| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : SIMPSON -v- PELET PTY LTD [2002] WADC 74 CORAM : LA JACKSON DCJ HEARD : 17 APRIL 2002 DELIVERED : 22 APRIL 2002 FILE NO/S : CIV 388 of 2001 BETWEEN : VIVIAN SIMPSON Applicant (Defendant)
AND
PELET PTY LTD (ACN 056 350 335)
Respondent (Plaintiff)
Catchwords: Practice and procedure - Application to strike out Statement of Claim - Whether an action lies on a felony-tort
Legislation: Nil
Result: Application partially succeeded; claim based on "felony-tort" struck out, there being no such cause of action
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Representation:
Counsel:
Applicant (Defendant) : Dr P R MacMillan
Respondent (Plaintiff) : Mr I A Morrison
Solicitors:
Applicant (Defendant) : Tydde & Co
Respondent (Plaintiff) : Karp Steedman Ross-Adjie
Case(s) referred to in judgment(s):
Black & White Cab Co v Kelk [1984] 2 Qd R 484
Garuda Indonesia Ltd; Ex parte Grellman; Fed Ct of Australia; BC 9406073 16 February 1994
Halabi v Westpac Banking Corp (1989) 17 NSWLR 26
Smith v Selwyn [1914] 3 KB 98, 106
Case(s) also cited:
Dairy Containers Ltd v NZI Bank Ltd [1995] 2 NZLR 30
Deatons Pty Ltd v Flew (1949) 79 CLR 370
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1 LA JACKSON DCJ: This is an application by the defendant to strike out the plaintiff's statement of claim in this action.
2 The plaintiff carries on business as a real estate agent and residential rental management agent. The defendant was employed by the plaintiff as its property manager. The plaintiff claims that in that capacity the defendant stole money being either the property of the plaintiff or moneys held in trust by the plaintiff for various clients. The sum of a little over $24,058.12 is claimed under this head. 3 The plaintiff also claims a relatively small amount in damages for failure to properly carry out the work of property manager. 4 The plaintiff does not maintain its action on the basis of a breach of an implied term of the defendant's contract of employment. Rather its action is based on a "felony-tort". 5 The defendant denies such a cause of action exists and says the proper basis of an action against a thief is for restitution. Whilst that is certainly the appropriate cause of action against a thief, where the thief is an employee, I would have thought the contractual cause of action be far simpler and more obvious. 6 The main issue I need to determine is whether the plaintiff's cause of action against the defendant based on a felony-tort can be maintained. 7 The most recent decision referred to me was an unreported Federal Court decision of Garuda Indonesia Ltd;Ex parte Grellman; Fed Ct of Australia; BC 9406073 16 February 1994. That was a claim by Garuda Airlines against Grellman's trustee in bankruptcy for money stolen by Grellman. It was rejected on the grounds that the debt arose from a felonious act by the bankrupt and as the bankrupt had not been prosecuted by Garuda or upon evidence provided by Garuda the debt was not provable against the trustee in bankruptcy. Garuda applied to the Federal Court for an order that the decision of the trustee be reversed. 8 Lockhart J dealt with the "felony-tort" concept. At p 8 he said: "I turn to the second question: is Garuda's right to prove ousted by what is said to be the old rule of law, that a debt founded in a felony cannot be proved unless the offender has been prosecuted by the party proving, or upon his evidence?" Having discussed a number of decisions, at p 11-12 he said:
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"There are various possibilities as to the origin of the so-called rule; but in my view, an analysis of the cases establishes that the more probable foundation is the ground of public policy enunciated in many of the cases that it is a rule calculated to bring offenders to justice (Master v Miller 4 TR 320 per Buller J); a rule intended to ensure that, until the vindication of the criminal law is complete, any civil action should not be entitled to proceed based upon the felony. But the cases demonstrate that it is always a question of fact whether the cause of action which the plaintiff seeks to prosecute arises out of a felony committed by the bankrupt or not. The principle that emerges from the cases is that the creditor, if he uses due diligence in endeavouring to bring the felon to justice, is entitled to sue or prove in the bankruptcy of the felon; but, on the other hand, if he connives at the felon escaping justice, he is not entitled to sue or prove until he has done all he can to bring the felon to justice; but the cases are replete with exceptions to this so-called rule, to which I referred earlier." Further at p 13 Lockhart J said: "The difficulty in determining if there was or is a rule that a felon must be criminally prosecuted before he can be sued civilly is that the statement of the rule differs from case to case, sometimes markedly, expressed to be subject to numerous exceptions and its existence has been questions (sic) by courts of high authority. I am not persuaded that it is or ever has been a settled rule of the common law. But whatever may be the answer to the question, it is plain that the present state of the law in Australia is that where it is said that an injury amounts to an infringement of the civil rights of an individual and at the same time to a criminal act, the civil remedy and the right to prove in the bankruptcy of the wrongdoer, may be stayed or suspended by the Court in which the civil proceeding has been brought (or the Court exercising bankruptcy jurisdiction), until the party inflicting the injury has been prosecuted or the person aggrieved has done everything reasonably possible to bring the wrongdoer to criminal justice." And further at p 14: "The true principle is that the civil remedy for recovery of a debt (and hence the right to prove in bankruptcy) may be suspended until the creditor has first performed his public duty
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of doing his best to bring the offender to justice. The Court may stay the proceedings until public justice is satisfied; and then the Court, in the exercise of its discretion, may prevent abuse of its own process and interfere by stay." 9 There is nothing in the judgment of Lockhart J that suggests it is the criminal offence of itself that gives rise to a cause of action. It may be that some misunderstanding has arisen because of the head note in Halabi v Westpac Banking Corp (1989) 17 NSWLR 26. It reads: "Samuels JA (contra). The common law felony-tort rule whereby a civil action based on a felony is automatically stayed…" (My underlining.) The same phrase was used in the passage from p 11 of Garuda Indonesia (supra). McHugh J in Halabi at 53-56 detailed the history of the felony tort rule. There is no suggestion in that judgment that the commission of an offence (felony) is of itself an independent cause of action. 10 In Smith v Selwyn [1914] 3 KB 98, 106 Phillimore LJ said: "A plaintiff against whom a felony has been committed cannot make that felony the foundation of a cause of action unless the defendant has been prosecuted or a reasonable excuse has been shewn for his not having been prosecuted." Again there is a suggestion in those words that it is the felony that is the cause of action. 11 In Black & White Cab Co v Kelk [1984] 2 Qd R 484 the plaintiff sued the defendant for a breach of duty of trust as an employee. The defendant had been indicted for a breach of the Companies Code for making improper use of information obtained as an employee so as to gain a benefit. At 485 Connolly J said: "The old rule in relation to felonious torts probably had its origin in the right of the Crown to forfeiture of the property of the felon and its inception was designed to protect the interests of the Crown. It was later explained in terms of a public policy against the compromise of serious crime. However in modern times a rule has developed which is concerned rather to protect a person charged from prejudice in his criminal trial and the courts have recognised a discretion to stay the civil proceedings on broad grounds of justice between the parties."
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Again there is no suggestion that it was the breach of the Companies Law that gave rise to an independent cause of action. 12 In my view the felony-tort rule, far from being a cause of action, provides either a defence or grounds of stay of a civil action pending the conclusion of criminal proceedings. Like early equitable principles, it is a shield not a sword. In this case, as I understand it, the plaintiff agreed not to report the matter to the police in return for the defendant repaying the money. There has, as I understand it, been no prosecution. It may well be difficult for a person in the defendant's position (as distinct from a trustee in bankruptcy) to seek to stay any claim by the plaintiff for the moneys alleged to have been stolen. It would I think, be inherently unlikely for a defendant to seek to stay a claim by the plaintiff on the grounds that there had been no report to the police as such a plea would be likely to invite such action on behalf of a plaintiff to the detriment of a defendant. 13 I suggested to counsel that the current pleading was adequate to found what I saw being the appropriate cause of action, namely, a claim for breach of contract by stealing but neither counsel agreed with that proposition. In the circumstances par 4 of the statement of claim should be struck out. 14 The other issues in this application can be disposed of relatively shortly. 15 In par 4 there are "particulars of stolen moneys" which contains four columns. They are "date", "receipt nos", "bank deposit no" and an amount of money. Counsel for the defendant argued these particulars were inadequate to give to the defendant proper notice of how the claims were calculated. I do not agree with that proposition. In my view the pleading, whilst brief, is sufficient to detail the basis of the claim. It may well be that further particulars could be called for or it may be that upon discovery of the relevant documentation the basis of the claim will become more clear. 16 The defendant says the statement of claim should distinguish between money being the plaintiff's property and that being clients' property. I do not agree. The plaintiff will have suffered loss if it has had to reimburse its clients to the same extent as the loss by the theft of its own money. The loss will need to be proved, but the pleading is, in my view, sufficient to raise the issue. If the defendant stole the clients' money on a "frolic" of her own, so the plaintiff was not liable, then she can plead that fact.
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17 The plaintiff agreed that minor items in par 7 relating to a bank error and bank charges could be deleted and by consent they are.
18 The defendant claimed par 8 was too uncertain to stand. It is unnecessary for me to set out that paragraph. I do not agree with the arguments of the defendant and the paragraph will not be struck out. 19 Counsel for the defendant agreed that particulars set out in par 10 should be deleted and accordingly the words in the first paragraph after the word "practitioners" in the second line will be deleted as will paragraphs (a), (b), (c) and (d). 20 There was considerable discussion during the argument in this case about a claim for legal expenses allegedly incurred by the plaintiff and for professional time incurred by the plaintiff as a result of the alleged actions or neglects by the defendant. Whilst the basis for such claims might be somewhat tenuous, I do not see that it is a reason why the claim for them should be deleted. 21 There was I think no argument put forward by the plaintiff against the deletion of par 16 and par 17. 22 There were some other arguments put forward by the defendant that the pleading contains evidence rather than facts. To some extent that is probably correct but I do not think any such other matters are sufficiently important to warrant interference. 23 The defendant has been substantially successful in its claim to strike out the plaintiff's statement of claim. Accordingly the plaintiff will pay the defendant's costs of this application. 24 There will accordingly be the following orders: 1. Paragraph 4 is struck out. 2. In par 7 the particulars bearing dates 27.10.2000, 24.11.2000 and 13.12.2000 are struck out. 3. In par 10 the words in the first paragraph after the word "practitioners" in the second line and paragraphs (a), (b), (c) and (d) are struck out. 4. Paragraph 16 is struck out. 5. Paragraph 17 is struck out.
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25 The plaintiff put forward a minute of proposed directions for the disposal of the action. The action has been before the Court for some time and counsel for the defendant agreed, as do I, that some programme to bring it to fruition is appropriate. Whilst I found the plaintiff's suggested directions helpful, I think it better to ultimately have the plaintiff enter the action for trial in the usual way. In particular, I see a pre-trial conference being a sensible step. The amounts in issue are relatively small compared to the costs likely to be incurred by a trial. It seems at one stage the parties were going to compromise. I would have thought that should be further explored.
26 I make the following directions: 1. By 4.00 pm on 26 April 2002 the plaintiff file and serve an amended statement of claim. 2. By 4.00 pm on 2 May 2002 the defendant file and serve her defence. 3. By 4.00 pm on 10 May 2002 each party gives discovery on affidavit. 4. By 4.00 pm on 17 May 2002 the parties conclude inspection of discovered document. 5. On or before 25 May 2002 the plaintiff enter the action for trial. The plaintiff pay the defendant's costs of this application. |