Sea Culture International Pty Ltd v Scoles, J.A

[1991] FCA 18

JUDGMENT No. . !g ... .. l....%-,

C A T C H W O R D S

PRACTICE AND PROCEDURE - motion to strike out statement of claim - statement of claim defective - embarrassingly vague and disconnected, despite possibility that statement of claim as a whole may contain a discernible cause of action - statement of claim struck out - applicant granted leave to file and serve new statement of claim.

Federal Court Rules, 0.11 r.16

Coe v Commonwealth (1979) 24 ALR 118

Turner v Bulletin Newspaper Co. Ptv. Ltd. (1974) 131 CLR 69

REDISTRY

SEA CULTURE INTERNATIONAL PTY. LTD. v JOHN ALLIBON SCOLES &

Ors.

WAG 137 of 1990

FRENCH J

23 January 1991

PERTH RECEIVED

12 FEB 1991

FEDERAL COURT OF

PRINCIPAL

IN THE FEDERAL COURT

OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION	No. WAG 137 of 1990
B E T W E E N :
SEA CULTURE INTERNATIONAL PTY LTD

First Applicant

and

JOHN ALLIBON SCOLES

First Respondent

and

GAYLEEN MOREA MEEHAN

Second Respondent

and

OCEAN FOODS INTERNATIONAL

PTY LTD

Third Respondent

and

VAPAC LIMITED

(in receivership)

Fourth Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:  FRENCH J

DATE OF ORDER:	23 January 1991
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.    The statement of claim herein be struck out.

2.   The applicant have leave to file and serve a new statement of claim on or before 13 February 1991.

3.    The applicant pay the lst, 2nd and 3rd respondents' costs

!

of the motion.

NOTE: Settlement and entry of Orders is dealt with in Order

36 of the Federal Court Rules.

IN THE FEDERAL COURT 1

OF AUSTRALIA

WESTERN AUSTRALIA I

DISTRICT REGISTRY	j
GENERAL DIVISION	) NO. WAG 137 of 1990
B E T W E E N :

SEA CULTURE INTERNATIONAL

PTY LTD

First Applicant

and

JOHN ALLIBON SCOLES

First Respondent

and

GAYLEEN MOREA MEEHAN

Second Respondent

and

OCEAN FOODS INTERNATIONAL

PTY LTD

Third Respondent

and

VAPAC LIMITED

(in receivership)

Fourth Respondent

CORAM:  FRENCH J.
23 January 1991

EX TEMPORE REASONS FOR JUDGEMENT ON MOTION TO STRIKE OUT

STATEMENT OF CLAIM

This application is brought by Sea Culture Foods International Pty Ltd (OFI) and Vapac Limited (Vapac),	International Pty Ltd (SCI). It sues two companies, Ocean
which is in receivership. John Scoles and Gayleen Meehan, shareholders and directors of OFI, are also named as respondents. Scoles is variously, and inconsistently, said to have been at all material times a director of Vapac and to have been appointed as a director on 17 January 1989 (paras 4 and 7). A man called Melville is said to be managing director of SCI, a director of Vapac at all material times and its
managing director from 30 June 1987 to 29 September 1989 (paras 3 and 1).
In July 1987 it is alleged that Scoles approached Vapac and "introduced a proposal for Aquaculture projects in Western Australia" (para. 6). The nature of the proposal is not further identified. Vapac is said to have agreed to investigate the feasibility of "such projects" and to have engaged Scoles' services as an employee on 18 July 1988. The nature of the services is not specified. On 1 May 1988 Scoles allegedly signed an agreement to "keep confidential all of the information which came into his possession during the course of his engagement with Vapac". This information is designated "the Confidential Information". Vapac engaged various experts as consultants or employees between August 1987 and 23 November 1988 to consider the feasibility of "the proposal". It also obtained from the Fisheries Department a licence to carry out experimental studies of "the possible sites in the state of Western Australia". This presumably is a reference to possible sites for the aquaculture projects proposed.
Albany, Shark Bay, Peel Inlet and Exmouth Gulf. Scoles was Preferred sites "for leases" were identified by Vapac at
also said to be responsible for negotiating for leases of land at Emu Point and Whale World for use as "land bases for the projects near Albany". By reason of his position as an employee and director of Vapac, Scoles is said to have been in possession of details of the research carried out by Vapac's employees and to have had copies of all information discovered. It is also said that Meehan and OF1 were in possession of the Confidential Information and aware of its confidential nature (para. 13).
A receiver, Coates, was appointed to Vapac on 23 November 1988. The basis of the appointment is not disclosed. On 8 September 1989, SCI and the receiver agreed that Vapac would sell to SCI all of its "rights and assets related to the

!	projectsn (para. 15). These included the benefits of
I	covenants made by former employees of Vapac and rights against
!	the present or former directors so far as they relate to the
1
I	Projects and the Confidential Information.
I I
Scoles was allegedly engaged by SCI from September 1989 to March 1990 to obtain finance for "the Projects". He conducted negotiations on behalf of SCI with the Fisheries Department and financiers. The thrust of what follows (paras 18 to 25) seems to be that Scoles and Meehan pursued their own interests and those of OFI, falsely representing as their own rights or interests which belonged to SCI. On 16 February
Meehan is alleged to have written to the Fisheries Department describing herself as Administrator of Sea Culture Pty Ltd
(Sea Culture) a subsidiary of Vapac. This description is said to have been false. By the letter Meehan is said to have represented that finance had been obtained for a project described as the "Oyster Project" otherwise undefined in the pleading. She is alleged to have stated that the project "belonged" to Melville, Scoles and herself. This statement was allegedly "untrue and fraudulent" and "made to deceive the Department and was intended to and did in fact lead to the granting of leases over the preferred sites at the Albany Project and the Shark Bay Project to OFI". No particulars of the alleged fraud are given and the contents of the Oyster Project, the Albany Project and the Shark Bay Project remain shrouded in mystery. How the representations in the letter led to the granting of leases to OF1 does not appear. A further letter of 19 February from Scoles to the Department is pleaded in which it is said that "without the knowledge or authority" of SCI, Vapac's receiver or Vapac, he represented that he and Meehan were beneficial owners with Melville in "the Project". Which project is referred to is not apparent and there is on the statement of claim no logical connection made between the representation and any cause of action.
Scoles is said to have told SCI in March 1990 that his negotiations for finance were unlikely to be fruitful and in July he and Meehan on behalf of OF1 are said to have applied to the Fisheries Department "for leases of areas in
Oyster and Princess Royal Harbours and Shark Bay". The areas for which they applied were said to have been identified by
Vapac's researchers, and the information on which the applications were based is said to be part of the Confidential Information. In the same month they allegedly applied to Albany Shire Council and Jaycees Community Foundation to lease sites selected by Vapac as "land bases" of the "Albany Project". Again they are said to have relied upon the Confidential Information. Leases were granted CO OF1 on dates unknown to SCI. Further representations were allegedly made by Scoles, Meehan and OFI, between February to August 1990, to the Albany Shire Council, the Jaycees Community Foundation and the Fisheries Department that OF1 was "the same as or a successor in title to Sea Culture". By these representations it is said Scoles, Meehan and OF1 "passed off" OF1 as being "the owner of the Projects". The term "owner of the Projects" has no legally intelligible meaning and none is disclosed on the statement of claim.
The statement of claim then alleges that Scoles, Meehan and OF1 have in trade or commerce engaged in conduct which is "false and misleading in breach of s.52 of the Trade Practices Act 1974 and s.12 of the Fair Tradinu Act 1987". The conduct is not identified. SCI is said to have suffered loss and damage "as a result of the actions of the respondent". The actions in question and how they resulted in loss or damage and what it is do not appear. In particular, what Vapac has done to h a m SCI does not appear.
The statement of claim concludes at para. 27 with an allegation that OF1 has "breached the applicant's copyright in the Confidential Information" by making, in a document presented to the Fisheries Department, "a series of claims as to its authorship of certain research work carried out by Vapac". No work is identified in which copyright is said to subsist. The Confidential Information was defined in paragraph 8 of the statement of claim as all information which came into Scoles' possession during the course of his engagement with Vapac. Copyright does not subsist in information, nor is it infringed by claims as to authorship.
The first, second and third respondents initially moved to dismiss or stay the proceedings under Order 20 Rule 2 and in the alternative to strike out the statement of claim under Order 11 Rule 16 as disclosing no reasonable cause of action or otherwise tending to cause prejudice, embarrassment or delay in these proceedings. I do not consider that this is a case in which the proceedings as a whole should be dismissed under Order 20 and the respondents have not pursued that aspect of the motion. It is possible that a cause of action may be constructed out of the aggregation of factual matters referred to in the statement of claim, and it would not be right at this stage to dismiss the entire proceedings on the basis of the defective pleading. I am satisfied, however, that the pleading is so defective that it should not stand.

Order 11 r. 16 provides:-

"Where a pleading -

(a)	discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading;
(b)	has a tendency to cause prejudice, embarrassment or delay in the proceeding; or
(c)	is otherwise an abuse of the process of the Court,

the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out".

This rule embodies elements of both 0.20 r.29 and 0.26 r. 18(1) of the High Court Rules, of which Jacobs J said in v Commonwealth (1979) 24 ALR 118 at 132:-

" . . . if a statement of claim already filed

is sufficient to raise a substantial question which ought to be judicially determined then prima facie it should not be wholly struck out. If a substantial question is disclosed the pleading cannot be struck out under 0.26, r.18(1), on the ground that it does not disclose a reasonable cause of action. . . . Nor generally should the whole of a pleading be struck out under 0.20, r.29, which provides for the striking out of any matter which is unnecessary or scandalous or which may tend to prejudice, embarrass or delay the fair trial of the action. That rule only permits the striking out of the whole of a statement of claim when objectionable matter is so clearly intertwined with other matter that the pleading as a whole may tend to embarrass the fair trial of the action. The whole pleading may then be struck out even though a cause of action might be able to be spelled out of the pleading as a whole: see Turner v Bulletin ~ewspaper CO Ptv Ltd

(1974) 131 CLR 69 per Menzies J at 88".

Menzies J, in the case cited by Jacobs J, referred to the power of the Supreme Court of Victoria to strike out a statement of claim in which objectionable matter is so mingled with other matter that the pleading as a whole may tend to embarrass the fair trial of the action, notwithstanding that a cause of action may be spelt out of it. His Honour said:-

"It was decided as long ago as 1878 in m v Garrett [(1878) 7 Ch. D. 4 7 3 1 that such a statement of claim ought to be struck out and, so far as I can see, that decision of the Court of Appeal has never been questioned. The practice is well settled in the Supreme Court of Victoria, as the various orders made in this action show, and it is a practice which has been followed in this Court".

It may be that within the aggregation of facts contained in the statement of claim some cause of action may be discerned, although I think the logical discontinuity is probably fatal in that respect. But the pleading taken as a whole is so embarrassingly vague and disconnected that it should not stand. I propose to order that the statement of claim be struck out and that the applicant have leave to file and serve a new statement of claim.

I certify that this and the preceding

seven (7) pages are a true copy of the

Ex Tempore Reasons for Judgment of his

Honour Justice French.

Associate: / ~ q k ! . ~ u ~

Date : 2 3

Counsel for the Applicant: Mr E.J. Picton-Warlow Solicitors for the Applicant: Picton-Warlow & Co.

Counsel for the First, Second and Third Respondents:

M r A. J. Goldfinch

Solicitors for the First, Second and Third Respondents:

Sly and Weigall

Date of Hearing:	23 January 1991
Date of Judgment:	23 January 1991