Miller v My Tunes Holdings Pty Ltd
[2007] WADC 71
•10 MAY 2007
MILLER -v- MY TUNES HOLDINGS PTY LTD & ORS [2007] WADC 71
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WADC 71 | |
| Case No: | CIV:2001/2006 | 13 FEBRUARY 2007 | |
| Coram: | REGISTRAR KINGSLEY | 10/05/07 | |
| PERTH | |||
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| PDF Version |
| Parties: | DAVID MILLER MY TUNES HOLDINGS PTY LTD (ACN 118 639 213) MY TUNES PTY LTD (ACN 010 268 023) ACINTYA KINGSLEY JAMES JURD |
Catchwords: | Practice Order 16 Striking out of statement of claim Economic duress |
Legislation: | Nil |
Case References: | Blomley v Ryan (1956) 99 CLR 362 Commercial Bank of Australia v Amadio & Anor (1983) 151 CLR 447 Crescendo Management Pty Ltd v Westpac Banking Incorporation (1988) 19 NSWLR 40 Dalgety Australia Ltd v de Vahl Rubin & Ors, unreported; FCt SCt of WA; Library No 5485; 24 August 1984 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 J & S Holdings Pty Ltd v NRMA Insurance Limited (1982) 41 ALR 539 Niven v Grant (1903) 29 VLR 102 Pancontinental Mining Ltd v Posgold Investments Pty Ltd and Others (1994) 121 ALR 405 Scolio Pty Ltd v Cote (1992) 6 WAR 475 Webster v Lampard (1993) 177 CLR 598 Nil |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
MY TUNES HOLDINGS PTY LTD (ACN 118 639 213)
First Defendant
MY TUNES PTY LTD (ACN 010 268 023)
Second Defendant
ACINTYA
Third Defendant
KINGSLEY JAMES JURD
Fourth Defendant
Catchwords:
Practice - Order 16 - Striking out of statement of claim - Economic duress
(Page 2)
Legislation:
Nil
Result:
Application dismissed
Representation:
Counsel:
Plaintiff : Mr D H Solomon
First Defendant : Mr P Tottle
Second Defendant : Mr P Tottle
Third Defendant : Mr P Tottle
Fourth Defendant : Mr P Tottle
Solicitors:
Plaintiff : Solomon Brothers
First Defendant : Tottle Partners
Second Defendant : Tottle Partners
Third Defendant : Tottle Partners
Fourth Defendant : Tottle Partners
Case(s) referred to in judgment(s):
Blomley v Ryan (1956) 99 CLR 362
Commercial Bank of Australia v Amadio & Anor (1983) 151 CLR 447
Crescendo Management Pty Ltd v Westpac Banking Incorporation (1988) 19 NSWLR 40
Dalgety Australia Ltd v de Vahl Rubin & Ors, unreported; FCt SCt of WA; Library No 5485; 24 August 1984
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
J & S Holdings Pty Ltd v NRMA Insurance Limited (1982) 41 ALR 539
Niven v Grant (1903) 29 VLR 102
Pancontinental Mining Ltd v Posgold Investments Pty Ltd and Others (1994) 121 ALR 405
Scolio Pty Ltd v Cote (1992) 6 WAR 475
Webster v Lampard (1993) 177 CLR 598
(Page 3)
- REGISTRAR KINGSLEY:
The pleaded case
1 The plaintiff in his statement of claim, dated 17 October 2006, pleads that in March 2006 the plaintiff agreed to sell to the first defendant as a purchaser, and the third and fourth defendants as covenanters, his business not including business trading stock for $400,000. The plaintiff's business was the reproduction, marketing, distributing and selling of personalised products, principally music compact discs, directed to the children's market.
2 The plaintiff goes on to plead that in June 2006 the plaintiff and defendant agreed to vary the terms of the sale agreement by reducing the purchase price from $400,000 to $200,000 and to include the business trading stock in the sale for no additional consideration. The plaintiff pleads at par 10 that he entered into the variation agreement as a result of pressure exerted on him by the defendants. The plaintiff particularises that pressure in the following terms:
a) The defendants alleged that the plaintiff had made various representations about the business, including turnover and contracts, and alleged the representations induced the first defendant and third and fourth defendants to enter into the sale agreed.
b) The defendants threatened to commence legal proceedings in relation to the representations unless the plaintiff agreed to vary the sale agreement.
c) The allegations and threats referred to above were made in an email and repeated in telephone conversations.
3 The plaintiff at par 11 of the statement of claim pleads that the pressure pleaded in par 10 was illegitimate and constituted economic duress. The plaintiff then in [21] details the particulars of the illegitimacy of the pressure. The plaintiff goes on to plead that if the defendants had not exerted the pressure pleaded, the plaintiff would not have entered into the variation agreement. The plaintiff terminated the variation agreement in October 2006.
The defendants' application and the law on the application
4 The defendants have brought an application, dated 28 November 2006, seeking leave to apply for summary judgment pursuant to O 16, and, in the alternative, leave to strike out the statement of claim. The
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- grounds of the application are that the plaintiff’s action is frivolous or vexatious, and that the statement of claim discloses no reasonable cause of action, or alternatively, the plaintiff’s claim is embarrassing and will prejudice or delay fair trial of the action.
5 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 is long regarded as authority for the proposition that a case must be very clear indeed to justify the summary intervention of a court to prevent a plaintiff from putting their case to trial. In Webster v Lampard (1993) 177 CLR 598 the court concluded that there was a need for exceptional caution where the ultimate outcome turns upon resolution of some disputed issue or issues of fact. In the Court’s opinion the plaintiff's version should be acted upon, in the absence of cross-examination, unless the plaintiff's version was inherently incredible.
6 In determining whether a pleading should be struck out the facts alleged in a statement of claim must be accepted as true. It is only in cases in which it can be seen from the outset that, however the facts be found, there is no basis for the legal conclusion contended by the plaintiff that the pleading should be struck (Niven v Grant (1903) 29 VLR 102, Dalgety Australia Ltd v de Vahl Rubin & Ors, unreported; FCt SCt of WA; Library No 5485; 24 August 1984). As stated by the Court in Pancontinental Mining Ltd v Posgold Investments Pty Ltdand Others (1994) 121 ALR 405 it is not whether the facts pleaded are in themselves sufficient to give rise to a cause of action, but rather whether it would be open to the applicant upon the pleadings to prove facts at the trial which would constitute a cause of action. To strike out a claim the Court must be satisfied there is a high degree of certainty about the ultimate outcome of the proceedings if it was allowed to go to trial in the ordinary way.
Economic duress
7 The plaintiff pleads that, by reason of economic duress, he may avoid the variation agreement. There are two elements to economic duress; pressure where the practical effect is compulsion to comply with a demand, or the absence of choice, and illegitimacy of that pressure. As stated in Crescendo Management Pty Ltd v Westpac Banking Incorporation (1988) 19 NSWLR 40 McHugh JA stated:
"A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then
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- ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress."
8 Defendant's counsel submits that the proposition that a threat to enforce legal rights by the institution of civil proceedings constitutes an unlawful or wrongful threat for the purposes of economic duress is incorrect. In J & S Holdings Pty Ltd v NRMA Insurance Limited (1982) 41 ALR 539 the Full Court of the Federal Court drew a distinction between the threat of legal proceedings which will not, in itself, ordinarily constitute compulsion or duress, and the situation where payment has been extracted under compulsion, and legal proceedings are threatened or on foot. The characterization of the payment – being under compulsion – does not change. The defendant's counsel goes on to cite pars 10-005 in the 6th ed, Goff and Jones "Law of Restitution" where the proper use of legal process does not constitute duress. Everyone is free to invoke the aid of the law in a proper case and, where a settlement is made or a payment exacted under such pressure as the law allows and provides, there is no reason for the law to interfere to upset the transactions. It is well settled that to threaten or to institute a civil action, in good faith, does not constitute duress.
9 The plaintiff submits that it is not necessary to prove that illegitimate pressure was the sole reason for entering into a contract; it is sufficient that the illegitimate pressure was one of the reasons for entering into a contract. Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct (Crescendo at 46).
10 The plaintiff's counsel submits there is unconscionable conduct where a party to a transaction is under some special disability in dealing with the other party with the consequence that there is an absence of any reasonable degree of equality between them and unfair or unconscientious advantage has been taken of the advantage thereby created (Commercial Bank of Australia v Amadio & Anor (1983) 151 CLR 447). The plaintiff's counsel submits that the circumstances that constitute a special disability may take a wide variety of forms and are not susceptible of being comprehensively catalogued.
11 However, the common characteristic of such circumstances is that they have the effect of placing one party at a serious disadvantage
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- vis-a-vis the other citing Amadio. Those common characteristics are derived from Blomley v Ryan (1956) 99 CLR 362 where Fullagar J commented that the circumstances adversely affecting a party which may adduce a court of equity either to refuse its aid or set a transaction aside are of great variety and hardly need to be satisfactory clarified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary.
12 The common characteristics, seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other. The characteristics referred to are of course personal characteristics of the person who has been induced into the transaction.
13 In determining whether pressure is illegitimate the court should consider the nature of the pressure applied and the nature of the demand which the pressure was applied to support. A threat of prosecution or legal action will not, of itself, ordinarily be sufficient to warrant a finding of duress. As plaintiff's counsel submits, this is not to say that a threat to commence legal proceedings can never amount to illegitimate pressure. It will depend upon the nature of the demand with which the threat is coupled, and in determining whether a threat of legal proceedings coupled with a demand for repayment of an alleged debt is illegitimate, the fact that the amount demanded is not in fact owed is a sufficient factor in weighing in favour of illegitimacy (Scolio Pty Ltd v Cote (1992) 6 WAR 475).
The Evidence
14 By an agreement executed on or about 21 March 2006 the plaintiff entered into a business sale agreement with the defendants in the sum of $400,000. On 9 June 2006 the defendants, through their solicitor Hunt Lawyers, wrote to the plaintiff's solicitors stating that the plaintiff had engaged in misleading and deceptive conduct, and alleging certain breaches of the Fair Trading Act. The defendants state, in the letter of 9 June 2006, that they were entitled to damages and to seek orders that the business sale agreement was void ab initio. However, notwithstanding those allegations the defendants, to avoid the cost of litigation, suggest they will agree to purchase the business for the amount of $200,000. On 13 June 2006 Hunt Solicitors wrote to Solomon Brothers stating they were instructed that the plaintiff had accepted the offer set out in the letter of 9 June 2006 and enclosed a draft deed and release of variation. Given the number of variations required to the draft enclosed by Hunt's lawyers,
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- Solomon Brothers were instructed to prepare a deed of settlement and release of variation which they forwarded to the defendant's solicitors by letter dated 15 June 2006. The Solomon Brothers deed of settlement and release was subsequently executed by all parties.
15 On 11 October 2006 Solomon Brothers, then wrote to the defendants alleging that the plaintiff had been induced to enter into the variation agreement as a result of economic pressure. They advised legal proceedings would be commenced if the defendants did not pay the full amount of the purchase price.
16 The plaintiff in his affidavit in opposition details the circumstances of the pressure in par 13 of his affidavit. At par 15 of the plaintiff's affidavit he deposes he was told by one of the defendants that both defendants would commence legal action immediately if he did not sign the variation agreement and that the plaintiff would be locked into a contract that he could not afford to fulfil.
17 At par 16 the plaintiff deposes he instructed Solomon Brothers to prepare the variation agreement because he thought the deed that had been previously prepared by the defendants was inadequate and needed to be reworked.
18 Of the five alleged misrepresentations relied upon by defendants to support their letter of 6 June 2006 the plaintiff deposes that four were not made at all, and as to the alleged misrepresentation referred to in par 1.1B of the 6 June 2006 letter, the plaintiff, in broad terms, deposes that representation was in fact true.
19 The plaintiff deposes that once the business sale agreement had been signed the plaintiff ceased plans to appoint exclusive subagents in each state. This was done because it may have prejudiced the defendants' future plans for the business, and the defendants have agreed that he should not do so for the same reasons. The plaintiff deposes that the defendants wanted the right to be able to structure their business as they pleased once settlement was complete, and that the plaintiff agreed they have that right. This meant however that the plaintiff was not able to meet the obligations he was contracted to comply with, putting himself at further risk of legal action from third parties. The plaintiff deposes that he felt under massive financial pressure and saw no alternative but to enter into the variation agreement.
(Page 8)
Conclusion
20 It is clear from Crescendo (supra) that the proper approach in determining whether there has been economic duress is to ask, firstly, whether any applied pressure induced the victim to enter into the contract and, then, whether the pressure went beyond what the law is prepared to countenance. The pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. The Court of Appeal in Crescendo (supra) rejected the overbearing of the will theory of duress, on the basis that a person who is subject to duress usually knows too well what they are doing. The person chooses to submit to the demand of pressure rather than take alternative courses of action, but the consequence is that the law treats the conduct as revocable.
21 The authorities are clear in saying that the proper use of legal process does not constitute duress. Where pressure is brought to bear by the improper application of legal process this would amount to duress. The question therefore is whether the threat of instituting proceedings, which may be baseless at law, could constitute illegitimate pressure such that it is unconscionable conduct. That question, in my opinion, is a question of fact, and is one that is open on the pleading to be accepted by the court.
22 Whilst the plaintiff at par 11 of his statement of claim particularises the illegitimacy, some of which do not relate back to the proposed legal process, once the evidence establishes that the pressure exerted on the plaintiff was illegitimate that is sufficient (Crescendo (supra)). The authorities cited in Goff and Jones "The Law of Restitution" 6th ed 2002 at 10-005 suggest that the threat of legal process must be used properly so that it does not constitute duress. In the cases cited in Goff and Jones the aid of the law is being invoked to bring pressure to bear on a person but provided the proceedings are regular, that they are lawfully invoked in good faith, and are not abused, duress cannot be said to have exercised on the person against whom they have been brought. The contention by the plaintiff in these proceedings is that the proceedings have not been invoked in good faith, and hence the pressure placed on the plaintiff is illegitimate.
23 For these reasons I am of the opinion that the plaintiff does have a case that is not frivolous or vexatious and that the statement of claim does disclose a reasonable cause of action. Further, I am of the opinion that the statement of claim is not so embarrassing nor will prejudice or delay a fair trial of the action.
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