DISTRICT COURT OF QUEENSLAND

1. [1]
   The fourth defendant seeks orders that the further amended statement of claim of the plaintiffs filed 11 August 2008 be struck out or in the alternative certain paragraphs relating to the fourth defendant be struck out and that the plaintiffs’ claim against the fourth defendant be dismissed.

2. [2]
   At the hearing of the application Mr Nott of Herbert Geer, the town agents for the plaintiffs’ Adelaide solicitors, Grope Hamilton, sought leave to withdraw as town agents on the record which leave I granted. It is apparent from an affidavit of Mr Nott dated 25 May 2009 that Grope Hamilton were aware of the hearing of the application but chose not to appear for the plaintiffs.

3. [3]
   The fourth defendant is a firm of accountants and is alleged in the subject pleading to have been the accountant for a company, Solar Pacific Technologies Pty Ltd (“Solar Pacific”), a shareholder of the second plaintiff which in turn was a 50% shareholder in Solar Pacific.

4. [4]
   The first and second defendants are directors of Solar Pacific and shareholders of the third defendant. Solar Pacific is not a party to the action.

5. [5]
   The first plaintiff alleges that he sold his solar heating business on or about 21 October 1997. He then alleges that the first and second defendants terminated his position in the management of Solar Pacific in May 2000 and that the company ceased trading in November 2002. The business name used by Solar Pacific and its assets being transferred to the third defendant.

6. [6]
   As against the present applicant fourth defendant the plaintiffs allege:

1. (a)
   That it was the accountant of Solar Pacific and the other defendants^[1];

2. (b)
   That – “at all material times, the fourth defendant owed Solar Pacific and/or its shareholders and/or creditors an implied duty to act honestly, in good faith and in the best interest of Solar Pacific and/or its shareholders and/or its creditors”, which allegation is then purportedly particularised^[2];

3. (c)
   Owed a duties to the plaintiffs to “insure that it did not intend to advise the defendants and Solar Pacific and/or acted negligently in advising in relation to the sale pleaded herein without attempting to stop the purported sale in circumstances where clearly the interests of the first, second and third defendants were being preferred to the interest of Solar Pacific and more particularly the plaintiff.”^[3];

4. (d)
   Acted as the plaintiffs’ agent in preparing and lodging the transfer of the business name of Solar Pacific to the third defendant^[4];

5. (e)
   Failed to tell the plaintiff in September 2002 about the transfer of the business name^[5];

6. (f)
   Failed to advise the first plaintiff on a timely basis that the fourth defendant was not intending to prepare financial accounts for Solar Pacific;

7. (g)
   Did not disclose to the plaintiffs the financial position of Solar Pacific on a timely basis^[6];

8. (h)
   Was negligent, acted in conflict of interest, acted without appropriate authority and acted dishonestly and/or fraudulently “to the detriment of all shareholders and Solar Pacific and to the plaintiffs”^[7];

1. (i)
   Breached its fiduciary duties by:-

1. (i)
   Giving effect to the transfer;

2. (ii)
   Not giving a proper value to the transfer;

3. (iii)
   Not transferring the assets for a proper purpose;

4. (iv)
   Conspiring with the other defendants “to give effect to the breach of the director’s duties and/or induced/counsel [sic] them to be in breach of their fiduciaries [sic] in giving effect to the transfer;

10. (j)
    Received the benefit of its professional fees with the knowledge that the business was misapplied by the first and second defendants and in breach of their fiduciary and/or statutory duty to Solar Pacific^[8];

10. (k)
    Further breached its fiduciary duties by breaching statutory duties in sections 180(2), 181(2) and 182(2) of the Corporations Act by being a person involved in the alleged contraventions of the first and second defendants^[9];

10. (l)
    Knew or ought to have known that its conduct (the breach of any or all of the above breaches) would cause harm and damage to Solar Pacific and/or its shareholders and/or its creditors^[10].

7. [7]
   In essence, the claim against the fourth defendant proceeds on the following bases:

1. (a)
   That the fourth defendant owed the plaintiffs, and breached, a fiduciary duty to act honestly in good faith and in the best interests of Solar Pacific and/or its creditors and/or its shareholders^[11];

2. (b)
   Owed the plaintiffs, and breached a duty of care in tort^[12];

3. (c)
   Conspired with the other defendants in their breach of directors duties^[13];

4. (d)
   Assisted in the committing of the fraud^[14];

5. (e)
   Owned the plaintiffs, and breached, statutory duties under sections 180(2), 181(2) and 182(2) of the Corporations Act 2001^[15]; and

6. (f)
   Caused the plaintiffs to suffer loss and damage as a result.

Fiduciary Duty

8. [8]
   No material facts are alleged founding the allegation that the fourth defendant as accountant to Solar Pacific, a non-party to the action, owed a duty to the plaintiffs. Even if a cause of action exists which is not certain.^[16] In the absence of any such facts the claim is untenable. 

Duty of care in tort

9. [9]
   Again, there is no proper basis pleaded to found any tortious duty owed by the fourth defendant to the plaintiffs. It is not said that the plaintiff ever acted for them as their accountant.

Fraud

10. [10]
    It is well established that allegations of fraud must be specifically pleaded and with particularity^[17].

11. [11]
    The plaintiffs’ allegation of fraud is a bare allegation unsupported by any material facts and falls far short of what is required of such a pleading.

Conspiracy

12. [12]
    This pleading is also no more than a bare allegation in that it is not pleaded:

1. (a)
   Which of the other defendants, the fourth defendant, is said to have conspired with;

2. (b)
   When the conspiracy was formed;

3. (c)
   The manner in which the fourth defendant and others conspired;

4. (d)
   The specific agreement said to have been arrived at between the fourth defendant and its co-conspirators; and

5. (e)
   The overt acts alleged to have been carried out by each of the co-conspirators.

13. [13]
    These matters must be precisely pleaded^[18].  As presently pleaded, this cause of action is not disclosed.

Breaches of Corporations Act 2001

14. [14]
    The allegations against the fourth defendant^[19] is that the fourth defendant owed statutory duties pursuant to sections 180, 181 & 182 of the Act and that the fourth defendant was involved by virtue of s 79 of the Act in the alleged contraventions of the Act by the first and second defendants.

15. [15]
    Sections 180, 181 and 182 impose duties on directors’ officers and the employees of corporations. Nothing is pleaded clothing the fourth defendant with any of those offices. Absent circumstances founding a claim that an accountant to a company fits into one of those categories, nowhere is to be found any material fact to support the allegation that the fourth defendant was “involved” in the alleged contraventions. In the absence of such facts being pleaded, the plaintiffs’ pleading fails to disclose a cause of action for breach of the Act.

16. [16]
    The pleading under attack also fails to set up any causal connection between the monetary relief claimed^[20] and the relief sought against the fourth defendant.  That may well be difficult to plead given that it is pleaded that the first defendant was sacked by the first and second defendants in May 2000 some two years before the transfer of the business which is alleged the fourth defendant was involved in^[21].  No suggestion is made that the fourth defendant was involved in the first plaintiff’s termination.

Principles involved in striking out pleadings

17. [17]
    The application is made under s 171 of the UCPR for the strike-out of the Statement of Claim under rules 5 & 371 in relation to the strike-out of the claim. In Banque Commerciale SA en liquidation v Akhil Holdings Limited^[22] the High Court said:

“The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In Liquidation) [1916] HCA 81; (1916) 22 CLR 490, per Isaacs and Rich JJ. at p 517. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision: per Mason CJ and Gouldron, p286.”

18. [18]
    In Thiess Pty Ltd v FFE Minerals Australia Pty Ltd^[23], White J stated:

“[36] … there is some duplication in the several purposes of the pleadings proper and the particulars which expand upon them, but it must be kept firmly in mind that what the UCPR require, reflective as they are of long held approaches to pleadings, or at least since the Judicature Act 1876, is that each fact, the proof of which is essential to success at trial, must be pleaded…

[38] More generally, the purpose of pleadings is to inform the opposite party of the case it has to meet and to permit, in a responsive pleading, the issues to be narrowed. Furthermore, the defendant cannot be expected to intuit what the plaintiff intends to convey in its pleadings by its own understanding of the facts and circumstances giving rise to the litigation. That would be a certain path to disaster.”

19. [19]
    Finally, in Boleman v Akinson^[24], Hanger CJ endorsed the following passage from Rodgers Principles of Pleading in Practice:

“Perhaps the best test is this:

After you have drafted your pleading, banish your instructions from your mind for a moment, and imagine yourself as a stranger coming fresh to the matter.  Would you draft, read by itself, convey to his mind a clear conception of your client’s case?”

20. [20]
    The present pleading would fail that test and in my view leaves the fourth defendant in the realm of speculation as to just what is alleged against it even if the causes of action were sustainable.

21. [21]
    I consider it appropriate that paragraphs 14-21, 30-33 and 36-38 of the Further Amended Statement of Claim be struck out pursuant to r171 of UCPR and I so order.

Strike out of claim

22. [22]
    The applicant also seeks an order that the claim against it be struck out. In considering that application it is appropriate to consider the circumstances surrounding this claim^[25].  It was filed on 9 December 2005. It was amended on 22 November 2006 pursuant to an order of 17 November allowing the addition of the second plaintiff.  On 12 January 2007 the fourth defendant’s solicitors sought further and better particulars of the then amended statement of claim.  It took until 20 July 2007 for the particulars to be provided despite repeated requests by the fourth defendant’s solicitors.  The latter considered the particulars inadequate and by letter dated 10 August 2007 wrote foreshadowing an application for an order for further and better particulars^[26].

23. [23]
    It then took some 7 ½ months until 31 March 2008 before a “foreshadowed further amended claim and statement of claim” was sent to the fourth defendant. That was never filed and on 17 June 2008, the fourth defendant wrote to the plaintiff’s solicitors pursuant to UCPR444 detailing complaints in relation to the amended statement of claim filed by the plaintiffs on 22 November 2006 and seeking the further and better particulars of the unfiled further pleadings sent on 31 March 2008.

24. [24]
    On 4 August 2008 the plaintiffs consented to an order of His Honour Judge Wilson striking out the then amended statement of claim filed 22 November 2006 and ordering that a further claim and statement of claim be filed and served by the plaintiffs by 8 August 2008. It is the amended claim and statement of claim filed on 11 August 2008 which is here under attack.

25. [25]
    So the plaintiffs have had since 9 December 2005 to properly formulate their claim against the fourth defendant and have filed two amended pleadings since then namely dated 22 November 2006 and 11 August 2008 but have still failed to properly formulate any claim against the applicant. As Chesterman J said in Althaus & Anor v Australia Meat Holdings Pty Ltd & Anor^[27]:

“[74] In a very real sense the plaintiffs’ persistent, incompetent and ineffectual attempts to describe a case against the defendants is an abuse of process. It is not, I think, an exaggeration to describe the conduct of the action by the plaintiffs as scandalous. The attempts are a misuse of the rules which permit and control the institution of proceedings; and subject the defendants to repeated, defective processes which they must answer or apply to strike out. There is a responsibility on plaintiffs and those who advise them to put their cases in proper form and get on with them. These plaintiffs have been signally unable to discharge that responsibility. The time for indulgence has passed. They must suffer the consequence of their own failures.”^[28]

26. [26]
    In my view, whilst I do not say the plaintiff’s conduct to date amounts to an abuse of process or scandalous, I regard the comments of Chesterman J as to the plaintiffs’ subjecting the applicant to repeated defective processes as apposite in this case. I consider the plaintiffs have had more than an ample opportunity to properly formulate a claim against the fourth defendant if it existed. It would, in my view be unfair and contrary to the letter and spirit of the UCPR, which speak of proceedings being progressed justly and expediently by reference to the real issues in dispute, to expect the fourth defendant to further wait around to allow the plaintiffs to make yet another attempt at pleading its case.

27. [27]
    In all the circumstances, it is appropriate that the plaintiffs’ claim against the fourth defendant be dismissed and that the plaintiffs pay the fourth defendant’s costs to date. The plaintiffs have breached rule 280 in failing to properly prosecute their claim and also rule 371 in failing to comply with the order of Wilson of 4 August 2008.

28. [28]
    I order:

1. That paragraphs 14, 15, 16, 17, 18, 19, 20, 21, 30, 31, 32, 33, 36, 37 and 38 of the     further amended statement of claim filed on 11 August 2008 be struck out;
2. That the plaintiffs’ claim against the fourth defendant be dismissed;
3. That the plaintiffs pay the fourth defendant’s costs of and incidental to the                          proceedings on the standard basis to be assessed;

29. [29]
    Having this morning heard the fourth defendant on the issue of costs of the application I further order that the plaintiffs pay the fourth defendant’s costs of the application on an indemnity basis.