Crowley v Sita Australia Pty Ltd - [2004] SADC 146

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master's Decision)
CROWLEY & ANOR v SITA AUSTRALIA PTY LTD
Judgment of Her Honour Judge Kelly
20 October 2004
PROCEDURE
Appeal from a Master refusing to strike out pleadings in a Statement of Claim - proceedings struck out as unnecessary, irrelevant - principle in Knowles v Roberts 38 ChD 263, applied.
S43 District Court Act (SA): Rule 97.01 1991; Knowles v Roberts (1888) 38 ChD 263; Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR; O'Brien Lovrinov Crafter Pty Ltd v Corradini 1999 SASC 159, referred to.

CROWLEY & ANOR v SITA AUSTRALIA PTY LTD
[2004] SADC 146
Appeal from a Master

In this action the plaintiffs Darrell and Judith Crowley have sued the defendant for damages for breach of contract and for conduct in breach of the Fair Trading Act. The statement of claim pleads various allegations in the history leading up to the signing of a business acquisition agreement between the parties on 30 June 2000.
Part of the history between the parties was the institution of an earlier action by the plaintiffs against the defendant for an alleged breach of a confidentiality agreement entered into between the plaintiffs and the defendant as part of negotiations between the respective parties for the purchase of the plaintiffs business.
That action was settled and the terms of the settlement were embodied in the business acquisition agreement which was executed by the parties on 30 June 2000.
Specifically part of the settlement was that the plaintiffs discontinue the earlier action based on alleged breach of the confidentiality agreement and each party released and discharged each other from any claim, action, demand or liability arising out of or in relation to the subject matter of that earlier action.
On 12 July 2000 that earlier action was dismissed with no order as to costs pursuant to an order of a Judge of the District Court.
In this action the plaintiffs filed a statement of claim on 10 July 2003.
The defendant took out an application seeking that paragraphs 6 to 21 inclusive and paragraph 26 of the statement of claim be struck out or in the alternative that the plaintiff provide better and further particulars of paragraphs 6 to 21 of their statement of claim.
The basis of the defendant’s application was that the impugned paragraphs did not comply with the pleading rules being both unnecessary and irrelevant and further that they had a tendency to cause prejudice, embarrassment or delay in the proceedings.
In an order dated 14 May 2004 Master Norman refused to strike out the relevant paragraphs giving leave to the plaintiffs to amend the statement of claim with particular reference to paragraph 16 and 17 and inviting them to consider any further amendments.
The defendant’s appeal against that order was based on the contention that the Master fell into error in applying the relevant legal principles and in the exercise of his discretion.
The appeal is brought as of right pursuant to Section 43 (2) of the District Court Act 1991 and Rule 97.01 of the Rules. The relevant principles applicable to this hearing are to be found in the judgment of Justice Martin in the case of O’Brien Lovrinov Crafter Pty Ltd v Corradinin [1999] SASC 159. Although I refer to argument before the Master in these reasons I am mindful that the appeal is a rehearing in which I am able to exercise my own discretion without regard to the way in which the Learned Master exercised the discretion at first instance.
In order to understand the defendant’s argument it is necessary to consider the historical allegations in the context of the current claim.
The plaintiffs claim is for damages for breach of contract occasioned by an alleged breach by the defendant of express and implied terms in the contract. Specifically one of the implied terms alleged is that the defendant as purchaser of the plaintiffs’ business would conduct the plaintiffs’ business during the escrow period of the contract in the same or like manner to the plaintiffs prior to the agreement being entered into.
The issues which arise for consideration on the plaintiffs current claim are whether the defendant did run the business during the escrow period of 3 months from 30 June to 31 October 2000 in like manner to the plaintiffs.
The impugned paragraphs 6 to 21 and paragraphs 26 refer in the main to events which gave rise to the issuing of the first proceedings. In short the pleadings in those paragraphs refer to the conduct of the defendant during the discussions in late 1999 and early 2000 between the plaintiff and the defendant which led to the signing of a confidentiality agreement. It was alleged that in breaching that confidentiality agreement the plaintiffs had lost clients, and suffered damage as a result.
The plaintiffs argument before the Master and again before me for inclusion of those paragraphs in essence relied on the principle enunciated in the decision of Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149CLR 337. As the plaintiffs counsel put it in argument, the history of what occurred in the period December 1999 and June of 2000 was relevant as the “substratum of the matter generally”, or as part of the factual matrix in which the implied representation alleged by the plaintiff to have been made by the defendant came to be relied on by the plaintiff.
The defendant whilst not disputing the accuracy of the Masters statement of the relevant principle denied that it was applicable on the facts before the learned Master. In short the defendant argued and maintained on appeal the relevance of the history in the context of the current claim and argued further that the inclusion of paragraph 6 to 21 and paragraph 26 in effect opened up the matters already disposed of by way of the settlement and discontinuance of the first action in breach of the principle of Knowles v Roberts (1888) 38 ChD 263 which decision has been followed in Australia.
In argument before the Master and again before me the plaintiffs conceded explicitly that they were not seeking to relitigate matters arising from the alleged breach of the confidentiality agreement. In an attempt to put that beyond doubt the plaintiffs offered to (and subsequently did) amend the statement of claim to include in paragraph 16 and 17 the words “alleged by D Crowley to be” and again in paragraph 26 to include those same words to make it clear that the matters of fact pleaded in those paragraphs were the subject of dispute. However, the amendment only emphasises that those matters are to be re-litigated.
It is plain from the order of Master Norman that the order he made refusing to strike out the relevant paragraphs of the pleadings was influenced by the plaintiffs undertaking to make those amendments.
The difficulty which arises in my view from that concession is as I have said, that far from clarifying the position the concession only compounds the difficulties for the defendant in that it confirms the contentious nature of the factual allegations within the pleading.
If as the plaintiff has conceded the disputed matters relating to the breach of confidentiality agreement are not to be relitigated in the current proceedings then the question must be asked what work do paragraphs 6 to 21 and paragraph 26 have to do even in its amended form?
As I have said apart from highlighting the contentious nature of the factual allegations in those paragraphs the amendments do nothing to elucidate the relevance of those factual allegations in the current proceedings.
The current action is based on breach of contract and deceptive and misleading conduct contrary to The Fair Trading Act. The allegations arise out of the defendant’s alleged conduct in running the plaintiffs’ business during the escrow period between 30 June 2000 and 30 October 2000 where it is said that the defendant failed to run the business in the same way as the plaintiffs thereby causing a loss of income during the relevant period which affected the plaintiffs entitlement to recover the escrow figure.
Specifically I note the plaintiffs claim is not based on any suggestion or allegation that the settlement of the earlier action and the business acquisition agreement was entered into under pressure or duress from the defendant. There is no claim by the plaintiff to set aside that agreement on that or any other basis.
The plain fact is that the allegations contained in paragraphs 6 to 21 remain substantially disputed between the parties. There were never any findings made in relation to those allegations and the action was settled on the terms disclosed in the business acquisition agreement signed on 30 June 2000.
In addition I am unable to see an arguable relevance of the allegations in those paragraphs to the existence of the implied term claimed by the plaintiffs to have been breached by the defendant.
The defendant properly conceded that some reference to the historical events which led up to the agreement is appropriate and in that regard some of the allegations in paragraph 18, 20, 21 and 22 may be unobjectionable. The fact of the previous dispute as opposed to the nature of that dispute is relevant.
Similarly the contents of paragraph 8 of the statement of claim have some relevance in the context of the current claim in the sense that the fact that the first contact made between the parties was made as early as December 1999 between Mr Panigas and the plaintiffs may well be relevant to the existence and reliance by the plaintiffs on the alleged implied terms.
The flaw in the plaintiffs argument is revealed in my view in the submissions made by the plaintiffs’ counsel before the Master, to the effect, that the fact that the agreement (referring to the confidentiality agreement) had been broken and that the plaintiffs clients had been solicited were material facts for the Court in its assessment of whether the alleged misrepresentation had been made. It seems plain from both the argument before the Master and before me that the plaintiff asserts the truth of the disputed allegations and presents them as fact in order to found the claim that there was a representation made by the defendant which on its face has nothing to do with the breach of the earlier confidentiality agreement.
If the nature of the dispute in the earlier action as opposed to the historical fact of that dispute is not relevant then it follows that paragraphs 9 to 21 are irrelevant and unnecessary.
If those paragraphs remain it seems clear that the defendant will have to defend the factual matters contained within those allegations, the resolution of which will not determine one way or another whether the defendant acted in breach of an expressed or implied term during the escrow period.
Notwithstanding the concessions made by the plaintiff in the manner referred to previously I consider that the proposed amendments on which the concessions are based in fact compound the problem which exists.
I consider there is force in the defendants argument that if the paragraphs as pleaded remain in the statement of claim then in effect the defendant will be forced to relitigate substantially the same factual disputes which gave rise to the earlier action. In so far as the plaintiffs have sought to persuade me that the underlying allegations of fact made in the earlier action have relevance to the existence and reliance by the plaintiffs on the representation alleged to have been made by the defendant, there is, in my view, no arguable connection.
The alternative ground relied on by the defendants namely that the Master took into account an irrelevant consideration namely the submission by the plaintiff that estoppel would be pleaded does not need to be dealt with in light of the view which I take of the main argument put by the defendant.
For these reasons I order that paragraphs 9 to 17 inclusive and part of paragraph 26 from the end of line two after the word “representations” be struck out.
Although the defendant’s application extended to seeking orders that paragraph 6, 7 and 8, 18 and 20 also be struck out for the reasons I have already given I consider that those paragraphs are relevant. It may be that the plaintiff will need to amend the pleadings in those paragraphs in the light of the paragraphs to be struck out and in order to clarify the historical facts. For that purpose the plaintiffs should have liberty to amend.
Accordingly the formal order of the Court is that I allow the appeal.
I set aside the order of the Master and in substitution for that order I order as follows:-
(1) I order that paragraphs 9 to 17 inclusive, paragraph 19 and the part of paragraph 26 referred to be struck out.
(2) I give leave to the plaintiffs to amend paragraphs 8, 18, 20 and 21 of the statement of claim limited to any consequential amendments necessitated by this order.
(3) The plaintiffs are ordered to pay party and party costs to the defendant on the appeal and the original application before the Master.