DALGOLD Holdings Pty Ltd v Joseph Charles Learmonth Duffy Pty Ltd - [2001] WADC 236

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: DALGOLD HOLDINGS PTY LTD & ORS -v- JOSEPH CHARLES LEARMONTH DUFFY PTY LTD & ORS [2001] WADC 236

CORAM: DEANE DCJ

HEARD: 17 AUGUST 2001

DELIVERED : 8 OCTOBER 2001

FILE NO/S: CIV 209 of 2000

BETWEEN: DALGOLD HOLDINGS PTY LTD
First Plaintiff
JEFF GREGSON
ROSLYN GREGSON
Second Plaintiffs
AND
JOSEPH CHARLES LEARMONTH DUFFY PTY LTD
First Defendant
SAMUEL WARD
MABEL WARD
Second Defendants

Catchwords:

Action for damages - Sale of business - Trade Practices Act 1974 and Fair Trading Act 1987

Appeals by plaintiffs against decisions of Deputy Registrar striking out part of amended statement of claim as against second defendants and refusing leave to plaintiffs to administer further interrogatories to second defendants - Whether a failure to plead material facts - Whether form of disputed interrogatories proper - Circumstances giving rise to second set of interrogatories - Whether leave to administer such interrogatories justified

Legislation:

Trade Practices Act 1974 s 75B(c)

Fair Trading Act1987 s 68(c)

Rules of the Supreme Court of Western Australia

Result:

Appeals allowed
Category B

Representation:

Counsel:

First Plaintiff                :     Mr P D Quinlan
Second Plaintiffs           :     Mr P D Quinlan
First Defendant             :     No appearance
Second Defendants       :     Mr P W Van Der Zanden

Solicitors:

First Plaintiff                :     Arns & Associates
Second Plaintiffs           :     Arns & Associates
First Defendant             :     No appearance
Second Defendants       :     Minter Ellison

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

Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1
Dale Coast Pty Ltd v Monisse [1999] WASCA 103
Fox v H Wood (Harrow) Ltd [1963] 2 QB 601
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Hunt v Knabe (No 2) (1992) 8 WAR 96
Kayhill v Queensland Housing Commission (No 2) [1964] QWN 48
Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146
Serrata Investments Pty Ltd v Rajane Pty Ltd & Anor (1991) 6 WAR 419
Smith v Littlemore (1996) 15 WAR 289
Yorke v Lucas (1985) 158 CLR 662
Zipside Pty Ltd v Anscorp Pty Ltd, unreported; SCt of Qld; BC9906318; 1 October 1999

Case(s) also cited:

Belmont Finance Corp Ltd v Williams Furniture Ltd [1979] Ch 250
Bruce v Oldhams Press Ltd [1936] 1 KB 697
Council for the City of the Gold Coast v Pioneer Concrete (Queensland) Pty Ltd (1998) 157 ALR 135
Goding v Queensland Newspapers Pty Ltd (1965) 113 CLR 170
H 1976 Nominees Pty Ltd v Galli and Apex Quarries Ltd (1979-80) 30 ALR 181
Hawke v Tamworth Newspaper Company Ltd [1983] 1 NSWLR 699
Jingellic Minerals NL v Abigoup Ltd (1992) 7 WAR 566
Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd & Ors (1985) 61 ALR 504
Ken Ernest Judge as Provisional Liquidator of Wildcat Holdings Pty Ltd & Ors v Ronald Samuel Finkel & Others [1997] WASC 13
Konings v Naylor [1964] Qd.R 235
Levi v Sterling Brass Founders Pty Ltd, unreported; FCt SCt of WA; Library No 970209; 9 May 1997
Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114
Mulley v Manifold [1959] 103 CLR 341
Parnell v Walter (1890) 24 QBD 441
Robinson & Ors v Adshead & Ors (No 2) (1995) 12 WAR 577
Sutton v A J Thompson (1987) 73 ALR 233

DEANE DCJ: This matter concerns two appeals by the first and second plaintiffs ("the plaintiffs") from decisions of a Deputy Registrar given on 23 March 2001, whereby the second defendants succeeded in their application to strike out portions of the amended statement of claim as against them. Further the plaintiffs failed in their application for leave to administer further interrogatories against the second defendants. As these are appeals from a Deputy Registrar's decision they are by way of a hearing de novo; Hunt v Knabe (No 2) (1992) 8 WAR 96; Hazart Pty Ltd v Rademaker (1993) 11 WAR 26. It should be noted that the second defendants' chamber summons to strike out part of the amended statement of claim as against them was substantially out of the time frame prescribed by the Rules of the Supreme Court ("the Rules").
The plaintiffs seek damages for misleading and deceptive conduct with respect to the sale of an icecream parlour business called "Swirls Icecream Parlour". They allege that pursuant to s 75B(c) of the Trade Practices Act and similar provisions pursuant to s 68(c) of the Fair Trading Act, the second defendants were either directly or indirectly concerned in, or a party to, that conduct as alleged against the first defendant. The first defendant was the business agent of the vendor of the business Astonlea Pty Ltd ("Astonlea"). Whilst Astonlea are not a party to the proceedings both the second defendants were directors of that particular company.
Paragraphs 7(a) and 7(b) of the amended statement of claim allege misleading and deceptive conduct against both the first and second defendants. Those pleadings also make reference to an information brochure allegedly prepared with respect to the sale of the business by the first defendant on behalf of the second defendants. Reference is also made to further representations allegedly made by the first defendant in connection with the sale of the business. Paragraph 8 of the amended statement of claim alleges misleading and deceptive conduct, effectively by way of silence on the part of the defendants by virtue of their alleged failure to reveal to the plaintiffs prior to settlement on 30 April 1997, that the turnover of the icecream parlour business was in decline and that the presence of a competitor "McDonalds" was having an impact on the financial turnover of the icecream parlour business. The second defendants do not take issue as to the allegation regarding their silence but deny the turnover of the business was in decline or that the presence of "McDonalds" was having an adverse impact on the business of "Swirls Icecream Parlour".
Paragraph 13 of the amended statement of claim is pleaded in the following terms:
"At all material times the second defendants, or each of them, were involved in the conduct pleaded in paragraphs 7 and 8 in that the second defendants were persons directly or indirectly knowingly concerned in or a party to such conduct within the meaning of s 75B of the Act and/or s 68 of the Fair Trading Act."
A statement of claim was initially filed on 28 March 2000 after which time both the first and second defendants filed defences. The second defendants then sought and obtained further and better particulars of the statement of claim. Discovery was given by all parties. Interrogatories were then administered by consent by the plaintiffs to the second defendants. Answers to those interrogatories were given in November 2000, although there seems to be some issue as to whether or not some of the answers were satisfactory. The answers to those interrogatories are contained in Annexure C to the affidavit in support of the plaintiffs' chamber summons to administer interrogatories.
Prior to that, in October 2000, orders were made by the Court regarding the exchange of expert evidence between the parties. The second defendants consented to leave to amend the statement of claim on 19 October 2000 in accordance with a minute filed on 6 September 2000. This document then stood as the amended statement of claim. It was after consenting to the current amended statement of claim and responding to the plaintiffs' interrogatories that the second defendants brought their application seeking to strike out portions of the amended statement of claim as it related to them, pursuant to O 20 r (1)(a), (b), and (c).
Although par 13 of the amended statement of claim is pleaded in somewhat bald terms merely alleging that the second defendants were directly or indirectly knowingly involved in a contravention of s 52 of the Trade Practices Act the plaintiffs provided further and better particulars of that paragraph somewhat belatedly in March 2001. Those particulars allege that the second defendants had actual knowledge of essential matters comprising misleading or deceptive conduct. I accept the second defendants' submission that before a person can be said to have been a party to a contravention of s 75B(c) of the Trade Practices Act a person must be an intentional participant in the sense that their intent must be based on a knowledge of the essential elements comprising the alleged contravention; Yorke v Lucas (1985) 158 CLR 662. The same may be said in relation to an alleged contravention of s 68(c) of the Fair Trading Act; Serrata Investments Pty Ltd v Rajane Pty Ltd & Anor (1991) 6 WAR 419. As a matter of logic it is implicit in a pleading of "knowing concern" that there is an allegation of actual knowledge relating to the necessary intent which is an essential requirement in order to establish the cause of action; Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1.
In argument counsel for the plaintiffs conceded that the form of the pleading in par 13 of the amended statement of claim was not particularly clear but submitted that the particulars which were subsequently provided remedy any problem and answer any criticism that may be directed at the pleading. Pursuant to O 20 r 8 of the Rules a statement of claim must contain in summary form a statement of the material facts on which the plaintiff relies to found the claim. In this case the plaintiffs plead actual knowledge on the part of the defendants and it must be appreciated that this relates to an alleged state of mind a matter about which one may not be able to provide further and better particulars as distinct from a situation where constructive knowledge is alleged and one is in a position to provide specific particulars. The distinction is one between alleged knowledge of an actual fact as opposed to an allegation that a party ought to have known a particular fact or facts. Where a state of mind is alleged, matters relied on to prove that actual knowledge whether it be direct proof or proof by inference are necessarily a matter of evidence; Fox v H Wood (Harrow) Ltd [1963] 2 QB 601 at 604; Smith v Littlemore (1996) 15 WAR 289 at 300 ‑ 301. In the light of this, although it is correct as counsel for the defendants submits that a statement of claim merely alleging a defendant was, directly or indirectly, knowingly involved in a contravention of s 52 of the Trade Practices Act is deficient and should be struck out (see Zipside Pty Ltd v Anscorp Pty Ltd, unreported; SCt of Qld; BC9906318; 1 October 1999) it is still necessary to examine the circumstances and the pleadings in cases on an individual basis. This is not to say that where there are allegations of fraud and misconduct such allegations must not be pleaded with a degree of specificity. In the end it seems to me that in the circumstances of this particular case, given its history, one must ask whether the pleadings and matters such as the further and better particulars examined as a whole satisfy the purpose of pleadings. The defendants are entitled to know the case against them in order to enable them to meet that case at trial.
Order 20 r 19(1) of the Rules gives the Court power to strike out a pleading on the grounds that;
(a)it discloses no reasonable cause of action or defence, as the case may be, or
(b)it is scandalous, frivolous or vexatious; or
(c)it may prejudice, embarrass or delay the fair trial of the action; or
(d)it is otherwise an abuse of the process of the Court … .
Paragraph 13 of the amended statement of claim does not plead material facts in support of the allegation that the second defendants were, directly or indirectly, knowingly concerned in or a party to the conduct in issue. Nonetheless the further and better particulars identify alleged circumstances from which it is said knowledge arose on the part of the second defendants. Whilst there is an argument that this may be categorised as evidence rather than particulars, it is the case in my view that the matters referred to in the end fairly and clearly identify the case the second defendants must meet at trial. The state of mind of the second defendants is largely a matter peculiarly within their knowledge. Information as to this may be obtained as a result of discovery and/or answers to interrogatories administered.
The further and better particulars of par 13 of the amended statement of claim state whereby the plaintiffs allege actual knowledge on the part of the second defendants, or each of them, of the essential matters that make up the conduct pleaded in par 7 and par 8 are found in par (a) to par (i) of those particulars. They are said to be particulars alleging circumstances from which it will be asserted that actual knowledge may be inferred. Insofar as the second defendants criticise the further and better particulars as containing evidence, I accept the plaintiffs' argument that where one seeks particulars as to a state of mind it may well result in a reference to matters of evidence. On a strict interpretation, some of those paragraphs contain allegation of material facts which it is said should be pleaded as such. I do not regard this criticism as sufficient to justify par 13 of the amended statement of claim being struck out at this point in these proceedings. In the end I do not regard it as a fundamental defect in the whole of the circumstances of this matter.
Whilst there is some merit in the arguments raised on behalf of the second defendants and while certainly par 13 of the amended statement of claim could have been more clearly pleaded, I am of the view that ultimately on the whole of the material available to the second defendants the case alleged against them by the plaintiffs, which is the case they must meet at trial, is clear and discloses a cause of action. The pleading in issue is not in my opinion scandalous, or vexatious. There is no other reason for par 13 of the amended statement of claim to be struck out at this late stage in the proceedings. The plaintiffs' appeal against the decision of the Deputy Registrar striking out par 13 of the amended statement of claim is therefore allowed.
In view of this finding it is not necessary to comment to any great extent on the submissions as to the second defendants' application for an extension of time in which to bring its application to strike out the pleading in question. Clearly that application was made substantially beyond the time frame contemplated by the Rules, albeit that the Court has power to extend the time period where the interests of justice demand that should occur; Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146. In this case it is evident that I am not persuaded there are compelling arguments supporting the striking out of the amended statement of claim insofar as it relates to the second defendants, nor am I persuaded that a failure to do so will or could result in the second defendants' rights to a fair trial being prejudiced or the Court process being embarrassed. For the sake of completeness, however, I consider it relevant to note that notwithstanding the result of this appeal it is appropriate that the extension of time be granted in any event.
As previously stated the plaintiffs' also appeal against the Deputy Registrar's decision dismissing their application for leave to administer interrogatories as against the second defendants and this matter must now be considered. There are five interrogatories in issue, although interrogatories 3, 4 and 5 each contain a number of questions.
The function or use of interrogatories is to enable one party to obtain from another party particular information concerning facts material to the questions in dispute between the parties for the purposes of obtaining admissions as to those facts. A party may interrogate about matters which go to support that party's case or which destroy or impeach the other party's case. Questions may be asked which might be asked on examination‑in‑chief of a witness at trial. Relevant to this a party may interrogate on its own pleading as to facts which tend to support that party's case. Questions which relate to matters in issue extend beyond facts directly in issue to other facts, the existence or non‑existence which are relevant to the existence of those facts that are directly in issue between the parties, although a distinction between those two categories is often subtle and difficult to determine.
It is the case, however, that an interrogatory must relate to some definite and existing circumstances and it cannot be posed with a view to discovering material or information of a nature which may assist the party interrogating to make out its case. An interrogatory may be relevant, this being a concept tested with respect to the interrogatory itself and not any answer which may be given to it. These observations reflect the general and useful commentary found in ch 5 of "Discovery and Interrogatories" Simpson, Bailey and Evans, Butterworths (1984).
The interrogatories which the plaintiffs wish to administer against the second defendants are further to interrogatories previously administered by them to the second defendants. In this regard counsel for the second defendants points to par 27.1.13 in Seaman's "Civil Procedure in Western Australia" which states:
"Under the old practice 'a party seeking leave to administer further or amended interrogatories had to show cogent reasons why he or she should be permitted to depart from the rule of practice that a party should only interrogate an opponent once and it was a cogent reason that without the opportunity to further interrogate, a case might not be heard upon its merits', Goding v Queensland Newspapers Pty Ltd (1965) 113 CLR 170 at 174."
Counsel for the second defendant also submits that loose drafting by itself is not sufficient or cogent reason to permit further interrogatories to be administered; Kayhill v Queensland Housing Commission (No 2) [1964] QWN 48. Further there is no doubt that leave to administer a second or subsequent set of interrogatories is very much the exception rather than the norm which requires something more than mere cogency of reason; Dale Coast Pty Ltd v Monisse [1999] WASCA 103. In this regard counsel for the plaintiff concedes that given leave is sought to administer a second or subsequent set of interrogatories the plaintiffs face some difficulty in persuading the Court that leave to do so should be granted. As against this however it is submitted that the minute of proposed interrogatories is directed at seeking admissions with respect to documents which have been discovered in these proceedings which are referred to in the amended statement of claim.
I accept the submission on behalf of the plaintiffs that from their face the documents appear to have been made on the basis of material either provided by or within the knowledge of the second defendants.
In carefully considering the form and content of the proposed interrogatories it would appear, as counsel for the plaintiffs submits, that interrogatories 1 and 2 are concerned with and relevant to the second defendants involvement with and/or authorisation to the first defendant (a real estate agency business) to provide information to any prospective purchasers of the icecream parlour business. I do not regard the content of interrogatory 2 as being too general or irrelevant in the circumstances of the case given the issues that arise on the pleadings. The content of the third proposed interrogatory deals with the information brochure relevant to the sale of the business, which document is referred to in the statement of claim. Although that brochure is not signed by either of the defendants it does bear in a number of places the name of the first defendant. One might readily infer from this that the document was apparently prepared by or with the knowledge of the first defendant at the very least. In my view there is merit in the plaintiffs' argument that the brochure is a critical document which on its face states that the first defendant, as agent for the vendor, is authorised to provide information (this apparently being a reference to information contained in the brochure) to assist persons wishing to purchase the business which is described in the brochure. That business is "Swirls Icecream Parlour" and the second defendants are alleged in the pleadings to have been the sole directors of the vendor of the business. I accept the submission that therefore the issue raised in relation to the document is directed at obtaining admissions with respect to what the document apparently suggests on its face. Adopting a practical approach it would seem that there are no other readily apparent means of obtaining admissible evidence to this effect.

Counsel for the defendants directs a number of criticisms at the proposed third interrogatory but in the end I do not think that any of those criticisms render the questions contained therein improper or impermissible. I do not consider it would be helpful to detail the objections and criticisms raised by counsel on behalf of the defendants save to illustrate the above point by reference to a few examples of the concerns raised by counsel in relation to this proposed interrogatory. A brochure relevant to the sale of "Swirls Icecream Parlour" is annexed to the plaintiffs' minute of proposed interrogatory by answer for the second defendants and is clearly marked with the letter "A". Proposed interrogatory No 3 is introduced with the words "look at the document annexed hereto and marked 'A' and answer the following" there then follows the first proposed interrogatory in this group which reads:
"(a)State whether you personally, or on behalf of Astonlea Pty Ltd, instructed the first defendant to prepare that document."
In relation to this the second defendants' query whether the plaintiffs are referring to an instruction to prepare that exact document or a similar document or a sales brochure. It would seem to me that a sensible reading of the interrogatory makes a clear reference to the specific document marked with the letter "A" annexed to the proposed interrogatories. The proposed interrogatory 3(e) requires "state whether you saw the document in draft form and, if so, when". Criticism levelled at this question is that it does not make it clear whether it is a reference to a whole or part of the document. Again one would think that a commonsense interpretation of the question is a reference to the document as a whole being the document marked with the letter "A" annexed to the proposed interrogatories. There is nothing therefore unclear or oppressive in my view in relation to proposed interrogatory 3(e). Similar comment may be made in relation to the complaint regarding proposed interrogatory 3(g).
Proposed interrogatories 4 and 5 seek admissions in relation to two other documents marked "B" and "C" both of which are annexed to the minute of proposed interrogatories. These documents were discovered to the plaintiffs. The plaintiffs argue that in relation to these proposed interrogatories they seek admissions in relation to what a fair reading of the document in issue might allegedly suggest, namely that the second defendants were aware between the date of the contract and settlement that there was a question as to the financial health of the icecream parlour business. Whether that is so or not is not for determination at this point in time. It will, however, clearly be one of a number of critical issues to be determined at trial.
As previously noted the second defendants deny that there was a decline in the turnover of the icecream parlour business or that the presence of "McDonalds" had an impact on the finances of the business. The document marked "B" (unsigned and dated 16 April 1997) and bearing the typed words "for S & M Ward" makes reference to matters of this nature. The document marked "C" is similar in content and is again unsigned and dated 11 April 1997.
It may well be that proposed interrogatories 4 and 5 are, as counsel for the defendants suggests, in similar form to interrogatories 5 and 6 of the first administered set of interrogatories. In the circumstances of this case, however, I do not think the interests of justice demand that if the plaintiffs were not satisfied with the answers to interrogatories 5 and 6 then an application for further and better answers to those interrogatories should have been made. With the benefit of hindsight it is frequently possible to suggest an appropriate course of action to deal with the problem but this matter must now be resolved at this point in time rather than a reference to what may have been appropriate at an earlier point in time.
In my view these interrogatories cannot properly be categorised as "fishing" because material facts are pleaded in relation to the business and those assertions are denied. There is an argument that the defendants have discovered documents which on their face may lend support to the facts alleged or may at the least provide some evidence relevant to possible knowledge of such facts and I accept the submission on behalf of the plaintiffs that they are in that regard seeking admissions in relation to the effect of the documents in question in proposed interrogatories 4 and 5.
It is correctly submitted on behalf of the defendants that there is no affidavit material before this Court from the plaintiffs explaining why a second set of interrogatories has occurred and no affidavits setting out in detail any exceptional circumstances justifying leave being granted by the Court. In the end, however, this aspect of the matter may properly be described as an application for leave to administer further interrogatories. On all the material before the Court I am satisfied that in this case the interests of justice which among other things require a case being heard on its merits, justify leave being granted to the plaintiffs to administer the proposed interrogatories 1 to 5 inclusive for answer by the second defendants. This second appeal by the plaintiffs is therefore allowed.