Cape York Airlines Pty Ltd v QBE Insurance (Australia) Ltd [2008] QSC 302 [2009] 1 Qd R 116

SUPREME COURT OF QUEENSLAND CITATION: Cape York Airlines Pty Ltd v QBE Insurance (Australia) Ltd [2008] QSC 302 PARTIES: CAPE YORK AIRLINES PTY LTD (ACN 000 627 010) (plaintiff) v QBE INSURANCE (AUSTRALIA) LIMITED (ACN 003 191 035) (defendant) FILE NO: BS 1762 of 2005 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: 24 November 2008 DELIVERED AT: Brisbane HEARING DATE: 12 September 2008 JUDGE: Daubney J ORDER: 1. I rule that paragraph 5(c) of the sixth further amended defence, filed on 16 July 2008, does not comply with the requirements of rule 166 of the UCPR 2. I will hear the parties as to the orders and directions necessary in light of this ruling CATCHWORDS: PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – PLEADING – DEFENCE AND COUNTERCLAIM – where plaintiff applies for striking-out of the defence under r 171 of the Uniform Civil Procedure Rules 1999 (Qld) – where plaintiff contends that certain denials and non-admissions in the defence are defective because they do not contain a direct explanation for the defendant’s belief that the relevant allegation is untrue or cannot be admitted – whether defence fails to comply with r 166(4) of the Uniform Civil Procedure Rules 1999 (Qld) Uniform Civil Procedure Rules 1999 (Qld), r 5, r 149, r 166, r 171 Ballesteros v Chidlow [2005] QSC 285, cited Davie v New Merton Board Mills Ltd [1956] 1 WLR 233, cited Gilbert v Goodwin (No 3) [2006] 1 Qd R 499, cited -- 1 of 13 -- 2 Gordon v Gordon [1948] VLR 57, cited Groves v Australian Liquor Hospitality and Miscellaneous Workers Union & Anor [2004] QSC 142, cited Hall v London & North Western Railway (1877) 35 LT 848, cited Pinson v Lloyds and National Provincial Foreign Bank Ltd [1941] 2 KB 72, cited Robinson v Laws & Anor [2001] QCA 122, cited Warner v Sampson [1959] 1 QB 297, cited COUNSEL: D R Cooper SC for the plaintiff S S W Couper QC for the defendant SOLICITORS: BCI Duells for the plaintiff Cooper Grace Ward for the defendant [1] On 8 February 2004, a Cessna 208 Caravan airplane, of which the plaintiff was the lessee and operator, suffered engine failure and ditched in the sea off the shore of Green Island near Cairns. The plaintiff had insured the airplane against accidental loss with the defendant insurer. The plaintiff has brought this proceeding against the insurer to recover losses and expenses which it contends are recoverable under the terms of the policy. The insurer wishes to defend the claim. [2] It is unnecessary for present purposes to descend into the details of the claim or the defence. The current pleadings in the matter are: - the third further amended statement of claim, filed on 18 June 2008 (‘the latest statement of claim’), and - the sixth further amended defence, filed on 16 July 2008 (‘the latest defence’). [3] The primary application before me is by the plaintiff, pursuant to Uniform Civil Procedure Rules 1999 (Qld) (‘UCPR’) rule 171, seeking that numerous paragraphs of the latest defence be struck out. Counsel for the parties agreed that alternative claims in the application, including for the defendant to provide further and better particulars of the latest defence ought to be treated as subordinate to the primary application, in the sense that the parties’ respective attitudes to and responses to the alternative claims will effectively be regulated by my determination on the primary application. [4] The basis for the plaintiff’s application to strike out the numerous paragraphs of the latest defence is that the paragraphs, as pleaded, are bad in form for failure to comply with rule 166 of the UCPR. The defendant says that its pleading is sufficient to comply with the requirements of that rule. [5] Given that the substance of all of the plaintiff’s complaints was the same, the parties were content for me to determine the issues specifically only in respect of one of the complaints, accepting that my reasoning on that paragraph would apply equally in -- 2 of 13 -- 3 respect of the other complaints. Accordingly, I will simply direct myself to the first on the plaintiff’s list of complaints. [6] Paragraph 8(b) of the latest statement of claim alleges: ‘8. As a consequence of the Ditching, the Aircraft: ... (b) immediately incurred, and is continuing to incur, a process of corrosion;’ [7] Paragraph 5(c) of the latest defence, about which the plaintiff complains, reads: ‘5. As to paragraph 8 of the statement of claim, the defendant: ... (c) denies the allegations contained in subparagraphs 8(b) on the grounds that: (i) between 18 and 20 February 2004 the Plaintiff undertook the complete stripping of the interior trim, panels and inspection panels throughout the Aircraft and washed it out thoroughly before applying a liberal spray of kerosene; (ii) on or about 20 February 2004 Gunther Stern of the Plaintiff orally informed Mike Ellis of the Defendant’s loss adjusters GAB Robins that the Plaintiff had in place an anti-corrosion program and had recently sprayed the entire internals of the Aircraft including inside the wings and tail with a corrosion inhibiting wax product (the Defendant cannot give further particulars until after disclosure); and (iii) further, if the hull of the Aircraft has incurred and is continuing to incur a process of corrosion, that is not a consequence of the ditching but a consequence of the Plaintiff’s failure to authorise repairs to the Aircraft as requested by the Defendant in letters dated 26 February 2004, 22 March 2004 and 24 March 2004. Particulars A. The Plaintiff has at all material times since on or about 18 February 2004 had possession and control of the Aircraft. B. Since on or about 20 February 2004, the Plaintiff has left the Aircraft unprotected and exposed to the elements and has taken no steps to prevent any ongoing corrosion of the Aircraft. C. If the Plaintiff had permitted the repairs referred to in this subparagraph the hull of the Aircraft would have incurred no process of corrosion.’ -- 3 of 13 -- 4 [8] The plaintiff submitted that this pleading fails to comply with rule 166 because it does not contain a direct explanation for the defendant’s belief that the allegation in paragraph 8(b) in the latest Statement of Claim is untrue or cannot be admitted. The plaintiff contended that the form of defence adopted by the defendant is confusing, and fails to draw a distinction between facts which are raised as an explanation as to the defendant’s belief which may have the consequence of merely putting the plaintiff to proof, and facts which are pleaded by the defendant as issues to be decided at trial on which the defendant bears the onus of proof. Counsel for the plaintiff pointed out that this is not a matter of academic concern or mere semantics, because the identification of the issues on the pleadings informs disclosure, the process of preparation for trial, and the determination of the relevance of evidence at trial. [9] The defendant submitted that each of the paragraphs challenged ‘is a denial accompanied by grounds for the denial as required by rule 166(4)’. It further submitted that ‘many, if not all, of the facts pleaded as grounds for denials in the relevant paragraphs are facts relevant to the issue in each case created by the allegation in the statement of claim and its denial’. The defendant relied in that regard on observations by Helman J in Gilbert v Goodwin (No 3)1 . Counsel for the defendant said that it proposes leading evidence at trial about those facts, but contended that the grounds for denial were not converted into facts ‘directly put in issue’, arguing that ‘the facts are relevant only because they are relevant to the fact in issue which has been pleaded in the statement of claim and denied’. In that regard, counsel for the defendant submitted that, in contrast to a non-admission under which a plaintiff is put to proof because rule 165(2) prohibits a party who pleads a non-admission from calling evidence in relation to the fact not admitted unless the evidence relates to another part of the party’s pleading, a denial puts the matter in issue and both sides may lead evidence about it. [10] Rule 165(1) sets out the permissible responses to a pleading: ‘A party may, in response to a pleading, plead a denial, a non-admission, an admission, or another matter.’ [11] Rule 166 regulates the pleading of denials and non-admissions by providing: ‘166 Denials and non-admissions (1) An allegation of fact made by a party in a pleading is taken to be admitted by an opposite party required to plead to the pleading unless - (a) the allegation is denied or stated to be not admitted by the opposite party in a pleading; or (b) rule 168 applies. (2) However, there is no admission under subrule (1) because of a failure to plead by a party who is, or was at the time of the failure to plead, a person under a legal incapacity. 1 [2006] 1 Qd R 499 -- 4 of 13 -- 5 (3) A party may plead a non-admission only if - (a) the party has made inquiries to find out whether the allegation is true or untrue; and (b) the inquiries for an allegation are reasonable having regard to the time limited for filing and serving the defence or other pleading in which the denial or non- admission of the allegation is contained; and (c) the party remains uncertain as to the truth or falsity of the allegation. (4) A party’s denial or non-admission of an allegation of fact must be accompanied by a direct explanation for the party’s belief that the allegation is untrue or can not be admitted. (5) If a party’s denial or non-admission of an allegation does not comply with subrule (4), the party is taken to have admitted the allegation. (6) A party making a non-admission remains obliged to make any further inquiries that may become reasonable and, if the results of the inquiries make possible the admission or denial of an allegation, to amend the pleading appropriately. (7) A denial contained in the same paragraph as other denials is sufficient if it is a specific denial of the allegation in response to which it is pleaded.’ [12] It ought now be regarded as uncontroversial that the introduction of the UCPR effected significant changes to the principles and practice of pleading in civil cases in Queensland. Underlying those principles and informing the way in which the practices are put into effect are the philosophies expressed in rule 5. Subrule 5(2) requires the Court to apply the UCPR ‘with the objective of avoiding undue delay, expense and technicality and facilitating the purpose of these rules’. The purpose on which that requirement is premised is the facilitation of the ‘just and expeditious resolution of the real issues in civil proceedings at a minimum of expense’ (emphasis added). Observance of this purpose requires the Court and the parties, from the outset of a proceeding, to utilise the processes provided under the UCPR to hone and refine the matters about which the parties to civil litigation perceive themselves to be in dispute to identify the ‘real issues’ between them. In Robinson v Laws & Anor2, de Jersey CJ said3 : ‘[52] ... The system of pleading in this State is geared to early comprehensive disclosure of the case to be mounted by the plaintiff, and the response of the defence. Beyond that, it remains geared, consistently with good commonsense, upon the plaintiff’s having the obligation to define the case he mounts, such that whether he succeeds depends on his sustaining that case. Civil litigation is, sensibly must be, claimant driven. 2 [2001] QCA 122. 3 at [52] – [53]. -- 5 of 13 -- 6 [52] The Uniform Civil Procedure Rules are premised on the need for that early, comprehensive definition of the case being mounted, and that equally early responsive definition of the position of the defence. Rule 5(1) states that the purpose of the rules is to facilitate “the just and expeditious resolution of the real issues in civil proceedings at the minimum of expense”. Rule 157 obliges a party to include in that party’s pleading “particulars necessary to ... define the issue for, and prevent surprise at, the trial.” The objective is early definition of the points at issue, and where possible their limitation.’ [13] With a view to implementing this philosophy, the UCPR radically changed the manner and mode of pleading defences. Generally speaking, it was permissible under the Rules of the Supreme Court (‘RSC’) for a defendant simply to traverse, either by denial or non-admission, every allegation in a statement of claim.4 Indeed, in Pinson v Lloyds and National Provincial Foreign Bank Ltd5 , Stable J6 could see no reason why a defendant was not entitled to put a plaintiff to proof on its whole case, if so advised, saying: ‘It is a commonplace of pleading to put in issue a fact as to which there is no real dispute to compel the plaintiff to call a particular witness to prove that fact and so afford the defendant an opportunity of cross-examining the witness on other matters material to the case. This seems to me a legitimate and well recognised method of pleading and one which on occasion serves a useful purpose.’ [14] In the same case, Goddard LJ said7 that a ‘bare traverse is a perfectly good plea provided that all that is thereby intended is to put the plaintiff to proof of his case’. [15] Under the RSC, there was no difference in effect between a denial and a non- admission. 8 Each was a common traverse, which did no more than put the plaintiff to proof of the allegation traversed.9 In Bullen & Leake and Jacob’s ‘Precedents of Pleadings’ (12th ed), it was explained at p 80: ‘The distinction usually observed [between a denial and a non-admission] is that a party denies any matter which, if it had occurred, would have been within his own knowledge, while he refuses to admit matters which are not within his knowledge; and sometimes the distinction is simply a matter of emphasis, a denial being more emphatic than a non-admission.’ [16] The attitude underpinning the previous approach to pleading defences under the RSC can be discerned from the following observation of O’Bryan J in Gordon v Gordon10 : 4 I say ‘generally speaking’, because RSC Order 25 Rule 1 provided that in actions for a debt or liquidated demand in money, a mere denial of the debt was not sufficient. 5 [1941] 2 KB 72 6 at 82 7 at 80. 8 Hall v London & North Western Railway (1877) 35 LT 848. 9 Warner v Sampson [1959] 1 QB 297; Candler v The Council of the South Australian Institute of Technology (1973) 6 SASR 162, per Walters J at 168. 10 [1948] VLR 57 at 58 -- 6 of 13 -- 7 ‘The defendant is not forced to make admissions and is entitled to deny or not to admit the plaintiff’s allegations. If he does so clearly he is allowed to do so, though he may eventually have to pay the costs for unnecessary denial or for improper refusals to admit.’ [17] One of the consequences of pleading a traverse by a bare denial was that the defendant was not permitted to adduce evidence beyond merely contradicting the plaintiff’s evidence on the fact which had been denied11 and if a defendant wished to go further than mere contradiction by putting an affirmative case it was required to plead that in its defence.12 [18] Under the UCPR, however, the bare traverse, either by way of denial or non- admission, which puts the plaintiff to proof is not available. Moreover, the UCPR recognises that a plea of denial and a plea of non-admission are quite different, with different effects. [19] Rule 166(3) by its terms limits the circumstances in which a party may plead a non- admission. Rule 166(4) requires, as a matter of form, that a non-admission of an allegation of fact ‘be accompanied by a direct explanation for the party’s belief that the allegation ... can not be admitted’. A failure to give this direct explanation results in the party being deemed to have admitted the fact – rule 166(5). The party who pleads a non-admission remains under an ongoing obligation to make reasonable inquiries and, if possible, amend the pleading to admit or deny the allegation – rule 166(6). 13 And, as noted above, rule 165(2) significantly limits a party’s ability to give evidence on a fact which it had not admitted. [20] Importantly, a non-admission can only be made if a party is ‘uncertain of the truth or falsity of the allegation’. It follows from the terms of the obligation imposed by rule 166(6) that, if that uncertainty is resolved by the party ascertaining that the not- admitted fact is true, the party is obliged to admit that fact. Equally, if the uncertainty is resolved by the party believing the not-admitted fact to be false, then the party is obliged to deny that fact, and such denial must comply with the requirements of rule 166(4). [21] It can therefore be said that the scheme of pleading provided for under the UCPR means that a party may only plead a denial of an allegation of fact made by its opponent if the party believes that allegation to be untrue. [22] This distinction between a denial and a non-admission under the UCPR also has an impact on the interpretation of rule 166(4). The reference in that rule to a party giving a direct explanation for believing that an allegation is untrue cannot relate to a non-admission because, by definition, a non-admission is only made when one is uncertain as to the fact’s truth or falsity. Similarly, a non-admission can only be 11 Davie v New Merton Board Mills Ltd [1956] 1 WLR 233 (n). 12 Pinson, per Goddard LJ at 80; Stable J at 83-84, that being a case concerning the traversing of a negative allegation in a statement of claim (i.e. the issue of the “negative pregnant”). 13 For an example of the practical operation of this ongoing obligation, see Anderson v AON Risk Services Australia Ltd (2004) QSC 49 at [87]. -- 7 of 13 -- 8 pleaded when a party is uncertain as to the truth or falsity of the allegation of fact being responded to and, if the truth of the fact is subsequently ascertained, it must be admitted. Accordingly, in my view, the elements of rule 166(4) ought be read disjunctively as follows: - a party’s denial of an allegation of fact must be accompanied by a direct explanation for the party’s belief that the allegation is untrue, and - a party’s non-admission of an allegation of fact must be accompanied by a direct explanation for the party’s belief that the allegation can not be admitted. [23] One then needs to ask: (a) What does the rule mean by requiring that there be a ‘direct explanation for the party’s belief’ that the allegation is untrue or that the allegation can not be admitted, as the case may be? (b) What, if anything, is the status and effect of that ‘direct explanation’ within the pleading? [24] The sorts of theoretical and practical difficulties to which these questions give rise in the case of defences have been adverted to by judges of this Court on a number of occasions since the introduction of the UCPR. For example, in Groves v Australian Liquor Hospitality and Miscellaneous Workers Union & Anor14 , Mackenzie J was called on to give a declaration as to the compliance of denials which consisted of ‘simply stating the negative of the propositions pleaded in the amended statement of claim without any further elaboration why the defendants believed that the allegation is untrue’. His Honour said: ‘13. The plaintiff respondent submitted that the meaning of the rule is that a defendant may not merely deny an allegation of fact but must give to the plaintiff material facts which he or she intends to establish by way of explaining the denials. The defendant contends that it does not require the basis of the denial to be expressed. It is submitted that it would be an unlikely interpretation of the rule to hold that it required a statement of evidence the defendant proposed to lead at trial since UCPR 149(1)(b) prohibits a pleading from containing evidence. Alternatively, if a denial were to be based on a “statement of opinion from the defendants as to why the denial should be made” this was also an unlikely interpretation for the same reason. Further, it was submitted that what were material facts to be proved depended on where the onus lay. The denials in paragraphs 4, 5(c), 6(c) and 7(e) were all concerned with material facts upon which the plaintiff bore the onus of proof. It could not have been the intention of UCPR 166(4) to impose an onus of proof on the respondent. 14. One of the oddities of the last proposition of the defendant’s argument is that the purpose of seeking the declaration is to preserve the right to rebut, if necessary, evidence led by the defendants, by calling evidence, to tip the balance, in a civil case, in 14 [2004] QSC 142 -- 8 of 13 -- 9 the defendant’s favour on the issue. Whichever way one looks at it, the plaintiff will still have to prove, on the balance of probabilities, that facts it alleges are true if it is to succeed in establishing the proposition whether the defendant calls evidence or not. Once there is no deemed admission, the plaintiff bears an onus of proof, which may be defeated either by cross-examination on behalf of the defendant without calling evidence, or calling evidence to show, on the balance of probabilities, that the plaintiff’s proposition is not true. 15. With respect to the other aspects of the defendant’s argument, there is a question which need not be pursued (and was not argued) whether giving an explanation involves simply that, and odes not involve pleading a fact at all. Whatever the proper view is, I am satisfied that the pleading is not sufficient to comply with UCPR 166(4). A mere statement to the opposite of what is alleged by an opposing party is not a denial “accompanied by a direct explanation for the party’s belief that the allegation is untrue”. A direct explanation is more than this. There does not need to be a pleading of evidence as that term is understood by the rules of pleading. A statement of fact as to why it is believed that the allegation is untrue does not involve contravention of the rule. If the point of the other aspect of the defendants’ argument is that in some cases the belief might depend on a mixed question of fact and law, a statement of a conclusion expressed as fact is ordinarily treated as a statement of fact (Thomas v The King (1937) 59 CLR 279 at 306-307).’ [25] In Ballesteros v Chidlow15 , White J observed16 : ‘The requirement to give “a direct explanation” for a party’s belief in the denial or non-admission raises significant difficulties for a pleader. The governing general principle in respect of pleadings set out in rule 149(1)(b) that a pleading must contain a statement of all the material facts “but not the evidence by which the facts are to be proved” is in apparent conflict with the “direct explanation” requirement in rule 166(4) if it be accepted that “an allegation of fact” in rule 166 must be regarded as synonymous with “material facts” in rule 149. The mischief of evasive denials or non- admissions which the rule seeks to remedy is, or was, well known. Commonsense clearly must prevail so that the “direct explanation” must be as brief as is consistent with the statement of material facts but not evidence although I note Helman J’s observations in Doelle v Watson of 26 June 2002 at p 14. I think the conclusion must be that if evidence necessarily intrudes into the “direct explanation”, so be it, and it should not, unless employed profligately, be struck out on that ground alone.’ [26] It is important, however, that the requirement for a defendant to give its ‘direct explanation’ for its belief that an allegation is untrue not be elided with the obligations on a defendant imposed by rule 149(1)(b) and (c) to state all the material facts on which it relies (but not the evidence by which the facts are to be proved) and to state specifically any manner that, if not stated specifically, may take the plaintiff by surprise. 15 [2005] QSC 285. 16 at [20]. -- 9 of 13 -- 10 [27] A ‘direct explanation for a party’s belief that an allegation is untrue’ is precisely what it says – a direct explanation for the belief. At first blush, it might be thought curious that the rule requires such an exposition of an essentially subjective matter – a party’s belief as to matters is generally neither here nor there so far as the Court is concerned. There is a significant body of principle and statute devoted to the primary evidentiary rule that witnesses should state facts not opinions and the exceptions to that rule. But the requirement that a party provide a direct explanation for its belief that an allegation is untrue fulfils two important functions: 1. it compels the responding party to expose, at an early stage of the proceeding, its rationale for a joinder of issue on a particular allegation; 2. it necessarily compels the responding party to formulate that rationale. In other words, the party must ask itself, and be able to answer the question, “Why am I denying this fact?” [28] A party’s direct explanation may, depending on the nature of the allegation in question, be straightforward (e.g. ‘this event alleged by the plaintiff did not occur at all’). It may be that the party’s belief that the allegation is untrue is founded in a different factual matrix (e.g. ‘this event did not occur in the manner alleged by the plaintiff’). Or it may be that the party believes the allegation to be untrue because the allegation is inconsistent with other matters which the party would propound (e.g. ‘the alleged fact is so inconsistent with other matters that the defendant believes it to be untrue’). I should hasten to add that, in giving these examples, I do not purport to cover the field of possible direct explanations, nor should these examples be regarded as templates. I refer to them, however, to reinforce the proposition that what rule 166(4) requires is exactly what it says – a direct explanation for the belief. [29] The direct explanation itself, clearly enough, is not a statement of a material fact for the purposes of rule 149. It may be, however, that the nature of the direct explanation of the party’s belief that an allegation is untrue necessarily compels the party to plead, in compliance with rule 149, the material facts (not evidence) on which it will rely to controvert the allegation or other matters to prevent the opponent being taken by surprise. Thus, if the direct explanation given by a defendant is that the alleged fact is so inconsistent with other matters that the defendant believes it to be untrue, the defendant should plead those other matters by way of response 17 , either as material facts under rule 149(b) or as matters required to be stated to prevent surprise under rule 149(c). On the other hand, if a party’s direct explanation is, for example, that it believes that a particular event simply did not occur, it may, depending on the case which it would seek to advance at trial, not be necessary to plead any other matters. [30] This approach to rule 166, in my view, reflects the scheme of pleadings introduced by the UCPR to achieve early comprehensive disclosure of the cases to be mounted by each party. The requirement for parties who are responding to allegations to turn their minds to making appropriate admissions and articulating their direct explanation in connection with denials and non-admissions is directed to the early and efficient identification of the ‘real issues’ which require ‘just and expeditious 17 Rule 165(1) expressly provides for a party to plead “another matter” in response -- 10 of 13 -- 11 resolution…at a minimum of expense’, and thereby observing the aspirational statement of purpose expressed in rule 5. [31] This approach also calls for the pleader of a defence to be alert to identifying precisely the allegations of fact which need to be addressed. So, to take paragraph 8(d) of the latest statement of claim in this case as an example, this paragraph, it seems to me, contains the following allegations of fact for which responses are required: A. The aircraft immediately incurred a process of corrosion; and B. The aircraft is continuing to incur a process of corrosion; and C. Each of A and B occurred as a consequence of the ditching. [32] When one looks at paragraph 5(c) of the latest defence, however, it is not at all clear whether either of facts A or B relating to corrosion are admitted, not admitted, or denied, or whether the matters alleged in paragraphs 5(c)(i) and (ii) are material facts on which the defendant will rely at trial in support of an inference that the corrosion alleged did not occur. Does the defendant believe that facts A and B are untrue because of other matters, namely the matters alleged in paragraphs 5(c)(i) and (ii)? It is possible, on the other hand, to read paragraph 5(c)(iii) as articulating the defendant’s direct explanation for believing fact C to be untrue, namely that any corrosion was not caused by the ditching but by the other matters pleaded and particularised in paragraph 5(c)(iii). That, it seems to me, can be seen as an example of a direct explanation which led the defendant, in compliance with rule 149, to plead material facts on which it will rely to controvert the plaintiff’s allegation. I would consider it preferable, however, for there to be an express statement of the ‘direct explanation’ in conformity with the requirements of rule 166. [33] One of the reasons for the imprecision in the latest defence is the use of the formula that a paragraph of the statement of claim is denied ‘on the grounds that ...’. This coincides with the defendant’s submission, noted above, that each denial is ‘accompanied by grounds for the denial’. Whilst this is understandable shorthand, there is nevertheless a subtle but palpable distinction between stating ‘grounds for a denial’ on the one hand and giving ‘a direct explanation for the party’s belief that the allegation is untrue’ on the other. The latter is what is expressly required by the UCPR. The seriousness of that requirement can be determined from the fact that a failure to comply with it leads to the allegation being deemed admitted. [34] Nothing in what I have said detracts from the force of the observations by Helman J in Gilbert v Goodwin. It is appropriate to quote his Honour’s short judgment in full: ‘HELMAN J: The applicants apply for orders that the respondents produce documents referred to in the respondents’ amended defence filed on 10 May 2001 and provide particulars of facts referred to in the amended defence. Those documents and those facts were referred to in the amended defence to comply with r. 166(4) of the Uniform Civil Procedure Rules 1999. They were referred to as part of the respondents’ direct explanation for their denials and non-admissions of allegations of fact in the applicants’ amended statement of claim. -- 11 of 13 -- 12 On behalf of the respondents a number of arguments were advanced in resisting this application, but the main argument was that the respondents should not be required to produce the documents or to give the particulars sought because, by referring to them by way of explanation for the respondents’ pleading, the respondents did not put the contents of those documents or the facts referred to in issue in the proceeding. In the case of a denial, the fact in issue is the fact denied. In the case of a non-admission, the fact in issue is the fact not admitted. The explanations given in the amended defence were included to comply with the rules but did not thereby create issues of fact for determination at the trial of the proceeding. I am persuaded by the argument on behalf of the respondents. It appears to me that the acceptance of the proposition advanced for the applicants that the direct explanations create further issues for determination at the trial of the proceeding would result in a proliferation of ancillary issues not directly relevant to the questions in issue between the parties. I therefore refuse the application.’ [35] If anything, his Honour’s judgment reinforces the necessity for a defendant to observe the distinction between, on the one hand, the ‘direct explanation’ required under rule 166(4) and its obligation, under rule 149, to plead the material facts on which it will rely at trial and other matters necessary to prevent surprise to the opponent. The “direct explanation”, understood as a subjective exposition in the manner I have described above, will not of itself constitute a further issue for determination at trial. A denial in a defence puts in issue the fact alleged in the statement of claim to which the denial is a response. If a defendant, when putting on its defence, pleads further material facts or matters to prevent surprise, it is then for the plaintiff to respond in accordance with Chapter 6 Part 4 of the UCPR, and, to the extent that the plaintiff’s response to particular allegations by the defendant consists of denials or non-admissions, my observations above apply with equal force. [36] For completeness, I should also say that I would not accept in an unqualified way the submission made on behalf of the defendant that a denial of a fact alleged in the statement of claim puts the matter in issue and both sides may lead evidence about it. If, for example, a defendant’s direct explanation for a denial of an allegation of fact was that the matter simply did not occur, then the evidence which the defendant might lead on that issue would be limited to controverting the plaintiff’s evidence. If, however, the explanation for the denial was not limited to a controversion of the fact but involved the advancement of an affirmative case, one would expect that to be apparent on the pleadings. [37] It follows from what I have said that it is my view, and I rule, that paragraph 5(c) of the latest defence does not comply with the requirements of rule 166 of the UCPR. [38] In light of that ruling, and having regard to the agreed basis on which the matter was argued before me, it is appropriate now for me to hear further from counsel as to the necessary orders and directions in this matter. -- 12 of 13 -- 13 -- 13 of 13 --