Majestic Group Pty Ltd v Suncorp General Insurance Limited
[2000] QSC 162
•8 June 2000
SUPREME COURT OF QUEENSLAND
CITATION: Majestic Group Pty Ltd v Suncorp General Insurance Limited [2000] QSC 162 PARTIES: MAJESTIC GROUP PTY LTD
(Applicant)
v
SUNCORP GENERAL INSURANCE LIMITED
(Respondent)FILE NO: Brisbane Registry S6863 of 1997 DIVISION: Trial Division DELIVERED ON: 8 June 2000 DELIVERED AT: Brisbane HEARING DATE: 12 April 2000 JUDGE: Mackenzie J ORDER: On the plaintiff’s application I order:
1. that pars 10(b) and 12 of the defence be struck out;
2. that the respondent provide to the applicant further and better particulars in terms of:
(a) par 6(b)(i),
(b) par 6(b)(ii);
(c) par 6(b)(iv) but limited to the names of natural persons who were representatives of the defendant;
(d) par 6(b)(v) but limited to so much of the terms of the negotiations as relate to the issue of whether it was an option prior to the contract being entered into that the subsidiary could, in the event of a merger, vacate the premises;
(e) par 19(c);
of the request for further and better particulars dated 21 January 2000, exhibit PP2 to the affidavit of Peter Previtera sworn 7 April 2000.
On the defendant's application I order:
3. that the application to strike out pars 18, 19 and 20(c) of the plaintiff's statement of claim be dismissed;
4. that the application that the respondent provide to the applicant further and better particulars requested in pars 14 and 15(3) of the applicant's request for further and better particulars dated 12 October 1999 be dismissed;
On each application I order:
5. that the defendant pay the plaintiff's costs of and incidental to the application to be assessed.
CATCHWORDS: PRACTICE - STRIKING OUT DEFENCE - STATEMENT OF CLAIM - FURTHER AND BETTER PARTICULARS – claim in negligence for economic loss - authority not in sufficient state of certainty to strike out claim - premature to order further and better particulars – paragraphs of defence struck out - unnecessary - further and better particulars to be provided - representations allegedly made - terms of negotiations. COUNSEL: T W Quinn for the applicant
G Brandis for the respondentSOLICITORS: Alex Mackay & Company for the applicant
Dunhill Madden & Butler for the respondent
MACKENZIE J: There are separate applications in this matter. The defendant Suncorp General Insurance Limited (Suncorp) applies to strike out certain paragraphs of the statement of claim and for an order that the plaintiff provide further and better particulars. The plaintiff Majestic Group Pty Ltd (Majestic) applies to strike out paragraphs of the defence and for an order that the defendant give further and better particulars.
The Defendant's Applications
The statement of claim discloses that it is alleged that the plaintiff and the defendant entered into a contract under which the defendant agreed to sell a commercial building to the plaintiff. A wholly owned subsidiary of the defendant was a tenant. It is alleged that during the negotiations the defendant's agents represented that there was no plan to terminate the tenancy of the subsidiary.
It is further alleged that prior to the contract being made the defendant's board of directors had formulated a proposal to merge its subsidiary with a like organisation and that the subsidiary could vacate the premises sold to the plaintiff. The merger subsequently happened and the subsidiary vacated the building. It is alleged that the plaintiff was unaware of the proposed merger until after the contract was made.
It is alleged that in the absence of disclosure of the proposed merger the representations made by the defendant's agents were misleading because they created a false impression that there was no known circumstance which could result in the termination of the tenancy and that there was no reason to suspect that the tenancy would not subsist at the date of settlement of the contract. It was also pleaded that the plaintiff is unaware whether prior to the making of the contract the defendant's agents shared the knowledge of the defendant's board with respect to the proposed merger, but the plaintiff claims that it was entitled to rescind the contract for innocent misrepresentation.
Alternatively, (and this is the pleading which is sought to be struck out), because the board of the defendant had formulated a merger proposal and was aware that the subsidiary could vacate the premises and because the building without the subsidiary as tenant was a substantially different property from it with the subsidiary as the tenant "the defendant owed a duty to the plaintiff to exercise reasonable care in making representations as to whether there was any plan to terminate" the subsidiary's tenancy for a number of reasons which are pleaded.
It was pleaded that there was a breach of duty of care because the defendant supplied incomplete and misleading information to the plaintiff with respect to the tenancy. The application also seeks to strike out the prayer to the extent that it seeks damages for negligent misstatement.
The test for having a claim struck out at this point is a stringent one. A series of authorities such as Dey v Victorian Railways Commissioners (1949) 78 CLR 62, General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 and Davis v The Commonwealth (1986) 68 ALR 18 show that it must be demonstrated that the claim is so untenable that it ought not to be allowed to proceed further.
Since Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529 Australian law has not adhered to the exclusionary principal in negligence that prevents recovery of damages in respect of economic loss that is not consequential on injury to person or property. Recognition of cases where recovery for such loss can be achieved has depended on recognising particular features of cases which allow a judgment to be made that it is appropriate to compensate the plaintiff for economic loss notwithstanding the acceptance that there is no general rule that one person owes to another a duty to take care not to cause for reasonably foreseeable financial harm.
The precise formulation of the circumstances in which recovery will be allowed cannot be made. Perre v Apand Pty Ltd (1999) 73 ALJR 1190 is the latest High Court authority on the subject. The judgments display no uniform approach to the issue of the principles applicable to determining whether a plaintiff may recover damages for economic loss. There is a body of opinion, perhaps commanding a majority, that the law should develop incrementally on a case by case basis. There is certainly no single defining principle to be discerned in the variety of opinions expressed.
In the present case it appears that the facts pleaded raise the relationship between two competing rights. One is protection of legitimate business interests of the defendant in confining knowledge of commercial negotiations to a limited class of company officers while other officers are conducting other negotiations on a basis different from the confidential negotiations and who may or may not know of the former. The other is the right of a plaintiff who claims to have suffered economic loss as a result of a transaction occurring in consequence of the confidential negotiations and contrary to the basis upon which negotiations with it were conducted.
On the present state of authority it cannot be established with the required degree of certainty that the claim pleaded is of such a character that it should be struck out. Accordingly, I refuse the application to strike out the paragraphs of the statement of claim relating to this issue.
The defendant seeks an order that the plaintiff provide certain further and better particulars concerning pars 14 and 15 of the statement of claim. Paragraph 14 pleads that the plaintiff did not become aware of the proposed merger until after the contract was made. The request for further and better particulars seeks particulars of the date upon which the defendant first became aware of the proposed merger.
Paragraph 15 pleads that the plaintiff was unaware whether the defendant's agents negotiating with it were aware of the proposed merger, but that the plaintiff was entitled to rescind the contract for innocent misrepresentation. The request for further and better particulars seeks particulars of when it is alleged the entitlement arose.
The objection to providing particulars of par 14 is based on analysis of what is in issue on the pleadings so far. The argument runs that because the defence admits that the defendant did not disclose the negotiations concerning the proposed merger and the plaintiff was not aware of the proposed merger prior to making of the contract, there is no issue with respect to misrepresentation to which the date upon which the plaintiff became aware of the proposed merger is relevant. However, pars 19 to 21 of the defence plead that in or about April 1994 the plaintiff was aware of the representations and that in late May or early June 1994 it affirmed the contract.
The plaintiff submits that it is not permissible to require particulars of the statement of claim for the purpose of furthering an issue raised by the defence and upon which the defendant bears the onus and that an attempt to obtain particulars is really an attempt to interrogate the plaintiff to support the defence. The defendant maintains that the request for particulars has been made in accordance with the rules.
In my opinion the application for further and better particulars should be refused at this point. The issue raised in pars 19 to 21 of the defence will need to be replied to and it is to be expected that the plaintiff will have to at least disclose its state of knowledge in or about April 1994 and its position with respect to the pleading that it had affirmed the contract in May or June 1994. What happens after that with respect to the need for further particularisation will depend on the way in which the reply is pleaded. In short it is premature to order further and better particulars as requested at this point. Indeed, reflecting the proper sequence of events, an order is made for reasons set out in pars 29 and 30 below for further and better particulars of par 19 of the defence.
With respect to par 15 of the statement of claim the plaintiff submits that it is precisely pleaded in the statement of claim that there was a right to rescission on 26 July 1994. On its pleading it is irrelevant to inquire when the right allegedly arose. It was also submitted that the question of a right to rescind involved a question of law or a mixed question of law and fact. If that was the case the plaintiff could not be required to plead it. It was also submitted that the real purpose of seeking the particulars was to interrogate. In this case also the defendant maintained that the request was made in accordance with the rules.
The issue on the pleadings is whether the letter of 26 July 1994 is an effective rescission as the plaintiff alleges or an act of repudiation (albeit not accepted) as the defendant alleges. The date when the right to rescind allegedly arose may be relevant to the issue of whether it predates or postdates the alleged affirmation with knowledge of the representation but for similar reasons to those in par 16 above, I consider it inappropriate to order further and better particulars at this point. The defendant's application insofar as it relates to further and better particulars is refused.
The Plaintiff's Applications
The first application is that pars 10(b) and 12 of the defence be struck out on the grounds that they disclose no reasonable defence, and are unnecessary, irrelevant and embarrassing. Paragraph 10 of the defence refers to par 16 of the statement of claim which alleges that by letter dated 26 July 1994 the plaintiff gave notice to the effect that the contract was rescinded for misrepresentation. Paragraph 10 of the defence admits in par (a) that the letter was sent and in par (b) "says that the letter amounted to repudiation of the contract by the plaintiff". Paragraph 12 pleads that by letter of 29 July 1994 the plaintiff repudiated the contract.
The plaintiff's argument is that these allegations are unnecessary and irrelevant since the defendant pleads in par 13 of the defence that it declined to accept either repudiation and affirmed the contract. It was submitted that the defendant having done so, any right which may have derived from repudiation ceased to have any significance. It is apparent from par 16 of the statement of claim that the effect of the letter of 26 July 1994 is in issue. The plaintiff pleads the letter as a notice of rescission of the contract for misrepresentation. The defendant treats it as repudiation which was not accepted. The defendant submits that pars 10(b) and 12 are proper pleadings on the basis that wrongful repudiation can be relied on and it is entitled to defend its conduct on any available ground.
Ordinarily an election to insist that the contract be performed is taken to be inconsistent with the continued right to terminate for that repudiation. An election to terminate for the repudiation ordinarily cannot be exercised after an election not to accept it has been made. As it has admitted that there was non-acceptance of repudiation pars 10(b) and 12 are irrelevant and should be struck out.
The next application relates to provision of further and better particulars. Par 6 of the defence it is in the following terms:
"6. With respect to paragraph 9 of the statement of claim, the defendant:
(a)does not admit the allegations in subparagraphs (a) and (b) of paragraph 9;
(b)says that from in or about November 1993 representatives of the defendant were negotiating a proposal to merge Hooker with BKF;
(c)says that prior to the making of the contract the defendant did not disclose the negotiations for the proposed merger to the plaintiff."
Paragraph 9 of the statement of claim alleged that:
(a) during 1993 the defendant by its board of directors formulated a proposal to merge the subsidiary with another like organisation;
(b) the defendant's board was aware that as part of the proposed merger the subsidiary could vacate the subject premises to occupy another building with the other party to the merger; and
(c) the defendant did not disclose the proposed merger to the plaintiff.
Paragraph 6 of the defence did not admit the allegations in pars 9(a) and (b). It says that "from in or about November 1993" representatives of the defendant were negotiating the merger proposal and says that prior to the making of the contract the defendant did not disclose those to the plaintiff.
Particulars are sought of the date upon which the negotiations began. The respondent says that the best particulars have already been provided. I will order further and better particulars since it would be surprising that a more accurate date for the commencement of the negotiations could not be isolated. If, on the other hand, the assertion on behalf of the defendant is correct it can do no more than has been done.
Particulars were also sought as to the parties to the negotiation up to the date of the contract. The defendant responds that the parties are identified in par 6(b) of the defence. There is nothing to suggest that the negotiations involved parties other than those named. There is no reason for further and better particulars in that regard as the matter stands.
Particulars are also sought of the identity of the representatives of the defendant who were negotiating the merger proposal up to the date of the contract. The defendant resists this on the basis that it is a request for evidence and not related to any material allegation. Particulars are also sought of the natural persons who were the representatives of each of the parties to the negotiations up to the date of the contract. The manner in which the defence is pleaded puts the plaintiff to proof that the defendant's board of directors formulated the merger proposal and was aware of the possibility that the subsidiary could vacate the subject premises as part of the merger proposal. The identity of persons engaged in negotiating the proposal is relevant to that issue. Particulars should be given. There is however no apparent reason why the names of persons negotiating on behalf of the other entity need be particularised.
The final further and better particulars sought in respect of par 6 concern the terms of the negotiations up the date of the contract in so far as they referred to the subject building or the accommodation requirements of the merged business. This was resisted by the defendant on the basis that the request concerns matters which were not relevant to a material fact and were "obtuse and meaningless". The terms of the negotiations are relevant as, at least, they may reveal whether vacation of the subject premises by the subsidiary was an element of the merger negotiations at any time prior to the contract being made. Particulars should be given, limited to so much of the terms of the negotiations as relate to the issue of whether it was an option prior to the contract being entered into that the subsidiary could in the event of a merger vacate the subject premises.
The other request for further and better particulars relates to par 19 of the defence which is in the form of an allegation that if representations were made the plaintiff was aware of them from about April 1994. The point of this appears to be that this was prior to an alleged affirmation of the contract (cl 20 of the defence). The original request for further and better particulars asked for the identity of the natural persons who had awareness on behalf of the plaintiff and the date upon which each person became aware. Those particulars were supplied. The request also asks for particulars of the facts and circumstances relied on as evidence of awareness or from which an inference of awareness is to be drawn. The plaintiff submits that it is consistent with the philosophy of rules 150 and 157 UCPR that they be provided notwithstanding that the pleading was delivered prior to the UCPR coming into force. The request is resisted on the basis that the request is not a proper request for particulars as it is directed to allegations that are sufficiently particularised in par 18 of the statement of claim, and is directed to matters of evidence.
Paragraph 18 of the statement of claim contains a number of allegations including an allegation of requests being made by the plaintiff for information about the future of the tenancy. If some inference is to be drawn from the fact that inquiries were made, in my view it is appropriate that the basic facts which are said to lead to that inference should be exposed. If the knowledge was gained by an express statement the basic facts should also be exposed. I will therefore order further and better particulars in that regard.
So far as costs are concerned the plaintiff has been substantially successful and the respondent has been substantially unsuccessful. Accordingly, the plaintiff should have its costs. The orders are as follows:
On the plaintiff's application, I order:
1. that pars 10(b) and 12 of the defence be struck out ;
2.that the respondent provide to the applicant further and better particulars in terms of:
(a) par 6(b)(i),
(b) par 6(b)(ii);
(c)par 6(b)(iv) but limited to the names of natural persons who were representatives of the defendant;
(d) par 6(b)(v) but limited to so much of the terms of the negotiations as relate to the issue of whether it was an option prior to the contract being entered into that the subsidiary could, in the event of a merger, vacate the premises;
(e)par 19(c);
of the request for further and better particulars dated 21 January 2000, Exhibit PP2 to the affidavit of Peter Previtera sworn 7 April 2000.
On the defendant's application I order:
3.that the application to strike out pars 18, 19 and 20(c) of the plaintiff's statement of claim be dismissed;
4.that the application that the respondent provide to the applicant further and better particulars requested in pars 14 and 15(3) of the applicant's request for further and better particulars dated 12 October 1999 be dismissed;
On each application I order:
5.that the defendant pay the plaintiff's costs of and incidental to the application to be assessed.
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