Matic v Simpson
[2020] TASSC 25
•23 June 2020
[2020] TASSC 25
COURT: SUPREME COURT OF TASMANIA
CITATION: Matic v Simpson [2020] TASSC 25
PARTIES: MATIC, Maree
v
SIMPSON NETWORKS PTY LIMITED
SIMPSON, Karena Lee
SIMPSON, James Robert
FILE NO: 451/2018
DELIVERED ON: 23 June 2020
DELIVERED AT: Hobart
HEARING DATE: 15 June 2020
JUDGMENT OF: Holt AsJ
CATCHWORDS:
Procedure – Civil proceedings in State and Territory Courts – Court's supervision – Amendment – Time for amendment – Amendment of defence – Introduction of counterclaim – Would delay trial – Leave to introduce counterclaim refused.
Supreme Court Rules 2000 (Tas), r 427.
Aon Risk Services Australia Limited v Australian National University [2009] HCA 27, 239 CLR 17, referred to.
Aust Dig Procedure [1111]
REPRESENTATION:
Counsel:
Plaintiff: S Stuckey QC
Defendants: N Evans
Solicitors:
Plaintiff: Williams Winter
Defendants: Aptum Legal
Judgment Number: [2020] TASSC 25
Number of paragraphs: 30
Serial No 25/2020
File No 451/2018
MAREE MATIC v SIMPSON NETWORKS PTY LIMITED
and KARENA LEE SIMPSON and JAMES ROBERT SIMPSON
REASONS FOR JUDGMENT HOLT AsJ
23 June 2020
A late application by the defendants to amend their pleading
On 15 May 2020 the defendants filed an application, specified as being made pursuant to r 427(1), for leave to amend their defence and for the first defendant to introduce a counterclaim.
The subrule is as follows:
"At any time before judgment the Court or a judge may grant leave to a party to amend any process or pleading in such manner and on such terms as may be just."
The application has been made at a time when otherwise the trial would be about to occur. On 30 September 2019 the solicitors for the parties applied for consent orders dealing with a timetable for the filing and service of a court book and opening submissions and for the allocation of a trial date no earlier than 7 December 2019. Orders were made accordingly. The timetable was varied by consent order made 6 February 2020, which order extended the time for the filing of the court book to 26 February 2020. On the same day that the extension of time was granted the week commencing 27 April 2020 was allocated for the trial. The COVID-19 pandemic restrictions intervened and the allocated trial judge called the case on for directions. The defendants had engaged, or were in the process of engaging, new solicitors and further attention needed to be given to the suitability of counsel and the witnesses appearing at the trial by audio visual link.
At the directions hearing, on 1 April, the listing for trial was vacated with the directions hearing to be resumed on 1 May. Upon the resumption, the allocated trial judge advised that a trial commencing 24 June might be able to be accommodated by the Court. At this directions hearing, counsel for the defendants foreshadowed an application to amend and it was ordered that any such application be filed by 15 May. The application, which has been filed, seeks leave for the introduction of a substantial counterclaim and also for some amendments to the defence. If the introduction of the counterclaim is not permitted, there is a possibility that a trial could occur in July 2020.
The existing pleadings
By writ issued 19 February 2018, the plaintiff commenced an action against the company which formerly employed her and against its two shareholders. The employment was terminated by the company on about 16 October 2017 and the plaintiff was paid five weeks net salary in lieu of notice. The plaintiff asserts that a reasonable period of notice was 26 weeks and that, accordingly, she should have damages equating to 21 weeks net salary, amounting to about $40,000. Further, the plaintiff alleges that in December 2014 agreement was reached and reduced to writing whereby the plaintiff would take over as director and secretary of the company in consideration of her salary being increased from $74,000 to $100,000. There was also provision for six of the 24 issued shares in the company to be transferred to the plaintiff by the second and third defendants upon payment of the sum of $100,000. The alleged agreement provided that the plaintiff would be paid 40% of the company profits. Executed counterparts of the contractual documents were never exchanged, the shares were not transferred and the plaintiff's appointment as director and secretary was not notified to ASIC. Regardless, the plaintiff alleges that representations were made that the arrangements had been put in place and that she assumed the role of director and proceeded on the basis that the agreement as to the shareholding would be honoured. She claims that it would be unconscionable for the defendants to deny the existence of the agreements. Amongst other matters, the plaintiff alleges that her salary was increased to $100,000, she took over the running of the business operated by the company, she was paid a dividend from trading profits which the company's accountant said had been adjusted to account for the plaintiff's obligation to pay $100,000 for the shares. The plaintiff, accordingly, seeks an order that an account of the profits of the company be taken in addition to her claim for damages in a sum of about $40,000.
By their defence, as amended in October 2018, the defendants say that five weeks' pay in lieu of notice of termination was the appropriate amount. They deny the existence of the agreements regarding directorship and shareholding. They say that the plaintiff was not paid a dividend but instead received an employee's bonus and that the plaintiff did not pay for the shares by way of set-off or otherwise.
The proposed counterclaim
The context in which the proposed counterclaim is sought to be introduced can be found in Secretary, Department of Education and Training v Simpson Networks Pty Limited [2019] FCAFC 239. The first defendant conducted the business of providing childcare services during school holiday periods primarily for children from low socio-economic backgrounds. If the individual engaging the service incurred a liability to pay fees and the individual was entitled to a family tax benefit a rebate could be claimed. This rebate could be claimed directly by the company and paid directly to the company. However, in order to receive a rebate the company needed to be in a position to satisfy the relevant department that an individual had in fact incurred a liability to pay a fee for the care of a child. The first defendant charged $98.80 per hour for each child under care and provided to the department insufficient information to justify the sum claimed as an amount which a parent or guardian had agreed to pay for the childcare.
In general terms, the proposed counterclaim is as follows. In May 2015 the department initiated a review of the entitlements of the first defendant which resulted in a warning being issued to the first defendant in November 2016. Thereafter the first defendant conducted school holiday programs during the periods 21 December 2016 to 27 January 2017, 3 April to 14 April 2017, 3 July to 7 July 2017 and 10 July to 14 July 2017. In respect of the first two periods the department paid to the first defendant rebates totalling about $5.5 million. In respect of the last two periods the first defendant submitted a claim for a rebate of about $1.5 million. The latter claim was rejected. In April 2018 the department issued a debt notice requiring the repayment of the rebate of about $5.5 million paid in respect of the first two periods.
It is proposed to be alleged that, if the plaintiff had assumed the role of the sole director of the first defendant, she had failed to carry out her duties with due care and diligence as required by the Corporations Act 2001 (Cth), s 180. It is alleged that the duty owed included a duty of ensuring compliance with departmental requirements. The failure to perform the duty has resulted in a loss to the first defendant of about $7 million. The first defendant seeks a compensation order under the Corporations Act, s 1317H, and in the alternative damages for breach of the directorship agreement which the plaintiff claims exists.
The grounds of opposition
The plaintiff opposes the introduction of the counterclaim on two bases. Firstly, it is said that the amendment application has been brought so late in the conduct of the proceedings that it should not be allowed as it will delay the trial of the primary proceeding. Secondly, the plaintiff says that, in any event, the counterclaim is inconsistent with the defendants' position that the directorship of the first defendant did not change and, accordingly, the counterclaim should be disallowed as embarrassing.
The lateness of the proposed plea
The first defendant attempted to have the department's analysis of the position rejected. This attempt came to an end with the publication of the decision of the Full Court of the Federal Court in Secretary, Department of Education and Training v Simpson Networks Pty Limited (above), on 23 December 2019. Thereafter the defendants' legal representation changed. In the circumstances I regard the lateness of the amendment application as being satisfactorily explained.
However, the matter must also be viewed from the perspective of the plaintiff and the requirements for the good administration of justice. In Aon Risk Services Australia Limited v Australian National University [2009] HCA 27, 239 CLR 17, French CJ said at [5]:
"In the proper exercise of the primary judge's discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system. Given its nature, the circumstances in which it was sought, and the lack of a satisfactory explanation for seeking it, the amendment to ANU's statement of claim should not have been allowed. The discretion of the primary judge miscarried."
Here, although I do not attribute the lateness of the application to inefficiency or a tactical change on the part of the first defendant, the proposed claim is within time for the commencement of a separate action and can be accommodated by the institution of a separate action should the first defendant be unsuccessful in defending the plaintiff's claim that she had assumed directorship of the company. If the proposed counterclaim is permitted and it is to be heard and determined at the same time as the primary action it will delay the trial and increase the cost. I do not accept the contention made by counsel for the defendants that allowing the counterclaim would only cause a short delay whilst additional discovery was attended to and that the trial on the counterclaim would not require additional witnesses. The plaintiff would need to plead to the counterclaim and thereafter the first defendant may file a reply. Close of the pleadings will be followed by further discovery including discovery going to the quantification of the first defendant's claim. Experts might need to be retained to examine the quantification of the alleged loss. Compliance with the department's requirements may have resulted in the amount of the rebates being less than the sum of $98.80 per hour per child as claimed. Questions of causation and contributory negligence might conceivably arise.
I consider that delaying the trial is unnecessary. The most substantial relief claimed by the plaintiff is an order that an account be taken of the profits. This would involve an affidavit verifying the account followed by potential objections and surcharges with a possibility of a resultant further hearing before the plaintiff's entitlement could be quantified. If the first defendant's counsel is correct and its claim can quickly be made ready for hearing, the decision on the account might roughly coincide with the determination of the claim proposed to be brought by the first defendant. If the plaintiff is unsuccessful in her claim as to directorship, she and the first defendant will not be put to the trouble and expense of litigating the prospective claim of the first defendant.
As a matter of discretionary judgment, I conclude that the justice of the case rests with declining to give leave for the filing and service of the counterclaim and leaving the first defendant to pursue the foreshadowed claim should the plaintiff succeed in her action.
The claim that the proposed pleading is impermissible as relying upon inconsistent sets of facts
The Supreme Court Rules 2000 (Tas), r 230 is as follows:
"Inconsistent pleading
(1) A party may claim relief on 2 or more inconsistent sets of facts or rights in the alternative but is to show on what facts or rights each claim is founded.
(2) A party may plead, cumulatively or in the alternative, any number of separate defences and may plead several distinct defences founded on separate and distinct facts but is to specify on what facts each defence is founded." [Copied over]
Despite the rule, in circumstances where a party must know that one of the sets of facts relied upon is false, the pleading should not be allowed. The position was concisely stated in J C Decaux Pty Ltd v Adshel Street Furniture Pty Ltd [2000] FCA 1118, 178 ALR 339, where Weinberg J said at [21]:
"Although a party can, as a general rule, plead inconsistent sets of facts in the alternative, it cannot do so where one of those sets of facts must be known to the party to be false. Such a pleading is embarrassing and will be struck out. In Brailsford v Tobie ((1888) 10 ALT 194) the defendant pleaded two factually inconsistent accounts in justification for her not having paid the moneys claimed by the plaintiff. Holroyd J ordered that the defendant elect which one of these two cases she would maintain, saying (at 195):
'… I think it would be most improper to allow the defendant to plead as she has done. The actual facts must be within her own knowledge, and that being so she has set up two sets of facts inconsistent with one another. If this were allowed it would be permitting the facts to deliberately place on the record statements, one or other of which must be known to be a lie. This, in my opinion, ought not to be allowed.' (See Issitch v Worrell (2000) 172 ALR 586 at 594 - 5.)"
Here, the first defendant is not pleading any set of facts inconsistent with the position adopted in the defence that the plaintiff was not a director. It is merely covering the possibility of a finding in favour of the plaintiff on her claim. There is no breach of the rules of pleading and I would not have disallowed the plea on the basis of the inconsistency asserted on behalf of the plaintiff.
The proposed amendments to the defence
Three of the proposed amendments to the defence are the subject of opposition.
The first relates to an allegation by the plaintiff that the agreements relied upon by her were in writing and executed by her and the second defendant on 24 December 2014 and executed by the first and third defendants on 27 December 2014. The defendants wish to add the following subparagraph:
"8(aa)they say further that the directorship agreement as purportedly executed by the plaintiff was incomplete and included incomplete placeholders and drafting notes and that key terms used in the body of the documents had not been properly defined, such that it was evident on the face of those documents that it was a draft only;"
The aspects of the agreement, which even if signed, would render it void for uncertainty have not been particularised. The defendants say that particulars will be provided.
In my view the elaboration can appropriately be left to the provision of particulars. The essential ingredient of the defence, namely that the agreement on its face is void for uncertainty, has been pleaded and there is no obligation to include the elaboration in the pleading as opposed to providing it by way of separately delivered particulars.
The proposed plea will be allowed.
The second of the opposed amendments appears at par 12(aa) and relates to a claimed representation made by the defendants' solicitors. It asserts that the solicitors were neither directed nor authorised to make the representation. The plaintiff says that the plea should be disallowed as futile. I agree. There is no accompanying plea going to ostensible authority and without such a plea an assertion that the defendants' solicitors could not bind the defendants in respect of the alleged representation takes the matter nowhere.
The proposed par 12(aa) will not be permitted.
The third of the opposed amendments is the addition of par 13A(b)(ii) as follows:
"or alternatively taken to have been repudiated by the plaintiff on failure to pay her consideration as required by the share transfer agreement."
The plaintiff says that this is an impermissible plea of inconsistent facts. In particular, that the defendants cannot say that they deny the existence of the agreements and also say that the plaintiff repudiated the agreements. Further, it is said that, there is no plea that the defendants accepted the repudiation so as to put the alleged contracts to an end.
The defendants are not putting forward inconsistent facts which they must know to be false. The plea is included to cover the contingency that a finding might be made that the agreements alleged by the plaintiff had come into existence. As to the proposition that there is a failure to plead acceptance, it is common ground, on the pleadings, that the shares were not transferred to the plaintiff and this would be sufficient to found an argument that the failure to transfer the shares amounted to an acceptance of the repudiation.
The proposed plea at par 13A(b)(ii) will be allowed.
Orders
I make the following orders:
1The defendants have leave to amend the defence in terms of the interlocutory application filed 15 May 2020 with the exceptions of subparagraph 12(aa); the set-off of the counterclaim pleaded in par 23 and the counterclaim pleaded in pars 24 – 52 inclusive.
2The parties have liberty to apply as to questions of costs arising from the interlocutory application and the amendment within 21 days of the publication of these reasons to them and in the absence of any such application, the order is that the defendants are to pay the plaintiff's taxed costs of and incidental to the application and any costs occasioned by or thrown away as a result of the amendment in any event.
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