National Foods Milk Limited v Wright & Wright - [2005] SADC 18

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
NATIONAL FOODS MILK LIMITED v WRIGHT & WRIGHT
Judgment of His Honour Judge Rice
28 February 2005
PROCEDURE
MASTER'S APPEAL - PLEADINGS
Appeal against the refusal of the Master to order that a Defence be filed.
Proceedings issued in September, 2002 - original Statement of Claim amended by an Amended Statement of Claim - struck out - Further Amended Statement of Claim filed - discovery given by the plaintiff, including discovery on oath - basic allegations of the plaintiff straightforward - debt allegedly arises from sale and purchase of milk supplies not all of which were paid for - defendants yet to argue that Further Amended Statement of Claim also be struck out - Master refused to order the filing of a Defence.
Held, a Defence should be filed - formulation of Defence would aid in identifying genuine disputes even if Further Amended Statement of Claim is the subject of an application to strike out.
District Court Act 1991 s 43; District Court Rules r 97.01, referred to.
O'Brien Lovrinov Crafter Pty Ltd v Corradini & Anor [1999] SASC 159, considered.

NATIONAL FOODS MILK LIMITED v WRIGHT & WRIGHT
[2005] SADC 18
Introduction

Without wishing to be unduly critical of the parties in this case, its progress makes a mockery of case flow management principles. The summons was issued on 13th September, 2002 and served a week later. There has been no shortage of activity since that time but, alas, little progress. The order appealed against is as follows:-
“1.That notwithstanding the plaintiff’s submissions that I now direct the defendants to file their defence, I continue to excuse them from that obligation until further order.”
That order was made on 17th December, 2004 and the appellant submitted that the defendants should have been directed to file a defence by 31st January, 2005.
The Notice of Appeal details the history of the proceedings. Although the summary is lengthy and may not be complete, I am content to adopt it for present purposes:-
“2.1.The summons in these proceedings was filed on 13 September 2002.
2.2.The summons in these proceedings was served on 20 September 2002.
2.3.On 27 November 2002 upon the application of the defendants, the learned Master had extended the time for the defendants to file and serve a defence until 23 December 2002.
2.4.The defendants failed to file a defence as directed.
2.5.By notice for specific directions dated 21 February 2003 the defendants sought an order that the plaintiff make discovery prior to the defendant being required to file a defence.
2.6.On 8 October 2003 the learned Master directed that the plaintiff make discovery prior to the defendants filing a defence.
2.7.The plaintiff made discovery as follows:
2.7.1.List of documents filed on 14 October 2003.
2.7.2.Further list of documents filed on 4 November 2003.
2.7.3.Supplementary List of Documents filed on 27 September 2004.
2.7.4.Affidavit of John Orr verifying discovery by the plaintiff sworn and filed on 27 September 2004.
2.8.The defendants have failed to inspect any of the discovery made by the plaintiff.
2.9.The plaintiff filed an amended statement of claim on 15 October 2003
2.10.By notice for specific directions dated 18 February 2004, the defendants applied to strike out the amended statement of claim.
2.11.On 13 April 2004 the learned Master struck out the amended statement of claim and granted leave to the plaintiff to file a further statement of claim.
2.12.On 18 June 2004 the plaintiff filed a further amended statement of claim.
2.13.On 6 September 2004 the learned Master directed the defendants to inspect the plaintiff’s discovery and to file and serve on or before 19 November 2004 any documents, including affidavits upon which they wish to rely in relation to any complaints concerning the further amended statement of claim and the plaintiff’s discovery. On the said occasion, the learned Master set down for argument all outstanding issues as to the further amended statement of claim and the plaintiff’s discovery on 7 December 2004.
2.14.The defendants did not comply with the said direction of the learned Master.
2.15.On 1 December 2004 the defendants’ solicitor communicated to the Court by letter advising that the said directions had not been complied with on the grounds of the ill health of the defendants’ solicitor and the second defendant.
2.16.On 7 December 2004 at a hearing before the learned Master, the plaintiff sought the filing of a defence. The learned Master indicated his view was that a defence ought to be filed, subject to his satisfaction by affidavit that the second defendant was in sufficient health to provide instructions.
2.17.On 13 December 2004 the second defendant deposed by affidavit as to her illness during the period from August 2004 to 28 October 2004, and that, inter alia,:
2.17.1.On 28 October 2004 she underwent surgery.
2.17.2.Following surgery she was in hospital for four days.
2.17.3.She had been medically unfit to discuss the action until 13 December 2004.
2.17.4.She returned to work on 13 December 2004.
2.18.On 17 December 2004 the plaintiff sought a direction that the defendants file a defence, which direction was refused by the learned Master.
Before proceeding further, I note this appeal is brought as of right pursuant to s 43 of the District Court Act 1991 and District Court Rule 97.01. For this appeal to succeed, there is no need for the appellant to show error as in the case of a conventional appeal. As part of Rule 97.01 provides, “....the Judge may exercise his own discretion without regard to the manner in which it was exercised in the decision, order or direction appealed against”. (See O’Brien Lovrinov Crafter Pty Ltd v Corradini & Anor [1999] SASC 159 (Martin J).)
Allegations of the plaintiff
It is only fair to the defendants to observe that the plaintiff has made a number of attempts to file an adequate Statement of Claim. An initial Statement of Claim was re-worked without being formally struck out, but an Amended Statement of Claim was struck out on 13th April, 2004. The Further Amended Statement of Claim was filed on 18th June, 2004.
It is to that Further Amended Statement of Claim that the plaintiff asks that a defence be ordered to be filed. I also note that this Statement of Claim is subject to an application that it be struck out. The argument on that application is due to be heard on 1st March, 2005. It is no part of my function on this appeal to pass judgment on the adequacy of this Statement of Claim. I do no more than treat it as a statement of the case for the plaintiff.
Whatever shortcomings the Further Amended Statement of Claim may have, the basic allegations are fairly straightforward. The plaintiff was in the business of producing, marketing and selling dairy products to customers both directly and through a network of distributors. In early 1994, the plaintiff, by one of its earlier legal forms, claims to have entered into an agreement with the defendants whereby it agreed to supply dairy products on credit to the defendants and they agreed to act as distributors of those products. The legal entity by which the plaintiff operated changed a number of times over the ensuing years by virtue of mergers/takeovers within the industry, but the plaintiff maintains that the agreement with the defendants continued until about April, 2001. There is now an allegation of novation and assignment The plaintiff says that it supplied dairy products to the defendants pursuant to this agreement (and variations of it) for about seven years.
It is alleged that the defendants carried on business under the name of Hahndorf Milk Supply. It is further alleged that the defendants have not paid on all the invoices sent by the plaintiff and that a particular amount remains outstanding. In other words, the cause of action is simply one in debt. It seems clear that the plaintiff acknowledges that some payments were made from time to time by the defendants.
As noted, this Further Amended Statement of Claim is the subject of an application to strike it out, argument on that being fixed for the near future. An earlier Amended Statement of Claim was struck out by Master Norman. As with the earlier Statements of Claim, the attack on the Further Amended Statement of Claim is that it fails to disclose a proper plaintiff, a proper defendant and a proper cause of action. There is also an allegation that proper discovery has yet to be made notwithstanding that discovery on oath has been made.
During the course of argument on the appeal, it became evident that the defendants were saying that another plaintiff should be added (TP25).
I note a number of matters from the history as set out in the Notice of Appeal above. Paragraph 2.7 refers to the discovery effected by the plaintiff, culminating, on 27th September, 2004, with the swearing and filing of discovery on oath.
Paragraph 2.8 refers to the fact that the defendants have failed to inspect any of the discovery made by the plaintiff. Mr Robert Sallis, who has appeared for the defendants at all stages, confirmed on the appeal that that remained the position, but said he had been supplied with copies of the main documents referred to in the Further Amended Statement of Claim.
As mentioned, the defendants continue to maintain that the plaintiff has not made full and adequate discovery and propose to file affidavits in support of that position.
As noted earlier, the Further Amended Statement of Claim was filed on 18th June, 2004. Paragraph 2.14 notes the defendants did not comply with the directions of the learned Master in paragraph 2.13. The failure of the defendants to so comply was adequately explained by affidavits from one of the defendants and the defendants’ solicitor. Essentially, both the second defendant and the solicitor were seriously ill (both required surgery) during the period covered by the Master’s order. No proper criticism could be levelled at the defendants for a failure to adhere to the Master’s order in that period. However, as appears from those affidavits, the second defendant was in a position to give instructions, and the defendants’ solicitor was in a position to receive those instructions, prior to Christmas 2004. In fact, the solicitor’s affidavit contained a request that the defendants be given until 31st January, 2005 to comply with the orders of the Master.
That leads me to the matter of instructions generally. During the hearing of the appeal it became abundantly apparent that, to that point, no instructions or very little by way of instructions have been taken from the defendants on the Further Amended Statement of Claim (TP65-67). Mr Sallis expressed it in this way (TP67):-
“....So what I am really saying is, coming back to your original question, do we concede that the defendant is trying to trade as Hahndorf Milk Supply. I put this to your Honour: this goes hand in hand, until the court says it is satisfied that the plaintiff has discovered all proper documents, we are not going to inspect their documents, and until the plaintiff comes up with a statement of claim that the court says stands, there is no point in taking piecemeal instructions on questions like that. Yes, it’s a very important question, but where does it take us to? We only have some pieces of the jigsaw puzzle. What comes first is, does the plaintiff have a statement of claim that stands? If it hasn’t, we shouldn’t have to respond to any of that.”
I agree that, being required to take instructions in a piecemeal fashion because of an inadequate Statement of Claim, is not efficient. However, unless the plaintiff has simply got the wrong defendant, a defendant should obtain some instructions to thereby focus complaints on genuine disputes and not simply make every complaint that is theoretically possible. After all, pleadings are meant to be a means to an end, not an end in themselves.
I note again that an extension was sought until 31st January, 2005 to comply with the orders of the Master.
Notwithstanding the imminent challenge to the Further Amended Statement of Claim, in my view the time has come for the defendants to file a defence. If the defendants do not know what the plaintiff is talking about, let them say so. If they had no involvement with National Foods (or an earlier entity) or did not trade as Hahndorf Milk Supply or did not receive milk products, then the pleading will be quite simple. If they traded with another entity or entities, then again the pleading is straightforward. If the essential allegation is true, but they say all monies have been paid, the defence should be short. I do not have in mind what may sometimes be referred to as an “holding defence”.
In making these comments, I have not lost sight of a number of things.
First, the Further Amended Statement of Claim may also be struck out. The defendants would then get their costs on that argument and for being forced to file a defence. It is not intended that the defendants’ rights be prejudiced. (If the plaintiff eventually succeeds even though the Further Amended Statement of Claim is also struck out, a real question would arise for the trial Judge as to the date from which pre-judgment interest should run.)
Secondly, if there are amendments to be made to the Further Amended Statement of Claim, then, obviously, if the need arose, leave would be given to file an Amended Defence.
Thirdly, I am all-too-conscious of the policy considerations that militate in favour of the defendants not being required to file a defence. It would fragment the system generally if every disgruntled litigant could appeal in this fashion. However, here there have been substantial delays (mostly caused by the plaintiff) and the defendants should now be in a position to file a defence within a modest period of time. Their other rights remain.
I would allow the appeal and order that the defendants file and serve a Defence to the Further Amended Statement of Claim by Friday, 11th March, 2005.