Jet-Cut Pty Ltd v Archimedes Group Pty Ltd
[2012] WASC 116
•5 APRIL 2012
JET-CUT PTY LTD -v- ARCHIMEDES GROUP PTY LTD [2012] WASC 116
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 116 | |
| Case No: | CIV:1296/2010 | 6 MARCH 2012 | |
| Coram: | ALLANSON J | 5/04/12 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | JET-CUT PTY LTD SOFT SOL PTY LTD SOUTHERN FLUID TECHNOLOGIES PTY LTD JET NET INTERNATIONAL PTY LTD ARCHIMEDES GROUP PTY LTD WIESLAW WALCZUK AGATHA WALCZUK CUTTING EDGE SOLUTIONS (WA) PTY LTD AYLA PTY LTD |
Catchwords: | Practice and procedure Separate trial of issues of liability and damages Relevance of chances of settlement after trial of liability |
Legislation: | Nil |
Case References: | Downey v Acting District Court Judge Boulton (No 4) [2010] NSWCA 114 Landsdale Pty Ltd v Moore [2009] WASCA 176 Spirits International BV v Federal Treasury Enterprise (FKP) Sojuzplodoimport [2011] FCAFC 69 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
SOFT SOL PTY LTD
Second Plaintiff
SOUTHERN FLUID TECHNOLOGIES PTY LTD
Third Plaintiff
JET NET INTERNATIONAL PTY LTD
Fourth Plaintiff
AND
ARCHIMEDES GROUP PTY LTD
First Defendant
WIESLAW WALCZUK
Second Defendant
AGATHA WALCZUK
Third Defendant
CUTTING EDGE SOLUTIONS (WA) PTY LTD
Fourth Defendant
- AYLA PTY LTD
Fifth Defendant
Catchwords:
Practice and procedure - Separate trial of issues of liability and damages - Relevance of chances of settlement after trial of liability
Legislation:
Nil
Result:
Application dismissed
Category: B
(Page 3)
Representation:
Counsel:
First Plaintiff : Mr T J Carmady
Second Plaintiff : Mr T J Carmady
Third Plaintiff : Mr T J Carmady
Fourth Plaintiff : Mr T J Carmady
First Defendant : No appearance
Second Defendant : In person
Third Defendant : In person
Fourth Defendant : Mr D K Cooper
Fifth Defendant : No appearance
Solicitors:
First Plaintiff : Williams & Hughes
Second Plaintiff : Williams & Hughes
Third Plaintiff : Williams & Hughes
Fourth Plaintiff : Williams & Hughes
First Defendant : No appearance
Second Defendant : In person
Third Defendant : In person
Fourth Defendant : Cooper Legal Pty Ltd
Fifth Defendant : No appearance
Case(s) referred to in judgment(s):
Downey v Acting District Court Judge Boulton (No 4) [2010] NSWCA 114
Landsdale Pty Ltd v Moore [2009] WASCA 176
Spirits International BV v Federal Treasury Enterprise (FKP) Sojuzplodoimport [2011] FCAFC 69
(Page 4)
1 ALLANSON J: In this action there are four plaintiffs. They were all parties to a share sale agreement made on or about 14 August 2007 with the first, second and third defendants: Archimedes Group Pty Ltd (Archimedes), Wieslaw Walczuk and his daughter, Agatha Walczuk. The agreement effected the sale of the business of Jet-Cut Pty Ltd to the other plaintiffs.
2 The plaintiffs allege that the first three defendants have breached various covenants in the agreement, including covenants restraining Mr Walczuk and Archimedes from competing against Jet-Cut. They allege that the fourth defendant, Cutting Edge Solutions (WA) Pty Ltd, induced or procured Mr Walczuk and Archimedes to breach their contract. The plaintiffs claim remedies including damages and injunctions.
3 In this application, the plaintiffs seek an order that the question of liability of the defendants to the plaintiffs, and any issue in relation to causation, be tried as preliminary issue before the question or issue of quantum of damages or other relief.
The principles
4 Order 32 r 4 of the Rules of the Supreme Court 1971 (WA) provides that the court may order that any question or issue arising in a matter be tried separately from any other question or issue whether before or after the trial or further trial of the proceedings. In Downey v Acting District Court Judge Boulton (No 4)[2010] NSWCA 114, Basten JA said of the operation of the equivalent rule in New South Wales:
The usual basis for determining one question (or group of questions) separately from other questions arising in proceedings is that determination of the separated question (or questions) will render unnecessary determination of the remainder. That may allow for an efficient allocation of court time and prevent unnecessary expenditure by the parties, but only when the separated question has a reasonable likelihood of determining the outcome of the proceedings and where there is significant quantifiable additional expense involved in preparing for, or determining, the remaining questions [14].
5 Whether an order for the separate trial of issues of liability and of damages should be ordered is a matter for the court's discretion. The relevant principles have recently been stated in Landsdale Pty Ltd v Moore[2009] WASCA 176 [19] - [24] (Newnes JA); Spirits International BV v Federal Treasury Enterprise (FKP) Sojuzplodoimport [2011] FCAFC 69. I will not repeat them here.
(Page 5)
The action
6 The proceedings were commenced in 2010. Initially the first, second third and fifth defendants were represented by the one firm of solicitors. The solicitors have ceased acting. Archimedes is no longer represented and as a result is not participating in the proceedings. The Walczuks have attempted to deregister the company, although those attempts will be hampered by the existence of these proceedings.
7 Mr Walczuk and Ms Walczuk represent themselves. Ms Walczuk lives in Queensland and has, to date, been participating by telephone.
8 The fifth defendant, Ayla Pty Ltd, is wholly owned by Archimedes. Its sole director is Marcin Walczuk, the son of Mr Walczuk. Ayla is not now represented. No relief is sought against Ayla.
9 The current pleading is an amended statement of claim filed in May 2011. The plaintiffs plead that there were express terms of the deed to the effect that:
1. Archimedes and Mr Walczuk would not, during three years from the date of settlement of the deed, directly or indirectly persuade, attempt to persuade, or counsel any employee of Jet-Cut or the third plaintiff (Southern Fluid Technologies Pty Ltd) to terminate employment or become employed by any other person: cl 10.3(a).
2. Archimedes, Mr Walczuk and Ms Walczuk would not, during the three years from the settlement date, directly or indirectly persuade, attempt to persuade or counsel an existing customer of Jet-Cut to cease doing business or reduce the amount of business it did with Jet-Cut: cl 10.3(b).
3. Archimedes, Mr Walczuk and Ms Walczuk would not in any capacity during the defined restraint period and within the defined restraint area directly or indirectly carry on any business similar to or otherwise competitive with the business: cl 10.4.
10 The plaintiffs allege that Mr Walczuk himself, and through both Archimedes and Ayla, established the business carried on by Cutting Edge; that he owns or controls shares in Cutting Edge, and has an option to acquire 51% of the shares in it; and that he has acted as a de facto director of Cutting Edge, has promoted its business, and has provided working capital to it. In that way he has breached cl 10.4.
(Page 6)
11 The plaintiffs plead that Ms Walczuk also has breached cl 10.4 by owning or controlling shares in Cutting Edge, and by providing working capital to Cutting Edge through Ayla.
12 The plaintiffs allege that Cutting Edge has advertised and promoted its services to Jet-Cut's customers, and that 'in the premises' Mr Walczuk and Archimedes have indirectly persuaded, attempted to persuade or counselled customers of Jet-Cut to cease or reduce their business with Jet-Cut.
13 The plaintiffs allege that Mr Walczuk and/or Archimedes attempted to persuade and, through Cutting Edge, persuaded three employees to leave Jet-Cut and become employed by Cutting Edge, and a fourth employee to leave Southern Fluid and become employed by Cutting Edge.
14 The plaintiffs claim damages, including Jet-Cut's loss of custom, particulars of which are still to be given. The plaintiffs also plead that, by reason of the breaches, the second plaintiff (Soft Sol Pty Ltd) and the fourth plaintiff (Jet Net International Pty Ltd) have suffered damage from the loss of commercial opportunities. The damages claimed by those companies are more than $6 million.
15 Finally, the plaintiffs allege that Cutting Edge induced or procured Mr Walczuk and Archimedes to breach the obligations in cl 10.3(b) and cl 10.4. The plaintiffs plead:
23. Breach of the terms of the share sale deed referred to at paragraph 6.2 and 6.5 has enabled Cutting Edge to:
23.1 conduct the business of ultra high pressure water blasting, abrasive jet and cutting in Western Australia;
23.2 persuade Jet-Cut's customers to cease doing business with and or reduce the amount of business they did with Jetcut.
As a consequence Jet Cut has suffered a loss of custom. Further particulars will be given when the defendants have given discovery.
17 Mr Walczuk, Ms Walczuk, Archimedes and Ayla, in a joint defence, deny the allegations that they breached the agreement. They admit the terms of the agreement with the plaintiffs, and plead that the restraints in it are against public policy and unenforceable. The defence also admits that Ayla lent money to Cutting Edge under a written loan agreement, but pleads that Ayla is controlled by its director, Marcin Walczuk. Otherwise,
(Page 7)
- the defence denies or does not admit the allegations made by the plaintiffs.
18 Cutting Edge is separately represented and has separately filed a defence. It admits that it has borrowed funds from Ayla under a secured loan, and also under an unsecured loan (since repaid). It admits that it has engaged Mr Walczuk as a machine operator, tradesman's assistant, labourer, boilermaker and welder 'within the specialised field of services that Cutting Edge provides'. It admits that it knew of the agreement and that it contained 'some form of restraint of Mr Walczuk'. Otherwise Cutting Edge either denies or does not admit the claims made against it.
The application
19 To succeed in this application, the plaintiffs need to show that it is practicable to separate the issues of liability and causation from the proof of amount of the damages suffered. They submit that those issues can be separated, even though one of the causes of action is in tort, because proof that Cutting Edge traded in competition with Jet-Cut will be sufficient to show that some damage has been suffered as a result of Mr Walczuk and Archimedes breaching their contract and Cutting Edge procuring that breach.
20 It is not sufficient that it is practicable to separate the issues. I need also consider what will best attain the objects set out in O 1 r 4B(1).
21 The plaintiffs, in an estimate made by their solicitor, say that the trial of liability alone on these causes of action will take about three or four days. Proving the amount of their loss will, however, be a much greater undertaking both in terms of time and cost. The additional time at trial is likely to be six or seven days. The proof of losses will require extensive expert evidence. The expert evidence on the loss of opportunity claim, in particular, will be a significant expense. The plaintiffs also say that further discovery will need to be given, and the matter will not be ready to go to trial until 2013 if all matters are to be heard together. A trial on liability alone may be ready to proceed later this year.
22 All of that may be accepted. As Newnes JA said in Landsdale [20], it is self-evident that generally a trial on liability alone will be shorter and less costly than a trial on both liability and damages. But will there be some overall saving in time and cost to the parties and the State, or will the just determination of the litigation best be promoted, by separating the issues? The plaintiffs accept that separation of issues in this matter will only result in a saving of time and cost if either the defendants are
(Page 8)
- successful, or if a determination of liability in favour of the plaintiffs leads to settlement.
23 The plaintiffs say that their loss of profit claim is in the order of $3 million, and the claim for loss of opportunity is 'up to $6.5 million' - that claim is against the first three defendants only. The plaintiffs submit that any judgment sum is likely to exceed the defendants' collective ability to pay, and should the plaintiffs succeed on liability there is a real prospect that they could negotiate a settlement without proceeding to the second phase of the trial. The chance of settlement is relevant to the decision on the application: Landsdale [28]. Assessing that chance is difficult.
24 There is limited financial information before me, but what there is supports the plaintiffs' submission that the defendants would not be able to meet any substantial judgment.
25 There is no objective evidence before me about the financial position of Mr Walczuk or Ms Walczuk.
26 The plaintiffs refer to an affidavit dated 1 December 2011, sworn by Mr Walczuk in his capacity as a director of Archimedes, where Mr Walczuk says that Archimedes has no assets that could be released to raise capital, and no funds.
27 In an affidavit of Mr Christopher Bailey, dated 24 January 2012, the plaintiffs produce a balance sheet for Cutting Edge dated March 2011. It shows that the company has assets, including cash on hand ($192,347), trade debtors ($96,699), and plant and equipment (about $600,000 at cost). But it also has substantial liabilities, including current liabilities (largely ATO and payroll) of about $300,000, loans of about $300,000, and chattel mortgages on plant and equipment. Total equity is $2,330.
28 Cutting Edge has filed an affidavit of one of its co-directors, Mr Kelvin Bickford, in which he expresses the opinion that Cutting Edge is no more likely to settle without establishing how much it would be ordered to pay. That opinion cannot be determinative. Nor can the opinion expressed by the plaintiffs' solicitors.
29 In the end there is a degree of speculation involved in my assessment of whether the matter is likely to settle. The greater part of the damages sought is against three unrepresented parties. From the way in which they have conducted the proceedings to date, and from the fact they are not represented, I am not satisfied that they would approach the decision
(Page 9)
- whether to settle on a rational commercial basis. Cutting Edge is represented and carries on a business, and may be more guided by commercial considerations. But the evidence now available does not give me any confidence that it would be able to meet a substantial judgment, or that it would have any incentive to settle when a judgment is likely to put it into insolvency.
30 Because I have real doubts whether a determination of liability will finally resolve the dispute, I am not satisfied that this is an appropriate case to separately try liability. It is unnecessary to determine whether it would be practical to do so.
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