Supreme Court Of the Australian Capital Territory; Case Title:; McKay v Findex Group Limited; Findex Group Limited v; McKay; Citation:
[2023] ACTSC 58
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | McKay v Findex Group Limited; Findex Group Limited v McKay |
Citation: | [2023] ACTSC 58 |
Hearing Dates: | 16 March 2023; 22 March 2023 |
DecisionDate: | 23 March 2023 |
Before: | McCallum CJ |
Decision: | Direct the parties to bring in short minutes of order in accordance with these reasons. List the matter on 11 April 2023 at 11:30am before McCallum CJ for directions. |
Catchwords: | CIVIL PROCEDURE – INTERLOCUTORY APPLICATION – Pleadings – Strike-out application – whether pleading is an abuse of process – whether pleadings disclose any reasonable cause of action – whether the pleadings may tend to embarrass the fair trial of the proceedings embarrassing – where lengthy history of litigation between the parties CIVIL PROCEDURE – INTERLOCUTORY APPLICATION – Statement of claim – Application to file a further amended statement of claim – whether the pleadings address previous identified inadequacies – whether amendments sought unreasonably expand the scope of the claim – where lengthy history of litigation between the parties |
Legislation Cited: | Court Procedures Rules2006 (ACT) rr 425, 504, 505 |
Cases Cited: | B & J Hudghton Investments Pty Ltd as trustee for the B & J Hudghton Family Trust v Lakeba Group Limited [2022] NSWSC 830 Ballantyne v Boylan [2013] SASC 177 UBS AG v Tyne [2018] HCA 45; 265 CLR 77 |
Text Cited: | David Rolph et al, Balkin & Davis Law of Torts (LexisNexis, 6th ed, 2021) G E Dal Pont, Law of Costs (LexisNexis, 5th ed, 2021) |
Parties: | SC 109 of 2020 David McKay ( Plaintiff) Findex Group Limited (First Defendant) Spiro Paule (Second Defendant) Danielle Ludbey (Third Defendant) Phillip Hart (Fourth Defendant) SC 464 of 2019 Findex Group Limited ( First Plaintiff) Findex Services Pty Ltd (Second Plaintiff) Financial Index Australia Pty Ltd (Third Plaintiff) Spiro Paule (Fourth Plaintiff) Danielle Bartholomeusz (Fifth Plaintiff) Phillip Hart (Sixth Plaintiff) David McKay (Defendant) |
Representation: | Counsel SC 109 of 2020 M Karam (Plaintiff) M Friedgut (Defendants) SC 464 of 2019 M Friedgut ( Plaintiffs) M Karam ( Defendant) |
| Solicitors SC 109 of 2020 Just Dispute Resolution ( Plaintiff) Harmers Workplace Lawyers ( Defendants) SC 464 of 2019 Harmers Workplace Lawyers ( Plaintiffs) Just Dispute Resolution ( Defendant) | |
File Numbers: | SC 109 of 2020 SC 464 of 2019 |
McCALLUM CJ:
The parties in these proceedings are engaged in several sets of proceedings which are explained in judgments of McWilliam AsJ to which I will return. It falls to the Court presently to determine two applications concerning the pleadings in two separate proceedings. I will deal first with the proceedings referred to by the parties as the trespass proceedings.
The Trespass Proceedings (SC 109 of 2020)
Background
In order to explain the application, whilst the relevant history is set out in detail in other judgments, it is convenient to explain some context. Mr David McKay was previously employed by a company within the Findex Group. The disputes between the parties began after he left that employment in September 2012. Findex became aware that a person using fictitious names or acting anonymously was publishing allegedly seriously damaging statements about the Findex Group and certain officers and employees of the Group.
Findex brought an application for preliminary discovery in the Supreme Court of New South Wales, as a result of which it was ascertained that the publisher was Mr McKay. Findex characterises him as “a former disgruntled employee” who had previously sold his financial services business to Findex and who had contractual non-disparagement obligations to Findex.
Findex claimed to have reason to apprehend that the publications it had discovered may only be the “tip of the iceberg” and was concerned that there was a risk that Mr McKay would destroy evidence of other publications made by him. Accordingly, the Findex parties made an application in the preliminary discovery proceedings for a search order. That application was granted by Rein J on 16 September 2016.
The search order was executed at Mr McKay’s home in the Australian Capital Territory on 20 September 2016. There followed a period of complex litigation between the parties in New South Wales concerning access to documents seized during the execution of the search order and applications for release from the Harman undertaking. Those matters were finally determined in September 2019.
Findex had given an undertaking as to damages when it initially sought the search order, as customarily required by a court when granting relief of that kind. At the conclusion of the search order proceedings, Mr McKay foreshadowed his intention to make a claim for damages pursuant to the undertaking. He was directed to file points of claim in the search order proceedings. Thereafter, he commenced the proceedings in which the present application is brought claiming damages for trespass arising from the execution of the search warrant (the trespass proceedings).
It is in relation to Mr McKay’s most recent pleading in the trespass proceedings that the present application is brought. By application filed 1 December 2022, Findex seeks an order that the amended statement of claim dated 31 August 2022 be struck out; in the alternative, that specified paragraphs be struck out as embarrassing, and that the proceedings be dismissed or that judgment be entered in its favour.
The application invokes r 425(1) of the Court Procedures Rules2006 (ACT), which provides:
(1) The court may, at any stage of a proceeding, order that a pleading or part of a pleading be struck out if the pleading—
(a) discloses no reasonable cause of action or defence appropriate to the nature of the pleading; or
(b) may tend to prejudice, embarrass or delay the fair trial of the proceeding; or
(c) is frivolous, scandalous, unnecessary or vexatious; or
(d) is otherwise an abuse of the process of the court.
All four limbs of the rule are invoked.
10. The grounds for the application were summarised by Mr Friedgut at the outset of the hearing of the application as follows: firstly, that the proceedings are an abuse of process on two grounds (to which I will return); secondly, that in any event the pleading discloses no reasonable cause of action; and thirdly, that specified parts of the pleading are embarrassing.
11. The pleading to which the strike-out application was directed was an amended statement of claim filed after McWilliam AsJ had considered the original statement of claim in a judgment published 27 July 2022: McKay v Findex Group Limited [2022] ACTSC 191. As her Honour explained in that judgment, the trespass proceedings sought damages for trespass on two separate grounds.
12. The first was an allegation that there was a procedural invalidity in the execution of the search order, as it was executed at premises in the Australian Capital Territory, the order having been granted in New South Wales. The basis for that complaint was an allegation that there had been a failure to effect proper service of the order under the Service and Execution of Process Act 1992 (Cth). Mr McKay contended that, in the result, the search was unauthorised. Findex was successful in having that part of the trespass claim struck-out.
13. However, Mr McKay’s claim in trespass was also put on an alternative basis summarised at [2](b) of McWilliam AsJ’s judgment as follows:
(b) Second, an allegation that the execution of the Search Order was an unauthorised interference with the Premises, Vehicles and Chattels (as defined in the pleading), which appears to be based on any or all of the following:
(1) access to the apartment via the common property was unauthorised,
(2)access in the apartment was unauthorised or by protest or permitted by mistake,
(3) an “unauthorised” security guard was involved,
(4) what was seized went beyond the terms of the order.
14. As to that second basis for the claim, her Honour held at [76] that the cause of action in trespass was “a triable action”. Her Honour directed the plaintiff to file an amended statement of claim on or before 31 August 2022 and that was attended to by the plaintiff. That is the pleading Findex now seeks to have struck out under r 425.
First Complaint: Abuse of Process
15. Findex contends that the amended pleading is an abuse of process. The first basis for that contention invites the Court to draw an inference that, the original pleading alleging trespass on the grounds of procedural invalidity having been struck out, the Court should infer that the only basis on which the plaintiff seeks to maintain the trespass claim is to avoid an adverse costs order, which would be the inevitable consequence of discontinuing the proceedings.
16. That basis was interrelated with the separate basis for contending an abuse of process, which was that the claim as now framed (shorn of the three paragraphs struck out by McWilliam AsJ) is in substance identical to the points of claim filed in the search order proceedings (for consistency with the parties’ submissions, I will refer to them as the undertaking as to damages proceedings). The identity or overlap of the grounds for the separate actions was said to indicate the existence of an abuse of process.
17. The difficulty in assessing the second point is that the Court was not taken to the exact alleged overlap by reference to the points of claim filed in the undertaking as to damages proceedings. Rather, the application filed by the defendants asserted that there were significant aspects of overlap, concluding with the following contention:
16. [E]ach and every allegation of fact in the Trespass Proceedings
a.has either already been alleged in the Undertakings as to Damages Claim or, if and insofar as it has not been alleged;
b.could and should have been alleged in the Undertakings as to Damages Claim which has been before the Court since 13 March 2020 and which is still before this Court;
c.is in any event frivolous or vexatious on its face; is not properly pleaded;
d.is in substance identical to the claims in the Undertaking as to Damages Claim.
18. From those contentions, it was asserted that Mr McKay had “no proper reason” to file the amended statement of claim on or about 31 August 2022 as “it serves no proper purpose in that [it is] unnecessary, vexatious and/or oppressive to the Findex parties, and is an abuse of process”, being based upon the same facts upon which the points of claim are or could be based and in substance seeking relief of the same kind.
19. Upon analysis, two separate complaints are there identified, leaving aside the inference the Court is invited to draw as to the reasons for acceding to the Associate Judge’s invitation to file an amended pleading.
20. The first is the question of alleged overlap in the facts upon which the claims are based. Mr Friedgut cited the decision of UBS AG v Tyne [2018] HCA 45; 265 CLR 77 (Kiefel CJ, Bell and Keane JJ), particularly at [45], [55], [56], [57] and [59], and also the judgment of Gageler J at [82], to support the contention that the duplication between the two proceedings is an abuse of process that should not be tolerated by the Court.
21. I do not think the decision in Tyne provides any great assistance in the present circumstances. That was a case in which the complaint was that an identical claim had been discontinued in one form and revived in another: at [55]. That is not the position here. The undertaking as to damages claim remains on foot and has been transferred to this Court by the NSW Supreme Court, at the request of Mr McKay but with the consent of the Findex parties.
22. Associate Justice McWilliam remarked in her judgment at [85] that, while her Honour accepted the defendants should not be “twice vexed”:
[T]he appropriate way to avoid that result is for the matters to be ordered to travel together until there is sufficient clarity in the pleading and the parties are able to understand whether it really is the case that the declaration sought here could not also be made in the Search Order proceeding, in substance if not in the same form.
23. Mr Friedgut submitted that the amended pleading has not established the clarity her Honour there sought. What I take from that passage, however, is that much of the alleged vexation can be avoided by the fact that here both proceedings remain extant and are currently travelling together. It may be that, at some point, as foreshadowed by Mr McKay, the Court will be asked to make an order that the two proceedings be consolidated and that evidence in one be evidence in the other. That would appear to be a sensible course.
24. In any event, even if there is overlap in the material facts and circumstances alleged in each pleading or statement of claim (which as I have indicated is a point that was not made good with any specificity in the argument before me), the causes of action are different and do not give rise to relief of the same kind (this addresses the second aspect of the complaint referred to at [19] above). I will return to explain how that is so when dealing with the second limb of the application, that the pleading discloses no reasonable cause of action. So far as the complaint about abuse invoking r 425(1)(d) is concerned, I am not persuaded that the concurrent existence of the trespass claim and the undertaking as to damages claim in itself constitutes an abuse of process.
25. Separately, as already explained, the Findex parties invited the Court to infer that the only reason for maintaining the trespass proceedings was to avoid meeting a costs order following upon McWilliam AsJ’s determination that the first basis for the trespass claim was unsustainable.
26. In my view, it follows from her Honour’s acceptance at the same time that the second basis for the claim was “triable” that the Court cannot draw that inference. That, as I have said, is interrelated with the next point as to whether the pleading discloses a reasonable cause of action.
Second Complaint: No Reasonable Cause of Action Disclosed
27. Much of the argument put by Mr Friedgut on this issue proceeded on what I think transpired to be an incorrect premise.
28. Mr Friedgut addressed the Court at length and in detail as to the difficulty Mr McKay would have in establishing that certain aspects of the execution of the search order and the conduct of those responsible for its execution was conduct for which Findex could be held vicariously liable. However, as Mr Karam (who appears for Mr McKay) made plain, the claim is not based on vicarious liability but on an allegation of authority to commit a tort.
29. Mr Karam took the Court to an extract from the text of David Rolph et al, Balkin & Davis Law of Torts (LexisNexis, 6th ed, 2021) at [26.28] as follows:
In many circumstances the law will attribute to a person the conduct of another being, whether human or animal, if the former has instigated that conduct. If X sets his or her dog upon Y, it is as much battery as if X had struck Y with a fist. One who instigates or procures another to commit a tort is deemed to have committed the tort personally. It matters not whether that other was employee, independent contractor or agent, human or otherwise. If, for example, a person employs an independent contractor to do a specific act, such as to break through a neighbour’s wall, the employer will be liable in respect of that act. This liability is not dependent upon any negligence on the part of the contractor — it arises because the act of the contractor is regarded as the act of the employer. It was on this basis that the defendant company in Ellis v Sheffield Gas Consumers Co incurred liability. The company had employed an independent contractor to dig up a part of a street. The plaintiff fell over a heap of earth and stones made by the contractor in the course of digging, and the defendants were held liable on the ground that they had authorised this nuisance.
(Footnotes omitted.)
30. Mr Karam also relied on the decision of Mullins J of the Queensland Supreme Court in Fanigun Pty Ltd v Woolworths Ltd [2006] QSC 28; 2 Qd r 366 at [90]; 383-4 as follows:
A trespass is constituted by an unjustified entry directly by a person on land in the possession of another which is carried out either intentionally or negligently: Halliday v Nevill (1984) 155 CLR 1, 10. A tortfeasor may be liable for trespass on the basis of having authorised or instigated others to commit the trespass for the tortfeasor: Doolan v Hill (1879) 5 VLR 290, 291. As it is the method by which Woolworths has conducted its business of a service station on Lot 1 that has caused or contributed significantly to the queuing of customers’ motor vehicles on a repetitive basis on the subject land, Woolworths has authorised its customers from time to time to commit a trespass to the subject land and therefore can be held liable for the actions of its customers. This situation can be distinguished from that in Stoneman v Lyons (1975) 133 CLR 550 where the trespass was committed by the independent contractors of the builder engaged by the adjoining owner and no issue of authorisation of the trespass by the adjoining owner arose.
31. Finally, Mr Karam took me to the decision of the Full Federal Court in Forestview Nominees Pty Ltd v Perron Investments Pty Ltd [1999] FCA 405; 93 FCR 117 at [107]. While that discussion sets out an interesting analysis of a different issue, I do not think it is of great assistance in this case. The issue there was the liability of a client for the actions of a solicitor in contempt of court. The principles may be of some assistance, but the facts are so different as to be unhelpful in the present context.
32. The point is that, in my assessment, Mr Karam made good the proposition that there is a reasonable cause of action disclosed in the allegations pleaded in the amended statement of claim in the trespass proceedings which is, firstly, not liable to be summarily struck out and, secondly, different from the cause of action (if that is the correct term) sought to be enforced in the undertaking as to damages proceedings.
33. Neither party took me to any authority about the basis on which the Court might award damages pursuant to an undertaking to the Court given as the price of obtaining interlocutory relief. The parties referred to the proposition (which is perhaps well understood) that such damages are liable to be awarded where the relief granted by the Court on the application of the moving party at the outset of proceedings turns out to be relief that, having regard to the merits of the following proceedings, ought not to have been granted.
34. That will raise very different issues from the trespass issues as I would see it. If the points of claim currently plead similar facts to those pleaded in the trespass claim, it does not follow that the causes of action are so similar as to amount to an abuse of process when being prosecuted at the same time.
35. Finally, as Mr Karam submitted, one thing that is clear about the cause of action (again, if that is the right term) for enforcement of an undertaking as to damages is that the relief is discretionary. That is not the position in the case of an established trespass. That of itself is sufficient reason to warrant maintaining both causes of action.
36. The vexation of the Findex parties can, as McWilliam AsJ said, be obviated by having the proceedings not only travel together but potentially be heard as a consolidated claim and indeed that is what Mr McKay proposes in short minutes of order provided to the Court.
Complaint 3: Vague and Embarrassing Pleadings
37. It remains to deal with Mr Friedgut’s separate complaints as to specific parts of the pleading and here I think some of Mr Friedgut’s points were made good. The particular points made were addressed at paragraphs 21-53 of the application in proceedings.
38. The first contention is that the amended statement of claim is vague and embarrassing. That contention is itself vague and embarrassing and does not assist the Court in determining the present application.
39. Secondly, the Findex parties asserted that the pleading fails to identify material facts, notwithstanding defects expressly drawn to Mr McKay’s attention in correspondence which was relied upon in support of the present application. To the extent that the application invited the Court to go through the correspondence and in effect mark Mr Karam’s homework, I would respectfully decline that invitation. The rulings or remarks that follow are addressed to the specific points raised in the application.
40. Paragraph 9A of the amended statement of claim contends that the Findex parties “authorised or instigated” members of the search party “to commit such trespass on their behalf”. I agree with Mr Friedgut’s submission that that assertion fails to specify the material facts that underlie it. In my view, that paragraph should be repleaded.
41. Paragraph 20 of the amended statement of claim pleads that the search party as agents of the Findex parties exceeded the authority of the search order and related complaints. Save to the extent that paragraph 9A needs repleading, I do not accept that there is any difficulty with paragraph 20 of the pleading. I would reject that submission.
42. Separately, a complaint was addressed to paragraph 22D of the amended statement of claim. That is the relief sought. It is not appropriately part of a complaint about the form of the pleading.
43. Paragraph 23 of the application is directed to paragraph 22B of the amended statement of claim and complains that the amended statement of claim fails to clearly provide the material facts disclosing what is actually alleged to constitute the alleged trespass by the Findex parties. I do not accept that submission. In my view, the position is adequately explained at paragraphs 15 and 16 of the amended statement of claim.
44. Next was a complaint about the pleading at paragraph 4 of the amended statement of claim that the search order was an order “purporting” to allow the Findex parties to enter and search the premises. Mr Karam accepted that the word “purporting” was embarrassing and should be removed from the pleading.
45. The next complaint related to paragraph 9 and included a further complaint about paragraph 9A which I have already addressed. As to paragraph 9, the matters there asserted cannot seriously be in dispute. I do not think the pleading is embarrassing. I have already indicated that, as to paragraph 9A, I agree that the pleading requires further specification of material facts, matters and circumstances replied upon.
46. The next complaint relates to an assertion which also derives from paragraph 9 of the pleading that a security guard taken along with the search party “executed the search order”. The complaint is that the assertion is impossible to understand because it is vague and embarrassing. I would, however, in turn remark that I do not understand why it is necessary to challenge that aspect of the pleading. If it is Findex’s case that the security officer did not execute the search order (which I understand to be the case because it is alleged that he remained outside the door of the unit), that allegation in the pleading can simply be denied.
47. The next complaint again relates to paragraph 9A and I have already indicated that that paragraph should be repleaded.
48. The next complaint relates to paragraphs 10 and 10A. The complaint is that the amended statement of claim “makes bald assertions” about the manner in which the independent solicitor and the security guard gained access to the premises and the common property. I do not see any difficulty with the content of those paragraphs. They assert material facts on the strength of which Findex should know the case it has to meet.
49. The next complaint relates to paragraph 11 of the amended statement of claim, which seems to me to be similarly clear in import. The complaint about that paragraph is, with great respect to the author, bordering on obtuse and reflective of the minute attention paid by the parties in these proceedings to any way of causing difficulty for each other, rather than to the pursuit of the objects of the Court Procedures Rules of assisting the Court to determine the real issues in the proceedings in a manner that is efficient and inexpensive.
50. The next complaint relates to paragraph 12 of the amended statement of claim, which is also asserted to be vague and embarrassing. Again, I do not agree. In my view, the pleading is adequately clear.
51. The next complaints relate to paragraphs 15 and 16 where it is pleaded that the search party did not enter the premises with the consent of Mr McKay or his wife. In the case of those paragraphs, I would agree that there is some confusion created by the way in which they are pleaded. In my opinion, those paragraphs should be repleaded to make clear precisely what is meant by the contention that consent was withdrawn and that:
The members of the Search Party entered and remained on the Premises under protest from the plaintiff and only because the plaintiff was purportedly liable to imprisonment, sequestration of the property or other punishment under the terms of the NSW Search Order if he was to refuse entry to the members of the Search Party.
It appears part of the pleading may be a relic of the earlier pleading alleging invalidity of the search orders. In any event, I think the position can be clarified.
52. The next complaint relates to paragraph 20 which it is submitted is vexatious because it is not clear how the claim made in that paragraph differs from the claims made by Mr McKay in the undertaking as to damages claim. I do not accept that the paragraph is vexatious for the reasons I have already given. However, I do think the proceedings would benefit from there being a consolidated pleading in the trespass and undertaking proceedings.
53. The next complaint relates to paragraph 21 of the amended statement of claim, which is said to be vague and embarrassing by reason of the lack of clarity of the phrase “defendants’ unauthorised interference with the Premises”. I agree. Again, it appears that paragraph may be a relic of the earlier pleading.
54. The next complaint relates to paragraph 21A which it is said is vague and embarrassing. That paragraph alleges that, following the search, the Findex parties caused surveillance of the premises to be conducted. I do not see anything vague or embarrassing about that allegation and I do not agree that it is unclear.
55. The next complaint relates to paragraph 22 of the amended statement of claim, which is the claim that pleads loss and damage as a result of the unauthorised interference. As with paragraph 21, I accept that the phrase “unauthorised interference” should be clarified. Otherwise, I do not accept the complaints made about that paragraph, which seems to me to make clear enough the basis on which damages are sought.
56. The remaining complaints relate to the relief sought which, as I have already indicated, is not properly the subject of a strike out claim. If the relief sought is unclear, the way in which it is said to be clear can be specified, but it is not part of the pleading. In any event, I do not accept that the relief sought is unclear.
57. For those reasons, I would dispose of the application by rejecting the contention that the whole of the pleading is liable to be struck out as an abuse of process or as disclosing no reasonable cause of action but acceding to the particular complaints about the pleadings in the manner I have indicated. I will direct the parties to bring in short minutes of order in accordance with the reasons I have given and would propose to grant Mr McKay leave to replead the paragraphs as to which the complaint has been made good. For abundance of caution, I indicate that I would anticipate that the short minutes of order that the parties will prepare will contemplate the preparation of a consolidated pleading in the trespass and undertaking as to damages proceedings.
The Disparagement Proceedings (SC 464 of 2019)
58. The second application before the Court concerns the proceedings referred to by the parties as the disparagement proceedings. There are six plaintiffs in those proceedings, three companies and three individuals.
59. Mr McKay sought summary dismissal of those proceedings. That application was determined by McWilliam AsJ in Findex Group Limited v McKay [2022] ACTSC 192. As noted in that judgment at [13], the plaintiffs’ claim framed the allegations as “breaches of an employment contract” and misleading or deceptive conduct in breach of the Australian Consumer Law, in each centred around Mr McKay’s alleged disparagement of the Findex Group after the termination of his employment.
60. Associate Justice McWilliam rejected a large number of the defendant’s objections to the pleading but agreed that paragraph 110 of the claim as to the loss and damage allegedly suffered by the plaintiffs was bad in form, being a rolled-up allegation. Her Honour struck out that paragraph. At [94]-[105] of the judgment, her Honour identified other pleading deficiencies in careful detail.
61. That judgment was published on 27 July 2022. The plaintiffs did not promulgate an amended pleading until earlier this year. On 17 February 2023, they moved the Court by application in proceeding for leave to file that pleading (identified as the further amended statement of claim). As I understand the position, leave is required under r 504 because the plaintiffs have previously amended the pleading. Rule 505 authorises a party to amend a pleading only once without leave.
62. Mr Karam opposed the proposed amendment on two principal grounds. First, he submitted that the amended pleading was deficient, bad in form and did not address the deficiencies identified by McWilliam AsJ or unpick the “rolled-up” claims of the separate plaintiffs.
63. Secondly, he submitted that, as a matter of discretion, the Court should refuse leave to the extent that the amended pleading travels “well beyond” what was contemplated by McWilliam AsJ. Mr Karam submitted that a number of matters are raised in the pleading for the first time, the prime example of which is the introduction of a claim by the Findex parties to recover by way of damages in the disparagement proceedings the legal costs incurred in the prosecution of the preliminary discovery proceedings (which include the costs of the many rounds of litigation involving the search order).
First Complaint: Continued Deficiencies
64. My ruling on this issue should be read in the context of the careful reasons published by McWilliam AsJ in Findex Group Limited v McKay [2022] ACTSC 192, the earlier round of this pleading dispute.
65. Mr Karam noted that McWilliam AsJ dealt with the “privity issue” at [90]-[93] of the judgment (set out below). The point made was that, whereas the employment contract pursuant to which Mr McKay is sued was entered into with Findex Services Pty Limited as the counterparty, the pleading appeared to claim damages on behalf of five additional parties who were not parties to the contract.
66. In her discussion of that issue, McWilliam AsJ said:
90.I accept that the doctrine of privity of contract applies to the plaintiffs other than Findex Services. The issue is to be resolved by reference to the pleading, and the Claim only pleads Findex Services as a party to the Employment Contract with Mr McKay.
91.It is also clear that the terms of the Employment Agreement conferred a benefit (in the form of clause 12) on those plaintiffs who were not parties to it. To that extent, those plaintiffs arguably have rights to declaratory relief, but that is not pleaded.
92.However, there is no basis for entering summary judgment against any of the First, or Third to Sixth Plaintiffs, because I also accept that enforcement rights arise under the other causes of action pleaded. The plaintiffs other than Findex Services have brought their case through the words in the Employment Agreement being a representation to them made in trade or commerce, rather than a contractual promise.
93.For completeness, I also accept that arguments about privity of contract similarly do not affect the First and Third to Sixth plaintiffs’ claims insofar as they are based on a benefit held by Findex Services on trust for them (pleaded at [17] of the Claim). However, it will still be necessary to separately consider Mr McKay’s complaint about the pleading deficiencies concerning the allegation that clause 12 of the Employment Agreement created a benefit that was Trust Property, which Findex Services is entitled to enforce on behalf of the other plaintiffs.
67. The amended pleading, in addition to repleading paragraph 110 and also adding a new lengthy paragraph 109, introduces even further parties which are identified at paragraphs 1(j) and 1(k) as subsidiaries of the first plaintiff in the proceedings, Findex Group Limited. Mr Karam submitted, and I agree, that the introduction of those parties in the pleading without any attempt to make them parties to the proceeding is confusing and embarrassing.
68. Mr Friedgut endeavoured to explain that what is sought to be achieved is for the Findex Group, which it is contended has globally suffered damage as a result of Mr McKay’s conduct, to recover all of those damages through the vehicle of this litigation, either on the basis that Findex Services Pty Ltd is the trustee of the interests of those parties under the contract as parties to whom the non-disparagement obligation was owed, or on the basis of separate pleadings which it was argued are specified adequately in paragraph 109 of the pleadings.
69. In my assessment, the position regarding the individual claims made by each plaintiff in the proceedings has only been made more confused by the amended pleading. The ways in which that is so were explored during argument and I do not think it is necessary to set them out in any great detail here. Examples include the particulars at paragraph 110 where loss and damage is particularised as follows:
The trading and business reputations of the members of the Findex Group (including Findex, Financial Services, and Financial Index) and the personal, professional and business reputations of each of Paule, Ludbey and Hart have been seriously injured.
It is not clear from those particulars what are all the entities referred to or why or how their trading and business reputations have been injured. It is not clear whether that claim is made as part of the contract claim or the separate claim in the pleading under the Australian Consumer Law.
70. The same particulars specify a claim for aggravated damages by the individual plaintiffs, Paule, Ludbey and Hart. It is not clear whether those damages are claimed in contract or under the consumer law claims. It would appear to be a difficult claim on either basis but certainly, to the extent that the claim is based in contract, that is a matter that was dealt with in the judgment of McWilliam AsJ.
Second Complaint: Additional Scope
71. The second principal complaint made by Mr Karam relates to paragraphs 109.1-109.19 of the pleading where the costs of the preliminary discovery proceedings are claimed as damages in the disparagement proceedings. Mr Karam submitted that this is a claim which is entirely new, which is in large scope and as to which this Court is already seized of the issue in the separate proceedings which remain before this Court, proceedings SC 172 of 2020.
72. Mr Friedgut addressed the Court at length as to the alleged reasonableness of seeking to include that claim. First, he submitted that it is not correct that this is a new claim. He submitted that the claim can be seen from page 61 of the further amended statement of claim and the same claim was included in the amended statement of claim. There, however, it was a proposed amendment which was not allowed.
73. There has never previously been on the pleading a claim for the costs of the preliminary discovery proceedings as part of the damages in the disparagement proceedings. It is, as Mr Karam submits, an allegation of extremely large scope. To permit the Findex parties to make that claim at this stage would, in effect, see this Court perhaps not fully rehearing those proceedings but certainly hearing a very large scope of evidence as to the course of those proceedings.
74. In my view, the sheer size of the claim and the extent to which it will expand the scope of these proceedings, when a remedy is available to the Findex parties by the mechanism of obtaining a costs order in the preliminary discovery proceedings, affords a reason for exercising the discretion not to permit the amendment at this very late stage of the proceedings.
75. When I say, “late stage”, I am referring to the time that has elapsed since the proceedings were commenced without the pleadings progressing in any way. Neither party has filed a defence to the other’s claim at this stage. Mr Friedgut submitted that the Findex parties are not responsible for any delay; that they commenced the proceedings in March 2019 but only obtained the documents required to prosecute them in 2021 and that the proceedings were “put on hold” by Mr McKay’s fight to get the documents back.
76. It is not possible, on an application of the present kind, to explore the merits of that kind of assertion. The simple fact is that what is sought to be introduced now is an extremely large additional claim as to which the plaintiffs require leave and as to which the scope of the claim would be so large as to warrant rejection at this stage.
77. Mr Friedgut submitted that, on a General Steel test, the Court could not be satisfied that the claim was so manifestly untenable as to reject it: see General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 . He submitted that there is no principle of law that, if part of a claim for damages is the costs of other proceedings, they cannot be recovered as damages in those proceedings. He referred the Court to a number of authorities in that context.
78. First, in oral submissions, Mr Friedgut cited two decisions to support the submission that, where subsequent proceedings are commenced, cost orders made in preliminary discovery proceedings may be affected by orders made in the subsequent proceedings: ObjectiVision Pty Ltd v Visionsearch Pty Ltd (No 3) [2015] FCA 304 at [22] (Perry J); B & J Hudghton Investments Pty Ltd as trustee for the B & J Hudghton Family Trust v Lakeba Group Limited [2022] NSWSC 830 (Rees J) at [36]-[37]. With leave, Mr Friedgut sent additional citations in an email after the hearing, commencing with a reference to G E Dal Pont’s Law of Costs (LexisNexis, 5th ed, 2021) at [7.23]:
The general principle noted above [that a successful plaintiff cannot recover his or her costs of the proceedings from the defendant as damages, even though the defendant’s wrongful act caused the plaintiff to incur those costs] does not, however, preclude the recovery of a defendant’s costs of an action as damages against a third party in separate proceedings.
(Emphasis in original.)
79. Mr Friedgut’s email also included the authorities in the footnote to that passage from Dal Pont, which gives the following examples of the qualification to the general principle: Gray v Sirtex Medical Ltd [2011] FCAFC 40; 193 FCR 1 at [30]-[42]; Provident Capital Ltd v Papa (No 2) [2013] NSWCA 156 at [13]-[16] (Macfarlan JA, with whom Sackville A JA agreed); Ballantyne v Boylan [2013] SASC 177. None of those authorities supports the proposed claim here, where the costs of earlier proceedings against Mr McKay are sought as damages in later proceedings against him.
80. In any event, as I have endeavoured to explain, the submission seeks to apply the wrong test. At this point, the plaintiffs are seeking leave to amend. Because they have already amended once, it is not a question of there being a strike out application invoking the General Steel test. It is a question of the plaintiffs seeking an indulgence to expand the scope of their claim in the context of the very complex litigation and cross-litigation between these parties which, in my view, will unduly expand the scope of these proceedings.
81. The upshot of my consideration of paragraphs 109 and 110 of the proposed further amended pleading is, in short, that it fails to address the concerns carefully specified by McWilliam AsJ in her Honour’s judgment, at the paragraphs to which I have referred: [94]-[105]. Again, I do not think it is the proper role of this Court, in effect, to have to mark Mr Friedgut’s homework in that respect.
82. Accordingly, I propose to refuse leave to file the further amended statement of claim, but to make orders in the terms suggested by Mr Karam on behalf of Mr McKay, that the plaintiffs have leave to file and serve a further amended statement of claim in the manner specified in proposed order 1(a) of the short minutes of order proposed by Mr McKay.
83. For those reasons, I make the following orders:
(1) Direct the parties to bring in short minutes of order in accordance with these reasons;
(2) List the matter on 11 April 2023 at 11:30am before me for directions.
| I certify that the preceding eighty-three [83] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice McCallum Associate: Grace Hartley Date: 5 April 2023 |
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