FEDERAL COURT OF AUSTRALIA Jacqualine Pty Ltd v Valsand Pty Ltd [2011] FCA 1037 Citation: Jacqualine Pty Ltd v Valsand Pty Ltd [2011] FCA 1037 Parties: JACQUALINE PTY LTD ACN 120 812 759 and JACQUALINE ELIZABETH FULLERTON v VALSAND PTY LTD ACN 072 348 568, SARAH JANE VOCKLER, FRONTLINE RECRUITMENT GROUP PTY LTD ACN 078 126 851 and PETER JOHN DAVIS File number: SAD 75 of 2011 Judge: LOGAN J Date of judgment: 19 August 2011 Catchwords: PRACTICE AND PROCEDURE – pleadings and particulars – application to strike out paragraphs of the amended defence of the third and fourth respondents - orders for particulars Cases cited: Ewing International LP v Ausbulk Ltd (No 2) [2009] SASC 381 cited McNeill & Ors t/a The Front Row v O'Kane for himself [2002] QSC 144 considered Moratic Pty Ltd v Lawrence James Gordon & Anor [2007] NSWSC 5 cited Date of hearing: 19 August 2011 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 14 Solicitor for the Applicants: LynchMorgan Lawyers Counsel for the First and Second Respondents: The First and Second Respondents did not appear Counsel for the Third and Fourth Respondents: Mr M Jones Solicitor for the Third and Fourth Respondents: HWL Ebsworth Lawyers IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION SAD 75 of 2011 BETWEEN: JACQUALINE PTY LTD ACN 120 812 759 First Applicant JACQUALINE ELIZABETH FULLERTON Second Applicant AND: VALSAND PTY LTD ACN 072 348 568 First Respondent SARAH JANE VOCKLER Second Respondent FRONTLINE RECRUITMENT GROUP PTY LTD ACN 078 126 851 Third Respondent PETER JOHN DAVIS Fourth Respondent JUDGE: LOGAN J DATE OF ORDER: 19 AUGUST 2011 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application is dismissed. 2. The third and fourth respondents have leave further to amend paragraph 33 of the existing amended defence. 3. The further amended defence is to be filed and served by 30 August 2011. 4. There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.362 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION SAD 75 of 2011 BETWEEN: JACQUALINE PTY LTD ACN 120 812 759 First Applicant JACQUALINE ELIZABETH FULLERTON Second Applicant AND: VALSAND PTY LTD ACN 072 348 568 First Respondent SARAH JANE VOCKLER Second Respondent FRONTLINE RECRUITMENT GROUP PTY LTD ACN 078 126 851 Third Respondent PETER JOHN DAVIS Fourth Respondent JUDGE: LOGAN J DATE: 19 AUGUST 2011 PLACE: BRISBANE REASONS FOR JUDGMENT 1 The first and second applicants, whom it is convenient to call the Jacqualine parties, have applied for interlocutory orders against the third respondent, Frontline Recruitment Group Pty Ltd, and the fourth respondent, Peter John Davis. It is convenient to refer to the third and fourth respondents collectively as the Frontline parties. The application seeks the striking out of para 33(c) and para 63(c) of the amended defence of the Frontline parties. Alternatively, the Jacqualine parties seek an order that the Frontline parties deliver further and better particulars of paras 30(a), 33(c), 35(a)(iii) and 63(c) of the amended defence. Those particulars, along with another question, were the subject of a request for particulars delivered by the Jacqualine parties to the Frontline parties and dated 29 July 2011. paragraph 33(c) 2 Of these interlocutory controversies para 33(c) of the amended defence is now the subject of a request for leave further to amend that paragraph having regard to some precision that was given to the meaning of gross income in paragraph 18 of the statement of claim. Paragraph 33(c)(ii) of the amended defence, in its present form, alleges a failure to properly manage the income earned by the SA Frontline Agency and an incurring of expenses which were unnecessary or unrelated to the business. That has been cast on an assumption, which seems to me something, with respect, of an heroic assumption, that the gross income referred to in paragraph 18 of the statement of claim is net revenue. Heroic though the assumption may be, it was informed by a reference to a case McNeill & Ors t/a The Front Row & Anor v O'Kane for himself and on behalf of Ors [2002] QSC 144 in which there is an unusual use of the term "gross income" in the course of the reasons for judgment. 3 It was made plain on behalf of the Jacqualine parties that the reference in para 18 to gross income was intended to mean the same as the expression "gross revenue" which appears in the extract from the standard franchise agreement set out in para 17 of the statement of claim. That in itself is, again, with respect, sloppy pleading. Notwithstanding that difference in terminology, it does nonetheless appear that the expression "gross income", on a fair reading of the statement of claim, is meant to mean the same as "gross revenue" referred to in para 17. All this is a long way of saying, though, that, insofar as the application concerns para 33, it does not seem to me to be desirable to decide so much of it as turns on or relates to para 33(c)(ii), and that is because it may well be deciding an issue which is academic. paragraph 63(C) 4 Given the understanding of the elements of a conventional estoppel that is evident on the part of the author of the pleading, it is perhaps to be regretted that the elements have not been pleaded seriatim in the way that they are set out in the Moratic Pty Ltd v Lawrence James Gordon & Anor [2007] NSWSC 5 or for that matter in Ewing International LP v Ausbulk Ltd (No 2) [2009] SASC 381. Also, there is something in the criticism about the use in the pleading of "in the premises", insofar as it governs "Frontline would suffer detriment" if nothing else. For all that, approaching para 63(c) in a non-pedantic way, it does seem to me that it adequately enough discloses the basis upon which the estoppel is said to arise. I decline to strike the paragraph out. Particulars 5 That leaves the question as to whether particulars requested should be ordered. As to that, it is said that particulars should be provided of the conduct of the applicant alleged in para 63(c)(ii) upon which the third respondent may seek to rely to show adoption of, or exceptions to the common assumption. That though seems to me to flow from the way in which paras 63(c)(i), (ii) and (iii) are already cast in terms of how the common assumption is said to arise, for better or for worse. I decline to order particulars. 6 The remaining areas of controversy concerns two paragraphs in the request for particulars. They are paras 1 and 4. 7 Paragraph 1 relates to para 30(a) of the amended defence. What is sought in respect of para 30(a) are particulars of the requirement referred to in that paragraph. A fair reading though of para 30(a) discloses that the requirement to which reference is made in that paragraph is to be found in the franchise agreement, in particular cl 2.39, and in policies and procedures which are particularised in a general way under para 30(a). I note there has been no request for particulars in respect of paragraphs of the manuals there stated which are said to give rise to that requirement. It is that, if anything, I would have thought, which might have been the subject of a request for particulars. Paragraph 1 of the request looks to me to be cast on a misreading of para 30(a) of the amended defence. I decline to order the particulars requested. 8 That then leaves the remaining paragraph of the request, which is paragraph 4. That seeks particulars of the matters alleged in para 35(a)(iii) of the amended defence. What is sought are particulars of the client agreements that did not require payment within seven days, para 35 of the amended defence providing, in subpara (a)(iii), that not all client agreements required payment within seven days. That has to be read in the context of para 35 of the statement of claim which is in these terms: 35. The representations alleged in paragraph 20 were misleading and deceptive or likely to mislead and deceive because:- (a) the Third Respondent did not have a legal obligation to supply a replacement candidate in circumstances where the employee placed by a franchisee did not remain in employment for 90 days but the client did not pay for the placement of the employee within the time required by the respective agreements between the Third Respondent and the respective clients of the Third Respondent after the commencement of the candidate's employment ("Due Payment Date Requirement"); Particulars The Due Payment Date Requirement is a term of each agreement entered into by the Third Respondent with clients to whom it provides services or its franchisees provide services ("Client Agreements"). (b) the Third Respondent's practice was to require all franchisees to provide replacements for clients of the Third Respondent in circumstances where clients did not comply with the Due Payment Date Requirement ("Replacement Practice"); Particulars The Third Respondent required franchisees to provide replacements by: (i) maintaining a "Outstanding Replacements Owing" report [sic] which recorded the placements which franchises were required by the Third Respondent to replace; (ii) treating the "outstanding replacements owing" as a liability of franchisees to the Third Respondent until such replacements were made by franchisees or the amount of the liability was paid by franchisees to the Third Respondent; (iii) implication from the document entitled "Frontline Retail Policies and Procedures Manual" (at pages 14 and 15) provided by the Third Respondent to franchisees including the First Applicant. (c) the Third Respondent did not disclose the 7 Day Requirement to the First Applicant prior to the commencement by The First Applicant of the S.A. Frontline Agency; (d) the amount of work required to be undertaken by franchisees in providing replacements in accordance with the Replacement Practice made it difficult for franchises to operate a financially successful and profitable business. Particulars The amount of work required for each placement was between 10 and 30 hours. [Emphasis in original] 9 That in turn refers to para 20 of the statement of claim which is in these terms: 20. On 17 May 2006 the Third Respondent represented to the Second Applicant that:- (a) in the operation of the S.A. Frontline Agency she was required to supply a replacement credit to any client of the Third Respondent where the initial employee placed with the client did not remain in the client's employment to the end of a 90 day period ("Replacement Credit Policy"); Particulars The representation alleged in sub-paragraph 20(a) was oral and made by the Third Respondent, by the Fourth Respondent, to the Second Applicant at a conference called the "Discovery Day" held at the Third Respondent's head office located at Level 20, Suite 2002, Tower 2, 500 Oxford Street, Bondi Junction in the State of New South Wales. (b) the S.A. Frontline Agency was a financially successful and profitable business even though replacement credits were supplied by the business to clients of the Third Respondent. Particulars The representation alleged in sub-paragraph 20(b) was implied by the Third Respondent's conduct referred to in sub-paragraph 19(c) and the Third Respondent's conduct referred to in sub-paragraph 20(a) above. [Emphasis in original] 10 It seems to me that all that para 35(a)(iii) is doing is putting an issue a premise upon which para 35 of the statement of claim is cast. To the extent that it does that, it puts the Jacqualine parties on notice as to the contest in relation to its own pleading and nothing more than that. I decline to order particulars in respect of that. 11 The end result is that the application, while it has largely failed, has nonetheless prompted a request for a further amendment to the defence. That particular further amendment does seems to me to have been prompted by a fair criticism of the way in which the material part of para 33 of the existing amended defence was cast, and that in turn prompted the application for the strike out. In other words, there has been mixed forensic success. As I have indicated, I am not completely convinced that the way in which para 33 of the statement of claim was read was a way which admitted of reading into the terms used by the Jacqualine parties "Net Revenue" or "Net Income", which was said to be why para 33 was materially cast in the amended defence. 12 So the question becomes what to do about costs? The view I have is that there has been, as I have said, mixed forensic success but there has been a need for the Jacqualine parties to come here in relation to that paragraph of the existing amended defence, if nothing else. There is a need which has been prompted by the issues raised to re-plead. Whilst the application has otherwise not succeeded, the Jacqualine parties did have a need to come here. They have dealt with that part of the application not on the merits, but rather by the more pragmatic way of seeking leave to re-plead. While I am willing to hear submissions my preliminary view is that each side in effect has had a measure of forensic success and I am not disposed to order costs. [submissions as to costs were then made] 13 As to costs, I have been reminded by counsel for the Jacqualine parties, that some aspects of the request for particulars were not answered until after the application as foreshadowed had been filed. Thus, whilst there has been an absence of forensic success with respect to particular paragraphs of the request that were pressed, others had to be the subject of court application before an answer was made. I do take that into account in terms of weighing up the need for the bringing of the application. I also take into account that, as I indicated earlier, the application prompted a rethinking on the part of the Frontline parties of the adequacy of the pleading of para 33 of the amended defence. 14 Given the mixed forensic success which has been enjoyed by each of the parties, it seems to me that there is no point in, as was submitted, reserving the costs such that the party that succeeded at trial might receive the benefits of today, but rather I should recognise immediately that degree of forensic success and failure by making no order as to costs. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate: Dated: 19 August 2011