Smoothy Cattle Co Pty Ltd v CCS Mining and Civil (WA) Pty Ltd [No 2] - [2019] WADC 155

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION:   PERTH
CITATION:   SMOOTHY CATTLE CO PTY LTD -v- CCS MINING AND CIVIL (WA) PTY LTD [No 2] [2019] WADC 155
CORAM:   REGISTRAR KINGSLEY
HEARD:   9 & 12 AUGUST 2019
DELIVERED          :   15 NOVEMBER 2019
FILE NO/S:   CIV 3256 of 2018
BETWEEN:   SMOOTHY CATTLE CO PTY LTD
Plaintiff

AND

CCS MINING AND CIVIL (WA) PTY LTD
First Defendant

KIERAN JOHN DUGGAN
Second Defendant

STEPHEN CHRISTOPHER O'SULLIVAN
Third Defendant

DONNCHA LOWNEY
Fourth Defendant

DANIEL HOGHTON
Fifth Defendant

Catchwords:

Practice - Application's pursuant to O 16 Rules of the Supreme Court 1971 (WA) and to strike paragraphs of statement of claim - Turns on own facts

Legislation:

Nil

Result:

Application pursuant to O 16 Rules of Supreme Court 1971 (WA) allowed in part
Application to strike paragraphs of statement of claim allowed in part

Representation:

Counsel:

Plaintiff	:	Mr J C Yeldon
First Defendant	:	Mr T Langdon
Second Defendant	:	Mr M Richards
Third Defendant	:	Mr T Langdon
Fourth Defendant	:	Mr T Langdon
Fifth Defendant	:	Mr T Langdon

Solicitors:

Plaintiff	:	Pacer Legal
First Defendant	:	HWL Edsworth Lawyers
Second Defendant	:	Rowe Bristol Lawyers
Third Defendant	:	HWL Ebsworth Lawyers
Fourth Defendant	:	HWL Ebsworth Lawyers
Fifth Defendant	:	HWL Ebsworth Lawyers

Case(s) referred to in decision(s):

Swiss Re International SE v Simpson [2018] NSWSC 233
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Yorke v Lucas (1985) 158 CLR 661

REGISTRAR KINGSLEY:

The plaintiff (Smoothy Cattle) pleads it was entitled to hire a 1540 Cone Crusher (Cone Crusher) and says that in or about 10 April 2017 Mr Smoothy, a director of Smoothy Cattle, and the second defendant (Mr Duggan) had a telephone conversation. Mr Duggan enquired whether the Cone Crusher was available for sale or hire, and if so what price did Smoothy Cattle want for the sale or hire of the Cone Crusher by, as Smoothy Cattle pleads, the first defendant (CCS Mining). Mr Smoothy replied to Mr Duggan that the Cone Crusher was available for hire at $45,000 per month but less per month if it was purchased, that Mr Smoothy required the directors to guarantee payment, and that Mr Smoothy would send the details.
By an amended defence to the statement of claim lodged 29 August 2018 Mr Duggan admits the telephone conversation with Mr Smoothy although Mr Duggan pleads that the conversation only related to the hire of a Cone Crusher not the purchase of the Cone Crusher.
Mr Duggan goes on to plead that he was engaging in negotiations and discussions with Smoothy Cattle in relation to the proposed hire of the Cone Crusher and was doing so for and on behalf of CCS Equipment Pty Ltd (CCS Equipment). Mr Duggan goes on to plead that the plaintiff through Mr Smoothy was aware Mr Duggan represented CCS Equipment because, in part, Smoothy Cattle had previously leased the Cone Crusher to CCS Equipment.
Smoothy Cattle goes on to plead that there were an exchange of SMS text messages between Mr Smoothy and Mr Duggan that ultimately led to Smoothy Cattle releasing the Cone Crusher to be delivered to its ultimate destination Telfer Gold Mine.
Mr Duggan has filed a chamber summons dated 26 July 2019 seeking orders that judgment be entered for Mr Duggan pursuant to O 16 Rules of the Supreme Court 1971 (WA) (RSC), alternatively, pursuant to O 20 r 19(1) RSC the claim of Smoothy Cattle discloses no reasonable cause of action, and that Smoothy Cattle be refused leave to further amend the statement of claim in the terms of a minute of proposed amended statement of claim (PASOC), and further alternatively par 16 – par 24 of the PASOC be struck. Leave is sought to bring the application.
The first, third, fourth and fifth defendants have also brought an application to strike the plaintiff's writ pursuant to O 16 RSC. I will collectively refer to the third, fourth and fifth defendants as the 'other Directors'.
A memorandum of appearance was filed by Mr Duggan on 12 November 2018 and by the other Directors on 11 September 2018. The applications referred to in par 5 and par 6 are out of time - Mr Duggan's by a lesser degree.
The affidavit of Mr Daniel Hoghton sworn 8 May 2019 gives scant details for the delay. Broadly, Mr Hoghton casts the blame on his solicitors for not informing the other Directors of the time limits for bring a summary judgment application. Further, Mr Hoghton deposes that Smoothy Cattle had filed an application for certain documents and the first defendant had claimed privilege over those documents. Thus Mr Hoghton submits the other Directors were distracted.
The time limits imposed by the Rule of Court are to ensure that unmeritorious actions are determined in a timely and cost efficient manner. The rule enabling an extension of time is remedial and a consideration, is whether the application has sufficient merit to warrant the grant of leave having regard to the interest of the parties and efficient case management. That consideration requires an examination of the merits of the action.
The first defendant CCS Mining has been deregistered. As a matter of law CCS Mining has ceased to exist and therefore must be removed as a party (Corporations Act 2001 (Cth) (CA) s 601AD(1)).
Affidavits in support of the other Directors' applications have been filed by the third, fourth and fifth defendants. Mr Duggan has filed an affidavit in support of his application.
Mr Smoothy has filed an affidavit in opposition to the applications.
All affidavits were subject to objection to various paragraphs. I have ruled on those objections and my reasons are framed around the paragraphs of the various affidavits that have been admitted into evidence.
Mr Duggan in his affidavit sworn 17 June 2019 (Mr Duggan's affidavit) deposes to his recollection of the conversation with Mr Smoothy and deposes at par 18 that he did not expressly refer to either CCS Mining or CCS Equipment. On the basis of his previous dealings with Mr Smoothy, Mr Duggan assumed that Mr Smoothy would understand that he was acting on behalf of CCS Equipment.
The plea against the other Directors is that these defendants engaged in a course of conduct in trade or commerce in which the other Directors falsely led Smoothy Cattle to believe CCS Mining intended to pay Smoothy Cattle for the hire of the Cone Crusher and, in the event CCS Mining was unwilling or unable to pay the hire payment, that payment would be made by the Directors of CCS Mining.
Smoothy Cattle goes on to plead that the directors of CCS Mining were knowingly concerned in the misleading and deceptive conduct of CCS Mining contrary to s 18 of the Australian Consumer Law 2010 (ACL).
Further, Smoothy Cattle pleads an estoppel in that CCS Mining and the directors encouraged and/or induced Smoothy Cattle to assume acceptance of the pleaded terms, and in so doing Smoothy Cattle acted to its detriment. In the circumstances Smoothy Cattle pleads it would be unconscionable for CCS Mining and the directors to resile or depart from Smoothy Cattle relying on the assumption.
Mr Duggan, nor the other Directors, have pleaded to the PASOC. In their defence the other Directors plead that if any representations were made by Mr Duggan to Mr Smoothy they were made in Mr Duggan's capacity as director of CCS Equipment and not as director of CCS Mining.
Thus the claims against Mr Duggan and the other Directors are under s 18 of ACL or, alternatively, by way of estoppel.
My starting point in considering this matter are the comments by Hammerschlag J in Swiss Re International SE v Simpson [2018] NSWSC 233 [35] where he stated:
Where plaintiffs, in a proceeding such as this, wish to make significant charges of misleading or deceptive conduct with potentially very significant consequences, it is incumbent on them to articulate their case with precision.
Having regard to the context of the allegations it is not seriously in dispute that the relevant conduct occurred in trade or commerce.
In this matter the legal position of Mr Duggan can be considered differently to the other Directors.
The negotiations were between Mr Smoothy and Mr Duggan in relation to the Cone Crusher. If there has been a contravention of s 18 then on the pleaded case it is clear Mr Duggan was directly concerned in the contravention.
The case pleaded against the other Directors, as detailed in par 16 PASOC, is that Mr Duggan for CCS and for himself and the other Directors engaged in a course of conduct. At par 17 PASOC it is pleaded Mr Duggan and the other Directors were knowingly concerned in the conduct which was false and misleading or deceptive and likely to mislead or deceive Smoothy Cattle.
The key to the personal liability of the other Directors is that if they are involved in the purported contravention. Section 2 of the ACL provides that a director will be involved if their conduct satisfies one or more of the following elements:
•aided, abetted counsel or procured the contravention;
•induced whether by threats or promises or otherwise the contravention;
•in any way directly or indirectly knowingly concerned in or party to the contravention; or
•has conspired with others to effect the contravention.
Whilst it is not necessary to prove that the other Directors knew the conduct to be misleading in order to be liable through involvement, Smoothy Cattle must demonstrate that the other Directors had knowledge of the essential matters which go to make up the contravention (Yorke v Lucas (1985) 158 CLR 661, 670).
There are no particulars of any knowledge by the other Directors of the purported contravention by Mr Duggan. In the context of the pleaded case the other Directors had no dealings with Smoothy Cattle, and there is no pleas that the other Directors had knowledge or the contemplation of the acts of Mr Duggan. That being the case there is no basis in law for an action against the other Directors as it is currently proposed to be pleaded.
The other Directors argue that the statement of claim does not contain any allegation that Smoothy Cattle has suffered loss or damage by reason of any contravention of s 18 ACL. However, in my opinion par 20 of the PASOC does sufficiently particularise a loss, though not necessarily damage. The particulars of par 20 PASOC claim the hire payment plus GST. There is no basis upon which Smoothy Cattle can claim to be entitled to pay GST on a claim for damages under s 236 ACL.
Smoothy Cattle pleads in the alternative that the other Directors are estopped from denying that they would guarantee payment by CCS Mining of the hire rate for the Cone Crusher.
The plea of estoppel against the other Directors is simply that they encouraged and/or induced Smoothy Cattle to assume acceptance of the guarantee terms. This encouragement or inducement was because the other Directors were, at all material times directors of CCS Mining, that the other Directors did not notify Smoothy Cattle of any objection, and the other Directors did not, prior to collection of the Cone Crusher, object to the hire terms. Smoothy Cattle pleads that it acted to its determinant in relying on the assumptions.
Since Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 estoppel has been used as a device for the imposition of obligations. Determining whether an estoppel has arisen in a particular case is a very fact specific enquiry.
In this matter the enquiry is whether Mr Duggan has induced Smoothy Cattle to adopt the assumption that he and the other Directors will guarantee the obligations of CCS Mining. Further, the enquiry would be directed to whether Mr Duggan and the other Directors have failed to act to avoid the detriment to Smoothy Cattle if the assumption is not fulfilled.
There is no agreement in writing. The other Directors submit that the Statue of Fraud applies and that there can be no cause of action against the other Directors by reason of the lack of writing. However, the very nature of estoppel is that, in this case Smoothy Cattle, is induced to change their position or to act in a certain way (by releasing the Cone Crusher) in reliance on promises that are made. In my opinion it is arguable that a guarantee can be enforceable even though it is not in writing.
For an estoppel to be found the party to be estopped must induce, by action or inaction, an assumption that, in this case, a contract of guarantee exists, or will exist. As pleaded and in the PASOC, there are no sufficient particulars of how Smoothy Cattle was induced by the other Directors. Smoothy Cattle may well be able to plead its case against the other Directors.

Conclusion

On the application for leave, having regard to the merits of the applications and the fact there has been no prejudice, leave is granted on both applications.
In relation to the other Directors in my opinion the case under the ACL is unstainable on the current pleading and in the PASOC writ is struck against the other Directors in relation to this cause of action.
The current pleading and the PASOC against the other Directors in relation to a purported guarantee is presently devoid of particulars and does not clearly present a case for which the other Directors can meet.
At this stage I am not prepared to enter judgment for the other Directors pursuant to O 16 in relation to the guarantee. It may well be that Smoothy Cattle can demonstrate, through its pleaded case, that there is a viable cause of action under the guarantee against the other Directors. Accordingly, at this stage I leave open the disposition of the O 16 application in relation to the guarantee.
As for Mr Duggan the pleas under the ACL and the guarantee are sufficiently made out for Mr Duggan to understand the case that he has to meet. I will not strike the writ or the paragraph of the statement of claim against Mr Duggan.
I will hear counsel of the form of orders and on costs arising from these reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
TS
Court Officer
13 NOVEMBER 2019