Beyond Films Ltd v Gary Hamilton

[2003] NSWSC 342

CITATION:	Beyond Films Ltd v Gary Hamilton & Anor [2003] NSWSC 342
HEARING DATE(S):	10 April 2003
JUDGMENT DATE:	10 April 2003
JUDGMENT OF:	Gzell J
DECISION:	Appeal allowed with costs. Leave to amend statement of claim granted with no order as to costs.
CATCHWORDS:	TRADE PRACTICES AND RELATED MATTERS - Consumer Protection - Whether "in" trade or commerce in s 42(1) of the Fair Trading Act 1987 requires present commercial activity - Whether prospective commercial activity is sufficient - PROCEDURE - Supreme Court procedure - Principles applicable to appeal from a Master to a single Judge - Appeal from decision not to strike out portion of statement of claim - Application for leave to amend statement of claim to allege present commercial activity
LEGISLATION CITED:	Fair Trading Act 1987 Supreme Court Rules Supreme Court Act 1970
CASES CITED:	Do Carmo v Ford Excavations Pty Ltd [1981] 1 NSWLR 409 Morrision v Judd, NSWCA, 10 October 1995, unreported House v The King (1936) 55 CLR 499 Robin Pty Ltd v Canberra International Airport Pty Ltd (1999) 179 ALR 449 Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
PARTIES :	Gary Hamilton - 1stDefendant/ Appellant Arclight Films International Ltd - 2nd Defendant/Appellant Beyond Films Ltd - Plaintiff/Respondent
FILE NUMBER(S):	SC 3735/02
COUNSEL:	Mr T S Hale SC/Ms Kate Barrett - Defendants/Applicants Mr T Duggan - Plaintiff/Respondent
SOLICITORS:	Abadee, Dresdner & Freeman Michael Frankel & Co Solicitors

LOWER COURTJURISDICTION:	Supreme Court (Master)
LOWER COURT FILE NUMBER(S):	3735/02
LOWER COURT JUDICIAL OFFICER :	Master Macready

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

THURSDAY 10 APRIL 2003

3735/02 BEYOND FILMS LTD v GARY HAMILTON & ANOR

JUDGMENT (Ex tempore)

1 I have before me an appeal from the decision of Master Macready refusing to strike out par 23 to par 27 of the statement of claim. Those paragraphs allege a breach of section 42(1) of the Fair Trading Act 1987 which provides that a person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

2 An appeal lies to the Court constituted by a judge under the Supreme Court Rules, Pt 60 r 10. The Supreme Court Act 1970, s 75A(5) provides that the appeal is by way of rehearing. It has been held, however, that where the Master’s decision involves an exercise of discretion, the same principles apply to the appeal as apply to an appeal from a single judge to the Court of Appeal (Do Carmo v Ford Excavations Pty Ltd [1981] 1 NSWLR 409; Morrision v Judd, NSWCA, 10 October 1995, unreported). The appellants must show that the Master acted on a wrong principle such as failing to take into account a material consideration (House v The King (1936) 55 CLR 499 at 505).

3 The appellant defendants submit that the requirement that the impugned conduct be “in” trade or commerce requires present, and not prospective, activity in trade or commerce at the time of the conduct. The impugned conduct comprised representations made on the date of termination of the first defendant’s employment of the plaintiff. Those alleged representations were that after he left that employment, the first defendant intended to take six months off and then go into the business of film production and that he would not compete with the plaintiff in its business of film distribution and sales agency.

4 Paragraph 24 of the statement of claim alleges that the representations were false in that the first defendant did not intend to take six months off but intended to incorporate the second defendant and immediately go into the business of film distribution and sales agency and that, at all material times, it was the intention of the first defendant that he would go into the business of film distribution and sales agency in competition with the plaintiff. The pleading, as it stood at the time I entered upon the appeal, related the impugned conduct to future trade or commerce of the defendants.

5 The short point is that the relevant trade or commerce cannot be that of the employer (Robin Pty Ltd v Canberra International Airport Pty Ltd (1999) 179 ALR 449 at 459, Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 at 172) and, at the time the representations were made, the first defendant had not embarked upon his prospective business so that the conduct was not “in” trade or commerce.

6 Mr Duggan, who appeared for the plaintiff, referred to an observation of the majority of the High Court in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 604 where it was said:

“... the mere driving of a truck or construction of a building is not, without more, trade or commerce and to engage in conduct in the course of those activities which is divorced from any relevant actual or potential trading or commercial relationship or dealing will not, of itself, constitute conduct “in trade or commerce” for the purposes of that section.”

7 I do not regard that passage as supporting the notion that impugned conduct by a person not engaged in commercial activity on his or her own account attributed solely to prospective action by that person can be described as falling within the phrase “in trade or commerce” with respect to that person. I accept the submission made by Mr Hale SC who, with Ms Barrett, appeared for the defendants, that in order to fall within the provision, the party accused of the offending conduct must be engaged in trade or commerce.

8 Mr Duggan drew my attention to par 16 of the statement of claim as it was then framed, which alleged that the first defendant engaged in business in competition with the plaintiff while in its employment. Mr Duggan submitted that par 23 to par 27 should be read in that context. In my view, however, par 23 to par 27 as they were originally pleaded, were with respect to a prospective business only.

9 I stood the matter over to allow Mr Duggan to make an application for leave to amend the pleading, which he has now done. He seeks leave to amend the statement of claim to add a further par 24(c) in the following terms:

“24 The representations were false in that:
….

(c) At the time the representations were made the First Defendant was already a competitor and rival of the Plaintiff in the business of film distribution and sales agency:

(i) During the course of his employment as General Manager of the Plaintiff, the First Defendant became aware that the producers of the four feature films, referred to in paragraph 15 herein, were prepared to offer the distribution and marketing rights of those films for sale to the Plaintiff upon certain terms and conditions.
Particulars

Paragraph 15 and the particulars, together with the further particulars provided in the letters from Abadee, Dresdner & Freeman to Michael Frankel & Co dated 15 November 2002 and 6 February 2003 in response to Michael Frankel & Co’s request dated 21 October 2002.

(ii) Whilst employed by the Plaintiff and prior to making the representations, the First Defendant intentionally refrained from negotiating the purchase of the distribution and marketing rights of the four feature films (referred to in paragraph 15 herein) on behalf of the Plaintiff.

(iii) The conduct referred to in paragraph 24(c)(ii) herein was engaged in so that either the First Defendant or a company yet to be incorporated, namely, the Second Defendant, could purchase the distribution and marketing rights of the four feature films after the First Defendant ceased employment with the Plaintiff.”

10 Mr Hale submits that this amendment to the pleading does not cure the vice that it continues to relate solely to a future business. He points out that the pleading does not allege the existence of any activities which might be regarded as normal indicia of the conduct of a business. There is no allegation of a derivation of income, nor any allegation of any action. All that is pleaded is knowledge, intention and a refraining from taking action.

11 In my view, however, the refraining from taking action might, arguably, itself constitute the commencement of business on the part of the first defendant which was to culminate, ultimately, in the establishment of the second defendant and the conduct thereafter of activities of business through the second defendant in competition with the plaintiff. There is, in my view, an arguable basis for alleging that the amended pleading identifies an existing business, the conduct of which is in the hands of the first defendant and that the representations made were “in trade or commerce” in the conduct of that business.

12 I am of the view that the material paragraphs from Concrete Constructions at 603-604, 606 and 614 are, arguably, met by the amended pleading.

13 I allow the appeal. The order of the Master is set aside and in lieu thereof I order that par 23 to par 27 of the statement of claim be struck out. I order the plaintiff to pay the defendants’ costs of the appeal and the costs of the application before the Master.

14 On the notice of motion, I allow the notice of motion and give leave to the plaintiff to amend the statement of claim in the terms of Sch 1 to the notice of motion. There will be no order as to costs on the notice of motion.

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Last Modified: 04/24/2003