Stuart v Hanna [No 2]
[2013] WASC 453
STUART -v- HANNA [No 2] [2013] WASC 453
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 453 | |
| Case No: | CIV:1997/2012 | 3 DECEMBER 2013 | |
| Coram: | MASTER SANDERSON | 17/12/13 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Leave to amend granted | ||
| B | |||
| PDF Version |
| Parties: | RICHARD ANTHONY STUART JULIAN PHILIP HANNA TERRENCE ROLAND GRAMMER |
Catchwords: | Practice and procedure Application to amend statement of claim Turns on own facts |
Legislation: | Nil |
Case References: | Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Stuart v Hanna [2013] WASC 133 Victorian WorkCover Authority v Game [2007] VSCA 86 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
JULIAN PHILIP HANNA
First Defendant
TERRENCE ROLAND GRAMMER
Second Defendant
Catchwords:
Practice and procedure - Application to amend statement of claim - Turns on own facts
Legislation:
Nil
Result:
Leave to amend granted
Category: B
Representation:
Counsel:
Plaintiff : Mr S J Howells
First Defendant : Mr J A Thomson SC
Second Defendant : Mr D E Molony
Solicitors:
Plaintiff : Ilberys Lawyers
First Defendant : DLA Piper
Second Defendant : Optima Legal
Case(s) referred to in judgment(s):
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Stuart v Hanna [2013] WASC 133
Victorian WorkCover Authority v Game [2007] VSCA 86
1 MASTER SANDERSON: This is the plaintiff's application for leave to amend its statement of claim in terms of a minute of proposed amended statement of claim dated 9 October 2013. The first defendant opposes the application. The original statement of claim was struck out on the application of the first defendant: see Stuart v Hanna [2013] WASC 133. The parties have negotiated at length about the form of the statement of claim. I accept those negotiations have been conducted in good faith and in an attempt to resolve the parties differences.
2 It was the first defendant's position, despite all the negotiations that had taken place and despite the best efforts of experienced counsel, it simply was not possible to formulate the plaintiff's claim in an acceptable way. It was submitted leave to amend in terms of the minute ought be refused and no further leave to replead ought be granted. This is a drastic step - it is akin to an application for summary judgment by the first defendant. Clearly, orders sought by the first defendant ought only be made in the clearest of cases when there is no real prospect of the plaintiff's claim succeeding.
3 This action relates to a partnership dispute. The plaintiff and the first and second defendants were, on the plaintiff's case, partners from around April or May 1999. At the time of the earlier strike out application, the second defendant was not a party to the proceedings. It seemed to me, given one of the remedies sought by the plaintiff was an account of the partnership, the action could not proceed unless and until the second defendant was joined. That has now been done. The second defendant did not take any part in this application. The first defendant did not object to any amendments which were necessary simply to reflect the fact the second defendant was now a party to the proceedings.
4 The first 12 paragraphs of the minute identify the parties and plead, in some detail, a partnership between them. For present purposes, it can be assumed there was such a partnership. The purpose of the partnership was to develop what is referred to in par 13 of the minute as the 'Proposal'. The Proposal was identification of certain nickel deposits and matters related thereto. It is clear from the rest of the pleading it was the partners' intention to market the Proposal with a view to it being incorporated in a company which would be floated on the stock exchange. That is, in fact, what happened. But it is important for present purposes to note the aim of the parties was to develop and market the Proposal, and then for them as partners to share in any benefits which might flow from the Proposal.
5 It is necessary at this point to jump forward slightly in the proceedings. The Proposal was taken up by an investor who provided seed capital. Eventually, a company known as Western Areas No Liability (WANL) was formed. It listed on the stock exchange and each of the partners received certain benefits by way of shares and options. Each of them was also employed by WANL. The first defendant became a director of WANL - the plaintiff and the second defendant did not. The plaintiff and the second defendant were paid an annual wage of $90,000. The first defendant was paid an annual wage of $140,000. It is this disparity in payment as between the first defendant and the plaintiff which is at the heart of this dispute.
6 When dealing with the earlier pleading, I pointed out the plaintiff had not pleaded any express or implied term in the partnership agreement to the effect that the alleged partners' remuneration would flow to the partnership, or any other logical basis why this would be the case. Without such a plea, it seemed to me the plaintiff's action could not possibly succeed.
7 Senior counsel for the first defendant put the position this way. A partnership is defined as two or more persons carrying on business with a view to profit. He submitted when the three persons, even assuming they were partners, were working for WANL, they could not logically have been furthering the interests of the partnership. After all, what is it they were doing? Counsel submitted no effective changes had been made to the earlier pleading which in any way would justify the conclusion remuneration paid by WANL to each of the parties was partnership property.
8 The plaintiff says it has introduced a number of new paragraphs which overcome this difficulty. The first of these new paragraphs is par 14A. It is in the following terms:
The partners were entitled to share equally in the Proposal and the profits of the Proposal and they were bound to account to each other for such profits pursuant to the Agreement and the partnership.
9 With respect, that paragraph does not really take the matter much further. Paragraph 3 of the minute defines the 'Agreement' as the agreement to enter into the partnership. The Proposal is defined in par 13 to be a detailed study of potential projects. It is difficult to see that par 14A does any more than restate what was in the previous pleading.
10 Paragraph 19A is in the following terms:
The partners were entitled to share equally in the profits derived from their work in the establishment of WANL and its activities subject to the interest of Mr Streeter as financier and they were bound to account to each other for such profits pursuant to the Agreement and the partnership.
11 It is difficult to see how the remuneration of each of the partners by WANL could equate to 'profits'. The term 'profit' generally means the difference between what it costs to acquire an asset and its sale price. So for instance, if the partnership acquired certain mining tenements in the course of putting together the Proposal, and it sold those mining tenements to WANL, then the difference between the acquisition price and the sale price would be profit and the partners would share that profit equally. But remuneration does not fit into that category.
12 Paragraph 23 of the former pleading is repeated in the minute. It alleges the partners agreed with the financier providing the seed capital that if and when funds became available that would sustain payments to them, they would be paid remuneration. It is not pleaded the partnership would be paid remuneration, or that each of the partners would be paid and the remuneration would be the property of the partnership. A new par 23A has been added. That reads as follows:
The partners were entitled to share equally in the profits of the remuneration referred to in paragraph 23 above and they were bound to account to each other for such profits pursuant to the Agreement and the partnership.
13 Particulars of that paragraph are provided. Reference is made to pars 4(e), 14, 17 - 21 and 23. Paragraph 4(e) is a plea it was an express term of the partnership agreement that task allocation for client work would be distributed evenly between the partners, and the income and other proceeds and liabilities would be shared equally. It is difficult to see that pars 14 and 17 - 21 add anything to the plaintiff's position. They simply detail the events that led to the formation of WANL and its adopting the Proposal. I have already referred to par 23; that does not seem to me to assist the plaintiff.
14 In the end then, it comes down to par 4(e). The plaintiff says this is sufficient to raise a triable issue. It was submitted it is well established that an employee who was paid a fixed wage could, nonetheless, be said to earn that wage as a partner so the wage itself became partnership property. Reference was made to the decision of the Court of Appeal in the Supreme Court of Victoria in Victorian WorkCover Authority v Game [2007] VSCA 86. It was submitted that case was very similar to the present.
15 It must be said the plaintiff's case is very thin. It is effectively put in the particulars to par 23A. But I am not satisfied the position is unarguable. It may be possible for the plaintiff to establish the partnership did continue after the partners were employed by WANL and that their remuneration was partnership property. Such a conclusion depends upon findings of fact about the terms of the partnership. Were I to refuse the plaintiff leave to amend, I would effectively be prejudging this question of fact.
16 Two further complaints were made about the pleading. First, it was said the pleading of misrepresentation against the first defendant still did not show any nexus between the alleged misrepresentation and any loss. The plaintiff has now inserted six new paragraphs. These follow on from par 41, the particulars to which have been amended:
41. In or about November 2006 the First Defendant assured and represented to the Plaintiff that his demands for appointment to the Board [of] WANL and an adjustment to his remuneration were being addressed.
Particulars
- The conversation took place between the parties at the offices of WANL during working hours. The First Defendant said words to the effect that Board members were considering appointing the Plaintiff to the Board and adjusting his remuneration accordingly.
41A The assurance and representation alleged in paragraph 41 were made by the First Defendant to induce the Plaintiff to refrain from making any claim directly to the Board of WANL or seeking relief in any form.
41B In reliance upon the assurance and representation alleged in paragraph 41 and their truth the Plaintiff took no further action in support of his claims and waited for the First Defendant to give effect to his assurance and representation.
41C The Plaintiff has since discovered that the assurance and representation alleged in paragraph 41 were untrue in that the First Defendant was not making, and had no intention to make, any attempt, alternatively any material attempt, to have the Plaintiff appointed to the Board.
41D Further, at no time subsequent to the representation alleged in paragraph 41 did the First Defendant make any attempt, alternatively any material attempt, to have the Plaintiff appointed to the Board.
41E The First Defendant gave the assurance and made the representation alleged in paragraph 41 knowing full well that they were false and untrue or else recklessly not caring whether they were true or false and to the extent the representation alleged in paragraph 41 related to future matters it was made without any reasonable foundation for making the said representations.
17 As was submitted by the first defendant, the plaintiff's claim is one of loss of opportunity. If such a plea is to be made, the plaintiff must plead the specific opportunity which he has foregone: see Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332. I accept the first defendant's submission the plaintiff has not identified what claims he would have made or legal recourse he would have sought were it not for the alleged conduct of the first defendant. Moreover, it is difficult to see how this claim can be maintained at all. The plaintiff was an employee of WANL. He was one of the partners that had brought the Proposal to the company. If the company had wanted him as a director, it would have been a simple step to appoint him to the Board. There is no allegation the first defendant acted in bad faith - what is alleged is the first defendant did one thing while telling the plaintiff he was doing something else. If that allegation is made out, it may suggest the first defendant was ethically unsound, but it is difficult to see how it could give rise to a claim in damages. Having said that, what has been pleaded is a chain of events which may be said to give rise to a loss. Referring to Sellars v Adelaide Petroleum NL, the judgment of Brennan J is summarised (in part) in the head note in the following terms:
Unless it can be predicated of an hypothesis in favour of causation of a loss that it is more probable than competing hypotheses denying causation, it cannot be said that the plaintiff has satisfied the court that the conduct of the defendant caused the loss. Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point where there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. Although the issue of a loss caused by the defendant's conduct must be established on the balance of probabilities, hypotheses and possibilities the fulfilment of which cannot be proved must be evaluated to determine the amount or value of the loss suffered. Proof on the balance of probabilities has no part to play in the evaluation of such hypotheses or possibilities: evaluation is a matter of informed estimation.
18 In my view, the case pleaded by the plaintiff is sufficiently clear to allow the first defendant to understand the case it has to meet. I would accept the plaintiff has not pleaded a date upon which the loss is said to have occurred. But there is sufficient clarity in the pleading to allow the first defendant to understand the plaintiff's case when it may not be possible to identify a specific date - rather, there will be a period when the loss crystallised.
19 In summary then, I am satisfied the pleading of the misrepresentation claim is now in a form which is satisfactory.
20 The remaining claim is described by the parties as an allegation of interference with contractual relations. It is alleged the first defendant persuaded WANL to terminate the employment of the plaintiff. Given the first defendant was a director of WANL, it is not immediately apparent how any actions he took in relation to the plaintiff's employment with the company could be wrongful interference with the contractual relationship between the plaintiff and WANL. Paragraph 48A does not take the matter any further. It alleges the first defendant in taking action against the plaintiff in relation to his employment, was acting outside the scope of his authority. Material facts would need to be pleaded to justify that bald assertion. In its present form, the pleading is unsatisfactory. However, I would give leave to replead with respect to this aspect of the claim.
21 In summary then, I am satisfied leave should be given to amend, largely in terms of the minute. There needs to be some reconsideration of the plea of interference with contractual relations. I will hear the parties as to the precise form of orders.
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