a party to any agreement with the University in respect of the assignment of intellectual property. Dr Gray was a member of its Board and was a Director of CACS which was subject to the supervision and control of the University (sc 122). 39 It is said that the Intellectual Property Acquisition Agreement which had not been disclosed to the University was made at a time when CRI knew that Dr Gray was an employee of the University, had breached his employment obligations and was engaged by the University to conduct research in the relevant area. The Agreement was entered into without the knowledge or consent of the University and entered into by Dr Gray in breach of the Employment Conditions and his fiduciary obligations. It is said to have purported to give rights to Sirtex which Dr Gray did not have (sc 122). Under the Agreement Sirtex allotted to Dr Gray 1,028,333 'A' Ordinary shares in Sirtex at 20 cents per share nominal value and a premium of $1.80 per share. It also allotted to him 341,664 'B' Ordinary shares in Sirtex at 20 cents per share nominal value with a premium of $1.80 per share. 40 In July 2000, Sirtex, CRI, Dr Gray and others entered into a Supplemental Subscription and Shareholders' Deed (sc 124). It was not entered into with the knowledge or consent of the University and it is said that other staff involved, Dr Jones and Dr Burton, knew that the Agreement was not entered into with that knowledge or consent and was in breach of the interests of the University. The Deed was in breach of Dr Gray's fiduciary obligations to the University and purported to give rights to Sirtex which no relevant person had an entitlement to do (sc 125). In the premises Sirtex held each of the right and holds each of the rights in the Technologies on trust (sc 126). 41 A transfer of shares in Sirtex to Dr Jones and Dr Burton in July 2000 is alleged (sc 127). The issue of 450,000 ordinary shares to Dr Gray immediately prior to the quotation of Sirtex shares is pleaded (sc 128). The issue of ordinary shares in Sirtex to a number of other named persons immediately prior to quotation is also pleaded (sc 129). Each ordinary share in Sirtex (except those offered on a prospectus) was converted to 11.225646 ordinary shares immediately prior to quotation (sc 130). By reason of these matters it is said that, upon the listing of Sirtex, Dr Gray would receive at least 19,438,443 shares and 114,000 options. CRI would receive 4,864,432 shares. Dr Jones and Burton would receive 1,122,565 shares and 22,451 shares respectively (sc 131). 42 The float of Sirtex is pleaded. The consideration for the issues issued to Drs Gray, Jones and Burton and to CRI is said to have been the intellectual property rights in the Technologies (sc 134). 43 Sirtex was listed on 23 August 2000 (sc 135). The shares and options received by Dr Gray are designated the 'Initial Gray Shares' and the 'Initial Gray Options' respectively. The shares received by CRI are designated the 'Initial CRI Shares' (sc 136). Dr Gray sold or transferred a number of his shares for value (sc 137). 44 CRI is said to have sent a letter to the University on 17 January 1997 representing that it had employed its own research scientists and developed the intellectual property itself. In the letter it was claimed that the University had no interest in any of its intellectual property (sc 138). These representations are said to have been misleading or deceptive and to have contravened s 52 of the Trade Practices Act (sc 139, 141). The University says it relied upon the representations provided by CRI with 'an assurance by letter' dated 22 January 1997 and did not have cause to investigate their truth (sc 140). It says it lost the opportunity to obtain funding for the benefit of the University, and to sponsor the early commercialisation of the Thermo-Sphere technology. It also lost an opportunity to obtain a benefit from the float of Sirtex (sc 142). 45 The statement of claim then sets out the various ways in which Dr Gray is said to have contravened the Patents Regulations, the Intellectual Property Regulations and the Employee Conditions (sc 143-144). 46 It is said that Dr Gray made representations to the University 'deliberately or recklessly' which induced the University to assume that he was complying with his contractual regulatory and statutory obligations and his fiduciary duties to the University and that he acted and intended to act honestly (sc 145). Letters from Dr Gray and CRI to the University dated 16 July 1999 and 17 January 1997 are pleaded (sc 145). The University says that in reliance upon his conduct it did not investigate its entitlement to the technologies or the activities of Sirtex. It was deprived of the opportunity to protect its interests (sc 146). 47 The University then says it is entitled to the Initial Gray Shares, the Initial Gray Options (sc 147) and the Initial CRI Shares (sc 150). It is also entitled to any consideration flowing from their sale and to rectification of the share register (sc 148-149, 151-152). The University says that it is entitled to the patents held by Sirtex and that they are held in trust for the University (sc 153-154). 48 The University alleges that Dr Gray is, and at all material times has been, the controlling mind of Sirtex and CRI and that his knowledge of the wrongfulness of his conduct can be contributed to those companies (sc 155-156). 49 There is at the end a general plea that the University has suffered and will continue to suffer damage by reason of the pleaded conduct of Dr Gray, Sirtex and CRI (sc 157). 50 The application claims a variety of orders which it is not necessary to set out here but which include orders of the kind referred to earlier. The statutory framework 51 The motions to strike out the statement of claim rely upon O 11 r 16 of the Federal Court Rules which provides: 'Where a pleading – (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; (b) has a tendency to cause prejudice, embarrassment or delay in the proceeding; or (c) is otherwise an abuse of the process of the Court, the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out.' General approach 52 The strike out motions and submissions related to them debate a large number of detailed objections to the statement of claim. 53 The rules of pleading are designed to ensure fair notice is given to the parties to litigation of the factual and legal issues to be raised in the case. They are not an opportunity for a myriad of more or less nit-picking attacks on technical grounds. In responding to the submissions therefore I propose to focus upon those matters which are of significance to the viability of the pleading and the management of the case. 54 I do not propose to strike out any cause of action as time barred. Questions of time limitation are best dealt with in the light of all the pleadings including the possible invocation of preclusionary doctrines by way of reply. Generally they should be considered in the setting of facts found, upon which a judgment can properly be made about when the relevant cause of action accrued. Of course in a very clear case a cause of action might be struck out on the pleadings as time barred. However in the present case given the factual and legal complexities it is not appropriate to accede to strike out submissions based upon alleged time limitations. 55 In my opinion pleading is not to be supported by reference to particulars which are not part of the material facts pleaded. I would not therefore uphold a plea upon the basis that particulars have been or will be provided to patch up its deficiencies. 56 There have been a large number of objections taken to various paragraphs of the statement of claim. In respect of those objections which I do not accept, I do not propose to give further detailed reasons. In the interests of economical expression I will simply indicate briefly those paragraphs of the statement of claim which, in my opinion, cannot stand. There are a significant number in that category. Generally they cannot stand because they do not describe a cause of action in the sense of establishing a logical connection between pleaded facts and a claim for relief. Some aspects of the pleading seem to bear the character of background facts and tend to raise false issues. 57 Having said that, I do not believe that the statement of claim as a whole is fatally flawed. In my opinion, however, having regard to the number of objections which I do uphold, it requires repleading in a tighter and more disciplined way which clearly discloses how each pleaded fact is related to a cause of action and a claim for relief made. Dr Gray's strike out motion 58 Counsel for Dr Gray saw the statement of claim as raising three broad causes of action against his client. They are breaches of his employment contract, breaches of his fiduciary duties and breaches of the Trade Practices Act. The primary criticisms of the statement of claim are: 1. It does not plead the existence of a fiduciary relationship, however it arises or the scope of the duty said to be owed. 2. It is pleaded at too greater level of generality. 3. The majority of the causes of action are statute barred. 59 As to the fiduciary duty said to be owed by Dr Gray to the University it is tolerably clear from par 16 that it is said to arise from the terms of his Employment Conditions which are pleaded as including duties to act in good faith. The breach of that duty is said to arise by virtue of the breach of his duties to act in good faith, compatibly with his duties to the University and to avoid conflicts of interest (sc 143(d)). Whether the conditions alleged can be established and whether their breach can also be characterised as a breach of fiduciary duty, involves matters of fact and law which will have to be determined at trial. The pleading is not so inadequate or the flaws so obvious in that respect that it should be struck out. I do not accept the sweeping proposition that the statement of claim as a whole is pleaded at too great a level of generality. That there may be a case for further particulars of some allegations is not a matter that goes to the viability of the pleading. 60 As already indicated, I am not satisfied that time limitation objections taken in this case are so clear that I should act upon them to strike out the causes of action objected to absent full pleading and a clearer picture of the factual matrix in which those causes of action arise. 61 In my opinion the objections made on behalf of Dr Gray are made out in respect of the following paragraphs: 1. Paragraph 18 which deals with the provision by the University of equipment facilities and research support to Dr Gray. This paragraph does not appear relevant to any pleaded cause of action. It raises an unnecessary issue. It cannot be saved by virtue of the fact that it incorporates the definition of the term 'the research areas'. That can be distinctly pleaded. 2. Paragraph 21. The allegation of the provision by the University of access to equipment and resources for 'other bound persons undertaking research' is embarrassing. Absent the identification of the 'other bound persons' and absent any apparent relevance of the allegation to any cause of action the paragraph should be struck out. 3. Paragraphs 23-33. These paragraphs relate to the application for the SIR-Spheres patent and the PCT in respect of the SIR-Spheres. I accept, despite the reference in the University's submissions to pars 143, 144 and 147 of the statement of claim, that the failure to pursue a patent application in New Zealand and the lapse of an application in Canada are not linked to any particular cause of action or a pleaded duty. This would seem however to go only to the viability of pars 30, 31 and 33. Those paragraphs should be struck out. Paragraphs 23 to 29 inclusive appear to identify intellectual property rights obtained by Dr Gray and Sirtex. 4. Paragraphs 46 and 47 which again relate to failures to pursue applications and the lapse of an application in Canada cannot stand for the same reason that pars 30, 31 and 33 cannot stand. 5. Paragraph 64 which relates to the failure to pursue the Hyperthermia PCT application in certain designated countries and the lapse of an application in Canada cannot stand for the same reason as the preceding paragraphs. 6. Paragraph 83(b) alleges breaches of the Employment Conditions by 'other bound persons'. This is not apparently connected to any cause of action against any party. It cannot stand. 7. Paragraphs 88-92 allege negotiations between Dr Gray and Nomura Jafco for funding. They do not forge any link with a cause of action giving rise to identifiable claims for relief. The Employment Conditions said to have been breached are not identified except by numbers not separately related to any particular condition. These paragraphs cannot stand. 8. Paragraph 93 has no apparent connection to a particular cause of action or claim for relief. The relevance of Dr Gray's intention is not apparent. This paragraph cannot stand. 9. Paragraphs 94 to 99. As with paragraphs 88 to 92, the Employment Conditions breached are not identified. This does not forge a link with any identified claim for relief. 10. Paragraphs 100 to 109. Mere non-disclosure by Dr Gray of the University's alleged interest does not make a case of misleading or deceptive conduct. These paragraphs cannot stand. 11. Paragraph 114 is a rolled-up plea which does not adequately expose the breaches alleged. It cannot stand. 12. Paragraphs 117 to 120 allege employment by other entities of persons who 'should have been employed by the University'. It does not apparently support any particular cause of action or claim for relief. These paragraphs cannot stand. 13. Paragraphs 121 and 122 refer to an Intellectual Property Acquisition Agreement. The agreement alleged is not adequately particularised as to parties or terms in such a way as to link it to any cause of action. The material facts should be made explicit. These paragraphs cannot stand in their present form. 14. Paragraph 125 pleads the Supplemental Subscription Deed. The agreement is not adequately pleaded as to terms so as to link it to a cause of action. This paragraph cannot stand. 15. Paragraph 126 invokes 'premises' which presumably refer to par 125. This paragraph falls with par 125. 16. Paragraph 129, other than 129(j), is irrelevant and embarrassing. This paragraph cannot stand except as to 129(j). 17. Paragraphs 143 to 145 assert, by reference to 'the premises', failure by Dr Gray to comply with his Employment Conditions. I accept the submission on his behalf that the verbal formula 'in the premises' is inadequate to link the breaches alleged to particular conduct. In respect of par 145, which raises allegations of dishonesty on the part of Dr Gray, the failure to link that alleged conduct to particular acts and states of knowledge on his part means that the pleading falls short of the expected particularity of a plea of fraud. Paragraphs 143 to 145 cannot stand. 18. Paragraph 157 is so vague and general and rolled-up as to be embarrassing. The Sirtex motion to strike out 62 In relation to Sirtex's objections, the general submission is made that the whole of the statement of claim should be struck out because embarrassing material is prevalent and difficult to separate from the remainder. That submission can be considered in the light of my conclusions about the particular objections which are raised. In dealing with Sirtex's objections it is not necessary to consider those raised in respect of paragraphs which, on the basis of Dr Gray's objections, I have already held cannot stand. Nor do I deal with objections raised by Sirtex in respect of pleadings against either of the other two parties. 63 Paragraphs 36 to 38 do not disclose a cause of action for damages under s 82 of the Trade Practices Act as they do not disclose a causal link between the misleading or deceptive conduct pleaded in pars 36 and 37 and the loss claimed in par 38. The question also arises as to how non-disclosure of an interest on the part of the University of itself was misleading or deceptive and who was or was likely to have been misled or deceived. I accept that a party can suffer loss or damage as a consequence of the response of another party to who is misled or deceived by misleading or deceptive conduct. The logical connections are not made in this case. 64 Paragraphs 55 and 56 suffer from the same deficiencies as pars 36 to 38 and do not disclose loss or damage flowing from the conduct in question. 65 Paragraph 78 is a speculative plea. It does not allege a material fact except upon a contingency. It cannot stand. 66 Paragraph 127 requires repleading in that it begins with the words 'In or about July 2000 it was a term of ...'. As submitted it does render the plea incomprehensible. CRI's strike out motion 67 CRI asserts that the University's claims against it did not appear clearly from the statement of claim. They assert that there are attempts to plead claims by way of: (a) damages for misleading and deceptive conduct; (b) damages for breach of an agreement made in October 1995 between CRI and the University; (c) the breach occurring in 1997; (d) a claim for a remedial constructive trust in respect of CRI's shares in Sirtex; (e) a claim for equitable compensation and damages. CRI submits that none of these attempts have been successful and that the statement of claim should be struck out in its entirety. Alternatively, it contends that particular paragraphs should be struck out either on the ground that no reasonable cause of action is disclosed or on the ground that they are embarrassing and prejudicial to the fair trial of the action. 68 Again, I will not revisit paragraphs in respect of which objections taken on behalf of Dr Gray have already been upheld. I will deal with objections specific to CRI which I am prepared to uphold. 69 Paragraph 54 sets up, in conjunction with par 56, a plea of misleading or deceptive conduct on the part of CRI. Just how the conduct is said to have misled and the causal connection to any claimed loss is not disclosed. This paragraph cannot stand. It is also a little odd to find an allegation that CRI misled Sirtex when Dr Gray is said, in par 156, to have been the controlling mind of both. 70 Paragraph 83(c)(i) alleges breach by CRI of an agreement pleaded in par 17. The term of the agreement said to have been breached has not been pleaded. It should be and absent such pleading the cause of action is incomplete. 71 Paragraphs 138 to 142. The plea of misleading or deceptive conduct should disclose how the alleged representations are falsified. This requires a pleading of the connection between 'the Technologies' and the 'technologies' referred to in par 138(d). Presumably there is some implied representation said to arise from CRI's alleged non-disclosure. If so this should be pleaded. I accept the submission also that the pleading does not disclose a causal connection between the conduct alleged and the loss or damage said to have been suffered. 72 In relation to the pleading of constructive trust generally, I do not consider that I am in a position to say that that pleading is so defective as to warrant striking out. However, the points made by CRI in its submission should be taken into account in repleading the statement of claim. Conclusions 73 The respondents have made out a significant number of objections to various aspects of the statement of claim. These are essentially matters of pleading rather than matters which suggest that the University's complaints against Dr Gray and the associated companies will not support viable causes of action. In my opinion, given the number of paragraphs in respect of which objections have been upheld, the statement of claim as a whole should be struck out with leave to replead. It is to be hoped that this will provide an opportunity for a pleading which identifies with greater clarity the connection between the various material facts pleaded and the causes of action raised and the relief claimed. 74 I do not consider it necessary in the circumstances to make any orders in relation to the claims for relief set out in the application. There will be leave to file a substituted application. I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. Associate: Dated: 17 March 2005 Counsel for the Applicant: Mr M Green Solicitor for the Applicant: Jackson McDonald Counsel for the First Respondent: Mr M Bennett Solicitor for the First Respondent: Bennett & Co Counsel for the Second Respondent: Solicitor for the Second Respondent: Counsel for the Third Respondent: Mr PD Evans Solicitors for the Third Respondent: Freehills Mr P Tottle Tottle Partners Date of Last Written submission: 11 March 2005 Date of Judgment: 17 March 2005