New South Wales Supreme Court CITATION : Integral Energy Australia v EDS (Australia) Pty Limited & Ors [2006] NSWSC 600 HEARING DATE(S) : 6/06/06 JUDGMENT DATE : 20 June 2006 JURISDICTION : Equity Division Technology and Construction List JUDGMENT OF : Einstein J DECISION : Notice of motion to be dismissed. CATCHWORDS : Pleadings - Elements of deceit - Necessity to identify persons who both made the relevant representations and either had knowledge of the representation or acted recklessly as to whether the representation was true or false LEGISLATION CITED : Uniform Civil Procedure Rules 2005 (NSW) AG-Exports (Australia) Pty Ltd v Export Finance and Insurance Group [2006] NSWSC 467 Brambles Holdings Ltd v Carey (1976) 15 SASR 270 Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 Bruce v Odhams Press Ltd [1936] 1 All ER 287 Derry v Peek [1886-90] All ER Rep 1 Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 446 Gould v Vaggelas (1985) 157 CLR 215 CASES CITED : Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd & Anor (1996) ATPR 41-522 Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 The Bell Group Ltd (In Liquidation) v Westpac Banking Corporation (5) [2004] WASC 273 Tresize v National Australia Bank Ltd [2005] FCA 1095 Wallingford v Mutual Society (1880) 5 App. Cas. 685 White v Overland [2001] FCA 1333 Integral Energy Australia (Plaintiff) PARTIES : EDS (Australia) Pty Limited (First Defendant) ACN 007 443 165 Pty Limited (Second Defendant) Indus International Inc (Third Defendant) FILE NUMBER(S) : SC 55025/05 Mr R Margo SC, Mr S Climpson (Plaintiff) COUNSEL : Mr M O'Meara (Second Defendant) Mr J Sackar QC, Ms Barrett (Third Defendant) Holding Redlich (Plaintiff) SOLICITORS : Freehills (Second Defendant) Blake Dawson Waldron (Third Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST Einstein J Tuesday 20 June 2006 55025/05 Integral Energy Australia v EDS (Australia) Pty Ltd, ACN 007 443 165 Pty Ltd and Indus International Inc JUDGMENT The notice of motion 1 By notice of motion the plaintiff seeks leave to file an amended summons propounding deceit as a new cause of action. The third defendant [SCT] against whom the cause of action is sought to be pleaded opposes the leave being granted. 2 The point is one of principle in terms of the requirements which require to be complied with in pleading the tort of deceit. 3 It is convenient to commence with unexceptional matters: Requirements of pleading generally i. A statement of claim must plead the material facts which are necessary for the purpose of formulating a complete cause of action ( Bruce v Odhams Press Ltd [1936] 1 All ER 287). ii. The statement of claim must include facts which, if not specifically pleaded, might take the other party by surprise ( Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522. See further the judgement of Allsop J in White v Overland [2001] FCA 1333 at [4], which was approved by Heydon JA in Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116). iii. The defendant is therefore entitled to know precisely the case it has to meet for trial. Requirements of a claim for deceit iv. Deceit must be pleaded distinctly and with particularity ( Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563. v. The Uniform Civil Procedure Rules 2005 (NSW) provide: 15.3: A pleading must give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which the party relies. 15.4: (1) A pleading that alleges any condition of mind must give particulars of the facts on which the party pleading relies. (2) In subrule (1), condition of mind includes any disorder or disability of mind, any malice and any fraudulent intention, but does not include knowledge. vi. A claim in deceit must address each of the elements of deceit. vii. In Tresize v National Australia Bank Ltd [2005] FCA 1095, Sundberg J summarised the elements of deceit at [38] as follows: (a) a representation of fact (which can be as to the representor's opinion or intention or the law) that is conveyed to the claimant by the representor's words or conduct; (b) knowledge on the part of the representor that the representation is false or, failing that, (a) the absence of a genuine belief that it is true or (b) recklessness as to whether it is true or false ( Derry v Peek [1886-90] All ER Rep 1); (c) an intention on the part of the representor that the claimant (or a class including the claimant) should act upon the representation; (d) actions by the claimant in reliance upon the representation that were induced by the representation ( Gould v Vaggelas (1985) 157 CLR 215); and (e) in the case of a claim in deceit, damage as a result of that reliance. 4 In Wallingford v Mutual Society (1880) 5 App Cas 685, Lord Blackburn observed (at pp 704–705): … if you swear that there was fraud, that will not do. It is difficult to define it, but you must give such an extent of definite facts pointing to the fraud as to satisfy the Judge that those are facts which make it reasonable that you should be allowed to raise that defence. The subject section of the pleading sought to be propounded 5 In very general terms the allegation of deceit seeks to allege that at a particular date [in the second half of 1997 or in early 1998] when certain representations were made by the third defendant to the plaintiff [as part of a marketing exercise], there was within the employ of the third defendant, certain officers and employees. These persons are said to have had knowledge that the particular software which was being marketed to the plaintiff did not have certain functions/functionality. 6 The allegation is that the particular representation [which continued as a continuing representation], was made in order to induce the plaintiff to acquire the particular software: the alleged representation having been that the software offered a high level of functional fit to the various requirements of the plaintiff. 7 Unfortunately the pleading is lengthy and complex. 8 For present purposes it suffices to set out the following section of the proposed amended deceit claim: C59A C59A SCT made and continued the SCT BANNER representation referred to in paragraph C28(a1) above ( the deceitful SCT representation): (a) with the intention of inducing Integral to select the BANNER software offered by MITS/SCT, to engage MITS for the CSS Project and to continue with the CSS Project thereafter; (b) knowing that it was false or without honest belief in its truth or recklessly, careless of whether it was true or not. Particulars of C59A (A) In the Request for EOI and the RFP, Integral stated that its requirements included that CSS would enable Integral to operate and compete in a fully contestable Australian electricity market. (B) In the MITS/SCT Response to the Request for EOI and the MITS/SCT Response to the RFP, SCT made the deceitful SCT representation, namely: That the BANNER Software offered by MITS/SCT had a high level of functional fit to Integral's requirements for CSS including that CSS would enable Integral to operate and compete in a fully contestable Australian electricity market. (C) SCT made and continued the deceitful SCT representation in the following ways: (a) in the MITS/SCT Response to the Request for EOI, SCT represented that the BANNER software offered by MITS/SCT: (i) required only "minimal modifications" to support the requirements of the Australian National Electricity Market (see covering letter to the Response); (ii) provided the tools to "support the increasingly contestable marketing of energy services" and "comply with the National Electricity Market System Code" (see page 1, Executive Summary of the Response); (iii) constituted "leading edge products" which "support customer service, work flow, materials and financial management processes for all utilities moving aggressively into deregulation" (see page 2 of Executive Summary of the Response); (iv) would provide Integral "with a system that always represents best current business practices in the deregulated utility market" (see page 12 of Schedule A of the Response); (v) "fully complied" with contestability requirements NA.1, NA.2, NA.5, NA.14, NE.1, NE.2, NE.4, BL.20 AND PP.8 and "partially complied" with contestability requirements NN.2, BL.24, EE.1 AND EE.3 in the Request for EOI; (b) in the MITS/SCT Response to the RFP, SCT represented that the BANNER software offered by MITS/SCT: (i) had a fit to Integral's requirements which was in excess of 95% (see pages 8 and 9 of the Response); (ii) provided the tools to "support the increasingly contestable marketing of energy services" and "comply with the National Electricity Market System Code and other regulatory requirements"; (iii) had the functionality to "support the business separation required by the regulatory codes" and to "provide the reporting needed to manage your business and satisfy regulatory requirements" (see page 2 of the Executive Summary of the Response); (iv) had the functionality to satisfy Integral's contestability outcomes stated in the RFP, namely outcomes 1.1.1, 1.2.1, 1.4.1, 1.4.4, 2.1.2, 2.1.4, 2.2.1, 2.2.3, 2.2.4, 2.3.4, 3.1.1, 3.1.2 and 3.2.2; (c) in the MITS/SCT Response to RFP, SCT represented that the cost of modifying the BANNER software offered by MITS/SCT so that it satisfied Integral's CSS Requirements would be $2,252,070, in the "Summary of Modifications to the BANNER software" (page 18 of Pt.2) did not identify any specific modifications as being required to satisfy Integral's contestability requirements, and did not state that any other cost would be required to modify the BANNER software offered by MITS/SCT to satisfy Integral's CSS Requirements, including that CSS would enable Integral to operate and compete in a fully contestable Australian electricity market (as was called for in the RFP); (d) in a letter from SCT and MITS dated 9 September 1997, SCT stated that SCT would honour the commitments it had made to Integral in terms of delivery of functionality and according to then agreed time frames and that SCT supported "Integral's short term requirements and the longer term as the Australian market develops and progresses through re-regulation"; (e) SCT said nothing to Integral thereafter to qualify or withdraw the said representations. (D) Further or in the alternative, the persons within SCT who had knowledge of the deceitful SCT representation were the senior officer(s), employee(s), or representatives of SCT who made or authorised or approved the making of the deceitful SCT representation in the above ways. SCT alone has complete knowledge of the persons in that class. (E) Further or in the alternative, the senior officers, employees and representatives of SCT who made or authorised or approved the making of the deceitful SCT representation in the abovementioned ways were: · Bill Mahoney, the President of SCT · Dave McNamara, SCT's Vice President Sales · Bob Szadek, SCT Sales Support Manager · Jim O'Reilly, SCT Pacific Rim Regional Manager. These are the best particulars of the making of the deceitful representation that Integral is presently able to supply. Further particulars may be supplied after interrogation and further discovery. (F) The deceitful SCT representation was false in that the BANNER software offered by MITS/SCT: (a) did not have the functionality to enable Integral to operate and compete in a fully contestable electricity market; (b) did not have the functionality to support the requirements of the Australian National Electricity Market with "minimal modifications" or otherwise; (c) did not have the functionality to fully comply with contestability requirements NA.1, NA.2, NA.5, NA.14, NE.1, NE.2, NE.4, BL.20 and PP.8 in the Request for EOI or to partially comply with the contestability requirements NN.2, BL.24, EE.1 and EE.3; (d) did not have the functionality to satisfy contestability outcomes 1.1.1, 1.2.1, 1.4.1, 1.4.4, 2.1.2, 2.1.4, 2.2.1, 2.2.3, 2.2.4, 2.3.4, 3.1.1, 3.1.2 and 3.2.2 in the RFP. The BANNER software offered by MITS/SCT did not have the abovementioned functionality inter alia because it was unable to support unbundling of rates in any of the following respects: (a) it was unable to unbundle rate structures in a way that identified them as belonging to different service provider utilities; (b) it was unable to associate charges with different service provider utilities; and (c) it was unable to provide inter-business or inter-utility exchange of data. (G) SCT had knowledge at all material times of the functionality and lack of functionality of its proprietary BANNER software, including the lack of functionality that falsified the deceitful SCT representation. Such knowledge may be imputed to SCT from the fact that: (a) BANNER was SCT's own proprietary product; (b) SCT represented that it understood contestability requirements for companies in deregulated utility markets (including the Australian market); (c) SCT made the representations referred to in paragraph C(a)-(d) above; (d) SCT was, in late 1997 and early 1998, still planning to develop functionality to enable unbundling of rates (see SCT's planning document titled "Plan 21, Production Directions for SCT Utility Systems, 1998-2000",); and (e) the earliest release of BANNER software that was developed to enable unbundling of rates was BANNER CIS 2.2.2 (released September 1999). (H) Further or in the alternative, the persons at SCT who had knowledge at all material times of the functionality and lack of functionality of SCT's proprietary BANNER software, including the lack of functionality that falsified the deceitful SCT representation, were the senior officer(s), employee(s) or representative(s) of SCT who were charged with the technical oversight and on-going development of SCT's proprietary BANNER software and those to whom they had a duty to report. SCT alone has complete knowledge of the persons in that class. (I) Further or in the alternative, the persons at SCT who had knowledge at all material times of the functionality and lack of functionality that falsified the deceitful SCT representation were: · Alan Creutz, SCT's Vice President Software Solutions · Barry Schwarz and Phil Duncan, SCT's Product Managers for Customer Management Systems. These are the best particulars of the said knowledge within SCT that Integral is presently able to supply. Further particulars may be supplied after interrogation and further discovery. (J) Further or in the alternative, the persons who made or authorised or approved the deceitful SCT representation to Integral in the abovementioned ways: (a) knew that there were persons within SCT charged with responsibility for technical oversight of BANNER who had detailed, actual knowledge of the functionality or lack of functionality of BANNER from time to time; (b) had opportunity, and a duty to SCT, when responding on its behalf to invitations to tender and before making or authorising or approving representations by SCT about what BANNER could or could not do, to obtain information about whether or not BANNER met or did not meet particular tender requirements from the persons within SCT having that actual knowledge; (c) could not have had a genuine belief in the truth of the deceitful SCT representation unless they had consulted with those at SCT having that actual knowledge; (d) if they did so consult, would have known that the representation was false; (e) if they did not so consult, recklessly refrained from doing so. C59B Integral relied on the SCT BANNER representations referred to in paragraph C28(a1) above and acted to its detriment by inter alia : (a) taking the steps referred to in paragraph C29(a)-(e) above; (b) taking the steps referred to in paragraph C32(a)-(e). The opening paragraph of C59A reproduced above refers to paragraph C28(a1) which provides as follows: During 1997 and the first quarter of 1998, SCT represented to Integral as a continuing representation and in order to induce Integral to acquire the BANNER software offered by MITS/SCT for its CSS ( the SCT BANNER Representations): … (a1) that the BANNER software offered by MITS/SCT had a high level of functional fit to Integral's CSS Requirements. Breaking the pleading down 9 It is apparent that the structure of the particulars is as follows : Representational particulars i. Particular C deals with the representations made by the company ii. Particular D deals with the representations made by the identified class iii. Particular E deals with the representations made by the identified persons Particulars of knowledge iv. Particular G deals with the allegation of knowledge in the company v. Particular H deals with the allegation of knowledge in the identified class vi. Particular I deals with the allegation of knowledge in the identified persons Particulars seeking to link representations and knowledge of falsity vii. Particular J seeks to link the representational particulars and the particulars of knowledge of falsity. 10 In the result there are three ways that the plaintiff appears to have put its claim against the third defendant alleging deceit with knowledge: Variant 1 i. First, the plaintiff alleges in the amended deceit claim that "SCT" made certain representations, without identification of the employees or officers of SCT responsible for doing so (particular (C)). It is assumed that this variant of the amended deceit claim is intended to be read together with particular (H), which identifies a class of persons at SCT alleged to have had knowledge of the facts giving rise to falsity, or with particular (I), which identifies two individuals who are said to have had knowledge of these facts. Variant 2 ii. Secondly, the plaintiff alleges that "[f]urther or in the alternative" there is: a) a class of persons who made or authorised the alleged representations (particular (D)); and b) a different class of persons who had knowledge of the facts giving rise to the alleged falsity of those representations (particular (H)). Variant 3 iii. Thirdly, the plaintiff alleges that "[f]urther or in the alternative" there is: 1. a group of individuals who made or authorised the alleged representations (particular (E)); and 2. a different group of individuals who had knowledge of the facts giving rise to the alleged falsity of the representations (particular (I)) 11 Mr Sackar QC appearing for the third defendant has produced a useful pictorial representation to explain the pleading in the proposed paragraph C 59A which is in the following form: Following are pictorial representations of the way in which the third defendant understands the plaintiff to plead its case in deceit in proposed paragraph C59A of the summons. First variant of deceit claim - with knowledge Representation Made by "SCT" - No identification of individuals or classes of person at SCT (C59A, particular (C)) Knowledge of facts giving rise to falsity Option 2 "SCT" had knowledge of functionality No identification of individuals or classes of persons at SCT (C59A, particular (G)) Option 1 Option 3 Senior officer(s), employee(s) Alan Creutz &/or Barry Schwartz or representative(s) of SCT. (C59A, particular (I)) "charged with the technical oversight and on-going development of SCT's proprietary BANNER software and those to whom they had a duty to report" No individuals identified. (C59A, particular (H)) Second variant of deceit claim – with knowledge Representation Made with knowledge of senior officer(s), employee(s) or representative(s) of SCT "who made authorised or approved the making of the … representation" No identification of individuals. (C59A, particular (D)) Knowledge of facts giving rise to falsity Held by senior officer(s), employee(s) or representative(s) of SCT "charged with the technical oversight and on-going development of SCT's proprietary BANNER software and those to whom they had a duty to report" No identification of individuals – but different class to above. (C59A, particular (H)) Third variant of deceit claim – with knowledge Representation Made, authorised or approved by Bill Mahoney, Dave McNamara, Bob Szadek and/or Jim O'Reilly (C59A, particular (E)) Knowledge of facts giving rise to falsity Knowledge held by Alan Creutz and/or Bill Schwartz (C59A, particular (I)) Fourth variant of deceit claim – with recklessness Representation The persons who made or authorised or approved the [representation] to Integral in the abovementioned ways" were either (C59A, particular (J)) Option 1 Option 2 senior officer(s), Mahoney, employee(s) or McNamara, Szadek representative(s) of SCT and/or O'Reilly "who made authorised or (C59A, particular (E)) approved the making of the … representation". No identification of individuals. (C59A, particular (D)) Knowledge of facts giving rise to falsity Either Option A Option B The representors consulted persons The representors recklessly at SCT who had knowledge failed to consult persons of the facts giving rise to falsity. at SCT who had knowledge C59A, particular (J)(d) of the facts giving rise to Those persons being either: - falsity. (C59A, particular (J)(c) & (e)). Those persons being either: - Option (a) Option (b) Alan Creutz and/or Unidentified senior officer(s), Bill Schwartz employee(s) or representative(s) of (C59A, particular (I)) SCT charged with the technical oversight and on-going development of SCT's proprietary BANNER software and those to whom they had a duty to report". (C59A, particular (H)). No individuals identified. The plaintiff's concession 12 The plaintiff in response to a request for particulars has clearly stated as follows: "It is not alleged that any particular person at SCT had knowledge at all material times of the falsity of the SCT representation." The central issue raised 13 The essence of the contention that the pleading is impermissible is simply that the pleading although: i. identifying one group of specific persons within the Corporation alleged to have made the representations ii. identifying another group of specific persons within the Corporation alleged: a) to have had knowledge that the representation was false or b) to have been reckless as to whether it was true or false, fails to identify any specific person or persons who both made the relevant representations and at the same time had the relevant knowledge of falsity or acted recklessly as to whether the representation was true or false. 14 The third defendants short propositions are : i. It is necessary for the plaintiff to plead the individuals which had one of the three states of mind required for a deceit, the facts supporting that allegation and the facts as a result of which, the state of mind of those individuals is alleged to be the state of mind of the third defendant. ii. These requirements have not been satisfied by the proposed amended pleading. 15 Mr Sackar in his address sought to encapsulate the suggested difficulties with the latest pleading in the following terms : [N]otwithstanding the fact that [the plaintiff has] seemingly tried to exhaust every permutation and combination, they still in our respectful submission do not adequately articulate a deceit case, that is a dishonesty case, on the part of the corporation… For the reasons given in our outline, we say either by not specifying persons, that of itself falls foul [of the pleading requirements], and the non-specificity arises either by alluding to SCT per se or to classes of people who either represented or have knowledge. When [the plaintiff does] descend to any level of specificity as to the named individuals, [it] either does so in a way that is by no means clear as to how the aggregation process works or, alternatively, it is clear [that it has] no idea ..about the mechanism, because ultimately when you get to J, it either asserts that … it was known that there were persons who had responsibility within the organisation, J(b), they had an opportunity and a duty when responding to make certain inquiries and they couldn't have a genuine belief and if they did consult they would have known the representations were false. In other words, that pleading is so high level and theoretical that, with great respect, we still don't understand what the case is we have to meet. We understand the gravamen of what they want to say. That is not the issue. The question is: Does it satisfy deceit and the way in which deceit ought to be pleaded? HIS HONOUR: When you say you understand the gravamen, what is it you understand they want to say but haven't been able to properly yet? MR SACKAR: Well, [they] want to say that the persons who made the representations presumably should have checked or didn't check, but they don't give any specificity as to that. They simply reverse engineer from the representations. In other words, instead of building the case in a way that we understand it, they say "the representations were deceitful, therefore you did not obviously make an inquiry", but when one looks at the cases on aggregation, one has got to be a little more specific than that. The state of the authorities 16 Corporations are responsible for their actions through those who act on their behalf, whether an act is performed by one person or by a number (Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 446 at 485, referred to in Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1). 17 When considering the knowledge of a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company (Brambles Holdings Ltd v Carey (1976) 15 SASR 270 (Brambles), approved by the High Court in Krawkowski. See also The Bell Group Ltd (In Liquidation) v Westpac Banking Corporation (5) [2004] WASC 273). 18 In Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 the majority of the High Court made it clear that where fraud is pleaded against a company it is necessary to ascertain whether the relevant representation had been made "consciously" by the company. In this respect the majority said (at 580): A representation that the instrument of lease covered the whole of the agreement between Eurolynx and Swaeder bears only one meaning. If that representation was made consciously by Eurolynx or its solicitor, it must have been made fraudulently. There is no sense in which a representation in those terms could have been honestly made by Eurolynx or by its solicitor. But was Eurolynx or its solicitor conscious of the making of a representation in those terms? 19 For the purposes of ascertaining whether Eurolynx' mind was conscious of making the representation the High Court found that it was relevant to consider the state of mind of all persons who had a connection with the relevant transaction. In this respect, the majority said as follows (at 582-583): The mind of Eurolynx does not depend upon the acceptance of the evidence of Gilbert alone [the officer of Eurolynx responsible for giving instructions to the solicitors in respect of the lease and side agreement] as to his appreciation of the significance of the separate agreement. Account must be taken of the evidence that Eurolynx' agent (Cini) and Eurolynx' officer (Ryan) who had first procured the agreement of Mermelstein (as agent for the purchasers) to buy unit 12 knew that the purchasers were willing to buy on the footing that the rent reserved by the lease was what the tenant had been and was willing to pay for a lease of the property offered to them. In other words, they were willing to buy at a price 10 times the amount of the rent which the property itself would yield. Their knowledge was the knowledge of Eurolynx, for they were the persons who were responsible for the initial negotiations and who had set the scene in which the representation had been made by the s 32 statement and the proffered contract of sale. As Bright J said in Brambles Holdings Ltd v Carey (1976) 15 SASR 270 at 279 (and see at 275-276, per Bray CJ; at 281-282 per Mitchell J) (emphasis added): " Always , when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company. A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them (See Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 446 at 485 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170). Neither Cini nor Ryan was called to give evidence. It is erroneous to make a finding as to the company's intention or willingness to misrepresent the contractual arrangements with Swaeder without reference to the knowledge of Cini and Ryan. 20 Another reason for requiring the plaintiff to identify the persons behind the alleged representations is that the subjective sense in which the representation was intended by the representee to be understood is an essential enquiry for a claim in fraud. In this respect, the majority in Krakowski said that (at 578, see also at 576-577): In order to succeed in fraud, a representee must prove, inter alia, that the representor had no honest belief in the truth of the representation in the sense in which the representor intended it to be understood. 21 It is not permissible to create a "notional person with a dishonest intent" for the purposes of proving fraud against a company. In Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 the question of whether it was appropriate to aggregate the knowledge of different officers of a corporation for the purposes of ascertaining fraud was raised directly, and rejected by Tadgell JA (with whom Winneke P agreed). In that case the Court considered the circumstances in which something less than knowledge of dishonesty will amount to fraud for the purposes of challenging indefeasible title conferred under statute. In this context, Tadgell JA cited the first sentence of the passage from Krakowski [commencing: "A division of function"] and said (at 145): That passage, so it was said on behalf of the respondent, authorises the aggregation of all the knowledge of officers of a corporation in order to determine a fraudulent state of mind of the corporation. The answering submission by counsel for the appellant is in my opinion correct. Neither that passage in Krakowski nor any other principle justifies the simple aggregation of the knowledge of a number of persons individually unaware of fraud, or facts which ought to disclose it, to create a notional person with a dishonest intent. The High Court in Krakowski was not purporting in the passage relied on to lay down any such principle but to authorise a consideration of the knowledge and circumstances of all relevant persons — including what may properly be inferred — in order to ascertain the mind of the corporation. 22 The plaintiff seeks to rely on AG-Exports (Australia) Pty Ltd v Export Finance and Insurance Group [2006] NSWSC 467 per Simpson J at [24] as authority for the proposition that the dictum of Bright J in Brambles referred to above did not require the pleading of an individual or individuals within a company in a claim in deceit. 23 This is not correct. The gravamen of Simpson J's judgment is that prior to pre-trial procedures it may be permissible for a plaintiff alleging deceit not to include particulars of the individuals alleged to have had the requisite knowledge and intent, but that such particulars must ultimately be provided (see paras [26] & [31]). In that case the proceedings had been on foot, 'in one form or another', for four and a half years and the plaintiff had had access to documents produced by virtue of pre-trial procedures (para [26]). 24 In these circumstances, Simpson J ultimately refused leave to amend the pleading to include a deceit claim for the following reasons (at paras [30] and [31]): 25 It is well recognised that an allegation of fraud is a most serious allegation, whether the fraud is attributed to an identified individual (or individuals) within an organisation, or (impermissibly) to the organisation as a corporate entity. 26 The first two variants of the pleading of deceit identified above are not sustainable because they do not identify with specificity the person or persons so closely and relevantly connected with the company that the state of mind of those persons can be treated as being the state of mind of the company. 27 All three variants of the deceit claim identified above are not sustainable because the plaintiff has failed to allege any connection between the persons or classes of persons alleged to have made or authorised the representation, and those alleged to have knowledge of the facts giving rise to its falsity. Inferences 28 Whilst ever the plaintiff continues to eschew the making of an allegation that individuals who made the representation had the requisite knowledge of falsity thereof, it will have failed to comply with the requisite pleading requirements. The making of such a serious allegation is itself subject to well-known ethical constraints. However in appropriate cases where it is reasonably open to draw inferences from circumstantial evidence, it can be proper to plead knowledge of falsity. These are matters for the party and not for the Court. Dealing with particular J 29 Particular (J) of paragraph C 59 (A) which begins "further or in the alternative, the persons who made or authorised or approved the deceitful SCT representation to Integral in the abovementioned ways" is deficient as follows : i. it then alleges knowledge in particular persons of the lack of functionality ii. it then alleges opportunities which such persons are said to have had and the duty owed by them to the Corporation to obtain information about whether or not the particular tender requirements were absent iii. it then alleges that those persons could not have had a genuine belief in the truth of the suggested deceitful representation unless they had consulted with those within the Corporation having that actual knowledge [this allegation eschews the charge that those persons did not have that genuine belief, a charge which may or may not be available to be made as supported by inference, depending upon the materials held by the plaintiff's legal advisers and their instructions]. iv. it then alleges that if these persons did so consult, they would have known that the representation was false [ this allegation eschews the charge that such persons knew that the representation was false, a charge which may or may not be available to be made by the plaintiff as supported by inference, depending upon the materials held by the plaintiff's legal advisers and the instructions given to by the plaintiff] v. it then alleges that if these persons did not so consult, they recklessly refrained from doing so [without positively making the charge that these persons did not so consult, again a charge which may or may not be available to be made by the plaintiff by inference and depending upon the materials held by the plaintiff's legal advisers and the instructions given to by the plaintiff] 30 Presently the application for leave to amend is disallowed for the above reasons. 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