Mackay Sugar Co-operative Association Ltd v CSR Ltd

[1995] FCA 486

CATCHWORDS

IN THE FEDERAL COURT OF AUSTRALIA     )
QUEENSLAND DISTRICT REGISTRY         ) No. QG 178 of 1994
GENERAL DIVISION  )

BETWEEN:    MACKAY SUGAR CO-OPERATIVE ASSOCIATION LIMITED

(ARBN 057 463 671)
  First Applicant

AND:    ED & F MAN AUSTRALIA PTY LTD

(ACN 054 982 071)
  Second Applicant

AND      :    MACKAY REFINED SUGARS PTY LTD
  (ACN 054 641 824)
  Third Applicant

AND      :    ED & F MAN NEW ZEALAND LIMITED
  (AK 552905)
  Fourth Applicant

AND:    MACKAY REFINED SUGARS (NZ) LIMITED (AK 552905)

Fifth Applicant

AND      :    CSR LIMITED (ACN 000 001 276)
  First Respondent

AND:    NEW ZEALAND SUGAR COMPANY LIMITED (AK 058799)

Second Respondent

CORAM:    Spender J
PLACE:    Brisbane
DATE:     7 July 1995

MINUTES OF ORDER

1. THE COURT GRANTS:

liberty to the applicants in the principal proceedings to replead the statement of claim within fourteen days.

1. THE COURT ORDERS THAT:

the respondents to the principal proceedings are to have the costs of their motion.

Note:     Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA     )
QUEENSLAND DISTRICT REGISTRY         ) No. QG 178 of 1994
GENERAL DIVISION  )

BETWEEN:    MACKAY SUGAR CO-OPERATIVE ASSOCIATION LIMITED

(ARBN 057 463 671)
  First Applicant

AND:    ED & F MAN AUSTRALIA PTY LTD

(ACN 054 982 071)
  Second Applicant

AND      :    MACKAY REFINED SUGARS PTY LTD
  (ACN 054 641 824)
  Third Applicant

AND      :    ED & F MAN NEW ZEALAND LIMITED
  (AK 552905)
  Fourth Applicant

AND:    MACKAY REFINED SUGARS (NZ) LIMITED (AK 552905)

Fifth Applicant

AND      :    CSR LIMITED (ACN 000 001 276)
  First Respondent

AND:    NEW ZEALAND SUGAR COMPANY LIMITED (AK 058799)

Second Respondent

CORAM:    Spender J
PLACE:    Brisbane
DATE:     7 July 1995

REASONS FOR JUDGMENT

On 21 March 1995 the first and second respondents filed a Notice of Motion seeking among other things that certain nominated parts of the Amended Statement of Claim be struck out.  An Amended Notice of Motion was filed on 8 June 1995, which narrowed some aspects of the relief sought. 

Following discussions between counsel concerning some aspects of the Amended Notice of Motion, a further substantial narrowing of the matters in dispute was achieved.  The application to strike out is now directed to paragraphs 38(b) and (c) and 39(b) and (c), paragraph 80A, and the words "/or in breach of its fiduciary duty" from paragraph 80 of the Statement of Claim.

In addition, the first and second respondents in the principal proceedings seek that the applicant be ordered to supply further and better particulars of "the date from which it is alleged in paragraphs 38, 39 and 48 of the Amended Statement of Claim that the Respondents hold agreements for the sale of refined or other sugar with customers in Australia and New Zealand in trust for or otherwise on behalf of the Applicants and the Respondents".

The history of the matter for present purposes may be summarised as follows.

Negotiations took place for a Joint Venture agreement between the applicants and the respondents to produce, distribute and sell sugar in Australia, New Zealand and elsewhere.  On 12 June 1993 a document entitled "Principles of Understanding" was executed by the parties.

On 9 August 1993 "Heads of Agreement" were executed which contemplated a formal Joint Venture agreement being entered into by the parties.  On 8 December 1993 the Trade
Practices Commission declined to authorise the Joint Venture. An application was lodged, for review of that decision, with the Trade Practices Review Tribunal.  On 31 January 1994, the respondents informed the applicants that they no longer intended to proceed with the application for review or the Joint Venture itself.

From about June 1993, the respondents had been securing agreements for the sale of refined sugar.  It is asserted that the purchasers were potential clients of the Joint Venture.  The applicants claim that they are entitled to a share of the benefits from those agreements as they were entered into in contemplation of the Joint Venture.

Also, the applicant undertook major construction work at Glebe in contemplation of the Joint Venture and is seeking half of the cost of that work from the respondents.

The applicant alleges estoppels, unconscionable conduct, breach of fiduciary duty, abuse of market power and misleading and deceptive conduct and seeks damages, equitable relief, injunctions and ancillary relief pursuant to s. 87 of the Trade Practices Act 1974.

The application to strike out is brought pursuant to O 11 r 16 and O 20 r 2 of the Federal Court Rules.  The principles to be applied on a striking out application are not in dispute.  The pleading or part of a pleading is to be struck out only in a plain and obvious case: Brownbill v Esanda Finance Corporation (1991) 31 FCR 153 at 158 and Davis v The Commonwealth (1986) 61 ALJR 32 at 35. As General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125 makes plain, an applicant for a strike out, on the basis of the absence of a reasonable cause of action, must demonstrate that the pleaded case is so clearly untenable that it cannot possibly succeed. It is also a sufficient basis for a successful strike out application that the pleading in truth has a tendency to cause prejudice, embarrassment or delay.

While the Amended Statement of Claim is a quite lengthy document of some fifty-eight pages, it is sufficient for present purposes to set out only the following paragraphs:

1. From on or about 23 August 1993 until on or about 31 January 1994:-

(a)CSR proceeded to enter into agreements for the sale of refined sugar and other sugar;

(b)NZSC proceeded to enter into agreements for the sale of refined sugar and other sugar.

...

1. CSR:

(a)entered into the agreements referred to in paragraph 33 hereof in its own name;

(b)has kept the benefit of those agreements;

(c)has failed to provide Mackay and MAN with copies or details of those agreements;

(d)has failed to account to Mackay and MAN for their respective shares of the profits made and benefits obtained by CSR from those agreements.

1. NZSC:

(a)entered into the agreements referred to in paragraph 33 hereof in its own name;

(b)has kept the benefit of those agreements;

(c)has failed to provide Mackay and MAN NZ with copies or details of those agreements;

(d)has failed to account to Mackay and MAN NZ for their respective shares of the profits made and benefits obtained by NZSC from those agreements.

1. Between 12 June 1993 and 31 January 1994 the Joint Venturers were associated in respect of the matters referred to in the Statement of Claim on the basis of mutual trust and confidence in the skill knowledge and integrity of each other.

1. By virtue of the matters referred to in paragraphs 16, 17, 18, 19, 20, 21 and 27 to 37 inclusive hereof CSR, in negotiating and entering into agreements for the sale of refined sugar between 12 June, 1993 and 31 January 1994:

(a)acted as agent for the Joint Venturers;

(b)acted in a fiduciary capacity;

(c)held and continues to hold its interests in those agreements for itself, Mackay and MAN.

1. By virtue of the matters referred to in paragraphs 16, 17, 18, 19, 20, 21, 22 and 27 to 37 inclusive hereof NZSC, in negotiating and entering into agreements for the sale of sugar between 12 June 1993 and 31 January 1994:

(a)acted as agent for the Joint Venturers;

(b)acted in a fiduciary capacity;

(c)held and continues to hold its interests in those agreements for itself, Mackay and MAN NZ or alternatively for itself and/or CSR, Mackay and MAN NZ.

Paragraphs 80A and 80 are in the following terms:

80A By virtue of the matters referred to in paragraphs 16, 17, 18, 19, 20, 21, 27 to 37, 68, 69, 70, 71, 72, 73, 74, 75, 76, CSR owed MRS a fiduciary duty in respect of the cost of the new work incurred by MRS.

1. In breach of its obligations under the Heads of Agreement and/or in breach of its fiduciary duty CSR has failed and refused to pay to MRS the sum of $5,404,250 being its half share of the cost of the new work.

Before dealing with the substance of the complaint, it is convenient to note a contention on behalf of the applicants in the principal proceedings that it would be futile to strike out the challenged allegations, it being asserted that if other pleaded facts, if proved, establish the existence of fiduciary relationship, the applicants can rely on the duty to which the relationship gives rise and its consequence, even if fiduciary duty and its breach are not pleaded. 

It was said that Ravinder Rohini Pty Ltd v Krizaic Pty Ltd (1991) 30 FCR 300 was authority for this proposition. I do not accept that this is so.

Ravinder was a case where the absence of a pleaded case of breach of fiduciary agreement at first instance was held by the Full Court not to be fatal.  At the appeal stage, Wilcox J at 314 said:

"It is clear that the respondent did not plead a case of breach of fiduciary agreement.  He did plead an agreement to enter into a partnership with Mr Sharma and work done by him pursuant to such an agreement, the factual situation which gives rise to the relevant fiduciary relationship.  He also claimed an accounting of the assets of the partnership at the time of dissolution.  But he did not, in terms, allege a breach of fiduciary duty.  Rather, the allegation of breach was stated only in terms appropriate to a claim of breach of contract.  And it appears to be correct that no submissions about breach of fiduciary duty were put to the trial judge.

However, I do not think that it follows that the respondent is precluded from resisting the appeal by reference to a case of breach of
fiduciary duty.  The purpose of pleadings is to disclose the facts upon which a party relies.  If a pleading discloses facts, proved at the trial, which entitle a party to succeed, it does not matter that the pleader did not realise that those facts disclosed a cause of action or defence other than the one to which they were directed. "

Later, Wilcox J referred to the advice of the Judicial Committee of the Privy Council in Connecticut Fire Insurance Co v Kavanagh [1892] AC 473, where the Judicial Committee specifically accepted the accuracy of the rule applied in Swinfen v Lord Chelmsford (1860) 5 H & N 890; 157 ER 1436:

"to the effect that, when a declaration discloses a certain state of facts, the plaintiff may recover upon the liability which the facts disclose. "

Wilcox J, however, continued:

"But Lord Watson added (at 480):

'When a question of law is raised for the first time in a court of last resort, upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is not only competent but expedient, in the interests of justice to entertain the plea.  The expediency of adopting that course may be doubted, when the plea cannot be disposed of without deciding nice questions of fact, in considering which the court of ultimate review is placed in a much less advantageous position than the courts below.  But their Lordships have no hesitation in holding that the course ought not, in any case, to be followed, unless the court is satisfied that the evidence upon which they are asked to decide establishes beyond doubt that the facts, if fully investigated, would have supported the new plea. ' "

At the foot of p. 315, his Honour said:

"As I have pointed out, in the present case the respondent pleaded facts which, if proved, would establish the existence of a fiduciary
relationship...On its face the case seemed to come within the principle enunciated by Lord Watson.  But, for more abundant caution, we asked counsel for the appellants, during the course of their submissions, to indicate the nature of any additional evidence which might have been adduced on their clients' behalf if the claim of breach of fiduciary duty had been made at the trial.  They were unable to suggest any such evidence.  Especially in the light of this response, it seems to me that this is a case where the court may feel satisfied that the whole of the relevant material is before it.  More than that, this is a case where the respondent is able to point to findings of the trial judge which establish all of the elements of the case which he belatedly seeks to raise.  I see no injustice in his being allowed to do so; on the contrary, it is in the interests of justice. "

Ravinder does not seek to subvert the necessity for proper pleading, nor does it authorise a pleading which is vexatious or embarrassing.  It is therefore necessary to have regard to what is pleaded and to the objections taken to that pleading in the present case.

Dealing with the question of particulars, it is apparent that there is a different period referred to in paragraphs 33 and 38.  It may be that the discrepancy in periods is the consequence of a misunderstanding as to when the heads of agreement were entered into.  It is possible that the date 23 August 1993 was thought to be the date on which the heads of agreement were reached.  The document, however, is dated 9 August.  That possible explanation arises from the written submissions on behalf of the applicants. 
         Whatever be the date on which the applicants in the principal proceedings wish to rely, in my opinion, it is perplexing to be confronted with this pleading.  If the fundamental allegation by the applicants is that the two respondents hold the proceeds of contracts for the sale of refined sugar made between 12 June 1993 and 31 January 1994 for itself, Mackay and MAN, the parameters of the claim are considerably greater than if the allegation was directed at the proceeds of such contracts for the period from 23 August 1993 or from 9 August 1993 to 31 January 1994.  Moreover, I am told from the bar table that the different periods have a significant possible impact on the extent of discovery that would be required to be made.

I think it is accepted on behalf of the applicants in the principal proceedings that this matter should be resolved by amending the pleading after appropriate inquiry is made as to what is the precise position for which the applicants contend.

As to the application to strike out the specified paragraphs, the applicants on the motion, being the first and second respondents in the principal proceedings, in essence seek a pleading which identifies the nature and scope of the duty which is alleged to exist, and precision in respect of what is said to be the breach by them of that duty.

It was rightly said by senior counsel for CSR and NZSR that however helpful an explanation by counsel for the applicants was as to what was sought to be conveyed by the statement of claim, that explanation can be no substitute for the real thing.

It may be accepted that the pleading could be better.  That is not the question, however.  The question is whether the applicant should be required to replead.  If it be the case for the applicants that, arising out of the discussions and steps referred to in the nominated paragraphs set out in paragraph 38, there was an oral agreement that CSR and NZSC would act as agents for themselves, Mackay and MAN in the entering into contracts for sale of refined sugar, that is one thing.  It was suggested by Mr John Muir QC, counsel for the applicants in the principal proceedings, that the conduct alleged in paragraph 38(a) had the consequence asserted in paragraph 38(b), with the consequence alleged in paragraph 38(c). 

The circumstances upon which an express trust results may be contrasted with circumstances in which a constructive trust arises, or those which lead to a resulting trust.  It was submitted on behalf of the applicants that, because of the existence of the fiduciary relationship, CSR was precluded from usurping the contracts for its own benefit.  It was said:

"CSR holds the contracts for the benefit of itself, Mackay and MAN by operation of a resulting trust. "

I confess my difficulty in categorising any trust consequence arising out of the assertions in paragraphs 38(a) and (b) as being a resulting trust.

The assertion of a fiduciary relationship (such as might be evidenced by the matters pleaded in paragraph 37 of the amended statement of claim) is not a pleading panacea.

Deane J in Chan v Zacharia (1984) 154 CLR 178, said at 195:

"Fiduciary relationships may take a wide variety of forms and may give rise to a wide variety of obligations.  Ordinarily, in determining whether a constructive trust of particular property has arisen as a consequence of the existence or breach of a fiduciary obligation, it is necessary to identify the nature of the particular fiduciary relationship and to define any relevant obligations which flowed from it; see, e.g. per Fletcher Moulton L.J. In re Coomber; Coomber v. Coomber [1911] 1 Ch. 723, at pp. 728-729. "

I interpolate to note that it was conceded by Mr Muir that what is alleged in paragraph 35 and 36 ought more rationally to follow what is asserted in paragraph 38 as constituting the allegations of breach of whatever be the duty owed by CSR and NZSC to the applicants.

In my opinion, the difficulty is of the kind referred to by Fletcher Moulton LJ in In re Coomber; Coomber v. Coomber [1911] 1 Ch. 723 at 728-9, where his Lordship said:

"Under those circumstances what objection can be made to this transaction?  It is said that the son was the manager of the stores and therefore was in a fiduciary relationship to his mother.  This illustrates in a most striking form the danger of trusting to verbal formulae.  Fiduciary relations are of many different types; they extend from the relation of myself to an errand boy who is bound to bring me back my change up to the most intimate and confidential relations which can possibly exist between one party and another where the one is wholly in the hands of the other because of his infinite trust in him.  All these are cases of fiduciary relations, and the Courts have again and again, in cases where there has been a fiduciary relation, interfered and set aside acts which, between persons in a wholly independent position, would have been perfectly valid.  Thereupon in some minds there arises the idea that if there is any fiduciary relation whatsoever any of these types of interference is warranted by it.  They conclude that every kind of fiduciary relation justifies every kind of interference.  Of course that is absurd.  The nature of the fiduciary relation must be such that it justifies the interference.  There is no class of case in which one ought more carefully to bear in mind the facts of the case, when one reads the judgment of the Court on those facts, than cases which relate to fiduciary and confidential relations and the action of the Court with regard to them. "

In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, Gibbs CJ said at 69:

"I doubt if it is fruitful to attempt to make a general statement of the circumstances in which a fiduciary relationship will be found to exist.  Fiduciary relations are of different types, carrying different obligations (see In re Coomber; Coomber v Coomber [1911] 1 Ch. 723, at pp. 728-729,
Jenyns v Public Curator (Q.) (1953) 90 C.L.R. 113, at pp. 132-133 and Phipps v Boardman [1967] 2 A.C. at pp. 126-127) and a test which might seem appropriate to determine whether a fiduciary relationship existed for one purpose might be quite inappropriate for another purpose.  For example, the relation of physician and patient, and priest and penitent, may be described as fiduciary when the question is whether there is a presumption of undue influence, but may be less likely to be relevant when an alleged conflict between duty and interest is in question.  Moreover, different fiduciary relationships may entail different consequences, as is shown by the discussion of the respective positions of a trustee and a partner in relation to the renewal of a lease; see In re Biss; Biss v. Biss [1903] 2 Ch. 40, at pp. 56-57, 61-62, Griffith v. Owen [1907] 1 Ch. 195, at pp. 203-204, and Chan v Zacharia (1984) 154 C.L.R. 178. "

Mason J, as he then was, said at 97:

"That contractual and fiduciary relationships may co-exist between the same parties has never been doubted.  Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship.  In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties.  The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them.  The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction. "

The above passage was relied on by Mr Bathurst Q.C. as relevant to his contention that the fiduciary claim advanced by the applicants in the principal proceedings was inconsistent with the terms in cl. 19 of the Heads of Agreement, which is that part of the Heads of Agreement
referred to by the applicants in paragraph 80 of the statement of claim. 

Clause 19 of the heads of agreement dated 9 August 1993 is in the following terms:

19.DISSOLUTION

In the event that the UJV does not proceed or is dissolved prior to the Production UJV commencing, otherwise than by default of the parties, the parties agree:-

(a)that any liabilities incurred by or on behalf of the UJV will be borne in accordance with their respective interests in the UJV; and

(b)that the benefits of any new sales contracts in the industrial markets in New Zealand and Australia entered into from the time of the commencement of marketing by the UJV shall be shared by the parties as follows:

(i)that part of the contracts relating to delivery periods applying prior to the attainment of Stage Three as referred to in Section 12 shall be for the benefit of CSR;

(ii)that part of the contracts relating to delivery periods applying after the attainment of Stage Three as referred to in Section 12 shall be for the benefit of the parties in accordance with their interests in the UJV.  

In my view, the pleading in the alternative of a contractual claim and a claim, possibly inconsistent, based on a fiduciary duty is not a sufficient basis for a strike out claim.  In my view, the applicants can arguably rely on cl. 19(a) to support some of their allegations.  It seems to me that the significance and operation of cl. 19(b) is a matter that should be canvassed at trial.
         However, for the reasons earlier expressed, in my opinion paragraphs 38(b) and (c) and 39(b) and (c) are embarrassing. 

As to what ought best be done, I do not think a simple strike out of certain parts of the statement of claim is the best way of dealing with the matter.  Having regard to the other matters where obviously improvement can be achieved with resulting benefit to all parties, it seems to me that I ought to give liberty to replead the statement of claim generally, although I would anticipate that it is only in relation to the question of the refined sugar contracts that a substantial recasting might be essayed.

I grant liberty to the applicants in the principal proceedings to replead the statement of claim within fourteen days.  I will hear counsel as to costs.

I certify that this and the preceding fourteen (14) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.

Associate

Date: 7 July 1995

Counsel for the applicant:   Mr J Muir QC
instructed by:              McCullough Robertson

Counsel for the respondents: Mr T. Bathurst QC and
  Mr S. Doyle
instructed by:              Clayton Utz

Date of Hearing:            8 June 1995