Naiman Clarke Pty Ltd v Tuccia
[2012] NSWSC 314
•05 April 2012
Supreme Court
New South Wales
Medium Neutral Citation: Naiman Clarke Pty Limited atf Naiman Clarke Trust v Marianna Tuccia [2012] NSWSC 314 Hearing dates: 30 March 2012 Decision date: 05 April 2012 Jurisdiction: Equity Division - Duty List Before: Ball J Decision: See paragraph 32 of this judgment.
Catchwords: PROCEDURE - application for transfer of proceedings from the Local Court to the Supreme Court - where the plaintiff is seeking to amend its statement of claim to seek relief which can only be granted by the Supreme Court - where the plaintiff knew of its right to bring proceedings in the Supreme Court and chose to initiate proceedings in the Local Court - where defects in proposed amended statement of claim Legislation Cited: Civil Procedure Act 2005 (NSW)
Corporations Act 2001 (Cth)
District Court Act 1973 (NSW)
Practice Note SC Eq 11
Uniform Civil Procedure Rules 2005Cases Cited: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Ryner Pty Ltd v Roller [2007] NSWSC 372
Tabet v Gett [2010] HCA 12; 240 CLR 537
White v Viewden Pty Limited [2005] NSWSC 196Category: Procedural and other rulings Parties: Naiman Clarke Pty Limited atf Naiman Clarke Trust (Plaintiff)
Marianna Tuccia (Defendant)Representation: HWD Stowe (Plaintiff)
CL Fini (Defendant)
Shanahan Tudhope Lawyers (Plaintiff)
Juris Prudentia Legal (Defendant)
File Number(s): 2012/82107
Judgment
This is an application by the plaintiff, Naiman Clarke, to transfer to this court proceedings it commenced on 6 April 2011 against the defendant, Ms Tuccia, in the Local Court (the Substantive Proceedings). Naiman Clarke also seeks leave to file a second further amended statement of claim (2FASC) in the Substantive Proceedings, although the application to do so is made - irregularly - in these proceedings. There is, however, a clear connection between the two applications. Some of the relief sought in the proposed 2FASC could only be sought in this court, and it is for that reason that the application for transfer is made.
Background
Naiman Clarke carries on a recruitment consultancy business. Ms Tuccia worked for Naiman Clarke as a legal recruiter from 14 May 2007 to 10 February 2011. She then commenced employment as a legal recruiter with Yair & Associates from 1 March 2011. On 23 December 2011, Ms Tuccia left Yair & Associates and on 9 January 2012 commenced employment, again as a legal recruiter, with Empire Careers.
On 6 April 2011, Naiman Clarke commenced the Local Court proceedings alleging that Ms Tuccia had breached confidentiality and restraint clauses in her employment contract and claimed damages in respect of those breaches. The proceedings were conducted on behalf of Naiman Clarke by Mr Johnothan Naiman, Naiman Clarke's chief executive officer, who is admitted as a legal practitioner in New South Wales and who holds a current practising certificate, but who has had limited litigation experience.
The original statement of claim filed by Naiman Clarke was clearly deficient, since it contained allegations that Ms Tuccia had breached certain provisions of her employment contract without identifying what conduct Ms Tuccia is alleged to have engaged in which amounted to a breach of the identified provisions.
Naiman Clarke sought to rectify the deficiencies with the original statement of claim by filing an amended statement of claim on 6 May 2011. That statement of claim was filed without leave, although the time for filing an amended statement of claim without leave had expired 2 days earlier: see UCPR r 19.1(1). Ms Tuccia sought particulars of the amended claim on 20 May 2011. Naiman Clarke did not supply those particulars and, on 24 June 2011, Ms Tuccia filed a notice of motion seeking orders that the amended statement of claim be struck out. On 19 August 2011, the Local Court made orders to the effect that Naiman Clarke have leave to file a further amended statement of claim and provide the particulars requested by Ms Tuccia by 9 September 2011 and that Naiman Clarke pay Ms Tuccia's costs of the motion.
Naiman Clarke did not supply the particulars ordered by the Local Court and, at a directions hearing on 22 September 2011, the court directed, among other things, that Naiman Clarke provide those particulars by 13 October 2011 and file a marked up further amended statement of claim. Particulars were ultimately supplied on 24 October 2011. There was a further directions hearing before the Local Court on 25 October 2011 and, at that time, the court extended the time for compliance with the other directions the court had made on 22 September 2011 (including the order that Naiman Clarke file a marked up version of its further amended statement of claim) until 15 November 2011 and ordered that Naiman Clarke pay Ms Tuccia's costs of the directions hearing of $250 within 14 days.
On 17 November 2011, Ms Tuccia filed a second notice of motion seeking an order that Naiman Clarke's further amended statement of claim be struck out. Following the filing of that notice of motion, Mr Naiman concluded that he should engage external legal advisers to act on Naiman Clarke's behalf, which is what he did. On 16 December 2011, by consent, the Local Court stood the proceedings over to 19 March 2012 pending a foreshadowed application by Naiman Clarke to transfer the proceedings to this court. After further delays, that application, and the application to file the 2FASC, were filed in this court on 14 March 2012.
The proposed 2FASC
The proposed 2FASC is substantially different from the further amended statement of claim. It is not necessary to describe those differences in any detail. It is, however, necessary to say something about how Naiman Clarke now seeks to put its case.
According to Naiman Clarke, Ms Tuccia, while its employee, had access to a spreadsheet containing the names of lawyers seeking jobs who had had previous dealings with Naiman Clarke (described in the 2FASC as "Candidates"). Naiman Clarke alleges that Ms Tuccia, while still its employee, used that spreadsheet to establish "connections" with the persons named on the spreadsheet using the social media network known as "LinkedIn", that the information contained on the spreadsheet was confidential information within the meaning given to that expression in her employment contract and confidential information under the general law, that Ms Tuccia took that confidential information with her when she left the employment of Naiman Clarke in the form of her LinkedIn profile and that she used that information in her subsequent employment. Naiman Clarke alleges that, in doing so, Ms Tuccia breached various obligations imposed on her by her employment contract, misused Naiman Clarke's confidential information (although a claim in those terms is not specifically pleaded) and breached her duty under s 182(1) of the Corporations Act 2001 (Cth) (the Act) by improperly using her position as an employee to gain an advantage for herself or someone else or to cause detriment to Naiman Clarke and her duty under s 183(1) of the Act by improperly using information she obtained by virtue of her position as an employee of Naiman Clarke to gain an advantage for herself or someone else or cause detriment to Naiman Clarke. Naiman Clarke claims damages for breach of contract. Those damages are said to be the loss of the opportunity to place one or more of the Candidates itself. However, no actual Candidates are identified, and Naiman Clarke simply says that it will give further particulars following discovery, subpoenas and interrogatories of the opportunities said to have been lost. Naiman Clarke also claims an account of profits. The profits are not identified, but it may be inferred that they consist of the commission Ms Tuccia is alleged to have earned on placing Candidates with law firms while an employee of Yair & Associates and Empire Careers. Naiman Clarke also claims compensation under s 1317H of the Act, although no particulars are given of that claim. Finally, Naiman Clarke claims orders in the nature of mandatory injunctions requiring Ms Tuccia to delete information concerning the Candidates from her LinkedIn profile and to deliver up documents containing that information.
Naiman Clarke also makes a separate claim on the basis that Ms Tuccia was over paid commission in respect of two Candidates who were placed at a law firm by Ms Tuccia while she was with Naiman Clarke, but who did not remain at that law firm for specified minimum periods of time so as to entitle Naiman Clarke to retain the placement fees it earned in respect of those Candidates. The total amount of commission paid to Ms Tuccia in respect of the placement of those Candidates was $11,368.25.
One feature of the 2FASC is that many of the allegations made in it are based on inference. So, for example, in support of the allegation made in para 13E that Ms Tuccia used the spreadsheet systematically "to establish connections with Candidates who were also members of the LinkedIn social media network", the 2FASC gives as particulars, among others, the fact that prior to late November 2010 Ms Tuccia spent minimal periods of time connected to the LinkedIn website but after that time spent up to 5 hours a day at her desk connected to the site, that Ms Tuccia had a copy of the spreadsheet with ticks and crosses against names on it and that the number of contacts she had through the LinkedIn network increased from around 150 in early December to over 500 by the time of the termination of her employment. In each case where the allegation is said to be one based on inference, the 2FASC says that further particulars will be given after discovery, subpoenas and interrogatories.
Is Naiman Clarke entitled to the relief that it seeks?
The power to transfer proceedings is conferred by section 140 of the Civil Procedure Act 2005 (NSW). That section relevantly provides:
(1) The Supreme Court may, of its own motion or on application by a party to proceedings before the District Court or the Local Court, order that the proceedings, including any crossclaim in the proceedings, be transferred to the Supreme Court.
...
(4) Proceedings in the Local Court are not to be transferred to a higher court under this section unless the higher court is satisfied that there is sufficient reason for hearing the proceedings in the higher court.
The section confers a broad discretion: Ryner Pty Ltd v Roller [2007] NSWSC 372. The court may impose terms on the transfer, including a term that the party seeking the transfer pay the other party's costs of the proceedings up until the time of the transfer: see Ryner Pty Ltd v Roller [2007] NSWSC 372.
Ms Tuccia seeks to resist the application for transfer on three main bases. First, she says that the mere allegation that the claim may exceed the jurisdiction of the Local Court is not sufficient. That allegation must be established by evidence. Second, she submits that Naiman Clarke knew of its rights to bring proceedings in the Supreme Court and chose, at the time the proceedings were commenced, to file the proceedings in the Local Court. It should be held to that choice. Third, she submits that the proposed 2FASC contains a number of defects which means that leave would not be given to Naiman Clarke to file it.
I do not accept the first two of these submissions. There is some force in the third. However, in my opinion, that does not provide a sufficient ground to refuse an order for transfer.
In support of the first submission, Mr Fini, who appeared for Ms Tuccia, relied on White v Viewden Pty Limited [2005] NSWSC 196. In that case, Johnson J pointed out at [9] that, before an order could be made for removal of proceedings in the District Court to the Supreme Court under s 145(2) of the District Court Act 1973 (which relevantly was in substantially similar terms to s 140 of the Civil Procedure Act), the court needed to be satisfied that the damages claimed by the plaintiff were likely to exceed $750,000 so as to fall outside the jurisdiction of the District Court. Here, however, it is clear that some of the relief sought by Naiman Clarke in its proposed 2FASC can only be sought in this court. It is not necessary for Naiman Clarke to prove it is likely to obtain that relief. It is sufficient for it to establish that that relief is not available from the Local Court and that it is entitled now to amend its claim to seek that relief.
As to the second point, in my opinion the evidence does not establish that Naiman Clarke was aware that it was entitled to seek the precise relief that it now seeks in the 2FASC. What the evidence establishes is that Mr Naiman was aware that this court, but not the Local Court, had jurisdiction to grant injunctions restraining breaches of confidentiality and noncompete obligations in an employment contract. However, Naiman Clarke does not seek relief of that type. More importantly, Ms Tuccia's submission would only have force if Naiman Clarke were precluded from seeking the relief that it now seeks because it did not seek that relief earlier. As a result of the High Court's decision in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 and the passing of ss 56-60 of the Civil Procedure Act 2005, courts are less willing than they were in the past to permit amendments. Aon was concerned with r 21 of the ACT Supreme Court Rules, which is in similar terms to s 56 of the Civil Procedure Act. That section relevantly provides:
(1) The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings.
(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.
(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.
Commenting on r 21, Gummow, Hayne, Crennan, Kiefel and Bell JJ said (at [102]):
The objectives stated in r 21 do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. Whilst r 21 assumes some ill-effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail. It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment.
In my opinion, Naiman Clarke's delay has not been so great nor have the proceedings progressed so far that Naiman Clarke should now be prevented from making the claims that it seeks to make. Naiman Clarke has unquestionably been guilty of substantial delay in prosecuting its case. Much of that delay is to be explained by Mr Naiman's inexperience in litigation and the failure of Naiman Clarke to engage external lawyers before December 2011. The result has been that virtually no progress has been made in the case in nearly a year. However, this is not a case where Ms Tuccia has prepared to meet a case which Naiman Clarke now seeks to change substantially. Nor is it a case where other litigants who are awaiting trial dates were prejudiced because Naiman Clarke's case was set down for hearing in advance of their own, but must now be vacated. Ms Tuccia has not even filed a defence in the proceedings, and no trial date has been set. Ms Tuccia has filed an application to strike out the existing statement of claim. If the amendment is not allowed and that application is successful, the result may be that Naiman Clarke would not be able to pursue its claim at all. I do not think that the delays to date justify that result.
Ms Tuccia raises a number of objections to the proposed amended pleading. Those objections are:
(a) Paragraph 1A pleads that Naiman Clarke brings the proceedings as trustee of the Naiman Clarke trust. It is said that that pleading is irrelevant;
(b) The 2FASC impermissibly seeks an account of profits in respect of alleged breaches of contract and there is no pleading that Ms Tuccia has made a profit;
(c) An employment contract is not the kind of contract which, upon breach, would entitle the plaintiff to recover damages for loss of a chance;
(d) There is no pleading or particularisation of the material facts of causation of damage in respect of the claim for compensation under s 1317H of the Corporations Act;
(e) The 2FASC fails to plead the facts by reason of which it is said that Ms Tuccia owed Naiman Clarke fiduciary duties;
(f) The claim is inadequately particularised and it is not open to Naiman Clarke to say that it will give further particulars following discovery, subpoenas and interrogatories.
The objections referred to in paragraphs (a) and (e) can be put to one side. The pleading referred to in (a) and the pleading that Ms Tuccia owed Naiman Clarke fiduciary duties are contained in the further amended statement of claim. They are not the subject of the amendment application.
As to objection (b), in my opinion, Naiman Clarke sufficiently pleads that the information on the spreadsheet was confidential information belonging to Naiman Clarke that was used by Ms Tuccia without Naiman Clarke's consent, and sufficiently pleads that Ms Tuccia as an employee owed Naiman Clarke fiduciary duties, to justify its claim for an account of profits. The pleading is defective in that it does not plead that Ms Tuccia earned profits as a consequence of those breaches of duties and does not identify the nature of the profits that Ms Tuccia is said to have earned. However, that is a drafting error which can be corrected without substantially changing the nature of the case that Naiman Clarke now seeks to bring.
In support of objection in (c), Mr Fini relies on the decision of the High Court in Tabet v Gett [2010] HCA 12; (2010) 240 CLR 537. That case, however, was concerned with the question whether the a plaintiff who had suffered brain damage following a seizure could claim damages from her treating doctor on the basis that she had lost the opportunity of a better outcome as a consequence of the doctor's negligence in failing to order a scan earlier than he did. The High Court held that she could not. In doing so, it drew a distinction between the loss of a commercial opportunity which itself had a recognised value and the loss of a chance which did not. The plaintiff's loss in Tabet fell into the latter category. Critical to that conclusion was the nature of the loss that was claimed. The case says nothing about the types of contract under which claims for the loss of a chance can be made. What is important is the nature of the loss claimed, not the nature of the contract breach which is said to give rise to that loss.
There are, however, difficulties with the way in which Naiman Clarke puts its claim for damages for breach of contract. It says that it has lost the opportunity to place one or more of the Candidates with law firms. However, it is not easy to understand how that lost opportunity represents a loss to Naiman Clarke. Naiman Clarke only lost an opportunity to place a Candidate if that Candidate was placed by Ms Tuccia. Naiman Clarke's opportunity to place each Candidate continued at least until that time. Moreover, it is far from clear that it could be said that Naiman Clarke suffers a loss even where a Candidate is actually placed by Ms Tuccia. Naiman Clarke earns its fees from law firms not Candidates. It would need to demonstrate that, as a result of losing an opportunity to place a Candidate because that Candidate had been placed by Ms Tuccia, it had lost the opportunity to earn fees by placing that Candidate with a law firm itself. Put like that, there are two possibilities. One is that Naiman Clarke lost the opportunity of placing the same Candidate with the same law firm as Ms Tuccia actually did. But it is difficult to see that loss as a lost opportunity. Naiman Clarke had the same opportunity as Ms Tuccia to place the Candidate. Its case in those circumstances must be that, if Ms Tuccia had not placed the Candidate with the relevant law firm, it would have. That is not the loss of an opportunity. It is the loss of an actual placement. The second possibility is that, if the Candidate had not been placed by Ms Tuccia, Naiman Clarke lost the opportunity to place the Candidate with some other law firm in circumstances where no other suitable Candidate was available. Much of the evidence relevant to these matters must be within the knowledge of Naiman Clarke. For example, it knows the name of each Candidate and the likelihood is that it would know whether those Candidates were not available for placement because they had already been placed and which firm or firms it says it had the opportunity to place those Candidates with if they had been available for placement. In any event, in my opinion, having regard to the history of the matter, it is incumbent on Naiman Clarke to explain in an affidavit sworn by an appropriate person exactly how it puts its case and why it believes that it has suffered a loss of the type described before the amendment should be allowed.
Similar points are raised by Naiman Clarke's claim for compensation under s 1317H of the Corporations Act. The pleading in its current form may have been acceptable if it had been included at the time the proceedings were commenced. It would then have been open to Ms Tuccia to seek particulars of the damage that Naiman Clarke says that it suffered as a consequence of her conduct. However, a year has now passed and the onus is on Naiman Clarke if it wants to make an amendment to explain the nature of the damage it says it has suffered and to produce sufficient evidence to satisfy the court that its claim is not simply speculative. It has not done that.
Mr Fini makes a number of points in relation to objection (f). First, he submits that Naiman Clarke's position that it will provide further particulars following discovery, subpoenas and interrogatories is inconsistent with the position that now applies as a result of the introduction of Practice Note SC Eq 11. Second, he submits that it is clear from the particulars already given concerning Ms Tuccia's activities that Naiman Clarke is in possession of material facts that it has refused to plead or particularise. Thirdly, he submits that the pleading barely rises above an allegation that Ms Tuccia had an opportunity to breach her employment contract and her fiduciary duties and duties under the Act and that the court should infer that there are no material facts in support of Naiman Clarke's case. Lastly, he submits that Naiman Clarke has failed to provide proper particulars of its claim for exemplary and aggravated damages.
As to Mr Fini's first point, para 4 of Practice Note SC Eq 11 provides:
The Court will not make an order for disclosure of documents (disclosure) until the parties to the proceedings have served their evidence, unless there are exceptional circumstances necessitating disclosure.
The practice note does not prohibit disclosure before evidence is served. Rather, it requires the existence of exceptional circumstances. One case where that requirement may be met is where information necessary for a party's case is solely within the knowledge of the party from whom disclosure is sought. In my opinion, it is open to Naiman Clarke to submit that that is the position in this case.
As to Mr Fini's second and third points, there is no evidence to support the assertion that Naiman Clarke knows facts that it has not pleaded. I accept the submission made by Mr Stowe, who appeared for Naiman Clarke, that by its nature this is a type of case where it cannot be expected that the plaintiff will know all the facts which support its claim and that all the plaintiff may be able to do is point to facts from which it might be inferred that the defendant has breached her duties. In my opinion, Naiman Clarke has satisfied that requirement.
As to Mr Fini's fourth point, I accept that Naiman Clarke has not provided particulars of its claim for exemplary and aggravated damages in accordance with UCPR rr 15.7 and 15.8. It should not be permitted to amend to add those claims until it does so.
In my opinion, it is not appropriate to give Naiman Clarke leave to file the 2FASC. For the reasons I have given, there are a number of defects in that document which will need to be fixed. In addition, it is not appropriate to give leave in these proceedings to file that document. That leave should be sought in the Substantive Proceedings and should only be considered by the court once those proceedings have been transferred. Nonetheless, it is clear from the terms of the proposed 2FASC that Naiman Clarke proposes to seek relief which falls outside the jurisdiction of the Local Court. In my opinion, it is entitled to amend to raise at least some of that relief. In particular, in my opinion it is entitled to amend its claim to seek an account of profits and injunctions. For that reason, it is appropriate that the proceedings be transferred.
Costs
In my opinion, each party should bear its or her own costs of these proceedings. Although, Naiman Clarke has been successful in obtaining an order that the proceedings be transferred, it has not been successful in obtaining leave to file the 2FASC in the Substantive Proceedings; and, in my opinion, further amendments will need to be made to that document before leave is granted. Consequently, each party has enjoyed partial success. An order that each party bear its or her own costs fairly reflects that position.
Mr Stowe accepted that Naiman Clarke should pay Ms Tuccia's costs occasioned by any amendment. However, he submitted that no other costs order should be made against it. In his submission, other preparatory work has been done in the Substantive Proceedings which remains of use and Naiman Clarke should not have to bear the costs of that work. I do not accept that submission. As I have indicated, most of the work that has been done to date in the Substantive Proceedings relates to defects in the statement of claim and the failure of Naiman Clarke to comply with orders and directions made by the Local Court. The proceedings have been on foot for almost a year and Ms Tuccia has not even filed a defence. That is an unsatisfactory state of affairs for which Naiman Clarke is responsible. Having regard to the very substantial amendments that Naiman Clarke now seeks to make, the work that has so far been done in the proceedings is likely to be of limited use. In those circumstances, Naiman Clarke should pay Ms Tuccia's costs up until the date of transfer. Those costs should be paid forthwith.
Orders
The orders of the court are:
(1) The Local Court proceedings 2011/111772 between Naiman Clarke Pty Limited as plaintiff and Marianna Tuccia as defendant be transferred from the Local Court of New South Wales to the Equity Division of the Supreme Court of New South Wales;
(2) Each party pay its or her own costs of these proceedings;
(3) The plaintiff pay the defendant's costs which have been properly incurred in the Local Court proceedings until the transfer of the proceedings to the Supreme Court in accordance with order (1);
(4) The costs referred to in order (3) be paid forthwith;
(5) The proceedings otherwise be dismissed.
**********
Decision last updated: 10 April 2012
7