Wardle v Siemens Ltd

Case •

[1999] WASC 256

•

14 DECEMBER 1999

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   WARDLE & ORS -v- SIEMENS LTD [1999] WASC 256

CORAM:   WHITE J

HEARD:   5 NOVEMBER 1999

DELIVERED          :   14 DECEMBER 1999

FILE NO/S:   CIV 1083 of 1995

BETWEEN:   RONALD WILLIAM WARDLE

First Plaintiff

VICTOR RICHARD YATES
Second Plaintiff

BLANK & GAP PTY LTD
Third Plaintiff

AND

SIEMENS LTD
Defendant

(BY ORIGINAL ACTION)

SIEMENS LTD
Plaintiff

AND

RONALD WILLIAM WARDLE
VICTOR RICHARD YATES

BLANK & GAP PTY LTD
Defendants

(BY COUNTERCLAIM)

Catchwords:

Pleadings - Amendments - Turns on own facts

Legislation:

Nil

Result:

Application refused
Leave to re-apply for leave to file a fresh substituted statement of claim

Representation:

Original Action

Counsel:

First Plaintiff                :     Mr R A Conti QC & Mr K S Pratt

Second Plaintiff            :     Mr R A Conti QC & Mr K S Pratt

Third Plaintiff               :     Mr R A Conti QC & Mr K S Pratt

Defendant:     Mr M J McCusker QC & Mr G M Abbott

Solicitors:

First Plaintiff                :     Paiker & Overmeire

Second Plaintiff            :     Paiker & Overmeire

Third Plaintiff               :     Paiker & Overmeire

Defendant:     Freehill Hollingdale & Page

Counterclaim

Counsel:

Plaintiff:     Mr M J McCusker QC & Mr G M Abbott

Defendants:     Mr R A Conti QC & Mr K S Pratt

Solicitors:

Plaintiff:     Freehill Hollingdale & Page

Defendants:     Paiker & Overmeire

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

Nil

Case(s) also cited:

Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Pty Ltd (1978) 140 CLR 216

Waltons Stores (Interstate) Ltd v Maher (1988) 76 ALR 513

  1. WHITE J:  This is an application for leave to amend the plaintiffs' statement of claim, which has been the subject of a number of previous amendments, by replacing it with a substituted statement of claim, in relation to which, senior counsel for the plaintiff acknowledges that further amendments will have to be made.  The action was initiated in 1995.

The background

  1. The third plaintiff, Blank & Gap Pty Ltd, was formerly named Wardle & Yates Electrical Co Pty Ltd.  The first and second plaintiffs, at all material times, were employed by and acted on behalf of the third plaintiff.

  2. By an agreement dated and made on 22 February 1994, the third plaintiff agreed to sell to the defendant the businesses carried on by the third plaintiff as described in that agreement and the first and second plaintiffs agreed that, on completion of such agreement, they would respectively enter into employment agreements with the defendant. 

  3. By separate written employment agreements, ("the Wardle Employment Agreement" and "the Yates Employment Agreement" respectively) dated and made on 22 February 1994, the defendant agreed to employ the first plaintiff and the second plaintiff respectively for the period 1 October 1993 to 30 September 1996, upon the terms and conditions contained in those agreements. 

  4. Each of those employment agreements contained provisions, inter alia, that:

    "(a)6A      If the Company [the Defendant] ceases operations

    or does not wish to continue the business of the Division known as Wardle & Yates Electrical Co. (being an intended Division of the Third Defendant) for reasons other than the low profitability of such business then the Employee [Wardle in the case of the Wardle Employment Agreement and Yates in the case of the Yates Employment Agreement] shall be entitled to terminate this Agreement upon 60 days notice in writing and shall be paid the balance of his salary remuneration pursuant to Clause 4 hereof for the unexpired period of this Agreement and the balance of his entitlements to profits pursuant to Clause 4(A) hereof calculated on the assumption that the maximum profit payment of $100,000.00 is paid for each of the years remaining in the unexpired period of this Agreement.

    (b)4A(b)   In addition to the remuneration set out in clause 4

    hereof the Employee shall be entitled to be paid a bonus of an amount equal to the percentage set out in Part 9 of the Schedule hereto (hereinafter called 'the percentage) of the Profit for the financial years ending on the 30th September 1994, 30th September 1995 and 30 September 1996."

  5. Part 9 of the schedule to each of the Wardle Employment Agreement and the Yates Employment Agreement provided:

    "(a)  One half of 100% of the profits which are in excess of $400,000.00 up to $600,000.00 in a given financial year with a maximum of $100,000.00 bonus;

    (b)  Plus one half of 50% of the next $200,000.00 of profits, namely profits from $600,000.00 to $800,000.00 in a given financial year;

    (c)  Plus one half of 25% of the profits in excess of $800,000.00 in a given financial year. ('Part 9 of the Schedule')".

  6. I understand that there is a factual problem with par 5 of the substituted statement of claim, which senior counsel for the plaintiff will seek to rectify.  I do not need to set out par 5, but simply point to the fact that it alleges that certain matter was expressed in a facsimile dated 9 November 1994 which it is now recognised formed no part of that facsimile.  No doubt this can be cleared up when a new substituted statement of claim is prepared.  Paragraph 5 does allege that, by that facsimile, the defendant advised each of the plaintiffs that it did not wish to continue the business of the division known as the Wardle & Yates Electrical Co.

  7. For the reasons which will appear hereunder, I shall not allow the proposed substituted statement of claim in the form in which it presently appears, but I propose to grant leave to the plaintiff to re‑apply for leave to file a fresh substituted statement of claim upon terms to be ordered.  I mention that, as a substituted pleading, such document should be prepared in clean form.

The defendant's objections to the proposed amendment

  1. The defendant objects generally to the proposed amendment on the grounds that there has been no adequate, or proper, explanation for the delay in amending the pleadings.  While that may be so, it seems to me highly desirable that the pleadings in this matter should be put into a final form as soon as possible, so that the matter can progress.  I shall, accordingly, not uphold that general objection but shall deal with the specific objections raised by the defendant.

Proposed par A

  1. The first objection by the defendant is to the proposed new par 6A, which reads as follows:

    "6AAlternatively, if it be the case, contrary to paragraphs 5 and 6 hereof, that the Defendant did not notify the First Plaintiff and the Second Plaintiff at or by any material time the reason of low profitability of the business of the Wardle & Yates Electrical Co Division for its wish not to continue the business, or if it be the case that the Defendant was not obliged to give any such reason for such discontinuance upon the true construction of Clause 6A of the Wardle Employment Agreement and of the Yates Employment Agreement, which in either case the First and Second Plaintiffs deny the Defendant is and always has been estopped from giving notice of termination of the Wardle Employment Agreement and of the Yates Employment Agreement upon the basis of low profitability of the business, because any such low profitability of the said Division as might have existed from and after the formation of the Wardle Employment Agreement and the Yates Employment Agreement was attributable wholly or substantially to the following circumstances:

    (i)non‑fulfilment of the representations the subject of Representation 1 pleaded in paragraph 12.4 below and of Representation 2 pleaded in paragraph 14.5 below;

    (ii)to the knowledge and expectation of the Defendant, the reliance by the First Plaintiff and the Second Plaintiff upon the said Representations 1 and 2 and each of them in respectively entering into the Wardle Employment Agreement and the Yates Employment Agreements;

    (iii)fulfilment of such Representations 1 and 2 and each of them would have ensured the absence of the low profitability of the Division which allegedly occurred."

  2. Paragraph 12.4 pleads "representation 1" as follows:

    "12.4During the discussion John Keast, for and on behalf of the Defendant, represented to the First Plaintiff and the Second Plaintiff that the Defendant held world wide policies of insurance which would satisfy those corporations and/or persons who customarily awarded contracts to Wardle & Yates Electrical Co. Pty Ltd that there would be no need for the Defendant to offer to be bound by the Wardle and Yates usual liability conditions after completion of the Sale Of Assets Agreement.

    ('representation 1')"

  3. Paragraph 14.5(ii) pleads "representation 2" as follows:

    "14.5During that discussion held on 13 January 1994 Adolf Van Gaalen, for and on behalf of the Defendant, represented to the First and Second Plaintiffs that:

    (i)…

    (ii)Such ways and means would be employed by the Defendant, from the time of the Siemens' takeover of the business of the Third Plaintiff, to ensure that the intended Wardle & Yates Electrical Co Division of the Defendant would be able to secure contracts satisfactory to the customers with whom the Third Plaintiff had theretofore been dealing and with whom the Wardle & Yates Electrical Co Division of the Defendant would be dealing after the takeover date, notwithstanding that to do so might or would involve derogation from the Wardle & Yates usual liability conditions to the apparent detriment of such customers.

    ('representation 2')"

  4. (It seems to me that par 6A would, whatever may be its other merits or defects, be rendered far more intelligible if it were recast and not left as a single sentence extending to 269 words and 29 lines of typescript.)

  5. The defendant objects to the paragraph on the basis that the issue of Notification raises an entirely false issue, in that cl 6A of the employment agreements does not refer to notification at all.  The true issue, it was submitted, is as to what was, in fact, the reason for the decision to close down the business.  Senior counsel for the defendant did indicate that the plaintiff might, as a matter of particularity, wish to plead that the reasons for the decision are to be found in some document or documents.

  6. Furthermore, the defendant points to the allegation pleaded in relation to the issue of estoppel, namely that the defendant is and always has been estopped from giving notice of termination of the employment agreements on the basis of low profitability. 

Proposed par 6B and par 6C

  1. Paragraph 6B and par 6C of the proposed substituted statement of claim read as follows:

    "6B.By reason of the foregoing representations it became and remains unconscionable for the Defendant to purport to rely upon alleged low profitability of the business of Wardle & Yates Electrical Co Division of the Defendant as the reason to terminate the Wardle Employment Agreement and the Yates Employment Agreement under or pursuant to Clause 6A thereof.

    6CBy reason of the circumstances pleaded in paragraph 6A hereof and each of them, the First Plaintiff became and is still entitled to treat the Wardle Employment Agreement as having been terminated by the Defendant on or about 9 November 1994 for reasons other than low profitability of the said business and the Second Plaintiff also became and still is entitled to treat the Yates Employment Agreement as having been terminated by the Defendant on or about 9 November 1994 for reasons other than low profitability of the said business."

  2. To those proposed paragraphs, the defendant takes the same objection as in relation to par 6A. 

  3. The plaintiff argues that the defendant has misconceived the function of the new par 6A and par 6B, which is to provide a basis for the entitlements claimed in par 7, alternatively to that pleaded in par 6.

  4. One of the serious problems with par 6A and par 6B (and, it follows, 6C) is that it was not the defendant who gave a notice of termination of the employment agreements at any material time.

  5. The terms of the employment agreements pleaded in par 4 of the proposed substituted statement of claim, which I have quoted above, do not give the defendant the right to terminate.  The terms give to the employees, namely, the first and second plaintiffs, the right to terminate if they so wish and, in such event, where the decision to discontinue the business is for reasons other than low profitability, each of the first and second plaintiffs who terminates is entitled to certain remuneration. 

  6. In addition, I accept that the pleading of the "notification" of the decision of the defendant raises a false issue - the true question being as to whether or not the defendant decided not to continue the business in question for reasons other than the low profitability of such business.

  7. The pleading in par 6A of the estoppel is also based upon a proposition that it was the defendant which terminated the contracts which, as I have indicated above, is incorrect and which the plaintiff does not now seek to press.  The plea is, in effect, that the defendant is estopped from doing something, which it did not do or purport to do.

  8. It is apparent, therefore, that the proposed amendment by adding par 6A, par 6B and par 6C cannot be allowed in their present form.

Proposed par 7

  1. Proposed par 7 reads as follows:

    "7.By reason of the matters pleaded in paragraphs 1 to 6C inclusive hereof, the Defendant is liable to pay each of the First Plaintiff and the Second Plaintiff:

    (a)the balance of their respective entitlements to profits (pursuant to Clause 4A(b)) on the assumption of a profit payment of $100,000.00 for each of the financial years 1995 to 1996) in respect of each of the Wardle Employment Agreement and the Yates Employment Agreement; and

    (b)the balance of their respective salaries and salary remuneration (pursuant to Clause 6A) of each of the Wardle Employment Agreement and the Yates Employment Agreement from 15 January 1995 to 30 September 1996.

    The balance of entitlements to profits under clause 4A(b) for each of the First Plaintiff and Second Plaintiff was $200,000.00 as at 15 January 1995.  The salary remuneration of each of the First Plaintiff and the Second Plaintiff amounted to of $80,000.00 per annum, together with their respective entitlements pursuant to the provision of the Superannuation Guarantee Levy Act (Cwth) and the use of a fully maintained vehicle provided at the expense of the Defendant for the terms of their employment."

  2. The defendant objects to the proposed par 7 and the plaintiff responds that that paragraph is merely a consequential amendment brought about by the insertion of par 6A and par 6B.  It follows that, with the failure of those paragraphs, par 7 must also fail.

Proposed amended par 9

  1. The proposed amendments to par 9 result in the following paragraph:

    "9.By the Sale Of Assets Agreement made and dated 22 February 1994, the Third Plaintiff sold to the Defendant, inter alia, all of the assets of Wardle & Yates Electrical Co. Pty Limited which included the business name known as Wardle & Yates Electrical Co. and which was being conducted by the Third Plaintiff in Western Australia and Queensland on the terms and conditions contained therein which included:

    (a)Clauses 2 and 10(2)(i) which provided that the Defendant would conduct the said business under the name or Division of Wardle & Yates Electrical Co from 1 March 1994 ('the Siemens' takeover date'), and

    (b)Clause 15 which provided that the Third Plaintiff and the Trustees of certain trust estates associated with the families of the First and Second Plaintiffs (therein called 'Corporate Covenantors') would be restricted from, inter alia, conducting any business of electrical design contracting and engineering services, including but not limited to the business of electrical design contracting and engineering services to commercial domestic mining and industrial properties under the name of Wardle & Yates Electrical Co. in Australia for the period until 1 October 1995, or until 3 years after the termination of both the Wardle Employment Agreement and the Yates Employment Agreement."

  2. The defendant objects to the proposed par 9 on the grounds that it leads nowhere and is not the basis of any relief claimed by the plaintiff.  However, it seems to me that the paragraph pleads background information which is not prejudicial to the defendant and which may prove useful.  I do not uphold this objection.

Proposed par 15

  1. Proposed par 15 is in the following terms:

    "15.1In addition or alternatively to being a representation of existing fact as to the Defendant's ability and capacity to obtain business upon the basis of the Siemens' usual liability conditions, Representation 2 was a representation as to future matters namely that after completion of the takeover, the Defendant would employ means and take steps to ensure that its Wardle & Yates Electrical Co Division would be able to secure contracts satisfactory to the customers with whom the Third Plaintiff had been dealing prior to completion and would be thereafter dealing, notwithstanding that to do so would involve departure from the Wardle & Yates usual liability conditions.

    15.2Representation 2 was false and deceptive when made because the Defendant was not then able or willing to relax, modify or circumvent directly or indirectly the Siemens usual liability conditions in order to satisfy directly or indirectly potential customers to the Wardle and Yates Electrical Co Division of the Defendant."

  2. The defendant objects to the proposed amendment on the grounds that representation 2 was not that the defendant was able or would be able or willing to relax, modify or circumvent its usual liability conditions.  Accordingly, par 15.2 does not, it was submitted, falsify the representation pleaded but refers to something quite different which has never been pleaded, that is, an ability or willingness to relax, modify or circumvent the Siemens' liability conditions.  I uphold this objection

Proposed par 22

  1. This paragraph reads:

    "22.The First and Second Plaintiffs acted in reliance upon the said promises of the Defendant by entering into the Employment Agreements and by committing the Third Plaintiff to the Sale of Assets Agreement, and thereafter continued to believe that the said promises would be honoured until approximately the third week in March 1994, when in the course of a tender process involving the Wardle & Yates Electrical Co Division and Western Mining Corporation, the Defendant's Commercial Manager for Western Australia Chris McNiel notified the Plaintiffs that under no circumstances would the Defendant remove, vary or modify the Siemens' usual liability conditions, notwithstanding that the tender to Western Mining Corporation would thereby become non‑conforming and unsuccessful, and notwithstanding that Western Mining Corporation had awarded substantial work to the Third Plaintiff over the twenty years preceding the takeover and that its custom had contributed substantially to the profitability of the Third Plaintiff during that period of time."

  2. The defendant objects to this paragraph on the grounds that no cause of action is disclosed.

  3. In general, and save where I have specifically indicated to the contrary, I consider that there is merit in the defendant's objections, many of which were, very fairly, conceded by senior counsel for the plaintiff.  It would be appropriate if the plaintiff were to give further consideration to the pleading, bearing in mind the aforegoing, and make an application for leave to bring in a fresh substituted statement of claim accordingly.  It may be that the parties will be able to resolve their differences as to the pleading in that case.  I think it is reasonably plain what case the plaintiff seeks to establish and it should be possible to plead it appropriately so that this action can proceed without further delay.  I shall hear from counsel as to the appropriate order to give effect to these reasons.

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