Stuart v Hanna - [2013] WASC 133

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: STUART -v- HANNA [2013] WASC 133

CORAM: MASTER SANDERSON

HEARD: 20 MARCH 2013

DELIVERED : 18 APRIL 2013

FILE NO/S: CIV 1997 of 2012

BETWEEN: RICHARD ANTHONY STUART
Plaintiff
AND
JULIAN PHILIP HANNA
Defendant

Catchwords:

Practice and procedure - Application to strike out statement of claim - Turns on own facts

Legislation:

Nil

Result:

Statement of claim struck out
Leave given to re-plead

Category: B

Representation:

Counsel:

Plaintiff: Mr S J Howells & Ms E Y H Scarff
Defendant: Mr J Thomson SC & Mr S D Hubbard

Solicitors:

Plaintiff: Ilberys Lawyers
Defendant: DLA Piper

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

Nil

MASTER SANDERSON: By chamber summons filed 18 December 2012 the defendant applied to strike out the plaintiff's statement of claim. Subsequent to the application being made, but prior to the hearing, the plaintiff foreshadowed amending the statement of claim in terms of a minute of proposed amended statement of claim dated 1 March 2013. Counsel for the defendant indicated at the hearing he was prepared to deal with this document - on the basis the defendant objected to the plaintiff being given leave to amend in terms of the minute. That is the way the matter proceeded.
The plaintiff alleges in April/May 1999 he and the defendant, together with one Terrence Grammer, entered into a partnership known as 'Australian Nickel Project Consultants' (ANPC). The partnership agreement was said to be partly oral, partly in writing and partly by conduct. There were express and implied terms. It is pleaded the parties owed one another fiduciary duties. By par 7 ‑ 12 the plaintiff said the partners did certain things which, taken together, establish there was the partnership as pleaded.
Paragraph 13 pleads the parties developed what they define as 'the Proposal'. Particulars of the Proposal are given. In summary it is alleged the partners worked over a period of some months to identify, examine, assess and record a large number of nickel deposits 'in the region'. That phrase is undefined. It would appear the Proposal was embodied in a document. It is pleaded the Proposal was partnership property and from November 1999 it was promoted by the partners to potential investors. One of those investors was a Mr Terrence Streeter. As a result of discussions with Mr Streeter a company styled 'Western Areas No Liability' (WANL) was incorporated. Between January and May 2000 the partners worked on a prospectus and undertook certain exploration work, presumably on tenements detailed in the Proposal.
By par 23 it is pleaded in or about March 2000 the partners agreed with Mr Streeter that if and when funds became available that would sustain payments to them they would be paid remuneration. Presumably this means each of the partners would be employed by WANL. Significantly there is no plea the partnership would be employed by WANL. But it is implied, if not expressly stated, each of the partners was to be employed by WANL in their capacity as partners. By pars 24 ‑ 25 it is alleged the defendant agreed with Mr Streeter he would be paid more than the other two partners. It is alleged this agreement was not brought to the attention of the other two partners and the agreement was in breach of the defendant's fiduciary duties owed to the partnership.
Further it is alleged the defendant secured Mr Streeter's agreement he would be made a director of WANL. The plaintiff says he approached the defendant in relation to this directorship. He says he was advised he too would be made a director of the company and he relied upon that representation. All of these matters are pleaded in pars 24 ‑ 28.
By pars 29 ‑ 31 it is pleaded a prospectus was issued, the company was listed on the Australian Stock Exchange, and the partners and Mr Streeter were allocated shares in WANL. By par 32 it is pleaded in August 2000 the partners commenced employment with WANL. Again it is to be noted the plea is 'the partners commenced employment' - it is not pleaded the partnership itself was employed but rather each individual was employed by WANL.
Based upon all of these pleaded matters par 33 is in the following terms:
As a consequence of the matters alleged above the Defendant constituted himself a constructive trustee of the salary and other benefits received by him that were in excess of the amounts paid to the Plaintiff and Mr Grammer.
A similar plea is made in par 34 of the statement of claim which deals with additional options which were allocated to the defendant over and above the allocation received by the plaintiff and Mr Grammer. It is to be noted the plaintiff alleges the constructive trust arose because of the 'Agreement' which is defined in par 1 as being the agreement to enter into the partnership, the partnership itself, the ownership of the Proposal and the pleaded assurance as to the plaintiff's directorship of WANL.
Paragraph 35 pleads the partners 'as employees of WANL' discussed an acquisition of a base metal project east of Mt Newman and determined it should proceed. Paragraph 36 pleads the partners, again 'as employees of WANL', discovered substantial nickel deposits around the Forrestania area. Whatever else may be said about these two paragraphs they appear to relate to nothing in the pleading. The previous paragraphs do not lead to them and subsequent paragraphs do not raise any claim based upon them. They seem to have no purpose and for that reason they should be omitted.
Paragraph 37 pleads in March 2004 Mr Grammer left his employment with WANL. Nothing is said about whether this brought the partnership to an end. Presumably it did not - the remainder of the pleading seems to anticipate the partnership continuing at least until September 2011. How then par 37 is a relevant material fact is unclear. Perhaps it assists in the narrative. Either way it causes no real mischief and need not be struck out.
Paragraphs 39 ‑ 40 plead during the course of 2006 the plaintiff demanded of the defendant he be appointed to the Board of WANL and his remuneration be adjusted to equal that of the defendant. Paragraph 41 pleads in November 2006 the defendant assured and represented to the plaintiff that his demands for appointment to the Board and adjustment and remuneration were being addressed. There then follows pars 41A ‑ 41E. Essentially the plaintiff says he relied upon the representation pleaded in par 41, the representation was untrue, the defendant knew it was untrue or otherwise it was recklessly made and as a result of the representation the plaintiff was denied the opportunity of taking his claims to the Board. As to this last point par 41E reads as follows:
In consequence of the foregoing the plaintiff was denied the opportunity of making his claims to the Board of WANL and of bringing claims that were by then statute barred to the Court.
With respect that paragraph is meaningless. It is understandable the plaintiff could plead he was denied the opportunity of taking his claims to the Board. But what claims were by then statute barred, and if they were statute barred, how could the defendant's actions have prevented those claims being litigated. At least the last part of that paragraph must be struck out.
Paragraph 43 pleads a similar representation to that pleaded in par 41 but the representation being made on 3 July 2007. Paragraphs 43A ‑ 43E mirror pars 41A ‑ 41E. The difficulties with the last part of par 41E apply to par 43E and that section of the plea must be struck out.
Paragraphs 44 ‑ 45 plead the defendant denied the partnership and denied any obligation to assist the plaintiff becoming a director of WANL. Paragraph 46 pleads the defendant took steps aimed to harass the plaintiff into leaving his employment. In par 47 it is pleaded in breach of the agreement the partnership and his fiduciary duty the defendant persuaded the Board members of WANL to 'wrongfully' terminate the plaintiff's employment. Paragraph 48 pleads that was done and par 49 pleads the defendant wrongly induced WANL to breach its contract with the plaintiff.
The remaining paragraphs of the statement of claim plead the plaintiff's entitlement to relief - an account, damages for breach of constructive trust, damages for breach of contract, damages for misrepresentation and damages for inducing a breach of contract. Strictly speaking none of pars 51 ‑ 53 are necessary - they are nothing more than a prayer for relief tucked in at the end of a pleading.
Leave to amend in terms of the minute ought be refused. There are a number of difficulties with the way the plaintiff's case is pleaded. It may be possible to overcome those difficulties but at present the pleading is embarrassing. I have already mentioned a number of paragraphs which are either unnecessary or make no sense. If these were the only defects they would not be sufficient to cause a difficulty. But taken with other matters referred to below it seems to me the statement of claim would benefit from redrafting.
The first and most obvious difficulty with the plaintiff's claim is the failure to join Mr Grammer. If, as I understand to be the plaintiff's position, the partnership did not come to an end when Mr Grammer left the employment of WANL then he must have been a partner up until the time the partnership did come to an end. In fact there is no specific plea as to when the partnership did terminate. During the course of his submissions counsel for the plaintiff said it was when a demand was made for accounts. If that is so Mr Grammer remained a partner up until 2011 and he must be joined as a party to the proceedings and be served. What role he takes thereafter is a matter for him. But without him being a defendant the action cannot proceed.
There is also a difficulty with the way the partnership as pleaded ties in with the claims. The agreement and the partnership are all tied in with developing and marketing the Proposal. It is not actually pleaded the Proposal passed into the hands of WANL but that must be what happened. After all a prospectus was prepared, presumably based upon the Proposal, and WANL was listed. It does not logically follow that when the partners were employed individually by WANL their remuneration flowed to the partnership. Why should it? There appears to be no express agreement to that effect and there is no plea there was such an implied term in the partnership agreement. So there is a fundamental disconnect between the way the agreement and the partnership are pleaded and the relief claimed.
There is also a logical difficulty with the misrepresentation claim. Essentially it is said the defendant represented to the plaintiff that he (the defendant) would persuade the Board of WANL to increase the plaintiff's salary and to make him a member of the Board. Relying upon that representation the plaintiff took no action. It is not clear if the plaintiff had taken any action his aims would have been realised. It may be the claim is for loss of the chance. But whether or not that would translate into any tangible benefit must be open to doubt. After all in the particulars to par 40 the plaintiff says that in October 2006 he made a formal representation to the remuneration committee of WANL that there was an agreement he and the defendant would be treated as equals. Presumably the remuneration committee in discharge of its duties considered the plaintiff's position but determined not to pay him any more. It is not clear from the pleading how the defendant could have done anything to change that decision.
The defendant did complain about the plea of inducing breach of contract. Whatever may be the merits of the claim it seems to me the elements of the cause of action have been pleaded. If the plaintiff is able to establish the defendant persuaded WANL to terminate his employment and that termination was wrongful then the defendant may be liable to the plaintiff. While the particulars presently provided are inadequate that can be cured by means other than striking out the pleading.
In all the circumstances it is appropriate to allow the plaintiff the opportunity to re‑plead this claim. It might be observed in passing, as is so often the case, a pleading which deals in material facts rather than pleads causes of action may assist in an understanding of the plaintiff's claim.
I will hear the parties as to the appropriate orders and as to costs.