Kleio Pty Ltd v Comlease AFG Ltd - [2009] SADC 147

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
KLEIO PTY LTD v COMLEASE AFG LTD & ORS
[2009] SADC 147
Ruling of His Honour Judge Chivell
17 December 2009
PROCEDURE
NO CASE TO ANSWER - CONSIDERATION OF PRINCIPLES
Submission by first defendant that no case to answer - Claim for damages for breach of contract and for misleading and deceptive conduct - business conducted by partnership - whether plaintiff has standing to sue in own name - whether first defendant should elect whether to call evidence - whether a hiatus in the eviddence. Submission rejected.
Distict Court Rules 1987 r 27.02; Lunns Civil Procedure r 27.02.25 ; Stamp Duties Act 1923 (SA) s22; Corporations Act 2001 (Cth) s601AD(1), referred to.
Residues Treatment & Trading Co. Ltd and Anor v Southern Resources Ltd and Ors (1989) 52 SASR 54; R v Prasad (1979) 23 SASR 161; Popovic v Tanasijevic (No. 4) [1999] SASC 351; Sutherland and Ors v Gustar (1994) Ch 304; Burnside v Harrison Marks Productions Ltd [1968] 2 All ER 286; Coulls v Bagots Executor and Trustee Company Limited and Ors (1966) 119 CLR; Roche v Sherrington [1982] 2 All ER 426 ; Protean (Holdings) Ltd v American Home Assurance Co. [1985] VR 187; R v Bilick (1984) 36 SASR 321, considered.

KLEIO PTY LTD v COMLEASE AFG LTD & ORS
[2009] SADC 147
Ruling on Submission of No Case to Answer

This is an action for breach of contract, and misleading and deceptive conduct. The plaintiff carried on a supermarket business in partnership with Dimone Pty Ltd (“Dimone”) and Temalo Pty Ltd (“Temalo”). All three companies were trustees of family trusts. The partnership was created by a written agreement (Exhibit P4) dated 7 August 1997. Paragraph 3 of the agreement describes the partnership business as being the operating of the supermarket business known as “Big ‘N’ Fffresh Foodland” at 432 North East Road Windsor Gardens, South Australia.
The Plaintiff alleges that in September 1997, a contract was entered into between the partnership and the First Defendant (“Comlease”). The contract was for the “rental with maintenance” of a computerised point-of-sale system for the business.
The Plaintiff alleges that Comlease breached the contract in various ways. It also alleges, in the alternative, breaches of a written rental agreement dated 4 February 1998, and misleading and deceptive conduct by the Second Defendant (“IRS”) as agent for Comlease, and by Comlease on its own behalf.
The Second Further Amended Statement of Claim, dated 4 February 2009, asserts that the partnership has suffered loss and damage as a result of those breaches and that conduct (paragraph 24), but seeks damages, declarations and orders on its own behalf. Indeed, paragraph 1 of the Second Further Amended Statement of Claim states that the Plaintiff “brings this action in its capacity as trustee of the (family trust)”, and not on behalf of the partnership.
Election
Counsel for Comlease, Mr Dal Cin, submitted that he should not be required to make an election as to whether his client proposes to call evidence before his submission is entertained.
In Residues Treatment & Trading Co. Ltd and Anor v Southern Resources Ltd and Ors (1989) 52 SASR 54 at 68-9, Perry J described the various situations in which a submission of no case to answer may be made:
As to that aspect of the matter it seems to me that there are primarily four situations in which a submission of no case to answer may be made. They are:
1.      Where no reference at all to the evidence is required.
2.      Where a reference to the evidence is required only to establish that there is an evidentiary hiatus or failure to adduce any evidence as to an essential element in the cause of action.
3.      Where it is argued that on a consideration of the evidence adduced by the plaintiff taken at its highest from the plaintiff's point of view, the evidence could not support the causes of action pleaded.
4.      The situation where it is contended that although there is some evidence to support the plaintiff's claim, it is so weak and unreliable that it should be dismissed without calling upon the defendant.
In the criminal jurisdiction, category 4 would be met by following the course referred to in R v Prasad (1979) 23 SASR 161: see in particular per White J at 172.
As to category 1, this should normally be argued on the pleadings, preferably before the trial commences. No question of election arises in that situation. Likewise, consideration of a submission of no case to answer in category 2 should not involve an election.
As to categories 3 and 4, these situations should normally be met by the application of what I have referred to as the general rule that counsel should be called upon to elect.
(See also Popovic v Tanasijevic (No. 4) [1999] SASC 351)
Mr Dal Cin contended that his submission is of the type described in category 2 above, namely, that there has been a failure to adduce any evidence as to an essential element in the cause of action.
I indicated that I would entertain Mr Dal Cin’s submission on the basis that it would not call for an evaluation of the evidence except to the extent necessary to identify the alleged hiatus, but that should such an evaluation become necessary, I would revisit the question of an election.
The Legal Issue
Mr Dal Cin submitted that it has not been established by the plaintiff that it has standing to litigate in these proceedings.
It is clear on the pleadings that the partnership was in existence when the alleged causes of action arose. The alleged loss and damage were suffered by the partnership.
Mr Dal Cin submits that there is no evidence that Temalo, or Dimone for that matter, have assigned their rights and interests arising from the partnership to Kleio, and hence Kleio does not have a legal standing to bring these proceedings in its own name.
He submitted that one partner may bring an action to recover partnership property only when:
·the partner sues in the name of the partnership; or
·it joins the other partners as defendants if they decline to join as plaintiffs.
He referred to the judgment of Beaumont J in Kapeteris and Ors v Bytenet Pty Ltd and Ors in the unreported Federal Court on 4 August 1997 (p 2,3). In that case, His Honour referred to Sutherland and Ors v Gustar (1994) Ch 304, and Burnside v Harrison Marks Productions Ltd [1968] 2 All ER 286.
In Coulls v Bagots Executor and Trustee Company Limited and Ors (1966) 119 CLR 460 at 479, Barwick CJ, after giving an example of a promise by A made to both B and C for consideration to pay them both, said:
Such a promise, in my opinion, is clearly enforceable in the joint lifetime of B and C: But it is only enforceable if both B and C are parties to the action to enforce it.
Mr Dal Cin argued that His Honour’s use of the word “enforceable” makes it clear that the principles arising from the English cases referred to earlier are substantive in nature, going to the cause of action, and are not merely procedural.
I have reservations about that proposition. The causes of action in contention here are contract and misleading and deceptive conduct. Even if Mr Dal Cin’s argument that this action should have been brought in the name of the partnership is correct, it does not, in my opinion, follow that the first defendant has no case to answer.
The proposition Mr Dal Cin seeks to invoke is enshrined in Rule 27.02 of the 1987 Rules of Court. It provides:
Unless the court otherwise orders, a plaintiff who claims any relief to which any other person is jointly entitled should join as parties to the proceeding all persons so entitled, and any of them who do not consent to be joined as a plaintiff should be made a defendant.
The power of the court to “otherwise order” suggests to me that this principle is merely procedural. Further, Judge Lunn in Civil Procedure at [R27.02.25] quotes Roche v Sherrington [1982] 2 All ER 426 as authority for the proposition that the defendant would be entitled to an order staying the proceedings until the Rule is complied with. Again, this suggests that the rule is merely procedural.
If that is so, then it was incumbent on the first defendant to have applied for a stay at a much earlier stage then this. As Perry J said in Residues Treatment (supra), such an issue should have been determined on the pleadings before evidence was taken. The fact that the plaintiff has not pleaded that the partnership has dissolved, or any other ground upon which it seeks to sue in its own name, could have given rise to an application for a stay at an interlocutory stage of the proceedings.
For that reason, I might have been inclined to refuse to entertain the submission in the exercise of my discretion (see the remarks of Olsson J in Popovic (supra) at [124], and Perry J in Residues Treatment at page 60 adapting the dictum of Tadgell J in Protean (Holdings) Ltd v American Home Assurance Co. [1985] VR 187 at 237).
However, since the question of whether I should have entertained the submission at all was not argued, and in the interests of avoiding further delay, I will proceed to an examination of the evidence to evaluate whether the alleged “hiatus” exists.
The Evidence
The question to be decided in this exercise is whether there is any evidence from which it can be inferred that there has been an assignment by the other parties to the plaintiff of their rights and interests arising from the partnership. Adapting the words of King CJ in R v Bilick (1984) 36 SASR 321 at 331 to a civil case, the test is:
On the assumption that all the evidence of primary fact considered at its strongest from the point of view of the case for the (plaintiff), is accurate, and on the further assumption that all the inferences most favourable to the (plaintiff) which are reasonably open are drawn, is the evidence capable of producing in the mind of a reasonable person satisfaction (on the balance of probabilities that each of the constituents of the plaintiffs claim have been established)
(See also Cross on Evidence (7^th Australian Edition) at [9120])
Mr Sotirios Portellos, the director of the plaintiff, gave evidence that Mr Angelo Salamone, a director of Dimone, took an active role in the business, particularly after his son’s severe head injury in March 1998 (T218). Mr Pappas, the director of Temalo, had been involved in a different supermarket venture at Frewville, but he took no active role in the Windsor Gardens business after it opened.
Mr Portellos said that Temalo’s withdrawal from the partnership was documented in a deed which is undated, but which would have been signed on or about 12 May 1999. Exhibit P48 is said to be a copy of the deed which has been executed by Dimone and Mr Salamone, the plaintiff and Mr Portellos, but not by Temalo or Mr Pappas.
Mr Portellos said that the document Exhibit P48 accurately records the agreement that was reached with Mr Pappas (T222). There is no evidence that such a document was ever executed by Temalo, or that the terms of the agreement were ever carried out.
In any event, since the document Exhibit P48 has not been stamped, Mr Strawbridge, counsel for the plaintiff, conceded that I should have no further regard to it (see Stamp Duties Act, 1923 (SA), s22). However, in the absence of a fully executed agreement dissolving the partnership, I consider that for the purposes of the submission that there is no case to answer, I can have regard to Mr Portellos’ oral evidence that there was a dissolution of the partnership with Temalo in about May 1999. For the purposes of the submission, the inference arises from that evidence that Temalo assigned its rights and interests in the partnership to the plaintiff.
As to Dimone, Mr Salamone gave evidence that he sold Dimone’s share in the business to the plaintiff, and an agreement was signed. No such agreement has been produced, but this evidence was led without objection.
Mr Salamone said that Mr Portellos will have paid the full payout figure ($650,000) by December 2009, a period of 10 years since the monthly payments commenced (T1023). When being pressed in cross-examination by Mr Dal Cin, Mr Salamone insisted that he had no interest in the outcome of the case, and that if the plaintiff succeeded it would be “no benefit to me” (T1027).
In those circumstances, there is evidence from which it can be inferred for the purposes of this ruling that the partnership between the plaintiff and Dimone has been dissolved, and that Dimone has assigned its rights and interests in the partnership to the plaintiff.
Finally it is accepted by both the plaintiff and the first defendant for the purposes of this ruling that Temalo was de-registered on 30 June 2003, and Dimone was de‑registered on 21 April 2006. The companies therefore ceased to exist on those dates (Corporations Act, 2001 (Commonwealth), s601AD(1)).
Conclusion
I conclude that there is some evidence before the court from which it can be inferred that the former partners in the business which is the subject of these proceedings, namely Temalo and Dimone, had left the partnership and assigned their rights and interests arising from the partnership to the plaintiff at a point in time prior to the institution of these proceedings.
That being so, the “hiatus” in the evidence asserted on behalf of Comlease does not exist. The submission that Comlease has no case to answer on the basis of that hiatus is therefore rejected. If Mr Dal Cin wishes to make a submission on the basis of the strength of the evidence on the point, it would be appropriate to call upon him to elect before deciding to entertain it.
I reserve the right to give expanded reasons for this ruling should this become necessary.