D Tannous No 2 Pty Limited v Bevillesta Pty Limited

[2009] NSWSC 782

CITATION:	D TANNOUS NO 2 PTY LIMITED & ANOR v BEVILLESTA PTY LIMITED [2009] NSWSC 782
HEARING DATE(S):	Friday 26 June 2009
JUDGMENT DATE :	12 August 2009
JURISDICTION:	Common Law
JUDGMENT OF:	Hall J at 1
DECISION:	(1) The notice of motion in relation to the relief sought in paragraphs 1 and 2 is dismissed. (2) In relation to paragraph 4 of the notice of motion: (a) Liberty to the defendant to apply to the Registrar as may be necessary in relation to particulars of the claim in paragraphs 1 to 5 of the statement of claim, following service of any amended statement of claim. (b) In relation to the claim by the second plaintiff in paragraphs 10 to 14 of the statement of claim, liberty to the defendant to apply to the Registrar in relation to particulars, following service of any amended statement of claim. (3) Order that the plaintiffs’ solicitor is to provide to the defendant’s solicitor a certificate pursuant to s.347 of the Legal Profession Act 2004 within 14 days of this order. (4) Costs of the notice of motion are reserved. Liberty to either party to apply in respect thereto.
CATCHWORDS:	PROCEDURE - SUMMARY DISMISSAL PROCEEDINGS – claim based on contractual indemnity provision in Deed between the parties to a commercial venture – indemnity by defendant in favour of first plaintiff in respect of any liability that the lessee (first plaintiff) may have to pay income tax on the amount of any fit-out contribution paid by the lessor (the defendant) to the lessee in connection with a lease – additional provision that lessor cease to have any liability to indemnify on the third anniversary of the date of the Deed – questions of construction – competing interpretations – consideration of interaction between the two clauses in question – construction on indemnity as a commercial contract may require evidence as to surrounding circumstances known to the parties at the time of the Deed – not amenable to summary dismissal order – additional claim by second plaintiff for management fees – establishment of the contract alleged – the nature of any contract is a matter for evidence and, accordingly, a question of fact for determination at a final hearing – relevant principles determining the nature and scope of evidence required in relation to the contract claim – not amenable to summary dismissal – orders
LEGISLATION CITED:	Legal Profession Act 2004 Workers Compensation Act 1926
CASES CITED:	Acquatec-Maxcon Pty Limited v Minson Nacap Pty Limited [2004] VSCA 18 Andar Transport Pty Limited v Brambles Limited (2004) 217 CLR 424 Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 Australian Timber Workers' Union v Monaro Sawmills Pty Limited (1980) 42 FLR 369 Brimson v Rocla Concrete Pipes Limited (1982) 2 NSWLR 937 Commissioner of Taxation (Cth) v J Walter Thompson (Aust) Pty Limited (1944) 69 CLR 227 Commonwealth of Australia v Griffiths [2007] NSWCA 370 Golden Plains Fodder Australia Pty Limited v Millard [2007] SASC 391 Grincelis v House (2000) 201 CLR 321 Hillebrand v Penrith Council [2000] NSWSC 1058 Howard Rotavator Pty Limited v Wilson (1987) 8 NSWLR 498 Marshall v Whittaker’s Building Supply Co (1963) 109 CLR 210 MBP (SA) Pty Limited v Gogic (1991) 171 CLR 657 McCann v Switzerland Insurance Australia Limited (2000) 176 ALR 711 Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 Price v Grant Industries Pty Limited (1978) 45 FLR 129 Screenco Pty Limited v R L Dew Pty Limited (2003) 58 NSWLR 720 Upper Hunter County District Council v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429
PARTIES:	D TANNOUS NO 2 PTY LIMITED & ANOR v BEVILLESTA PTY LIMITED
FILE NUMBER(S):	SC No 15653 of 2008
COUNSEL:	P: B W Rayment QC/D W Rayment D: J E Richards
SOLICITORS:	P: McLachlan Chilton D: Shand & Associates

OF NEW SOUTH WALES
COMMON LAW DIVISION

HALL J

WEDNESDAY 12 AUGUST 2009

No 15653 of 2008

D TANNOUS NO 2 PTY LIMITED & ANOR v BEVILLESTA PTY LIMITED

JUDGMENT

1 HIS HONOUR: These proceedings concern an application by the defendant company under the Uniform Civil Procedure Rules (UCPR), Part 13, r 13.4 for the dismissal of certain claims made by the plaintiff company in the statement of claim filed on 27 October 2008.

2 The claims relate to various aspects of a commercial venture involving a shopping centre in Gosford, New South Wales. The defendant was the owner of the shopping centre. It entered into leases with the first plaintiff, D Tannous No 2 Pty Limited. The second plaintiff, Gabriel Rahme, claims that he was retained pursuant to an oral agreement to act as centre manager for one year for which he was to be remunerated.

3 In a notice of motion filed on 26 March 2009, the defendant sought the following orders:-

(1) An order pursuant to UCPR r 13.4 dismissing the claims set forth in paragraphs 1 to 5 of the statement of claim.

(2) An order pursuant to UCPR r 13.4 dismissing the claims set forth in paragraphs 10 to 14 of the statement of claim.

(3) An order that the plaintiffs pay the defendant’s costs of the proceedings referable to that part of the claim which has been dismissed.

(4) An order pursuant to UCPR r 15.10 requiring the plaintiffs to provide particulars within seven days.

(5) An order that the plaintiffs’ solicitors provide to the defendant’s solicitors a certificate pursuant to s.347 of the Legal Profession Act 2004.

(6) Costs of the motion.

4 In support of the notice of motion, the applicant/defendant relied upon the following affidavits:-

(1) The affidavits of Fiona Shand sworn 26 March 2009 (paragraphs 9, 12 and 13 not admitted) and 25 June 2009.

(2) The affidavit of Melissa James sworn 24 April 2009.

5 The plaintiffs relied upon the affidavits of:-

(1) Petros John Macarounas sworn 25 June 2009.

(2) Gabriel Rahme sworn 20 April 2009 (paragraphs 24 and 26 not read).

(3) Stephen Prent sworn 20 April 2009.

6 Mr B W Rayment QC with Mr D W Rayment appeared for the plaintiffs, the respondent to the motion, and Ms J E Richards of counsel appeared for the defendant/applicant.

Summary disposal of proceedings

7 Rule 13.4 of the UCPR under which the applicant seeks order (1) in the notice of motion deals with summary disposal of proceedings and provides as follows:-

“(1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:-

(a) the proceedings are frivolous or vexatious, or

(b) no reasonable cause of action is disclosed, or

(c) the proceedings are an abuse of the process of the court,

the court may order that the proceedings be dismissed generally or in relation to that claim.

(2) The court may receive evidence on the hearing of an application for an order under subrule (1).”

8 The question in an application under rule 13.4 of the UCPR, has been stated as being whether it is transparently clear that the plaintiff has no reasonable cause of action: Brimson v Rocla Concrete Pipes Limited (1982) 2 NSWLR 937 at 946.

9 In Commonwealth of Australia v Griffiths [2007] NSWCA 370, Beazley JA with whom Mason P agreed said:-

“ 11. The general principles relating to the summary disposal of proceedings are well-known: see General Steel Industries Inc v Commissioner for Railways (NSW) & Ors [1964] HCA 69;(1964) 112 CLR 125 at 129. If it is demonstrated that there is a real question to be tried , the matter is inappropriate for the entry of summary judgment: Dey v Victorian Railway Commissioners [1949] HCA 1;(1949) 78 CLR 62. The tests stated in the authorities as to whether it is appropriate that a case be disposed of by the entry of summary judgment include statements such as that the matter is “ so obviously untenable that it cannot possibly succeed ”; “ manifestly groundless ” or “ would involve useless expense ”: see General Steel Industries at 129.
12. The summary disposal of proceedings or part thereof deprives a party of the right to a contested hearing. For that reason it is said that the requirement for establishing that there is no triable issue is demanding: Air Services Australia v Zarb (Court of Appeal, 26 August 1998, unreported)…” (emphasis added)

(1) The indemnity claim

10 The first plaintiff alleges in the statement of claim that it has become liable to pay income tax to the Deputy Commissioner for Taxation in the sum of $1,437,000 and claims an indemnity from the defendant under the terms of a deed of indemnity. The defendant allegedly paid the first plaintiff fit-out contributions in respect of the leases executed between the first plaintiff and the defendant. In the deed of indemnity, the defendant agreed to indemnify the first plaintiff against any income tax liability for the fit-out contributions paid by the defendant to the first plaintiff.

11 The relevant paragraphs of the statement of claim concerning the indemnity claim are as follows:-

“(1) By Deed of Indemnity entered into in or about June 2005, the defendant agreed to indemnify and keep indemnified the first plaintiff against any income tax liability for any fit out contribution paid by the defendant to the plaintiff in connection with any lease entered into between the plaintiff and the defendant.
(2) The defendant has paid the sum of $5,917,930.00 to the first plaintiff by way of fit out contribution in relation to 24 leases executed by the first plaintiff and the defendant.
(3) The first plaintiff has since become liable to pay the sum of $1,437,000.00 in income tax to the Deputy Commissioner of Taxation in respect of the $5,917,930.00 paid by the defendant to the plaintiff for fit out contributions in respect of the leases.
(4) The first plaintiff has demanded the defendant and the defendant has refused to indemnify it in relation to the income tax liability in the sum of $1,437,000.00.
(5) The first plaintiff claims indemnity from the defendant in respect of its income tax liability of $1,437,000.00.”

12 The relevant provisions of the Deed are contained in clause 2.1. It was entered into in June 2005. In the Deed, “Lessor” is a reference to the defendant and “Lessee” is a reference to the first plaintiff. Clause 2.1 is in the following terms:-

“ 2.1 The Lessor will indemnify and keep indemnified the Lessee against:
(a) any liability that the Lessee may have to the lessor under any of the Leases to compensate the lessor for early termination of the Lease where the early termination is a result of the Lessee’s default under or repudiation of the Lease; and
(b) any liability that the Lessee may have to pay income tax on the amount of any fit-out contribution paid by the Lessor to the Lessee in connection with a Lease .”

The applicant’s submissions

13 In relation to paragraphs 1 to 5 of the statement of claim, the applicant/ defendant submitted that there was no basis for the indemnity claim in respect of the alleged income tax liability. The first plaintiff, it was emphasised, did not allege that it has paid the alleged income tax liability, but rather that it has become “liable to pay the sum of $1,437,000” (SOC, paragraph 3).

14 The defendant further submitted there has been no demand for payment pursuant to the indemnity.

15 The defendant submitted that a right to claim an indemnity arises on payment of a sum in respect of which the indemnity is claimed: Howard Rotavator Pty Limited v Wilson (1987) 8 NSWLR 498 at 500-1. The first plaintiff has not pleaded that it has paid the alleged income tax liability. On that basis, the defendant contended no triable issue is disclosed in paragraphs 1 to 5 of the statement of claim.

16 Ms Richards, accordingly, argued:-

(1) That a right to claim an indemnity arises on payment of a sum in respect of which the indemnity is claimed. In this case, it was said that the plaintiff does not allege that it has paid the asserted income tax liability of $1,437,000 or any part of it.

(2) That no assessments or demands for payment had been received.

(3) That the claim cannot succeed for the reason that it has been made outside the period of time that it was agreed the indemnity would stand in accordance with the provisions of clause 4.1(b) of the Deed.

17 In relation to the time limitation, clause 4.1 of the deed of indemnity provides that:-

“ (a) The Lessor shall cease to have any liability to indemnify under clause 2.1(a) in relation to a Lease on the scheduled expiry date of the initial term of that Lease.
(b) The Lessor shall cease to have any liability to indemnify under clause 2.1(b) on the third anniversary of the date of this Deed .”

18 The affidavit of Ms Shand sworn 26 March 2009, establishes that the parties entered into the “Lease Indemnity Deed” in June 2005 (paragraph 7). On that basis, the third anniversary of the Deed occurred in June 2008. The statement of claim at paragraph 1 refers to the deed of indemnity having been entered into in June 2005. The proceedings were commenced by statement of claim on 27 October 2008. Accordingly, the defendant asserted that there is no reasonable cause of action disclosed as on the face of the deed of indemnity there is no longer any right to sue. The argument advanced by the defendant was that the correct interpretation of the clause was that its provisions were in the nature of a statute of limitations provision.

19 If a cause of action is clearly statute barred, the Court may conclude that the cause of action is not reasonable: Hillebrand v Penrith Council [2000] NSWSC 1058 at [27]. The precondition to that conclusion is that on the pleadings, the limitation period clearly applies and has expired.

20 The essential point concerning the first plaintiff’s alleged entitlement to rely upon the indemnity essentially turns upon the proper construction to be given to the relevant provisions, in particular, those contained in clauses 2.1(b), 3.3 and 4.1(b) of the Deed.

The plaintiff/respondent’s submissions

21 Mr Rayment QC contended that the construction of clause 2.1(b) is linked to the provisions of clause 4.1(b). He submitted that it will be necessary for the Court to construe what is meant by the latter provision in the context of the Deed.

22 The contention was that in order to understand the effect of clause 4.1(b), it will be necessary for the Court to receive evidence of surrounding circumstances and this fact alone operated against summary dismissal of the claim.

23 In addition, Mr Rayment emphasised that the indemnity provided for in clause 2.1(b) was not in respect of a payment but related to “any liability”. An indemnity for a liability, he argued, was quite different from an indemnity or promise to pay or re-pay an amount of money.

24 Mr Rayment contended that clause 2.1(b) should be interpreted as an indemnity for any liability that the first plaintiff incurred, not an indemnity for payments made by the plaintiff. In Rotavator (supra), an employer sought to recover the amount of compensation it had paid to the employee under s.64(1)(b) of the Workers Compensation Act 1926 from the tortfeasor. The employer was given a statutory indemnity in respect of the compensation which he had paid being a right of action in respect of each payment made. The distinguishing factor was that the present case does not concern a payment, but rather a liability.

25 A letter from the first plaintiff’s solicitors to the defendant dated 31 March 2009 (Exhibit 2) was relied upon by the first plaintiff as constituting a demand for the payment of the income tax liability. Clause 2 of the deed of indemnity is referred to on page 1 of the letter. On p.2, the first plaintiff sought recovery of the sum of $591,792.99 for outstanding invoices, the sum of $124,814.48 for the accrual of interest and the sum of $1,775,378.96 for GST on the invoices. The total amount, $2,491,986.43, was the subject of the demand for payment in the letter. Ms Richards for the defendant submitted that although the letter claimed payment for various sums, including GST, it did not specifically make a demand for the amount of the income tax liability in question in these proceedings.

26 In construing clause 4.1 of the Deed, Mr Rayment submitted on behalf of the first plaintiff that the Court would, on a final hearing, apply the principles expressed in Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451. A majority of the High Court stated at [22]:-

“The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction. In Codelfa Constructions Pty Ltd v State Rail Authority of NSW , Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen :

‘In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.’”

27 In reference to the “surrounding circumstances” in which the Deed was entered into, Mr Rayment outlined, by way of background, that the first plaintiff took the leases of all of the shopping centre in question and received a fit-out allowance from the landlord and, in return, he was to find sub-tenants or assigned tenants for the whole of the shopping centre. Part of his remuneration for the fit-out was the contributions paid by way of the fit-out unless particular shops were passed on to those who would become his sub-tenants. He maintained that what was envisaged was that the leases for the shopping centre in favour of the first plaintiff would be for a period of three years.

28 In the present case, the surrounding circumstances, it was said, would be those that were known to the parties including the purpose and object of entering into the deed. Proof of the surrounding circumstances by evidence was a matter to be determined at trial. These circumstances include the fact that the first plaintiff entered into certain lease agreements on the condition that the defendant would provide an indemnity for any tax liability incurred by the first plaintiff in respect of fit-out contributions paid by the defendant.

29 Mr Rayment submitted that there are a number of possible constructions of clause 4.1(b). Firstly, the clause could be construed so as to effectively apply to the contributions that were made in the period of three years of the deed but not thereafter and would operate with respect to tax liability whenever assessed. Secondly, the clause could be understood as only applying to fit-out contributions which have attracted an actual liability to income tax within three years of the deed. Thirdly, the clause could apply to contributions that have attracted actual liability to income tax and been the subject of a demand and sued upon within three years (that is, in the nature of a statute of limitations provision). The third possibility, it seems is the construction that the defendant will contend for at any final hearing.

30 As to the second suggested interpretation, the argument outlined included the following points:-

(1) Clause 2.1 prescribed an obligation in the defendant to indemnify the first plaintiff in respect of any liability that may arise as described. Any such liability was in respect of future contribution payments paid by the defendant as lessor.

(2) If a payment attracted liability of the kind specified, the date of assessment is not relevant so long as it was in respect of a payment(s) made in the three year period.

31 It was argued for the first plaintiff that any other construction would deprive the first plaintiff of the indemnity in many circumstances that could be envisaged.

32 The first plaintiff accordingly contended that the Court would at trial be required to resolve the interpretation of clauses 2.1(b) and 4.1 by considering relevant factors in accordance with the principle stated in Pacific Carriers (supra). Reliance was placed by the plaintiff upon a letter from Spanko Soulos Solicitors, who were acting for the plaintiffs, to Bartier Perry Solicitors who were acting for the defendant dated 24 May 2005 (Annexure A to the affidavit of Petros John Macarounas sworn 25 June 2009). The letter, it was claimed, is relevant in establishing the intentions of the parties, it forming part of the negotiations between them prior to entering the deed. Reference was made to the statement in the letter: “a provision that the lessor will indemnify our client in respect of any assessment made by the ATO in respect of fit-out contributions in respect of the year in which the contribution is paid.”

33 Mr Rayment further submitted that the process of interpreting terms of a contract (in this case, the Deed) is a pragmatic process, and “no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements”: Upper Hunter County District Council v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429, per Barwick CJ at [35]-[36], [40]-[42]. Questions as to meaning are “to be answered in a practical and realistic way, not in a way which adopts an overly fined or theoretical approach that is alien to commercial agreements”: McCann v Switzerland Insurance Australia Limited (2000) 176 ALR 711 at 729.

34 If there are at least two constructions open on the language of a contract, the preferable construction is the one which avoids consequences which appear to be “capricious, unreasonable, inconvenient or unjust”, even if it is not the most obvious or grammatically accurate. It is also permissible to depart from the ordinary meaning of the words of a provision if it is necessary to avoid an inconsistency between that provision and the rest of the instrument: per Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 at 109.

35 Finally, in relation to the contention that there had been a failure by the first plaintiff to comply with the requirements of clause 3.3 of the Deed, Mr Rayment raised two points:-

(1) Firstly, (the claimed failure to supply the defendant with income tax assessments or other material), the defence does not raise any point in this regard, in particular, as to any failure by the first plaintiff to make a written request for payment or supply such material.

(2) That, in any event, a written request was sent by the first plaintiff to the defendant (Exhibit 2, p.2), being a letter dated 31 March 2008 sent by McLachlan Chilton to the Proper Officer of the defendant. It was accepted that the tax was wrongly described as a goods and services tax (GST) and not income tax. In circumstances in which it was clear that no GST liability could arise, it was submitted that it should be construed as a demand for the sum now sued upon. Reference was made on p.1 of Exhibit A to the indemnity provisions of clause 2 of the Deed. Accordingly, it was submitted the letter did constitute a demand.

Consideration

36 In the context of a summary dismissal application, it is incumbent upon the defendant to establish that the claim is clearly unarguable or manifestly groundless: Brimson (supra) at 944 and 948 to 949.

37 The lease indemnity deed containing the relevant indemnity was drafted by the former solicitors for Bevillesta Pty Limited (Bartier Perry, Solicitors) apparently after discussions between those solicitors and Spanko Soulos & Co who acted on behalf of the first plaintiff. The letter from the solicitor on behalf of the first plaintiff to Bartier Perry dated 24 May 2005 referred to discussions that had taken place between the parties, inter alia, with a view to the inclusion of a provision “… that the lessor will indemnify our client in respect of any assessment made by the ATO in respect of fit-out contributions in respect of the year in which the contribution is paid”.

38 Whether or not clause 2.1(b) be described as a provision in the nature of a guarantee or an indemnity, relevant principles of construction are to be implied to it. See, in that regard, the High Court’s decision in Andar Transport Pty Limited v Brambles Limited (2004) 217 CLR 424 at 436 to 438.

39 It is not here necessary to express any final conclusion as to the application of those principles to the lease indemnity deed. Clearly the provisions relating to indemnity are required to be construed in the context of the whole agreement and in accordance with relevant principles of construction. Clause 2.1(b) of the Deed is not of a kind that is directed to indemnifying the first plaintiff in respect of any tortious or contractual liability to a third party but rather its terms are specifically directed to a potential statutory liability to pay income tax arising in respect of payments made by the defendant to the first plaintiff by way of a “fit-out contribution” paid to the first plaintiff.

40 The meaning and scope of the indemnity provided by the terms of clause 2.1(b) is open to interpretation. In this respect, I refer to the submissions made on behalf of the first plaintiff to which I have outlined above.

41 Further, integral to the construction question is the interaction between the provisions of clause 2.1(a) and clause 4.1(b) in light of the agreement as a whole including the recitals which include “D the lessee has agreed to enter into the leases on the condition that the lessor provides certain indemnities in the Deed”.

42 Additionally, the construction issue may depend upon the extent to which evidence is admissible to establish the commercial purpose of the lease indemnity deed and other matters of background or context as at the date of the Deed.

43 In my opinion, an interpretation of the clause as other than one in the nature of a statute of limitation provision, as contended for by the defendant, is at least open to argument. The latter interpretation would prevent the first plaintiff from recovering under the indemnity income tax for which it may only become liable after the three year period. Whether, however, an alternative interpretation of the clause is in fact the proper interpretation is, in my opinion, a question to be determined at a final hearing. The fact that there is more than one possible interpretation is sufficient to establish that there is a real question to be tried.

44 Finally, the absence of any income tax payment having been made by the first plaintiff in relation to the contributions, a matter relied upon by the defendant, is not, in my opinion, sufficient to conclude the issue as the defendant/applicant has contended. The type of indemnity in question in these proceedings is directed to a liability being incurred, not a payment made.

45 Accordingly, I consider that a triable issue is disclosed in paragraphs 1 to 5 of the statement of claim. It follows that this ground for summary dismissal of the claim must fail.

(2) The centre management fees claim

46 The second claim is in respect of alleged centre management fees. The second plaintiff asserted that a sum of $150,000 is due to him pursuant to an oral agreement. A claim is also made for a further amount of $13,500.

47 The relevant paragraphs of the statement of claim in respect of the centre management fees claim are as follows:-

“(10) By oral agreement the second plaintiff agreed to act as a Centre Manager in relation to the shopping centre at Gosford Town Centre until its sale by the plaintiff.
(11) It was a term of the agreement that the defendant would pay the second plaintiff the sum of $150,000 per annum.
(12) The second plaintiff acted as Centre Manager at the Gosford Town Centre for the period 11 August 2005 to 11 August 2006.
(13) In breach of the agreement the defendant has failed to pay the second plaintiff at all.
(14) The second plaintiff claims payment for services rendered at the request of the defendant for the period 11 August 2005 to 11 August 2006 in the amount of $150,000.00 plus superannuation entitlements in the amount of $13,500.00 .”

48 The defendant submitted that no reasonable claim is made out in paragraphs 10 to 14 of the statement of claim.

49 In this respect, it was submitted that paragraph 10 fails to plead an agreement with the defendant. It alleges only an oral agreement between the second plaintiff and another unidentified person or entity. Additionally, the agreement is not characterised as an employment contract, nor does it describe the second plaintiff as an independent contractor. The implied or express terms of the agreement in relation to superannuation entitlements are not pleaded.

50 The defendant relied upon the evidence which it maintained establishes that the defendant never employed the second plaintiff. Melissa James was employed by the Beville Group which owned the Gosford Town Centre from late 2003 until her resignation in June 2006 (affidavit of Melissa James sworn 24 April 2009 at paragraph 1). In his affidavit sworn 30 April 2009 at paragraph 27, the second plaintiff, Mr Rahme, stated that “Malcolm Beville offered me a salary of $150,000.00 to take her [Melissa James] position”. The contention advanced by the defendant was that there is no evidence as to the second plaintiff’s asserted employment by the defendant.

51 Whether a worker is an employee is a mixed question of fact and law: Commissioner of Taxation (Cth) v J Walter Thompson (Aust) Pty Limited (1944) 69 CLR 227; Marshall v Whittaker’s Building Supply Co (1963) 109 CLR 210; Price v Grant Industries Pty Limited (1978) 45 FLR 129; Australian Timber Workers’ Union v Monaro Sawmills Pty Limited (1980) 42 FLR 369. Ascertaining the terms of a contract, and the correct inferences that are to be drawn from those terms, are questions of fact. Whether or not the relationship arising from those terms is an employment relationship is a question of law. Where there is a real question to be tried, either of law or fact, summary judgment ought not be entered: Acquatec-Maxcon Pty Limited v Minson Nacap Pty Limited [2004] VSCA 18. Accordingly, if a contract is proved, questions as to the precise nature of the second plaintiff’s employment or engagement by the defendant are matters to be determined at trial.

52 Insofar as paragraphs 10 to 14 of the statement of claim as presently drafted are capable of embracing a contention of an employment agreement between the second plaintiff and the defendant, principles of employment law require the relationship to be established by an examination of the totality of the circumstances that establish the reality of the relationship. Such circumstances may include the conduct of the parties subsequent to the making of the contract. The relevant principles have recently been stated by the Full Court of the Supreme Court of South Australia in Golden Plains Fodder Australia Pty Limited v Millard [2007] SASC 391. There, Gray J (with whom David J agreed), stated:-

“ Principles from employment law
32. Where there is an issue of identifying the employer of an employee when there might be two (or more) possible employers, courts have adopted the approach of resolving the issue by the application of the principles developed for determining whether a person was an employer at all.
33. The touchstone is the practical reality of the relationship. Courts have consistently emphasised that in determining whether a relationship between parties is one of employment or independent contract, the court should focus on the practical reality of the relationship.
34. The totality of the circumstances surrounding the relationship of the various parties, including conduct subsequent to the creation of the alleged employment relationship, is relevant.
35. Documentation created by one or more of the parties describing or evidencing an apparent employment relationship will be relevant to, but not necessarily determinative of, the true character of the relationship. The documentation may have been brought into existence for other purposes, for example, for tax minimisation or the reduction of insurance premiums, without reflecting the reality of the parties’ relationship. The payment of wages by a particular entity is not conclusive of the existence of an employment relationship. The beliefs of the employees as to the identity of the employer is admissible and is entitled to be given weight.”

53 Applying the above principles, it is clear that the claim for management fees is dependent upon the second plaintiff establishing a contract in the terms alleged and that this will involve a determination of issues of fact and possible issues of law, as discussed above.

54 It is clear on the affidavit of Ms James sworn 24 April 2009 that there is a significant factual issue as to whether or not the second plaintiff was employed by the defendant as a “Centre Manager” as alleged. The resolution of that issue would appear to depend, inter alia, upon evidence that may be given by the second plaintiff and by Ms James. Additionally, the question of the identity of the alleged employer may be an issue for a final hearing.

55 Accordingly, these are matters for determination at trial and the claim is not, in my opinion, susceptible to a strike out application. The application in that respect, accordingly, should be dismissed.

56 Before departing from this aspect of the matter, it is clear that the statement of claim does not sufficiently plead the essential matters relied upon in support of the claim. This is a matter that is partly taken up in the discussion below in relation to particulars of the claim. I will later in this judgment refer to the need for a case management approach to be adopted for the proceedings in order to ensure an efficient and expeditious disposal of the proceedings. The question of an appropriate amendment to the statement of claim, accordingly, requires consideration in order to overcome the deficiencies to which I have referred.

(3) Provision of particulars

57 The affidavit of Ms Shand sworn 26 March 2009 sets out the history concerning requests for particulars made on behalf of the defendant on 18 November 2008, 2 December 2008 and 5 March 2009.

58 The requests for particulars related to both the indemnity claim and the centre fees management claim.

59 In her affidavit sworn 25 June 2009, Ms Shand attaches further correspondence including a letter from McLachlan Chilton providing particulars by facsimile dated 15 April 2009.

60 Correspondence thereafter related to the question of the particulars of documents as referred to in the letter suppling particulars (Annexure C to Ms Shand’s affidavit sworn 25 June 2009) and to a notice to produce served on behalf of the defendant (Annexures D, G and H to Ms Shand’s affidavit sworn 25 June 2009).

61 No further issue was raised concerning the adequacy of particulars supplied on 15 April 2009. On the hearing of the application, no further submissions were made by counsel for the defendant on the subject of the provision of particulars.

62 On the material before me, there is no basis for making an order that the plaintiffs provide further particulars. In the event that the parties remain in dispute following the implementation of case management procedures to which I refer below, including any dispute concerning any matter of particulars, then I grant leave to the parties to approach the Registrar in that respect.

(4) Provision of a solicitor’s certificate

63 The statement of claim did not carry a certificate specified in s.347(3) of the Legal Profession Act which requires a plaintiff’s solicitor to certify there are reasonable grounds for the claim. Section 347(2) only requires that a certificate be given and appear on the statement of claim for a claim for damages. It was the defendant's submission that what is sought is money by way of damages. The defendant’s submission was that, at the very least, a certificate should be provided if there is an argument in relation to the nature of the indemnity. Additionally, there is a claim for a substantial amount of interest. Interest, if nothing else, is in the nature of damages which would require a certificate to be given.

64 The defendant submitted that the claim for interest should be considered as being in the nature of damages. Reference was made to the remarks of Handley JA in MBP (SA) Pty Limited v Gogic (1991) 171 CLR 657 at 663 in which his Honour stated:-

“… The function of an award of interest is to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period: Batchelor v Burke , per Gibbs CJ. ”

65 That principle was referred to with approval in Screenco Pty Limited v R L Dew Pty Limited (2003) 58 NSWLR 720 at [12] and Grincelis v House (2000) 201 CLR 321 at [16].

66 Ms Richards on behalf of the defendant submitted that the first plaintiff’s claim pursuant to the deed of indemnity was properly characterised as a claim for damages for breach of the deed. The quantum of the claim will be proved at trial. The second plaintiff’s claim was properly characterised as a claim for damages for breach of contract.

67 Mr Rayment submitted on behalf of the plaintiffs that no claim for damages had been made in the statement of claim, only a claim for a certain quantified sum.

68 The fact that the primary amount the subject of the indemnity claim may be a claim for a certain quantified sum does not mean that the claim is not to be characterised as a claim for damages.

69 Some money claims are for liquidated damages whilst others are unliquidated damages. The claim in the present proceedings seeks monetary compensation by way of indemnity against a liability for taxation. Such a claim, in my opinion, is a claim for damages. The claim by the second plaintiff is also a claim for damages in respect of the remuneration claimed.

70 The statement of claim, accordingly, is required to be certified under s.347(3) of the Act.

71 The present proceedings require case management. I consider that the plaintiffs should within 21 days of this judgment, file and serve an amended statement of claim with full particulars of the two claims considered in this judgment. The legal representatives of the parties should confer within a period of 14 days after the service of any amended statement of claim with a view to settling a timetable for the service of verified witness statements in relation to each of the claims made in any amended statement of claim.

72 In the event that the parties have not, within that period of 14 days, agreed upon a timetable for the service of verified statements, then I grant leave to either party to apply for the purpose of the Court determining an appropriate case management programme for the proceedings. The liberty to apply in that respect should, in the first instance, be made to the Registrar.

73 I make the following orders:-

(1) The notice of motion in relation to the relief sought in paragraphs 1 and 2 is dismissed.

(2) In relation to paragraph 4 of the notice of motion:-

(a) Liberty to the defendant to apply to the Registrar as may be necessary in relation to particulars of the claim in paragraphs 1 to 5 of the statement of claim, following service of any amended statement of claim.
(b) In relation to the claim by the second plaintiff in paragraphs 10 to 14 of the statement of claim, liberty to the defendant to apply to the Registrar in relation to particulars, following service of any amended statement of claim.

(3) Order that the plaintiffs’ solicitor is to provide to the defendant’s solicitor a certificate pursuant to s.347 of the Legal Profession Act 2004 within 14 days of this order.

(4) Costs of the notice of motion are reserved. Liberty to either party to apply in respect thereto.

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