FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Australialink Pty Ltd (No 3) [2009] FCA 552 PRACTICE AND PROCEDURE – striking out of a pleading – whether the Defence ought to be stuck out pursuant – whether the Defence complies with O 11 r 1B(1) , O 11 r 13(3) and O 11 r 18 of the Federal Court Rules – whether it is sufficient for the respondents to deny the making of allegations in certain paragraphs of the Statement of Claim or whether it is necessary in addition to the denial to plead specifically to the allegation – in the absence of a specific denial or non-admission there is deemed to be an admission – appropriate to give an opportunity to the respondents to consider their position in relation to the non-pleading of the allegations – respondents have leave to file a fresh Defence Federal Court Rules O 11 r 1B(1), O11 r 13(3), O 11 r 16(b), O 11 r 18 Australian Competition and Consumer Commission v Francis (2004) 142 FCR 1 Banque Commerciale SA En Liquidation v Akhil Holdings Limited (1990) 169 CLR 279 Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd [1996] ATPR 41-522 AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v AUSTRALIALINK PTY LTD ACN 092 507 483, RACHEL LOUISE DARGIE and DESMOND JOHN O'KEEFE QUD 406 of 2008 SPENDER J 27 MAY 2009 BRISBANE IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QUD 406 of 2008 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: AUSTRALIALINK PTY LTD ACN 092 507 483 First Respondent RACHEL LOUISE DARGIE Second Respondent DESMOND JOHN O'KEEFE Third Respondent JUDGE: SPENDER J DATE OF ORDER: 27 MAY 2009 WHERE MADE: BRISBANE THE COURT DIRECTS THAT: 1. The respondents have leave to file and serve a defence on or before 4 pm on 29 May 2009, and that such defence: (i) specifically plead to each allegation in each paragraph and sub-paragraph of the Statement of Claim, and specifically identify the matter in issue, if any, in each paragraph and sub-paragraph of the Statement of Claim; (ii) specifically traverse any matter that is not admitted; (iii) be accompanied by a certificate in accordance with Form 15B signed by a legal practitioner, and otherwise comply with O 11 r 1B. THE COURT ORDERS THAT: 1. The respondents pay the applicant's costs of and incidental to the applicant's Notice of Motion filed 9 April 2009, such costs to be taxed if not agreed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QUD 406 of 2008 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: AUSTRALIALINK PTY LTD ACN 092 507 483 First Respondent RACHEL LOUISE DARGIE Second Respondent DESMOND JOHN O'KEEFE Third Respondent JUDGE: SPENDER J DATE: 27 MAY 2009 PLACE: BRISBANE REASONS FOR JUDGMENT 1 This is a Notice of Motion filed by the Australian Competition and Consumer Commission (ACCC) on 9 April 2009, moving the Court for a number of orders, primarily that the Further Amended Defence be struck out pursuant to O 11 r 16(b) of the Federal Court Rules on the grounds that it does not comply with O 11 r 1B(1), O11 r 13(3) and O 11 r 18, and consequently has a tendency to cause prejudice, embarrassment or delay in the proceeding. Legislative provisions 2 Order 11 r 16 is as follows: 16 Embarrassment etc 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. 3 Order 11 r 1B(1) provides: 1B Pleading prepared by legal practitioner (1) If a pleading is prepared by a legal practitioner representing a party, the pleading must, when filed, be accompanied by a certificate in accordance with Form 15B signed by the legal practitioner. … 4 Form 15B requires the legal practitioner to certify that: … the factual and legal material available to me at present provides a proper basis for: (a) each allegation in the pleading; and (b) each denial in the pleading; and (c) each non-admission in the pleading. 5 Order 11 r 13 provides: (1) Subject to subrule (3) and to Order 43, rule 7 (which deals with persons under disability), an allegation of fact made by a party in his pleading is deemed to be admitted by the opposite party unless it is traversed by that party in his pleading or a joinder of issue under rule 14 operates as a denial of it. (2) A traverse may be made either by a specific denial or by a statement of specific non-admission. (3) Subject to subrule (4), every allegation of fact made in a statement of claim or counterclaim which the party on whom it is served does not intend to admit must be specifically traversed by him in his defence or defence to counterclaim, as the case may be; and a general denial of such allegations, or a general statement on non-admission of them is not a sufficient traverse of them. … 6 Order 11 r 18 provides: 18 Denial to be substantial answer When a party in any pleading denies an allegation of fact in the previous pleading of the opposite party, he must not do so evasively or generally, but must answer the point of substance, in accordance with rule 13 of this Order. 7 Insofar as to the absence of a certificate pursuant to O 11 r 1B(1), counsel for the respondents conceded that this omission will be attended to by a further amendment to the Further Amended Defence. 8 As to the absence of a specific traverse of allegations in the Statement of Claim, the complaint may be illustrated by reference to a paragraph in the Statement of Claim and in the Further Amended Defence. 9 Paragraph 26 of the Statement of Claim by the ACCC alleges, "Each of O'Keefe and Dargie knew each of the matters pleaded in paragraph 2, 5 to 9, 11 to 17 and 19 to 21". 10 Paragraph 20 of the Further Amended Defence is in these terms, "The Respondents deny the allegations in paragraph 26, 27 and 28 of the Statement of Claim by reason of the matters pleaded in paragraphs 3 to 16 aforesaid". 11 Paragraph 2 of the Statement of the Claim alleges: 2. The first respondent ("Australialink"): 2.1 is and was at all material times a company incorporated in Australia; 2.2 is and was at all material times a corporation within the meaning of section 4 of the Act; 2.3 at all material times carried and carries on the business of: 2.3.1 publishing business directories on the internet; and 2.3.2 selling listings in the said directories to persons and businesses throughout Australia. 12 Further, the Further Amended Defence admits the allegation made in the Statement of Claim that the second respondent, Mr Dargie, at all material times "is and was a director, shareholder and the accounts manager of Australialink"; and admits that the third respondent, Mr O'Keefe, at all material times, "is and was the general manager and computer systems manager of Australialink". 13 It is therefore improbable in the extreme that Mr Dargie and Mr O'Keefe did not know the matters pleaded in par 2 of the Statement of Claim, as par 20 of the Further Amended Defence in effect asserts. 14 Paragraph 20 is really a broad-brush general denial. Proper pleading of the Defence would require a statement as to whether knowledge of each of the matters alleged in par 26 of the Statement of Claim is contested by Mr Dargie, or Mr O'Keefe. Counsel for the respondents indicated in the course of argument that deficiencies in the Further Amended Defence of which this is but one example, will also be rectified. 15 The principal complaint, however, is directed to whether the respondents are required to plead to a number of allegations made by the ACCC in the Statement of Claim. The nature of this complaint is encapsulated in par 19 of the submissions on behalf of the ACCC: 19. Paragraphs 8.3 to 8.6 of the [Statement of Claim (SOC)] allege facts said to support the allegation that the pleaded representations made by the LAN (the LAN Representations) are untrue and misleading. Paragraph 5 of the [Further Amended Defence] (FAD) simply denies the relevant LAN Representations were made, and does not address the facts pleaded in paragraphs 8.3 to 8.6 of the SOC. [These paragraphs allege that each of the representations alleged were untrue.] 20. Similarly, paragraphs 16.1 to 16.5 and 16.7 of the SOC allege facts said to support the allegation that the pleaded representations made by the Notice of Intention (the "Notice of Intention Representations") are untrue and misleading. Paragraph 13 of the FAD denies paragraph 16 "by reason of the matters pleaded in paragraph 12 [of the FAD]". Paragraph 12 of the FAD denies the relevant representations were made. Again, the FAD does not traverse the facts pleaded in paragraph 16 SOC, which go to whether the representations were untrue (not whether they were made). 16 The question then becomes: if a party alleges that certain representations were made, and each of them was untrue, is it sufficient for the respondents to deny the making of each of those allegations, or is it necessary, in addition to the denial of the making of the representations, to plead specifically to the allegation that the representation (which the party denies making) was untrue? 17 The function of pleadings is to state with sufficient clarity the case that must be met and to define the issues for decision: Banque Commerciale SA En Liquidation v Akhil Holdings Limited (1990) 169 CLR 279 per Mason CJ and Gaudron J at 286. 18 Burchett J said in Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd [1996] ATPR 41-522, at 42,679: The primary function [of a statement of claim] is to tell the defending party what the claim is that he has to meet. That is a matter of elementary and natural justice; the claim cannot be answered until it is known. When a sufficient defence has been filed to a sufficient statement of claim, a further function will generally have been performed – that of defining the question or questions for decision. This definition is required, of course, from an early stage, or else discovery and other interlocutory procedures are likely to prove misdirected, wasteful and unproductive. 19 These general statements of principle do not specifically address what the effect is of O 11 r 13. 20 The effect of O 11 r 13 was specifically considered by Gray J in Australian Competition and Consumer Commission v Francis (2004) 142 FCR 1 (Francis), where his Honour said, at [37]: 37 Order 11, r 13, is not easy to construe. In particular, the purpose of the words "Subject to sub-rule (3)" at the start of subr (1) is something of a puzzle. Subrule (3) does not appear to contain a derogation from the effect of subr (1), as the words "subject to" suggest, and as O 43, r 7 undoubtedly does. Rather, subr (3) appears to provide an explanation of what is meant by the word "traversed" in subr (1). It is really to be read as "having regard to subr (3)". Even if subr (1) is read in this way, it does appear that the effect of O 11 r 13 is to both to impose a requirement (that every allegation be traversed specifically, unless admitted) and to provide for a consequence of non-compliance with that requirement (that every allegation not specifically traversed is deemed to be admitted). 38 The effect of O 11, r 13 therefore appears to be that, in the absence of a specific denial or non-admission of an allegation, there is deemed to be an admission. This is so even if the pleading manifests an intention not to admit allegations. 21 The Further Amended Defence does not plead to or traverse the allegations in pars 8.3 to 8.6, and 16.1 to 16.5, and 16.7 of the Statement of Claim. 22 As the submissions on behalf of the ACCC acknowledge, pars 8 and 16 of the Statement of Claim "constitute a core part of the applicant's case". The ACCC says that it is clear that the respondents dispute that the relevant representations were made. However, if the applicant succeeds in establishing they were made, it will be necessary for the Court to consider if they were untrue. It is therefore important to know whether the respondents contest the facts alleged in pars 8 and 16, or otherwise put them in issue. 23 In my opinion, the effect of O 11 r 13 is that in the absence of a specific denial or non-admission of an allegation, there is deemed to be an admission. This is so even if the pleading manifests an intention not to admit allegations. This view is consistent with the view expressed by Gray J in Francis earlier set out. 24 The consequence is that unless the respondents specifically deny or plead the non-admission of the allegations in pars 8.3 to 8.6, and in 16.1 to 16.5, and 16.7 of the Statement of Claim, there is deemed to be an admission of those allegations, and if the ACCC succeeds in establishing that the representations were made, the consequence of the absence of a specific denial or non-admission of those paragraphs has the effect that they are deemed to be admitted. 25 The respondents have repeatedly declined to plead that the allegations were untrue. The position, in my opinion, is that should that remain the position on the pleadings, and the ACCC succeeds in its allegation that the representations were made, the consequence is that the effect of O 11 r 13 is that the allegations of the untruth of the representations is deemed to be admitted. 26 In the light of these reasons, it is appropriate to give an opportunity to the respondents to consider their position in relation to the non-pleading of the allegations of untruth, and to remedy the deficiencies that have been earlier acknowledged. 27 In the circumstances, it seems to me to be appropriate to order that the respondents have leave to file a fresh Defence, rather than to attempt to amend the most recent Further Amended Defence. 28 I will direct that the respondents have leave to file and serve a Defence on or before 4 pm on 29 May 2009, and that such Defence: (i) Specifically plead to each allegation in each paragraph and sub-paragraph of the Statement of Claim, and specifically identify the matter in issue, if any, in each paragraph and sub-paragraph of the Statement of Claim; (ii) Specifically traverse any matter that is not admitted. (iii) Be accompanied by a certificate in accordance with Form 15B signed by a legal practitioner, and otherwise comply with O 11 r 1B. 29 The ACCC sought costs of its Motion on an indemnity basis. It is, in my opinion, clearly inappropriate to order costs on that basis. 30 I make the following order as to costs: (1) The respondents pay the applicant's costs of and incidental to the applicant's Motion filed 9 April 2009, such costs to be taxed if not agreed. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender. Associate: Dated: 27 May 2009 Counsel for the Applicant: Mr JD O'Regan Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondents: Mr AJP Collins Solicitor for the Respondents: Fitz-Walter Lawyers Date of Hearing: 1 May 2009 Date of Judgment: 27 May 2009