FEDERAL COURT OF AUSTRALIA Australian Securities and Investments Commission v Kobelt [2014] FCA 737 Citation: Australian Securities and Investments Commission v Kobelt [2014] FCA 737 Parties: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v LINDSAY KOBELT File number: SAD 100 of 2014 Judge: WHITE J Date of judgment: 26 June 2014 Date of hearing: 26 June 2014 Place: Adelaide Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 41 Counsel for the Applicant: Ms N Charlesworth Solicitor for the Applicant: Australian Securities and Investments Commission Counsel for the Respondent: Mr D Trim QC with Mr H Heuzenroeder Solicitor for the Respondent: Lempriere Abbott McLeod IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 100 of 2014 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: LINDSAY KOBELT Respondent JUDGE: WHITE J DATE OF ORDER: 26 june 2014 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. The Australian Securities and Investments Commission (ASIC) is to provide further and better particulars of its allegation contained in [13] of the statement of claim by identifying which of the 133 customers identified by ASIC to the respondent comprise: 1.1 the majority of cases in which the periodic payment was the customer's only source of income; 1.2 the majority whose use of the relevant debit card and personal identification number is said in [13.2] to be the primary or exclusive means by which the customer accessed their bank account; 1.3 the majority who were unable or unwilling to question or negotiate the terms of the Nobby's Credit Facility as defined. 2. In relation to [74] of the statement of claim, ASIC is to provide particulars of the facts, matters and circumstances upon which it relies for the allegation that the respondent continues to engage in the contravening conduct alleged. 3. Orders 1 and 2 made on 30 May 2014 be vacated, and in place of those orders directs that the applicant file and serve, by no later than close of business on 29 August 2014, an amended statement of claim incorporating the particulars which have been ordered today and the particulars which it has agreed voluntarily to provide to the respondent, save only that the Court expects that ASIC will not include in a document filed in this Court information concerning the customers of the respondent which would ordinarily be regarded as of a private nature. 4. The respondent is to file and serve his defence by no later than close of business on 30 September 2014. 5. The applicant is to file any reply by no later than 20 October 2014. 6. The time fixed by Order 4 made on 30 May 2014 is varied by deleting the date "25 August 2014" and substituting "31 October 2014". 7. The time fixed by Order 5 made on 30 May 2014 is varied by deleting "25 August 2014" and substituting "31 October 2014". 8. The directions hearing presently listed for 9:00am on 3 September 2014 is vacated and in its place a directions hearing is fixed for 9:00am on Friday 10 October 2014. 9. The parties have liberty to apply. 10. Each party is to bear their own costs of and incidental to the respondent's interlocutory application of 13 June 2014. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 100 of 2014 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: LINDSAY KOBELT Respondent JUDGE: WHITE J DATE: 26 june 2014 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 These reasons concern an application for further and better particulars of a statement of claim. 2 The respondent conducts a general store at Mintabie in the APY lands in far north South Australia. The applicant (ASIC) alleges that, as part of the store's business, the respondent has sold motor vehicles to customers and has provided credit to those customers in relation to those sales without holding a licence to do so, thereby contravening s 29(1) of the National Consumer Credit Protection Act 2009 (Cth). Section 29 proscribes a person engaging in a credit activity "if the person does not hold a licence authorising the person to engage in the credit activity". 3 In addition, ASIC alleges unconscionable conduct by the respondent by, as a condition of his provision of credit to customers in relation to the sales of motor vehicles or other goods and services, taking possession of customers' debit cards, requiring the disclosure to him of their personal identification numbers, and, from time to time, deducting amounts from their accounts in repayment of the debts owed to him. The customers in respect of whom the allegations against the respondent are made are members of the communities living on the APY lands. 4 ASIC seeks by way of relief declarations with respect to the alleged contraventions, injunctions restraining the respondent from engaging further in the alleged conduct, the imposition of civil penalties and orders for the publication of corrective statements. 5 That is a very brief and general description of ASIC's case against the respondent, but it suffices to provide the background to the respondent's present application. 6 ASIC commenced the proceedings on 7 May 2014 and, at the same time, filed a statement of claim. Orders of the Court made on 30 May 2014 required a defence to be filed by 23 June 2014. The respondent has not complied with that order. Instead, on 13 June he filed an interlocutory application seeking the vacation of the orders made on 30 May and an order that ASIC provide further and better particulars of its statement of claim before he be required to file his defence. The respondent has foreshadowed that, in the event that the particulars are not ordered or not provided, he will seek the striking out of several paragraphs in the statement of claim, but the Court is not asked today to deal with an application for strike-out. 7 The application for particulars is governed by r 16.45 of the Federal Court Rules 2011 (Cth), the terms of which are as follows: (1) If a pleading does not give a party fair notice of the case to be made against that party at trial and, as a result, the party may be prejudiced in the conduct of the party's case, the party may apply to the Court for an order that the party who filed the pleading serve on the party: (a) particulars of the claim, defence or other matter stated in the pleading; or (b) a statement of the nature of the case relied on; or (c) if there is a claim for damages—particulars of the damages claimed. (2) An application under subrule (1) may be made only if: (a) the particulars in the pleading are inadequate; and (b) the party seeking the order could not conduct the party's case without further particulars. (3) A respondent who applies to the Court for an order under subrule (1) before filing the respondent's defence must satisfy the Court that an order is necessary or desirable to enable the respondent to plead. Note: The intent of the pleading rules is that a party should include all material facts in its pleadings as initially filed so that there is no unfairness to another party by any lack of particularity. If the party has not done so, the Court may at trial refuse to allow the party to present a case that is outside the terms of their pleading. 8 As can be seen, r 16.45 circumscribes the circumstances in which orders for the provision of particulars in advance of a defence will be required. It is, in effect, a discouragement of disputes concerning the adequacy of pleadings, particularly before any defence has been filed. Experience indicates that often interlocutory activity of this kind, with the associated incurring by the parties of costs, does not advance the progress of the matter. Nevertheless, there may be proper cases, as the rule itself acknowledges, in which an order for particulars before the filing of a defence may be appropriate. Those circumstances will arise in a case like the present only if the conditions in subrules (2) and (3) are satisfied. 9 I did not understand there to be any significant difference between the parties as to the principles generally to be applied on an application for further and better particulars, although there may have been some differences of emphasis. That makes it unnecessary in this ex tempore judgment to review the principles relating to the requirements of pleadings, the requirements for sufficient particulars and the principles upon which Courts usually act when dealing with applications for further and better particulars. 10 ASIC has provided voluntarily some of the particulars sought by the respondent, doing so without any admission that it was required to do so. That circumstance makes it unnecessary for me to deal with every aspect of the interlocutory application. These reasons address only those aspects which were pursued by the respondent. 11 The respondent sought to discharge the onus contained in r 16.45(3) in three ways, as set out in the affidavit of his solicitor, Mr Holland, sworn on 13 June 2014. Mr Holland deposes, first, to the perceived importance of the requested particulars to a strategic decision which the respondent may wish to make. Given the privileges against self-incrimination and exposure to penalties which are enlivened because of ASIC's claim for the imposition of civil penalties, it may be sufficient for the respondent to file what Mr Holland has described as "a very attenuated defence". Mr Holland deposes, however, that the respondent may consider it strategically advantageous to file a detailed defence so as to position himself better for an application for indemnity costs in the event that ASIC proceeds regardless. He deposes that the respondent seeks the requested particulars in order to enhance his ability to make that strategic decision. 12 I am inclined to think that there is force in ASIC's response to that contention as the identified consideration does not appear to be one contemplated by r 16.45. I refer particularly to subrule (2)(b) and to subrule (3). I also observe that there are other means by which the respondent can, if he chooses, put ASIC on notice of the deficiencies in its pleading or in its case so as to preserve his position with respect to an application for indemnity costs. 13 The second matter which Mr Holland raises is the desirability of the respondent obtaining witness statements from members of the communities in the APY lands before filing a defence. I agree that this may be desirable in an ideal sense but do not consider that it establishes either of the matters which the respondent must establish under r 16.45(2) or (3). In particular, Mr Holland's affidavit does not suggest an inability on the respondent's part to file a defence without having the foreshadowed witness statements. I acknowledge that r 16.45(3) refers to both necessity and desirability, but I do regard it as significant that it is not suggested that the respondent is unable to file a defence without having obtained witness statements from customers. 14 The third basis identified by Mr Holland is more substantial and better adapted to r 16.45, that is, that the respondent will be prejudiced in the conduct of his case by the lack of particularity. This basis requires close attention to the alleged deficiencies in the statement of claim, and it is to that topic that the majority of the parties' submissions were directed. 15 It is convenient to address separately the complaints made about individual paragraphs in the statement of claim. Paragraph 6.2 16 Paragraph 6.2 of the statement of claim alleges that, by agreeing to defer all or part of the payment due for the cars sold to the customers, the respondent entered into contracts with the customers, pursuant to which "credit to which the National Credit Code applies" was provided to those customers. It alleges that these were credit contracts within the meaning of s 4 of the National Credit Code, and for the purposes of s 6(1) of the National Consumer Credit Protection Act. 17 The respondent referred to the elaboration of the expression "provision of credit to which the National Credit Code applies", contained in the National Credit Code. He contends that he is entitled to know which feature or features of the detailed definition ASIC relies upon for this allegation. 18 In my opinion, this request overlooks s 13(1) of the National Credit Code to which ASIC drew attention. Section 13(1) requires that it be presumed in proceedings in which a party claims that a credit contract is one to which the Code applies that it is such unless the contrary is established. Thus, the respondent has, at the least, an evidentiary onus in relation to this issue. That indicates that his request for particulars in inappropriate. 19 Counsel sought to avoid that conclusion by referring to the decision of Flick J in Kazar v Kargarian [2010] FCA 1381 at [82]-[88]; (2010) 81 ACSR 158 at 181-3. I do not regard Kazar as indicating a contrary conclusion to that which I have already indicated. In that case, Flick J was discussing the position at trial, when it seems, belatedly, the plaintiff sought to rely upon a statutory presumption of which no previous notice had been given to the respondent, and when no allegation of the primary facts on which the presumption operated was included in the pleadings. In particular, Flick J regarded the absence of any previous notice as significant in concluding that the proposed reliance on the presumption should have been pleaded. That is not the present case. The respondent knows that ASIC will be relying on the presumption. He does not need to have the presumption pleaded in order to be able to conduct his defence. Paragraph 9 20 Paragraph 9 of the statement of claim pleads as follows: In the circumstances, Mr Kobelt has since 1 July 2011 contravened, and is continuing to contravene, s 29(1) of the National Credit Act. 21 The respondent referred, first, to the introductory clause "in the circumstances". He contended that this was an uncertain pleading because it did not identify sufficiently the particular circumstances to which reference is being made. There are cases in which a pleading of this kind should be regarded as defective. However, I do not consider that that characterisation is appropriate in relation to paragraph 9. Paragraphs 5 to 9 inclusive of the statement of claim appear under the heading "Contravention of section 29(1) of the National Credit Act (Unlicensed Credit)". It is apparent that paragraphs 5 to 8 plead the matters relied upon for the allegation. It is also apparent that the clause "in the circumstances", with which paragraph 9 is prefaced, refers to the matters pleaded in paragraphs 5 to 8 inclusive. 22 Next, the respondent referred to the clause "and is continuing to contravene" in paragraph 9 and to the absence of any particulars to support that allegation. In my opinion, that submission is well made. ASIC acknowledged the force of the submission and indicated that it would amend the statement of claim to delete the words "and is continuing to contravene" from paragraph 9. Accordingly, as the respondent's counsel acknowledged, this request for particulars falls away. Paragraph 13 23 Paragraph 13 pleads that "in the majority of cases" in which the respondent provided credit, a number of features were common to the customers. Those features are as follows: 13. In the majority of cases where the Nobby's Credit Facility was issued: 13.1. the periodic payment into the customer's bank account was the customer's only source of income; 13.2. use of the relevant debit card and PIN was the primary or exclusive means by which the customer accessed their bank account; 13.3. the customer: 13.3.1. was a resident of a remote community in the APY Lands; 13.3.2. had very limited or no net assets; 13.3.3. had very limited net income; 13.3.4. was unable or unwilling to question or negotiate the terms of the Nobby's Credit Facility. 24 ASIC has now provided a list of 133 customers to which paragraph 13 relates. The respondent contends that ASIC should identify which of those 133 customers are relied upon for each of the allegations in subpars 1, 2 and 3. ASIC concedes that claim in relation to paragraph 13.3.4. However, it says that it wishes to provide the particulars sought after it receives an independent expert report, which it has already commissioned. It proposes that the respondent be relieved from pleading to paragraph 13 until it has provided those particulars. At the moment, I am inclined to think that that is an inconvenient course to adopt, but will defer consideration of that suggestion until I have addressed the remaining complaints. 25 I do consider that ASIC should provide the particulars which the respondent has sought in relation to paragraphs 13.1, 13.2, and the earlier subpars in 13.3. The respondent should not have to ascertain for himself which of the 133 customers to whom those allegations relate had the characteristics which are pleaded in the respective subparagraphs. I accept that this may be important to the preparation of the defence to be filed in this Court and to the subsequent conduct of his defence. That part of the application for further and better particulars, therefore, is upheld. Paragraphs 18 and 19 26 In paragraphs 18 and 19 of the statement of claim, ASIC alleges that, from time to time, the respondent agreed to requests that he provide additional credit, that that provision was at the respondent's discretion, and that this had effects which, putting it generally, were of an adverse kind, including the creation and continuation of a relationship of dependency between the customers and the respondent. 27 The respondent's critique of those paragraphs seemed really to go to the sufficiency of the pleaded paragraphs to make out a claim of unconscionability, rather than identifying respects in which the respondent needed further particulars in order to conduct his defence. If, as the respondent contends, the pleaded matters are insufficient to make out ASIC's claim, then its application may well fail. An application for further and better particulars is not the occasion to be addressing that question. As the respondent's counsel noted, this may be a matter which will need to be addressed if the foreshadowed strike-out application is brought. Accordingly, the application with respect to paragraphs 18 and 19 is refused. Paragraph 25.1 28 In paragraph 24 of the statement of claim, ASIC alleges that conduct of the respondent constitutes a system of conduct or pattern of behaviour within the meaning of s 12CB(4)(b) of the Australian Securities and Investments Commission Act 2001 (Cth), incidents of which are particularised in paragraphs 25 to 72 of the statement of claim. The allegations in paragraphs 25 to 36 concern a customer identified in the pleadings as Customer A; the allegations in paragraphs 37 to 48, a customer described as Customer B; the allegations in paragraphs 49 to 60, a customer identified as Customer C; and the allegations in paragraphs 61 to 72, a customer identified as Customer D. Each of these series of paragraphs has much in common, although they are not entirely identical. The identities of the Customers A, B, C and D, although kept anonymous in the statement of claim, have been disclosed to the respondent by ASIC. 29 In relation to paragraph 25, the respondent seeks particulars of the allegation of the transactions into which the respondent is said to have entered with Customer A. In particular, he seeks particulars of the dates, precise vehicles, and precise amounts paid in respect of those vehicles. 30 In my opinion, the current pleading contains sufficient particulars by reference to time (although I acknowledge in some cases it is only an approximate time), car registration number, and, in one instance, price, to inform the respondent of the transactions which are the subject of the allegation. I am not satisfied that the respondent needs to have particulars of the precise purchase date or the precise purchase price in order to know the transactions in question or to be able to plead to the allegations. Accordingly, I am not satisfied that he has satisfied the requirements of r 16.45 so as to warrant an order for particulars at this stage. Paragraphs 28, 40, 52 and 64 31 Paragraphs 28, 40, 52 and 64 of the statement of claim are in a common form and can be considered together. They allege that, at relevant times, the identified customers received periodic payments into their bank accounts, in some instances being payments in the nature of unemployment benefits, and in some instances payments from the customer's employer. The respondent contends that he is entitled to particulars of the periodic payments alleged. 32 In my opinion, the respondent has not satisfied the requirements of r 16.45 in relation to these particulars. In particular, it is not apparent that the respondent needs those particulars in order to be able to plead to the essential allegation made by ASIC in relation to paragraphs 28, 40, 52 and 64. I also consider that there is some force in ASIC's submission that, given the large number of periodic payments into the customers' bank accounts, it would be onerous to require ASIC to provide the requested particulars at this stage. Paragraphs 29.2, 41.2, 53.2 and 65.2 33 These paragraphs are also in common form. They allege with respect to each of the Customers A, B, C and D that the periodic payments into their respective bank accounts were their only source of income, and that the use of a debit card and the personal identification number relating to that account were the "primary means" by which the customer accessed the bank account. 34 The respondent contends that the expression "the primary means" is uncertain and seeks particulars of it. He says that the extent to which customers had access to internet banking may become an issue depending on the particulars which ASIC may provide. That has the consequence, he submits, that if ASIC was to allege that the customers were unable to conduct banking via the internet, he would need to identify potential evidence to answer that allegation. 35 I consider that the provision of the requested particulars is not warranted at this stage. ASIC's allegation in the impugned paragraphs is an allegation concerning what, in fact, happened, that is, how the customers did, in fact, access their respective bank accounts. The respondent is not entitled to particulars of an allegation which ASIC has not made concerning alternative means by which customers could in theory have accessed their respective bank accounts. 36 Further, I am not satisfied that the expression "the primary means" is so uncertain as to warrant the respondent having particulars in advance of the defence. As I discussed with Mr Trim QC for the respondent, the position would really not be much different if ASIC had, instead of using that expression, used some other expression like "more often than not". Accordingly, I refuse that part of the application having regard to the requirements of r 16.45. Paragraph 74 37 Paragraph 74 is the last paragraph in the pleading. It includes an allegation that the respondent continues to engage in the alleged contravening conduct and that, unless restrained, he will continue to engage in the alleged contravening conduct. The statement of claim does not contain any particularisation at all of the matters said to constitute the continuation of the alleged conduct. 38 In my opinion, the respondent is entitled to know at this stage the factual allegations which ASIC makes in that respect. Ms Charlesworth for ASIC referred to paragraphs 4 to 8 of the statement of claim but, in my respectful opinion, those paragraphs cannot be regarded as providing the requisite particulars. They are expressed in the past tense and relate to past conduct, and not to current or predicted conduct. 39 I appreciate the force of the point made by Ms Charlesworth that, if particulars are provided, it may amount to a pleading of statements made by the respondent himself which ASIC contends are in the nature of admissions; and that admissions are often regarded as evidence. Nevertheless, there are cases in which the particulars of an allegation and the evidence which supports it overlap. This may be one such instance. It is appropriate, in my opinion, that ASIC provide the requested particulars at this stage. 40 ASIC indicated that it required until the end of August to provide particulars in relation to paragraph 13.3.4 since, as I have said, it is awaiting an expert report. I consider it convenient for ASIC to provide all of the particulars arising out of the interlocutory application in the one document, at the one time. 41 The orders I make on the interlocutory application are these: (1) ASIC is to provide further and better particulars of the allegation contained in paragraph 13 of the statement of claim by identifying: (a) which of the 133 customers identified by ASIC to the respondent comprise the majority of cases in which the periodic payment into the customer's bank account was the customer's only source of income; (b) which of the 133 customers notified to the respondent comprise the majority whose use of the relevant debit card and PIN is said in paragraph 13.2 to have been the primary or exclusive means by which the customer accessed their bank account; (c) which of the 133 customers notified by ASIC to the respondent are said to comprise the majority who were unable or unwilling to question or negotiate the terms of the Nobby's Credit Facility as defined. (2) In relation to paragraph 74, ASIC is to provide particulars of the facts, matters and circumstances upon which it relies for the allegation that the respondent continues to engage in the contravening conduct alleged. I make these further orders: (3) I vacate orders 1 and 2 made on 30 May 2014. In place of those orders I direct that the applicant file and serve by no later than 29 August 2014 an amended statement of claim incorporating the particulars which have been ordered today, and the particulars which it has agreed voluntarily to provide to the respondent, save only that the Court does not expect ASIC to include in a document filed in this Court information concerning the customers of the respondent which would ordinarily be regarded as of a private nature. (4) The respondent is to file and serve his defence by no later than close of business on 30 September 2014. (5) The applicant is to file any reply by no later than 20 October 2014. (6) I vary the time fixed in order number 4 made on 30 May 2014 by deleting the date "25 August 2014" and substituting "31 October 2014". (7) I vary the time fixed in order number 5 by deleting the date "25 August 2014" and substituting the date "31 October 2014". (8) I vacate the directions hearing presently listed for 9 o'clock on Wednesday, 3 September 2014, and fix in its place a directions hearing at 9 o'clock on Friday, 10 October 2014. (9) I grant liberty to the parties to apply. (10) As to the costs of today's application I acknowledge that it is difficult for the Court to gain an appreciation of the particulars provided voluntarily and to assess the extent to which the Court may have ordered them. On the requests which I have determined, the respondent has failed on the majority of his claims, but had some success. On that basis, I consider that an appropriate order with respect to costs is that the parties should bear their own costs. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White. Associate: Dated: 9 July 2014