Practice and procedure - Application to amend statement of claim - Unlawful interference with contract - Whether non­pecuniary loss can ground action - Adequacy of pleading - Turns on own facts

Atkinson v Fitzwalter [1987] 1 All ER 483

Boral Bricks NSW Pty Ltd v Frost (1987) Aust Torts Reports 80-097

Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 131 ALR 422

Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Hooker Corporation Ltd v Commonwealth (1986) 65 ACTR 32

Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365

Jones Brothers (Hunstanton) Ltd v Stevens [1955] 1 QB 275

Joyce v Sengupta [1992] EWCA Civ 9; [1993] 1 All ER 897

Lonrho Plc v Fayed (No 5) [1993] 1 WLR 1489

MacKenzie v MacLachlan [1979] 1 NZLR 670

Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494

Merkur Island Shipping Corp v Laughton [1983] 2 AC 570

Pratt v British Medical Association [1919] 1 KB 244

Quinn v Leathem [1901] UKHL 2; [1901] AC 495

Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889

Rookes v Barnard [1964] UKHL 1; [1964] AC 1129

Short v City Bank of Sydney [1912] HCA 54; (1912) 15 CLR 148

Sinclair v James [1894] 3 Ch 554

Spring v Guardian Assurance Plc [1993] 2 All ER 273

Woolley v Dunford (1972) 3 SASR 243

Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530

Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd [1995] FCA 1368; (1995) 58 FCR 26

Boase v Seven Network (Operations) Ltd [2004] WASC 245

Boase v Seven Network (Operations) Ltd [2005] WASC 89

Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" [1976] HCA 65; (1976) 136 CLR 529

Esanda Finance Corporation Ltd v Alvaro, unreported; SCt of WA; Library No 960539; 18 September 1996

Greig v Insole [1978] 1 WLR 302

1 MASTER NEWNES: This is an application by the plaintiff for leave to amend the writ of summons and statement of claim in accordance with minutes of amended writ and statement of claim respectively. That follows the striking out of a previous version of the statement of claim. The proposed amendments are opposed by the defendants on the basis that the statement of claim, as amended, will disclose no reasonable cause of action or will prejudice, embarrass or delay the fair trial of the action.

2 The relevant portions of the proposed statement of claim are as follows:

1.1 was formerly employed by the Second Defendant and as and from a date and time not known to the Plaintiff thereafter by the First Defendant for a period in aggregate of approximately 28 years;

1.2 at all material times was employed by the First Defendant; and

1.3 at all material times, pursuant to his employment by the First Defendant has acted as the Chief Pilot of the Second Defendant.

5. At all material times it was a term of the Plaintiff's Contract of Employment that he comply with the Policies stipulated or adopted by the First and Second Defendants and further such Policies were and each of them was as and from the date each such Policy was adopted a term of the Plaintiff's Contract of Employment.

Particulars

The term is to be implied as a matter of law being an incident to a contract of employment and the Plaintiff's obligation to comply with the reasonable requirements of his employer.

6. At all material times the Plaintiff carried out his duties of Chief Pilot for the Second Defendant in accordance with the Seven Network Limited Corporate Aviation Policy compliance of which was a term of the Contract of Employment between the Plaintiff and the First Defendant and in that regard:

6.1 the Plaintiff was responsible for all matters involving operations and administration to Mr Wharton as Managing Director of the Second Defendant; and

6.2 the Plaintiff was required to liaise with Mr Menegola on a daily basis for tasking of the Second Defendant's helicopter for use in the gathering and reporting of news by the Second Defendant.

The term was an express term orally agreed by the Plaintiff and the First Defendant upon the adoption by the First Defendant of the Corporate Aviation Policy in or about November 1999.

7. By reason of the manner in which the Plaintiff was required to perform work as the Chief Pilot of the Second Defendant and to fly journalists and cameramen to various localities to gather and report news he was required to deal in a close professional working relationship with journalists and cameramen and other staff assigned by the Second Defendant to the news department.

8. At all material times, as and from 1 June 2003, the First Defendant introduced with effect to, inter alia, each of its employees engaged in work on behalf of the Second Defendant an occupational health and safety system involving the adoption implementation and maintenance of various written policies and procedures ('the Policies').

9. By reason of the matters referred to in paragraph 8 hereof as and from 1 June 2003 it was a term of the Plaintiff's Contract of Employment that:

9.1 the First Defendant would apply the policies referred to in paragraph 8 hereof so as to provide a working environment for all employees free from harassment.

9.2 in so far as the Plaintiff was employed in a position as a manager the Plaintiff was responsible for implementing the policies referred to in paragraph 8 hereof and in particular to be aware of harassment and take steps consistent with the policies to ensure it is dealt with in accordance with the Grievance Handling Policy.

9.3 any complaint against the Plaintiff would be dealt with in accordance with the Grievance Handling Policy and in a manner that:

9.3.1 afforded the Plaintiff a fair opportunity to respond to the complaint.

9.3.2 protected the Plaintiff's rights as an employee.

...

20. On 3 April 2004 the First Defendant:

20.1 placed locks on the helicopter hangar gate at the premises of the Second Defendant in Tuart Hill;

20.2 notwithstanding that the Plaintiff was the designated pilot of the helicopter for that day, caused the helicopter to be flown off-site from the station prior to the Plaintiff attending work;

20.3 employed security guards to guard the helicopter hangar at the premises of the Second Defendant at Tuart Hill;

20.4 purported to suspend the Plaintiff without notice or reason from performance of his employment duties; and

20.5 purported to direct the Plaintiff that he was not to have contact with any other employee of the First Defendant.

21. The First Defendant by its General Manager, Group Human Resources, Scott Blakeman ('Blakeman'):

21.1 interviewed the Plaintiff on Thursday, 8 April 2004;

21.2 informed the Plaintiff that the reason for his suspension was that Ms Fan had made a complaint against the Plaintiff for harassment;

21.3 informed the Plaintiff that the suspension was part of the purported implementation of an enquiry pursuant to the Grievance Policy referred to in paragraph 9 hereof;

21.4 failed and refused to disclose to the Plaintiff the complaint made against him by Ms Fan.

22. By letter dated 16 April 2004, the First Defendant, gave formal notice to the Plaintiff of warnings in respect of his ongoing employment with the First Defendant that:

22.1 his conduct was in breach of the duty of good faith to the First Defendant as an employee because it was asserted that:

22.1.1 [the Plaintiff's] conduct in 'attempting to have [a covert] tape recording for use in court proceedings against Howard [Gretton] and/or against Seven was..... in opposition to, or conflict with, Seven's interests';

22.1.2 [the Plaintiff's] conduct in 'attempting to persuade Alison Fan to covertly tape record Howard Gretton in the newsroom' was intimidatory and amounts to harassment.

23.1 asserted that the Plaintiff's behaviour was 'volatile and aggressive';

23.2 asserted that the Plaintiff's conduct gave rise to concerns that he 'may well presently be unfit to fly';

23.3 purported to require the Plaintiff to provide to the said Blakeman 'a current medical certificate declaring [the Plaintiff] fit to fly before [the Plaintiff] will be rostered to fly' and further purported to require the certificate be issued by a specialist who was to be briefed by the First Defendant as to the First Defendant's alleged concerns and must thereafter declare the Plaintiff 'mentally fit to fly'; and

23.4 purported to provide a formal warning to the Plaintiff for failing to comply with the unlawful instruction not to initiate contact with any other employee of the Second Defendant.

24. The conduct of the First Defendant referred to in paragraphs 20 to 23, was in breach of the contract of engagement between the Plaintiff and the First Defendant in that:

24.1 the Plaintiff's attempts referred to in paragraphs 14 and 16 hereof to identify and eliminate bullying and harassment of fellow employees in the workplace resulted in the Plaintiff being suspended; and

24.2 the Plaintiff was not given a fair or reasonable opportunity to defend himself against the complaint made against him.

25. By the conduct referred to in paragraph 20 and the letter referred to in paragraph 22 hereof the Plaintiff's ongoing employment with the First Defendant has been adversely affected.

26. The Second Defendant:

26.1 as and from 5 May 2004 monitored the Plaintiff's telephone calls;

26.2 on or about 5 May 2004 carried out or caused to be carried out covert surveillances and following of the Plaintiff, the Plaintiff's wife and members of the Plaintiff's family; and

26.3 purported to demand the return 'for safekeeping, servicing and necessary upgrades' a desktop computer provided to the Plaintiff by the Second Defendant.

27.1 by letter dated 5 May 2004 purported to give notice to the Plaintiff of a further investigation;

27.2 by letter dated 5 May 2004 gave notice that the Second Defendant was monitoring the Plaintiff's telephone call

27.4 on or about 5 May 2004 together with the Second Defendant caused the Plaintiff and the Plaintiff's wife and members of the Plaintiff's family to be placed upon covert surveillance and followed;

27.5 by the letter dated 5 May 2004 purported to require the Plaintiff to return to the Second Defendant 'for safe keeping, servicing and any necessary upgrades' a desktop computer provided to the Plaintiff by the Second Defendant;

28. The First Defendant's conduct referred to in paragraph 27 was in breach of the terms of the Plaintiff's Contract of Employment referred to in paragraph 9 hereof.

29. Further and in the alternative the conduct of the Second Defendant referred to in paragraphs 26 above constituted a tortious interference with the Plaintiff's Contract of Employment.

30. By reason of the matters referred to in paragraph 29 hereof the Plaintiff has suffered mental distress and thereby loss and damage.

31. The Second Defendant's conduct referred to in paragraph 26 hereof was in contumelious disregard of the Plaintiff's rights as an employee and the Plaintiff claims exemplary damages.

32. By reason of the First Defendant's conduct referred to in paragraphs 25 and 27 the Plaintiff has suffered distress and damage.

33. By reason of the Second Defendant's conduct referred to in paragraph 26 hereof the Plaintiff has suffered loss and damage."

3 The terms of the endorsement on the amended writ of summons are as follows:

"1 The Plaintiff's claim arises in respect of the following matters:

1.1 the First Defendants' breach of the Plaintiff's Contract of Employment by letter dated 16 April 2004;

1.2 the First Defendants' further breach of the Plaintiff's Contract of Employment as and from 16 April 2004;

1.3 the First and Second Defendants tortious interference in the Plaintiff's Contract of Employment as and from 16 April 2004."

4 The relevant principles to be applied on an application of this nature are well established. A party will not be granted leave to amend a pleading into a form which is liable to be struck out: Hooker Corporation Ltd v Commonwealth (1986) 65 ACTR 32, at 38, Atkinson v Fitzwalter [1987] 1 All ER 483 at 490, 502, Sinclair v James [1894] 3 Ch 554, at 557. A pleading is liable to be struck out, among other things, if it is embarrassing in form or if it discloses no reasonable cause of action. A pleading will only be struck out on the latter ground where the claim is plainly unarguable and great care must be exercised to ensure that a plaintiff is not improperly deprived of the opportunity to have its case determined at trial: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, at 130. Courts at first instance should also be careful not to risk stifling the development of the law by summarily rejecting claims where there is a reasonable possibility that, as the law develops, it will be found that a cause of action will lie: Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365, at 373.

5 The first objection by the defendants was to par 5 of the minute. It is apparent that par 5 contains in effect two elements; first that it was a term of the contract that the plaintiff would comply with policies stipulated or adopted by the defendants, and secondly that any such policy became a term of the contract as from the time it was adopted by the defendants. The defendants did not complain about the first element.

6 It was submitted, however, that in respect of the second, the minute was objectionable on several grounds. First, it appears that the proposed implied term is said to be necessarily implied, that is, "as a necessary incident of the definable category of contractual relationship". Counsel referred to Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 131 ALR 422 per McHugh and Gummow JJ at 477, 451. If that is the case then the facts said to give rise to the implication must be pleaded and the pleading must set out the circumstances from which it is said such an implied term necessarily forms part of the contract. Counsel referred to Hooker Corporation Ltd v Commonwealth of Australia (supra) at 36.

7 Secondly, the defendants argued that par 5 did not allege a binding contract because, in effect, the plea that once adopted by the defendants a policy became a term of the contract of employment, left the content of the contract entirely in the discretion of the defendants. That is, it permitted the defendants unilaterally to vary the terms of the contract; there was not the necessary consensual element. The defendants relied upon the judgment of North J in the Federal Court in Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889 at [111].

8 Thirdly, it was submitted that there was an inconsistency between pars 5 and 6 of the minute. Paragraph 5 pleaded an implied term that the plaintiff comply with policies stipulated or adopted by the defendants from time to time, whereas par 6 pleaded that compliance with the Corporate Aviation Policy comprised an express term of the contract of employment. That is, while par 5 pleaded that any policy, once stipulated or adopted, was an implied term of the contract, par 6 pleaded that, at least in respect of one policy, it was an express term of the contract that the plaintiff comply with it.

9 As to the first objection, counsel for the plaintiff submitted that particulars of the ground upon which the term is to be implied are not required because the term is not said to be implied as a matter of fact, but by law as an incident of the relationship of employer and employee.

10 I do not consider that the pleading is deficient in failing to plead facts from which the implied term is said to arise.

11 In Byrne v Australian Airlines Ltd (supra), McHugh and Gummow JJ said (at 451):

"What, then, is involved in the proposition that a contractual term is implied as a matter of law rather than as the assumed intention of the parties? There is at least one basic distinction. It is that ... terms implied by the application of what one might call the business efficacy test are terms unique to the particular contract in question, depending upon the form of the contract, the express terms and the surrounding circumstances. By contrast, terms implied by law are, in general, implied in all contracts of a particular class or which answer a given description.

Further, as Hope JA pointed out in Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd:

'Although the distinction between the two classes of implication has not been and perhaps is still not universally appreciated, classes of contract in respect of which terms will be implied by law, and the terms which will be implied, have in many cases been long established. Typical classes are contracts between master and servant, for the sale of goods, for the provision of work and materials and between landlord and tenant. However, the classes of contracts in which the law will imply terms are not closed; the difficult question is to determine what test should be applied before the courts imply such a term for the first time.' "

12 As the plaintiff does not rely on facts or circumstances beyond the existence of the contract of employment to give rise to the term pleaded, in my view the defendants' objection to the plea must fail.

13 Turning to the second ground of objection, in Riverwood International Australia Pty Ltd v McCormick (supra), the plaintiff, McCormick, executed a written contract of employment with his employer, Riverwood. The written contract provided, among other things, that McCormick "agree[d] to abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced". Although there were a few instances of burdens on the employees, the major part of the manual addressed matters which were for the benefit of employees of Riverwood. After McCormick executed the written contract, Riverwood inserted into the manual a redundancy policy providing for certain payments to be made to employees whose services were terminated on the ground of redundancy. Riverwood terminated the employment of McCormick on the ground of redundancy but did not make a payment to him pursuant to the redundancy policy. McCormick commenced proceedings against Riverwood, alleging, among other things, breach of contract.

14 The trial Judge found that the manual was incorporated into the contract of employment by reference and that the contract contained an implied term that McCormick would receive redundancy benefits if his position was made redundant. An appeal against that decision was dismissed by a majority of Mansfield and North JJ, Lindgren J dissenting. The majority held that the manual was incorporated by reference into the contract of employment.

15 North J found that the parties intended to accept mutual obligations in accordance with the provisions of the manual, which was primarily, although not entirely, to make provision for benefits for employees. His Honour rejected a contention by Riverwood that because the contents of the manual could change, it was an unacceptable guide to whether it bound Riverwood to provide to the plaintiff the current entitlements under it. North J held there was no evidence that there had been any change in the essential characteristics of the manual. In that context, in a passage relied upon by the present defendants, his Honour said (at [110]):

"In any event, the purported agreement to abide by alterations or additions to the policies and practices of Riverwood did not create a legally binding obligation on Mr McCormick to accept any unilateral alteration or addition. A purported agreement which leaves the content of the agreement entirely at the discretion of one party is not contractual in nature. Any alteration or addition to the company policies and practices could only achieve binding contractual effect if there was separate agreement to such alterations or additions, either by way of variation of the existing agreement or by way of entering into a new agreement."

16 I do not, however, understand his Honour to mean that any contract containing a term permitting one party to vary the contractual entitlements or obligations of the other does not have binding contractual effect. It is, for example, common for loan contracts to contain provisions enabling the lender to vary the rate of interest payable by the borrower: see, for instance, Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494. I understand his Honour to be referring to a provision which leaves the terms of the agreement entirely at the discretion of one party, rather than one where, within the scope of the contract of employment, the employer may alter or adopt policies.

17 I do not therefore accept that the implied term alleged is so untenable that it is liable to be struck out at this stage.

18 As to the third ground of objection, I do not consider there is necessarily an inconsistency between par 5 and par 6. Paragraph 5 refers to policies in general which, it is alleged, upon adoption will become an implied term of the contract. Paragraph 6 refers to a specific policy in respect of which, it is alleged, there was an express oral agreement that it would become a term of the contract.

19 The defendants submitted that the plea in par 6 was objectionable because it was not adequately particularised, in that it did not set out the substance of the alleged conversation or say who, on behalf of the first defendant, made the agreement. Counsel for the plaintiff argued that if the defendants require those further particulars the appropriate course is to make a request for them.

20 It is the case that this is not the first proposed statement of claim in this matter and at this relatively late stage the proposed pleading should be adequately particularised. Nevertheless, if this was the only matter of complaint I would not regard it as sufficient to justify refusing leave to amend. The cost to the defendants of seeking and obtaining further particulars of it might raise other questions. But for reasons which I will come to, this is not the only matter which I think gives rise to difficulties with the proposed minute.

21 The defendants' next objection was to par 9 of the minute. Counsel submitted that the plea was objectionable because it did not set out how it is that the alleged terms came to be incorporated into the contract of employment and does not say whether the terms are express or implied and, if the latter, on what basis they are said to be implied. The defendants also objected to the plea on the basis that the policies, and the particular clause or clauses of the policies, relied upon have not been identified. Accordingly, the defendants do not know the alleged sources of the contractual terms on which the plaintiff relies. The plea was therefore embarrassing.

22 I consider that those complaints are made out. The plea is too general in its terms and while the defendants' complaints could adequately be addressed by a request for further and better particulars of the plea, the overall generality of the plea and the stage at which this amendment is sought lead me to the view that the necessary particulars should be incorporated in the amended pleading.

23 It was submitted on behalf of the defendants that pars 24 and 25 of the minute were also objectionable. Counsel argued that there was no plea that the breach of contract alleged in par 24 caused loss or damage. It was also submitted that, as the proposed amended writ of summons referred only to conduct alleged to have occurred from 16 April 2004, the pleas in pars 20 and 21, which refer to conduct prior to that date, were irrelevant as they fell outside the scope of the endorsement on the writ.

24 The latter complaint was also made about par 25, insofar as it referred to the plea in par 20 of events which are said to have occurred on 3 April 2004.

25 It seems to me there is substance in those objections. Indeed, I understood counsel for the plaintiff to accept that amendments would be necessary to cure them.

26 The plea in par 26 of the minute is relied upon for a claim for tortious interference by the second defendant with the plaintiff's contract of employment with the first defendant. In par 29 of the minute it is alleged that as a consequence the plaintiff has suffered mental distress and has thereby suffered loss and damage. In par 31 a claim for exemplary damages is made against the second defendant.

27 The defendants took several objections to those pleas and also submitted that on the facts alleged there was no arguable basis for a claim of tortious interference with contract.

28 The complaint as to the form of the pleas went to two matters. First, the defendants submitted that par 26 lacked particularity in that it was not pleaded who, on behalf of the second defendant, is alleged to have carried out the specific conduct pleaded in subpars 26.1 to 26.3, how the plaintiff's telephone calls are alleged to have been monitored in par 26.1, how the covert surveillance was carried out and by whom, and when, by whom, and in what manner the demand referred to in par 26.3 was made. Secondly, it was submitted that par 26.2 was inconsistent with the plea in par 27.4 and the plea in par 26.3 was inconsistent with the plea in par 27.5.

29 It is convenient to deal with those matters before turning to the more substantive issue. It is again the case that the plea is not, in my view, adequately particularised. I consider that the defendants' complaints are well-founded and, although they are matters which could be cured by a request for further and better particulars, at this stage of the proceedings they should be included in the amended pleading.

30 It does not seem to me, however, that there are inconsistencies between the paragraphs referred to. As the pleas stand, they do no more than allege that each of the defendants has engaged in similar, or even identical, conduct.

31 It is then necessary to turn to the substantive issue of whether the plaintiff has pleaded an arguable case of tortious interference by the second defendant with his contract of employment with the first defendant.

32 The general principle is that in order to establish a cause of action of unlawful interference with contract the plaintiff must show that the defendant, with knowledge of the contract and intent to prevent or hinder its performance, persuades, induces or procures one of the parties not to perform their obligations: Short v City Bank of Sydney [1912] HCA 54; (1912) 15 CLR 148.

33 The fact that the breach was a natural consequence of the defendant's conduct is not sufficient; the defendant must have intended the breach. It is not necessary that the defendant knows the precise terms of the contract: Woolley v Dunford (1972) 3 SASR 243 at 266 - 268. But the defendant must know of the contract and sufficient of its terms to know that what the defendant induced or procured the party to the contract to do would be in breach of the contract. If the defendant knew of the existence of the contract but believed reasonably that what the defendant induced or procured the party to do was not a breach, the defendant has not knowingly induced or procured the breach: Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 at [160].

34 Although the cases generally refer to a breach of contract, for the purposes of this application it was common ground that in fact it is not necessary that the defendant's conduct results in a breach, so long as it interferes in the execution of the contract. It was accepted that the law was as stated by Lord Denning in Torquay Hotel Co Ltd v Cousins [1969] 2 Ch 106 at 138 as follows:

"... there must be interference in the execution of a contract. The interference is not confined to the procurement of a breach of contract. It extends to a case where a third person prevents or hinders one party from performing his contract, even though it be not a breach."

35 That statement of the law been accepted in Australia: see Woolley v Dunford (supra) at 267; Boral Bricks NSW Pty Ltd v Frost (1987) Aust Torts Reports 80-097 at 68,11 per Brownie J. It was expressly affirmed by the House of Lords in Merkur Island Shipping Corp v Laughton [1983] 2 AC 570 at 608 per Lord Diplock.

36 To maintain an action the plaintiff must also prove damage. However, what it is necessary to prove in that respect was in issue on this application and that is a subject to which I will turn shortly.

37 The defendants submitted that the statement of claim failed to plead the necessary elements of the claim, including the nature of the alleged interference with the contract, the second defendant's knowledge and intention, and whether it is alleged the second defendant procured or caused a breach of the contract or whether it prevented or hindered performance without causing a breach.

38 It was also argued that it was not clear whether the alleged interference was direct or indirect. In particular, it was submitted that it was not clear how it is alleged that the conduct pleaded in par 26 brought about a breach of the plaintiff's contract of employment or even how the matters alleged might be said to have hindered its performance. On the face of it, the alleged conduct was incapable of either. It was submitted that if the alleged interference was indirect, the claim was also deficient because it did not plead any unlawful conduct on the part of the second defendant.

39 It was further submitted that a cause of action did not lie at the suit of the party to the contract whose performance had been interfered with but only with the other party to the contract, or that at least it did not lie where the former did not suffer economic loss.

40 Counsel for the plaintiff referred to The Law of Torts, Fleming (9th ed) at p 757 where the learned author says that, although the tort is conventionally known as "procuring breach", in recent years it has been extended to lesser forms of interference, including situations where performance became more difficult although not impossible, and where an employee, short of losing his job, suffered harassment and injury to his reputation. In relation to the last situation, the learned author refers to MacKenzie v MacLachlan [1979] 1 NZLR 670. That case was relied upon heavily by the plaintiff's counsel, the plaintiff's claim being put essentially on the basis that harassment of him by the second defendant constituted the relevant interference.

41 In MacKenzie v MacLachlan (supra), the plaintiff was the Assistant City Engineer of the Waitemata City Council and the defendant was the Town Clerk. The plaintiff alleged that by a course of conduct the defendant had attempted to induce, procure or persuade the Council to terminate the defendant's employment, causing the plaintiff to suffer a lowering of his reputation in the community and to be subject to contempt, ridicule and general inconvenience and hindrance in his work. An application to strike out the claim as disclosing no reasonable cause of action was rejected by Moller J, who held that the cause of action was clearly arguable.

42 Counsel for the plaintiff argued that it was not suggested in that case that a claim lay only at the suit of the other party to the contract and did not lie at the suit of the party whose performance had been interfered with.

43 In the course of argument, counsel for the defendants conceded that a party whose performance of their contract had been interfered with would arguably have an action for actual pecuniary loss that they thereby suffered, for instance in the loss of commission or bonuses that would otherwise have been earned. He contended, however, that no economic loss was pleaded in this case. What was alleged was that the plaintiff had suffered mental distress.

44 Counsel for the plaintiff pointed out that in MacKenzie v MacLachlan (supra) the plaintiff's claim had been that he suffered a lowering of his reputation in the community and was subject to contempt, ridicule and general inconvenience and hindrance in his work, and it had been held that there was an arguable claim.

45 In MacKenzie v MacLachlan (supra), however, the question in issue seems to have been limited to whether a claim lay in circumstances where the conduct complained of had not caused any breach of the contract between the plaintiff and the City. Having reviewed a number of authorities and texts, Moller J concluded that arguably it did and that the plaintiff's claim disclosed an arguable cause of action. But in so concluding, his Honour did not address the question of whether the damage alleged by the plaintiff would ground such a claim; that is, whether non-pecuniary loss is sufficient to give rise to the cause of action.

46 I do not think it can be said that, on the question of what loss or damage is necessary to ground the action, the law is entirely settled.

47 In Quinn v Leathem [1901] UKHL 2; [1901] AC 495, in his charge to the jury at trial FitzGibbon LJ said that pecuniary loss must be proved in order to establish the cause of action and "if the plaintiff gave proof of actual and substantial loss necessary to maintain the action, [the jury was] at liberty in assessing damages to take all the circumstances of the case, including the conduct of the defendants, reasonably into account". Although that matter went on appeal there appears no criticism of that direction in the speeches in the House of Lords. The Lord Chancellor, Lord Halsbury, (at 508) described the charge as "absolutely accurate".

48 In Pratt v British Medical Association [1919] 1 KB 244, McCardie J held (at 281 - 282) that once the plaintiffs had shown actual financial loss they were not limited to actual pecuniary loss but may be awarded a sum appropriate to the whole circumstances of the tortious wrong inflicted, including having regard to "the long period for which they respectively suffered humiliation and menace". In that case the damages included aggravated or exemplary damages.

49 That also appears to have been the approach taken by the House of Lords in Rookes v Barnard [1964] UKHL 1; [1964] AC 1129. In that case Lord Devlin said (at 1221):

"It must be remembered that in many cases of tort damages are at large, that is to say, the award is not limited to the pecuniary loss that can be specifically proved. In the present case, for example, and leaving aside any question of exemplary or aggravated damages, the appellant's damages would not necessarily be confined to those which he would obtain in an action for wrongful dismissal. He can invite the jury to look at all the circumstances, the inconveniences caused to him by the change of job and the unhappiness maybe by a change of livelihood. In such a case as this, it is quite proper without any departure from the compensatory principle to award a round sum based on the pecuniary loss proved."

50 It is not entirely clear, however, what non-pecuniary losses are also recoverable. The question of whether damages for distress and injury to feelings are recoverable other than in claims for defamation was left open by the Court of Appeal in Joyce v Sengupta [1992] EWCA Civ 9; [1993] 1 All ER 897, although Sir Michael Kerr referred to old cases which supported the view that such damages were recoverable only in a claim for defamation.

51 A differently constituted Court of Appeal subsequently held in Lonrho Plc v Fayed (No 5) [1993] 1 WLR 1489, that damage to reputation was not sufficient to ground an action for unlawful interference with contract, damage to reputation being actionable only in a claim for defamation. See also Spring v Guardian Assurance Plc [1993] 2 All ER 273.

52 The learned authors of McGregor on Damages (17th ed, 2003) at par 40-006, express the view that pecuniary loss is necessary to ground the action, but once pecuniary loss is made out damages may be awarded for non-pecuniary loss, limited to injury to feelings. They say that "it seems that even clear proof of a non-pecuniary loss by way of injury to feelings or to reputation is not sufficient to ground the action."

53 But whether that can be regarded as a statement of settled law in Australia is not clear in light of the decision of the High Court in Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530, where the Court noted (at 586) that the tort was only actionable on proof of damage and as authority for that referred to Jones Brothers (Hunstanton) Ltd v Stevens [1955] 1 QB 275 at 281 - 283. In that case, the Court of Appeal said (at 282):

"Now, there is no doubt, as appears from the cases already cited, that the violation of a legal right is a ground of action provided it causes injury or damage. Nowhere does this appear more clearly than in Lord Lindley's speech in Quinn v Leathem ([1901] AC at p 532 et seq). True, the damage need not be pecuniary. In the famous case of Ashby v White, Holt CJ put it thus (2 Ld Raym at p 955):

'My brother POWELL [sic] indeed thinks, that an action upon the case is not maintainable, because here is no hurt or damage to the plaintiff; but surely every injury imports a damage, though it does not cost the party one farthing, and it is impossible to prove the contrary; for a damage is not merely pecuniary, but an injury imports a damage, when a man is thereby hindered of his right.'

There, it will be remembered, the action was brought against a returning officer for refusing to allow the plaintiff to vote. That was the injury; he was deprived of his vote and damages were therefore at large."

54 In the present case, in par 30 of the minute it is alleged that as a result of the tortious interference with his contract, the plaintiff has "suffered mental distress and thereby loss and damage." Although the plea is not as clear as it might be and there are no particulars of it, I take it that the mental distress is alleged to have caused some pecuniary loss.

55 In any event, in the light of the present state of the authorities, I do not consider it can be concluded with the certainty required on an application of this nature that the plaintiff's claim is unarguable. The Court must also, of course, be careful not to stifle the development of the law.

56 There are, however, difficulties with the plea. In the first place, it is by no means evident in what respect it is alleged the conduct complained of interfered with the plaintiff's performance of his contract with the first defendant. The second defendant's alleged monitoring of telephone conversations, conduct of covert surveillance and demand for the return of a computer (a demand with which it is not pleaded the plaintiff complied) would not obviously interfere with the plaintiff's performance of his duties as chief pilot for the first defendant. While it is arguable that harassment of a party to a contract is sufficient to constitute the tort, the harassment must interfere with the party's performance of the contract, even if it does not cause a breach. As it is not apparent from the pleading how or in what respects it is said the matters alleged interfered with the plaintiff's performance of his contract, in my view the plea is deficient.

57 I also accept the defendants' submissions that the minute fails to plead the requisite knowledge and intention on the second defendant's part.

58 The plaintiff's counsel said in the course of argument that the alleged interference was direct and therefore it was unnecessary to plead unlawful conduct by the second defendant. That, it seems to me, is a matter that can only be determined when the facts relied upon as giving rise to the cause of action are more fully pleaded.

59 The defendants also argued that the plea in par 28 was objectionable because it was not apparent on what basis it was contended that the matters pleaded in par 27 constituted a breach by the first defendant of its contract of employment with the plaintiff. Those matters are not on their face obviously a breach of any of the terms pleaded in par 9 of the minute, nor are they obviously a breach of any contract of employment.

60 I consider that that objection is made out and that as it stands par 28 would be liable to be struck out.

61 As the minute is defective in several material respects, the appropriate course, in my view, is simply to refuse leave to amend with liberty to the plaintiff to bring in further minutes of proposed amended statement of claim and writ of summons within a specified time. I will hear counsel on the time within which that should be done and on costs.