Mallon and Co Lawyers Pty Ltd v Hog's Breath Company Pty Ltd
[2011] WASC 236
•7 SEPTEMBER 2011
MALLON & CO LAWYERS PTY LTD -v- HOG'S BREATH COMPANY PTY LTD [2011] WASC 236
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASC 236 | |
| Case No: | CIV:2120/2011 | 15 AUGUST 2011 | |
| Coram: | MASTER SANDERSON | 7/09/11 | |
| 7 | Judgment Part: | 1 of 1 | |
| Result: | Application granted | ||
| B | |||
| PDF Version |
| Parties: | MALLON & CO LAWYERS PTY LTD HOG'S BREATH COMPANY PTY LTD HOG'S BREATH CLOTHING CO PTY LTD HB INVESTMENTS PTY LTD DONALD RICHARD ALGIE GINGER LYNN WHITE HOG'S BREATH CAFE (AUSTRALIA) PTY LTD ALFRED BRETT DRYLAND ROSS MURRAY WORTH |
Catchwords: | Discovery Application for pre-action discovery Turns on own facts |
Legislation: | Rules of the Supreme Court 1971 (WA), O 26A r 4, O 26A r 5 |
Case References: | Waller v Waller [2009] WASCA 61 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
HOG'S BREATH COMPANY PTY LTD
HOG'S BREATH CLOTHING CO PTY LTD
HB INVESTMENTS PTY LTD
DONALD RICHARD ALGIE
GINGER LYNN WHITE
HOG'S BREATH CAFE (AUSTRALIA) PTY LTD
ALFRED BRETT DRYLAND
ROSS MURRAY WORTH
Defendants
Catchwords:
Discovery - Application for pre-action discovery - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 26A r 4, O 26A r 5
(Page 2)
Result:
Application granted
Category: B
Representation:
Counsel:
Plaintiff : Mr J D Maclaurin
Defendants : Mr G D Cobby
Solicitors:
Plaintiff : Griffith Hack Lawyers Pty Ltd
Defendants : Tucker & Cowen Solicitors
Case(s) referred to in judgment(s):
Waller v Waller [2009] WASCA 61
(Page 3)
1 MASTER SANDERSON: This is the plaintiff's application for pre-action discovery. It is said to be brought under O 26A r 4 and O 26A r 5 of the Rules of the Supreme Court 1971 (WA). There was no essential difference between the parties as to the relevant principles governing the application of both rules. But it is worth restating the principles.
2 So far as r 4 is concerned, the following conditions must be satisfied:
(a) the applicant wants to take proceedings against the potential party;
(b) the applicant has made reasonable enquiries;
(c) the applicant has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings;
(d) there are reasonable grounds for believing that the potential party had, has, or is likely to have had, or to have, possession of documents that may assist in making the decision whether to take proceedings.
3 Under r 5 the following conditions must be satisfied:
(a) the applicant must establish it 'may have a cause of action';
(b) the potential cause of action is against a person whose description has been ascertained;
(c) it either wants to commence proceedings against the potential party or wants to take proceedings against the potential party in the cause of action to which the person is a party;
(d) after 'reasonable enquiries' it has not been able to obtain sufficient information to decide whether or not to commence proceedings;
(e) as a necessary contaminant to (d) at the time of making the application the plaintiff has not reached a decision about whether or not to take proceedings;
(f) there are reasonable grounds for believing that the potential party has, in its possession, documents that may assist in making the decision; and
(g) the application must be supported by an affidavit which is served on the potential party.
4 There is a difference of focus between the two rules. Rule 4 is concerned about identifying a potential party. There is no mention of an
(Page 4)
- applicant having a belief it may have a cause of action against that potential party. Rule 5 is concerned with the situation where the plaintiff knows who it intends to sue and is satisfied it 'may' have a cause of action against an ascertained party.
5 To demonstrate that an applicant 'may' have a cause of action does not require the demonstration of a prima facie case. What is required is that, on the material presented to the court, there is a reasonable prospect that an action could be revealed by material in the possession of the other party. What is insufficient is pure speculation, conjecture, assertion, suspicion or the mere possibility a cause of action may assist: see Waller v Waller [2009] WASCA 61, 83 - 85 (Martin CJ).
6 The application is supported by two affidavits of Paul Gerard Stephen Mallon, the first sworn 28 June 2011, the second sworn 10 August 2011. The summary of facts which follows is taken from these two affidavits.
7 In 2006 the plaintiff, which is a firm of legal practitioners, issued proceedings in the Federal Court on behalf of one John Lamb against the first, second, third, fourth and sixth-named defendants. In Mr Mallon's affidavit and in the submissions, these parties are referred to as the 'Hog's Breath parties'. I will use that terminology. The nature of the proceedings is not presently relevant. It is sufficient if I say they had to do with the alleged breach by the Hog's Breath parties of intellectual property rights owned by Lamb. On or about 27 November 2008 Lamb and the Hog's Breath parties and the seventh and eighth-named defendants entered into a deed of settlement. The settlement deed provided for the payment of a sum to Lamb payable in monthly instalments. On or about 28 November 2008 Lamb authorised the plaintiff to use the settlement sums received by the plaintiff to pay the plaintiff's outstanding invoices and disbursements for legal costs.
8 The payments made by the Hog's Breath parties to Lamb under the terms of the settlement deed were to be paid into the plaintiff's trust account. Lamb signed an authority permitting the plaintiff to deduct his fees from the payments made. The Hog's Breath parties paid three instalments totalling $225,000 which, in accordance with the payment authority signed by Lamb, were transferred to the plaintiff's general account in part-payment of the plaintiff's fees and disbursements.
9 Lamb is and has been at all material times a resident of the United States of America. He engaged a lawyer (Mr Gary Gam) who
(Page 5)
- commenced negotiations directly with the Hog's Breath parties and the seventh and eighth defendants (in this action). In or about February 2009 agreement was reached to vary the terms of settlement. Ultimately, the Hog's Breath parties and the seventh and eighth-named defendants entered into a deed of variation which varied the deed of settlement and reduced the settlement sum from $750,000 to $710,000. The variation also provided for payments being made not into the plaintiff's trust account but into the account of Lamb's American lawyer.
10 At no time was the plaintiff aware of the renegotiation of the agreement and of the deed of variation. Of course, the result of this renegotiated deal was the plaintiff was, to use his expression, 'cut out' of the arrangements and he was not paid what was owed to him in fees. He did make enquiries but by the time he worked out what had happened it was too late. The settlement sum had been paid by the Hog's Breath parties to Lamb and they were discharged.
11 The plaintiff has attempted to pursue Lamb and has issued proceedings seeking recovery of the amount he is owed. Lamb has indicated he will resist the plaintiff's claim. Further, he has intimated he is impecunious and if any judgment is awarded against him it will remain unsatisfied.
12 It is difficult to see how any discovery under r 4 could be ordered. There is nothing in the affidavit material to suggest the plaintiff needs more information to identify a particular party. But this was not the main area of dispute between the parties. The defendant maintained the evidence did not disclose the plaintiff 'may' have a cause of action.
13 In par 24 of his first affidavit Mr Mallon lists five potential causes of action he may have against the Hog's Breath parties and the seventh and eighth-named defendants. He says the parties may have:
(a) engaged in misleading and deceptive conduct in breach of s 52 and s 53 of the Trade Practices Act 1974 (Cth) and the equivalent sections of the Fair Trading Act in Western Australia and Queensland;
(b) committed the tort of deceit by representing dishonestly or recklessly that the plaintiff's enquiry would be responded to when there was an obligation to state correctly the position at settlement;
(c) interfered with the plaintiff's contractual relations with the first defendant;
(Page 6)
- (d) conspired with the first defendant to breach the contractual agreement between the first defendant and the plaintiff; and
(e) caused harm to the plaintiff as the plaintiff was a third party beneficiary to the deed of settlement.
14 It was the defendants' position the plaintiff had failed to establish that the claims were anything more than entirely speculative. The defendants say central to the claims of interference with contractual relations, conspiracy and 'causing harm' identified by the plaintiff is the allegation that the deed of settlement made between the defendants and Lamb in respect to previously Federal Court litigation purports to confer a benefit on the plaintiff. That has two aspects. It maybe the plaintiff is alleging it is entitled to enforce the contract in its own name by virtue of s 11(2) of the Property Law Act 1969 (WA) or that the defendants otherwise knew of the existence of the arrangement between the plaintiff and Lamb regarding the proceeds of the settlement.
15 The defendants say a crucial element of the tort of interference with contractual relations is the requirement the tortfeasor have sufficient knowledge of the contract to ground the requisite intention to interfere with contractual rights. Furthermore, s 11(2) of the Property Law Act does not apply unless the person who seeks to enforce a benefit conferred under the contract is identified in the contract as the conferee of that benefit. The defendants called on the plaintiff to produce the deed of settlement but it has not done so. In their written submissions the defendants assume the deed does not purport to confer a benefit on the plaintiff and that has not been denied by the plaintiff. They also submit the terms of the deed do not indicate the existence of any arrangement between the plaintiff and Lamb regarding the plaintiff's entitlement to settlement moneys. Once again, the plaintiff has not denied this is the case.
16 In par 19(e) of Mr Mallon's first affidavit he says in March 2009 he had a conversation with a solicitor for the Hog's Breath parties and the seventh and eighth-named defendants. Mr Mallon advised the solicitor he understood that settlement payments had been suspended and they would continue. Mr Mallon asked for confirmation of this fact. He was advised the Hog's Breath parties' solicitors would respond in due course. On 27 March 2009 Mr Mallon wrote to the solicitors seeking confirmation of what had been discussed. Thereafter, the solicitors took steps to urgently settle the Federal Court proceedings. Once these proceedings had been settled then they responded to Mr Mallon. Sharp practice indeed.
(Page 7)
17 The defendants say the conduct complained of by Mr Mallon is not in any sense causative of his loss. As it is an element of each cause of action the claimed loss be caused by the conduct complained of, no potential cause of action arises out of the conduct referred to in Mr Mallon's affidavit. Furthermore, the defendants say any claim based upon misleading and deceptive conduct or deceit would require the plaintiff to adduce some evidence to suggest the defendants were obliged to inform it they had been contacted by Lamb's American lawyer so the defendants' failure to do so could be said to be potentially actionable. In other words, the defendants say they owed no duty to Mr Mallon and no claim of action could arise.
18 Taking into account all matters raised by the defendants, I am nonetheless satisfied that discovery ought be ordered. As matters stand at present it is difficult to say what the plaintiff's cause of action against any of the defendants might be. I would accept the difficulties so carefully articulated by counsel for the defendants throw up considerable obstacles to the plaintiff taking action. But the fact remains a settlement was entered into and payments were made to Mr Mallon's trust account. Mr Mallon says in his affidavit that Lamb was impecunious and that fact may well have been known to the defendants. A reasonable person may well have assumed that Federal Court proceedings, which had to be paid for somehow, would have been paid out of the proceedings of settlement. If that was not the case, why would the payment have been made into Mr Mallon's trust account? Armed with all that information the Hog's Breath parties agreed to a variation of the settlement agreement which gave them a commercial advantage and disadvantaged Mr Mallon. Against those background facts I am satisfied Mr Mallon is entitled to have discovery of documents to allow him to determine whether or not a cause of action may arise.
19 In the course of his submissions, counsel for the defendants pointed out most of the documents covered by the application would be the subject of legal professional privilege. He submitted an order ought not be made because it would lack utility. It may well be privilege attaches to certain documents. But that goes to the question of inspection. It does not limit the right of a party to obtain discovery - either pre-action discovery or discovery generally. There is no merit in this submission.
20 I am then prepared to order the defendants give discovery. The time within which the discovery is to be provided and the scope of the discovery can be the subject of further submissions. I will hear the parties as to costs.