| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : OPALSWAN PTY LTD -v- HARTZ & ORS [2004] WADC 207 CORAM : ACTING PRINCIPAL REGISTRAR KINGSLEY HEARD : 12 OCTOBER 2004 DELIVERED : 26 OCTOBER 2004 FILE NO/S : CIV 1052 of 1998 BETWEEN : OPALSWAN PTY LTD (ACN 061 164 510) Plaintiff
AND
CLIVE RAYMOND HARTZ
First Defendant
ANTHONY JAMES GRIST
Second Defendant
CAROLYN ANNE HARTZ
Third Defendant
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Catchwords:
Application to substitute statement of claim - Proposed statement of claim raises allegation of deceit - allegations unparticularised and wanting in material fact
Legislation: Nil
Result: Application dismissed - Leave refused to file a fresh substituted statement of claim Representation:
Counsel:
Plaintiff : Mr J A Davies
First Defendant : Mr A Power
Second Defendant : Mr A Power
Third Defendant : Mr A Power
Solicitors:
Plaintiff : Davies & Co
First Defendant : Dean & Rowick
Second Defendant : Dean & Rowick
Third Defendant : Dean & Rowick
Case(s) referred to in judgment(s):
Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205
Case(s) also cited:
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Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470
Adour Holdings Pty Limited (In Liquidation) v Commonwealth Bank of Australia (1991) ATPR 41-147
Bateman v Slatyer (1987) 71 ALR 553
Belmont Finance Corporation Ltd v Williams Furniture Ltd & Ors [1979] 1 Ch 250
Bisset v Wilkinson & Anor [1926] AC 177
Bright v Sampson and Duncan Enterprises Pty Ltd (1985) 1 NSWLR 346
Bromley v Ryan (1956) 99 CLR 362
Byrd v Nunn (1877) 7 Ch D 284
Campbell v Metway Leasing Ltd (1998) ATPR P41-630
Charlie Carter Pty Ltd v SDAEA (Western Australia) (1987) 13 FCR 413
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40
Dare v Pulham (1982) 148 CLR 658
Davie v New Merton Board Mills Ltd [1959] AC 604
Davy v Garratt (1878) 7 Ch D 473
Derry & Ors v Peek (1889) 14 App Cas 337
Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152
Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410
Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167
Ex parte Burrell (1866) 1 Ch D 537
Lawrance v Lord Norreys & Ors (1890) 15 App Cas 210
Multigroup Distribution Services Pty Ltd v TNT Australia & Ors (1996) ATPR P41-552
Wallingford v Mutual Society (1880) 5 App Cas 685
White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169
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1 ACTING PRINCIPAL REGISTRAR KINGSLEY: This is the plaintiff's application for leave to further amend the statement of claim. The application is dated 11 February 2000.
2 The action was commenced in March 1998 with the plaintiff claiming $137,000 against the defendants for breaches of duty under s 232 of the Corporations Law. In June 1998 the plaintiff files a statement of claim and in July 1998, at a case management hearing, I ordered that the plaintiff, within 14 days, file and serve an amended statement of claim. The amended statement of claim was filed on 24 July 1998. 3 In September 1998 Registrar Hewitt, on the defendants' application, ordered that the amended statement of claim be struck out. In August 1998 the plaintiff files an application for leave to amend the statement of claim together with a minute of proposed re-amended statement of claim. The application is heard in April 1999 and the application is dismissed. 4 In June 1999 Registrar Hewitt on the defendants' application, orders that unless the plaintiff files and serves a substituted statement of claim within 14 days the action be struck out. The plaintiff files a substituted statement of claim within time but now raises a cause of action in deceit. Upon the defendants' application to dismiss the action or alternatively to strike out the statement of claim dated June 1999, Registrar Hewitt in February 2000 orders that the plaintiff have leave to amend the endorsement of writ to include a claim and deceit. The statement of claim filed in June 1999 is struck out. The plaintiff was ordered to file a serve a minute of proposed substituted statement of claim within 21 days. The plaintiff filed a minute of proposed substituted statement of claim dated 3 December 2003. 5 The defendants oppose the plaintiff's application under a number of heads: 1. There is no explanation for the delay nor is there any affidavit evidence relating to the question of leave. 2. The statement of claim is wholly deficient because the essence of an action of deceit being honesty, the plaintiff has not pleaded any material facts to establish the elements of dishonest behaviour on the part of each defendant. 3. The defendant also makes a general attack on various paragraphs of the pleadings.
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6 The plaintiff's pleading dated 3 December 2003 pleads a number of agreements and representations made by Dean Douglas Scott who was Lending Manger for Commercial & General Acceptance Pty Ltd ("CAGA"). The issues centre around the financing and acquisition of heavy earthmoving machinery. The plaintiff pleads that in August 1993 the plaintiff and one Caratti – Caratti being an agent of the plaintiff – were interested in purchasing heavy machinery from a company known as Productive Parts Corporation Pty Ltd. In August 1993 but prior to 4 August 1993 Scott advises Frederick Wayne Johnson ("Johnson"), one of the directors of the plaintiff that CAGA had authority from Productive Parts Corporation Pty Ltd and a financier to arrange the sale of the heavy machinery. The plaintiff then pleads that in or about the end of August 1993 the plaintiff through Johnson entered into an agreement with Scott for the sale and financing of the heavy machinery.
7 The plaintiff pleads in September 1993 the first defendant instructed Scott to advise Johnson that the sale of the heavy machinery could only proceed if the price was increased and fee paid to CAGA. Johnson agreed to those terms and a second agreement came into existence. 8 In week commencing 20 September 1993 the plaintiff pleads that in a course of several telephone conversations Scott represented to both Johnson and to Caratti that the second agreement was concluded and possession of the heavy machinery would be given to the plaintiff within a few days. 9 In October 1993 the plaintiff pleads Scott on the instructions of the defendants, advised Caratti that there were insufficient funds to finance the whole of the heavy machinery but the heavy machinery other than the 089 scraper would be financed, within the week. The plaintiff pleads Caratti advised Scott that the plaintiff agreed to the variation of the second agreement, provided the plaintiff immediately had possession of the heavy machinery other than the 089 scraper, and that 089 scraper would be provided within a few days. Scott represented that those conditions would be accepted. The representations were repeated by Scott on the instructions of the defendants, to Caratti and Johnson on 1 October 1993 and again on 2 October 1993 that possession of the 089 scraper would be given to the plaintiff in a few days. On 3 October 1993 possession of the heavy machinery, other than 089 scraper was given to the plaintiff. 10 The plaintiff pleads that on or about 5 to 8 October 1993, Scott acting in accordance with instruction of the defendants given by the first defendant, assured Caratti that settlement on the 089 scraper would take
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place on 8 October 1993. By 3 November 1993 Scott, again acting on instruction of the defendants given by the first defendant, advised Caratti that the plaintiff would have possession of the 089 scraper by 9 November 1993. 11 On 3 November 1993 Scott on instruction from the defendants, made demand that the plaintiff pay to a company the sum of $7,427.08 to ensure that finance for the 089 scraper was approved immediately. On 4 November 1993 the plaintiff made a payment to CAGA as agent for the company. However, on 15 November 1993 Scott on instructions from the defendants, advises Caratti that a new agreement was necessary and CAGA would now be financing the purchase of the 089 scraper. On 18 November 1993 the plaintiff pleads that Scott, acting in accordance with instruction from the defendants given to him on or about that date by the first defendant, advised Caratti that the documentation for the financing of the heavy machinery was complete and the plaintiff was now in a secured position to pay for the spare parts needed to put the 089 scraper into working condition. 12 On 19 November Caratti advised Scott that the plaintiff intended to purchase spare parts, and Scott on instructions from the defendants, assured Caratti the plaintiff was free to take possession of the 089 scraper and perform repairs to it. The plaintiff pleads that Scott on instructions from the defendants, confirmed the conversation that Scott had with Caratti on 18 November 1993, with Johnson on 19 November 1993. 13 By reason of the matters outlined above the plaintiff pleads that these representations made by Scott constituted a deceit by the defendants.
The action of deceit 14 The essence of an action of deceit is dishonesty. It is not enough to show that the representations relied on were made without any reasonable ground for believing the representations to be true, and that, in fact, it was false. For a claim to succeed it must be proved that the representations were made dishonestly. In Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205 at p 211; Viscount Maughan comments that to sustain a common law action of deceit four things must be established. There must be a representation of fact made by words or by conduct and includes a case where the defendant has manifestly approved and adopted a representation made by some third person. Secondly, the representation must be made with the knowledge that it is false, and it must be wilfully false, or at least made in the absence of any genuine belief that it is true. Thirdly, the representation must be made (Page 7)
with intention that it be acted upon by the plaintiff and finally, it must be proved that the plaintiff has acted upon the false statement and has sustained damages. 15 In my opinion, particularly where a pleading is based on dishonesty or fraud, the material facts must be stated to show distinctly that a fraud is alleged. The pleading must contain precise and particularised allegations of facts and circumstances leading to the reasonable inference that it was the alleged fraud that led to the damage complained. In my opinion it is not permissible for fraud to be inferred from the facts pleaded. 16 The plaintiff's counsel submits that the function of pleadings of particulars is to ensure a fair trial by putting the opposite party on notice of the case to be met. The plaintiff's counsel submits that the proposed minute sets forth all the necessary information with respect to the representations. The plaintiff's counsel cites authorities showing a shift towards pleadings at a level of generality which excuses the failure to plead every fact, material to the cause of action sued upon. Whilst the case is cited by the plaintiff's counsel do lead in that direction, it can only be in appropriate cases where that generality is allowed. In my opinion, a plea based on dishonesty is never one that falls into a category of generality. 17 The plaintiff submits that the defendants are well aware of the case that they have to meet. In the Federal Court there were proceedings by the present plaintiff against CAGA. The amended substituted statement of claim filed in June 2000 was virtually identical to the statement of claim filed in the Federal Court proceeding. Thus plaintiff's counsel says the defendants know the case they have to meet. 18 The Federal Court proceeding involved a different cause of action and different parties. In any event, the defendants in this action are entitled to a properly pleaded case against each of them. 19 The minute refers to a series of representations made by Scott to various parties associated with the plaintiff. There are no particulars of the alleged falsity of the representations nor is there any linkage between the alleged falsity of the representations made by Scott and each of the defendants. The only link is the assertion the representation was made on instruction from the defendants. 20 In my opinion each defendant is entitled to know, with particularity, what the dishonesty is alleged of that defendant. It is only at that point that the individual defendant knows the case that it has to meet. The (Page 8)
particulars provided by the plaintiff in par 3 and par 56 of the minute fall well short of a necessary particular to establish the plea of deceit. 21 In my opinion there are no material facts to support a plea of deceit against each defendant and the pleadings simply implies that each of the defendants are guilty of deceit by way of association. 22 In its written submission dated 7 October 2004 and the supplementary submissions dated 12 October 2004 the defendants object specifically to certain paragraphs, on the issue of deceit and because the specific paragraphs are embarrassing. I will deal with the issue of embarrassment by reference to each paragraph.
Paragraphs 6, 7 & 9 23 These paragraphs imply or assume ownership of the heavy machinery but there is no plea as to who owned the heavy machinery. Without the issue of ownership being pleaded the plea that Scott is authorised to conduct the sale on behalf of the owner is embarrassing. There is no proper basis for that plea.
Paragraphs 9 & 10 24 Paragraphs 9 and 10 refer to the first agreement. The defendants submits that Nicholson J in the Federal Court proceedings decided that the first agreement was not made out and this issue can not be relitigated. In regard to that point whilst the claim in the Federal Court arose out of the same factual circumstances, the cause of action is different and the parties are different. I am of the opinion that it is not necessarily an abuse to plead the first agreement. However, the defendants' submission that the agreement is presumably an agreement between the plaintiff and CAGA but this is not specifically stated is well founded and for that reason par 9 is embarrassing.
Paragraph 11 25 This paragraph pleads an oral contract referred to as the second agreement. There is no pleas to who the parties are to that agreement. In my opinion par 11 is embarrassing and ought to be struck.
Paragraph 13 26 Paragraph 13 pleads that in relation to the second agreement, Scott advised Johnson that this agreement had been confirmed by the vendor. There is no definition of who is the vendor. Accordingly, it is unclear (Page 9)
whether the plaintiff pleads that Scott advised Johnson of the sale of the heavy machinery had been confirmed by the liquidator of Productive Parts Corporation Pty Ltd or someone else. Paragraph 13 is embarrassing.
Paragraph 20 27 The defendants submits to that the expression concluded used in par 20 is vague and ambiguous. In my opinion there is no ambiguity sufficient to embarrass the defendants in this paragraph. The plaintiff has pleaded the substance of the representation and, in my opinion, that is enough.
Paragraphs 21, 22, 23 & 27 28 The defendants submits that the third representation was held not to be misleading and deceptive in the Federal Court proceeding insofar as it related to the heavy machinery other than the 089 scraper. For the reasons already mentioned, I am of the opinion that this plea is not an abuse. 29 However, I accept the defendants' submissions that there is no plea in par 22 that the defendants or any one of them were involved in the fourth representation. As it stands this paragraph has no relevance to the cause of action in deceit.
Paragraph 29 30 Paragraph 29 is in my opinion irrelevant to the present cause of action. It has no bearing in the action of deceit nor to the damages claimed and ought to be struck.
Paragraph 38 31 This paragraph refers to conversations in November 1993 between Johnson and Scott whereby the matter is pleaded in par 36 were repeated by Johnson and the assurances was pleaded in par 37 were again given by Scott. The defendants submits that the paragraph does not make it clear to whom it is alleged the assurance were again given by Scott. The pleading makes clear that it refers to the conversation on 19 November 1993 and that the assurance given by Scott to Johnson. I am of the opinion the defendants are not embarrassed by this plea.
Paragraph 55 32 Paragraph 55 pleads that as a result of the matters pleaded in pars 7-54 the plaintiff has suffered a loss and damage. The particulars refer to the residual value of the 089 scraper less the original purchase (Page 10)
price together with a fee paid to CAGA to arrange finance and the cost of repairs of the 089 scraper. The total claim by the plaintiff is $89,000 but the defendants are left to assume how the sums are made up. 33 The figure of $155,000 refers to a sum paid by the plaintiff to Productive Parts Corporation Pty Ltd to settle litigation and complete the purchase of the 089 scraper. The particulars are embarrassing to the defendants as they cannot determine the purchase price of the 089 scraper. There is a reference to the residual value of the 089 scraper but there is no particularisation as to how the amount $222,353 is made up. I am of the opinion then that par 55 and par 60 failed to proper particularise the loss.
Delay 34 The application for leave to amend the statement of claim is not supported by any affidavit material. There is no evidence given as to why there has been such a considerable delay between the statement of claim being struck out and leave to be given to file a further substituted statement of claim and the present minute. 35 The plaintiff's counsel submits that the defendants filed an appeal in 2000, whilst the Registrar's orders that the statement of claim filed June 1998 be struck out were still executory. Her Honour Judge O'Brien dismissed the appeal in November 2000. There the matter lay dormant until the plaintiff filed a notice of intention to proceed on 8 July 2003. On 17 November 2003, the plaintiff requested the matter be put before Registrar Hewitt for orders consequential to Her Honour Judge O'Brien's judgment. 36 In the context of an action of deceit in my opinion the issue of delay becomes one of importance. This is particularly so when the events concern, for the most part, oral conversations in the latter part of 1993. In my opinion it is incumbent on the plaintiff to proceed, in an action for deceit with some expedition. Where that expedition is lacking, then the delay must be explained. 37 I am of the opinion that the plaintiff has failed to give any explanation for the delay in prosecuting this application There is nothing before me to engage my discretion to grant leave.
Leave to bring in a further substituted statement of claim 38 The issues giving rise to the plaintiff's plea in an action of deceit arise in 1993. The pleading is one primarily of conversations by Scott to principals of the plaintiff or their agent. The action will come a hearing in (Page 11)
2005 and the events will then be 12 years old. It is clear then that there will be real issues in terms of the memory of the various key players. 39 Pleas of dishonesty and fraud on the part an individual ought, in my opinion, to be dealt with reasonably quickly. In this case the content of the alleged dishonesty is principally in oral representations in 1993. In 2000 the plaintiff sought to amend the endorsement of the writ to provide a cause in deceit. Whilst an endorsement is not a pleading raising that allegation of fraud in the endorsement must mean the plaintiff's counsel has reasonably credible material which establishes a prima facie case of fraud. In my opinion it is not good enough to wait three years, without explanation, to raise scant, unparticularised, and bald allegations that each defendant was involved in a deceit. 40 I am of the opinion that this action is one in which the defendants can legitimately say "enough is enough". I am of the opinion that leave ought not to be given to file a fresh substituted statement of claim. 41 I will hear counsel on the form of orders and costs. |