Gillford Pty Ltd v Burdon Pty Ltd
[1995] FCA 1071
•19 DECEMBER 1995
CATCHWORDS
TRADE PRACTICES ‑ matters of procedure ‑ application to strike
out ‑ whether paragraphs of statement of claim manifestly or
plainly unarguable ‑ evidence ‑ admissibility
confidentiality
COSTS ‑ interlocutory proceedings ‑ security for costs
whether appropriate if reasonable argument that financial
plight of applicant contributed to or caused by conduct of
respondent impugned in proceeding.
Trade Practices Act 1974: s 52
Fair Trading Act 1974: s 52
GILLFORD PTY LIMITED. ALAN VARLEY HANNAFORD, KATHERINE
ELIZABETH HANNAFORD, GREGORY JAMES GILBERT, NICOLA FRANCES
GILBERT v Burdon PTY LIMITED, ROBERT GRAHAM KENT. KEVIN GEORGE
White
AG 79 of 1994
LOCKHART J.
SYDNEY
19 DECEMBER 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. AG 79 of 1994
)
GENERAL DIVISION )
BETWEEN:GILLFORD PTY LIMITED
First Applicant
ALAN VARLEY HANNAFORD
Second Applicant
KATHERINE ELIZABETH HANNAFORD
Third Applicant
GREGORY JAMES GILBERT
Fourth Applicant
NICOLA FRANCES GILBERT
Fifth Applicant
AND:BURDON PTY LIMITED
First Respondent
ROBERT GRAHAM KENT
Second Respondent
KEVIN GEORGE WHITE
Third Respondent
JUDGE MAKING ORDER: LOCKHART J.
WHERE ORDER MADE: SYDNEY
DATE ORDER MADE: 19 DECEMBER 1995
MINUTE OF ORDER
THE COURT ORDERS THAT:
The respondents' amended notice of motion is dismissed.
The respondents shall pay the costs of the applicants of the notice of motion and of the amended notice of motion.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
CATCHWORDS
TRADE PRACTICES - matters of procedure - application to strike out - whether paragraphs of statement of claim manifestly or plainly unarguable - evidence - admissibility - confidentiality
COSTS - interlocutory proceedings - security for costs - whether appropriate where reasonable argument financial plight of applicant contributed to or caused by conduct of respondent impugned in proceeding.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. AG 79 of 1994
)
GENERAL DIVISION )
BETWEEN:GILLFORD PTY LIMITED
First Applicant
ALAN VARLEY HANNAFORD
Second Applicant
KATHERINE ELIZABETH HANNAFORD
Third Applicant
GREGORY JAMES GILBERT
Fourth Applicant
NICOLA FRANCES GILBERT
Fifth Applicant
AND:BURDON PTY LIMITED
First Respondent
ROBERT GRAHAM KENT
Second Respondent
KEVIN GEORGE WHITE
Third Respondent
19 December 1995
REASONS FOR JUDGMENT
LOCKHART J.
On 30 March 1995 I gave judgment in this matter concerning some of the issues raised in the proceeding, namely, those arising from paragraphs 49 to 56 of the amended statement of claim filed on 17 February 1995. The issues tendered by those paragraphs of the pleading concerned an alleged 'settlement agreement'. It is described in my reasons for judgment of 30 March 1995, which I shall not repeat. The issues were heard by the Court by consent on a final basis.
The upshot of the judgment delivered on 30 March 1995 was that the Court declined to grant the relief sought by the applicants concerning paragraphs 49 to 56 of the statement of claim, namely, the relief sought in paragraphs 16A, 16B, 16C and 16D of the amended application, also dated 17 February 1995. The Court made no orders on 30 March 1995; but it adjourned the proceeding to a date to be fixed for the purpose of hearing argument on the question of costs and the further conduct of the proceeding.
Subsequently, argument was addressed to the Court, and on 13 April 1995 the Court ordered that the applicants pay the costs of the respondents of the proceeding the subject of the judgment of 30 March 1995.
The respondents filed a notice of motion on 10 May 1995 in which they sought the following orders:-
'1.That each of the Applicants provide security for costs in the sum of $155,000.00.
2.That the paragraphs numbered 7 to 36 in the Amended Statement of Claim filed 17 February 1995 be struck out.
3.That the prayers for relief numbered 1 to 10 and 14 in the Amended Application filed 17 February 1995 be struck out.
4.Such further or other orders or directions as this Honourable Court thinks fit.'
Pursuant to directions of the Court, the parties were directed to file written submissions concerning the issues raised in the notice of motion of 10 May 1995. This was done. Supplementary written submissions were also filed, and there was brief oral argument.
The reason for the supplementary submissions was that subsequent to the notice of motion of 10 May 1995, the respondents filed an amended notice of motion and an affidavit of Steven Thomas Miles sworn on 21 August 1995. In the amended notice of motion (for which leave is sought to file) the following orders are sought by the respondents:
'1. That each of the Applicants provide security for costs in the sum of $155,000.00.
2.That each of the Applicants pay into Court the sum of $60,000.00 as security for the costs ordered by Justice Lockhart on 14 March 1995.
3.That the paragraphs numbered 7 to 36 in the Amended Statement of Claim filed 17 February 1995 be struck out.
4.That the prayers for relief numbered 1 to 10 and 14 in the Amended Application filed 17 February 1995 be struck out.
5.Such further or other orders or directions as this Honourable Court thinks fit.'
The Court grants leave to the respondents to file the amended notice of motion; and it is to that document that I now turn.
Motion to strike out paragraphs 7 to 22 of the amended statement of claim
.It is alleged by the applicants in those paragraphs that in earlier proceedings in this Court (AG 118 of 1993) the applicants sued the second and third respondents, Mr Kent and Mr White, in respect of alleged misleading and deceptive conduct in contravention of s. 52 of the Trade Practices Act 1974 ('the TP Act') (para. 7).
.In June 1994, the second and third applicants, Mr Hannaford and Mrs Hannaford, and Mr Kent and Mr White, attended the offices of a firm of solicitors to settle the disputes the subject of proceeding AG 118 of 1993 (para. 8).
.On 10 June 1994, the applicants and the respondents entered into an agreement in writing in settlement of the disputes (para. 9).
.In the course of the mediation, Mr Kent and Mr White made certain representations relating to the potential position of the respondents, and the capacity of the first respondent, Burdon Pty Limited, to manage 'the Gillford's stores' in Moree or Narrabri (para. 10).
.The applicants entered into the agreement as a result of and in reliance upon the representations (para. 11).
.At the time the representations were made they were false, they were known to be false by Mr Kent and Mr White, and they were intended to deceive the applicants (para. 12).
.Each of the representations was, so far as Burdon is concerned, in contravention of s. 52 of the TP Act and, so far as Mr Kent and Mr White are concerned, in contravention of the Fair Trading Act 1987 (NSW) ('the FT Act') (para. 15).
.Mr Kent and Mr White were knowingly concerned in the contravention by Burdon of s. 52 of the TP Act (para. 17).
.At the time of the mediation, the applicants were under great financial stress due to the failure of the relevant stores to perform in accordance with the projections provided by Burdon and in respect of which proceeding AG 118 of 1993 had been commenced (para. 18).
.The respondents took advantage of the position of the applicants, they did not negotiate in good faith, and they made the misrepresentations previously mentioned in order to induce the applicants to enter into the settlement agreement (para. 21).
.In the circumstances, Burdon contravened s. 51AA of the TP Act, and Mr Kent and Mr White were knowingly concerned in the contravention by Burdon (para. 22).
All of the relevant allegations are denied by the respondents.
It was argued as follows on behalf of the respondents in support of the motion to strike out:
.Clause 19 of the mediation agreement of 10 June 1994 precludes the disclosure of 'confidential information'.
.The information alleged to be the subject of the representations, and contained in them, is confidential information within the meaning of clause 19. This is because the information was imparted in circumstances where confidential matters were discussed 'without prejudice' because the information was created by the skill and effort of Burdon and of its directors, and because the information could not have been otherwise acquired by the first applicant, Gillford Pty Limited. The information was 'jealously guarded' by Burdon and its directors and was only made available at the mediation. It was clear to Gillford that the information was confidential and that, objectively considered, the information was inherently of a confidential nature.
.Clause 20 of the mediation agreement prevents the disclosure of information of the kind previously mentioned.
.The alleged representations fall within the prohibition of disclosure imposed by clause 20.
.Clause 27, which seeks to make admissible certain evidence which otherwise would be inadmissible, does not apply.
.Further, there are compelling reasons of public policy why discussions that occur in the course of mediation should be privileged from disclosure; as recognized by s. 53B of the Federal Court of Australia Act 1976.
.Reliance was placed upon various authorities, including Field v Commissioner for Railways for New South Wales (1957) 99 CLR 285 and Quad Consulting Pty Limited v David R Bleakley & Associates Pty Limited (1990) 27 FCR 86.
The following was argued on behalf of the applicants:
.Evidence of what occurred during the mediation is admissible in the present proceeding.
.The provisions of the mediation agreement do not preclude the tender of evidence to establish the alleged contraventions for the following reasons:
(a)Clause 19 provides that information will be kept confidential. The evidence sought to be tendered is of misleading statements, the contents of which were untrue; and such information is not within the ambit of the information to which clause 19 applies. Also, clause 19 imposes a contractual obligation, of which a breach would result at most in damages. The Court would not grant an injunction to restrain a breach of the contract in the current circumstances. And further, the current application does not in fact involve disclosure of the information, as suitable confidentiality orders could be made by the Court if necessary.
(b)Clause 20 does not prevent the tender or disclosure of the relevant information as its application is limited to 'any arbitral or judicial proceedings in respect of the Disputes or any of them'. The present proceeding is not 'in respect of the Disputes'.
(c)Clause 27 is irrelevant as the current proceeding is not a proceeding to enforce the terms of the settlement.
(d)Public policy favours the applicants. The mediation agreement is not part of a judicial proceeding; it is a private contract. There is no authority for an exception to the operation of s. 52 of the TP Act in the case of negotiations leading to the formation of a contract. Indeed, such cases are common. To accede to the respondents' submissions would be to give the imprimatur of the Court to misleading and deceptive conduct, provided such conduct is for the purpose of settlement of existing proceedings, and such a position is 'unthinkable'.
The tests to be applied in determining motions to strike out pleadings are well established and need no restatement. It is sufficient to refer to General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 and Trade Practices Commission v Pioneer Concrete (Qld) Pty Limited (1994) ATPR 41-317. The power the strike out pleadings must be exercised sparingly and only where there is a manifestly untenable case. The impugned paragraphs of a pleading must not be struck out unless it is plain that they are unarguable.
In my opinion the questions raised by the paragraphs 7 to 22 of the amended statement of claim are not manifestly or plainly unarguable. The applicants should not be denied, by the summary process of striking out, the benefit of a full and final hearing on these questions. They raise real issues both of fact and law which are appropriate to be determined on a final hearing, and not on a motion to strike out.
Paragraphs 23 to 36 of the amended statement of claim
The allegations in these paragraphs may be summarized as follows:
.At the time of the execution of the settlement agreement it was assumed by each of the parties that each of the lessors of the relevant shops would probably require the directors of Burdon to personally guarantee the performance by Burdon of its obligations, pursuant to the relevant lease, as a condition of agreeing to the novation of each lease to Burdon, and to the release of related guarantees and security provided by the applicants (para. 23(a)).
.It was the mutual intention of the parties that Mr Kent and Mr White would execute all of the relevant documents to enable a novation of each lease, so that Burdon would become lessee, and also to enable the release of related guarantees and security provided by the applicants to each lessor (para. 23(b)).
.The applicants and respondents thought that the settlement agreement, in particular clause 3(d) thereof, so provided (para. 23(c)).
.It was an implied term of the settlement agreement that Mr Kent and Mr White would each personally guarantee the performance by Burdon of its obligations, pursuant to the relevant lease, if so required by a lessor as a condition to the lessor agreeing to the novation of the relevant lease, and to the release of related guarantees and security provided by the applicant (para. 24).
.Alternatively to paragraph 24, the agreement should be rectified (para. 25).
.Neither lessor would release the guarantees and security provided by the applicants in respect of the leases, unless the guarantees or other substitute securities were acceptable to the lessor (para. 26).
.Mr Kent and Mr White have contended that they are not obliged to provide personal guarantees, and have refused to do so (para. 27).
.Pursuant to clause 3(d) of the settlement agreement, Burdon is required to use its best endeavours to become lessee and to obtain a novation of the leases and releases of related guarantees or securities (para. 31).
.Each lessor is prepared to consent to a novation of the relevant lease, and to release related guarantees or security provided by the applicants, if adequate alternative security is provided by Burdon (para. 32).
.Burdon has failed to take any steps to provide adequate or any alternative security, and thus has not used its best endeavours to become lessee and to obtain a novation of the leases and the release of related guarantees or securities; and Burdon would be able to provide security acceptable to each lessee (paras. 34 to 36).
It was argued on behalf of the respondents that the settlement agreement does not impose an obligation upon Mr Kent and Mr White to provide personal guarantees; and that this is accepted by the applicants as they seek to have such a term implied by para. 24 of the amended statement of claim. According to the respondents' argument, the applicants, as plaintiffs in earlier proceedings before the Supreme Court of New South Wales, propounded the terms of settlement, and they now seek either to construe the terms of settlement in a manner different to that which they propounded before the Supreme Court or to have this Court imply a term contrary to the terms they propounded there. It was submitted that the applicants should not be permitted to act in this manner because of the doctrines of common law estoppel, Anshun estoppel, waiver, election, or the rule against approbating and reprobating. Reliance is placed on various authorities in support of this proposition, including Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589.
In reply, it was argued on behalf of the applicants that the respondents are in error in asserting that the applicants accept that the settlement agreement does not impose an obligation on Mr Kent and Mr White to provide personal guarantees. According to them, the proceedings before the Supreme Court were essentially concerned with, and resolved, the issue of whether the heads of agreement had been varied pursuant to a conversation between the solicitors for the parties. At the time of the hearing in the Supreme Court (19 and 26 August 1994), no occasion had arisen for Mr Kent and Mr White to be required to execute any security documents pursuant to clause 3(b) of the heads of agreement, and there was no issue between the parties with respect to the obligation of the respondents to do so. Hence, no question of Anshun estoppel or other estoppel can arise from the proceedings. Indeed, it is said that at the time of the proceeding before the Supreme Court the respondents were evincing an intention to provide personal guarantees.
The applicants in their submissions join issue with the statements, or assumptions as to fact, which they say are made by the respondents in their submissions, or which underpin their submissions.
In my opinion, it would be inappropriate for this issue to be determined at this stage of the case. It must go to a final hearing on the merits. Plainly, the parties are at issue on questions of fact and law which could only be satisfactorily resolved at a final hearing.
Security for costs
The respondents seek from the applicants security for the costs of the proceeding in the sum of $155,000. In this regard, reliance is placed upon s. 56 of the Federal Court of Australia Act, on O 53 r 8 of the Court's rules, and on s. 1335 of the Corporations Law. It was argued on behalf of the respondents that the affidavit evidence discloses assertions on various occasions by directors of Gillford that Gillford is in serious financial difficulty, and that accordingly there is reason to believe that Gillford will be unable to pay the costs of the respondents in the event that they are successful in their defence.
The respondents also seek an order against each of the applicants for security in the sum of $60,000 for the costs ordered to be paid by this Court on 14 March 1995 in relation to the issues relating to the 'Botanic Gardens settlement' (paras. 49 to 56 of the amended statement of claim).
The applicants do not dispute their impecuniosity; but they say that it arises from the conduct of the respondents which is the subject of this proceeding and which was the subject of the earlier proceeding in this Court. They assert that they are not seeking to hide behind a corporate veil or otherwise to avoid the personal consequences of an adverse costs order; and that accordingly the Court ought not order security, as the effect would be to stifle the proceeding simply because of the impecuniosity of the applicants.
The applicants further argue that in the proceeding in the Supreme Court they obtained an order for costs against the respondents in respect of that proceeding which occupied a greater number of hearing days than the hearing in this Court concerning the 'Botanic Gardens settlement'. They state that those costs have not yet been taxed, and remain outstanding.
The applicants also dispute the estimate of the costs incurred by the respondents contained in the affidavit on which the respondents rely, namely, the affidavit of Mr S T Miles, the solicitor for the respondents. Mr Miles has sworn that the costs in this case which have been incurred in relation to the 'Botanic Gardens settlement' total approximately $100,000, and that he estimates the 'party and party' component of those fees to be $60,000.
By the consent of the parties, the Court heard the issues raised by paragraphs 49 to 56 of the amended statement of claim separately from other issues because, if the applicants had succeeded on those issues, it was likely that the whole of the remaining issues would be subsumed in the findings of the Court with respect to the 'settlement agreement', and that the case effectively would be concluded. Those issues were resolved against the applicants and in favour of the respondents for the reasons given in my judgment of 30 March 1995.
If the applicants should ultimately succeed in this case (I have no view about that at all), there is a reasonable argument that based on their success, and correspondingly on the failure of the respondents, their present financial plight would have been contributed to or caused by the conduct of the respondents impugned in the proceedings. In all the circumstances, I do not regard this as an appropriate case in which to order that the applicants pay into Court either the sum of $155,000 or of $60,000 as security for the costs ordered by the Court on 14 March 1995.
The amended notice of motion of the respondents is dismissed. The Court orders the respondents to pay the costs of the applicants of the notice of motion and of the amended notice of motion.
I certify that this and the preceding sixteen (16) pages are a true copy of the reasons for judgment herein of the Honourable Justice Lockhart.
Associate
Dated: 19 December 1995
Counsel for the Applicants : Mr C P Comans
Solicitors for the Applicants : Deacons Graham & James
Counsel for the Respondents : Mr B M J Toomey QC
Mr C J Leggat
Solicitors for the Respondents: Donovan Oates & Hannaford
Date of Hearing : 26 July 1995
Date of Judgment : 19 December 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. AG 79 of 1994
)
GENERAL DIVISION )
BETWEEN:GILLFORD PTY LIMITED
First Applicant
ALAN VARLEY HANNAFORD
Second Applicant
KATHERINE ELIZABETH HANNAFORD
Third Applicant
GREGORY JAMES GILBERT
Fourth Applicant
NICOLA FRANCES GILBERT
Fifth Applicant
AND:BURDON PTY LIMITED
First Respondent
ROBERT GRAHAM KENT
Second Respondent
KEVIN GEORGE WHITE
Third Respondent
JUDGE MAKING ORDER: LOCKHART J.
WHERE ORDER MADE: SYDNEY
DATE ORDER MADE: 19 DECEMBER 1995
MINUTE OF ORDER
THE COURT ORDERS THAT:
The respondents' amended notice of motion is dismissed.
The respondents shall pay the costs of the applicants of the notice of motion and of the amended notice of motion.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
CATCHWORDS
TRADE PRACTICES - matters of procedure - application to strike out - whether paragraphs of statement of claim manifestly or plainly unarguable - evidence - admissibility - confidentiality
COSTS - interlocutory proceedings - security for costs - whether appropriate if reasonable argument that financial plight of applicant contributed to or caused by conduct of respondent impugned in proceeding.
Trade Practices Act 1974: s. 52
Fair Trading Act 1987 (NSW)
GILLFORD PTY LIMITED, ALAN VARLEY HANNAFORD, KATHERINE ELIZABETH HANNAFORD, GREGORY JAMES GILBERT, NICOLA FRANCES GILBERT v BURDON PTY LIMITED, ROBERT GRAHAM KENT, KEVIN GEORGE WHITE
AG 79 of 1994
LOCKHART J.
SYDNEY
19 DECEMBER 1995
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