White City Tennis Club Ltd v John Alexander's Clubs Pty Ltd

[2007] NSWSC 1430

CITATION:	White City Tennis Club Ltd v John Alexander's Clubs Pty Ltd [2007] NSWSC 1430
HEARING DATE(S):	12 November 2007
JUDGMENT DATE :	12 November 2007
JURISDICTION:	Equity
JUDGMENT OF:	Hamilton J
DECISION:	Application to strike out statement of claim dismissed.
CATCHWORDS:	EQUITY [29] - General principles – Priority and notice – Transaction carried out in breach of trust – Whether case falls within first limb in Barnes v Addy - PROCEDURE [93] - Supreme Court procedure - Practice under Supreme Court Rules - Summary disposal - Power to terminate summarily - Principles applicable.
LEGISLATION CITED:	Real Property Act 1900 s 42 Trade Practices Act 1974 (Cth) ss 51AC & 51AA
CASES CITED:	Bahr v Nicolay [No 2] (1988) 164 CLR 604 Barnes v Addy (1874) LR 9 Ch App 244 Farah Constructions Pty Ltd v Say-dee Pty Ltd (2007) 81 ALJR 1107 General Steel Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 White City Tennis Club Ltd v John Alexander’s Clubs Pty Ltd [2007] NSWSC 1210
PARTIES:	White City Tennis Club Limited (P) John Alexander's Clubs Pty Limited (D1) Poplar Holdings Pty Limited (D2)
FILE NUMBER(S):	SC 3359/07
COUNSEL:	S T White SC and N J Kidd (P) J M Ireland QC and J S Cooke (D1&2)
SOLICITORS:	Kemp Strang (P) Thompson Eslick Solicitors (D1&2)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

MONDAY, 12 NOVEMBER 2007

3359/07 WHITE CITY TENNIS CLUB LIMITED v JOHN ALEXANDER’S CLUBS PTY LIMITED & ANOR

JUDGMENT

1 HIS HONOUR: This commenced as an application to strike out an amended statement of claim, which became during the course of it an application to strike out a further amended statement of claim, as I allowed an additional amendment during the argument. The additional amendment was to insert a par 25A, which specifically pleaded that there was sufficient fraud to circumvent the provisions of s 42 of the Real Property Act 1900 (“the RPA”). Mr White, of Senior Counsel for the plaintiff, contends that there were in any event sufficient allegations of fraud contained in the pleading to fulfil that function without the inclusion of the charge of law contained in par 25A.

2 Brereton J has already recently dealt with an application for and granted an interlocutory injunction in the proceedings for reasons given by his Honour: White City Tennis Club Ltd v John Alexander’s Clubs Pty Ltd [2007] NSWSC 1210. However, the serious question to be tried on which his Honour granted that relief was limited and is really separate from the basis on which Mr Ireland, of Queen’s Counsel for the defendants, has contended today that the further amended statement of claim should be struck out. Indeed, Brereton J in [38] of his judgment expressed the view that there was a significant obstacle to the imposition generally of the fiduciary obligations of joint venturers on the contractual relationship between the parties arising from the terms of clause 7.1 of the Memorandum of Understanding, which is one of the contractual arrangements involved in the case. Clause 7.1 is as follows:

“7 Disclaimer
7.1 Nothing in this MOU shall be taken to constitute the Parties as partners or as joint venturers for any purpose whatsoever.”

3 The contractual arrangements underlying the dealings the subject of this matter are complex and involve a number of parties. A general outline of those arrangements was given by Brereton J in his judgment and I do not propose to set them out in detail here.

4 Certainly, Mr Ireland has contended, first, that the plaintiff cannot succeed because the fiduciary relationship for which it contends is incompatible with the terms of a commercial engagement and, secondly, that the case is not within the first limb of Barnes v Addy (1874) LR 9 Ch App 244 as contended by the plaintiff.

5 Mr Ireland has argued the application with his usual vigour and cogency and it seems to me that the defendants do face a number of difficulties in making out the case that they propound. They include the difficulty to which his Honour adverted in [38] of his judgment. They also include a difficulty as to whether the circumstances can be said to fall, as the plaintiff contends, within the first limb in Barnes v Addy, as recently discussed by the High Court in Farah Constructions Pty Ltd v Say-dee Pty Ltd (2007) 81 ALJR 1107, especially at [111] - [113]. A third difficulty arises from the question of whether fraud of the requisite quality is established to satisfy the requirements in Bahr v Nicolay [No 2] (1988) 164 CLR 604 to circumvent the requirements of s 42 of the RPA.

6 I do not intend a discourtesy to Mr Ireland’s submissions by the fact that I have not heard Mr White at length orally in answer to them, but I have taken fully into account Mr White’s succinct and helpful written submissions. Nor have I forgotten what Mason J said concerning the creation of fiduciary relationships in the context of contractual arrangements in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 97.

7 Had the Memorandum of Understanding in terms provided that no fiduciary relationship could arise out of the contract or in relation to its subject matter, Mr Ireland’s argument as to this aspect of the matter would have been unanswerable. However, it used the very much more equivocal language, that nothing in the Memorandum of Understanding should be taken to constitute the parties as partners or as joint venturers for any purpose whatsoever. And a fiduciary relationship can, of course, arise in appropriate circumstances outside an arrangement formally characterised as a joint venture arrangement, which the arrangement in the Memorandum of Understanding is proclaimed not to be.

8 Whilst, as I have said, there is a great deal of force in what Mr Ireland has put, I must bear in mind the stringency of the test in General Steel Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125 in determining whether matters should be decided on a summary judgment application (which this in substance is) or whether they should go to trial. I remind myself of what was said by Barwick CJ in General Steel at 129:

“It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action—if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal—is clearly demonstrated. The test to be applied has been variously expressed; ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ‘discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; ‘be manifest that to allow them’ (the pleadings) ‘to stand would involve useless expense’.

At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or ‘so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument’; ‘so to speak apparent at a glance’.”

9 Despite the difficulties in the plaintiff’s case raised by Mr Ireland’s argument, I do not think that the causes of action propounded by the plaintiff based on breach of fiduciary duty and Barnes v Addy are sufficiently hopeless to justify their summary termination by striking out the statement of claim. I bear in mind that the situation as to the first limb in Barnes v Addy is left in a state of uncertainty by the decision of the High Court in Say-Dee.

10 Mr Ireland has also put a strong argument in relation to the causes of action pleaded under s 51AC and s 51AA of the Trade Practices Act 1974 (Cth). Whilst, again, the arguments have been strongly put, I have come to the conclusion that the causes of action propounded under those sections are not sufficiently hopeless to meet the fate of being struck out.

11 In those circumstances, I propose to dismiss the defendants’ application.

…oOo…

12 Mr White has asked for costs of the application. Mr Ireland submits that the order for costs should be that the costs of the application be the plaintiff’s costs in the proceedings. He does this on the basis of the late further amendment to the amended statement of claim, which he says was necessary for the plaintiff to have achieved the success that it has. I do not agree with that. Whilst I allowed the amendment, there would have been no different result had the amendment not in fact been made.

13 The orders of the Court are therefore:

(1) The defendants’ notice of motion of 19 October 2007 is dismissed.
(2) Order that the defendants pay the plaintiff’s costs of the notice of motion.

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