Skalkos v Smiles and 5 Ors

[2001] NSWSC 261

CITATION:

Skalkos v Smiles & 5 Ors [2001] NSWSC 261

CURRENT JURISDICTION:

Common Law

FILE NUMBER(S):

SC 21033/95

HEARING DATE(S):

5 April 2001

JUDGMENT DATE:

11 April 2001

PARTIES :

John Skalkos
(Plaintiff)

James John Smiles
(First Defendant)

Archibald George Poulos
(Second Defendant)

Smile Poulos Services Pty Limited
(Third Defendant)

Taxcare Pty Limited
(Fourth Defendant)

Svelte Corporation Pty Limited
(Fifth Defendant)

George Kotsakis
(Sixth Defendant)

JUDGMENT OF:

Master Harrison

COUNSEL :	Mr M J Cohen (Plaintiff) Mr P Cook (First Defendant)
SOLICITORS:	Rosier Associates (Plaintiff) Abreu & Associates (First Defendant)
CATCHWORDS:	Summary judgment - breaches of TPA - conspiracy
LEGISLATION CITED:	Supreme Coourt Rules Trade Practices Act 1974 (Cth) Bullen & Leake and Jacob's Precedents of Pleadings 12th ed. at 341
CASES CITED:	H 1976 Nominees Pty Ltd v Galli Ltd & Quarries Ltd (1979) ALR 181 Air Services Australia v Zarb (NSWCA unreported, 26 August 1998, Rolfe AJA) Dey v Victoria Railway Commissioners (1948-49) 78 CLR 62 General Steel Industries Inc v Commissioner for Wailways (1964) 112 CLR 125 Webster & Anor v Lampard (1993) 177 CLR 598 TPC v Sterling (1980) ATPR 40-145 Maritime Union of Australia and Ors v Geraldton Port Authority and Ors (1999) 165 ALR 67 McKellar & Anor v Container Terminal Management Services Ltd & Ors (1999) ALR 409 Trade Practices Commission v Allied Mills Industries Pty Ltd (1980) 32 ALR 570 Council For the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd (1998) 157 ALR 135 R v Chow (1987) 11 NSWLR 561
DECISION:	(1) The plaintiff is to file and serve a further amended statement of claim within 28 days; (2) Each party is to pay their own costs.

12

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER HARRISON

WEDNESDAY, 11 APRIL 2001

21033/95 - JOHN SKALKOS v JAMES JOHN SMILES
& 5 ORS

JUDGMENT (Summary judgment; breaches of TPA;

conspiracy)

1   MASTER: By notice of motion filed 6 November 2000 the first defendant seeks that the plaintiff’s amended statement of claim filed 5 March 1999 be struck out pursuant to Part 15 r 26 of the Supreme Court Rules (SCR). The second defendant is Archibald George Poulos; the third defendant is Smile Poulos Services Pty Limited; the fourth defendant is Taxcare Pty Limited; the fifth defendant is Svelte Corporation Pty Limited and the sixth defendant is George Kotsakis.

2 The first defendant submitted that the plaintiff’s statement of claim fails to disclose reasonable basis to support any cause of action at least in relation to the allegation of conspiracy and contravention of provisions of the Trade Practices Act 1974 (Cth) (TPA). The first defendant is not seeking to strike out the claims of breach of trust and confidence and breach of fiduciary duty.

3   The statement of claim is a complex pleading and it is unfortunate that the parties could not resolve their minor difficulties without having to resort to the court thereby incurring extra expense and time that was not warranted. The first defendants counsel agreed that the defects alleged could all be cured by amendment.

4   The onus is on the plaintiff in the statement of claim to set out the facts upon which the defendants can become aware of the precise allegations made against them and hence what is it that they have to meet. If a fact is material, it must be pleaded and not merely referred to in particulars - see H 1976 Nominees Pty Ltd v Galli Ltd & Quarries Ltd (1979) ALR 181 at 186-187.

5   The plaintiff pleads at paragraph (1) of his amended statement of claim filed 5 March 1999 that the first defendant conducted a practice as a chartered accountant or alternatively as a practising accountant under the style and title of JJ Smiles & Co in which capacity he held himself out as possessing reasonable skill and capacity as the provider of accounting services to the plaintiff who at all material times was the first defendant’s client.

6   In paragraph (2) of his amended statement of claim the plaintiff pleads that the second defendant conducted a practice as a chartered accountant or alternatively as a practising accountant in partnership and association with the first defendant under the style and title of Smiles Poulos & Associates in which capacity the second defendant held himself out as possessing reasonable skill and capacity as the provider of accounting services to the plaintiff who at all material times was the client of the second defendant. It is pleaded that these companies were involved in trade and commerce. It is also pleaded that Mr Smiles was the controller of the third and fourth defendants.

7   The plaintiff alleges at Paragraph (9) that on 17 July 1991 the first and second defendant commenced to conduct certain tax agency services in the name of the third defendant, using the fourth defendant as a service company in and about the conduct of the practice, and in which capacity the fourth defendant held itself out as possessing reasonable skill and diligence as the provider of accounting services to the plaintiff who at all material times was the client of the fourth defendant.

8   At paragraph (10) the plaintiff alleges that on 21 September 1993 the first and second defendants commenced to conduct their practice as chartered accountants or alternatively as practising accountants under the style and title of Smiles Poulos & Associates, using the third defendant as a service company in and about the conduct of the practice, and in which capacity the third defendant held itself out as possessing reasonable skill and diligence as the provider of accounting services to the plaintiff who at all material times was the client of the third defendant.

The law in relation to summary judgment

9   Part 15 r 26 says:

“(1) 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 proceedings, or

(c) is otherwise an abuse of the process of the Court,
the Court may at any stage of the proceedings, on terms, order that the whole or any part of the pleadings be struck out.
(2) The Court may receive evidence on the hearing of an application for an order under subrule (1).”

10   In a Court of Appeal decision Air Services Australia v Zarb (NSWCA unreported, 26 August 1998) Rolfe AJA found it useful to remind himself of the highly demanding test imposed on a party seeking summary judgment. His Honour referred to Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 and Webster & Anor v Lampard (1993) 177 CLR 598. I have reproduced the passages quoted in Zarb.

11   In General Steel Barwick CJ, who heard the application alone stated:

“Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, 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.”

12   Barwick CJ also said:

“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 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.”

13   In Webster Mason CJ, Deane and Dawson JJ reinforced the rigorous test stating 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.”

14   According to Rolfe AJA in Zarb:

“The demanding nature of the test is in no way lessened in circumstances where there are the potential for difficult factual and legal issues to arise. Rather, as the decision in Webster made clear, it is heightened: see also Wickstead & Ors v Browne (1992) 30 NSWLR 1 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241.”

15 The first defendant submitted that the claim under s 52 of the TPA is deficient. The first defendant submitted that it is not clear whether the claims are made against the first defendant as an individual or by the first defendant aiding and abetting the company’s conduct. Section 52 appears in Part V of the Act headed “Consumer Protection”.

16 Section 52 provides:

“Misleading or deceptive conduct
(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).

17 Thus the elements to be established to found an action for breach of s 52 are (i) The corporation; (ii) in trade or commerce; (iii) engaged in conduct; (iv) that is misleading or deceptive or likely to mislead or deceive; and (v) reliance was upon the representation by the plaintiff.

18   Section 75B appears in Part VI of the Act headed “Enforcement and remedies”. It provides:

“Interpretation
(1) A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB or V, or of section 75AU or 75AYA, shall be read as a reference to a person who:
(a) has aided, abetted, counselled or procured the contravention;
(b) has induced, whether by threats or promises or otherwise, the contravention;
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention”

19   According to TPC v Sterling (1980) ATPR 40-145 if s 52 is read with s 6(2) of the Act it applies to both individuals and corporations and it is to be read as follows:

“(i) between Australia and places outside Australia;
(ii) among the States;
(iii) within a Territory, between a State and a Territory, or between two Territories; or
(iv) by way of the supply of goods or services to Australia or an authority or instrumentality of Australia, …”

20   The representations are particularised as:

para 13: investment advice and certain representations (“investment representations”);
para 18: representations regarding Smiles-Kotsakis loan (“repayment representations”);
para 19: further representations regarding Smiles Kotsakis loan (“second repayment representation”);
para 20: that second repayment representations were made by Smiles in his personal capacity;
para 24: further representations (“Smiles-Kotsakis loan restructuring representations”);
para 33: the charges security representations.

21 It is clear that the plaintiff has pleaded that the first and second defendants were involved in conduct within the meaning of s 75B - see para 43 ASC. However, from the representations referred to above it appears that the plaintiff may have intended to plead a breach of s 52 against the first defendant as an individual - see para 20 ASC. The plaintiff should clarify whether he is alleging that the first defendant as an individual has breached s 52 and if so plead it so as the requirements stipulated in Sterling are satisfied.

Conspiracy

22   Paragraphs 36 to 38 of the amended statement of claim plead conspiracy. They state:

“36. Further and in the alternative, in the premises, upon the facts, matters and circumstances pleaded herein together with the matters set out herein below, the individual Defendants (save and except for Svelte), conspired with the predominant purpose of causing injury to the Plaintiff by unlawful means
PARTICULARS

Smiles, Poulos and Kotsakis intended, and it is the fact that they obtained, an advantage and profited from having and using the plaintiff’s moneys, without the further intention that the Plaintiff be rewarded or profit from the said use, and Smiles, Poulos and Kotsakis have thereby been unjustly enriched.

37. In pursuit of the said conspiracy, the Defendants (save and except for Svelte) engaged in overt conduct which was in breach of the agreement in writing dated 13 August 1987, or alternatively, as amended by agreement in writing dated 21 May 1992 between the Plaintiff and Smiles and Kotsakis.
PARTICULARS
The Plaintiff repeats the particulars contained within paragraphs 13, 18, 19, 20, 24, 33 & 36 herein.
38. Each of the acts particularised herein was done, carried out or taken into effect by the Defendants (save and except for Svelte) as herein alleged on behalf of themselves and each of their joint conspirators in furtherance of the said conspiracy, or alternatively the Defendants intentionally were joint tortfeasors.”

23   In text of Bullen & Leake and Jacob’s Precedents of Pleadings 12th Edition at 341, the learned author says:

“The statement of claim should describe who the several parties are and their relationship with each other. It should allege the agreement between the defendants to conspire, and state precisely what was the purpose or what were the objects of the alleged conspiracy, and it must then proceed to set forth, with clarity and precision, the overt acts which are alleged to have been done by each of the alleged conspirators in pursuance and in furtherance of the conspiracy; and lastly, it must allege the injury and damage occasioned to the plaintiff thereby.”

24   The elements of the tort of conspiracy are:

(a) each of the alleged co-conspirators was a party to an agreement or combination with either of the other co-conspirators;
(b) the purpose of that agreement or combination was to injure the plaintiff by unlawful means;
(c) the agreement or combination was carried into affect by the commission of agreed unlawful acts;
(d) those unlawful acts caused damage to the plaintiff.
(see Maritime Union of Australia and Ors v Geraldton Port Authority and Ors (1999) 165 ALR 67 at 132).

25   The first defendant submitted that the plaintiff has not pleaded the agreement which is an essential element of the tort of conspiracy.

26   The last relevant submission by the first defendant is that paragraph 36 of the ASC does not make it clear as to whether the plaintiff has pleaded that there was both conspiracy to contravene the TPA and a common law conspiracy. It is my view that upon a careful reading of para 36 it is not pleaded that there was a conspiracy to contravene the provisions of the TPA but rather only a pleading of conspiracy at common law. In any event it is clear that if the plaintiff sought to plead a tort of conspiracy to contravene the provisions of TPA at common law outside the form of conspiracy expressly provided by s 75B(1)(d) of the Act, such a pleading is not available. The Act covers the field in relation to the contraventions including statutory conspiracy to contravene those provisions- see McKellar & Anor v Container Terminal Management Services Ltd & Ors (1999) ALR 409 per Weinberg J at [197]; Trade Practices Commission v Allied Mills Industries Pty Ltd (1980) 32 ALR 570 at 579 per Sheppard J; Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd (1998) 157 ALR 135 at 150 per Drummond J. See also R v Chow (1987) 11 NSWLR 561 at 570.

27   It is pleaded that the defendants (except Svelte) engaged in overt conduct which was in breach of the agreements dated 18 August 1987 and 21 May 1992 between the parties. But it is my view that the agreement between the alleged conspirators is not plead. This needs to be rectified.

28   Costs are discretionary. As I said at the outset these matters need not have troubled the court. One or two amendments need to be made to the amended statement of claim. Some of the plaintiff’s submissions failed. The appropriate order for costs is that each party is to pay their own costs.

29   The orders I make are:

(1) The plaintiff is to file and serve a further amended statement of claim within 28 days.

(2) Each party is to pay their own costs.
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Last Modified: 04/24/2001