Leblanc Communications Australia Pty Ltd v Fero Industries Pty Ltd

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: LEBLANC COMMUNICATIONS AUSTRALIA PTY LTD -v- FERO INDUSTRIES PTY LTD & ANOR [2007] WADC 57

CORAM: PRINCIPAL REGISTRAR GETHING

HEARD: 30 MARCH 2007

DELIVERED : Delivered Extemporaneously on 30 MARCH 2007 typed from tape and edited by the Registrar

FILE NO/S: CIV 2205 of 2005

BETWEEN: LEBLANC COMMUNICATIONS AUSTRALIA PTY LTD
Plaintiff
AND
FERO INDUSTRIES PTY LTD
First defendant
AKZO NOBEL PTY LTD
Second defendant

Catchwords:

Leave to amend statement of claim - Challenge to pleading - Reliance on documents referred to in pleading

Legislation:

Supreme Court Rules

Result:

Directions given as to use which may be made of documents referred to in a pleading for the purposes of challenging it

Representation:

Counsel:

Plaintiff:     Mr S J Lemonis
First defendant              :     No appearance
Second defendant          :     Mr G R Hancy

Solicitors:

Plaintiff:     Fairweather & Lemonis
First defendant              :     Bowen Buchbinder Vilensky
Second defendant          :     Dibbs Abbott Stillman

Case(s) referred to in judgment(s):

Banque Commerciale SA en Liquidation v Akhill Holdings Ltd (1990) 169 CLR 279
Day v William Hill (Park Lane) Ltd [1949] 1 KB 632
Kimberley Downs Pty Ltd v Western Australia, unreported; SCt WA; Library No 6414; 25 August 1986
Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd [1992] 1 Qd R 91
Neilson & Anor v City of Swan [2006] WASCA 94
Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146
Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323
Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290

PRINCIPAL REGISTRAR GETHING: In this action, the plaintiff claims damages arising out of defects in the painting and coating of certain structural steelworks by the first defendant. The steelworks were part of a wider contract between the plaintiff and Boeing Australia Ltd.
The second defendant is the manufacturer of the coating used in the steelworks in question. The plaintiff pleads causes of action in misleading conduct and negligence against the second defendant on the basis of representations allegedly made by the second defendant about the adequacy of the preparatory work proposed to be done on the steel prior to the application of the second defendant's coating.
By chamber summons dated 6 March 2007, the plaintiff has sought leave to amend the statement of claim. This present application appears to be the latest in a series of attempts by the plaintiff to properly and fully plead its claim. The application is consented to by the first defendant but opposed by the second defendant.
When the application came on for hearing on 28 March 2007 it became apparent that the second defendant sought to place extensive reliance on documents referred to in the further minute of re‑amended statement of claim dated 27 March 2007, which I will refer to as "the Minute", in its challenge to the plaintiff's application. These documents had previously been provided to the second defendant pursuant to Supreme Court Rules O 26 r 8 (2) and I will refer to these documents as "the Documents".
The plaintiff objected to the use being made of the Documents. Given the use sought to be made of the Documents by the second defendant will have a large bearing on the scope of the challenge to the Minute, I took the view that it was appropriate that I rule on the objection prior to the balance of the application being heard. One reason for taking this course is that if the objection was disallowed it may well be that the plaintiff will seek to adduce further affidavit evidence on the application.
The second defendant seeks to use the Documents for two broad purposes:
(a) to demonstrate inconsistencies between the material in the Documents and statements in the Minute such that the Minute either fails to disclose a reasonable cause of action or is otherwise embarrassing;
(b) this being a subsequent attempt to amend the statement of claim, to form part of the factual basis for the exercise of the general discretion governing the grant of leave to amend.
The plaintiff submitted that documents referred to in a pleading may only be referred to in an application to challenge pleadings where there is a direct inconsistency. It appeared to be common ground between counsel that, for example, if there was a plea in a statement of claim that summarised a particular term of a written contract, it would be permissible to refer to the document if there was an assertion that the plea did not accurately reflect the actual term.
In Kimberley Downs Pty Ltd v Western Australia, unreported; SCt WA; Library No 6414; 25 August 1986, Master Staples summarised the principles applicable on an application to strike out a statement of claim on the ground that it discloses no reasonable cause of action. Those principles are set out on pp 6 and 7 of the judgment in six numbered paragraphs:
"(1)The rule is intended to apply only to cases which are really not arguable and not to cases where under the previous practice demurrer would have been the proper course: Packard v Transport Trading and Agency Co Ltd (1912) 14 WALR 191 per Burnside J at p 195.
(2)On the application, not only must all the facts alleged in the statement of claim be accepted as true, but it must be taken for granted that on all other points the pleading is unassailable: Niven v Grant (1903) 29 VLR 102 per Holroyd J at p 106.
(3)Great care must be exercised to ensure that a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal: General Industries Inc v Commissioner for Railways NSW (1964) 112 CLR 125 per Barwick CJ at p 130.
(4)But the rule should not be reserved for those cases where argument is unnecessary to show the futility of the plaintiff's claim. Argument, even extensive argument, may be necessary to demonstrate that the plaintiff's case is so clearly untenable that it cannot possibly succeed. Ibid.
(5)As a general rule, a plaintiff is entitled … as of right to have his case heard, to have the facts found and then to argue the question of law as it arises before the trial Judge upon the facts as found. It is only in cases in which it can be seen from the outset that, however the facts be found, there is no basis for the legal conclusion contended for by the plaintiff that the pleading should be struck out; Dalgety Australia Ltd v Rubin, FCt; 24 August 1984: Library 5485, per Burt C.J.
(6)A court at first instance should be careful not to risk stifling the development of the law by summarily rejecting a claim where there is a reasonable possibility that, as the law develops, it will be found that a cause of action will lie: Hospitals Contribution Fund of Australia v Hunt (1982‑1983) 44 ALR 365 per Master Allen."
This passage was cited with approval by Buss JA, with whom Wheeler and Pullin JJA agreed, in Neilson & Anor v City of Swan [2006] WASCA 94 at par 18.
In effect, the second defendant is asking the court to depart from the general principles in par 2 of the principles set out by Master Staples, namely that it must be assumed that all the facts alleged in the statement of claim are true.
For example, in par 19 of the minute the plaintiff pleads: "From in or about December 1999 to February 2000 the first defendant was provided with galvanised steelwork for painting the coating works which had not been chromic-acid quenched".
The second defendant refers to a report from Boeing dated 13 December 2002 from which it appears some of the galvanised steelwork in question came from Malaysia and had been chromic‑acid quenched. I note that the Boeing report which is referred to in the minute was not in evidence before me, only a summary of the report in a facsimile from the second defendant's solicitors to the plaintiff's solicitors annexed to an affidavit sworn by a solicitor employed by the second defendant's solicitors. In effect the second defendant is asking what case it has to meet. Is it that none of the steelwork had been chromic‑acid quenched or that some of it had?
A strict application of the principles set out in Kimberley Downs would lead the court to assume that what was in par 19 of the Minute was true and then assess the adequacy of the Minute on the basis that the fact in par 19 would be proven at trial.
The starting point in the second defendant's submissions is Supreme Court Rules O 26 r 8 (2) which provides:
"Any party to a cause or matter shall be entitled at any time to serve a notice on the other party in whose pleading or affidavits reference is made to any document requiring him to produce that document for inspection by the party giving the notice."
Where the document is referred to in a pleading, the purpose of the rule is to put the party requesting the document in the same position or advantage as if the document had been fully set out in the pleading, the authority for that proposition being Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd [1992] 1 Qd R 91 at 92, 93, 97 and 98.
Reliance is then placed by the second defendant on the decision in Day v William Hill (Park Lane) Ltd [1949] 1 KB 632. In that case Singleton LJ stated (at 639):
"I am not sure that there was any necessity for the affidavit sworn by the defendant which merely exhibited the documents referred to in the statement of claim, since if documents are referred to in a pleading they become part of the pleading and it is open to the court to read them."
On the facts of that case, a client sued his bookmaker on the basis of an account stated. The document in which it was alleged that the account was stated was produced. Upon examination by the court, it became apparent that the document was a weekly account with a balance carried forward and not an account stated in the strict legal sense of that word. The Court of Appeal struck out the statement of claim as disclosing no cause of action.
The second defendant thus cites that case as authority for the proposition that the court is entitled to read a document produced pursuant to Supreme Court Rules O 26 r 8 (2) and that - and here I quote from the second defendant's written submissions:
"If an allegation that purports to derive from a document is not supported by what is contained in the document the allegation is liable to be struck out."
I respectfully agree with this as a statement of ratio decidendi of the decision in the Day (supra) case. However, that does not necessarily lead to the conclusion that the objection ought to be disallowed.
Rather a two‑stage analysis follows. The first is to isolate the allegation in the pleading that is said to be supported by the particular document. The second is to read the document produced to determine whether the allegation is so supported. It is not every part of the document that is able to be referred to, only that part said to support the allegation made.
The reference made by the plaintiff to the Boeing report is a good example of the application of these principles. In par 21 of the Minute, the plaintiff pleads that on or about 19 December 2002 the plaintiff received notice by letter dated 13 December 2002 from Boeing that in respect to counterweight towers 2 and 10 there were three specified defects. The particulars to par 21 identify the letter. It is thus permissible for the court to read the letter to determine whether it supports the allegation pleaded in par 21 of the Minute. It is not permissible for the court to look to the contents of the Boeing letter more generally to ascertain whether the allegations set out in the remainder of the Minute are supported by, or are consistent with, what is set out in the balance of the Boeing letter.
Rather, applying the decision in Kimberley Downs, those allegations must be assumed to be true unless they are supported by a different document, in which case a similar analysis is undertaken for the particular allegation and the particular document.
This conclusion makes eminent sense from a practical perspective. It may well be that the Boeing letter contains facts which the plaintiff disputes or contests or at least does not rely on. This outcome would not be surprising given that Boeing and the plaintiff are on different sides of a contractual rectification claim. There is no reason why the plaintiff's statement of claim need be consistent with a letter written to it by a third party.
The same goes for the report of Zedcon Scientific Services referred to at par (g) to the particulars to par 22 of the Minute. The allegation made is that the plaintiff engaged Zedcon to investigate the failure of the coating, that Zedcon tested paint flakes for foreign contaminants and prepared a report dated 23 August 2004 and that Zedcon inspected the coating on-site on 26 August 2004 and prepared a report dated 6 August 2004.
Regard may be had to the reports dated 23 August and 6 September 2004 to determine whether the allegations made are supported by the documents. If, for example, the documents do not reveal that an inspection took place on 26 August 2004, that particular is liable to be struck out.
Regard may not be had to these reports to challenge the factual basis of other allegations in the statement of claim. Consistent with the decision in Kimberley Downs (supra) they must be assumed to be true.
This approach does not in any way prejudice the second defendant. This is seen when we look to the function of pleadings. In the words of the then Mason CJ and Gaudron J in Banque Commerciale SA en Liquidation v Akhill Holdings Ltd (1990) 169 CLR 279 at 286:
"The function of pleadings is to state with sufficient clarity the case that must be met. In this way pleadings serve to ensure the basic requirements of procedural fairness that a party should have the opportunity of meeting the case against him or her and incidentally to define the issues for decision."
The case which the second defendant has to meet is set out in the Minute. The fact that there is a conflict between what is set out in the Minute and a statement made in a document discovered pursuant to Rules of the Supreme Court O 26 r 8 (2), which is not relied upon in the Minute, does not detract from the conclusion that it is the statement set out in the Minute which is the case the second defendant has to meet.
Going back to the example which I quoted earlier in relation to par 19 of the Minute, dealing with whether or not the steelwork provided had been chromic-acid blenched, the case the second defendant has to meet is the case as set out in par 19 of the Minute.
The fact that there may well be different or inconsistent statements in other documents not relied upon to support that allegation merely forms part of the evidentiary background to the case which will be determined at trial.
This then leaves the second use which the defendant proposes to make of the Documents. It asks the court to rely on the Documents when looking at the question of discretion to allow the statement of claim to be amended in the manner sought.
It is clear that evidence may be led on the following matters:
(a) the prejudice to the plaintiff if leave is not granted;
(b) the prejudice to the defendant if leave is granted;
(c) prejudice to the public interest, for example the vacation of trial dates at such a late stage that they cannot be allocated to other litigants;
(d) the reasons for delay in the making of any applications;
(e) case management considerations more generally.
I cite three authorities in support of those propositions: Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323 at 335-336; Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290 at 315‑316; and Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 at 154‑155.
If taken to its logical conclusion, the second defendant's submission is that from the Documents the plaintiff's case on its merits has some demonstrable weaknesses in it and that as a matter of discretion the plaintiff should not then be able to amend its pleadings.
To my mind this submission takes the claim into the territory of a summary judgment application. The plaintiff faced with such a submission may out of an abundance of caution place before the court sufficient evidence to support the claim at least at a level that in the ordinary course would be sufficient to defend a summary judgment application. This would seem to be a most undesirable development in pleadings challenges and this is especially so in the context of the decision in Kimberley Downs (supra), recently approved by the Court of Appeal, that on an application to strike out a statement of claim as disclosing a reasonable cause of action, the court is to accept that each of the facts alleged in the statement of claim is true.
It would thus seem to me to be inappropriate for the court to delve into the factual merits of the plaintiff's claim in a context of the application such as the present one. Either the claim as pleaded discloses an arguable cause of action or it does not. If it does not, it will be struck out either in whole or in part. If it does disclose a cause of action, then the general rules, again as quoted in the Kimberley Downs case, would apply and the plaintiff is entitled as of right to have his case heard, to have the facts found and then to argue questions of law as they arise before the trial judge on the facts as found.
Having made those comments I do note that the discretionary considerations are very wide. Accordingly I do not propose to make any ruling on the evidence striking out any part of the affidavit before me. What I propose to do is to consider all the evidence before me in the context of the discretionary considerations. The key question is one of the weight to be given to each part of the evidence before me in light of the authorities which I previously referred to dealing with a grant of leave to amend.

[2007] WADC 57

30 March 2007 typed from tape and edited by the Registrar