Personalised Tuition Services Pty Ltd v Hatziokostis - [2001] WASC 30

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: PERSONALISED TUITION SERVICES PTY LTD & ANOR -v- HATZIOKOSTIS & ANOR [2001] WASC 30

CORAM: HASLUCK J

HEARD: 11 DECEMBER 2000

DELIVERED : 12 FEBRUARY 2001

FILE NO/S: CIV 1091 of 1999

BETWEEN: PERSONALISED TUITION SERVICES PTY LTD
First Plaintiff
KIM PETER SOIA
Second Plaintiff
AND
GEORGE HATZIOKOSTIS
First Defendant
ARUDKUMARAN BALARATNASINGHAM
Second Defendant

Catchwords:

Pleading - Application to strike out - Copyright and restraint of trade issues - Defamation issues as to meaning and justification - Turns on own facts

Legislation:

Copyright Act 1968 (Cth)

Supreme Court Rules, O 21 r 5

Result:

Application for leave to amend refused

Representation:

Counsel:

First Plaintiff                :     Mr J D MacLaurin
Second Plaintiff            :     Mr J D MacLaurin
First Defendant             :     Mr A S Stavrianou
Second Defendant         :     Mr A S Stavrianou

Solicitors:

First Plaintiff                :     Bennett & Co
Second Plaintiff            :     Bennett & Co
First Defendant             :     Arthur Metaxas
Second Defendant         :     Arthur Metaxas

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

General Steel Industries Inc v Commissioner for Railways NSW (1964) 112 CLR 125
Polly Peck (Holdings) Plc v Trelford [1986] QB 1000
Unilever plc v The Proctor & Gamble Co (1999) 2 All ER 691

Case(s) also cited:

Nil

HASLUCK J : This is an application by the defendants for an interlocutory order that the defendants have leave to file and serve an amended defence and counterclaim in terms of a minute or proposed amended defence and counterclaim dated 30 June 2000.
The writ of summons in this matter was issued on 28 January 1999. The nature of the plaintiffs' claim is reflected in a minute of amended statement of claim dated 15 March 2000. The plaintiff company, Personalised Tuition Services Pty Ltd, carries on the business of the provision of private educational tuition to primary and secondary school students and university students. The second plaintiff, Kim Soia, is a director of the plaintiff company and, together with the plaintiff company, is the legal and beneficial owner of certain intellectual property used in the business. The defendants are former employees of the business, having been employed as casual tutors.
The plaintiffs say that as a consequence of written contracts of employment, the defendants each separately covenanted that in relation to any materials used for the purpose of the services provided by the business which were written by the defendants copyright in the same was to be vested in the plaintiffs. The plaintiffs allege that in mid‑1998 the defendants distributed written materials, the copyright to which was vested in the plaintiffs, without permission and thereby infringed provisions of the Copyright Act 1968 (Cth).
The plaintiffs say further that subsequent to the cessation of their employment with the plaintiff company, in November 1997 the defendants established a partnership trading under the name "TEE Taskforce" and proceeded to solicit custom from clients of the plaintiff company contrary to covenants contained in their contracts of employment. The defendant allegedly provided tuition services at seminar rooms in the Alexander Library.
The plaintiffs say further that by letter dated 12 July 1998 the defendants, or alternatively, the first defendant, published a letter containing various criticisms of the plaintiffs and accusing the second plaintiff of intimidation tactics. The words complained of are said to defamatory of the second plaintiff in that in their natural and ordinary meaning the words meant that the second plaintiff was a bully, particularly of young people. It seems from the statement of claim that this letter led to correspondence between the first defendant and the plaintiffs' solicitors. The correspondence is said to have given rise to further defamations of the second plaintiff.
The plaintiffs seek an account of profits and relief by way of injunction with a view to requiring the defendants not to breach the covenants of employment and to deliver up materials infringing the plaintiffs' copyright. The plaintiffs also seek damages in respect of the alleged defamations, including aggravated and exemplary damages.
It is apparent from the defendants' minute of proposed amended defence and counterclaim that the defendants deny liability. I will turn to the adequacy and details of the defendants' proposed pleading in a moment. It seems, however, that the defendants admit the contracts of employment, but deny that they covenanted as alleged. They wish to assert that the materials they prepared for the assistance of students were simply summaries, with the result that copyright did not attach to the same. They admit the existence of covenants whereby they would not conduct a competing business for a period of 24 months after the termination of their employment, but assert that provisions to this effect are void as being an unlawful restraint on trade.
As to the defamation claims, the defendants are prepared to admit that the first defendant delivered the letter dated 12 July 1998 to a booking officer at the Alexander Library. They deny that the first defendant's letter was defamatory of the second plaintiff and say that in its natural and ordinary meaning it simply meant that the second plaintiff on one occasion had spoken to a group of students in a threatening and intimidating manner. Alternatively, if the meaning contended for by the plaintiffs is accepted such a meaning "was true". They say that the first defendant's letter to the plaintiffs' solicitor dated 8 September 1999 was a without prejudice communication with the result that the plaintiffs "are not entitled to plead against the first defendants the matters arising therefrom". The defendants deny that they are liable to the plaintiffs in defamation or that the plaintiff is entitled to the relief sought.
By their proposed counterclaim, the defendants allege that on or about 10 July 1998 at the Alexander Library, Northbridge, "the plaintiff" spoke defamatory words of the second and first defendants to four students then receiving tuition from the first defendant, that is to say: "Arul and George and a bunch of thieving, dirty dogs. You'd better stop having tuition with them because I'm suing them." The defendants say that these words in their natural and ordinary meaning meant that the defendants had stolen property of the plaintiffs and legal action was being taken to retrieve the plaintiffs' property so stolen.
The plaintiffs oppose the defendants' application for leave to amend in terms of the relevant minute. Counsel for the plaintiffs recognises that by O 21 r 5 of the Supreme Court Rules the Court may allow any party to amend his pleading. Counsel for both parties recognise that the Court will not usually grant leave to amend a pleading into a form which ought to be struck out: Seaman, Civil Procedure at par 21.5.4. Accordingly, many of the submissions at the hearing before me were directed to issues of the kind usually arising under O 20 r 19, that is to say, whether the defendants' minute was in a form that might prejudice, embarrass or delay the fair trial of the action and, as to the defendants' defamation claim, whether the proposed counterclaim disclosed a reasonable cause of action or otherwise whether it might prejudice, embarrass or delay the fair trial of the action. Counsel for both parties accepted that for the purposes of a striking‑out application, the Court generally proceeds upon the basis that the facts alleged in the disputed pleading are accepted as true.
Counsel for the plaintiffs commenced by criticising the sufficiency of the plea reflected in par 3, par 4 and par 5 of the defendants' minute. It is apparent upon a fair reading of these paragraphs that the defendants, in essence, intended to assert that they were not responsible for the alleged infringement of copyright because the materials allegedly distributed by the defendants were summaries only and not being original material were not subject to any copyright vested in the plaintiffs.
Counsel for the plaintiffs submitted that the plea was vague and embarrassing, first because the defendants had simply pleaded the effect of an entire contract without any reference to the effect of specific terms and, second, because the circumstances in which the plaintiffs would obtain copyright under the contract were not made clear.
On a striking‑out application, care must be exercised to ensure that a party is not improperly deprived of his or her opportunity to have the case tried by the appointed tribunal. A plea will generally only be struck out if it is so clearly untenable that it cannot succeed: General Steel Industries Inc v Commissioner for Railways NSW (1964) 112 CLR 125. A plea that is not framed with precision so that it gives rise to ambiguity will be struck out if it will cause delay or embarrassment.
In the circumstances of the present case, I am not persuaded that the defendants' plea concerning the alleged infringement of copyright should be struck out. The defendants could undoubtedly have provided greater detail in formulating their defence to this aspect of the claim. Nonetheless, to my mind, the effect of par 3, par 4 and par 5 is to convey to the plaintiffs with sufficient clarity that the materials in question are said to be summaries only, and thus not being original material, are not subject to any copyright vested in the plaintiffs. The plaintiffs have been acquainted with the case they have to meet at trial and resolution of the issue will depend upon the evidence presented at trial.
The plaintiffs attacked the adequacy of the plea in par 7 of the defendants' minute that certain provisions relied on by the plaintiffs were "an unlawful restraint on trade and void and further that the effect of such terms is to render the contracts void."
Counsel for the plaintiffs submitted that the plea in this form was objectionable in that the defendants had failed to plead sufficient material facts to establish in what way the provisions complained of were said to be unreasonable. The plea was simply the expression of a conclusion of law. There was no plea of material facts as to whether the clauses in question were said to be unreasonable in regard to geography, time, or the extent of the prohibited competitive acts.
I consider that the plea in par 7 of the defendants' minute should be struck out on the grounds that it is embarrassing for the reasons given by the plaintiffs. In my view, the defendants are required to set out the exact basis upon which it is said that there is an unlawful restraint on trade and if any statutory provision is relied upon by the defendants in regard to this aspect of the matter, then such a provision must be pleaded. The plaintiffs are not presently in a position to know the nature of the case being advanced against them.
The plaintiffs challenged the adequacy of par 11 of the defendants' minute concerning the first defendant's delivery of a letter to a booking officer of the Alexander Library. Counsel for the plaintiffs submitted that the pleading was internally inconsistent and therefore embarrassing because, on the one hand, the plea contained a denial that the defendants sent a letter, but, on the other hand, there was also an admission that a letter had been delivered.
The distinction between a letter being sent and a letter being delivered may be a very fine distinction, but I am not satisfied that the plea should be struck out as embarrassing. It is apparent from par 11 of the defendants' minute that a concession is made that a letter was delivered by hand. To my mind, the plaintiffs are thus given sufficient notice of the case they have to meet.
The plaintiffs challenged the adequacy of par 12 of the defendants' minute on the grounds that the relevant principles of law concerning the pleading of an alternative meaning had not been observed and upon the grounds that it was insufficient for the defendants simply to assert that, in any event, the implication alleged by the plaintiffs, if found to be the meaning of the words in question, was true.
The rule is that the defendant is not obliged to specify in his pleading what the words complained of mean, but if he wishes to establish that the statement has a defamatory meaning different from that contended for by the plaintiff, and that the statement is true in that different sense, then he must frame his plea of justification so as to inform the plaintiff and the Court precisely what meaning it is he will seek to justify: Gatley on Libel and Slander (9th ed) par 11.12.
The same learned author goes on to say at par 27.7, while reviewing the principles emerging from Polly Peck (Holdings) Plc v Trelford [1986] QB 1000, that in giving particulars in support of his plea, the defendant is entitled to cull some or all of the facts and matters from parts of the publication of which the plaintiff has chosen not to complain, provided that he does not attempt to justify separate and distinct defamatory statements contained in the publication, which do not share a common sting with the defamatory allegations contained in the words complained of. In all cases where the defendant pleads justification of the words in their natural and ordinary meaning, he must make clear to the plaintiff what is the case which he is seeking to set up. The particulars themselves may make this quite clear, but, if they are ambiguous, then the situation must be made unequivocal.
Counsel for the plaintiffs submitted also that par 23 of the defendants' minute was defective because it is said simply that the defendants' personal and business reputations have been seriously damaged and that they have suffered distress and embarrassment. Counsel argues that in the absence of any plea that the defendants have been brought into hatred, ridicule and contempt or have been lowered in the estimation of right‑minded people, the defamation alluded to in the counterclaim has not been pleaded out in the proper form.
In my view, the defendants have not pleaded a sufficient causal link to the defamation complained of and damage to reputation. It is not sufficient to speak simply of distress and embarrassment. It is clear that the defendants' minute will have to be revised and I therefore consider that this matter should be attended to also. I will strike out par 23.
In the present case, I am persuaded that the criticisms of par 12 advanced by counsel for the plaintiffs are valid. The alternative meaning apparently contended for by the defendants does not appear to cover the same ground as the imputation being advanced by the plaintiffs. Further, and more importantly, although it seems that the defence of truth or justification is only advanced by the defendants in respect of the meaning contended for by the plaintiffs, no particulars are provided and the plaintiffs are therefore not in a position to know the nature of the case to be addressed at trial. I note also that the defendants use the word "implication" rather than the word "imputation" and it seems to me that this, too, is embarrassing. Accordingly, I am not prepared to allow leave to amend in the terms proposed because a pleading in that form is defective and should be struck out.
In regard to par 14 of the defendants' minute, the plaintiffs submit that it is confusing and embarrassing for the defendants simply to assert that a letter complained of by the plaintiffs was a without prejudice communication and that, in any event, the words complained of bore an alternative meaning. I am satisfied that this plea is defective for the reasons advanced by the plaintiffs. If the reference to a without prejudice letter is made with a view to setting the scene for a defence by way of qualified privilege then, of course, more detail is required in order to establish that the publication complained of was made on a privileged occasion. If, on the other hand, for reasons which are not immediately apparent to me, the plea is of a different kind, namely, that no mention or use whatsoever can be made of the without prejudice communication, then it would be necessary to set out with particularity the nature of the dispute to which the without prejudice communication related: Unilever plc v The Proctor & Gamble Co (1999) 2 All ER 691. Further, in this paragraph also, one finds a bald assertion that the defendants will rely upon a defence that the words were true, but without any particulars being provided. Accordingly, in my view, this paragraph should be struck out as embarrassing.
Paragraph 16 of the defendants' minute contains, again, in relation to the correspondence between the defendants' and the plaintiffs' solicitors, an assertion that "the contents of the letter were true". For the reasons I have just given, in my view, this paragraph must be struck out also on the grounds that it is embarrassing because no particulars are provided.
Paragraph 21 of the defendants' minute contains the plea mentioned earlier that "the plaintiff" allegedly spoke certain defamatory words of the second and first defendants respectively to four students then receiving tuition from the first defendant. The reference to the plaintiff is presumably a reference to the second plaintiff, but that should be made clear. The persons to whom the words were allegedly spoken are not identified and it is not made clear in the pleading as to whether those who heard the words were in a position to understand that a reference to "Arul and George" was a reference to the defendants. The counterclaim sets up a plea in defamation by way of slander predicated upon the natural and ordinary meaning of the words, but in the absence of specific identification of the defendants by name, a question arises as to whether the defendants are obliged to plead by way of innuendo and thus identify the extrinsic facts required to support such a plea. Accordingly, I am persuaded that par 21 and par 22 of the defendants' minute should be struck out. I have already noted that par 23 will be struck out.
It follows from this review of the issues raised by the plaintiffs that in various important respects the defendants' minute is defective. The following paragraphs are to be struck out: 7, 12, 14, 16, 21, 22 and 23. The consequence is that I cannot allow leave to the defendants to amend in terms of their proposed minute and their application for leave to amend is refused accordingly. I will, however, allow to the defendants leave to replead. The defendants will be allowed leave to submit a further minute of proposed defence and counterclaim within 21 days. I will hear from the parties as to whether any further orders are required.