Joyce Rural Pty Ltd (formerly Allnet Corporation Pty Ltd) v Davgem Pty Ltd (formerly Davison Industries Pty Ltd)
[2001] WASC 175
JOYCE RURAL PTY LTD (formerly ALLNET CORPORATION PTY LTD) & ANOR -v- DAVGEM PTY LTD (formerly DAVISON INDUSTRIES PTY LTD) & ORS [2001] WASC 175
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASC 175 | |
| Case No: | CIV:1091/2000 | 9 APRIL 2001 | |
| Coram: | MASTER SANDERSON | 29/06/01 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Application succeeds in part - Particulars ordered | ||
| PDF Version |
| Parties: | JOYCE RURAL PTY LTD (formerly ALLNET CORPORATION PTY LTD) (ACN 076 886 710) JOYCE CORPORATION LTD (ACN 009 116 269) DAVGEM PTY LTD (formerly DAVISON INDUSTRIES PTY LTD) (ACN 009 159 406) DAVREEF PTY LTD (formerly DAVISON OILS PTY LTD) (ACN 009 160 445) RAE CAMPBELL DAVISON CORRALYN MAY DAVISON GARRY RAE DAVISON |
Catchwords: | Practice and procedure Application to strike out statement of claim Turns on own facts |
Legislation: | Nil |
Case References: | Costa Vraca Pty Ltd v Berrigan Weed and Pest Control Pty Ltd (1998) 155 ALR 714 Fox v H Wood (Harrow) Ltd [1963] 2 QB 601 Nagle v Rottnest Island Authority (1993) 177 CLR 423 Perre v Apand Pty Ltd (1999) 198 CLR 180 Pyrenees Shire Council v Day (1998) 192 CLR 330 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 Banque Commerciale SA En Liquidation v Akhil Holdings Ltd [1990] 169 CLR 279 Bruce v Odhams Press Ltd [1936] 1 KB 697 Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) ATPR 40,782 Colonial Mutual Life Assurance Society Ltd v The Producers & Citizen Co-Operative Assurance Co of Australia Ltd (1931) 46 CLR 41 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FLR 164 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 L Grollo Darwin Management Pty Ltd v Victor Plaster Products Pty Ltd (1978) 33 FLR 170 Gurr & Gurr v Forbes (1996) ATPR 41,491 Harris v Cigna Insurance Australia Ltd, unreported; FCA (Kiefel J); 10 November 1995 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR 46,054 Logie Brae Pty Ltd v Sevenhill Holdings Pty Ltd, unreported; FCA; 27 October 1992 Meridian Global Funds Management Asia Ltd v Securities [1995] 2 AC 500 Mikaelian v Commonwealth Scientific and Industrial Research Organisation (1999) 163 ALR 172 Peek v Gurney (1873) LR 6 377 R v Associated Northern Colliers [1910] 11 CLR 738 Richard Ellis (WA) Pty Ltd v Mullins Investments Pty Ltd (In Liq) (1995) Aust Tort Rep 81-319 The Green Team (WA) Pty Ltd v Brulee Pty Ltd (1995) Aust Tort Rep 81,362 TPC v Sun Alliance Australia Ltd (1994) ATPR 41,286 Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 Warner v Elders Rural Finance Ltd (1993) ATPR 41,238 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 Yorke v Lucas (1985) 158 CLR 661 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
JOYCE CORPORATION LTD (ACN 009 116 269)
Second Plaintiff
AND
DAVGEM PTY LTD (formerly DAVISON INDUSTRIES PTY LTD) (ACN 009 159 406)
DAVREEF PTY LTD (formerly DAVISON OILS PTY LTD) (ACN 009 160 445)
First Defendants
RAE CAMPBELL DAVISON
CORRALYN MAY DAVISON
Second Defendants
GARRY RAE DAVISON
Third Defendant
(Page 2)
Catchwords:
Practice and procedure - Application to strike out statement of claim - Turns on own facts
Legislation:
Nil
Result:
Application succeeds in part - Particulars ordered
Representation:
Counsel:
First Plaintiff : Mr R L Le Miere QC
Second Plaintiff : Mr R L Le Miere QC
First Defendants : Mr D M Stone
Second Defendants : Mr D M Stone
Third Defendant : Mr D M Stone
Solicitors:
First Plaintiff : Freehills
Second Plaintiff : Freehills
First Defendants : Williams & Hughes
Second Defendants : Williams & Hughes
Third Defendant : Williams & Hughes
Case(s) referred to in judgment(s):
Costa Vraca Pty Ltd v Berrigan Weed and Pest Control Pty Ltd (1998) 155 ALR 714
Fox v H Wood (Harrow) Ltd [1963] 2 QB 601
Nagle v Rottnest Island Authority (1993) 177 CLR 423
Perre v Apand Pty Ltd (1999) 198 CLR 180
Pyrenees Shire Council v Day (1998) 192 CLR 330
Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477
(Page 3)
Case(s) also cited:
Banque Commerciale SA En Liquidation v Akhil Holdings Ltd [1990] 169 CLR 279
Bruce v Odhams Press Ltd [1936] 1 KB 697
Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) ATPR 40,782
Colonial Mutual Life Assurance Society Ltd v The Producers & Citizen Co-Operative Assurance Co of Australia Ltd (1931) 46 CLR 41
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FLR 164
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82
L Grollo Darwin Management Pty Ltd v Victor Plaster Products Pty Ltd (1978) 33 FLR 170
Gurr & Gurr v Forbes (1996) ATPR 41,491
Harris v Cigna Insurance Australia Ltd, unreported; FCA (Kiefel J); 10 November 1995
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83
Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR 46,054
Logie Brae Pty Ltd v Sevenhill Holdings Pty Ltd, unreported; FCA; 27 October 1992
Meridian Global Funds Management Asia Ltd v Securities [1995] 2 AC 500
Mikaelian v Commonwealth Scientific and Industrial Research Organisation (1999) 163 ALR 172
Peek v Gurney (1873) LR 6 377
R v Associated Northern Colliers [1910] 11 CLR 738
Richard Ellis (WA) Pty Ltd v Mullins Investments Pty Ltd (In Liq) (1995) Aust Tort Rep 81-319
The Green Team (WA) Pty Ltd v Brulee Pty Ltd (1995) Aust Tort Rep 81,362
TPC v Sun Alliance Australia Ltd (1994) ATPR 41,286
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
Warner v Elders Rural Finance Ltd (1993) ATPR 41,238
Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97
Yorke v Lucas (1985) 158 CLR 661
(Page 4)
1 MASTER SANDERSON: This is the second-named second defendant's and third defendant's application to strike out par 30, par 31, par 32, par 36, par 37, par 38, par 39, par 41, par 42, par 44(c), par 44(d), par 44(e), par 51, par 54, par 55, par 56, par 57, par 60, par 61, par 62, par 65, par 66, par 67, par 70, par 71 and par 72 and parts of par 27 and par 76 of the plaintiffs' amended statement of claim. It is said by the second-named second defendant and third defendants that these paragraphs disclose no reasonable cause of action. They also apply to strike out par 38 of the amended statement of claim on the grounds that it is embarrassing. The amended statement of claim was filed 7 February 2001.
2 For the purposes of this application it is unnecessary to go into detail as to the facts. It is sufficient if I say that prior to April 1997 the first defendants conducted a chemical formulation business. The second defendants were at all material times directors of the first defendants. The third defendant, Garry Rae Davison, is the son of the second defendants and was at all material times an employee of the first defendants. In or about January 1997 the plaintiffs agreed to purchase from the first defendants the chemical formulation business. The purchase agreement was subject to a due diligence period. Settlement of the purchase agreement took place on 1 April 1997.
3 The claims made against the second-named second defendant are a claim for misleading and deceptive conduct contrary to the provisions of the Trade Practices Act and for damages for negligence for breach of duty. It is the plaintiffs' case that some time prior to January 1997 the land on which the business was situated became contaminated either by chemical spills or some deliberate act on the part of the first defendants or their directors: see par 33. The plaintiffs say that the defendants, including the second-named second defendant did not disclose this contamination to the plaintiffs. Paragraph 30, par 31, and par 32 plead this failure to disclose in the following way:
"30 The Defendants did not, at any time, advise the Plaintiffs that there had been any, or any material, chemical spills or releases, or burial or disposal of chemical wastes, on the Land during the conduct of the Business by the Defendants (save for the burial of the Evaporator Waste, which had since been exhumed).
31 The Defendants did not at any time, inform the Plaintiffs that they had not kept any records of chemical spills or
(Page 5)
- releases, burial or disposal of chemical wastes on the Land.
- 32 The Defendants did not, at any time, inform the Plaintiffs that there was any contamination on the Land apart from a small area of low strength contamination around the waste sump area."
4 There is a further allegation of a failure to inform in par 42. That paragraph is in the following terms:
"42 The Defendants failed to inform the Plaintiffs at any time that there were pesticides, herbicides or agricultural chemicals:
(a) stored on the Land below ground, in drums or in other containers (other than the Evaporator Waste),
(b) spilled, leaked, released or disposed of on the Land (other than canola oil and the Evaporator Waste), and
(c) sprayed on the Land (other than for the purposes of weed control in the firebreaks)."
"41 The respective conduct of the First, Second and Third Defendants, pleaded in paragraphs 27, 29, 35, 36, 37, 38, 39, and 40, either alone or in the circumstances pleaded in paragraphs 16, 18, 20-25, gave rise to a reasonable expectation on the part of the Plaintiffs that if there were any pesticides, herbicides or agricultural chemicals:
(Page 6)
- (a) stored on the Land below ground, in drums or in other containers (other than the Evaporator Waste),
(b) spilled, leaked, released or disposed of on the Land (other than canola oil and the Evaporator Waste), or
(c) sprayed on the Land (other than for the purposes of weed control in the fire breaks),
then the Defendants would so inform the Plaintiffs."
- (In its original form par 41 referred to par 30, par 31 and par 32. During the course of the hearing counsel for the plaintiffs applied to amend so as to remove reference to these three paragraphs. There being no opposition leave was granted.)
6 When reference is made to par 27 and par 29 neither says anything about the conduct of the second-named second defendant. Paragraph 27 refers to a site visit as part of the due diligence process and there is no plea that the second-named second defendant was present when that visit took place. Paragraph 29 refers to the third defendant forwarding on a report prepared by a third party. There is no reference at all to the second-named second defendant. Paragraph 35 refers to answers to requisitions provided by the first-named second defendant for and on behalf of the first defendants. Once again there is no reference to the second-named second defendant. The same is true of par 39 and par 40. Neither of these two paragraphs makes any reference to the second-named second defendant and could not give rise to any reasonable expectation.
7 That then leaves par 36, par 37 and par 38. These paragraphs are in the following terms:
"36 On or about 31 January 1997, during a visit to the Land by Dan Smetana, a director of Joyce Corporation and of Joyce Rural ('Smetana'), in response to any enquiry by Smetana on behalf of the Plaintiffs where there was anything about the business or the conduct of the Business of which the Plaintiffs had not been informed, about which the Plaintiffs might reasonably expect to be informed, Rae Davison and Corralyn Davison made oral representations to the effect that there was not.
(Page 7)
- 37 On or about 25 February 1997, at the Campo de'Fiori Restaurant, in response to an enquiry by Smetana on behalf of the Plaintiffs whether there was anything about the business or the conduct of the Business of which the Plaintiffs had not been informed, about which the Plaintiffs might reasonably expect to be informed, Rae Davison, Corralyn Davison and Bond made oral representations to the effect that there was not.
38 On various occasions during the Due Diligence Period, the dates of which the Plaintiffs no longer recall, Smetana enquired of the Davisons whether there were any environmental or waste disposal matters of which the Plaintiffs had not been informed, about which the Plaintiffs might reasonably expect to be informed, in response to which the Davisons made oral representations to the effect that there was not."
8 There is one difficulty with these paragraphs. It is pleaded in par 47 that the second-named second defendant knew of the matters referred to in the three paragraphs. Knowledge on the part of the second-named second defendant is a necessary prerequisite to any obligation to disclose. However, there is no plea that the second-named second defendant had formed a view that the plaintiffs could expect disclosure and the grounds for that belief.
9 It is pleaded in par 74 that the plaintiffs placed reliance upon conduct of the second-named second defendant in agreeing to purchase the business and then settling on the contract. In my view it is open to the plaintiffs to plead, provided it is properly pleaded, that the plaintiffs were induced by conduct pleaded in par 36, par 37 and par 38. However, in its present form the pleading is defective. I should also add for the sake of completeness that it is difficult to see what the references in par 14 to par 16, par 18 and par 20 to par 25 add to the pleading. These paragraphs deal respectively with the heads of agreement, the business purchase agreement and various aspects of the EPA licence. None of these paragraphs go any way to establishing that the second-named second defendant knew of the contamination of the land.
10 In my view the criticism made of the pleading so far as the second-named second defendant is concerned is to a limited extent well-founded. Amendment is required to deal with the question of the basis that the second-named second defendant formed the view disclosure
(Page 8)
- was required. The pleading is, it must be said, to an extent confusing. The reference in various paragraphs to "the defendants" and the inclusion of all of the defendants without specificity in the paragraphs is confusing. Some amendment in this respect would assist.
11 Turning then to the plea in negligence the relevant paragraphs of the minute so far as the second-named second defendant is concerned are par 51, par 54, par 57, par 60, par 65 (as amended with leave during the course of submissions) and par 70. These paragraphs are in the following terms:
"51 Further or alternatively to the matters aforesaid, each of the Defendants:
(a) at all material times knew that the Plaintiffs were interested in purchasing the Business and the Business Assets;
(b) failed to provide the information pleaded or referred to in paragraphs 30, 31, 32, and 42 relating to the Business and the Business Assets, to the Plaintiffs, prior to 28 February 1997;
(c) at all material times knew, alternatively ought to have known, that the Plaintiffs would rely upon the information provided by the Defendants and that the Plaintiffs would rely upon the Defendants to provide any information about the Business or about the conduct of the Business of which a prudent purchaser might reasonably expect to be informed;
(d) at all material times, knew or ought to have known that the Plaintiffs had no personal knowledge or skill or expertise in relation to the affairs of the Business and the Business Assets and that the Plaintiffs were relying upon them to provide the Plaintiffs with accurate and reliable information in relation to the Business and the Business Assets and to provide any information about the Business or about the conduct of the Business of which a prudent purchaser might reasonably expect to be informed;
(Page 9)
- (e) at all material times knew or ought to have known that if the information they provided to the Plaintiffs was inaccurate or unreliable, or if they failed to provide any information about the Business or about the conduct of the Business of which a prudent purchaser might reasonably expect to be informed, then in the event that the Plaintiffs acquired the Business and the Business Assets, the Plaintiffs might suffer loss and damage.
54 Corralyn Davison provided the information pleaded in paragraphs 36, 37, and 38, relating to the Business and the Business Assets, to the Plaintiffs, or was present when the information was provided to the Plaintiffs (as pleaded in those paragraphs).
57 The information pleaded in paragraphs 27, 29, 35, 36, 37, 38, 39, and 40, was not reliable, accurate or complete in that it did not include the information pleaded in paragraphs 30, 31, 32, 33 and 42.
60 Corralyn Davison engaged in the conduct pleaded in paragraphs 30, 31, 32, 36, 37, and 38 (as pleaded in those paragraphs), for the purpose of, or knowing that such conduct would be likely to have the effect of, inducing the Plaintiffs to acquire the Business and the Business Assets.
65 By reason of the matters pleaded in paragraphs 51(a), (b), (d) and (e), 54, 57 and 60, Corralyn Davison owed a duty of care to the Plaintiffs to exercise reasonable care and skill in connection with providing the Plaintiffs with information about the Business and the Business Assets and to provide any information about the Business or about the conduct of the Business of which a prudent purchaser might reasonably expect to be informed."
(Page 10)
12 Counsel for the defendants roundly criticised the plaintiffs' pleading of negligence on a number of different grounds. The essential thrust of counsel's submissions was that there was no pleading of material facts which could possibly give rise to a duty of care. It was submitted that as no more was pleaded than that the second-named second defendant was a director of the first defendants, no duty of disclosure could arise. Further, it was said, that as this was a claim for pure economic loss it was necessary for the plaintiffs to plead that the second-named second defendant actually knew the plaintiffs would rely upon her statements and this fundamental element of the claim was missing from the pleading.
13 In Pyrenees Shire Council v Day (1998) 192 CLR 330 Kirby J set out the questions to be decided in determining whether a legal duty of care exists. His Honour put the position as follows (at 419 - 420):
"1. Was it reasonably foreseeable to the alleged wrong-doer that particular conduct or an omission on its part would be likely to cause harm to the person who has suffered damage or a person in the same position?
2. Does there exist between the alleged wrong-doer and such person a relationship characterised by the law as one of 'proximity' or 'neighbourhood'?
3. If so, is it fair, just and reasonable that the law should impose a duty of a given scope upon the alleged wrong-doer for the benefit of such person?"
14 The way in which these broad principles are to be applied is illustrated by the decision of the High Court in Nagle v Rottnest Island Authority (1993) 177 CLR 423. This case involved personal injury by accident and to that extent it differs from this case which involves pure economic loss. But leaving that difference to one side the approach is instructive. In this case if a duty of care is to exist the plaintiffs must plead material facts which give rise to that duty. It is difficult to imagine the mere fact that the second-named second defendant was a director of the first defendants and the first defendants were selling a business to the plaintiffs could give rise to a positive duty to disclose any information. A duty which could conceivably arise was that a person in the position of the second-named second defendant who provided information to the plaintiff was under a duty to ensure that the information was accurate. Counsel for the defendants accepted that such a duty could exist. However, it is an essential element of such a duty that the second-named second defendant
(Page 11)
- have knowledge, actual or constructive, that the failure to provide accurate information will harm the plaintiff. As McHugh J said in Perre v Apand Pty Ltd (1999) 198 CLR 180 at 231 that such knowledge is "virtually a prerequisite of a duty of care in cases of pure economic loss".
15 There is a pleading to this effect in par 51(e). However, the pleading provides no particulars and they should be provided: see Fox v H Wood (Harrow) Ltd [1963] 2 QB 601. In the circumstances this lack of particulars would not, in my view, be sufficient reason to strike out that paragraph of the statement of claim. The same complaint about lack of particulars of knowledge can be made with respect to par 51(c) and (d). Again, while particulars should be provided, that is not sufficient ground for striking out the paragraphs.
16 There are two further failings in the pleading which must be addressed. The complaint against the second-named second defendant to be found in par 54 is that she provided the information in par 36, par 37 and par 38. There is the plea in par 47 that the second-named second defendant knew of the matters referred to in par 33 but no particulars of knowledge are provided. Again I would not see this as a basis for striking out the pleading but such particulars ought be provided in due course. Secondly, there is a plea that the second-named second defendant knew or ought reasonably to have known that information communicated to the plaintiffs was likely to lead the plaintiffs to take some step or enter into the transaction of the kind entered into in reliance upon the information: see par 60. Particulars of this paragraph ought be provided.
17 In summary then I would not strike out the claim in negligence as pleaded against the second-named second defendant.
18 So far as the complaints made by the third defendant are concerned they should be viewed against a background of the complaints made by the second-named second defendant. The two have much in common. By par 41 it is pleaded that the matters referred to in par 27, par 29, par 35, par 36, par 37, par 38, par 39 and par 40 gave rise to a reasonable expectation that the plaintiffs would be informed of certain matters. It is worthy of note that the third defendant was not at the material time an officer of either of the first defendants. He was solely an employee.
19 By par 27 it is alleged that the third defendant was present at a site visit when certain representations were allegedly made by the first-named second defendant. It is difficult to see how the mere presence of an employee in such circumstances could give rise to a reasonable
(Page 12)
- expectation on the part of the plaintiffs that information would be passed on to them. There is a plea in par 49 that the third defendant knew of the contamination of the site pleaded in par 33. But there must be more than the mere presence of an employee at a site visit to give rise to a reasonable expectation of disclosure.
20 By par 29 it is said that the third defendant "on behalf of the first defendants" forwarded a report prepared by a third party to the plaintiffs. There is no plea that the third defendant knew of the contents of that report, let alone whether the contents were wrong. Furthermore, the mere act of an employee forwarding a report to the plaintiffs could hardly give rise to a reasonable expectation that the employee would comment on the contents of the report.
21 Paragraph 36 and par 37 do not concern the third defendant. The reference to "the Davisons" in par 38 does not include a reference to the third defendant: see the definition of "Davisons" in par 17. Nor is the third defendant involved in any conduct pleaded in par 39 and par 40. The complaints against the third defendant then are limited to par 27 and par 29.
22 In my view the pleading against the third defendant in its present form fails to disclose a cause of action. I would, however, grant the plaintiffs leave to replead on this issue. However, I would suggest that careful consideration needs to be given as to whether or not there is a maintainable cause of action pursuant to the Fair Trading Act against the third defendant.
23 The pleading in relation to negligence against the third defendant is not without difficulty. In essence what is pleaded is that the third defendant, as an employee of the first defendants, was under a duty to advise the plaintiffs of what he knew of contamination of the site. I have real doubts as to whether such duty can arise. However, I am satisfied that the pleading in its present form against the third defendant is satisfactory. I would not be prepared to strike out the case in negligence pleaded against the third defendant.
24 I will hear the parties as to the precise form of order and as to costs.
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