Imagination Entertainment Ltd v Hetherington - [2011] SASC 41

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
IMAGINATION ENTERTAINMENT LTD & ANOR v HETHERINGTON
[2011] SASC 41
Reasons of Judge Burley a Master of the Supreme Court
30 March 2011
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - SUMMARY JUDGMENT
Application by defendant for summary judgment against second plaintiff - claim for contractual damages - second plaintiff not a party to the contract - claims for intentional interference with contractual relations and breach of fiduciary duty - whether second plaintiff could pursue such claims - defective pleading of Statement of Claim - whether appropriate to give summary judgment.

PRIVATE INTERNATIONAL LAW - STAY OF PROCEEDINGS
Application for stay/dismissal of Supreme Court proceedings - where appropriate court - other proceedings in California stayed by the Californian Superior Court to enable proceeding to be "re-filed" in Australia.
Supreme Court Civil Rules 2006 r 232, referred to.
Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, applied.

IMAGINATION ENTERTAINMENT LTD & ANOR v HETHERINGTON
[2011] SASC 41
JUDGE BURLEY:

By application filed on 17 September 2010 (FDN12) the defendant has sought judgment against the second plaintiff. At the hearing, counsel for the defendant, by paragraph 2 of his written submissions, said:
2.For the reasons that are outlined below, insofar as the application seeks summary judgment, the orders now sought are:
2.1 Summary judgment against to the second plaintiff on liability insofar as it alleges breach of the agreement alleged at paragraph 11 of the Statement of Claim.
2.2 A stay or dismissal of proceedings as to the balance of the claim by the second plaintiff.
3.The basis for a stay or dismissal is that the Supreme Court of South Australia is a clearly inappropriate forum for the balance of the claim by the second plaintiff.
The affidavits received on the application are as follows:
·B R Williams, sworn 17 September 2010 (FDN13);
·R K Smith, sworn 7 March 2011 (FDN16);
·B R Williams, sworn 8 March 2011 (FDN17);
·B R Williams, sworn 10 March 2011 (FDN20).
An analysis of the pleadings and evidence reveals the following undisputed facts. The plaintiffs carry on a business of marketing interactive entertainment products for distribution under licence in North America, the United Kingdom, Europe and Australia.
The defendant is an Australian citizen. He was employed by the first plaintiff between 8 January 2007 and 4 February 2007. During that period of employment, although he travelled from time to time to America, he was based in Australia. From 5 February 2007 he was either employed by the second plaintiff or co-employed by the second plaintiff and was based in the United States.
The employment agreement for 8 January 2007 to 4 February 2007 was entered into in November 2006. The defendant was to be employed as Special Projects Sales and Business Development Manager. The agreement was in writing.[1] The defendant is clearly identified as the employee, but the identity of the employer is somewhat obscure. Nevertheless, the defendant, in his Second Defence, asserts that he entered into an employment agreement with “Imagination Group” on or around 20 November 2006. It is to be noted that he signed the letter of 10 November 2006 on 20 November 2006. In the pleadings, written outlines of submissions and during the course of the hearing, the two plaintiffs were sometimes referred to as constituting the Imagination Group. However, at paragraph 5 of the Statement of Claim the plaintiffs assert that the employment agreement of 10 November 2006 (rather than 20 November 2006) was an agreement between the first plaintiff and the defendant.
[1] See Exhibit RK7 to the affidavit of R K Smith, sworn 7 March 2011 (FDN16).
Notwithstanding this lack of clarity, it appears to have been accepted by both parties during the course of argument that the defendant was employed by the first plaintiff from about 8 January 2007 until 4 February 2007 and thereafter by at least the second plaintiff until about August 2008.
The defendant relies upon Rule 232(2)(b) of the Supreme Court Civil Rules 2006. The rule confers a discretion on the Court to give summary judgment where the Court is satisfied that “there is no reasonable basis for the [plaintiff’s] claim”.
The primary contention of the defendant was that the second plaintiff could not claim damages for breach of a contract to which it was not a party. I accept that, in the case of employment agreements (and confidentiality agreements, of which more will be said later), if there is a breach of same by the employee, the employer is the only party who can recover damages for breach of contract. The question which arises on this application is whether or not the defendant has been able to establish that the second plaintiff has no contractual right to recover damages. The plaintiffs have argued that the claim for damages for breach is based on a contract between the second plaintiff and the defendant. If that is the pleaded case, it was argued, the application for judgment should be dismissed.
I mention at this stage that the plaintiffs’ claims were not limited to damages for breach of contract. At paragraphs 33 and 34 of the Statement of Claim the plaintiffs rely upon alleged intentional interference with contractual relations and at paragraphs 35 and 36 the plaintiffs rely upon alleged breach of fiduciary duty. In my opinion, the pleading of these respective causes of action are faulty, if only because there is a complete failure to differentiate between the separate claims that each of the plaintiffs might have. The claims are pleaded as if they were joint claims. This is a general fault in the pleadings, including the claim for damages for breach of contract. It is by reference to the latter cause of action that I will state in a more detailed manner the inadequacies of the pleading.
The plaintiffs’ claim for damages based on breach of contract
As I understand it, the essence of the plaintiffs’ claim is based on the assertion that in November 2006 two agreements were entered into: first, an employment agreement and, second, a confidentiality agreement. Both of those agreements are in evidence before me. They are respectively exhibits RKS7[2] and BRW2.[3] The employment agreement shows the defendant as an employee, but, as I have said, it is unclear who the employer is. The second agreement was between the first plaintiff as employer and the defendant as employee. It is perhaps because both agreements were executed at about the same time, the plaintiffs allege in paragraph 5 of the Statement of Claim that the employment agreement was between the first plaintiff as employer. Paragraph 11 of the Statement of Claim confirms what is apparent from the confidentiality agreement that the agreement was between the first plaintiff as employer and the defendant as employee. The plaintiff next pleads at paragraphs 7 and 8 of the Statement of Claim that the defendant was transferred to Los Angeles in early February 2007, at which time the defendant became employed by the second plaintiff. Reference is made to a letter of 10 January 2007 setting out the terms of the employment agreement.
[2] Affidavit of R K Smith, sworn 7 March 2011 (FDN16).
[3] Affidavit of B R Williams, sworn 8 March 2011 (FDN17).
Paragraph 8 of the Statement of Claim is as follows:
The terms of the letter of employment dated 10 November 2006 pleaded in paragraph 5.1 continued to apply. The terms of the defendant’s employment with the second plaintiff were set out in the letters dated 10 November 2006 and 10 January 2007 pleaded in paragraphs 51. and 7.1 (together the Employment Agreement).
In paragraph 10 of the Statement of Claim it is alleged that it was a condition of the employment agreement that the defendant enter into a confidentiality agreement. Paragraph 11 pleads that a confidentiality agreement was entered into on 10 November 2006. There is no factual basis pleaded to support the assertion that it was a condition of the agreement between the defendant and the second plaintiff that the defendant must enter into a confidentiality agreement. Apart from the assertion in paragraph 11 that a confidentiality agreement was entered into in November 2006, there is no assertion in the Statement of Claim that a confidentiality agreement was entered into between the second plaintiff and the defendant. It could not be said that the Statement of Claim asserts that the confidentiality agreement of November 2006 was incorporated into the arrangement between the second plaintiff and the defendant because no such assertion is made either implicitly or explicitly. It follows that to the extent that the second plaintiff relies upon a breach of a confidentiality agreement, that claim cannot succeed on the present pleading because of the lack of a pleading that the second plaintiff was a party to such agreement.
This is not the only flaw in the plaintiffs’ pleading. As I have mentioned, the plaintiffs’ claims for damages for breach of contract are treated as though they are joint claims. That cannot be the case. The respective plaintiffs can only claim for damages for breaches of contracts to which they were a party. On the present pleading, the second plaintiff was not a party to the employment and confidentiality agreements entered into in about November 2006 and, as such, cannot claim for any breach of either agreement. Similarly, the first plaintiff cannot claim for damages for breach of a contract to which it was not a party. It appears that from about February 2007, the first plaintiff was not a contractual party. Consequently, in respect of any breaches that occurred after February 2007 the first plaintiff may only claim if the breach consists of actions on the part of the defendant which constitute a breach of the employment agreement or confidentiality agreement entered into in November 2006. The Statement of Claim does not descend to such particularity. The same lack of specificity occurs with the causes of action based on alleged contractual interference and breach of fiduciary duty.
Given the state of the pleading, I have had to ask myself whether or not it would be appropriate to proceed to a summary judgment against the second plaintiff as sought on the application. In my opinion, the pleading is so defective that I consider that little purpose would be served in proceeding to such a judgment, even it were open to me to do so. This is a somewhat surprising result because, if it is the case that the second plaintiff relies upon an alleged breach of contract to which it is not a party, that aspect of the claim should be dismissed. But, because the Statement of Claim is in important respects obscure, to grant a summary judgment at this stage would in my opinion not be of assistance to the parties. An order dismissing the second plaintiff’s various claims for damages would not put an end to the proceedings. It would be open to the plaintiffs to apply to amend the Statement of Claim to remove the defects in the current pleading. On the one hand, I cannot rule out the possibility that, properly pleaded, the second plaintiff has an arguable claim. On the other, if the plaintiffs accept that the second plaintiff has no claim at all, any proposed amendment would reflect that position.
In those circumstances, I think it is preferable not to proceed to a dismissal of the second plaintiff’s claims. I would dismiss the defendant’s application for summary judgment.
Forum non conveniens
The defendant also sought either a stay or dismissal of the second plaintiff’s claims on the basis that the Supreme Court of South Australia was not an appropriate forum for the determination of the second plaintiff’s claims. The relevant parts of the defendant’s written outline are as follows:
15.The claim by the second plaintiff is, therefore, a simple claim for breach of an employment agreement relating to employment in the US, breach of fiduciary duty in the US and interference with contractual relations in the US. With respect to each of these claims:
15.1The claimant is a US corporation.
15.2The defendant is a US resident.
15.3 All of the conduct occurred whilst the defendant was employed by the second plaintiff in the US.
16. The defendant contends that, as a result:
16.1 …
16.2 A stay of the balance of the claim by the second plaintiff on the grounds that South Australia is a clearly inappropriate forum for a claim by the second plaintiff for breach of the employment agreement, interference with contractual relations or breach of fiduciary duties is the US.
17.The test for forum, has, since Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, adopting Deane J in Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 247-248, been the “clearly inappropriate forum” test. This requires the Court to make an assessment (1988) 165 CLR 197 at 247-248, been the “clearly inappropriate forum” test. This requires the Court to make an assessment in the exercise of its discretion as to whether in the circumstances of the case the chosen forum is “so inappropriate a forum for their determination that their continuation would be oppressive and vexatious to him”. The adjectives “oppressive and vexatious” are not to be narrowly construed. Further, a relevant consideration is the availability of a foreign forum for the dispute.
As part of the plaintiffs’ opposition to a stay of proceedings, Mr Duggan, counsel for the plaintiffs, referred me to documentation filed in the Superior Court of the State of California in an action between the defendant and the plaintiffs. This documentation discloses that the defendant sought a stay of proceedings brought by the plaintiffs in the Californian court to recover damages against the defendant. The defendant was successful in obtaining an order staying the Californian proceedings. It was recorded that the Californian court “granted the motion and ordered the action stayed so that the plaintiffs may re‑file the action in Australia”. In pursuing that motion for a stay, the defendant asserted that the Australian court was the appropriate venue, in complete contrast to the submissions put in this application. In my opinion, where one party puts to the respective court such contradictory submissions, it could not be said that the forum chosen by the plaintiffs in these proceedings is “so inappropriate a forum for their determination that their continuation would be oppressive and vexatious” to the defendant. For these reasons I would dismiss this aspect of the defendant’s application.