Christou v Stantons International Pty Ltd (No 3) [2011] FCA 655
Federal Court of Australia
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FEDERAL COURT OF AUSTRALIA
Christou v Stantons International Pty Ltd (No 3) [2011] FCA 655
Citation: Christou v Stantons International Pty Ltd (No 3) [2011] FCA 655
Parties: NICK CHRISTOU v STANTONS INTERNATIONAL PTY LTD ACN 103 088 697, STANTONS INTERNATIONAL SERVICES PTY LTD ACN 109 717 071, KEITH GRAEME LINGARD and NEIL KEVIN JOYCE
File number: WAD 182 of 2010
Judge: MCKERRACHER J
Date of judgment: 9 June 2011
Date of hearing: Determined on the papers
Date of last submissions: 21 April 2011
Place: Perth
Division: GENERAL DIVISION
Category: No Catchwords
Number of paragraphs: 136
Counsel for the Applicant: A Rumsley
Solicitor for the Applicant: Allan Rumsley Commercial Dispute Lawyers
Counsel for the Respondents: ML Bennett
Solicitor for the Respondents: Bennett & Co
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION WAD 182 of 2010
BETWEEN: NICK CHRISTOU
Applicant
AND: STANTONS INTERNATIONAL PTY LTD ACN 103 088 697
First Respondent
STANTONS INTERNATIONAL SERVICES PTY LTD ACN 109 717 071
Second Respondent
KEITH GRAEME LINGARD
Third Respondent
NEIL KEVIN JOYCE
Fourth Respondent
JUDGE: MCKERRACHER J
DATE OF ORDER: 9 JUNE 2011
WHERE MADE: PERTH
THE COURT ORDERS THAT:
1. The re-amended statement of claim filed 8 March 2011 be struck out.
2. The applicant do have liberty to file and serve within one month a further re-amended statement of claim.
3. The applicant do pay the costs of the respondents of this motion to be taxed or 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 Federal Law Search on the Court's website.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION WAD 182 of 2010
BETWEEN: NICK CHRISTOU
Applicant
AND: STANTONS INTERNATIONAL PTY LTD ACN 103 088 697
First Respondent
STANTONS INTERNATIONAL SERVICES PTY LTD ACN 109 717 071
Second Respondent
KEITH GRAEME LINGARD
Third Respondent
NEIL KEVIN JOYCE
Fourth Respondent
JUDGE: MCKERRACHER J
DATE: 9 JUNE 2011
PLACE: PERTH
REASONS FOR JUDGMENT
INTRODUCTION
1 This is the third application in this proceeding to strike out the statement of claim, as amended. In Christou v Stantons International Pty Ltd [2010] FCA 1150 (Christou No 1) and Christou v Stantons International Pty Ltd (No 2) [2010] FCA 1437 (Christou No 2), I dealt with previous strike out applications in respect of the statement of claim and an amended statement of claim. The same abbreviations are used in these reasons as in Christou No 1 and Christou No 2.
2 In Christou No 1 (at [3]-[6]), I set out the relevant principles as follows:
3 In Wright Rubber Products Pty Ltd v Bayer AG [2008] ATPR 42-258, Tracey J (at [5]) said:
5 The principles governing the exercise of the Court's power summarily to dismiss a claim on the ground that it discloses no reasonable cause of action, the principles which govern pleadings in this Court and the relevant authorities are conveniently summarised by Weinberg J in McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at 415-421. It is not necessary to restate, at length, his Honour's exposition of the relevant rules and the statements of principle which emerge from the cases to which he refers. It is sufficient, for present purposes, to note that:
• The power to dismiss a claim because it discloses no reasonable cause of action will not lightly be exercised: see Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-130; Webster v Lampard (1993) 177 CLR 598 at 602-603.
• The purpose of pleadings is to define the issues with sufficient clarity such that respondents understand, and have the opportunity to meet, the case made against them: see Dare v Pulham (1982) 148 CLR 658 at 664; Mitanis v Pioneer Concrete (Vic) Pty Ltd [1997] ATPR 41-591 at 44, 151ff.
• A statement of claim must plead all the material facts necessary for the purpose of formulating a complete cause of action. If it does not it is liable to be struck out: Mitanis; Bruce v Odhams Press Ltd [1936] 1 KB 697 at 712-713.
• It is not sufficient for the pleader to state conclusions drawn from unstated facts: see Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 114-5.
• There will be cases in which the power to strike out pleadings will not be exercised notwithstanding a failure to plead all material facts. Such restraint will be appropriate where the deficiency causes no confusion and does not raise issues of substantive principle (HECEC Australia Pty Ltd v Hydro-Electric Corp [1999] FCA 822 at [59]), and where deficiencies can be overcome by ordering the provision of particulars or the furnishing of affidavits (State of Queensland v Pioneer Concrete (Qld) Pty Ltd [1999] ATPR 41-691 at 42,828-9).
• Not all conclusionary pleadings will be struck-out as being deficient: see Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association (WA) (1987) 13 FCR 413 at 417. Whether or not such a pleading should be struck out will depend on whether or not the facts are pleaded at too great a level of generality: see Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd [1991] FCA 557.
4 In Sun Earth Homes Pty Ltd v Australian Broadcasting Corporation (1990) 98 ALR 101, Burchett J pointed out that courts have repeatedly emphasised that the power under the rule should be exercised with caution and only where clearly appropriate. That is a principle which has been evident for many years from authorities such as General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 (at 130).
5 In order to disclose a reasonable cause of action, the statement of claim must contain all the relevant facts to support any allegation made: H 1976 Nominees Pty Ltd v Galli (1979) 40 FLR 242. As will be seen, the analysis below reveals that the pleading misses crucial links. Without that linkage, all of the necessary elements to found a cause of action under s 52 TPA cannot be sustained and the statement of claim should be struck out and re-pleaded.
6 In the present pleading, if all of the facts asserted by Mr Christou are true (and any strike out application based on O 11 r 16 FCR must so assume) then it may well be that the Mr Christou can fashion a clear case in which there is breach which leads to loss and damage which is recoverable. At present, however, the pleading does not establish with sufficient clarity the linkage between the alleged contraventions and the consequences sustained. Additionally, it does not show how certain events discussed below are 'relevant circumstances' for the purpose of determining whether conduct was misleading and deceptive conduct in trade and commerce.
3 The same considerations continue to apply.
4 On the other hand, while precision in a pleading is necessary (and this pleading is not a model of precision), it is often artificial to attempt to construe any given paragraph in isolation, ignoring the context. Some of the respondents' complaints, in taking that course, rather suggest that they are a little too easily 'embarrassed'.
5 While a number of the complaints have been upheld and while an entirely fresh draft would be desirable, it is not difficult to discern the essence of a possible claim as noted in Christou No 1, assuming the pleaded facts to be true. The time devoted by all concerned to the three strike out applications could have been more usefully engaged.
6 In that regard, it may be noted that in many cases, the time and expense involved in the consideration and resolution of an interlocutory dispute is entirely disproportionate to its significance to the just and effective resolution of the case as a whole by mediation or trial: see Youlden Enterprises Pty Ltd v Heath Solutions (WA) Pty Ltd (2006) 33 WAR 1 (at [2]) per Martin CJ. Australian Courts in more recent times have taken a restrictive attitude towards interlocutory skirmishes in general and strike out applications in particular: see Grant v Monitor Money Corporation Pty Ltd [2006] FCA 1716 per Siopis J (at [14]–[17] and [73]).
7 Martin CJ also noted in Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82 (at [8]):
Most pleadings in complex cases ... can be criticised from the perspective of technical pleading rules that evolved in a very different case management environment. In my view, the advent of contemporary case management techniques and the pre-trial directions, to which I have referred, should result in the Court adopting an approach to pleading disputes to the effect that only where the criticisms of a pleading significantly impact upon the proper preparation of the case and its presentation at trial should those criticisms be seriously entertained.
8 In Gardiner v Ray [1999] WASC 140, Steytler J said (at [33]):
Applications to strike out pleadings are, in my opinion, overused. They are always productive of delay and expense, sometimes substantially so, and often produce no sufficient countervailing benefit, particularly when they are brought at a late stage of the proceedings ... Those who wish to bring an application of this kind ... should consider ... what benefit will be derived by bringing the application and then weigh against that the inevitable consequences of delay and expense. …
9 The Court should adopt a flexible approach to pleading applications that may not always be consistent with the practices of earlier times. As Lockhart J said some time ago in Australian Competition and Consumer Commission v Golden West Network [1997] FCA 792:
It is important that I say something about motions to strike out statements of claim in the conduct of modern litigation. Today, courts are playing an increasingly active role in case management. Motions to strike out pleadings are matters of practice and procedure. In its role of case management, courts devise various procedures to overcome deficiencies in pleadings other than by simply ordering that the offending paragraphs be struck out. Sometimes it is appropriate to strike them out, sometimes not. On some occasions it is better for the court to direct the applicant, whose statement of claim is under challenge, to furnish particulars or to file and serve affidavits to show that there really are facts which can be proved and which, if proved, would support the general statements made in the statement of claim. This was the course which I took in Trade Practices Commission v Australian Iron and Steel Pty Ltd (1990) 22 FCR 305, a practice which other judges adopt from time to time. This is not, of course, intended to be a substitute for a defective pleading in every case because, as is well known, pleadings must assert basic or constitutive facts, not the evidence by which they are to be proved. But case management is a sensible and flexible thing. It must not be unduly circumscribed.
THE GENERAL APPROACH TAKEN BY THE RESPONDENTS
10 On this occasion, the respondents (Stantons) have attacked many paragraphs of the re-amended statement of claim. The applicant (Mr Christou) has responded to each of those attacks.
11 In those circumstances and for the sake of clarity, it is necessary to set out the pleaded paragraphs in full together with a summary of the attacks, the responses and my conclusions.
ANALYSIS OF THE RE-AMENDED STATEMENT OF CLAIM BY PARAGRAPH
12 The current form of the re-amended statement of claim pleads as follows:
APPLICANT
1. The Applicant (Christou) is and at all material times was:
1.1 a director, shareholder and sole secretary of Stanton Partners Australasia Pty Ltd (SPA);
1.2 an accountant who, in partnership with the Third Respondent and Fourth Respondent:
1.2.1 from or about 1 October 1998, carried on an accounting practice (the Practice) under the name of Stanton Partners; and
1.2.2 owns the whole of the goodwill of the Practice of Stanton Partners.
Particulars
The partnership is evidenced by a deed dated 21 January 1999 to which the Applicant and Third and Fourth Respondents were parties; and is evidenced by the Licence Agreement pleaded in paragraph 12 of this Re-Amended Statement of Claim.
The goodwill and the Practice of the Partners are particularised in the Licence Agreement pleaded in paragraphs 12 to 16 inclusive of this Re- Amended Statement of Claim.
13 Stantons suggest that the particulars subjoined to the paragraph raise an irrelevant issue, namely, the accuracy of the description in the Licence Agreement pleaded in para 12. They raise the same complaint concerning para 4.1.2 and para 5.1.2.
14 Mr Christou, however, says that those three paragraphs are to be read in context with the balance of the re-amended statement of claim including paras 9-11. He says that the goodwill of the Partnership remains an asset of the Partnership after termination of the Partnership.
15 Stantons make the point that the Licence Agreement pleaded in para 12, pleads and particularises the agreement of the three partners in relation to the goodwill of the Partnership. Mr Christou argues that if Stantons takes issue with the accuracy of the description in the Licence Agreement, it should be raised in a defence not by seeking to strike out the plea.
16 In my view, although the pleading is somewhat confusing and would certainly benefit from clarification, the response from Mr Christou is correct. I would not strike out this paragraph or the particulars.
RESPONDENTS
2. The First Respondent (SI) is and at all material times was:
2.1 a company duly incorporated according to the Corporations Act 2001, on or about 6 December 2002;
2.2 engaged in trade or commerce, for the purposes of the Trade Practices Act 1974;
3. The Second Respondent (SIS) is and at all material times was:
3.1 a company duly incorporated according to the Corporations Act 2001, on or about 24 June 2004;
3.2 engaged in trade or commerce, for the purposes of the Trade Practices Act 1974;
4. The Third Respondent (Lingard) is
4.1 a chartered accountant who, in partnership with Christou and the Fourth Respondent:
4.1.1 has carried on an (sic) the Practice under the name of Stanton Partners; and
4.1.2 owns the whole of the goodwill of the Practice of Stanton Partners;
Particulars
The partnership is evidenced by a deed dated 21 January 1999 to which the Applicant and Third and Fourth Respondents were parties; and is evidenced by the Licence Agreement pleaded in paragraph 12 of this Re-Amended Statement of Claim.
The goodwill and the Practice of the Partners are particularised in the Licence Agreement pleaded in paragraphs 12 to 16 inclusive of this Re-Amended Statement of Claim.
4.2 a director and shareholder of the SI (sic);
4.3 the director in charge of SI;
4.4 the director in charge of international projects for SI;
4.5 the sole director of SIS from 24 June 2004 until 15 December 2006;
4.6 one of two directors of SIS from 15 December 2006 until 22 September 2009;
4.7 a shareholder of SIS from or about 24 June 2004, to or about 22 September 2009; and
4.8 a director and shareholder of SPA;
4.9 engaged in trade or commerce, for the purposes of the Fair Trading Act 1987, when acting in his capacity as a director of SI while it was engaged in trade or commerce; and
4.10 engaged in trade or commerce, for the purposes of the Fair Trading Act 1987, when acting in his capacity as a director of SIS while it was engaged in trade or commerce
5. The Fourth Respondent (Joyce) is and at all material times was:
5.1 a chartered accountant who, in partnership with Christou and Lingard:
5.1.1 has carried on the Practice under the name of Stanton Partners;
5.1.2 owns the whole of the goodwill of the accounting practice of Stanton Partners;
Particulars
The partnership is evidenced by a deed dated 21 January 1999 to which the Applicant and Third and Fourth Respondents were parties; and is evidenced by the Licence Agreement pleaded in paragraph 12 of this Re-Amended Statement of Claim.
The goodwill and the Practice of the Partners are particularised in the Licence Agreement pleaded in paragraphs 12 to 16 inclusive of this Re- Amended Statement of Claim.
5.2 A manager of business services and tax compliance for SI and SIS;
5.3 a director and shareholder of SPA;
5.4 engaged in trade or commerce, for the purposes of the Fair Trading Act 1987, when acting in his capacity as a manager of SI, while it was engaged in trade or commerce; and
5.5 engaged in trade or commerce, for the purposes of the Fair Trading Act 1987, when acting in his capacity as a manager of SIS, while it was engaged in trade or commerce.
17 The submission by Stantons in relation to para 4.9 is also made for paras 4.10, 5.4 and 5.5. The submission is that the paragraphs are meaningless in the context of the pleading as a whole and appear to reflect a mistaken view as to the liability as a director. Moreover, given the specific pleas in para 87 and para 88, which makes no reference back to para 4, the pleas are said to be superfluous.
18 Mr Christou contends that the directors and officers of a company when acting for that company in trade and commerce also act in their own right in trade and commerce for the purposes of the Fair Trading Act 1987 (Cth) (FTA). Therefore, paras 4.9, 4.10, 5.4 and 5.5 simply plead part of the factual basis grounding liabilities for the third respondent (Mr Lingard) and the fourth respondent (Mr Joyce) under the FTA.
19 I accept that the paragraphs under attack are foundational only. They will not be struck out.
THE PARTNERSHIP
6. From 1989 until 30 September 1998, an accounting practice in the name of Stanton Partners was carried on by a partnership comprising four partners; Christou, Lingard, Joyce and Stan Palassis.
7. From or about 30 September 1998 the four person partnership, pleaded in paragraph 6 above, was dissolved and a new partnership was formed in the name of Stanton Partners, by Christou, Lingard and Joyce (the Partnership).
Particulars
The partnership is evidenced by a deed dated 21 January 1999 to which the Applicant and Third and Fourth Respondents were parties; and is evidenced by the Licence Agreement pleaded in paragraph 12 of this Re-Amended Statement of Claim.
20 Stantons also complain that it is unnecessary to plead evidence. Evidence of the Partnership is not in issue nor is it a material fact to support the plea in para 7.
21 Mr Christou says that the existence of the Partnership is a 'material fact that grounds the plea of a fiduciary duty arising from the Partnership, in paragraph 89'. I accept this response as far as it goes. Paragraph 7 is foundational only. But the particulars do not elucidate the terms of the Partnership in the way they should. The particulars of the pleading should identify what terms, express or implied, are material to the cause of action.
8. The Applicant, Lingard and Joyce each have had, at all material times from 1 October 1998, a one third interest in the Partnership.
9. The Partnership was terminated on 3 July 2003, pursuant to section 37 of The Partnership Act 1895, by Christou giving written notice to Lingard and Joyce.
10. On 28 March 2008, Beech J made orders in the Supreme Court of Western Australia in relation to the winding up of the Partnership.
11. There has not been a winding up of the Partnership.
THE LICENCE AGREEMENT
12. By a Licence Agreement dated 12 November 1998, stamped 3 December 1998, between the Partnership and SPA, the Partnership granted an exclusive licence to SPA to use the goodwill and carry on the Practice of the Partnership (the Licence).
12.1 A copy of the Licence can be inspected at the offices of Christou's solicitor; and
12.2 The Applicant will reply (sic-rely) upon the Licence at the trial of this action for its full terms, meaning and effect
13. Clause 3.3 of the Licence materially provides:
"Goodwill means the goodwill of the Practice, including the personal connection of the Partners and the name "Stanton Partners", ("the Name") but does not include any of the other assets of the Practice, including the debtors, the equipment, stock of consumables or work in progress as at the date of this Agreement."
14. Clause 3.5 of the Licence materially provides:
"Practice means the accountancy practice carried on by the Partners and includes a reference to the accountancy practice as carried on by the Licensee in accordance with the terms of this Agreement."
15. Clause 4 of the Licence materially provides:
"The Partners grant an exclusive licence to the Licensee to use the Goodwill and carry on the Practice on the terms of this Agreement.
The Licence contained in this Agreement is extended on the terms and conditions of this Agreement solely to the Licensee who shall have no right to licence or grant to others any rights or interest in the Licence or the Goodwill other than as expressly permitted under this Agreement.
As between the Licensee and the Partners, the Licensee recognises and acknowledges the Partners sole and exclusive ownership of, and right to use, the Goodwill and nothing contained in this Agreement shall be construed to vest in the Licensee any right, title or interest to the Goodwill now or in the future."
16. Clause 6 of the Licence materially provides that:
"As consideration for the grant of this Licence, the Licensee shall pay the Partners a fee of 3% of the net fees, excluding disbursements, derived from the carrying on of the Practice for the duration of this Agreement."
17. The Applicant will refer to the Licence at the trial of the action for its full terms, meaning and effect.
SPA ACTING UNDER THE LICENCE AGREEMENT
18. At all material times from 12 November 1998 SPA has used the Goodwill and carried on the Practice of the Partnership, under the Licence.
Particulars
From 12 November 1998 to 30 June 2008.
19. Since July 2003, SPA has continued to conduct the Stanton Partners Practice pursuant to the Licence
22 In relation to both para 18 and para 19, Stantons complain that two terms are used in these paragraphs 'Practice of the Partnership' in para 18 and 'Stanton Partners Practice' in para 19 which gives rise to an embarrassing plea. Stantons complain that it is not known whether it is contended, as suggested by the particulars to para 18, that use of the Practice continued up until 30 June 2008 and whether this is the material time for the balance of the pleading. Paragraph 19, in contrast, appears to be open ended.
23 In response to this, Mr Christou says that the 'Practice' is the Practice defined in para 1.2 of the re-amended statement of claim and has the same meaning in para 18 and para 19. In addition, para 19 is to be read in context with para 18 and para 73 which plead the date from which Stantons ceased to conduct the Practice.
24 While this response clarifies the position, the two terms are confusing in a pleading which is already complex. They should be clarified as should the material dates.
20. In carrying on the Practice, SPA has:
20.1 Used the Goodwill;
20.2 Traded from premises at Level 1, 1 Havelock Street, West Perth;
20.3 Used the telephone number (08) 9481 3188;
20.4 Used the facsimile number (08) 9321 1204; and
20.5 Used the internet website domain name www.stanton.com.au;
20.6 Engaged the following personnel:
20.6.1 Keith Lingard;
20.6.2 Neil Joyce;
20.6.3 John Van Dieren;
20.6.4 Julian Kovacs; and
20.6.5 James Cottrill
20.7 Used email addresses ending "@statons.com.au" (sic)
20.8 Used ASIC registered agent number 812, registered to the Partnership;
20.9 Used the tax agent's registration of the Partnership;
20.10 Advertised for new clients in the Yellow Pages using the details pleaded in paragraphs 20.2 to 20.5 above.
VALUE OF THE PRACTICE
21. On 24 January 2002, Christou, Lingard and Joyce entered a written agreement relating to the potential sale of the practice and settlement of all disputes and differences of opinion regarding practice entitlements (the 2002 Agreement).
Particulars
A written agreement dated 24 January 2002, between the Applicant and the Third and Fourth Respondents;
A copy of the 24 January 2002 Agreement can be inspected at the offices of the Applicant's solicitor.
22. By the 2002 Agreement, Christou, Lingard and Joyce agreed the value at which they would sell the Practice was $8,000,000
Particulars
The Third and Fourth Respondents and the Applicant were the parties to the 2002 Agreement;
By the 2002 Agreement, the Third and Fourth Respondents and the Applicant agreed the value at which they were prepared to sell the Practice of the Partnership;
By clause 1 of the 2002 Agreement Template "A" forms part of the agreement;
Template "A" materially states the "Total" is "$8,000,000"
25 Stantons point to the fact that an Agreement dated 24 January 2002 is included in the plea under the heading 'Value of Practice' at para 21 and para 22 and appears intended to support a plea as to actual value of the Practice (see, for example, the particulars to para 86). In reality, however, it is only an Agreement between three partners that they will attempt to sell their Practice for $8 million and does not establish that it was, in truth, worth $8 million. The particulars to para 75 are said to repeat the same error. The plea is therefore embarrassing and fails to sustain any cause of action.
26 Mr Christou says that by the Agreement pleaded in para 21 and para 22, the partners agreed to a number of matters including, materially, that the value of the Practice was $8 million. He says that a valuation reached between the parties is evidence of the value of the Practice. The plea is material to the quantum of the loss pleaded in paras 86, 88 and 92.
27 If Mr Christou contends that the value of the Practice was in reality $8 million, that should be clearly pleaded. It is not. An agreement between existing partners to sell or attempt to sell a practice for a particular sum, to others, does not prove that the Practice was actually worth that amount.
SALE AGREEMENT
23. On or about 11 June 2004, SI registered the business name of Stantons International, to carry on the business of an accounting and consulting firm from 2 July 2004, from premises at Level 1, 1 Havelock Street, West Perth.
24. On 28 June 2004, SPA, as vendor, by Lingard and Joyce, signed an agreement for sale and purchase of business assets from SPA to SI, as purchaser (the Sale Agreement).
24.1 A copy of the Sale Agreement can be inspected at the offices of Christou's solicitor; and
24.2 Christou will reply (sic-rely) upon the Sale Agreement at the trial of this action for its full terms, meaning and effect
25. Clause 1.1 of the Sale Agreement materially provides:
"Business means the accountancy and corporate consultancy business carried on by SPA.
Premises means the property from which the Business is conducted in Western Australia, namely Level 1, 1 Havelock Street, West Perth, Western Australia and Darwin; namely U2 & U3, 20 Knuckey Street, Darwin"
26. Clause 10.1 of the Sale Agreement materially provides:
"the Vendors warrant to the Purchaser, to the intent that such warranties shall survive Completion that:
(a) the Vendors have good right and title to sell and assign the Business Assets to the Purchaser in the terms of this Agreement."
SETTLEMENT OF SALE AGREEMENT ENJOINED
27. On 30 June 2004, Pullin J, in Supreme Court Action Civ 1788 of 2003, made an interim order restraining the parties to the Sale Agreement from proceeding to settlement on the sale of the business ("Injunction").
28. By an undertaking dated 1 July, SPA, Lingard and Joyce undertook not to proceed to settlement under the Sale Agreement.
28.1 A copy of the undertaking can be inspected at the offices of Christou's solicitor; and
28.2 Christou will reply (sic-rely) upon the undertaking at the trial of this action for its full terms, meaning and effect ("Undertaking").
RESPONDENTS' CONDUCT
29. From or about 2 July 2004 the Respondents, in material published on the internet, including on www.stantons.com.au and to past and existing clients of the Partnership, have stated and represented that SI
29.1 Has some 60 personnel and has been operating as an accounting and audit practice for over 25 years.
29.2 Its head office is located in West Perth, a key commercial and business district in the state capital of Western Australia.
29.3 It also has a branch office in Darwin, capital of Australia's Northern Territory.
29.4 The firm's partners include John Van Dieren (head of the External Audit and Corporate Services division), Keith Lingard (in charge of International Projects) and Neil Joyce (responsible for Tax Compliance and Tax Consulting).
29.5 main activities are:
29.5.1 statutory audit, with clients including 42 public companies listed on the Australian Stock Exchange (ASX);
29.5.2 internal audit, with most of the work being for state government departments and trading entities; international consulting, mainly on aid-funded projects in the Asia-Pacific region for the Asian Development Bank, AusAID and the World Bank;
29.5.3 corporate tax consulting; and general tax services and accounting for small and mid-size businesses.
29.6 In 2004 was placed third amongst Australian accountants advising on successful IPOs on the ASX, based on the number of listings in the six months to 30 June 2004. In 2003 it was fourth, and in 2002 fifth by number of IPOs.
29.7 Clients of the External Audit division include many mineral exploration and production companies, along with some well-known private enterprises, such as Skywest, Western Australia's largest regional airline.
29.8 The firm is also a preferred supplier to the Auditor General of Western Australia for external audits of government authorities under contract.
29.9 The Internal Audit division is among the leading practices in this field in Perth and undertakes internal audit, probity audits, efficiency and effectiveness reviews and IT audit, mainly for Government.
29.10 A copy of the material published on the internet can be inspected at the offices of Christou's solicitor;
Particulars
The representations pleaded in paragraphs 29.1 to 29.9 were made in writing Particulars of material published to past and existing clients of the partnership will be provided after discovery and inspection.
28 Stantons complain that the plea in para 29 is so generalised that it is embarrassing. The plea is that Stantons has published material on the internet (a reference to all four respondents). It is said that the words 'including on www.stantons.com.au' are embarrassing. The specific websites should be identified and the specific publishing respondent should be identified. It is also said that the reference to 'material published to past and existing clients' is not capable of being particularised given the particulars subjoined to para 29.10. Those particulars which show that the representations were made in writing fail to identify the written document said to contain the representations.
29 In response, Mr Christou says that the plea in this paragraph, as well as para 31, is in relation to the conduct of Stantons by which the material particularised was published. It identifies when and where the publication occurred. Mr Christou says he will be in a position to provide particulars on the extent of publication to clients once Stantons has provided the discovery sought.
30 Particulars should be given of any known personal involvement and of any other known websites but otherwise, this paragraph can stand. Questions may or may not arise as to which particular respondent so published. At present the pleading, correct or otherwise, is, in effect, that they all published.
30. Christou will rely upon the material published on the internet and to past and existing clients of the Partnership at the trial of this action for its full terms, meaning and effect.
31 This plea is said to be embarrassing as it is not a plea of a contract but a plea of a representation. Therefore, it is not sufficient for Mr Christou to say that he will rely on its full terms, meaning and effect at trial as he is obliged to plead the representation clearly at this stage.
32 Mr Christou says that the relevant conduct is pleaded in para 29 and para 31 and he will rely it on at trial.
33 At best this plea, if necessary at all, should be a particular, but the complaint is not one of weight. The paragraph can remain.
31. The Respondents have and continue to state and represent, in material published on the internet, including on www.stantons.com.au and to past and existing clients of the Partnership, that:
31.1 SI is a financial advisory firm based in Perth, Western Australia with offices in Darwin. For over twenty years, it has provided a range of services to a mix of private and public sector clients in assurance and consulting services, business advisory and accounting, corporate advisory and taxation, financial attest, financial modelling and risk analysis and management.
31.2 SI's directors are:
31.2.1 Keith Lingard; international Projects;
31.2.2 Neil Joyce; Business Services and Tax Compliance;
31.2.3 John Van Dieren; Corporate Services and External Audit;
31.2.4 Julian Kovacs; Business Services and Tax Compliance;
31.2.5 James Cottrill, IT Auditing and Consulting
31.3 Julian has been with SIS since April 1998. He became a partner with SIS in 2002. Prior to that he was a tax principal in the business services and tax compliance division.
31.4 A copy of the material published on the internet can be inspected at the offices of Christou's solicitor;
Particulars
The representations pleaded in paragraphs 31.1 to 31.3 were made in writing. Particulars of material published to past and existing clients of the Partnership will be provided after discovery and inspection.
34 Stantons complain, again, that the plea is so generalised as to be embarrassing. Again, it is directed to all four respondents. The plea that they 'have and continue to state and represent' is embarrassingly vague.
35 Mr Christou repeats his response given to the complaints about para 29.
36 Particulars should be given of any known personal involvement and of any other known websites but otherwise, this paragraph can stand.
32. Christou will rely upon the material published on the internet and to past and existing clients of the Partnership at the trial of this action for its full terms, meaning and effect
37 Stantons raise the same complaints as raised concerning para 30 and the same response is given by Mr Christou.
38 At best this plea, if necessary at all, should be a particular, but the complaint is not one of weight. The paragraph can remain.
33. From or about 2 July 2004, SI and SIS have carried on an accounting and audit practice, including the Practice as carried on by SPA under the Licence from the Partnership and used the personal connection of Lingard and Joyce as partners of the Partnership and the name Stanton Partners in carrying on the accounting and audit practice and the Practice, and
33.1 Traded from premises at Level 1, 1 Havelock Street, West Perth;
33.2 Used the telephone number (08) 9481 3188;
33.3 Used the facsimile number (08) 9321 1204; and
33.4 Used the internet website domain name www.stanton.com.au;
33.5 Engaged the following personnel:
33.5.1 Keith Lingard;
33.5.2 Neil Joyce;
33.5.3 John Van Dieren;
33.5.4 Julian Kovacs; and
33.5.5 James Cottrill
33.6 Used email addresses ending "@statons.com.au" (sic)
Particulars
The accounting and audit practice carried on by SI and SIS used the same Premises, Telephone number, Facsimile number, Internet website, Email addresses, Personnel and Clients as used to carry on the Practice of the Partnership. Otherwise the Applicant relies on the material facts already pleaded in paragraph 33 of this Re-Amended Statement of Claim.
39 Stantons say that in contradistinction to para 18 and para 19 referring to the Practice of the Partnership and the Stanton Partners Practice, para 33 now uses the terms 'the Practice as carried on by SPA under the Licence from the Partnership' which is confusing and embarrassing. Further, the reference to the 'personal connection of Lingard and Joyce as partners of the Partnership' is embarrassing and vague, particularly in light of para 33.5. No particulars are given of how the personal connection is said to be used and the use of the name 'Stanton Partners' appears to be something in addition to the matters particularised in paras 33.1 to 33.6. The particulars to this paragraph, it is said, are not particulars at all but simply a repetition of the paragraph.
40 The response to this from Mr Christou is that the paragraph is to be read in context with para 1.2 defining the 'Practice' and in the context of para 13, that defines the Goodwill licensed as including the 'personal connection' and the name 'Stanton Partners'. The point is made that if insufficient particulars are asserted, the appropriate solution is a request for particulars under O 12 r 5 of the Federal Court Rules.
41 In my view, the complaints by Stantons are valid. The terminology needs tidying up and the expressions clarified.
34. From or about 1 July 2004, SI invoiced clients of the Practice carried on under the Licence by SPA, for work carried out by and under the direction and supervision of Lingard and Joyce.
34.1 Particulars of the clients will be provided after discovery has been provided by the Respondents.
35. By engaging in the conduct pleaded in paragraphs 29, 31, 33 and 34 above, the Respondents with knowledge of the terms of the Licence pleaded in paragraphs 12 to 16 above and the Injunction and the Undertaking pleaded in paragraphs 27 and 28 respectively above, without limitation, falsely represented, that SI and SIS have the right and authority to act as pleaded in paragraphs 29, 31, 33 and 34 above.
36. By making the representations pleaded in paragraph 35, above, the First and Second Respondents have engaged in conduct that is misleading or deceptive or likely to mislead or deceive, contrary to section 52 of the Trade Practices Act 1974.
42 Stantons say that the plea at para 34 is 'hopelessly confusing'. They ask whether it is:
… saying that the SI invoiced clients of the practice for work carried out by SPA (which would be a plea of fraud)? Is it saying that SI invoiced clients for work carried out by and under the direction and supervision of Lingard and Joyce (that is separately a different fraud – SI claiming costs that are recoverable by Lingard and Joyce)? Is it saying that SI (utilising Lingard and Joyce) carried out work for former clients of the practice and invoiced them?'
43 Stantons complain that in matters of this seriousness there should be no ambiguity nor should a generalised allegation 'from or about 1 July 2004' be accepted given that no particulars whatsoever have been provided. The importance of this is underlined given the plea following in para 35. The representation does not appear to flow from the allegation in para 34 (depending on what para 34 is in fact intended to say). Stantons point to the fact that if, for example, SI invoiced clients for work carried out by SI then there would no representation in the manner alleged in para 35. If SI invoiced clients, it cannot be the conduct of SIS. It is not alleged in para 34 to be the conduct of SIS. Therefore, para 36 should be struck as well.
44 In response, Mr Christou states that para 34 pleads to the conduct of the respondents engaged from July 2004, as reflected in invoices issued by SI. In relation to para 36, Mr Christou relies on the conduct as being misleading or deceptive or likely to mislead or deceive and that 'the conduct is confusing is consistent with it being a contravening conduct'. Mr Christou does not plead a claim in fraud against any respondents.
45 The pleading is a little confusing and embarrassing, although not, in my view, to the extent that Stantons suggest. Taken in context with the surrounding pleadings, it is understandable but if fraud is not alleged, it should be made clear who authorised SI to invoice clients. Dates should also be supplied in relation to these events.
37. As a result of the First and Second Respondents' conduct in breach of section 52 of the Trade Practices Act 1974, pleaded in paragraphs 35 and 36 above, clients that SPA was providing services to under the Licence Agreement have ceased to engage SPA to provide services to them and engaged SI and SIS to provide services to them in place of SPA.
46 Stantons complain that this plea is so generalised it should be struck out as the respondents are entitled to know which clients ceased to engage SPA and when it is said those clients ceased to engage SPA (not in the least so as to fix the date it is alleged by Mr Christou that he suffered loss and damage).
47 Mr Christou responds generally in relation to the complaints about paras 37, 38 and 39 saying that they plead the consequences of the conduct can be particularised on provision of the documents sought by discovery and if the respondents assert lack of particulars, they should seek them.
48 There is a prospective 'limitation' consideration arising in relation to this conduct. It is important that the dates of the conduct be identified.
38. As a result of the First and Second Respondents' conduct in breach of section 52 of the Trade Practices Act 1974, pleaded in paragraphs 35 and 36 above, clients that SPA was providing services to under the Licence Agreement have paid the income for services provided to SI in place of SPA.
49 Again, Stantons contend this pleading is so generalised it is embarrassing. Which clients of SPA paid 'the income for services provided to SI in place of SPA'? (it is assumed that this is a typographical error and means 'provided by SI', otherwise the paragraph is meaningless). Again, this would involve a requirement of identifying that SPA was in the course of providing services under the Licence Agreement to clients and they have paid income for those services to SI in place of SPA, again being a plea of fraud requiring specific pleadings.
50 Again, it would be artificial, however, to suggest that from his external position, Mr Christou would be able to identify each and every client. Nevertheless, if he means 'all' clients, he should say so. If he is able to identify some only, he should do so.
39. As a result of the First and Second Respondents' conduct in breach of section 52 of the Trade Practices Act 1974, new clients seeking to engage SPA to provide services to those clients under the Licence Agreement have engaged SI and SIS to provide services to them instead of SPA.
51 Similar complaints are raised by Stantons as to the lack of generality in this paragraph as to those raised in para 37 and para 38.
52 It would be artificial, again, to suggest that from his external position, Mr Christou would be able to identify each and every client. Again however, if he means 'all' clients, he should say so. If he is able to identify some only, he should do so.
SI BANK ACCOUNT DETAILS
40. From or about 1 July 2004, the First and Second Respondents have provided account details for the bank account of SI, held with the National Australia Bank, to clients of SPA for payments in relation to services provided to clients that SPA was providing services to under the Licence Agreement.
53 It is complained that this plea is confusing and embarrassing. It is unclear as to whether it is being said that SI and SIS provided bank details for the accounts held by SI to clients for payments in relation to services provided to the clients by SPA or SI and SIS. Stantons say 'one is a plea of fraud and the other is not a plea of a cause of action at all'.
54 In addition, it is asserted that Stantons are entitled to know which clients are being referred to when it is said those clients were provided with details of the bank account as well as how they were provided. The same complaint is made concerning para 41.
55 The response from Mr Christou is that the paragraph pleads conduct of the respondents 'in from July 2004' as reflected in invoices issued by SI and Mr Christou relies on the conduct as being misleading or deceptive or likely to mislead or deceive (see para 42). It is not a plea of fraud. Particulars should be sought and they would be provided if sought.
56 Again, it would be artificial to suggest that from his external position, Mr Christou would be able to identify each and every client. Nevertheless, if he means 'all' clients, he should say so. If he is able to identify some only, he should do so.
57 The pleading is not one of fraud but of statutory breach. This is made clear in the subsequent paragraph, therefore, subject to the clarification referred to in the previous paragraph, the pleading can stand.
41. By engaging in the conduct pleaded in paragraph 40 above, the First and Second Respondents with knowledge of the terms of the Licence pleaded in paragraphs 12 to 16 above and the Injunction and the Undertaking pleaded in paragraphs 27 and 28 respectively above, without limitation, falsely represented, that SI and SIS have the right and authority to act as pleaded in paragraph 40 above.
42. By making the representations pleaded in paragraph 41, above, the First and Second Respondents have engaged in conduct that is misleading or deceptive or likely to mislead or deceive, contrary to section 52 of the Trade Practices Act 1974.
43. As a result of the First and Second Respondents' conduct in breach of section 52 of the Trade Practices Act 1974, pleaded in paragraphs 41 and 42 above, clients that SPA was providing services to under the Licence Agreement have paid the income for services provided to them to SI in place of SPA, thereby reducing the income of SPA.
TENDERS
44. From or about 1 July 2004, the First and Second Respondents have submitted tenders in response to tender requests from clients of SPA, that SPA provided services to under the Licence Agreement.
58 It is complained that it is unclear when and in what respect it is said that SI and SIS submitted tenders to which requests and from which clients. This is said to be important in determining the nature of the representation referred to in the plea in para 45.
59 Mr Christou repeats in respect of the complaints to paras 44, 45, 46 and 47 that the conduct will be particularised on provision of discovery and the proper remedy is to seek particulars. Again, it would be artificial to suggest that from his external position, Mr Christou would be able to identify each and every client. Nevertheless, if he means 'all' clients, he should say so. If he is able to identify some only, he should do so.
60 Further, there must be some more specific material in relation to actual tenders which justified raising the plea. If there is such material, it must be identified in the pleading.
45. By engaging in the conduct pleaded in paragraph 44 above, the First and Second Respondents with knowledge of the terms of the Licence pleaded in paragraphs 12 to 16 above and the Injunction and the Undertaking pleaded in paragraphs 27 and 28 respectively above, without limitation, falsely represented, that SI and SIS have the right and authority to act as pleaded in paragraph 44 above.
61 Stantons complain that without particulars and material facts in para 44, this pleading is meaningless. On its face, the allegation that SI and SIS submitted tenders in their own names does not give rise to a representation in the manner pleaded but taken in context with the surrounding pleas, this paragraph is not 'meaningless'.
46. By making the representations pleaded in paragraph 45 above, the First and Second Respondents have engaged in conduct that is misleading or deceptive or likely to mislead or deceive, contrary to section 52 of the Trade Practices Act 1974.
62 Stantons say this falls as a consequence of the objections to para 44 and para 45.
47. As a result of the Respondents conduct pleaded in paragraphs 45 and 46 above, clients that previously engaged SPA to provide services under the Licence Agreement, have engaged SI and SIS to provide the services to them instead of SPA.
63 A similar objection arises to para 47 as raised in relation to para 43.
64 These paragraphs can stand but only if some material is provided to flesh out the pleaded tenders. Absent such material, this section appears to be speculation only in the hope that discovery will provide some basis for making the allegation.
TAX AGENT REGISTRATION
48. By letter dated 16 November 2006, to Joyce at Stanton Partners, the Tax Agents Board of Western Australia materially represented:
"The Board has received information that you are trading under a corporate structure.
In light of your current registration status as a partnership you are required to complete a new registration as a company."
48.1 A copy of the letter dated 16 November 2006 can be inspected at the offices of Christou's solicitor; and
48.2 Christou will rely upon the letter dated 16 November 2006 at the trial of this action for its full terms, meaning and effect
49. By Stanton Partners letter dated 28 November 2006, to the Tax Agents Board, Joyce materially stated:
"the Stanton Partners partnership was formally dissolved by one of the partners, Mr Nick Christou, on 3 July 2003. Since that time we have been converting all returns to a new registration in the name of Julian Kovacs, as Principal of the firm"
49.1 A copy of the letter dated 28 November 2006 can be inspected at the offices of Christou's solicitor; and
49.2 Christou will rely upon the letter dated 28 November 2006 at the trial of this action for its full terms, meaning and effect
50. The Tax Agents Board cancelled the registration of Stanton Partners as a tax agent, by letter dated 11 December 2006
50.1 A copy of the letter dated 11 December 2006 can be inspected at the offices of Christou's solicitor; and
50.2 Christou will rely upon the letter dated 11 December 2006 at the trial of this action for its full terms, meaning and effect
51. On or about 19 February 2007, the Tax Agents Board granted registration as a tax agent in the name of SIS, with effect 1 March 2007.
51.1 A copy of the registration can be inspected at the offices of Christou's solicitor.
52. From or about 19 February 2007, the Respondents have written to the ATO and advised the ATO that the clients that SPA was acting as tax agent for under the tax agent's registration of Stanton Partners, have been transferred to SIS.
Particulars
52.1 Particulars of the communications with the ATO will be provided after discovery and inspection is provided by the Respondents
65 Stantons say they are entitled to know how it is said that each of the four respondents have written to the Australian Tax Office (ATO) in respect of which clients and in which terms. Again, Mr Christou says that further particulars will be given after discovery.
66 In my view, the identity of the clients is not essential at this stage for this pleading. As to which of the respondents wrote, this should be clarified if it is known.
53. From or about 1 March 2007, SIS has carried on part of the Practice as carried on by SPA under the Licence from the Partnership and used the personal connection of Lingard and Joyce as partners of the Partnership and the name Stanton Partners using its registration as a tax agent.
Particulars
SIS has used the tax registration pleaded in paragraph 51 of this Re-Statement (sic) of Claim and used the same Premises, Telephone number, Facsimile number, Internet website, Email addresses, Personnel and Clients as used to carry on the Practice of the Partnership.
67 Stantons say this paragraph is also meaningless and appears in some way to be duplicating para 33. It suffers from the defect of describing 'the Practice as carried on by SPA'. Stantons complain that it fails to particularise the plea 'used the personal connection of Lingard and Joyce as partners of the Partnership' and it fails to say how it used the name Stanton Partners in its registration as a tax agent given the plea in para 51 that they were registered as a tax agent in the name of SIS. The matters are material by reference to the pleading in para 54. The pleading in para 49 is a plea that it is related only to Mr Joyce. In para 54, it is said to be the conduct of all four respondents without explanation. Without particulars being given that include Mr Lingard or SI (presumably caught with a generalised un-particularised plea in para 52) there is no basis for suggesting there was any relevant conduct by either Mr Lingard or SI.
68 To this, Mr Christou says that para 53 is to be read in context with para 1.2 defining the 'Practice' in the context of para 13 that defines the Goodwill licensed as including the 'personal connection' and the name 'Stanton Partners'. The paragraph pleads conduct in relation to clients transferred to SIS as a consequence of the conduct leading to cancellation of the Stanton Partners tax agent registration and issuing of SIS tax agent registration.
69 I find this response somewhat confusing. In my view, Stantons' complaints are valid. It should be possible to clarify the points raised. One definition should be used for the Partnership. The involvement of a particular person in the conduct should be identified. The expression 'personal connection' must be explained or clarified.
54. By engaging in the conduct pleaded in paragraphs 49, 52 and 53 above, the Respondents with knowledge of the terms of the Licence pleaded in paragraphs 12 to 16 above and the Injunction and the Undertaking pleaded in paragraphs 27 and 28 respectively above, without limitation, falsely represented, that SI and SIS have the right and authority to act as pleaded in paragraphs 49, 52 and 53 above.
55. By making the representations pleaded in paragraph 54, above, the First and Second Respondents have engaged in conduct that is misleading or deceptive or likely to mislead or deceive, contrary to section 52 of the Trade Practices Act 1974.
70 It is said this paragraph should be struck out as a consequence of striking out para 53 and para 54. This is correct until para 54 is amended.
56. As a result of the First and Second Respondents conduct in breach of section 52 of the Trade Practices Act 1974, clients that SPA was providing tax agent services to under the Licence Agreement have ceased to engage SPA to provide those services to them and engaged SI to provide those services to them in place of SPA.
71 Stantons raise the same complaint that this is a generalised plea that could be a plea of fraud. If not, it is not a plea of any 'causative loss'. It is said that Stantons are entitled to know which clients of SPA to which SPA is said it was providing a tax agent service ceased to engage SPA, when it is they ceased to engage SPA and when it is they are said to have engaged SI.
72 It would be artificial to suggest that from his external position, Mr Christou would be able to identify each and every client. Nevertheless, if he means 'all' clients, he should say so. If he is able to identify some only, he should do so.
57. As a result of the First and Second Respondents conduct in breach of section 52 of the Trade Practices Act 1974, new clients seeking to engage SPA to provide tax agent services to under the Licence Agreement have engaged SI and SIS to provide services to them instead of SPA.
73 Complaint is raised as to the same lack of particularity rendering the plea embarrassing. Which new clients were seeking to engage SPA and when did they engage SI and SIS to provide services to them? How is it said that they engaged SI in circumstances where the tax registration was in the name of SIS. These points should be clarified.
EXCLUSION OF CHRISTOU FROM PRACTICE
58. From or about 4 February 2008 the Respondents, through Lingard, have prevented Christou from carrying on work in the Practice of the Partnership and attending the SPA business premises, at Level 1, 1 Havelock Street, West Perth.
Particulars
58.1 Two police officers from the Dignitary Protection Unit of the Western Australian Police, attended the offices of SPA and escorted Christou from the premises, at the request of Lingard.
58.2 On or about 5 February 2008, the Respondents installed locks on the premises and changed the locks that Christou had keys to.
74 Complaints are raised that para 58 and para 60 proceed on an un-pleaded assumption that Mr Christou was entitled to work in the Practice of the Partnership and to attend the SPA business premises. However, 'at the material time (whatever is meant by the expression)' from or about 4 February 2008, the Partnership had been terminated since 2003 and the Practice had otherwise been licensed.
75 The response by Mr Christou to this is that his entitlement to work in the Practice of the Partnership was as a consequence of the Licence Agreement as pleaded in paras 12-17 of the re-amended statement of claim. If that is so, the link should be pleaded as should the first occasion and subsequent occasions, if any, of which Mr Christou was prevented from carrying on work as pleaded.
58A. The Respondents have not, in the published material pleaded in paragraphs 29, 31 and 34 above, disclosed or otherwise qualified the publications to say:
(a) Christou has been prevented from carrying on work in the Practice of the Partnership; and
(b) Christou has not consented to SI and SIS carrying on a business that includes the Practice of the Partnership ("the non-disclosure conduct").
76 Stantons complains that the reference to para 34 is meaningless given that the plea in para 34 merely refers to invoices by SI for work done. Stantons say that, again, there is an:
un-pleaded averment that it was necessary for the respondents to publish in some way that Christou had been prevented from carrying on work. It is important to note that the plea in paragraph 29 and 31 suggest publications from 2004 onwards (this is assumed for paragraph 31 which is embarrassingly unclear). It appears to be a plea that in 2004 there should have been publication of the events that did not occur until the date pleaded in paragraph 58, namely 4 February 2008.
77 Mr Christou concedes that the plea in relation to para 34 ought be removed and that the plea is in relation to publication after 4 February 2008, 'after the events occurred'. With this correction and with amendments which should be made in light of earlier rulings, the paragraph could otherwise stand.
59. By engaging in the non-disclosure conduct pleaded in paragraph 58A above, the First and Second Respondents with knowledge of the terms of the Licence pleaded in paragraphs 12 to 16 above and the Injunction and the Undertaking pleaded in paragraphs 27 and 28 respectively above, have engaged in conduct that is misleading or deceptive or likely to mislead or deceive, contrary to section 52 of the Trade Practices Act 1974.
78 As to para 59, Stantons complain that the plea is dependent upon factual matters not pleaded in para 58A. Mr Christou says that the plea in para 58A is of conduct by way of non-disclosure in circumstances where the conduct is inconsistent with the rights under the Licence Agreement which non-disclosure can constitute contravening conduct. Mr Christou says that para 59 makes this clear.
79 Necessary amendments to the earlier paragraphs should mean that this paragraph can be maintained.
60. As a result of the First and Second Respondents conduct in breach of section 52 of the Trade Practices Act 1974, clients that SPA was providing services to under the Licence Agreement, by Christou providing the services have, from or about 4 February 2008, ceased to engage SPA to provide services to them and engaged SI and SIS to provide services to them in place of SPA.
80 Stantons raise the same complaints for para 60 and para 61, namely, embarrassing imprecision as to which clients were providing services.
81 Mr Christou, again, has indicated that particulars will be supplied after discovery, if they are requested.
82 It would be artificial to suggest that from his external position, Mr Christou would be able to identify each and every client. Nevertheless, if he means 'all' clients, he should say so. If he is able to identify some only, he should do so.
TRANSFER OF ASIC REGISTRATION
61. In or about February 2008, the First and Second Respondents, advised the Australian Securities and Investment Commission (ASIC) that the registration of the Partnership, as an ASIC agent was to be transferred to SI.
62. In or about February 2008, the ASIC transferred the registration of the Partnership to SI.
63. By engaging in the conduct pleaded in paragraph 61 above, the Respondents with knowledge of the terms of the Licence pleaded in paragraphs 12 to 16 above and the Injunction and the Undertaking pleaded in paragraphs 27 and 28 respectively above, without limitation, falsely represented, that SI and SIS have the right and authority to act as pleaded in paragraph 61 above.
83 As to para 63, Stantons say that it is unclear how the conduct in para 61, which is limited to SI and SIS, can be said to be conduct of all four respondents and how it could be in breach of the Licence Agreement noting that the pleas in the terms of the Licence Agreement in paras 12-16 did not refer to the Australian Securities and Investment Commission (ASIC) registration. Stantons complain that it is unclear as to whether this occurred some time after February 2008 and if that is the case, that there should be a plea that SPA was carrying on those services up until February 2008.
84 Stantons say these particulars are essential because it otherwise appears that Mr Christou has deliberately pleaded in an imprecise and un-particularised manner with a careful consideration on the limitation period, in other words, complaining of conduct that in fact occurred at a date prior to February 2008. Stantons argue that if, in fact, SPA ceased to carry on these services in 2004 consistent with the earlier pleas, then this is an improper attempt to use imprecise language, that is, it is un-particularised in order to avoid being met by the inevitable limitation defence.
85 A short response to this by Mr Christou is that paragraph 63 'is to be read in context with paragraphs 4 and 5 of the Statement of Claim, in relation to the position of the Third and Fourth respondents'. Secondly, Mr Christou says the ASIC registration was held in the name of Stanton Partners by the Partnership and its transfer was contrary to the provisions pleaded at paras 13-15 of the re-amended statement of claim.
86 It seems to me that the link between para 61 and para 63 should be clarified.
64. By making the representations pleaded in paragraphs 61 and 63, above, the First and Second Respondents have engaged in conduct that is misleading or deceptive or likely to mislead or deceive, contrary to section 52 of the Trade Practices Act 1974.
65. As a result of the First and Second Respondents' conduct in breach of section 52 of the Trade Practices Act 1974, clients that SPA was providing ASIC agent services to under the Licence Agreement have ceased to engage SPA to provide those services to them and engaged SI to provide those services to them in place of SPA.
87 As to para 65, Mr Christou pleads that the SPA was carrying on the services at all material times from 12 November 1998 in para 18 and para 19. It is submitted that as the proceedings were commenced on 30 June 2010, any conduct of the respondents after 30 June 2004 is within the relevant limitation period. Beyond that, particulars will be provided after discovery.
88 It seems to me that the link between para 61 and para 63 should be clarified.
66. As a result of the First and Second Respondents conduct in breach of section 52 of the Trade Practices Act 1974, new clients seeking to engage SPA to provide ASIC agent services to under the Licence Agreement have engaged SI and SIS to provide services to them instead of SPA.
YELLOW PAGES ADVERTISING
67. From or about 2008, the First and Second Respondents have advertised in the Yellow Pages Directory as providing accounting and auditing services, using the details pleaded in paragraphs 20.2 to 20.5 above.
89 Stantons note that the same phrase 'From or about 2008' is also used as a preface to para 67 as is apparent when one reverts to para 20. As at 2008, on the allegations of Mr Christou, however, SI and SIS have been using the details pleaded in paras 20.2-20.5 for some four years.
90 Mr Christou accepts that if Stantons have been advertising as they did in 2008 from 2004, then the relevant conduct prior to 2008 is also contravening conduct. The impugned conduct is said to have taken place in or about February 2008. If so, it would be well within any limitation period. If the contention is rejected, the defence can so plead. The paragraph can stand.
68. By engaging in the conduct pleaded in paragraph 67 above, the Respondents with knowledge of the terms of the Licence pleaded in paragraphs 12 to 16 above and the Injunction and the Undertaking pleaded in paragraphs 27 and 28 respectively above, without limitation, falsely represented, that SI and SIS have the right and authority to act as pleaded in paragraph 67 above.
91 Stantons complain that it is not articulated as to why the conduct in para 67 is said to be the conduct of all four respondents.
92 Mr Christou responds in relation to both para 68 and para 70 saying that if Stantons assert a lack of particulars, the remedy is to seek them. They will be provided after discovery.
69. By making the representations pleaded in paragraph 67 and 68, above, the First and Second Respondents have engaged in conduct that is misleading or deceptive or likely to mislead or deceive, contrary to section 52 of the Trade Practices Act 1974.
70. As a result of the First and Second Respondents conduct in breach of section 52 of the Trade Practices Act 1974, new clients seeking to engage SPA to provide services under the Licence Agreement have engaged SI and SIS to provide services to them instead of SPA.
93 The same complaint about particulars and the same response is provided.
94 If Mr Christou knows which particular respondent engaged in the impugned conduct, that respondent should be identified. Realistically, at this stage, prior to discovery, identification of the particular respondent, given Mr Christou's external position may well be difficult or impossible. As some allegations are made against all respondents, the difficulty of identification of a particular respondent in relation to particular conduct prior to discovery does not mean that the pleading should be struck out.
CONSEQUENCES OF CONDUCT OF RESPONDENTS
71. As a result of the conduct pleaded in paragraphs 29 to 68 above the clients previously receiving services from SPA, under the Licence Agreement, no longer receive services from SPA, but receive the relevant services from SI and SIS.
95 Stantons submit that none of the matters in paras 29-68 support the plea in para 71. No date is provided for the occurrence. The dates in paras 29-68 are said not to match (2004-2008). Stantons ask how it could be said that the conduct in 2008 (the Yellow Pages, for example) caused the events in 2004. It is said that para 71 and para 72 both seem to be a repetition (in generalised, un-particularised and unacceptable form) of earlier paragraphs that have dealt with individual matters.
96 Mr Christou says those paragraphs:
accept that the combination of the conduct pleaded at paragraphs 29 to 68 between 2004 and 2008, was a cause of there no longer being a practice conducted by SPA, from 2008, they do not plead that each plea of conduct caused the whole.
97 This response is difficult to follow. It is necessary to identify which conduct and when it occurred in order to make good an arguable claim.
72. As a result of the conduct pleaded in paragraphs 29 to 68 above the clients seeking the services provided by SPA, under the Licence Agreement, have engaged SIS and SIS (sic) to provide the relevant services, not SPA.
73. As a result of the conduct pleaded in paragraphs 29 to 68 above:
73.1 the clients to which SPA provided services under the Licence Agreement reduced from about 2 July 2004 to nil by or about 1 July 2008 and SPA has not provided any services to clients from or about 1 July 2008; and
73.2 the income received by SPA reduced from about 2 July 2004 to nil by or about 1 July 2008.
74. As a result of the matters pleaded in paragraphs 71 to 73 above the value of the Practice of the Partnership and the Goodwill has reduced from about 2 July 2004 to nil by about 1 July 2008.
98 Stantons complain that this is a logical fallacy. The mere 'matter fact' that income has been reduced to nil and the client services reduced to nil does not of itself result in the value of the Practice of the Partnership and the goodwill being nil.
99 Mr Christou observed that he is required to plea material facts relied on rather than evidence. If Stantons proposes to plead that the Practice retains a value when it provides no client services and receives no income, it is a matter for the defence of Stantons.
100 This is a matter that may be raised by defence. The ground of objection is not made out.
75. From or about 1 July 2004, Christou has not received, been paid, or had accommodation for his one third of the value of the Practice of the Partnership and the Goodwill.
Particulars
Christou has not received any part of the $8,000,000 value of the Practice or Income under the Licence Agreement.
101 Stantons asks what is meant by the words 'had accommodation for his one third of the value of the Practice of the Partnership and the Goodwill'? Again, this is based on the false premise that agreeing or attempting to sell the Practice for $8 million constitutes true value.
102 Mr Christou explains that para 75 is intended to plead that he has not received any form of consideration for one-third of the Practice that he owned that was appropriated as a result of the conduct pleaded in paras 29-70 of the statement of claim.
103 He also says that by the Agreement pleaded in para 21 and para 22, the Partners agreed to a number of matters including, materially, that the value of the Practice was $8 million. A valuation reached between the parties is evidence of the value of the Practice.
104 In my view, the complaints of Stantons on this aspect are made out.
76. From or about 1 July 2004, Christou has not received, been paid, or had accommodation for his one third of the fee payable pursuant to clause 6 of the Licence, pleaded in paragraph 16 above.
105 The complaint is that this plea is not supported by the term pleaded in para 16 again using words that are meaningless or embarrassing, namely, 'had accommodation'. Mr Christou says to this that the term pleaded in para 16 provides for the payment of a fee to the Partners and para 8 pleads Mr Christou's entitlement to one-third of the fee.
106 In my view, the complaints of Stantons on this aspect are also made out.
77. During the 2009 financial year SPA received no income from any activities, under the Licence or otherwise.
78. As a result of the matters pleaded in paragraphs 71 to 73 above the income that SPA would have received from carrying on the Partnership Business under the Licence, has been received by SI and SIS, so that Christou has lost the opportunity to receive his proportion of the fee payable pursuant to clause 6 of the Licence, pleaded in paragraph 16 above.
107 As to para 78, Stantons say that this paragraph falls as a result of the other objections. Mr Christou does not accept this saying that para 78 relies on para 71-73 in which the pleas accept that the combination of the conduct pleaded at paras 29-68 between 2004 and 2008 was a cause of there no longer being a Practice conducted by SPA from 2008. 'They do not plead that each plea of conduct caused the whole'.
108 This response is difficult to follow. It is necessary to identify which conduct and when it occurred in order to make good an arguable claim.
FALSITY OF REPRESENTATIONS
79. The Representations pleaded in paragraph 29 and 31 are false in that
79.1 SI was not:
79.1.1 in existence prior to 6 December 2002;
79.1.2 carrying on business as an accounting and consulting firm, prior to 2 July 2004; and
79.2 SIS was not:
79.2.1 in existence prior to 24 June 2004;
79.2.2 carrying on business, prior to 2 July 2004; and
79.3 Notwithstanding the termination of the Partnership on 3 July 2003, Christou, Lingard and Joyce continued to work in the Practice of the Partnership
109 Stantons assert that the plea in para 79.3 does not appear relevant to the pleas in para 29 and para 31 and itself is un-particularised. Is it intended that Messrs Lingard, Joyce and Christou worked exclusively in the Practice of the Partnership?
110 Mr Christou says the plea in para 79.3 is directly inconsistent with the matters pleaded in paras 29.1, 29.4 and 29.5 'which is why the conduct was likely to mislead or deceive'.
111 I accept this response. The paragraph can stand.
80. The representations pleaded in paragraphs 35, 41, 45, 53, 62 and 67 are false in that:
80.1 an exclusive licence was granted to SPA by the Partnership to use the Goodwill and Carry on the Practice, pursuant to clause 4 of the Licence, pleaded in paragraph 15 above; and
80.2 SPA, Lingard and Joyce, and each of them, had no right to licence or grant to others any rights or interests in the Licence or the Goodwill, pursuant to clause 4 of the Licence, pleaded in paragraph 15 above.
112 Stantons say that, again, it appears substantively to be a false plea. There is no plea that SPA, Messrs Lingard and Joyce granted a licence or assigned rights or interest in the Licence or Goodwill. To this Mr Christou says the plea in para 80 and para 81 is that the conduct was inconsistent with the rights under the Licence Agreement as no (further) grant or assignment could be made.
113 The same response is given by Mr Christou to the same objection raised in connection with para 81.
81. The representations contained in the letter dated 28 November 2006, pleaded in paragraph 48 above, were misleading or likely to mislead, as:
81.1 the Practice of Stanton Partners had been carried on by SPA, under the Licence since or about 12 November 1998; and
81.2 SPA, Lingard and Joyce, and each of them, had no right to licence or grant to others any rights or interests in the Licence or the Goodwill, pursuant to clause 4 of the Licence pleaded in paragraph 15 above..
114 In my view, the paragraphs are sufficiently clear to remain.
POSITION OF LINGARD AND JOYCE
82. The conduct pleaded in paragraphs 24, 29, 31, 33, 34, 35, 40, 41, 44, 45, 49, 52, 53, 54, 58, 58A, 61, 63, 67 and 68 above was engaged in by Lingard and Joyce or with the knowledge and authorisation of Lingard and Joyce.
115 Stantons complain the plea is so generalised as to be meaningless. They say that it is impossible to say that a plea of actual publication by Stantons can be read as a plea that some respondents 'stated and represented' and that it was done with the knowledge or authorisation of other respondents.
116 Mr Christou responds to the complaints concerning para 82 and para 84A together saying each of them are to be read in the context with para 4 and para 5.
117 If Mr Christou knows which particular respondent engaged in the impugned conduct, that respondent should be identified. Realistically, at this stage, prior to discovery, identification of the particular respondent, given Mr Christou's external position may well be difficult or impossible. In my view, as some allegations are made against all respondents, the difficulty of identification of a particular respondent in relation to particular aspect of conduct prior to discovery does not mean that the pleading should be struck out.
83. The conduct pleaded in paragraphs 29 to 35, 40, 41, 45, 49, 52, 54, 58A, 61, 63, 67 and 68 above was conduct involving the use of postal, telegraphic or telephonic services, for the purposes of sections 6(3) and 6(4) of the Trade Practices Act 1974.
118 Stantons ask how it is said that the conduct in para 34 involved the 'use of postal, telegraphic or telephonic services' to which Mr Christou says the invoices were sent by post, facsimile or email.
119 If that is a relevant matter, it must be pleaded.
84. On the basis of the matters pleaded in paragraphs 82 and 83 above, Lingard and Joyce are persons for the purpose of the extended definition of corporation in section 6(3)(b) of the Trade Practices Act 1974.
84A. By reason of the matters pleaded in paragraph 82 above, Lingard and Joyce are also persons involved in a contravention of section 52, for the purposes of section 75B, of the Trade Practices Act 1974
BREACH OF THE TRADE PRACTICES ACT 1974
85. By engaging in the conduct pleaded in paragraphs 29, 31, 33, 34, 35, 40, 41, 44, 45, 49, 52, 53, 54, 58, 58A, 59, 61, 63, 67 and 68 above, the Respondents have engaged in conduct which is misleading or deceptive or is likely to mislead or deceive, contrary to section 52, including when read with section 75B, of the Trade Practices Act 1974.
120 Paragraph 85 is said to be a meaningless duplication of the earlier pleas. Mr Christou says that para 85 and para 87 identify the conduct pleaded that he relies on as being contravening conduct engaged in by Stantons.
121 I accept the response. The paragraph can stand.
86. The Respondents' conduct in breach of section 52 of the Trade Practices Act 1974 was a cause of the loss or damage suffered by Christou for the purposes of sections 82 and 87 of the Trade Practices Act 1974.
Particulars of Loss and Damage
86.1 The loss of the value of the Practice, being the full amount pleaded in paragraph 22, above; and
86.2 The loss of the opportunity to receive one third of the fee payable pursuant to clause 6 of the Licence from 1 July 2004 on the net fees of SI and SIS.
122 It is complained that this plea does not follow. Again, it mistakes the value of the Practice as being the amount sought as opposed to the true value.
123 Mr Christou responds to para 86 and para 88 together saying that those paragraphs quantify the loss suffered by reference to the Agreement pleaded in para 21 and para 22 by which they agreed a value of the Practice as being $8 million. 'A valuation was reached between the parties as evidence of the value of the Practice'.
124 I have previously ruled on the valuation point. The pleading needs to be corrected on the same basis.
BREACH OF THE FAIR TRADING ACT 1987
87. Further and in the alternative, by engaging in the conduct pleaded in paragraphs 29, 31, 33, 34, 35, 40, 41, 44, 45, 49, 52, 53, 54, 58, 58A, 59, 61, 63, 67 and 68 above Lingard and Joyce engaged in conduct that was misleading or deceptive or likely to mislead or deceive contrary to section 10 of the Fair Trading Act 1987.
88. The conduct of Lingard and Joyce, in breach of section 10 of the Fair Trading Act 1987 was a cause of the loss or damage suffered by Christou for the purposes of sections 77 and 79 of the Fair Trading Act 1987.
Particulars of Loss and Damage
88.1 The loss of the value of the Practice, being the full amount pleaded in paragraph 22, above; and
88.2 The loss of the opportunity to receive one third of the fee payable pursuant to clause 6 of the Licence from 1 July 2004, on the net fees of SI and SIS.
BREACH OF FIDUCIARY DUTY
89. By reason of the position of Lingard and Joyce as partners in the Partnership with Christou:
89.1 Christou reposed his complete trust and confidence in Lingard and Joyce to act in his best interests;
Particulars
From 12 November 1998 to 3 July 2003.
89.2 Christou depended upon Lingard and Joyce acting in his best interests in all their dealings with the Practice, the Partnership, the Licence and SPA;
Particulars
From 12 November 1998 to 3 July 2003.
89.3 Lingard and Joyce had a special opportunity to exercise a power or discretion to the detriment of Christou; and
89.4 Christou was, vulnerable to abuse by Lingard and Joyce of their position.
125 Stantons say that it appears in para 89 that the extent of the fiduciary duty is said to exist up until 3 July 2003: see particular 89.1 and particular 89.2. However, it is then said in some ways particular 89.3 and particular 89.4 arise separately. Stantons ask how it is that Mr Christou is vulnerable to abuse and how was it that they had a special opportunity to exercise a power or discretion to the detriment of Mr Christou.
126 The response to this from Mr Christou is that the fiduciary duties owed by Messrs Lingard and Joyce continued after the termination of the Partnership (Chan v Zacharia (1984) 154 CLR 178).
127 If the ongoing duty is the basis of this pleading, then it should be clearly pleaded.
90. By reason of the matters pleaded in paragraph 71 (sic-89) above, Lingard and Joyce were and each of them was under an obligation and owed a fiduciary duty to Christou not to:
90.1 allow their interest in SI and SIS to detract from or effect in a manner disadvantageous to Christou the rights under the Practice, the Partnership and the Licence;
90.2 not allow their self interest in obtaining benefits themselves or for or through the other Respondents, to detract from or effect in a manner disadvantageous to Christou the rights under the Practice, the Partnership and the Licence.
Particulars
12 November 1998 to 30 June 2008 and continuing
128 This paragraph is to be amended to refer to para 89, not para 71.
91. Lingard and Joyce breached the fiduciary duties pleaded in paragraph 90 above, by engaging in the conduct pleaded in paragraphs 29 to 68 above.
92. As a result of the conduct of Lingard and Joyce in breach of the fiduciary duties pleaded in paragraph 91 above, Christou has suffered loss and damage and continues to suffer loss and damage.
Particulars of Loss and Damage
92.1 The loss of the value of the Practice, being the full amount pleaded in paragraph 22, above; and
92.2 The loss of the opportunity to receive one third of the fee payable pursuant to clause 6 of the Licence from 1 July 2004, on the net fees of SI and SIS.
General Submission
129 As a matter of general submission, Stantons point to the fact that Mr Christou has now had extensive opportunity to try and plead a statement of claim. It is said that it is now apparent that the current re-amended statement of claim filed months out of time represents an attempt not to make plain the case that he seeks to bring against Stantons but in many material respects 'to disguise the claim'. It is submitted this is done for the forensic purpose of 'seeking to avoid limitation defences and the like'. Stantons argues that this is a case that appears to be alleging fraud and as such ought to be pleaded specifically, clearly and distinctly especially having regard to the ethical responsibilities of the solicitor signing the statement of claim to be satisfied that there is an adequate basis for the pleas. In those circumstances, it is submitted that the Court should be cautious in giving any further leave to amend the statement of claim and should do so on strict terms, if at all, namely, as to costs; to be payable forthwith; and any amendment to be filed in a 'extremely limited period of time'.
130 It is submitted that the Court, if it has not already reached the point at which it should deny Mr Christou the opportunity to re-plead his claim, should at least make plain that he has only a last and final attempt to plead fairly the claim against Stantons and to do so promptly.
131 As a more general response, Mr Christou says that Stantons engaged in a course of conduct between 2004 and 2008 which was clearly extensive and contrary to the rights established under agreements in effect from 1998. The claim is not for fraud but for statutory breaches. Mr Christou expressly asserts in written submissions that he 'does not assert a cause of action in fraud, notwithstanding the respondents' contention that the plea supports such a cause of action'. Mr Christou says that because of the duration and breadth of conduct engaged in, pleading the relevant conduct is more complex than in a claim where a single piece of conduct was relied on, however, the pleading does inform Stantons of the case they have to meet.
CONCLUSION
132 The re-amended statement of claim will be struck out in its entirety but there will be leave to re-plead. In my view, the amendments required are so significant that to amend paragraph by paragraph piecemeal would not be as efficient as would be the redrawing of the statement of claim, hopefully taking into account the reasons why a good number of the paragraphs have not survived this or the earlier strike out applications.
133 Although some of the complaints raised by the respondents have not succeeded, there is no plausible argument that the respondents should not have their costs of bringing the strike out application. I do not consider that it is appropriate that the respondents should be required to meet the case that was pleaded against them due to its confusing and uncertain content.
134 However, I accept that the factual matters that Mr Christou seeks to plead are reasonably complex and it would be expected that some difficulty would be occasioned in fashioning a straightforward pleading. The current statement of claim could certainly not be described in that way. Nevertheless, as observed from the outset, if everything that Mr Christou seeks to establish is true, one can envisage the possibility of an arguable cause of action, subject to various defence issues, not least of which is the limitation point. However, it seems to me that the interests of justice require that there be a relatively limited further opportunity to recast the pleading. I say relatively limited to make it clear to Mr Christou that the resources of the Court and the interests of the parties cannot be consumed in endless pleadings disputes. Equally, I expect the respondents to recognise that once a claim is presented with adequate clarity, the matter should move forward or be resolved. Objectively viewed (and putting aside entirely the merits), it is not impossible to identify the nature of the claim sought to be made.
135 I do not propose ordering the payment of taxed costs forthwith but I do not rule out that possibility if the confused nature of the pleading is replicated.
136 The following orders will be made:
1. The re-amended statement of claim filed 8 March 2011 be struck out.
2. The applicant do have liberty to file and serve within one month a further re-amended statement of claim.
3. The applicant do pay the costs of the respondents of this motion to be taxed or agreed.
I certify that the preceding one hundred and thirty-six (136) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.
Associate:
Dated: 9 June 2011