Chapman v Australian and New Zealand Banking Group Limited [2008] FCA 86 (18 February 2008)

Chapman v Australian and New Zealand Banking
Group Limited [2008] FCA 86

PRACTICE AND PROCEDURE – pleading – whether statement of claim adequately pleaded causation between misleading or deceptive misrepresentations and loss suffered – applicants pleaded they were induced by misrepresentations to enter into transaction by which they bought shares in a company and lent money to that company, and that absent the representations they would not have done so – applicants also pleaded that after entering into the transaction, they took various subsequent steps involving dealings with their shares and debt, and that those steps caused the applicants to incur further losses – whether pleading adequate as pleading of a "no transaction" case.
Held: the causal link between either the representations or the principal transaction, and the subsequent steps and losses, must be pleaded.

Federal Court Rules O 12 r 5(3)

Australian Automotive Repairers’ Association (Political Action Committee) Inc v NRMA Insurance Ltd [2002] FCA 1568 referred to
Collex Waste Management Pty Ltd v Waste Recycling & Processing Service of New South Wales [1999] FCA 213 referred to
Goldsmith v Sandilands [2002] HCA 31; (2002) 190 ALR 370 referred to
Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 referred to
Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd & Anor (1996) ATPR referred to
Police and Nurses Credit Society Ltd v Burgess Rowson (WA) Pty Ltd [2006] FCA 1395 referred to

GEORGE EDWARD CHAPMAN AND OTHERS v
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
(ABN 11 005 357 522)

NSD 1053 OF 2007

LINDGREN J
18 FEBRUARY 2008
SYDNEY

BETWEEN:	GEORGE EDWARD CHAPMAN First Applicant MARGO JEANETTE CHAPMAN Second Applicant GEOMAR SUPERANNUATION PTY LIMITED Third Applicant
AND:	AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ABN 11 005 357 522) Respondent

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

BETWEEN:	GEORGE EDWARD CHAPMAN First Applicant MARGO JEANETTE CHAPMAN Second Applicant GEOMAR SUPERANNUATION PTY LIMITED Third Applicant
AND:	AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ABN 11 005 357 522) Respondent

1 By its amended notice of motion filed on 5 December 2007, the respondent (ANZ) moves for a striking out of certain paragraphs of the amended statement of claim filed by the applicants on 26 October 2007 (ASC) and for an order that the applicants provide further and better particulars of certain paragraphs of the ASC.

2 The following is a summary paraphrase of the relevant allegations made in the ASC. I will omit the words "the applicant alleges" (or words to that effect) in my account of the ASC to avoid tedious repetition. The numbers in bold below refer to paragraphs bearing those numbers in the ASC.

3 The first applicant (Mr Chapman) and the second applicant (Mrs Chapman) are, and at all material times were, directors of the third applicant (Geomar). [2, 3] Geomar is, and at all material times was, the trustee of a superannuation fund, the beneficiaries of which included Mr Chapman and Mrs Chapman. [4]

4 Ken Chapman and Helen Chapman are the son and daughter of Mr Chapman and Mrs Chapman. [10, 11] Helebeth Pty Ltd (Helebeth) is a proprietary company, all of the issued shares in which were, at all material times, held by Helen Chapman. [6]

5 ANZ is a financial corporation made up of various divisions including the Private Equity division (ANZPE). [7]

6 At all material times, Ken Chapman was a non-executive director of certain companies within the "Chapman group of companies" and an executive director of certain other companies within that group. [10] (I note that the term "Chapman group of companies" is not defined in the ASC.)

7 From 1 October 2002 to 30 April 2003, Helen Chapman was an executive director of certain companies within the "Chapman group of companies" and a non-executive director of certain other companies within that group. From 29 June 2005, she was a non-executive director of Helebeth. In July 2005 and September 2005 she carried out casual work for certain companies within the Chapman group of companies, but otherwise was not employed by any of them. [11]

8 McCaffertys Holdings Pty Ltd (MHL) was at all material times up to 1 May 2003 the ultimate holding company for the coachline and coach building businesses known as "McCafferty’s, Greyhound and Motorcoach" (McCafferty’s). [12]

9 ANZPE established Greyhound Australia Pty Ltd (formerly called McCaffertys Greyhound Pty Ltd) (Newco) for the purpose of purchasing McCafferty’s. [13]

10 Prior to 31 December 2002, ANZPE negotiated with Tony McCafferty, the Chief Executive Officer of MHL, in connection with a proposed acquisition of MHL’s assets by interests, including a company associated with ANZ which ultimately became Newco. [15]

11 On 31 December 2002, ANZPE offered to work with the then existing management of MHL to that end. [16] MHL accepted ANZPE’s offer. [18] On 5 March 2003 ANZ and MHL entered into a Heads of Terms agreement. [18A]

12 In March 2003, ANZPE invited the applicants to participate with ANZPE as a co-investor and co-financier of Newco. [21]

13 ANZ, in trade or commerce, made numerous false representations (the Representations) to the applicants. [19-29D]

14 ANZ took no steps to disabuse the applicants in relation to the Representations at any time prior to the completion of the Transaction (the term Transaction is defined at [19] below). [30] The Representations were continuing representations down to the entry into the Transaction. [31]

16 ANZ provided financial services to Mr Chapman and Mrs Chapman within the meaning of s 12BAB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). [34] Some of the Representations were representations wholly or partly with respect to a future matter or future matters for the purposes of s 51A of the Trade Practices Act 1974 (Cth) (TP Act) and s 12BB of the ASIC Act. [35]

17 By reason of the matters pleaded in paras 18A to 35 of the ASC, ANZ engaged in conduct in contravention of s 52 of the TP Act and s 12DA of the ASIC Act. [36]

18 Upon completion of the Transaction (the term Transaction is defined at [19] below), Newco paid ANZPE a $4.6 million transaction fee. [36A]

(together, the Transaction), by reason of which the applicants have suffered loss and damage as set out later in the ASC. (my emphasis) [37]

(a) as a result of reliance by Ken Chapman and Helen Chapman on the Representations, Mr Chapman entered into the aspect of the Transaction referred to in para 37(a) of the ASC (as set out at [19](a) above);

(b) as a result of reliance by Mr Chapman, Ken Chapman and Helen Chapman on the Representations, Mrs Chapman entered into the aspect of the Transaction referred to in para 37(b) of the ASC (as set out at [19](b) above); and

(c) as a result of reliance by Mr Chapman, Ken Chapman and Helen Chapman on the Representations, Geomar entered into the aspect of the Transaction referred to in para 37(c) of the ASC (as set out at [19](c) above),

21 By virtue of the matters referred to in paras 37 and 37A of the ASC, each of the applicants suffered loss or damage "as a result of entering into the Transaction, including loss and damage on a loss of opportunity basis, as set out in paragraphs 52 to 57 [of the ASC]". [37B]

22 (I digress from this account of the ASC to note a key issue that arises on the strike out aspect of the motion. Later paragraphs of the ASC plead that the applicants took various steps subsequent to the Transaction on 1 May 2003 (the Post Transaction Steps) and that this caused them further losses. The applicants submit that the ASC makes it clear that the pleaded claim is of a "no transaction" case, that is to say, that but for the Representations, the Transaction would not have taken place at all, with the result that the further losses the applicants suffered as a result of the Post Transaction Steps would not have been suffered. ANZ, on the other hand, submits that the ASC does not adequately plead a causal link between the Representations, and the Post Transaction Steps and losses suffered.)

23 On or about 9 January 2004 the directors of Newco identified the need for an immediate cash injection of $4 million into Newco because the revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) of Newco had not been as represented to the applicants by ANZ. [38] Newco’s future profitability and revenue would suffer without continuing financial support. [39] On or about 16 January 2004, at Newco’s request, Mr Chapman and Mrs Chapman provided a subordinated loan to Newco of $1,228,985. [40] On or about 9 July 2004, at Newco’s request, Mr Chapman provided further financial support to Newco by subscribing for $1,300,000 worth of shares in Newco. [41]

24 On 3 September 2004, Geomar transferred $3,518,676 of the debt owed to it by Newco to Mr Chapman (the Internal Transfer) for which Mr Chapman paid Geomar a consideration of $3,518,676. [42] (This would leave $536,880 owing to Geomar – see para 37 of the ASC summarised at [19] above.)

25 On 30 June 2005, all shares held in Newco by, and debts owed by Newco to, Mr Chapman and Mrs Chapman were assigned to Helebeth for a nominal consideration of $10 per entity (the Internal Assignment). [43] (It will be recalled that Mr Chapman had acquired $333,333 worth of ordinary shares on 1 May 2003 (see para 37 of the ASC summarised at [19] above) and $1,300,000 worth of shares on 9 July 2004 (see para 41 of the ASC summarised at [23] above); that Mrs Chapman had acquired $2,622,222 worth of convertible preference shares on 1 May 2003 (see para 37 of the ASC summarised at [19] above); that Mr Chapman and Mrs Chapman had provided a subordinated loan of $1,228,985 to Newco on 16 January 2004 (see para 40 of the ASC summarised at [23] above); and that by the Internal Transfer on 3 September 2004 Mr Chapman had acquired $3,518,676 of the debt owed by Newco to Geomar (see para 42 of the ASC summarised at [24] above). In the result, Helebeth would own $4,255,555 worth of shares in Newco, and $4,747,661 of indebtedness owed by Newco).

26 On 14 June 2005, ANZ required Newco to be restructured, with the result that the applicants would hold only 15% of Newco’s shares and 15% of the subordinated debt (the Restructure). [44] The Restructure would substantially reduce the applicants’ and ANZPE’s shareholdings and economic interests in Newco. [45]

27 Between June 2005 and December 2005, ANZ informed the applicants that unless they accepted the terms of the proposed restructure, ANZ would appoint receivers (with the consequences that all of the applicants’ and Helebeth’s investments would be lost and substantial damage would be caused to Mr Chapman’s personal reputation and creditworthiness). [46]

28 On or about 23 December 2005 the applicants and Helebeth agreed to the Restructure in order to mitigate their losses. Particulars are said to be found in an agreement dated 22 December 2005 (the Amendment Agreement) and a restructure deed dated 23 December 2005 (the Deed). [47]

29 Under the terms of the Deed, Newco owes the applicants and Helebeth the following debts:
(a) $815,000 for a term loan made by Geomar calculated as follows:

30 Under the terms of the Amendment Agreement, Newco owes the applicants and Helebeth interest pursuant to Exhibit A of the Amendment Agreement (the Loan Agreement). [49]

31 Under the Deed, the applicants were required by ANZ to forgive all other debts owed to them by Newco. [50]

32 Helebeth has retained 1,571,251 ordinary shares, representing a 15% shareholding in Newco under the Deed. [51] The applicants were required to transfer the remainder of their shares for a total consideration of $1 to SPV1G Pty Limited (SPV1G), a subsidiary of Korda Mentha, established by ANZ. [51]

33 But for the misleading or deceptive conduct and negligence of ANZ, the applicants would not have entered into the Transaction and would not have become a co-investor in, or co-financier of, Newco, or suffered further losses because of reasonable attempts to mitigate. [52]

34 As at the date of the Internal Assignment to Helebeth on 30 June 2005, the shares in Newco (now held by Helebeth) and the subordinated non-interest bearing debt owed by Newco to Helebeth, "were worth substantially less than what was paid for them (if anything at all)". [53]

35 If Geomar had not invested in Newco, it would have deployed those funds by investing them in shares. Other funds held by Geomar at all material times were so invested and achieved the average rate of return shown in a table to para 54 of the ASC. In the circumstances, Geomar claims:

36 Mr Chapman and Mrs Chapman claim interest at the prevailing pre-judgment interest rate in this Court. [55]

37 At the date of commencement of this proceeding (12 June 2007) the applicants calculated their damages as set out in a table to para 56 of the ASC. According to the particulars to that paragraph, the total amount claimed by the applicants as damages is $13,198,682.38. [56, 57].

38 The amounts in the table to para 56 of the ASC in fact totalled $17,739,238.38. On the hearing, counsel for the applicants submitted a substituted table (the Substitute Table), a copy of which is annexed to these reasons. The amounts in the right hand column of the Substitute Table,, total $13,183,682.38, which corresponds to the total amount claimed by the applicants.

CONSIDERATION OF THE ASPECT OF THE MOTION TO STRIKE OUT PARAS 37, 37A, 37B, 53, 56 AND 57 OF THE ASC

39 I will not discuss the legal principles governing the adequacy of a pleading: I discussed them in Collex Waste Management Pty Ltd v Waste Recycling & Processing Service of New South Wales [1999] FCA 213 and Australian Automotive Repairers’ Association (Political Action Committee) Inc v NRMA Insurance Ltd [2002] FCA 1568. Reference may be made also to Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd & Anor (1996) ATPR.

40 It suffices to ask here whether the applicants have made clear to ANZ and to the Court the nature of the claim they propound.

41 Prior to the filing of the notice of motion on 23 November 2007 (it is noted that an amended notice of motion was filed on 5 December 2007), there was correspondence between Freehills, the solicitors for ANZ, and Atanaskovic Hartnell, the solicitors for the applicants. This culminated in the writing of a letter dated 21 November 2007 by Atanaskovic Hartnell to Freehills. In that letter Atanaskovic Hartnell explained that the claim of each of the applicants was put on the basis that but for the misleading or deceptive conduct of ANZ, that applicant would not have entered into the Transaction and would not have been a co-investor in, or a co-financier of, Newco, and would not have suffered any further losses by reason of reasonable attempts to mitigate their loss.

42 In that letter, Atanaskovic Hartnell said that the case was brought on the basis that it was a "no transaction" case The "basis for the losses" of the applicants were set out as follows:

43 The applicants say in their submissions that the reference to a transfer by Geomar of its interest in the debt to Helebeth was an error.

44 As appears below, I have come to the view that, even taking into account the matters stated in the letter, the ASC is deficient and the applicant should have leave to re-plead by filing a further amended statement of claim. In that further amended statement of claim, matters of the kind referred to in the letter of 21 November 2007 should be included in the pleading.

45 On the hearing, counsel for the applicants also indicated that the words "and negligence" in para 52 of the ASC had been included by error and should be omitted. These words should likewise be omitted in the further amended statement of claim.

46 The substantial issue between the parties on the strike out application can be outlined as follows. ANZ points out that according to para 31 of the ASC, the Representations were continuing representations down to the entry into the Transaction on 1 May 2003 and, by implication, not beyond that date. Accordingly, a question arises as to the basis on which it is claimed that ANZ is liable in respect of the further losses incurred as a result of the Post Transaction Steps taken by the respective applicants.

47 The applicants emphasised that paras 37, 37A and 37B of the ASC show that the claim as pleaded is a claim of a "no transaction" case, that is to say, that absent the Representations the Transaction would not have been entered into, so that the applicants could not have taken the further steps which led to their incurring the further post-1 May 2003 losses.

48 I accept that there is more than one permissible way in which the applicants are entitled to put their case. That the applicants were induced directly by the Representations to take the Post Transaction Steps that they allegedly took is only one of those ways. I accept that they may be entitled to recover damages in respect of losses resulting from the Post Transaction Steps if they took those steps reasonably in an attempt to mitigate loss. Thus, a person who has been induced by misleading or deceptive conduct to enter into a transaction may be entitled to recover losses incurred as a result of his or her reasonably taking steps to mitigate loss, even though by the time of taking them the person was aware of the true facts, so that the misleading or deceptive effect of the conduct had ceased to be operative. It all depends on the facts.

49 The deficiency in the present pleading, however, is that it does not make it clear what the connection is between the Post Transaction Steps and the losses incurred as a result of the Post Transaction Steps on the one hand, and the entry into the Transaction on the other.

50 Counsel for the applicants did not suggest a case based on the claim that the Representations continued to operate after 1 May 2003. It is consistent with the ASC that the applicants became aware of the misleading and deceptive nature of the Representations the moment after the Transaction was entered into. It is not enough, however, in my view simply to emphasise that the claim is of a "no transaction" case. It must also be made clear on the pleading that there was a causal link between the situation in which the applicants found themselves in consequence of having entered into the Transaction and the Post Transactions Steps and associated losses.

52 Perhaps the clearest example of the omission is to be found in paras 42 and 43 of the ASC (as summarised at [24] and [25] above), but even in relation to the other steps taken, there should be pleaded the circumstances in which the applicants found themselves prior to taking the step in question that made it reasonable for them to take it.

53 The alternative, which I reject, but which the applicants seem to support, is that any losses that the applicants suffered as a result of any post Transaction dealings by the applicants with the shares and debt are to be compensated for by ANZ on the basis that those steps could not have been taken but for the Transaction because the applicants would not have owned the shares in Newco and would not have been owed the debt by Newco.

54 I turn now to the parties’ submissions, which were structured around issues raised in ANZ’s submissions.

55 According to the Substitute Table, Mr Chapman claims to recover $3,518,676.00 plus interest on that sum from 3 September 2004 (the date of the Internal Transfer) to 12 June 2007 (the date of commencement of the proceeding). It will be recalled that the Internal Transfer was pleaded in para 42 of the ASC, and alleged that Mr Chapman paid Geomar $3,518,676 in consideration of the transfer by Geomar to him of $3,518,676 of the debt of $4,055,556 that Newco owed to Geomar.

56 In their letter dated 21 November 2007, Atanaskovic Hartnell claimed that Mr Chapman would not have acquired the indebtedness of $3,518,676 from Geomar "had it not been for consequences that flowed directly from the misrepresentations...of ANZ that caused Geomar to enter into the Transaction" and that "[t]he loss claimed is the difference between what Mr Chapman paid Geomar ($3,518,676) and the value of that debt as at the time of acquisition of the debt...namely zero".

57 The letter seems to suggest that Newco had no assets with which to satisfy, in whole or in part, a debt of $3,518,676, and that Mr Chapman paid $3,518,676 to Geomar for nothing. On their face, such facts would suggest the possibility that Mr Chapman may have a remedy against Geomar.

58 In their submissions, the applicants assert that Atanaskovic Hartnell’s letter of 21 November 2007 makes it clear that Mr Chapman would not have acquired the debt from Geomar "had it not been for consequences that flowed directly from the misrepresentations of ANZ that caused Geomar to enter into the Transaction". This suggests that the Representations did continue to be operative after 1 May 2003 and were a direct cause, rather than an indirect cause, of the Internal Transfer.

59 It may be that when Mr Chapman paid $3,518,676 to Geomar on 3 September 2004 for an assignment of part of the debt owed to Geomar by Newco, Mr Chapman suffered a loss of the entire sum of $3,518,676 by reason of his having entered into the Transaction induced by the misleading or deceptive Representations made by ANZ. However the ASC does not plead material facts showing either a direct causal link back to the Representations or a causal link back to the entry into the Transaction.

Damages in respect of shares acquired and loans made by Mr Chapman and Mrs Chapman

60 According to the Substitute Table, Mr Chapman claims $333, 333.00 and interest on that sum from 1 May 2003 (the date of the Transaction) to 12 June 2007 (the date of commencement of the proceeding), while Mrs Chapman claims $2,611,111.00 and interest on that sum for the same period. It will be recalled that the amounts mentioned were the amounts that Mr Chapman paid on 1 May 2003 to purchase 333,333 ordinary shares in Newco, and that Mrs Chapman paid on the same date to purchase 2,611,111 convertible preference shares in Newco, respectively, in each case as part of the Transaction.

61 In their letter of 21 November 2007, Atanaskovic Hartnell assert that the value of the shares in Newco so purchased by Mr Chapman and Mrs Chapman was, in each case zero. Counsel for the applicants correctly points out that para 53 of the ASC states that at the date of the Internal Assignment (to Helebeth on 30 June 2005 as pleaded in para 43 of the ASC), the shares in Newco were worth substantially less than what was paid for them "if anything at all". He makes the point that these last words contemplate the possibility of a value of zero. It is not clear, however, why responsibility for a fall in value down to zero between 1 May 2003 and 30 June 2005 should be assigned to ANZ. If the applicants case is that the fall in value was not ANZ’s fault except indirectly, in the sense that the initial acquisition of the shares in Newco was induced by the Representations and for that reason alone the measure of Mr Chapman’s and Mrs Chapman’s recoverable losses is the fall in value due to market forces, this should be made clear on the pleading.

62 If the shares were worth zero at 30 June 2005, it is understandable that Mr Chapman and Mrs Chapman sold their shares to Helebeth on that date for a nominal consideration of $10 per entity (see para 43 of the ASC). The problem is that no material facts are pleaded showing any connection between the Transaction on 1 May 2003 and the zero value of the shares a little over two years later. I should make it clear that by "connection" I include what may be the ultimate case on which the applicants intend to rely, namely, that the Transaction placed them in situations at different times in which they were forced to take steps in, what they reasonably believed represented, their best interests at the time. Material facts constituting a case of that kind however, must be pleaded.

63 According to the Substitute Table, Geomar claims interest on $4,055,556.00 from 1 May 2003 to 3 September 2004. Geomar also claims $536,880.00 and interest on that sum from 3 September 2004 to 31 December 2005 (less repayments of $500,000 as referred to below). It will be recalled that on 3 September 2004 Geomar transferred $3,518,676 of the debt of $4,055,556 owed to it by Newco to Mr Chapman in return for payment of $3,518,676, leaving Newco owing $536,880.00 to Geomar thereafter. According to the Substitute Table, interest of $1,257,331.50 accrued on $4,055,556 from 1 May 2003 to 3 September 2004. Interest of $206,882.52 accrued on the sum of $536,880.00 from 3 September 2004 to 31 December 2005, making a total of principal and interest of $743,762.52. A footnote to the Substitute Table records that $250,000 was paid on 3 July 2006 and a further $250,000 on 2 January 2007 (these payments are pleaded in para 48 of the ASC as summarised at [29] above). Those two payments total $500,000 and, when deducted from $743,762.52, leave a balance of $243,762.52. That amount plus the interest of $1,257,331.50 makes a total sum of $1,501,094.02, which is claimed by Geomar. As I understand it, the applicants say that this description of the loss represents the claim made.

64 I have difficulty, however, in reconciling the position described with para 48 of the ASC. Why does interest cease to accrue at 31 December 2005? According to Atanaskovic Hartnell’s letter of 21 November 2007, Geomar transferred the debt to Helebeth on 31 December 2005. This would explain why no interest accrued beyond that date. However, as previously mentioned at [43] above, the applicants concede that Geomar did not transfer the debt to Helebeth.

65 Whatever the true claim, the ASC should state it clearly. It does not do so at present.

66 In principle there is no difficulty in the applicants complaining that, having been induced by ANZ’s misleading or deceptive conduct to enter into the Transaction, they lost all the money they paid at the time of doing so, and there is no difficulty in the applicants seeking to recover that money with interest, whether based on Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 or otherwise. However, the ASC should plead facts showing that the applicants claim that they got nothing in return for the money paid. It is not suggested, for example, that Newco did not become legally indebted to Geomar for the sum of $4,055,556 which it lent to Newco on 1 May 2003. I presume that immediately following the loan, Newco was able to repay it. Some facts to the effect that Newco ceased to be able to repay the loan at some time should be pleaded.

67 Paras 56 and 57 of the ASC set out the amounts claimed by "the Chapmans" (the ASC uses that expression to refer to the applicants). ANZ complains that para 57 of the ASC is embarrassing because it asserts that the applicants, without distinguishing between them, claim the amount of $13,183,682.38.

68 In their submissions, the applicants reply that the letter dated 21 November 2007 from Atanaskovic Hartnell, coupled with the Substitute Table (that is annexed to these reasons for judgment), adequately identifies the amounts claimed by the respective applicants.

69 I agree with counsel for the applicants that the letter dated 21 November 2007 from Atanaskovic Hartnell coupled with the Substitute Table makes it clear what the amount of each applicant’s individual claim is, but it remains true that paras 56 and 57 of the ASC are embarrassing and should be amended. Those paragraphs suggest a liability of ANZ to all of the applicants jointly. In truth, there are four several claims as the Substitute Table demonstrates. Paragraphs 56 and 57 should reflect this position.

70 Again, the legal principles governing the supply of further and better particulars are not in controversy. I need not refer to the authorities. It may be said that the object of particulars is to inform a party more fully of the nature of the case to be met as distinct from stating the bare facts sufficient to constitute the claim as a claim cognisable in law, and, of course, from the evidence to be adduced in support of the claim.

(a) particulars of the oral Representations pleaded in paras 19, 21A, 22, 24, 25, 26, 27, 28 and 29 of the ASC; and

(b) in respect of each of the subparagraphs of para 29D of the ASC, the factual matters said to give rise to the alleged failure on the part of ANZ.
In Goldsmith v Sandilands [2002] HCA 31; (2002) 190 ALR 370 at 371, Gleeson CJ stated:

Particulars of the Representations pleaded in paras 19, 21A, 22, 24, 25, 26, 27, 28 and 29 of the ASC

72 In relation to each of the Representations pleaded in the paragraphs identified, ANZ seeks an order that the applicants specify:

73 I do not think that ANZ is entitled to require the applicants to categorise the alleged Representations as being as to present fact or as to an opinion. No doubt, there will be submissions on the final hearing as to the proper characterisation of particular Representations for the purpose of s 51A of the TP Act and s 12BB of the ASIC Act, but I do not think that characterisation at this stage is necessary in order to enable ANZ to file its defence.

74 The applicants point out that a reading of the paragraphs complained of makes it plain that in so far as oral Representations are concerned, the relevant period during which they were made was the very limited period commencing in March 2003 and ending on 1 May 2003. Further, in each instance, the person to whom the Representation was made is identified as being one or more (as identified in each case) of Mr Chapman, Helen Chapman or Ken Chapman.

75 Finally, the applicants submit that the maker of the Representation is also clearly identified. As to the large majority, it is pleaded that it was Mr Dudurovic. The ASC identifies Mr Rade Dudurovic as having been at all material times the Director, Regional Investment Banking and Private Equity, of ANZPE. Another maker of some of the Representations who is referred to in some instances is Mr Graeme Thomas, whom the ASC identifies as having been at all material times the Relationship Manager for ANZ in Cairns.

76 Order 12 r 5(3) of the Federal Court Rules provides that the Court shall not make an order for a party to file and serve particulars before the filing of the defence unless, in the opinion of the Court, the order is necessary or desirable to enable the respondent to plead or for some other special reason.

77 The applicants submit that by seeking the order for particulars, ANZ is seeking to impose on the applicants the task of gathering together the level of detailed information that it would ordinarily not otherwise have to do until preparation of its evidence.

78 It has been suggested that in contemporary commercial litigation, where there will inevitably be a direction for the filing and service of affidavits or witness statements, the necessity for lengthy particulars may be viewed with disfavour: Police and Nurses Credit Society Ltd v Burgess Rowson (WA) Pty Ltd [2006] FCA 1395 at [17].

79 I have read carefully paras 19, 21A, 22, 24, 25, 26, 27, 28 and 29 of the ASC and I am of the view that the particulars already provided are adequate. In each case, it is said that in so far as the Representations in question were oral, they were made in "a conversation", "a discussion", "various discussions" or "several discussions", between a named person on behalf of ANZPE and one or more named persons on behalf of the applicants. As well, either a particular date or a confined period is stated.

81 Paragraph 29D of the ASC pleads falsity of the "Due Diligence Representations" referred to in paras 29(a), 29(c)-(h), 29(j) and 29C of the ASC. In each case it is pleaded that ANZ did not do the things the subject of those Representations.

82 ANZ submits that taken individually and cumulatively, the allegations in para 29D are so broad as to attack every aspect of ANZ’s conduct prior to the Transaction of 1 May 2003. ANZ submits that in order to plead to these paragraphs, it would need to satisfy itself that every aspect of the due diligence process was completed "properly and adequately", "including" the "commercial, management, account, legal, taxation and insurance" due diligence. ANZ submits that it is oppressive that it should be required to undertake such an exercise, and that the applicants should be required to identify those respects in which they say the due diligence exercise was flawed before ANZ is required to plead to the allegations.

83 For their part, the applicants submit that it should be borne in mind that the due diligence process was conducted and coordinated by ANZ on behalf of itself and the applicants, and that the applicants do not have available to them all the detailed information about the due diligence process that will be likely to be available to them on discovery.

84 Notwithstanding this, I think that the applicants should be required to do more than they have done. If they are truly unable to give any particulars at all, a question arises as to the basis on which the allegation of a deficiency in the due diligence process has been made. I accept the applicants’ submission that they may be in a position to provide further and better particulars following discovery, but they must surely have some more precise notion at present of the failure on the part of ANZ on which they will rely, beyond the generalisations contained in para 29D of the ASC.

85 Accordingly, I think that there should be an order for the provision of the best further and better particulars of the kind as sought in para 2 of Sch 1 to the amended notice of motion that the applicants are presently able to give.

86 ANZ has succeeded in relation to the strike out aspect of its motion. It would be possible simply to make an order that particular paragraphs of the ASC be struck out, but inevitably this would have implications for the remainder of the ASC. I think that my reasons above will make it clear what is required to fix the pleading, and that the better course is to strike out the amended statement of claim in total and grant the applicants leave to re-plead. This course will permit the applicants to improve the pleading by taking into account other matters mentioned in the course of the hearing,

87 The applicants have succeeded in resisting the first part of the motion relating to further and better particulars, while ANZ has succeeded on the latter part.

88 My present disposition is to order the applicants to pay two thirds of ANZ’s cost of the motion, but I will give the parties an opportunity to make submissions on costs if they wish to seek a different order.

Counsel for the Applicants (Respondents on the Motion):	Mr JR Lockhart

Solicitor for the Applicants (Respondents on the Motion):	Atanaskovic Hartnell

Counsel for the Respondent (Applicant on the Motion):	Mr RA Dick and Ms K Richardson

Solicitor for the Respondent (Applicant on the Motion):	Freehills

Date of Hearing:	18, 19 December 2007

Date of Judgment:	18 February 2008

Interest	Investment	Start Date	End Date	No of days	Interest Rate	Interest per day	Interest Owed	Total Investment plus interest	Loss claimed
Mr Chapman	$333,333.00	01-May-03	12-Jun-07	1,504	0.09	$82.19	$123,616.14	$456,949.14	$456,949.14
	$1,300,000.00	09-Jul-04	12-Jun-07	1,069	0.09	$320.55	$342,665.28	$1,642,665.28	$1,642,665.28
	$3,518,676.00	03-Sep-04	12-Jun-07	1,013	0.09	$867.52	$878,896.56	$4,397,572.56	$4,397,572.56
Mrs Chapman	$2,611,111.00	01-May-03	12-Jun-07	1,504	0.09	$643.83	$968,327.38	$3,579,438.38	$3,579,438.38
Mr & Mrs Chapman	$1,228,985.00	16-Jan-04	12-Jun-07	1,244	0.09	$303.04	$376,978.00	$1,605,963.00	$1,605,963.00
Geomar	$4,055,556.00	01-May-03	03-Sep-04	492	0.23	$2,555.55	$1,257,331.50	$5,312,887.50	$1,257,331.50
	$536,880.00	03-Sep-04	31-Dec-05	485	0.29	$426.56	$206,882.52	$743,762.52	$243,762.52^[1]
Total	$9,528,985^[2]						$4,154,697.38		$13,183,682.38^[3]

^[1] The two payments of $250,000 each received on 3 July 2006 and 2 January 2007 (see paragraph 48(a) of the ASOC) have been notionally credited to reduce the loss on the original $536,880 invested to $36,880.

^[2] The amount of $4,055,556.00 is not included in the total of the "Investment" column as this sum was divided into the amounts of $536,880 and $3,518,676, as readily apparent from the dates referred in the interest calculation included in table in paragraph 56 of the ASOC and the facts pleaded in paragraph 42 ASOC.

^[3] The amounts of $500,000 and $4,055,556.00 are not included in the total of the "Loss claimed" column for the reasons set out in footnotes 1 and 2 above.

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URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/86.html

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1053 OF 2007

JUDGE:	LINDGREN J
DATE OF ORDER:	18 FEBRUARY 2008
WHERE MADE:	SYDNEY

JUDGE:	LINDGREN J
DATE:	18 FEBRUARY 2008
PLACE:	SYDNEY

Federal Court of Australia

Chapman v Australian and New Zealand Banking Group Limited [2008] FCA 86 (18 February 2008)