Robert McPhail Leisure Management (Australia) Pty Ltd v Wodonga Rural City Council
[1999] VSC 423
•10 November 1999
SUPREME COURT OF VICTORIA
CAUSES JURISDICTION Do not Send for Reporting Not Restricted
No. 7343 of 1998
| ROBERT MCPHAIL LEISURE MANAGEMENT (AUSTRALIA) PTY LTD (ACN 075 363 969) | Plaintiff |
| V | |
| WODONGA RURAL CITY COUNCIL | Defendant |
| AND | |
| WODONGA RURAL CITY COUNCIL | Plaintiff by Counterclaim |
| V | |
| ROBERT MCPHAIL LEISURE MANAGEMENT (AUSTRALIA) PTY LTD (ACN 075 363 969) | Defendant by Counterclaim |
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JUDGE: | Balmford, J. | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 October 1999 | |
DATE OF JUDGMENT: | 10 November 1999 | |
CASE MAY BE CITED AS: | Robert McPhail Leisure Management Pty Ltd v Wodonga Rural City Council | |
MEDIA NEUTRAL CITATION: | [1999] VSC 423 | |
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| Appeal from decision of Master – Pleading summons seeking to strike out paragraphs of the statement of claim – Summary dismissal of claim - Application for security for costs – Whether an order for security will stultify the plaintiff’s action. General Rules of Civil Procedure; RR 23.01, 23.02, 23.04(2), 62.02, 77.05 Ariss v Express Interiors Pty Ltd [1996] 2 VR 507 |
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr P Bick QC with Ms M Loughnan | Slater & Gordon |
| For the Defendant | Mr WT Houghton QC with Mr GJ Fitzgerald | Maddock Lonie & Chisholm |
HER HONOUR:
Introduction
This is an appeal by the defendant under Rule 77.05 of the General Rules of Civil Procedure (“the Rules”) against a decision of Master Wheeler made on 11 June 1999 dismissing with costs a summons of the defendant filed on 13 November 1998. In that summons the defendant sought the striking out of certain paragraphs in the plaintiff’s statement of claim and an order for security for costs. By virtue of Rule 77.05(7) this appeal is a re-hearing de novo of the application to the Master.
The Statement of Claim
The Notice of Appeal filed on 18 June 1999 seeks orders that the decision of the Master be set aside and, in lieu of it, orders be made that paragraphs 4(a), (b), (c), (d), (f) and/or (i), 7, 10, 11, 14, 15, 16, 18, 19(d) and (f), 22(l), 25, 29 and/or 30 of the statement of claim endorsed on the writ dated 29 September 1998:
(i)do not disclose a course [sic] of action;
(ii)are scandalous, frivolous or vexatious;
(iii)may prejudice, embarrass or delay the fair trial of the proceeding; or
(iv)are otherwise an abuse of the process of the Court and are struck out.
In fact, the submissions of the defendant related to the terms, not of the statement of claim endorsed on the writ, but of the amended statement of claim filed on 12 March 1999 in proceeding 6892 of 1998 (also dealing with associated issues between the parties) and the amended further and better particulars thereof filed on 1 March 1999 in this proceeding. No issue was made of these inconsistencies by the plaintiff and I will deal with the matter on the basis of the submissions which were made. It was generally agreed that there had been some confusion between the two proceedings and in view of the decision I have reached it is not necessary for present purposes to disentangle that confusion.
In McKellar v Container Terminal Management Services [1999] FCA 1101 (unreported, delivered on 13 August 1999) Weinberg J set out conveniently the present state of the authorities on the principles governing summary dismissal. Given the submission of Mr Bick for the plaintiff that the striking out of the paragraphs in question would effectively bring the matter to an end, those are the principles relevant to this matter. His Honour said at [12] – [18]:
It is clearly established that the jurisdiction of the Court to dismiss a claim upon the basis that it discloses no reasonable cause of action is to be sparingly invoked.
In Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Dixon J (as he then was) stated at 91:
A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.
In General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Barwick CJ cited that passage with approval at 129-30, and stated earlier at 128-9:
The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references. There is no need for me to discuss in any detail the various decisions, some of which were given in cases in which the inherent jurisdiction of a court was invoked and others in cases in which counterpart rules to Order 26, r. 18, were the suggested source of authority to deal summarily with the claim in question. It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense".
At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or "so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; "so to speak apparent at a glance".
Barwick CJ continued at 130:
[. . . ] in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.
The remarks of Dixon J in Dey v Victorian Railways Commissioners were also cited with approval by Mason CJ, Deane and Dawson JJ in Webster v Lampard (1993) 177 CLR 598 where their Honours said at 602:
The power to order summary judgment must be exercised with "exceptional caution" and "should never be exercised unless it is clear that there is no real question to be tried".
The same strict approach has been taken in the United Kingdom. In Williams & Humbert Ltd v W & H Trade Marks (Jersey) Ltd [1986] 1 AC 368 Lord Templeman stated at 435-6:
My Lords, if an application to strike out involves a prolonged and serious argument the judge should, as a general rule, decline to proceed with the argument unless he not only harbours doubts about the soundness of the pleading but, in addition, is satisfied that striking out will obviate the necessity for a trial or will substantially reduce the burden of preparing for trial or the burden of the trial itself.
Other United Kingdom authorities are canvassed by O'Loughlin J in Cubillo v Commonwealth of Australia (1999) 163 ALR 395 at 415-6. They confirm that a proceeding should not be dismissed summarily merely on the ground that it appears, at the early stage of the hearing of the motion brought for that purpose, to advance a highly implausible claim which will very probably fail, but only where the claim may properly be described as unarguable, and almost incontestably bad, or where the claim is otherwise objectionable as an abuse of the process of the court.
It is relevant to note that the argument on this issue occupied almost the whole of one day.
Neither in the summons filed on 13 November 1998 bringing the matter before the Master, nor in the notice of appeal, nor in the submissions of counsel for the defendant was it indicated whether the application was brought under Rule 23.01 or Rule 23.02. The form of the summons and of the notice of appeal would seem to indicate that the ground for the application is in Rule 23.02, which provides, so far as relevant:
23.02 Where an indorsement of claim on a writ . . .—
(a)does not disclose a cause of action . . . ;
(b)is scandalous, frivolous or vexatious;
(c)may prejudice, embarrass or delay the fair trial of the proceeding; or
(d)is otherwise an abuse of the process of the Court—
the Court may order that the whole or part of the indorsement or pleading be struck out or amended.
By virtue of Rule 23.04(2), evidence is not admissible on an application under Rule 23.02 on the question of whether an indorsement of claim or pleading offends against that Rule. However, counsel for the defendant relied extensively on affidavit material already before the Court. Counsel for the plaintiff submitted that this reliance indicated that the application was brought under Rule 23.01, which reads, so far as relevant:
23.01(1) Where a proceeding generally or any claim in a proceeding—
(a) does not disclose a cause of action;
(b) is scandalous, frivolous or vexatious; or
(c) is an abuse of the process of the Court—
the Court may stay the proceeding generally or in relation to any claim or give judgment in the proceeding generally or in relation to any claim.
In view of the decision I have reached, it is not necessary to resolve this question.
Paragraph 4
It is claimed in paragraph 3 of the amended statement of claim that the agreement between the parties was partly in writing, contained in three documents, partly oral, contained in certain conversations, and partly implied from practice and custom in the leisure centre management industry. The essential submission of the applicant in relation to paragraph 4 was that the challenged paragraphs relied upon oral or implied terms of the contract between the parties and were inconsistent with the plain written terms of a document entitled Management and Operation of Wodonga Sports and Leisure Centre, which was one of the three documents referred to in the amended statement of claim. That document was not executed by the respondent and I find that, as submitted by Mr Bick, there is a triable issue as to what indeed were the terms of the agreement between the parties.
Paragraphs 7, 10, 11, 14A, 14B and 15
These paragraphs relate to the claimed wrongful termination by the defendant of the agreement between the parties. I accept the submission of Mr Bick that there are triable issues as to the several matters claimed in those paragraphs.
Paragraph 16
Paragraph 16 contains the particulars of the loss and damage which is claimed. The making good of those claims is a matter for proof at the trial.
Paragraph 18
Paragraph 18 refers to the drawing down of a bank guarantee by the defendant. I accept the submission of Mr Bick that there is a triable issue as to whether the specific procedures in the agreement for the drawing down of the bank guarantee were followed.
Paragraph 19
Whether the particulars given support the allegations of misrepresentation made in sub-paragraphs 19(d) and (f) will be a matter for evidence at the trial. I have already dealt with the issue as to the terms of the agreement between the parties.
Paragraph 22
I accept the submission of Mr Bick that the particulars provided are appropriate to make out each of the allegations of misrepresentation made by the plaintiff.
Paragraph 25
I do not accept the submissions of Mr Houghton that there is nothing to suggest a nexus between the particulars of loss and damage claimed in paragraph 16 and the matters raised in paragraph 35 of the amended further and better particulars, expanding on the particulars provided in paragraph 25 of the amended statement of claim; or that the expression “by reason of the matters aforesaid” is, in the context, vague and ambiguous.
Paragraphs 29 and 30
I accept the submission of Mr Bick that there is an arguable issue comprised in the claims of misleading and deceptive conduct in these two paragraphs.
As to paragraph 30 of the amended statement of claim, Mr Bick conceded that the expression “paragraph 16” in the particulars to that paragraph should read “paragraphs 16 to 25”. No submission on that point was made by Mr Houghton and it is appropriate that that amendment be made. However, as proceeding number 6892 of 1998 is not before me, I am not able to make that amendment.
Security for Costs
The defendant seeks, pursuant to Rule 62.02 of the Rules and section 1335(1) of the Corporations Law, an order that the plaintiff give security for costs in the sum of $55,000, being the costs of the defendant in this proceeding as assessed to be incurred prior to trial, or such other amount as the Court considers appropriate. Mr Houghton, for the defendant, indicated that his instructions were that if security for costs was ordered and not provided, and the action was therefore stayed, his client would not pursue the counterclaim.
Rule 62.02 of the Rules reads, so far as relevant:
(1)Where —
.. .
(b)the plaintiff is a corporation . . . and there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so;
.. .
the Court may, on the application of a defendant, order that the plaintiff give security for the costs of the defendant of the proceeding and that the proceeding as against that defendant be stayed until the security is given.
Section 1335(1) of the Corporations Law reads:
(1)Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
It is not in issue that the plaintiff “has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so” or that it “will be unable to pay the costs of the defendant if successful in . . . its defence”. As to that, I should note Mr Bick’s indication that his client was being represented pro bono. However the plaintiff submits, on the basis of the affidavit evidence of Mr Robert McPhail, a director of the plaintiff, of 20 August, 14 September and 15 December 1998, that the making of an order for security for costs would stifle the plaintiff’s ability to proceed with the action. The plaintiff has already paid some costs of the defendant of interlocutory proceedings.
The task of the Court in considering an application for security for costs is summed up by Peter Gibson LJ in Keary Developments Pty Ltd v Tarmac Construction Ltd [1995] 3 All ER 534 at 540:
. . . [the Court] must weigh the injustice to the plaintiff if prevented from pursuing a proper claim by an order for security against the injustice to the defendant if no security is ordered and at trial the plaintiff’s claim fails and the defendant is unable to recover costs from the plaintiff. The Court will properly be concerned not to allow the power to order security to be used as a instrument of oppression, but also it will be concerned not to be so reluctant to order security that an impecunious company can use its inability to pay costs to put unfair pressure on the defendant.
The Court of Appeal held in Ariss v Express Interiors Pty Ltd [1996] 2 VR 507 at 513 that, while the Court should approach an application for security for costs without any predisposition either in favour of the application or against it, nevertheless the impecuniosity of the plaintiff company is not only the occasion for the exercise of the discretion, but a factor, and often a most significant factor, in the exercise of the Court’s discretion.
At page 510 of Ariss, Phillips JA, with whom the other members of the Court agreed, referred to a number of authorities for the principle that, where a plaintiff company seeks, as in this case, to resist an order for security for costs on the basis that to order security would stultify the action, the plaintiff is required to demonstrate not only that it lacks the resources to meet the order itself, but also that those who stand behind it and who will benefit from the litigation lack those resources. I am satisfied from the affidavit of Mr McPhail sworn on 15 December 1998 that that is the case so far as he and his wife, the directors of the plaintiff, as well as the plaintiff itself, are concerned.
The principles according to which the Court will consider whether to exercise its unfettered discretion to grant an application for an order for security for costs are well established. See for example Drumdurno Pty Ltd v Braham (1982) 42 ALR 563, or Comcorp Australia Ltd v Commonwealth Bank of Australia (unreported decision of Coldrey J delivered on 24 June 1998). I have already found that there are arguable issues to be determined between the parties. It has not been suggested that the claim of the plaintiff is not brought bona fide. There is clearly a major issue as to whether the impecuniosity of the plaintiff was brought about by the actions of the defendant, a matter as to which Ormiston J said in Australian Quarry Holdings Pty Ltd v Dougherty (1993) 11 ACLC 52 at 53-54:
It might be said that this factor raises similar difficulties to that relating to the prospects of success but in my opinion the factor is ordinarily taken into account upon the assumption that it would be unfair to deny the plaintiff the right to sue where its impecuniosity may be said to result from the matters complained of, without great regard to the plaintiff’s chances of success. (Emphasis in the original)
The writ was issued on 19 August 1998 and the summons seeking security for costs was filed on 13 November 1998, after a written request to that end was refused. The application did not proceed before Master Wheeler until 21 April 1999 although there had previously been two returns of the summons. Interlocutory steps have been completed and the matter is now ready to be set down.
Having taken into account the matters to which I have referred, I am satisfied that this is not an appropriate case in which to exercise the discretion of the Court to grant the application for an order for security for costs.
Conclusion
For the reasons given, the appeal will be dismissed. Counsel may wish to make submissions as to costs.
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