Mary v Schon [No 3]
[2016] WADC 113
•1 SEPTEMBER 2016
MARY -v- SCHON [No 3] [2016] WADC 113
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WADC 113 | |
| Case No: | CIV:3629/2014 | 27 JULY 2016 | |
| Coram: | DEPUTY REGISTRAR HEWITT | 1/09/16 | |
| PERTH | |||
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| PDF Version |
| Parties: | BRANDON EDWARD MARY IVAN THOMAS SCHON |
Catchwords: | Practice and procedure Application to strike out statement of a claim or parts of it Turns on its own facts |
Legislation: | Trade Practices Act 1974 (Cth), s 51 |
Case References: | Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
IVAN THOMAS SCHON
Defendant
Catchwords:
Practice and procedure - Application to strike out statement of a claim or parts of it - Turns on its own facts
Legislation:
Trade Practices Act 1974 (Cth), s 51
Result:
Application dismissed
Representation:
Counsel:
Plaintiff : Mr C E Chenu
Defendant : Mr J P Cook
Solicitors:
Plaintiff : Bennett & Co
Defendant : Mendelawitz Morton
Case(s) referred to in judgment(s):
Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161
1 DEPUTY REGISTRAR HEWITT: This action was commenced by a writ of summons filed on 7 November 2014. Following the delivery of a statement of claim, the defendant applied for summary judgment under O 16 of the District Court Rules2005 (WA) for a judgment dismissing the action and, I presume, as an alternative that certain nominated paragraphs of the statement of claim be struck out on the grounds they may prejudice, embarrass or delay the fair trial of the action.
2 The court ordered that the summary judgment application be heard separately from the application to strike out and the matter proceeded to a determination before Deputy Registrar Harman. He ruled in favour of the summary judgment application and dismissed the action. That dismissal led to an appeal by the plaintiff which was heard by Judge Derrick who delivered a decision on 11 December 2015. The plaintiff achieved mixed success on the appeal, the dismissal being overturned in some respects and upheld in others. The plaintiff then re-amended the statement of claim to pursue those parts of the action which survived and that pleading in its turn came under attack by an amended chamber summons filed on 8 June 2016. The statement of claim comprises, in its latest manifestation, approximately 56 paragraphs of which the defendant seeks to strike out 35 on the grounds that they may prejudice, embarrass or delay the fair trial of the action. The applicant further seeks, no doubt as a consequence of the large amount of material which would be struck out in the event that the application succeeds, that the statement of claim as a whole be struck out.
3 In my view, applications to strike out pleadings are frequently a waste of the court and the party's resources and in that respect, I echo the words of Chief Justice Martin in Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161 in which his Honour said:
Before dealing with this specific application, I would observe that both I and the other members of this court are firmly of the view that interlocutory disputes of this kind must be actively discouraged. In many cases, interlocutory disputes, particularly disputes relating to pleading issues, consume very substantial amounts of time and expense on the part of both the parties and the court. In many cases, the time and expense involved in the consideration and resolution of the interlocutory dispute is entirely disproportionate to its significance to the just and effective resolution of the case as a whole by mediation or trial. For this reason, this court will use the existing powers available under Rules of the Supreme Court (the Rules) and if necessary amend the Rules to actively discourage disputes of this kind. In very general terms, interlocutory disputes of this kind will only be entertained by the court if the time and expense involved in their resolution is proportionate to the significance of the dispute to the just and effective resolution of the case. The principle is, in my view, already inherent in the provisions of the Rules when read as a whole, including in particular O 1 r 4A and r 4B, O 29 and O 29A.
4 It follows from these remarks that in my view minor defects in a pleading, so long as the overall meaning of the pleading is clear and the opposing party has a proper chance to understand it and meet it, should not lead to strike out applications. In other words, a strike out application should not be an exercise of trawling through the pleading in an endeavour to find what imperfections it may contain as a basis of bringing an application. What is required are genuine problems which need to be corrected in order to preserve the integrity of the court process.
5 The plaintiff's claim arises from his involvement as a general manager of a company formerly known as SAS Telecom Pty Ltd of which the defendant was the managing director and a shareholder. The particular focus of the action involves a separation agreement entered between the plaintiff and the company and it is the circumstances surrounding the execution of that agreement which form the foundation of the various causes of action pursued by the plaintiff.
6 SAS Telecom is a company in administration and the plaintiff has chosen to launch his action against the defendant, as a director of the company, no doubt with an eye to potential recovery of any judgment that he might obtain. The action was originally based on an allegations of intentional interference by the defendant in contractual relations between the company and the plaintiff, alleged misleading and deceptive conduct towards the plaintiff, alleged negligent misstatements made by the defendant to the plaintiff and alleged misleading or deceptive conduct engaged in by the director of the company towards the company.
7 Insofar as the original statement of claim alleged intentional interference in contractual relations between the company and the plaintiff and alleged misleading or deceptive conduct engaged in by the director of the company towards the company, his Honour upheld the decision of the deputy registrar. His Honour upheld the dismissal in regard to their intentional interference between the company and the plaintiff on the grounds that as a director the actions of the defendant should be characterised as those of the company, not of him personally and as a consequence, he could not be capable of intentional interference in such a contract and likewise, his Honour held that it was not, as a matter of law, possible for the defendant to be involved in misleading or deceptive conduct towards the company of which he was a director. His Honour's conclusions on those matters are to be found at [69] of his decision which is in the following terms:
1. The law is that if a director intentionally induces the company of which he is a director to breach its contract with a third party, the director cannot be held liable for the tort of intentionally interfering with the rights of the third party under the contract if the director, in inducing the breach of the contract, was acting within his authority as a director of the company;
2. The question whether or not a director of a company can be held liable for intentionally interfering with the rights of a third party under a contract which the third party has entered into with the company, in circumstances where the conduct which the director has engaged in and which has induced the company to breach the contract with the third party is not within the scope of his authority as a director of the company, is yet to be definitively answered; and
3. The question whether or not the conduct of a director of a company which is not in bona fide in the interests of the company is conduct which must be regarded as falling outside the scope of the director's authority and consequently as conduct which can form the basis of a claim that the director, by the conduct, intentionally interfered with the rights of a third party under a contract entered into between the third party and the company is also yet to be definitively answered.
8 It will be seen from this quoted passage that his Honour has held that a director who intentionally induces the company of which is a director to breach its contract with a third party cannot be liable for the tort of intentionally interfering with the rights of the third party providing he is acting within his authority as a director. As to the other matters, his Honour was of the view that the propositions of law were not yet definitively answered. That is, where the actions of the director are not within the scope of his authority or were not bona fide in the interests of the company. Likewise, his Honour held that the negligence claim embodied in the original statement of claim was potentially capable of successfully being pursued and insofar as it was struck out, it should be reinstated. From that general overview, I now turn to an analysis of the application which is brought.
9 As I have earlier mentioned, a great swathe of the paragraphs of the statement of claim are under attack and I shall first commence by consideration of the attack on pars 25 – 30. I shall deal with those paragraphs and all the other paragraphs within the application on the basis of the minute of further re-amended statement of claim which was filed, or at least dated, on 27 July 2016. The numbers contained within that minute accord with those on the pleading under attack.
10 It is said that those paragraphs are in conflict with the appeal decision. It is difficult to see how that can be correct since par 25 concerns certain representations. Paragraph 26 refers to an email dated 9 February 2009 and allegations as to the falsity of the information contained in that email. Paragraph 27 and 28 refer to an invoice referred to in the previous paragraphs. The paragraphs contain simple propositions of fact. What those paragraphs, and various others of the paragraphs which follow, support are propositions which are advanced in pars 37 and 38 of the pleading which allege that the behaviour of the defendant described in the preceding paragraphs was intended to, and did, induce the company to breach the separation agreement and that such conduct was unlawful and in breach of provisions of the Corporations Act 2001 (Cth). In that respect the pleading defers to the finding of his Honour Judge Derrick insofar as his Honour held open the proposition that conduct which is not bona fide in the interests of the company might be conduct falling outside the scope of the director's authority and could form the basis of a claim against that director. Therefore, I conclude that in the broader scheme of the statement of claim, the pleading is not as suggested competing with the appeal decision, but in fact defers to the appeal decision.
11 I next deal with pars 41, 43, 46 and 56 which deal with the question of whether there is an adequate pleading of loss in the pleading. The concept of loss is essential to the cause of action being pursued but in my view there is a pleading of loss although it is not at this stage particularised. It is clear however from other portions of the statement of claim that the loss complained of is the failure to pay the monies which should have been due and paid by the company to the plaintiff under the terms of the separation agreement which they entered. Furthermore, there is a pleading that the plaintiff had certain entitlements from the company in respect of his employment contract and he abandoned those entitlements in favour of the separation agreement being induced to do so by misrepresentations made to him by the defendant. Insofar as par 43 suggests that it might have been open to the plaintiff to have entered a different separation agreement, the other terms which offered him protection, I take the view that those matters are redundant. If there was a loss, it was a loss of entitlements by virtue of the separation agreement. Whether that loss could have been avoided by a differently worded separation agreement is neither here nor there. The fact is he entered the separation agreement and that was the cause of his loss.
12 I now turn to matters rather more peripheral in respect of the application, namely an attack on pars 4 and 5 which are said to be vague and embarrassing. Paragraphs 4 and 5 set out the proposition that the plaintiff was employed by the company as its general manager pursuant to a verbal employment contract. Paragraph 5 sets out what the plaintiff considers to be the material terms of that contract. I am quite unable to see what is vague or embarrassing about those matters. It is perfectly clear what is being said and I see no embarrassment or difficulty in the defendant responding to the allegation.
13 Paragraph 6, 7 and 8 are also under attack. Paragraph 6 refers to written and verbal negotiations and the nature of those negotiations and their timing. Paragraph 7 sets out various representations which are said to have been made by the defendant to the plaintiff in the course of the negotiations to which I have referred. Paragraph 8 refers to the representations being made in trade or commerce as a director of the company within the scope of his apparent or actual authority, therefore making the representations deemed to be conduct engaged in by the company. The relevance of that pleaded paragraph escapes me but I have no difficulty understanding the proposition which is expressed nor see any basis upon which I would deem it worthy of a strike out.
14 The next paragraph under attack is par 10 which is said to be irrelevant. Paragraph 10 sets out what is said to be a common understanding of the financial status of the company in late October 2008 and as at 31 October 2008, that being the relevant date of the execution of the separation agreement. I am unable to see how this paragraph can be said to prejudice, embarrass or delay the fair trial of the action which is the basis of the application before me.
15 The next issue requiring consideration are the representations which are contained in par 7. It is said that they do not constitute allegations of fact capable of being true or false. That is quite correct. They are pleaded to be representations. That is, things which were said, they are capable of being true or false, depending on whether they were or were not said. It is argued by the applicant that the failure to plead the provisions of s 51 of the Trade Practices Act 1974 (Cth) or the Fair Trading equivalent infringes pleading requirements. I am unable to see that that is so. Section 51 has the effect of reversing the onus. I am unable to see that it is obligatory for a plaintiff to rely on that section. The pleading is, in effect, that the defendant was deliberately deceitful. Section 51 to my mind has very little and probably no bearing on the matter at all.
16 I next consider par 13 of the statement of claim. That pleads certain implied terms contained in the separation agreement. It is said those implied terms conflict with those contained in the separation agreement. I struggle to understand how the terms can be in conflict but in any event I do not have the separation agreement before me and I am unable to comprehend how the propounded implied terms are in conflict with it. On my reading of the paragraph, they are said to be complimentary to it, not in conflict with it.
17 I next consider par 14 which is under attack. That paragraph appears to me to be deleted in the current version and the attack is no longer relevant.
18 Paragraph 32 next requires consideration where it is said that it is necessary to particularise the facts that constitute the demand referred to. It is common ground between the parties that the company did not pay the monies which are claimed by the plaintiff to be due under the separation agreement. The point of the objection escapes me and I will not deal with it further.
19 I next turn to negligent misstatement. It is said that that claim is for pure economic loss and as such is unsustainable. That aspect of the case was the subject of specific consideration by his Honour. He said at par 15 'for the reasons I have stated, I will allow the appeal against the registrar's decision dismissing the common law negligent misstatement claim'. The challenge which is mounted is simply a re-run of the summary judgment application and in my view unsustainable``.
20 In conclusion I am of the view that the application should be dismissed. Some deficiencies were noted in the course of argument, particularly in regard to par 43, but those deficiencies do not warrant any intervention, much less, a strike out order.
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