Marini v MLH Insurance Brokers Pty Ltd
[2004] SASC 400
•2 December 2004
SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master)
MARINI v MLH INSURANCE BROKERS PTY LTD & ORS
Judgment of The Honourable Justice Besanko
2 December 2004
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PRACTICE UNDER RULES OF COURT - PLEADINGS
Appeal from a decision of a Master - where the appellant applied for an order that the Statement of Claim be struck out on the basis that a number of paragraphs of the Statement of Claim were deficient - where the Master made an order giving the respondents leave to file an amended Statement of Claim but rejected the appellant's challenge to certain paragraphs - whether the relevant paragraphs fail to comply with the rules as to pleadings by not setting out "such further material facts as are necessary to give other parties fair notice of the case which they will have to answer" - held that certain of the paragraphs identified do not comply with the rules as to pleadings - whether a conclusion that the paragraphs do not comply with the rules as to pleadings justifies an order striking out the whole of the Statement of Claim, an order striking out those paragraphs or an order that the respondents plead further material facts - held that the paragraphs should not be struck out but they may be the subject of an order that further material facts be pleaded.
Supreme Court Rules 1987 rr 46A.16, 46.18, 46A.02, 46A.03, 46A.09, 46A.08, 46A.03, referred to.
Williams v Australian Telecommunications Commission (1988) 52 SASR 215; Rupcic v A W Baulderstone Pty Ltd (1987) 46 SASR 99, discussed.
MARINI v MLH INSURANCE BROKERS PTY LTD & ORS
[2004] SASC 400Appeal from a Master
BESANKO J: This is an appeal from a decision of a Master of this Court. Mr Giovanni Marini is the appellant and he is the defendant to an action commenced in this Court by MLH Insurance Brokers Pty Ltd, Insurance and Risk Management Pty Ltd and Gulliford Nominees Pty Ltd. It is convenient to continue to refer to the parties by reference to their status in the action. After the action had been commenced the defendant and a company called JMRM Investments Pty Ltd (as trustee for the Marini Family Trust) issued a counterclaim against the three plaintiff companies and two other persons. The counterclaim is not relevant for present purposes.
The Master’s decision relates to the Amended Statement of Claim/Orders Sought (“Statement of Claim”) issued by the plaintiffs on 3rd June 2004. By Notice for Specific Directions dated 23rd July 2004 the defendant applied for an order that the Statement of Claim be struck out. He did so on the basis that a number of paragraphs in the Statement of Claim were deficient. The Master made an order giving the plaintiffs leave to file and serve a further Amended Statement of Claim which amends certain paragraphs in the Statement of Claim. He rejected the defendant’s challenge to three paragraphs in the Statement of Claim, and it is his decision in that respect which is the subject of the appeal.
The plaintiffs’ claim
The first plaintiff is engaged in the business of providing insurance brokerage services to the public. Between 29th December 1999 and 27th February 2004 the defendant was the managing director of the first plaintiff. Mr Graham Gulliford and Mr Grantley Goldner were also directors, and they remain directors to this day. The second plaintiff is a one-third shareholder in the first plaintiff, and Mr Goldner is, and has been, a director of the second plaintiff. The third plaintiff is also a one-third shareholder in the first plaintiff and Mr Gulliford is, and has been, a director of the third plaintiff. In the action, the plaintiffs allege that in late 1999 the defendant made representations to them to the effect that he wished to operate the first plaintiff with Mr Goldner and Mr Gulliford and to the effect that if his role in the business did not “work out” then he did not wish to continue in the insurance brokerage industry and wished to be paid out his interest in cash so that he could explore a new career. The plaintiffs allege that these representations were false and misleading. The plaintiffs allege that on 1st January 2000 the appellant, Mr Goldner, Mr Gulliford, a company associated with the defendant and the plaintiffs entered into a written agreement which was partly express and in writing and partly implied which was to govern the commercial relationship between the parties and the terms of the defendant’s employment. The plaintiffs allege that the representations made by the defendant induced them to enter into the agreement. The agreement was called a Shareholders Agreement for MLH Insurance Brokers Pty Ltd and the MLH Client Partnership (“the agreement”). The plaintiffs allege that there were a number of express and implied terms of the agreement. It is not necessary for me to set out those terms in any detail. It is sufficient to say that they relate to the defendant’s duties as a director and employee of the first plaintiff and his obligations should he retire or be dismissed from his position with the first plaintiff. The three paragraphs in the Statement of Claim which were challenged by the defendant and which are the relevant paragraphs for the purposes of the appeal are as follows:
“12. Marini breached the agreement by (inter alia):
12.1 Failing to achieve key performance targets including:
(a) Refusing to assist in the training of administrative staff;
(b) Refusing to delegate work;
(c) perennially failing to keep internal and external appointments;
(d) refusing to participate in board meetings;
(e) failing to attend required internal training sessions; and
(f)failing to comply with MLH’s statutory obligations under the Corporations Act, 2001 (Cth) with regard to (inter alia) Northline Freight.
12.2 failing to write a reasonable amount of new insurance business commensurate with his experience and standing in the insurance brokerage industry;
12.3 Failing to conduct himself in a courteous, professional and business like manner including;
(a) Being abusive, unco-operative and rude to staff; and
(b) Causing the resignation of a key member of staff.
12.4 Engaging in conduct which brought MLH’s reputation into disrepute including (inter alia) becoming involved in a fist fight while intoxicated during an insurance industry conference in Tasmania in or about mid February 2004;
12.5 Soliciting, inducing and assisting an alternative service provider to offer services to the clients of MLH; and
12.6 Engaging in conduct contrary to the business interests of MLH and its shareholders.
…
14.The plaintiffs refer to the matters pleaded at paragraphs 12.5 and 12.6 inclusive of this claim, and say that immediately following Marini’s removal as a Director of MLH:
14.1 Marini began negotiations to become a Director and authorised representative of Frith WA for the purposes of providing insurance brokerage services in competition with MLH;
14.2 From 21 April 2004, Marini became a Director of Frith and an authorised representative of Frith WA for the purpose of engaging in a business in competition with the business of MLH;
14.3 Contacted the clients of MLH with a view to soliciting, inducing business from and offering insurance brokerage services to those clients;
14.4 Made statements to the clients of MLH for the purpose of inducing their business including (inter alia) that:
(a) MLH was experiencing solvency problems; and
(b)MLH lacked the experience, expertise and resources to properly service its clients.
…
16.As a consequence of the matters pleaded in paragraph 14 of this claim, Marini has earned fees, commission, profit and salary.”
In this context it is important to note that the plaintiffs allege that the defendant was removed as managing director of the first plaintiff on or about 27th February 2004 and that he was provided with notice of his termination as an employee of the first plaintiff on 31st March 2004. The plaintiffs seek the following relief against the defendant.
“1.An order that Marini be restrained from contacting, soliciting, inducing or otherwise offering insurance brokerage services to such clients of MLH who have not signed terms of engagement with Marini or any company associated with him for a period of 3 years;
2.That Marini make full disclosure of the identity of all clients previous (sic) serviced by MLH, which are now receiving insurance brokerage services from Marini or any company associated with him;
3.That Marini provide an equitable account of profits;
4.That Marini pay the plaintiffs’ liquidated damages within the meaning of clause 13.5 of the agreement;
5.That Marini pay the plaintiffs’ damages at common law;
6.That Marini pay the plaintiffs’ damages pursuant to section 84 of the Fair Trading Act, 1987 (SA);
7.Interest; and
8.Costs.”
Issues on the appeal
Rule 46A of the Supreme Court Rules 1987 deals with pleadings and affidavits of loss. It applies to all actions commenced on and after 3rd June 2000 and to such actions commenced earlier as the Court directs. The rules dealing with pleadings for actions commenced before 3rd June 2000 are contained in r 46.
Rule 46A.16 provides that certain rules in r 46 apply to actions governed by r 46A except insofar as they are inconsistent with the express provisions of r 46A. One such rule is 46.18 which provides as follows:
“46.18 Where a pleading:
(a) discloses no reasonable cause of action or defence;
(b) does not comply with the Rules as to pleadings;
(c) has a tendency to cause prejudice, embarrassment or delay in the proceedings;
(d) is scandalous, frivolous, or vexatious or contains scandalous matter; or
(e) is otherwise an abuse of the process of the Court,
the Court may at any stage of the proceedings, order that the whole or any part of the pleadings be struck out, on such terms as it thinks just or may direct that the scandalous matter be expunged.”
The appellant submits that paragraphs 12, 14 and 16 in the Statement of Claim should be struck out on the ground that they do not comply with the rules as to pleadings (r 46.18(b)). The relevant rules as to pleadings are those contained in r 46A.
Rule 46A.02 sets out certain requirements for all pleadings. It relevantly provides:
“All pleadings are to:
(a) be as brief as the nature of the case permits;
(b) plead only the material facts relied upon and not the evidence or arguments by which they are to be proved;
(c) be divided into discrete numbered paragraphs so that admissions and cross references may be made readily by referring to the paragraph numbers;”
Rule 46A.03 sets out the requirements for a statement of claim where damages for personal injuries are not claimed. It is the relevant rule in this case and it provides as follows:
“In an action where damages for personal injuries are not claimed the Statement of Claim must plead, but plead only:
(a) the material facts relied upon to constitute any cause of action, or grounds for an extension of time or other relief sought;
(b) such further material facts as are necessary to give other parties fair notice of the case which they will have to answer;
(c) the general nature of the legal causes of action;
(d) any statutory provisions relied upon; and
(e) the general nature of the relief sought.”
The other rule to which reference should be made is r 46A.09 which provides as follows:
“(1) No order is to be made that any further material facts are to be pleaded other than where the material facts pleaded do not disclose facts sufficient to give the other parties fair notice of the case which they will have to meet and the party seeking them would be significantly prejudiced in the conduct of its case by not having them. (The intent of Rule 46A is that parties should include all material facts in their pleadings as initially filed so that there is no unfairness to another party by any lack of particularity and if they have not done so the trial Judge may refuse to allow that party to present a case which is outside the terms of its pleading.)
(2) No pleading is embarrassing for want of particularity unless the missing particulars would be ordered under (1).
(3) Where an order is made under (1) the pleading is to be amended.
(4) No costs are to be allowed to the party making any amendment under (3) in respect of it unless the Court or a taxing officer for good reason allows them.”
The defendant submitted to the Master that the Statement of Claim did not comply with the rules as to pleadings in that paragraphs 12, 14 and 16 did not set out “such further material facts as are necessary to give other parties fair notice of the case which they will have to answer” (r 46A.03(b)). The appellant submits that the Master erred in not upholding that submission.
In his reasons, the Master said that each of paragraphs 12, 14 and 16 pleaded material facts, and that in effect the defendant was complaining that the plaintiffs had not pleaded evidence, a matter which not only were they not required to do but in fact they were prohibited from doing (r 46A.02(b)).
The first question is whether paragraphs 12, 14 and 16 comply with the Rules as to pleadings. As I have said, the defendant submits that they did not in that they did not contain “such further material facts as are necessary to give other parties fair notice of the case which they will have to answer” (r 46A.03(b)). In Williams v Australian Telecommunications Commission (1988) 52 SASR 215 King CJ referred to the fundamental purpose of pleadings as one of providing a structure for the action designed to promote a just outcome. He referred to the two basic functions of pleadings the second of which is to give the parties “fair notice of the case to be made against them at trial thereby minimising the risk of injustice resulting from surprise” (at 216). This is the concept embodied, or at least partly embodied, in r 46A.03(b).
Rule 46A.03(a) deals with those material facts which are essential to the cause of action. In other words, without the pleading of those facts it is clear the action will fail. A failure to plead one or more such facts will ordinarily lead to the conclusion that the Statement of Claim discloses no reasonable cause of action and should be struck out. By contrast, r 46A.03(b) deals with those facts which in fairness should be pleaded in order to prevent surprise and therefore delay at trial. It is impossible to generalise about the nature of such facts because it will depend on the circumstances of the particular case. However, I think that it can be said that in assessing the question of what constitutes fair notice, the Court is entitled to take into account the scope of the investigation and preparation a defendant will be required to undertake if further material facts are not provided. This case provides an illustration. Paragraphs 12.1 – 12.4 contain allegations as to the ways in which the defendant is said to have breached the agreement. Paragraphs 12.1, 12.3 and 12.4 do not identify particular times at which the alleged failures occurred. The defendant was the managing director of the first plaintiff for a little over four years. Perhaps he could prepare his case to cover every possibility over that four year period, but in my opinion that would be quite an unreasonable burden and there is always the possibility that he will overlook an event and be taken by surprise at trial. In my opinion, the plaintiffs’ failure to identify with any precision the dates on which various events occurred and something of their circumstances means that the Statement of Claim does not plead such further material facts as are necessary to give the defendant fair notice of the case which he will have to answer. The same may be said of paragraph 12.2 although for slightly different reasons. In relation to that paragraph, the defendant is entitled to know what new insurance business the plaintiffs will allege he wrote and what level of insurance business the plaintiffs say he should have written.
Paragraphs 12.1 – 12.4 do not comply with the Rules as to pleadings in that they do not plead such further material facts as are necessary to give the defendant fair notice of the case he will have to answer. Paragraphs 12.5, 12.6, 14 and 16 were attacked on the same ground, but I reject the criticism in relation to those paragraphs. As I understood him, counsel for the plaintiffs said that paragraph 14 in fact provides particulars of the allegations in 12.5 and 12.6. That should be made clear by an amendment to the Statement of Claim. On that basis I think the defendant has fair notice of the further material facts. He will know which clients of the first plaintiff he has contacted and made statements to.
Nor do I think the challenge to paragraph 16 should be upheld. It is true that the fees, commission, profit and salary earned by the defendant are not specified. However, I do not think that it can be said that the defendant does not have fair notice of the fees, commission, profit and salary received by him. Furthermore, one of the claims for relief is that the defendant disclose the clients of the defendant or any company associated with him who were previously clients of the first plaintiff.
The defendant sought an order from the Master that the Statement of Claim be struck out. My conclusion that paragraphs 12.1 – 12.4 do not comply with r 46A.03(b) would not justify an order striking out the whole of the Statement of Claim. Does it justify an order striking out those paragraphs under r 46.18 or does it at best justify an order under r 46A.09 that further material facts be pleaded?
The power to strike out a statement of claim or parts thereof in r 46.18 is not restricted to a case where the pleading discloses no reasonable cause of action. It may be exercised where there is a failure to comply with a rule as to pleading such as r 46A.03(b). Therefore, a court has the power to strike out a pleading or part of a pleading which does not comply with r 46A.03(b). However, in my opinion the court should not ordinarily exercise that power where the real complaint is what under the 1947 Rules would be characterised as a failure to provide particulars. In Rupcic v A W Baulderstone Pty Ltd (1987) 46 SASR 99 Cox J described the difference between pleadings and particulars in the following terms (at 101):
“Under the old Rules, there was a clear distinction between pleadings and particulars. The statement of claim, say, had to allege the material facts upon which the plaintiff relied. The purpose of particulars was not to state material facts omitted from the statement of claim, but to give supplementary information to the defendant of particular aspects of the claim so that he would not be taken by surprise at the trial. Thus it was said: ‘The function of particulars is not to enlighten a party as to the true facts of the case. It is to let him know what case he will have to meet and to enable him to know what evidence he ought to be prepared with.’ Philliponi v Leithead (1958) 76 WN (NSW) 150 at 153. See also Pinson v Lloyds and National Provincial Foreign Bank Ltd [1941] 2 KB 72 at 75-76. The particulars were not a part of the pleading itself, so there was no need for the draftsman to plead to the particulars; indeed, it was said to be bad pleading on his part to do so: see Pinson’s case; Turner v Bulletin Newspaper Co Pty Ltd (1974) 131 CLR 69 at 81. (Of course, they might be treated in the same way as pleadings for certain purposes: cf Minchin and The Church of the New Faith Inc v Adamson (1975) 10 SASR 119 at 122.) The defendant did not admit the particulars by not canvassing them in his defence. Nor did he thus admit their relevance to the cause of action upon which the plaintiff relied.”
In my opinion, where the failure to comply with r 46A.03(b) partakes of what was previously considered a failure to provide adequate particulars, the appropriate application is an application under r 46A.09 rather than an application to strike out. Otherwise a party could avoid the strictures of r 46A.09 by issuing an application to strike out. Those strictures include the need to show not only that fair notice is not given but also that the applicant would be significantly prejudiced in the conduct of his case by not having the further material facts.
I think the approach I have suggested is the approach I should take having regard to the terms of the relevant Rules. There is a discretion not to strike out a pleading or part of a pleading and it is a proper exercise of that discretion not to strike out if the deficiency is a lack of further material facts in the sense referred to in r 46A.09. The approach I have suggested might be justified by an alternative route. Rule 46.18 only applies to pleadings governed by r 46A to the extent that it is not inconsistent with r 46A.16. In my opinion, it is inconsistent with the provisions of r 46A and, in particular, r 46A.09, to strike out a pleading or part of a pleading because of a lack of further material facts in the sense referred to in r 46A.09.
Conclusion
In my opinion, paragraphs 12.1 – 12.4 inclusive fail to comply with r 46A.03(b), but the failure is, in essence, what would previously have been considered a failure to provide adequate particulars. Those paragraphs should not be struck out but they may be the subject of an order under r 46A.09. I am satisfied that the appellant would be significantly prejudiced in the conduct of his case in not having further material facts in relation to those paragraphs. I think that that is clear enough from the nature of the deficiencies and that this is not a case where evidence of significant prejudice is required. I will hear the parties as to whether on the appeal I can and should entertain an application for an order under r 46A.09.
I reject the challenge to the Master’s decision in relation to paragraphs 12.5, 12.6, 14 and 16.
14
5
1