BARALDA Pty Ltd (T/As Perth Candy Company) v Cape Cats Pty Ltd - [2008] WADC 153

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: BARALDA PTY LTD (T/As Perth Candy Company) -v- CAPE CATS PTY LTD & ORS [2008] WADC 153

CORAM: DEPUTY REGISTRAR HARMAN

HEARD: 27 AUGUST 2008

DELIVERED : 10 OCTOBER 2008

FILE NO/S: CIV 2726 of 2007

BETWEEN: BARALDA PTY LTD (T/As Perth Candy Company) (ACN 009 043 378)
Plaintiff
AND
CAPE CATS PTY LTD (ACN 067 346 954)
First Defendant
JAMES CURWEN BOYD
Second Defendant
DEBORAH JANE JACOB
Third Defendant

Catchwords:

Practice - Practice under the Rules of the Supreme Court1971 (WA) - Application to strike-out statement of claim or alternative parts thereof - Application for summary judgment by two defendants - Turns on its own facts

Legislation:

Nil

Result:

Statement of claim struck out
Summary judgment not granted

Representation:

Counsel:

Plaintiff:     Mr P Redding
First Defendant              :     Ms P Martino
Second Defendant         :     Ms P Martino
Third Defendant            :     Ms P Martino

Solicitors:

Plaintiff:     Redding & Associates
First Defendant              :     P A Martino
Second Defendant         :     P A Martino
Third Defendant            :     P A Martino

Case(s) referred to in judgment(s):

Nil

DEPUTY REGISTRAR HARMAN: Prior to the plaintiff's engagement with the defendants it operated two businesses, one as confectionary manufacturer, and the other as wholesaler of the manufactured product. It agreed to sell the wholesale business to the first defendant. The second and third defendants are shareholders and directors of the first defendant.
By the application now before me the defendants seek to strike‑out the statement of claim, or alternatively parts of it. The second and third defendants apply for judgment. In each application the applicants bear the onus.
At par 8 of their written submissions the defendants portray the plaintiff's pleading as a convoluted document that struggles to identify the causes of action with any clarity and is difficult for them to follow.
The standard by which a statement of claim is judged is that it should state the material facts that together constitute the case upon which the plaintiff's claim is founded. The defendant can then file a responsive pleading and prepare for trial.
The transactions the subject of the plaintiff's claims are identified as the agreement, the further agreement and a representation. Broadly speaking the agreements are the same. The plaintiff contends that they ought to have been the same and seeks rectification to that end.
The first of a series of breaches of agreement pleaded at par 25.1 is the failure or refusal of the defendants to pay to the plaintiff the sum of $209.30 as being "its" share of the plaintiff's electrical and telephone expenses. As for the identity of the party or parties in breach, one of the alternative readings opened by the pleading is obviously unintended. The parts of the statement of claim that would bear upon the claim are as follows:
•at par 6, that there was an agreement between the plaintiff and the second and third defendants;
•at par 6.1, that under the agreement the wholesale business would be sold to the first defendant;
•at par 6.2, that each of the defendants would conduct the business on the same basis that it had been conducted by the plaintiff;
•at par 6.4, that the business would be operated by an unspecified singular defendant in the same manner in which it had been operated by the plaintiff;
•at par 9.2, that the business would "continue to pay outgoings and expenses at the then percentage prevailing rate of total costs as had been in operation with the manufacturing business prior to and at the time of the agreement";
•at par 23.15, that the first defendant paid the sum of $550.00 to the plaintiff as its share of the electrical and telephone expenses incurred to an unspecified time;
•at par 23.16 paid the sum of $349.98 to the plaintiff as its share of the electrical and telephone expenses incurred to an unspecified time;
•at par 24, that pursuant to the terms of the agreement or varied agreement or the representation the defendants were required to pay the total sum of $16,480.05 for various outgoings and shared expense costs as incurred by the first defendant in the conduct of the business.
In my opinion insufficient attention has been paid to the need to express the material facts upon which the claim is made. At the very least the plaintiff should plead the proportion of electrical and telephone charges payable under the agreement or agreements upon which it relies.
As for the terms by which the allegation of breach is expressed, at par 25 the plaintiff contends that the defendants are in breach, yet at par 6.1 it was only the first defendant that would purchase the business and at par 6.4, it was only the defendant, (I take to be the first defendant) who would operate the business. I also note that in expressing the breach the plaintiff refers to the defaulting party in the singular. The basis for the contention at par 6.2 that the second and third defendants would be bound to conduct the business in the particular manner or be liable to the plaintiff for any breach of obligation by the first defendant is not apparent. I perceive that the plaintiff has taken the course of pleading evidence rather than allegations of material fact.
As for par 9.2, the court would not imply a term that required a business to pay outgoings; any such obligation would only be imposed on an entity against whom it could be enforced. Similar reasoning would apply to the allegation at par 4.2 that the manufacturing business rather than its owner engaged in particular activity. Whilst that allegation would not present much difficulty for the defendant, the corresponding allegation at par 5.3 relating to the wholesale business is complicated by the allegation at par 6.2. Before I leave par 6.2 in my opinion it is significant that the plaintiff does not plead the particular manner in which the plaintiff had conducted the wholesale business. Whilst it may be considered that particulars may be all that are required, I suspect that one facet of the difficulty that the defendants have with the pleading as a whole is the plaintiff's failure to address that issue. I believe that had it done so the plaintiff would not have pleaded as it has.
The same reasoning applies equally to other parts of the pleading (pars 5.4, 6.3, 9.1 and 25.4) at which the plaintiff characterises a business as an entity. I accept that in some of those instances the plaintiff may have intended to articulate the terms upon which the parties actually agreed, but if that is the case, it has overlooked one of the fundamentals: that parties plead material facts, not evidence.
Finally in relation to par 9.2, because the meaning of the expression "of the then percentage prevailing rate of total costs" is elusive I am satisfied that the court would not so pronounce.
The next breach for which the plaintiff claims at par 25.2 is expressed is for $212.66 as being for the use of a specified bar code. There is no pleading to justify a specified code being expressed in the plural. There is no pleading that directly relates to the bar code or its usage. Conceivably the plaintiff would draw upon par 9.2 but that alone could not have founded the case in the absence of an assertion that the usage of the bar code was an outgoing or expense for the purposes of par 9.2. There is no pleading as to how or when the facility became available for use by the defendant, on what terms and whether it was used.
The next breach is expressed at par 25.3 is of the defendants' failure or refusal to pay $2,859.99 as rent for an unspecified period commencing on 30 June 2006 during which the first defendant failed to provide vacant possession of an unspecified portion of unspecified property it occupied.
I have inserted the word 'unspecified' at the particular points to highlight the obvious deficiencies of the pleading. The assertion of failure to provide vacant possession is not supported by any allegation. The allegation of breach squarely raises the issue of the basis of the contended liability of the second and third defendants for the particular default of the first.
The next breach is at par 25.4 and is expressed as the defendants failure or refusal to pay $127,234.27, the difference between that part of the purchase price of the business allocated to stock under the agreement or the further agreement together with stock subsequently supplied by the plaintiff to the wholesale business for the period to 1 June 2006 less an accounting for the amounts received from the defendants by the plaintiff.
The parts of the pleading that relate to stock are as follows:
•at par 8.1, that the gross price of the business was $280,000.00; and that a material term of the agreement that the value of the stock was $130,000.00;
•at par 8.6, that settlement was due to take place on or before a particular event;
•at par 12.3, that from 1 August 2005 the plaintiff provided stock to the first defendant on divers occasions at a cost to the first defendant of $185,074.47;
•at par 12.4, the plaintiff prepared and delivered to the wholesale business stock transfer sheets identifying stock supplied to the business;
•at par 16.4, that a material term of the further agreement was that the value of the stock was $121,000.00;
•at par 16.5, that settlement was set for 1 December 2005;
•at par 16.6, that the first alternatively the second and third defendants would pay the balance of the amount due under the further agreement from the proceeds of sale of either of 2 specified properties;
•at par 23, that in part payment for stock supplied the first defendant paid particular sums to the plaintiff. There is no reason to specify the particular payments other than that that at par 23.2 is identified as being the deposit; and that expressed at par 23.12 is expressed as having been transferred from funds held in the plaintiff's suspense account, having been received from debtors of the wholesale business, which transfers had been approved by the second and third defendants. Similarly at par 23.13 that funds had been held in account, but had been recovered from debtors of the first defendant; and that those and from par 23.14 to par 23.21 inclusive are specified as expenses that range from rent to bin collection expenses;
•at par 24.1 that pursuant to the terms of the agreement or the further agreement the defendants were required to pay $275,591.08 for the business;
•at par 24.2 that the defendants were required to pay a total sum for stock supplied to 31 May 2006 of $185,074.08;
I accept that the date of settlement expressed in either the agreement or the further agreement would provide the date for payment of stock the subject of the particular agreement. According to the terms of the pleading I take it to be the case that the settlement date under the agreement had not passed when the parties entered into the further agreement. It is not clear whether the date for settlement under the further agreement has passed. At par 16.5 the plaintiff pleads that it was a material term of that agreement that the settlement date was 1 December 2005, however it would appear to be inconsistent with par 16.6 by which the plaintiff pleads that the funds to facilitate settlement would be paid from the proceeds of sale of either of two items of real estate. That I can do no more than speculate on the significance of par 16.6 and raise the prospect of inconsistency is a reflection on the pleading. It is evident that neither of the properties was owned by the first defendant. Those pleadings reveal the plaintiff's failure to plead a clear case.
As for the stock supplied, there is no plea of any terms of supply or that any amount is due and owing. The allocation by the plaintiff of funds it identifies as payments made by the first defendant for other purposes is confusing. At the very least it may be considered to be irrelevant alternatively that the plaintiff has anticipated the defendant's response. In my experience anticipating a responsive plea generates cumbersome and confusing pleading.
The next breach is at par 25.5, by which the plaintiff claims $3,000.00 for damage caused by the defendants to the plaintiff's Elmeco machines.
Having reviewed the whole of the pleading I can find no reference to the plaintiff's Elmeco machines or to any damage to those machines caused by any of the defendants. At least in that instance the pleading of the broader allegation of breach against the defendants is consistent with the particular claim. Having made that observation I will later observe that in relation to the pleading of breach there is no basis upon which to consider that the damage would amount to breach.
The next breach pleaded is at par 25.6, by which the plaintiff claims $8,796.84 received by the first defendant from trade debtors of the business prior to the date it was operated by the first defendant. As was the case with the allegation of breach at par 25.5, I cannot locate any pleading which would support the allegation although at par 25.6 the plaintiff refers to the content of Schedule 2 to the pleading, part of the heading of which refers to the particular claim. The balance of the heading expresses that it is of "payments received from First Defendant-Debtors of Perth Candy Wholesale for the period prior to 1 August 2005". The schedule itself tabulates the name of a business or entity and an amount for each business or entity under the heading "total due". It is clear that the entirety of the pleading at that point needs some attention. I suppose on reflection that par 25.6 is another illustration of the difficulty to which I had earlier alluded as to the significance of the plaintiff's portrayal of the business as an entity. It is not apparent whether it contends that the debtors were of the plaintiff or the business. If the latter then the plaintiff ought to specify that the agreement for sale and purchase excluded trade debtors.
The next breach, at par 25.7 is for $13,000 for out of code stock sold by the first defendant to the business. I can find no pleading that relates to out of code stock or the basis upon which the plaintiff is entitled to the amount claimed from the defendants.
The plaintiff's last claim, at par 25.8, is for $4,500 for stock supplied by the plaintiff to the wholesale business. It is not supported by any pleading. It is also confusing in light of the claim expressed at par 25.4. It is yet another illustration of the insufficiency of the pleading to sustain a clear case against any particular defendant.
Each of the allegations of breach is expressed to be of the agreement, the further agreement or the representation. None of the breaches expressed at pars 25.2, 25.3, the stock supplied referred to in pars 25.4, 25.5, 25.6 25.7 and 25.8 relate to any pleaded part or parts of the agreements or representations.
Returning to par 6 of the statement of claim, the pleading of the agreement expresses the relevant parts as being that the purchaser would be the first defendant; that the business purchased would be conducted by each of the defendants on the same basis as it had been conducted by the plaintiff; that the business (and here I read the first defendant) would continue to purchase candy from the plaintiff; and in all other respects the business would be operated by the defendant (unspecified) in the same manner as it had been operated by the plaintiff. It is unclear as to whether any of those allegations find their way into any of the cases constructed by the plaintiff. I would add that it is also unclear as to what consideration would found a difference between what is expressed at each of pars 6.2 and 6.4.
I have already referred to par 9.2. It is one of the terms that the plaintiff would have the court imply. I understand that they would be drawn upon the existing relationship between the manufacturing and wholesale businesses that the plaintiff pleads at par 6. They are as follows:
"1that the wholesale business would continue to purchase stock from the manufacturing business at the deemed prevailing rates for such stock;
2that the wholesale business would continue to pay outgoings and expenses at the then percentage prevailing rate of total costs as had been in operation with the manufacturing business prior to and at the time of agreement;
3each party would do all that was necessary on their part to enable the other parties who have the benefit of the agreement, including each party using its best endeavours to complete all necessary steps under the agreement and cause the same effected;
4the defendants would exercise reasonable care and skill in the management of and conduct of the wholesale business;
5the defendants would not deprive the plaintiff of the benefit of the agreement;
6the defendants would exercise skill and expertise as part of a relationship of confidence between the plaintiff and the first defendant;
7the first defendant would render true accounts and full information and all things affecting the wholesale business;
8the first defendant would keep proper records of all income and expenditure in so far as the same affected its dealings with the plaintiff;
9in respect of the wholesale business, the first defendant would give the plaintiff information which was necessary for the plaintiff to perform its obligations under the agreements and that the first defendant would exercise due care to protect its own interests;
10the first defendant would exercise its best endeavours to promote the sale of the products manufactured by the wholesale business (sic) for the mutual benefit of the plaintiff and the first defendant; and
11the first defendant would not do anything inconsistent with the relationship of confidence between the plaintiff trading as the manufacturing business and the first defendant trading as the wholesale business."
The applicants contend that many of those terms are so unusual that they would not be implied. In my opinion that assessment has some validity but in the context of the strike out applications the more important consideration is that they do not appear to be addressed to any identifiable part of any of the plaintiff's claims.
I make the same observation in relation to pars 11 and 22 in which the plaintiff pleads that under the agreement (and in the case of par 22, the further agreement) the first defendant was obliged to purchase the business on the terms and conditions expressed in the agreement (or further agreement).
At par 12 the plaintiff pleads that the business was transferred to the first defendant as from 1 August 2005. It then goes on to make allegations that it provided assistance to the first defendant in the form of personnel and stock transfer sheets. Those allegations have no bearing upon any of the plaintiff's claims.
At par 13.2 the plaintiff pleads that "the second defendants would ensure the balance of the amount due and payable under the terms of the agreement and in any event will be paid …" I have already observed that there is no plea that the condition specified has been satisfied. The plea is significant as it is characterised by the plaintiff as the amended agreement and as a representation. In my opinion the plaintiff has failed to plead an allegation of material fact only the evidence that may support an unstated allegation or allegations. Accordingly it is not clear whether the term 'and in any event' draws upon the agreement or would extend to the subsequent purchase of stock by the first defendant and conceivably any default of the first defendant in its ongoing relationship with the plaintiff. It is conceivable that it is the key to the claims expressed against the second and third defendants. If so, they are entitled to a clear pleading of the case against them.

At par 17 the plaintiff characterises the further agreement as being partly in writing, partly by conduct and partly implied. In each particular of that allegation it introduces the earlier agreement. In my opinion whilst the defendants are not required to plead in response they are entitled to know the dimensions of the case against them. In particular how it is that the agreement amounts to part of the writing that constitutes the further agreement and how entering into the agreement is conduct for the purposes of the further agreement.
At par 21 the plaintiff seeks rectification of the further agreement on the basis of the representation. On the basis that rectification is ordered it claims $20,000.00 being the difference between the gross value of the business expressed in each agreement. As the component parts of the gross value change from agreement to agreement; the first defendant was evidently operating the business and purchasing stock at the time of the further agreement; the plaintiff claims alternatively for stock supplied; and that the particular claim for $20,000.00 is not expressed in the prayer for relief, in my opinion it is incumbent upon the plaintiff to provide clarity and express that claim in the prayer for relief if it is to be maintained.
As for par 24.1 it expresses a different figure as being the amount required to pay the purchase price of the business to that expressed at par 8.1 as the purchase price. There is no pleading to account for the difference.
As to the balance of par 24, the plaintiff contends that under the terms of the agreement, the further agreement or the representation the defendants were required to pay for outgoings, shared expenses and additional costs and expenses. None of those terms are defined.
At par 27 the plaintiff pleads loss of a commercial opportunity with no reference to any supporting allegation of material fact.
At par 28 the plaintiff pleads the alternative claim against the first defendant for stock purchased. It does not actually plead that any amount is due and owing for any stock supplied. At par 29.2 where it expresses its loss it refers specifically to the amount of $20,000.00 to which I have referred in my analysis of par 21, but I still make the same observations. Whilst on the subject of the particular claim for stock it was conceded by the plaintiff that it was outside the scope of the indorsement on the writ.
In my opinion the points that I have made provide sufficient reason to strike out the statement of claim.
As to the claim for summary judgment it would be difficult to make a determination absent a pleading. Be that as it may in my opinion whilst there is at least scope for conjecture as to the meaning of the words "in any event" in par 13.2 in my opinion it would be inappropriate to award judgment. Otherwise it would appear that there is at least the prospect of a claim against the second and third defendants revealed by par 25.5.