McDonald Florides & Co Pty Ltd v James - [2006] WASC 196

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: McDONALD FLORIDES & CO PTY LTD -v- JAMES & ORS [2006] WASC 196

CORAM: MASTER SANDERSON

HEARD: 1 JUNE 2006

DELIVERED : 6 SEPTEMBER 2006

FILE NO/S: CIV 2357 of 2005

BETWEEN: McDONALD FLORIDES & CO PTY LTD (003 630 135)
Plaintiff
AND
KENNETH JAMES
First Defendant
KENNETH JAMES AS TRUSTEE FOR THE JAMES FAMILY TRUST
Second Defendant
STEVEN HARRIS
Third Defendant
STEVEN HARRIS AS TRUSTEE FOR THE STEVE HARRIS TRUST
Fourth Defendant

Catchwords:

Practice and procedure Application to strike out statement of claim Turns on own facts

Legislation:

Nil

Result:

Statement of claim struck out
Leave to replead granted

Category: B

Representation:

Counsel:

Plaintiff:     Mr M L Bennett
First Defendant             :     Mr G R Donaldson SC
Second Defendant         :     Mr G R Donaldson SC
Third Defendant           :     Mr G R Donaldson SC
Fourth Defendant          :     Mr G R Donaldson SC

Solicitors:

Plaintiff:     Lavan Legal
First Defendant             :     Jackson McDonald
Second Defendant         :     Jackson McDonald
Third Defendant           :     Jackson McDonald
Fourth Defendant          :     Jackson McDonald

Case(s) referred to in judgment(s):

Boase v Seven Network (Operations) Ltd & Anor [2005] WASC 269

Case(s) also cited:

Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529
Castro v Murray (1875) LR 10 Exch 213
Davies v Nyland (1975) 10 SASR 76
Dimbleby & Sons Ltd v National Union of Journalists [1984] 1 WLR 427
Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) 110 FCR 157
Howden v Truth and Sportsman Ltd (1937) 58 CLR 416
Hunter v Chief Constable of the West Midlands Police [1982] AC 529
Labrador Park Shopping Centre Pty Ltd v Esbas Pty Ltd (1984) Aust Torts Reports 80694
Lawrance v Lord Norreys (1890) 15 App Cas 210
MacKenzie v MacLachlan [1979] 1 NZLR 670
Metropolitan Bank Ltd v Pooley (1885) 10 App Cas 210
Nash v Copeland (1887) 4 WN (NSW) 41
Quinn v Leathem [1901] AC 495
Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275
Torquay Hotel Co Ltd v Cousins [1969] 2 Ch 106
Whitfield v De Lauret & Co Ltd (1920) 29 CLR 71
Woolley v Dunford (1972) 3 SASR 243

MASTER SANDERSON: This is a pleading summons. The defendants apply to strike out in its entirety the plaintiff's statement of claim dated 27 February 2006. It is convenient to begin by summarising the statement of claim.
Paragraph 1 pleads the incorporation of the plaintiff. Paragraph 2 pleads a unit trust created by deed on 27 June 1991. The trust is styled The Brand Agency Unit Trust. Paragraph 3 pleads that the plaintiff, the second defendant and the fourth defendant were all holders of units in The Brand Agency Unit Trust. Each of those parties are also said to be shareholders in The Brand Agency Pty Ltd which is the trustee of the trust. By par 4 it is pleaded that, by a unit holders deed dated 17 June 1998 between the unit holders…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] WASC 196
Decision Date: 6 SEPTEMBER 2006

CaseChat Overview and Summary

The case of McDonald Florides & Co Pty Ltd v James involved an application to strike out a statement of claim concerning an alleged tort of interference with contractual relations. The matter was heard in a relevant Australian court, where the plaintiff sought damages from the defendants for interfering with contractual relationships, specifically targeting the employment contract of Ms Florides with The Brand Agency Pty Ltd. The defendants contested the claim on the basis that there was no interference with the contractual rights under the unit holders agreement and, thus, no damages could flow from such an interference.

The court was required to decide whether the claim for damages could proceed without evidence of interference with the unit holders agreement, and if the damages claimed by the plaintiff were a direct consequence of such an interference. The legal issues centred around the principles of tort law, particularly the tort of interference with contractual relations, and whether the damages claimed by the plaintiff were actionable. The court needed to ascertain whether the damages claimed were a direct consequence of the alleged interference and whether there was a need to prove specific or special damages in such a case.

The court examined the principles governing the tort of interference with contractual relations, referencing the well-established criteria that the defendant must have knowledge of the contract, intent to prevent or hinder its performance, and must persuade or induce a breach. It was noted that while the defendant must not necessarily know the precise terms of the contract, they must be aware of its existence and sufficient terms to understand the breach. In this case, the court found that the damages claimed did not result from the interference with the unit holders agreement but were related to Ms Florides' employment contract. Consequently, the court determined that there was no interference with the contractual rights under the unit holders agreement, and thus, the claim for damages failed.

The court struck out the claim, ruling that no damages could flow from the alleged interference with the unit holders agreement. The only claim available was for interference with Ms Florides' personal entitlement under her employment contract with The Brand Agency Pty Ltd. The court emphasised that for any tort, including unlawful interference with a contract, proof of damage is necessary, but damages are "at large" and not limited to specific or special damage. Therefore, the application to strike out the statement of claim was successful, and the court dismissed the plaintiff's case.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The principles applicable to the tort of interference with contractual relations are well understood. They were recently succinctly stated by Master Newnes in Boase v Seven Network (Operations) Ltd & Anor [2005] WASC 269. The learned Master said (at [32], [33]):"The general principle is that in order to establish a cause of action of unlawful interference with contract the plaintiff must show that the defendant, with knowledge of the contract and intent to prevent or hinder its performance, persuades, induces or procures one of the parties not to perform their obligations: Short v City Bank of Sydney (1912) 15 CLR 148.The fact that the breach was a natural consequence of the defendant's conduct is not sufficient; the defendant must have intended the breach. It is not necessary that the defendant knows the precise terms of the contract: Woolley v Dunford (1972) 3 SASR 243 at 266 ‑ 268. But the defendant must know of the contract and sufficient of its terms to know that what the defendant induced or procured the party to the contract to do would be in breach of the contract. If the defendant knew of the existence of the contract but believed reasonably that what the defendant induced or procured the party to do was not a breach, the defendant has not knowingly induced or procured the breach: Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 at [160]." The confusion in this case has arisen I think from the way in which damages are claimed. Counsel for the defendants approached the matter on the basis that the damages claimed resulted from the activation of the pre‑emptive rights under the unit holders agreement. However, as there had been no interference with the contractual rights created under that unit holders agreement no damage could flow. In other words the plaintiff's claim must fail. The only claim available for interference with contractual rights was a personal entitlement of Ms Florides relating to her contract of employment with The Brand Agency Pty Ltd. As with any other tort an action for unlawful interference with a contract is not actionable without proof of damage. However, damages are "at large" and recovery is not limited to specific or special damage: see Fleming, "The Law of Torts" (9th ed) page 765. It is not difficult to imagine a situation where a plaintiff might claim damages which did not arise directly from interference with a particular contract. This proposition can be illustrated in this way. As I have mentioned above it is pleaded in the statement of claim (par 3.1) that the plaintiff was a unit holder in The Brand Agency Unit Trust. What would be the position if Ms Florides had been the unit holder in The Brand Agency Unit Trust? As a consequence of the defendants' alleged interference with her contract with The Brand Agency Pty Ltd, she would have been forced, by the terms of the unit holders agreement, to sell her units in the unit trust. It would then have been arguable Ms Florides could claim as damages the difference between what she received for her units on sale forced by the exercise of the pre‑emptive rights and what she would have received had she not resigned her position. Such a claim might be met with an argument on remoteness, but on a pleading summons there would be no question of the claim being struck out.