Supreme Court New South Wales Medium Neutral Citation: Canon Finance Australia Limited v Reliance Medical Practice Pty Ltd & Ors (No 3) [2018] NSWSC 1378 Hearing dates: 27, 28, 29, 30, 31 August 2018 Date of orders: 31 August 2018 Decision date: 31 August 2018 Jurisdiction: Common Law Before: Campbell J Decision: Ruling at [27] Catchwords: CIVIL PROCEDURE – allegations of misleading and deceptive conduct – deficiencies in rental payment agreement – pleadings – fraud or dishonesty – specific and particular allegations – matter arising after commencement of proceedings – allegations not open on pleadings Legislation Cited: Competition and Consumer Act 2010 (Cth), s 18 Cases Cited: Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70 Leotta v Public Transport Commission of NSW (1976) 50 ALJR 666 Texts Cited: Nil Category: Procedural and other rulings Parties: Reliance Medical Practice Pty Ltd trading as ATF Reliance Medical Practice Trust (First Cross-Claimant) Rodney John Beckwith (Second Cross-Claimant) Voice Print & Data Australia Pty Ltd (First Cross-Defendant) Christian Altenburg (Second Cross-Defendant) Grant Edwards (Third Cross-Defendant) BHD Leasing Pty Ltd (Sixth Cross-Defendant) Representation: Counsel: G A Moore (Cross-Claimants) A J H Morris QC with I Erskine (First and Third Cross-Defendants) A F Fernon (Second Cross-Defendant) L W Chan (Sixth Cross-Defendant) Solicitors: Gorval Lynch (Cross-Claimants) Anthony Delaney Lawyers (First and Third Cross-Defendants) O'Neill McDonald Lawyers (Second Cross-Defendant) Holman Webb (Sixth Cross-Defendant) File Number(s): 2016/362193 ex tempore Judgment – Revised 1. The cross‑claimant claims, inter alia, damages under the Competition and Consumer Act 2010 (Cth) ("the Act") from four remaining cross‑defendants. The litigation arises out of a dispute between the cross‑claimants and the cross‑defendants over the supply of information technology involving hardware, software and the ongoing provision of support services. The first, second and third cross‑defendants were involved in the formation of the agreement for the supply of the services. The sixth cross‑defendant, in neutral terms, facilitated the provision of finance for the acquisition of the proposed supply. The fourth and fifth cross‑defendants have been released from the proceedings. 2. The events giving rise to the formation of the agreement occurred in the latter part of 2015. This judgment concerns a ruling sought by the first to third cross‑defendants on whether the cross‑claimant's claim, as now formulated, is open to be maintained on the pleadings. In precise terms, the relief sought was formulated as follows: "The first and third cross‑defendant seek a ruling that the cross‑claimants may not conduct their case on the basis that the representations alleged in subparas 18(e), (f) and (h) were misleading or deceptive by reason of or by reference to the provisions of the rental payment agreement dated 25 November 2015." 1. In order to make this ruling, it is necessary for me to expand upon the background to the litigation. In general terms, the goods and services to which I have referred were ordered from the first cross‑defendant. The acquisition of those goods and services was to be financed through a third party financier organised by the sixth cross‑defendant. The finance arrangement took the form of a commercial lease embodied in a written contract I have already referred to as the rental payment agreement dated 25 September 2015 (at CB 2.773). 2. In the course of opening his client's case, Mr Moore of counsel said (at 15.45T): "It is the cross‑claimant's case that the rental payment agreement only related to the Mitel telephone system, which, according to the third cross‑defendant, in its quotes of 13 October were about $4,000 out of the $22,000 monthly payment, and the Live Office, which was the big reason why the cross‑claimant should be doing this deal with the first cross‑defendant, just wasn't part of the rental payment agreement." To put this in context, Mr Moore also pointed to two subscriber agreements issued on 13 October 2015 and signed on 15 October 2015, relating to, first, the Mitel telephony system, and second, a bundle of products and services referred to as a LiveOffice Wide Area Network (WAN). The greater proportion of the monthly fee proposed related to the latter. It is Mr Moore's case that the subscriber agreements are not contractual. In his opening he referred to each of them as a quote (at 15.5T). His case is that the signature on those documents is no more than an acknowledgement of the quote and "it's the rental payment agreement that's the one that's binding" (15.35T). 1. My understanding of the case as opened and as refined by the course of the evidence is that the relevant misrepresentation relied upon, if I may put it that way, for the purpose of s 18 of Schedule 2 of the Act, is that the rental payment agreement would cover the whole of the goods and services the first cross‑defendant proposed; and, on the cross‑claimant's case, it did not. 2. The central allegations founding the case of misleading or deceptive conduct by the first and third cross‑defendants as suppliers are set out in paras 18, 19 and 20 of the cross‑claimant's further amended statement of cross‑claim. So far as it is presently material, para 18 is in the following terms: "Throughout the period July to 25 November 2015 the [cross‑defendants] represented to [the cross‑claimants] that: ... (e) the equipment, software and services to be provided would address the inefficiencies of the cross‑claimant's current system; (f) the products would address the concerns and shortfalls of the cross‑claimant's IT and printing systems; (h) the products would be quicker and more efficient than the current system which relied upon a physical server in the office; …" Paragraph 19 avers that the equipment and services to be provided did not in fact address those concerns and para 20 was pleaded in terms that the first and third cross‑defendants "failed to advise" the cross‑claimants that "the equipment and services to be provided" did not address those concerns. 1. The rental payment agreement is first mentioned in the formulation of the claim against the third cross‑defendant as a person involved in the alleged contraventions of s 18 of the Act relied on. Paragraph 25 is pleaded in the following terms: "By reason of and in reliance of the representations, failure to advise and conduct pleaded, inter alia in paras 18, 19 and 20 above, the [cross‑claimants] entered into: 1. the subscriber agreement dated 13 October 2015 between the cross‑claimants and the first cross-defendants; and 2. the rental payment agreement dated 25 November 2015 between [the cross‑claimants] and the sixth cross‑defendant." 1. I should say that the first and third cross‑defendants did not seek particulars of what the cross‑claimant said the equipment, software and services to be provided were. The second cross‑defendant did but no answer was provided which suggested that the cross‑defendants had represented that they would provide both the Mitel telephony system and the LiveOffice WAN, but in fact proposed to provide only the former. 2. When Mr Moore made clear his focus on what I will call the deficiencies of the rental payment agreement, Mr Morris QC, who appears with Mr Erskine for the first and third cross‑defendants rose to voice an objection in these terms (at 16.15T): "I can identify our position very succinctly. This is not part of the pleaded claim. This proposition that the telephone system was somehow omitted from the rental payment agreement was nowhere pleaded ("sic.") The complaints in the statement of claim are entirely about the ITN printing system and if it mattered, the rental agreement as executed in fact picks up the quotation number for the LiveOffice WAN. But as our learned friend has pointed out, the sums of money involved add up to the total of the two quotes for the telephone system and the WAN system so that there is just no pleaded case to which any of this is relevant, and that's our position." The reference to the omission of the telephone system was a mere slip of Senior Counsel's tongue, which everyone understood at the time. 1. Mr Fernon of counsel, who appears for the second cross‑defendant, adopted Mr Morris's objection, and with respect added that what was being put forward "as completely at odds with the written opening outline of submissions ... put forward on behalf of the cross‑claimants" (17.35T). 2. I delayed making a ruling on the point immediately but indicated I would return to the matter prior to the close of the cross‑claimant's case. In the meantime, Mr Morris and Mr Erskine provided detailed written submissions in relation to the matter and I returned to the argument on the fourth day of the hearing, yesterday afternoon, after Mr Moore had called the cross‑claimant's final witness but before the closure of the cross‑claimant's case. 3. Before making my ruling, I should point out, with great respect, that Mr Fernon's recollection about the omission of the matter from the written opening was erroneous. I have, during the course of the argument, been taken to certain documents exchanged between the parties, which I will refer to in a moment. I should say that there is no doubt that a case formulated, as Mr Moore formulated it in the passage from his opening I have quoted above, arose late in the piece. The guiding mind of the corporate cross‑claimants, Dr Rodney Beckwith, gave evidence by way of a number of affidavits and was cross‑examined on them before me. It was apparent from his evidence that he did not appreciate any deficiency in the rental payment agreement at the time he signed it or at the time the contract was entered into. He was adamant in saying that he did not become aware of that matter until his attention had been drawn to it by his lawyers. And that occurred after his lawyers obtained affidavits from two information technology experts; a Mr Goodwin, an entirely independent expert; and a Mr Benson, who was the person who normally provided IT services to the cross‑claimants' medical practice. 4. When asked initially about how long before the trial he received that advice he said, "[a]bout a month ago" (43.45T) but when I asked him without objection when he recalled in relation to the mediation which occurred in early July, and he said, "Just prior" (151.10T). Moreover in accordance with the usual practice in the Common Law Division, the parties were required to provide a joint memorandum of issues and facts. That document runs to 11 pages, but on page 9 at paras 17 ‑ 20, the following are identified as being issues. I will only refer to para 17 and 18. "[17] What products and services were to be supplied by the first cross‑defendant pursuant to the RPA signed on 25 November 2015? [18] Did the RPA include the provision of equipment and services relating to the service known as LiveOffice?" And in his written opening filed on 17 August 2018, Mr Moore, in identifying the conduct relied upon in relation to the first to third cross‑defendant included the following matter: "It was misleading and deceptive for VPD and Mr Edwards to send an email on 13 October to Mr Dimond advising that RMP would be receiving; 1. LiveOffice and WAN provision; and 2. A Mitel phone system When in actual fact (the cross‑claimant) entered into the RPA with the sixth cross‑defendant (for the provision of a Mitel phone system only)." (Emphasis added.) 1. It should also be pointed out that the sixth cross‑defendant requested particulars of the claim against it on 1 August 2018 and in answer to part of that request the following was stated in the cross‑claimant's solicitor's letter of 6 August 2018 (at [26]). "The equipment, software and services as to be provided in the rental payment agreement signed on 25 November 2015, did not...actually provide or provision for an IT cloud solution, specifically LiveOffice and WAN provision; contrary to what was represented in the subscriber agreements and Mr Edwards' email of 13 October 2015.Not only were those not provided for in the rental payment agreement, but they were in fact also not necessary." 1. I have referred to those matters to indicate that whatever the pleadings said, the attention of each of the responding parties by one means or another was drawn to the consideration that this was part of the cross‑claimant's case, even if it was a relatively late entry into the "lists." 2. However, it is important to bear in mind that, as Mr Morris submitted, and Mr Moore did not demur, that the flavour of a case having that focus involves an aspect of dishonesty on the part of the first and third cross‑defendants in any event. When that was put and I asked Mr Moore about it, as I have said, he did not demur. He certainly rejected the idea that if the rental payment agreement was deficient in its failure to refer specifically to the products and services that would constitute the LiveOffice WAN, it could be no mistake. Rather it must have involved a deliberate decision on the part of, on his argument, the first and third cross‑defendants. In support of that submission, he tendered Ex E, which I received only for the purpose of making this ruling. 3. Part of Ex E constitutes a schedule. There are actually two similar copies of the same schedule forming part of Ex E, by which the total amount of the finance figure, a figure in excess of $760,000, is apportioned amongst listed products, so that the whole of that sum is expended by reference to the total items listed in the schedule. It is this matter that Mr Goodwin and Mr Benson say, at least very substantially, if not wholly, relates to the Mitel telephony system rather than the LiveOffice matter. The importance of that, from the cross‑claimant's point of view, is that, as the passage from Mr Moore's opening I have quoted makes clear, the lion's share of the agreed price related to the LiveOffice WAN rather than the Mitel telephony system. 4. What I have recounted of the submissions I hope does justice to what was put. As I have said, Mr Fernon joined in Mr Morris's objection and made submissions in relation to the matter from the point of view of the second cross‑defendant. Ms Chan of counsel, who appears for the sixth cross‑defendant, does not make the objection and did not participate in the argument. 5. On one level, I suppose it could be said that the language of para 18 of the Further Amended Cross‑Claim is of such generality that it could accommodate a case as formulated by the impugned passage in the opening. However, with respect, that is not the test. It seems to me that the question is whether that case was identified with sufficient precision in the statement of cross‑claim to enable the responding parties to appreciate that that was at least part, and indeed, as things have now transpired, a very important part of the case that they are required to meet. 6. I do not think that the generality of that language by any means achieves that important purpose. Moreover, as I have said, para 25, which seems to relate only to the third cross-defendant, refers to both the subscriber acknowledgements/agreements issued on 13 October 2015 and the rental payment agreement, without seeking to impugn either in this way. Indeed, from reading the statement of cross‑claim as a whole, one does not garner the impression that the subscriber agreements were mere quotes and that the rental payment agreement was the critical contractual document or that the latter was deficient in the way Mr Moore opened. 7. The law on this topic is quite clear. The remedies sought by a party and the basis on which those remedies are sought must be found in the pleadings. It is sufficient to refer to Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70 (at 664) in that regard, although doubtless references to authority could be greatly multiplied. A party is bound by its pleadings unless the parties have permitted the evidence at trial to run beyond the confines of the pleadings, so that they have both or all chosen to fight the case on a ground different from the ground identified by the pleadings. Even when that occurs, it is necessary that the pleadings should be amended so that they accord with the case actually fought between or amongst the active parties to the litigation: Leotta v Public Transport Commission of NSW (1976) 50 ALJR 666 at 668. 8. The fact that Mr Morris rose to object to a case formulated in the terms I have set out above as soon as that case was articulated in the opening demonstrates that the first and third cross‑defendants did not acquiesce in the case presented by the cross‑claimants deviating or departing from the ground set out in the written pleading. That Mr Fernon also joined in that objection illustrates that the second cross‑defendant did not acquiesce in a departure from the case as pleaded. 9. I should also refer to the fact that it is a well-known rule of pleading, and requires no specific citation of any rule of Court in that regard, that where a party wishes to assert that the conduct of another party to the litigation has been dishonest or effectively amounts to fraud, those allegations must be pleaded with precise particularity. This is not only so that the party against whom such allegations are made may see with pellucidity that such an allegation is being made, but also to bind the party raising the allegation, as an important matter of practice, based upon the ethics of the profession, to the case so formulated with all of the potential consequences which may flow from bringing such a case on an unsecure footing. For that reason as well, it seems to me that the central parts of the pleadings relied upon do not raise the case that Mr Moore opened. 10. I have set out that this case was telegraphed in documents exchanged in the weeks leading up to the commencement of the hearing. However, the decisive consideration which arises is that: given that this was telegraphed; given it found its way into a longish statement of issues and into the written opening; given the nature of the allegations; and given the consideration that they do not fit into the pleadings as presently formulated, it was for the cross‑claimants to have sought leave to amend to bring such a case forward. With respect, it is no answer to the objection that has been taken and has now been argued that there was material available extraneous to the pleadings by reference to which the parties could have informed themselves that a case like that which Mr Moore wishes to press would be run at the trial. 11. For these reasons, on the pleadings as they presently stand, I am of the view that it is not open to the cross‑claimants to conduct their case on the basis that the representations alleged in sub-paras 18(e), (f) and (h) were misleading or deceptive by reason of what I have referred to as the deficiencies in the provisions of the rental payment agreement dated 25 November 2015. ******* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 September 2018