Redmond v Devonport Pty Ltd
[2004] WASC 176
REDMOND -v- DEVONPORT PTY LTD & ORS [2004] WASC 176
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 176 | |
| Case No: | CIV:1285/2004 | 19 JULY 2004 | |
| Coram: | MASTER NEWNES | 20/08/04 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Statement of claim struck out in part | ||
| B | |||
| PDF Version |
| Parties: | GAVAN ANDREW REDMOND DEVONPORT PTY LTD (ACN 009 437 049) ALBERT LAURENCE GERICK SHERLOCK BAY NICKEL CORPORATION LTD (ACN 008 942 809) |
Catchwords: | Practice and procedure Application to strike out statement of claim Turns on own facts |
Legislation: | Trade Practices Act 1974 (Cth), s 4, s 51AC |
Case References: | Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Joachimson v Swiss Bank Corp [1921] 3 KB 110 McKenzie v Albany Finance Ltd [2003] WASC 100 United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2002] NSWSC 1178 Wik Peoples v State of Queensland (1996) 187 CLR 1 Young v Queensland Trustees Ltd (1957) 99 CLR 560 Crestland Investments Pty Ltd v Parisi Holdings Pty Ltd [2004] WASC 57 Gardiner v Ray [1999] WASC 140 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Knowles v Roberts (1888) 38 Ch D 263 McLean v Lake Como Venture Pty Ltd [2003] QCA 562 Reading v R [1949] 2 KB 232 Ron Hodgson (Trading) Pty Ltd v Belvedere Motors (Hurstville) Pty Ltd [1971] 1 NSWLR 472 Searle v Western Australian Newspapers Holdings Ltd [2004] WASC 11 Stanley Drilling Co Pty Ltd v Australia and New Zealand Banking Group Ltd [2003] WASC 130 Tito v Waddell (No 2) [1977] Ch 106 Union Gold Mining Co NL v Baker Construction (Australia) Pty Ltd, unreported; SCt of WA (Owen J); Library No 940372; 11 May 1994 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
DEVONPORT PTY LTD (ACN 009 437 049)
First Defendant
ALBERT LAURENCE GERICK
Second Defendant
SHERLOCK BAY NICKEL CORPORATION LTD (ACN 008 942 809)
Third Defendant
Catchwords:
Practice and procedure - Application to strike out statement of claim - Turns on own facts
Legislation:
Trade Practices Act 1974 (Cth), s 4, s 51AC
(Page 2)
Result:
Statement of claim struck out in part
Category: B
Representation:
Counsel:
Plaintiff : Mr M L Bennett
First Defendant : Mr C D Belyea
Second Defendant : Mr C D Belyea
Third Defendant : Mr C D Belyea
Solicitors:
Plaintiff : Bennett & Co
First Defendant : Clayton Utz
Second Defendant : Clayton Utz
Third Defendant : Clayton Utz
Case(s) referred to in judgment(s):
Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Joachimson v Swiss Bank Corp [1921] 3 KB 110
McKenzie v Albany Finance Ltd [2003] WASC 100
United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2002] NSWSC 1178
Wik Peoples v State of Queensland (1996) 187 CLR 1
Young v Queensland Trustees Ltd (1957) 99 CLR 560
Case(s) also cited:
Crestland Investments Pty Ltd v Parisi Holdings Pty Ltd [2004] WASC 57
Gardiner v Ray [1999] WASC 140
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Knowles v Roberts (1888) 38 Ch D 263
McLean v Lake Como Venture Pty Ltd [2003] QCA 562
(Page 3)
Reading v R [1949] 2 KB 232
Ron Hodgson (Trading) Pty Ltd v Belvedere Motors (Hurstville) Pty Ltd [1971] 1 NSWLR 472
Searle v Western Australian Newspapers Holdings Ltd [2004] WASC 11
Stanley Drilling Co Pty Ltd v Australia and New Zealand Banking Group Ltd [2003] WASC 130
Tito v Waddell (No 2) [1977] Ch 106
Union Gold Mining Co NL v Baker Construction (Australia) Pty Ltd, unreported; SCt of WA (Owen J); Library No 940372; 11 May 1994
(Page 4)
1 MASTER NEWNES: This is an application by the defendants to strike out pars 5, 8, 11, 23 and 24 of the amended statement of claim on the ground that they disclose no reasonable cause of action, or alternatively that they are embarrassing. The third defendant seeks to have the claim against it struck out and judgment entered for it.
2 In the amended statement of claim the plaintiff pleads that he is and was at all material times a director of Redmond Drilling Pty Ltd (Administrator Appointed) ACN 009 256 106 ("Redmond"). The company carried on the business of providing services to the mining industry. Mr Gerick ("Mr Gerick") was a director of the first defendant ("Devonport") and a contractor providing services to Redmond.
3 It is pleaded in par 7 of the amended statement of claim that, between June and July 2000, the plaintiff entered into an agreement with Devonport, by Mr Gerick, by which Devonport agreed to lend the sum of $100,000 to Redmond.
4 Paragraph 8 of the amended statement of claim is in the following terms:
"8. At all material times, it was an implied term of the Agreement that:
(a) the amount of the Loan was repayable on demand by [Devonport]; and
(b) Redmond could repay the amount of the Loan in a reasonable time after demand was made.
The terms are to be implied in that they are and each of them is:
(a) reasonable and equitable;
(b) necessary to give business efficacy to the Agreement;
(c) so obvious that the terms and each of them go without saying;
(d) capable of clear expression and reasonably certain in its operation; and
(Page 5)
- (e) not in contradiction of any express terms of the Agreement."
5 It is alleged in par 9 that, between November 2001 and February 2002, Devonport, by Mr Gerick, performed work on behalf of Redmond for which Redmond incurred a debt to Devonport of $39,000. It is pleaded in par 10 that, in about February 2002, Mr Gerick, on behalf of Devonport, requested that the debt of $39,000 be added to the loan, increasing the amount to $139,000 and the plaintiff agreed to that.
6 It is then pleaded in par 11 as follows:
"11. [Mr Gerick] was at all material times a trusted adviser of the Plaintiff in business and financial matters.
- The Plaintiff has known [Mr Gerick] for approximately 30 years, and they have worked together for a considerable part of that time. With [Mr Gerick's] encouragement and advice, the Plaintiff and [Mr Gerick] invested in a number of common business ventures, including a tavern business purchased in about 2000. The Plaintiff has on several occasions made loans to [Mr Gerick] in relation to [Mr Gerick's] business activities. [Mr Gerick] advised the Plaintiff regarding his investment in shares in the Third Defendant and assisted the Plaintiff in monitoring the value of those shares."
7 The plaintiff pleads in par 12 of the amended statement of claim that Mr Gerick was responsible for the day-to-day operations of Redmond Drilling in Victoria.
8 It is alleged that in about February 2002 the plaintiff offered and Devonport, by Mr Gerick, agreed that the plaintiff would provide security for the loan by way of an equitable charge over 16.5 million shares in the third defendant (the "Security Agreement"). The agreement is said to have been oral and the plaintiff is said to have provided Devonport, by Mr Gerick, with an executed transfer of the shares.
9 It is alleged that, in May 2002, Devonport caused the shares to be registered in its name.
10 In about December 2002, Redmond purchased certain equipment from Devonport and the plaintiff orally agreed with Devonport, by
(Page 6)
- Mr Gerick, that the loan would be increased again, to a total amount of $174,000.
11 The essential dispute between the parties is as to who is entitled to the shares. The plaintiff says the shares were, and are, simply security for the loan, and it is entitled to redeem them. Devonport, on the other hand, says the shares were applied in partial satisfaction of the loan, pursuant to an agreement reached with Mr Redmond. As I understand it, at the time the shares were registered in Devonport's name they were valued at 2 cents per share and Devonport says it applied them in discharge of the debt at that value. The shares are now worth approximately 10 cents per share.
12 The plaintiff pleads that Devonport has never made demand for repayment of the loan, or any part of it, and the plaintiff has never assigned or abandoned its equity of redemption in the security. It pleads in the alternative that, if it did agree to assign or abandon its equity of redemption, no consideration for that was provided by Devonport.
13 The plaintiff pleads that Devonport has asserted that, by the transfer to it of the shares, Devonport took beneficial ownership of the shares in partial satisfaction of the loan, extinguished the plaintiff's equity of redemption and attributed a value to the shares of 2 cents per share, being the value of the shares at the date of transfer. The plaintiff says that Devonport's conduct in purporting to take legal and beneficial ownership of the shares is in breach of the plaintiff's right of redemption, is not authorised by the security agreement and constitutes conversion of the shares.
14 It is then pleaded in pars 23 and 24 of the amended statement of claim as follows:
"23. By reason of the matters referred to in paragraph 11 hereof [Mr Gerick] is and at all material times was a fiduciary to the Plaintiff and owed to the Plaintiff:
(a) a duty of loyalty; and
(b) a duty not to place himself in a conflict of interest between his personal interests and the interests of the Plaintiff.
24. If (which is denied) the Security Agreement entitled the First Defendant at its discretion and without notice to take
(Page 7)
- as at 1 February 2002 or alternatively at any time thereafter at the discretion of [Devonport] equitable ownership of the Shares then:
- (a) by procuring the Plaintiff to enter into the Security Agreement with [Devonport], [Mr Gerick] acted in breach of his duty of loyalty referred to in paragraph 23(a) hereof and acted in a conflict of interest contrary to the duty referred to in paragraph 23(b) hereof;
(b) by reason of the matters referred to in paragraphs 16, 17, 18, 19, 21, and 24(a) hereof, the conduct of [Devonport] in procuring the Plaintiff to enter into the Security Agreement was unconscionable conduct contrary to section 51AC of the Trade Practices Act 1974;
(c) Mr Gerick was directly and knowingly concerned in and party to [Devonport's] conduct contrary to section 51AC of the Trade Practices Act."
15 The first ground relied upon by the defendants in this application is that no basis is pleaded for the implied term in par 8 of the amended statement of claim that the loan would be repayable upon demand.
16 It was not in issue that, where money is lent without any stipulation as to the time of repayment, a present debt is created which is generally repayable without any requirement that demand first be made. The parties referred to Chitty on Contracts, 4th ed, (1999) 38-229 and United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2002] NSWSC 1178 at [48]; see also Young v Queensland Trustees Ltd (1957) 99 CLR 560 at 566. An agreement may provide that the amount of the loan is not repayable until a demand is made, in the sense that the making of the demand is a condition precedent to liability to repay, and in that case the debt is not payable until demand has been made: Joachimson v Swiss Bank Corp [1921] 3 KB 110; McKenzie v Albany Finance Ltd [2003] WASC 100. Counsel for the plaintiff submitted where a loan has been made and the parties have not agreed on a term for repayment the court must imply a term and, as the learned authors of Chitty on Contracts state, suitable implications as to the requirement of a demand for payment can readily be made in appropriate circumstances. Counsel argued that such an implication would be drawn in the circumstances of the present case.
(Page 8)
17 The defendants contended that no circumstances capable of giving rise to such an implication had been pleaded in the present case. Although the plaintiff alleged by way of particulars that such an implication was necessary to give business efficacy to the contract and was obvious, there was nothing pleaded which was capable of supporting that assertion. On the plaintiff's pleaded case there was simply nothing that would take the loan outside the general principle that no demand was necessary.
18 It seems to me that, as the amended statement of claim stands, circumstances have not been pleaded that would lead to the implied term alleged, namely that the loan was repayable only upon demand being made and within a reasonable time after demand was made. What is set out in the particulars are the circumstances in which a term will be implied: Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, but there is no plea of any facts which would be capable of satisfying those criteria. I would therefore strike out the plea with leave to replead.
19 The defendants' next complaint was that par 11 of the amended statement of claim does not plead material facts capable of establishing that Mr Gerick owed fiduciary duties of the sort pleaded in the statement of claim to the plaintiff.
20 Both parties referred to the following passage in Wik Peoples v State of Queensland (1996) 187 CLR 1, per Brennan J at [95]:
"It is necessary to identify some action or function the doing or performance of which attracts the supposed fiduciary duty to be observed. The doing of the action or the performance of the function must be capable of affecting the interests of the beneficiary and the fiduciary must have so acted that it is reasonable for the beneficiary to believe and expect that the fiduciary will act in the interests of the beneficiary (or, in the case of a partnership or joint venture, in the common interest of the beneficiary and fiduciary) to the exclusion of the interest of any other person or the separate interest of the beneficiary."
21 The defendants made two specific complaints about the plea in par 11. First, it was said that the matters particularised are not capable of establishing a fiduciary duty and, secondly, that, in any event, the facts relied upon must be pleaded as substantive averments and not simply included as particulars.
(Page 9)
22 I accept that, of themselves, the matters set out in the first three sentences of the particulars are not capable of establishing a fiduciary duty. The heart of the plaintiff's contention lies, as I think is evident from the outline of submissions filed in this application, in the last sentence relating to this particular transaction. In its written outline of submissions, the plaintiff said that the circumstances of the relationship between the plaintiff and Mr Gerick was such that the plaintiff trusted Mr Gerick to act in the plaintiff's interests in respect of business and financial matters. In particular, it said, Mr Gerick completed the documentary arrangements whereby the shares of the plaintiff were taken as security for the loan. The actions of Mr Gerick in this regard were capable of affecting the interests of the plaintiff and it was reasonable for the plaintiff to believe and expect that Mr Gerick would act in the plaintiff's interest.
23 The difficulty, it seems to me, is that that is not pleaded in the amended statement of claim, nor is it incorporated in the particulars. I accept the defendants' contention that the matters relied upon to give rise to the fiduciary duty should be pleaded as material facts and, in this case, what is set out in the particulars is, in any event, incapable of establishing the requisite fiduciary duty. In my view, the plea should therefore be struck out with leave to replead.
24 The defendants made two submissions about the plea under s 51AC of the Trade Practices Act 1974 (Cth). The first was that no claim under the Trade Practices Act 1974 is included in the indorsement of claim. That was not a matter raised before the hearing and counsel for the plaintiff objected to it being raised at this late stage.
25 I accept the plaintiff's complaint that the matter was raised without notice. That may have a bearing on costs but it seems to me the point is unanswerable and on that basis the claim should be struck out.
26 The second complaint was that the plea in par 24 is defective because it fails to plead first, how it is maintainable that the conduct of the first and Mr Gerick was in trade or commerce or, in fact, the precise conduct complained of by the plaintiff and secondly, how it is maintained that the loan is a supply or possible of goods or services.
27 The defendants also argued that par 24(a) of the amended statement of claim relied on the plea in par 23(a) and (b) which, in turn, relied on the defective plea in par 11 and must fall with it.
28 In respect of the Trade Practices pleas, the plaintiff referred to the definition of "services" in s 4 of the Act which provides, relevantly, that:
(Page 10)
- "'services' includes any rights (including rights in relation to, and interests in … personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, and without limiting the generality of the foregoing, includes the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under:
…
(d) any contract for or in relation to the lending of moneys;"
29 Counsel for the plaintiff acknowledged that there was in the amended statement of claim no incantation pleaded to the effect that the transaction was in trade or commerce, but said that the necessary elements of conduct in trade or commerce had been pleaded and the absence of such an incantation was irrelevant. The conduct of Devonport in making the loan to Redmond and in taking the shares as security was conduct in trade or commerce in connection with the supply of services to the plaintiff.
30 I accept that the plea is arguably sufficient and would not strike it out on that basis.
31 The defendants also complained that it is pleaded in par 5 of the amended statement of claim that Devonport was, at all material times, "a trading or financial corporation", whereas it seemed from the plaintiff's outline of submissions that the plaintiff only relied on the fact that it was a trading corporation. The defendants argued that it was unnecessary to plead both and they would be put to substantial additional costs in defending the claim based upon the contention that Devonport was a financial corporation. I accept, however, the submission of the plaintiff that that is not a basis upon which to strike out the plea. The allegation is framed disjunctively and it is open to the plaintiff to rely in the pleading upon the status of Devonport as a trading or financial corporation. I should mention that counsel for the plaintiff said that if one or the other were admitted, the plaintiff would not pursue the alternative.
32 The final complaint of the defendants was that there was no cause of action pleaded against the third defendant and therefore the claim for injunctive relief against it should be struck out.
33 I do not accept that. The relief sought in the amended statement of claim is injunctive relief to prevent the registration by the third defendant of the share transfers, except as they are authorised by the Court. I accept, as submitted by the plaintiff, there is nothing exceptional in that plea and I
(Page 11)
- would not strike it out. The fact that the plaintiff has obtained an injunction to restrain Devonport from lodging the transfers for registration does not form a basis upon which the claim against the third defendant should be struck out.
34 I would therefore strike out pars 8, 11, 23 and 24 of the amended statement of claim, with leave to the plaintiff to replead.
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