VALANA Pty Ltd v Clipmaster Enterprises Pty Ltd

[2002] WASC 177

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   VALANA PTY LTD & ANOR -v- CLIPMASTER ENTERPRISES PTY LTD & ORS [2002] WASC 177

CORAM:   MASTER SANDERSON

HEARD:   19 JUNE 2002

DELIVERED          :   27 JUNE 2002

FILE NO/S:   CIV 1051 of 2001

BETWEEN:   VALANA PTY LTD (ACN 071 766 973)

First Plaintiff

HIRE INTELLIGENCE PTY LTD (ACN 009 072 315)
Second Plaintiff

AND

CLIPMASTER ENTERPRISES PTY LTD (ACN 050 978 017)
First Defendant

LUIGI SALAMONE
Second Defendant

SERGIO COTELLESSA
Third Defendant

SERGIO DIVINCENZO
Fourth Defendant

Catchwords:

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

Legislation:

Nil

Result:

Statement of claim struck out
Particulars ordered

Category:    B

Representation:

Counsel:

First Plaintiff                :     Mr G A Rabe

Second Plaintiff            :     Mr G A Rabe

First Defendant             :     Mr R Guerrini

Second Defendant         :     Mr R Guerrini

Third Defendant           :     Mr R Guerrini

Fourth Defendant          :     Mr I R Freeman

Solicitors:

First Plaintiff                :     Stables Scott

Second Plaintiff            :     Stables Scott

First Defendant             :     Vincent Partners

Second Defendant         :     Vincent Partners

Third Defendant           :     Vincent Partners

Fourth Defendant          :     Phillips Fox

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

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83

Case(s) also cited:

Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214

Beach Petroleum NL v Johnson (1993) 115 ALR 411

Bruce v Odhams Press Ltd [1936] 1 KB 697

Chandler & Ors v Water Corporation [2001] WASC 166

Charlie Carter Pty Ltd v SDAE of WA (1987) 13 FCR 413

Coe v Commonwealth (1979) 24 ALR 118

Dare v Pulham (1982) 148 CLR 658

Davy v Garrett (1877) 7 Ch D 473

Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608

Dougherty v Nationwide News Pty Ltd (1967) 86 WN  (Pt 1) (NSW) 181

Esanda Finance Corp Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241

Girando v Padbury (1919) 22 WALR 7

Gold Coast City Council v Pioneer Concrete (Qld) Pty Ltd (1998) 157 ALR 135

Harris v Cigma Insurance Australia Ltd (1995) ATPR 41-445

Haynes v Harwood [1935] 1 KB 146

Mako Investments Pty Ltd & Ors v Quindo Pty Ltd & Ors, unreported; SCt of WA; Library No 6838; 28 July 1987

Meckiff v Simpson [1968] VR 62

Rassam v Budge [1893] 1 QB 571

Williamson v L & North West Railway Co (1879) 12 Ch D 787

Zierenberg v Labouchere [1893] 2 QB 183

1. MASTER SANDERSON:  This is the return of two pleadings summons.  The first to the third defendant on the one hand and the fourth defendant on the other seek to strike out the plaintiff's statement of claim.  Both summonses also seek an order for further and better particulars of the statement of claim.  To understand the complaints made by the defendants, it is necessary to examine the statement of claim in some detail.

2. The first seven paragraphs identity the parties.  By par 2 the first defendant is defined as "Clipmaster Enterprises".  The second and third defendants are said to have been at all material times directors of Clipmaster Enterprises and the fourth defendant was its secretary.  Paragraph 5 refers to a company known as Clipmaster Corporation (1993) Pty Ltd which is defined as "Clipmaster 93".  The second and third defendants are said to have been directors at all material times of Clipmaster 93 and the fourth defendant was its secretary.  By par 8 of the statement of claim it is pleaded that at all material times Clipmaster Enterprises was the owner of all rights and interests in "the Clipmaster staplegun and associated products".  These rights and interests are defined as "the Products".  It is also said that Clipmaster Enterprises held certain patents and patent applications in relation to the Products.  A defence has been filed on behalf of the first, second and third defendants.  Save for two matters, both of which are irrelevant to this application, the defendants admit these first eight paragraphs.  No defence has been filed on behalf of the fourth defendant.  However, it would not appear that any significant issue is taken with these introductory paragraphs.

3. By par 9 it is pleaded that in September 1994 Clipmaster Enterprises granted an exclusive worldwide manufacturing distribution licence to Clipmaster 93 in relation to the products.  This agreement is defined as the "1994 Licence Agreement". 

4. By par 10 it is pleaded that two individuals, Hagen and Crage, who were later to acquire and become first directors of the plaintiff, negotiated with the second, third and fourth defendants about rights to market and exploit for gain the Products.  These two paragraphs do not appear to be controversial.

5. There then follows par 11 about which complaint is made by the fourth defendant.  It is of some importance in the context of this application and I will quote the paragraph in full, including the particulars:

   "11.During the course of the aforesaid negotiations (the 'Negotiations') the Second, Third and Fourth Defendants and each of them represented both orally and in writing to Hagen and Crage that:

   a.they were the duly authorised agents of the sole proprietor of the Patents;

   b.that such proprietor by virtue of the Patents had the exclusive right to manufacture, distribute and license the exploitation of the Products; and

   c.the registered proprietor of the Patents was Clipmaster 93;

   (the 'Representations').

   Particulars of Representations

   i.Insofar as the Representations were oral, they were made:

   (1)by the Fourth Defendant for and on behalf of himself and the Second and Third Defendants during telephone discussions between the Fourth Defendant and Crage in November 1995;

   (2)by the Third and Fourth Defendants personally at the offices of Stables Scott during a meeting attended by those parties and Mr Scott, Crage and Mr Cobbold on 15 November 1995;

   ii.Insofar as the Representations were in writing, they were contained in documents produced by the Fourth Defendant for and on behalf of himself and the Second and Third Defendants and dated:

   13th November, 1995;

   14th November 1995

   17th November 1995

   22nd November, 1995."

6. Paragraph 12 pleads the acquisition of the first plaintiff by Hagen and Crage and says that it was acquired for the purpose of contracting with Clipmaster 93.

7. Paragraph 13 pleads that in reliance upon the Representations the first plaintiff and Clipmaster 93 entered into a deed which, for the purposes of the pleading, is defined as the "Deed".  The terms of the Deed are pleaded.  By par 14 it is pleaded that in September 1996 there was a variation to the Deed and that variation is referred to as "the Variation Agreement".  By par 15 it is pleaded that in January 2000 the first plaintiff became aware that the Representations were false, so it is alleged, as the registered proprietor of the patents was not Clipmaster 93 but Clipmaster Enterprises.  By par 16 it is pleaded that the second, third and fourth defendants knew of the existence of the 1994 Licence Agreement.

8. Up to this point the pleading is relatively straightforward.  There is a plea of Representations which could be characterised as conduct, as that term is used in s 52 of the Trade Practices Act, and s 10 of the Fair Trading Act.  There is a plea of reliance - the first plaintiff entered into the Deed based upon the Representations.  There follows that a plea that the Representations were false, therefore that the conduct was misleading and deceptive.  Assuming that loss resulted from misleading and deceptive conduct, and that is pleaded further on in the statement of claim, the cause of action is complete and unremarkable.  But the plaintiff then goes further.  Paragraphs 17, 18 and 19 of the statement of claim are in the following terms:

   "17.By making the Representations and by causing Clipmaster 93 to enter into the Deed and the Variation Agreement, the Second, Third and Fourth Defendants impliedly represented to the First Plaintiff that:

   a.Clipmaster 93 had the exclusive right to deal with the Patents as the absolute owner thereof and to give good discharges for any consideration for any such dealings;

   b.the rights granted by Clipmaster 93 to the First Plaintiff pursuant to the Deed and the Variation Agreement were not encumbered by any obligation owned by Clipmaster 93 to any other party.

   18.In circumstances where the Second, Third and Fourth Defendants:

   a.made the Representations and implied represented the facts as set out in the previous paragraph;

   b.knew of the existence of the 1994 Licence Agreement;

   the Second, Third and Fourth Defendants had at all material times a duty to disclose to the First Plaintiff the existence of the 1994 Licence Agreement.

   19.The Second, Third and Fourth Defendants failed to disclose to the First Plaintiff at any relevant time the existence of the 1994 Licence Agreement."

9. It is not easy to see what cause of action is pleaded by these three paragraphs.  It appears that what is said is that failure by the second, third and fourth defendants, during the course of negotiations, to disclose the 1994 Licence Agreement was a misrepresentation by silence.  That seems to follow from the use of the phrase "impliedly represented" in par 17.  Paragraph 18 then refers to a duty on the part of the second, third and fourth defendants to disclose the existence of the 1994 Licence Agreement.  It is well established that silence may amount to conduct which can give rise to a claim under s 52 of the Trade Practices Act or s 10 of the Fair Trading Act:  see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 85. On that basis it is open to the plaintiffs to plead that there was a misrepresentation by silence by the second, third and fourth defendants.

10. The difficulty with the pleading as it stands at present is that there is no distinction drawn between the alleged misrepresentations pleaded in par 11 and the alleged misrepresentation by silence pleaded in par 17, 18 and 19.  In my view, these are two separate and distinct grounds upon which a claim might be brought.  As the pleading stands at the moment, they are fused together and it is difficult to know how one relates to the other.  On that basis I am satisfied that the pleading is embarrassing and that it ought to be struck out.

11. There is a further difficulty with par 18.  It is pleaded that the three named defendants had a duty to disclose the existence of the 1994 Licence Agreement.  If that is so, the material facts which give rise to the duty must be pleaded.  This is not a matter of particulars.  It is a matter of material fact.  A pleading which does not clearly identify the facts that give rise to the duty is manifestly defective.

12. Complaint was made by counsel for the first, second and third defendants as to par 20 of the statement of claim.  With respect, that paragraph seems to me to be a necessary plea in establishing that loss has been suffered by the plaintiffs.  It is proper and it should stand.

13. All defendants complain of par 24.  They say that the losses claimed by the plaintiffs have not been particularised and as most of the losses claimed are within the knowledge of the plaintiffs, particulars should not have to await discovery.  Further, the first, second and third defendants complain that par 24(d) of the particulars is vague and uncertain.  Taking this last point first, the subparagraph does not appear to indicate how the losses claimed arise from the misleading and deceptive conduct.  It is not clear whether the plaintiffs entered into contracts with the named entities which they were not able to perform, or whether other parties entered into contracts with these entities and derived profits which should have passed to the plaintiffs.  This issue requires clarification.

14. It is difficult to see why the plaintiffs are not now in a position to provide particulars of their loss to the defendants.  It may be that precise quantification is not yet possible.  But in relation to some of the losses claimed, precise calculation should be possible.  The plaintiff has pleaded the date upon which it entered into the Deed and it has pleaded the date upon which Clipmaster Enterprises terminated the 1994 Licence Agreement.  It also pleads the date upon which it became aware of termination of the 1994 Licence Agreement.  By reference to those dates, calculation of any losses claimed ought be possible.  As I indicated to counsel for the plaintiffs during the course of his submissions, I would not see the fact that particulars of losses have not been provided as being a ground for striking out the statement of claim.  But the particulars must be provided and they should be provided as soon as possible.  I will hear counsel further before providing a timetable for the provision of these particulars. 

15. Complaint is made by the first, second and third defendants as to par 26 and par 27(b) of the statement of claim.  These two paragraphs in general terms seek to "impute" to the first defendant knowledge of the misleading and deceptive conduct.  Essentially, what is said is that because the second, third and fourth defendants were officers of the first defendant, the first defendant must have known of the misleading and deceptive conduct.  While it might well be said that the pleas in par 26 and par 27(b) are not direct and precise, they do disclose to the defendants the case that they have to meet.  While I would urge a review of these two paragraphs as part of a general overall review of the pleading, they are not so offensive as to require that they be struck out.

16. Complaint is made as to par 28.  The complaint about this paragraph really follows on from what was said in relation to par 26 and par 27(b).  Once again, while I am of the view that par 28 could be more happily drafted, it discloses to the defendants the case they have to meet and is, to that extent, unobjectionable.  Again, while permitting the paragraph to stand in its present form, I would urge counsel to reconsider its terms. 

17. All defendants had requested particulars of par 11 of the statement of claim.  The request made by the first, second and third defendants differed from the request made by the fourth defendant.  At the hearing I was advised that the first, second and third defendant's request had been answered and this was no longer an issue between the parties.  However, the fourth defendant's request had not been answered and this remained an issue.  The fourth defendant's request is in the following terms:

    "11(i)(2) Please provide every particular of statement, fact, matter or thing as to the allegation that the fourth defendant was acting for and on behalf of the second and third defendants".

18. By par 11(i)(1) under "Particulars of Representations" it is alleged that the fourth defendant made representations "for and on behalf of himself and the second and third defendants".  It is nowhere pleaded how it is that any representations made by the fourth defendant were made on behalf of the second and third defendants.  In my view the request for particulars is reasonable and it should be answered.  However, there appears to be no allegation of agency in par 11(i)(2) and the reference to that subparagraph in the request for particulars is meaningless.  Request 1(B) should be answered, bearing this in mind.

19. In his written submissions counsel for the fourth defendant complained of a lack of particularity in the particulars given to par 11.  It was submitted that the plaintiff should indicate when telephone discussions took place and what was said during the course of those discussions.  While I would not be prepared to strike out par 11 based on a lack of particularity, it is clear that the fourth defendant is entitled to particulars of the telephone discussions, indicating the number of discussions that took place and the dates.  However, a request should await a redrafted pleading and perhaps the provision of a defence. 

20. I am satisfied then that the plaintiff's substituted statement of claim filed 22 February 2002 ought be struck out.  For the sake of convenience it may be appropriate to strike out the whole of the statement of claim with leave to file a minute of further substituted statement of claim.  I will hear the parties as to the precise form of orders and as to costs.