Menzies v Paccar Financial Pty Ltd

Judgment 1The Plaintiffs commenced proceedings on 27 May 2011 claiming damages by reason of an alleged abuse of process and a malicious prosecution by the Defendant. Both causes of action are alleged to derive from the Defendant, a finance company, becoming substituted as a creditor on a bankruptcy petition brought by BP Australia and the obtaining of a sequestration order against the Plaintiffs. 2There were proceedings on foot brought by the Defendant against the Plaintiffs in relation to the hire of trucks by a company owned by the Plaintiffs and the guaranteeing by them of the loan agreements associated with the hire. The proceedings were originally commenced in the Supreme Court of Victoria but were transferred to this Court for determination. The Plaintiffs allege that the Supreme Court of Victoria identified the triable issues arising in the proceedings as being: (a) whether or not the Plaintiffs had ever signed the contracts of guarantee; (b) whether the contracts of guarantee were the Plaintiffs' documents. 3It is alleged that by becoming substituted as creditor and obtaining a sequestration order when the Defendant knew that the debt was disputed in the Supreme Court proceedings, the prosecution of the Plaintiffs in the Federal Magistrates Court was an abuse of process and was malicious. 4The Plaintiffs have now sought to amend the Statement of Claim and have brought the present Motion to do so. The Defendant does not object to the proposed amendments except for the amendment to paragraph 12 in the proposed Amended Statement of Claim. Paragraph 12 in the existing Statement of Claim contains the pleading alleging malicious prosecution. Paragraph 12 in the proposed Amended Statement of Claim substantially amended the paragraph but continued to plead matters asserting malicious prosecution. 5In the course of preparing the present Motion for hearing it was agreed between the parties that if the Defendant was successful in resisting the inclusion of amended paragraph 12 in the proposed Amended Statement of Claim, the Defendant would also be entitled to have paragraph 12 of the existing Statement of Claim struck out. Although as a matter of formality the Defendant ought to have moved on its own Notice of Motion to strike out paragraph 12 of the existing Statement of Claim, the agreed course was followed to minimise cost and expense. The parties are to be commended for approaching the matter in this way. 6The proposed paragraph 12 reads as follows: 12.a. Further and alternatively, the prosecution seeking of the order for substitution for BP Australia Limited as petitioning creditor and the maintaining of the creditor's petition proceeding had been initiated and maintained by the Defendant against the Plaintiffs without any reasonable or proper cause, and were was a malicious prosecution being a malicious presentation of a creditors petition for the purposes of seeking that the plaintiffs' estates be administed in bankruptcy. Particulars of malice: - (i) At no mater i a l time being from the date of commencement of the application for substitution for BP Australia Limited as petitioning creditor until 20 May 2010 could it be inferred that the defendant did hold or could the defendants have held any honest belief that they were entitled to prosecute the creditors petition proceedings; Particu l ars: 12.b. Such is to be inferred by the pendency of the Supreme Court proceedings and the effect that a successful prosecution of the creditors petition proceedings would have on the continued prosecution of the Supreme Court proceedings. (ii) 12 c. At all material times, the Defendant knew and was aware that their claims in the creditors petition proceedings related to and concerned a disputed debt; Particulars: -The Plaintiffs rely on the judgment and reasons for judgment of Habersberger J of t he Supreme Court of Victoria at paragraphs 5, 14, 15, 16, 21, 22, and 23. (iii) 12.d. The Defendant in prosecuting the creditors petition proceedings led evidence in them that it knew or ought reasonably to have known created a genuine dispute as to whether there was a debt, and that it otherwise knew to be false. The Defendant prosecuted the proceedings in any event; Particulars: - an affidavit of Jeff Penter at paragraph 20 sworn 29 January 2010 stated at para 20, that he met with the Plaintiffs on or about the middle of November, 2006 and gave them the rewritten Contracts with them to sign and send back to Paccar, whereas the affidavit of David Mueller sworn 29 January 2010 stated at para 12, that the disputed contracts had come into existence by being posted to the Plaintiffs by ordinary pre-paid mail, who had then signed them alone. (iv) 12.e. The Defendant through tho person by an affidavit sworn by Holland Hollingsworth in the bankruptcy proceedings testified that the Plaintiff had not presented with a broken neck held in a brace when meeting with it to discuss matters subject of the contracts and the Supreme Court proceedings, which 7evidence the Defendant knew to be false. 7The issue concerning paragraph 12 in the Statement of Claim and the proposed Amended Statement of Claim is a narrow one. It concerns what must be pleaded and particularised by the Plaintiffs in relation to the issue of malice, an element in the tort of malicious prosecution. The issue arises in this way. 8The Defendant requested particulars containing the following question: 6. If it is alleged that any particular person decided to prosecute the proceedings maliciously on behalf of the Defendant, please identify that person. The question was answered in an email sent from counsel for the Plaintiffs to counsel for the Defendant as follows: In answer to your paragraph 6 it is not alleged at this time that any particular person decided to prosecute the proceedings maliciously. Should such a person be discovered during any discovery process then your instructing solicitor will be informed of the identity of that person. 9The Defendant says that it is necessary for the Plaintiffs to specify who in the Defendant Company had the malicious intent to prosecute the Plaintiffs to bankruptcy. The Plaintiffs submit that there is no such necessity, and that the issue of malicious intent may be inferred from the absence of reasonable and proper cause for pursuing the proceedings. The Plaintiff points to what was said by Bowen LJ in Brown v Hawkes [1891] 2 QB 718 at 727: It is sometimes said that the non-existence of reasonable and probable cause is some evidence from which the jury may infer malice. This is based upon the idea referred to in what Lord Mansfield says in Sutton v Johnstone (1 TR 493 at 545) viz, that if there is an absence of reasonable and probable cause, the jury may think that the defendant knew there was no probable cause. 10Similarly, the Plaintiffs draw attention to what was said by Lord Aitkin in Herniman v Smith [1938] AC 305, a case of malicious prosecution where the Judge left to the jury the following question (amongst 2 others): Has it been proved that the defendant commenced and proceeded with the prosecution without any honest belief that the plaintiff was guilty of fraud? 11At 316 Lord Aitkin said: I know of no better statement of the issue than the words of Hawkins J. in Hicks v. Faulkne r (8 QBD 167 at 171): " I should define 'reasonable and probable cause' to be, an honest belief in the guilt of the accused based upon a full conviction, founded upon reasonable grounds, of the existence of a state of circumstances, which, assuming them to be true, would reasonably lead any ordinarily prudent and cautious man, placed in the position of the accuser, to the conclusion that the person charged was probably guilty of the crime imputed". 12In A v State of New South Wales [2007] HCA 10; (2007) 230 CLR 500 the High Court made clear that in the tort of malicious prosecution acting maliciously by the Defendant was an entirely separate element to acting without reasonable and proper cause - see at [1], [51], [54] and [117]. To the extent that Brown v Hawkes suggests that malice can be inferred simply from an absence of reasonable and proper cause, it must be regarded as not expressing the law in Australia. It is not sufficient, therefore, for the Plaintiffs to say that it is not necessary to identify who had the malicious intent because malicious intent can be inferred on the Company's part from the showing of no reasonable and proper cause for proceeding to a sequestration order. 13In Johnston v Australia and New Zealand Banking Group Ltd; Johnston v Richardson [2003] NSWSC 454 the Plaintiffs sought damages for malicious prosecution and abuse of process, alleging that ANZ by its solicitors sent a letter to the Police making accusations or implications that were unfounded, misleading and untrue which led to the making of AVO orders against the Plaintiff. A challenge was made to the form of the pleading and, in particular, to the fact that the Plaintiffs did not identify who in the Bank had the malicious intent. Davies AJ said: [27] In particular, the allegations against the ANZ are of such generality that they breach the rule that, where states of mind are attributed to a company, particulars of relevant persons within the company must be given so that the company can turn its defence to the state of mind of those persons. In Krakowski v Eurolynx Properties Limited (1995) 183 CLR 563, Brennan, Deane, Gaudron and McHugh JJ, cited at pp 582-3, the following remarks of Bright J in Brambles Holdings Ltd v Carey (1976) 15 SASR 270 at 279: "Always, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company. This process is often necessary in cases in which companies are charged with offences such as conspiracy to defraud." [28] If it is alleged that the ANZ acted with malice or with an improper purpose or procured false evidence with a view to harming Mr Johnston, particulars should be given of the acts or circumstances that constitute that conduct. If particulars are not given, a jury could be asked to infer malice and improper purpose from the fact that the criminal prosecution was dismissed and from evidence given by Mr Johnston that he was not a violent man and did not threaten either Mr Star or Mr Ariff. If the case proceeded in that way, it might be difficult for the ANZ to rebut it, for no particulars of relevant conduct by an officer of the bank would have been given. [29] This lack of particulars is emphasised by the fact that the statement of claim is shy in relating allegations of malice with acts done. The untrue statements to the Police, which were said to lead to the prosecution, are alleged to have been made by Mr Bernard Star (not the second defendant), by Mr Ariff, by Ms Annie White, and by Mr Daryl Floyd. What the Further Amended Statement of Claim does not state, or not state clearly, is that Mr Bernard Star, Mr Ariff, Ms White and Mr Floyd were acting maliciously when making untrue statements to the Police. It is not alleged that particular individuals acted untruthfully and maliciously. Rather a general allegation is made in paragraph 19 that, "The Defendant's [sic] action outlined in paragraphs (9), (14), (16) and (18) were malicious acts intended to result in the prosecution of the Plaintiff ". 14The Plaintiffs submitted that the passage from the judgment of Bright J in Brambles Holdings Ltd had to be seen in the context of what was being discussed by the High Court in Krakowski. The Plaintiffs pointed in particular to what was said at 582 and 583. It seems to me, however, that those passages reinforce the importance of identifying who in the Company had the necessary intent before it could be alleged that the Company had the intent. That case concerned misleading and deceptive conduct of a company brought about by 2 officers. The plurality judgment said (at 583): It is erroneous to make a finding as to the company's intention or willingness to misrepresent the contractual arrangements with Swaeder without reference to the knowledge of Cini and Ryan [the two Company officers]. 15I agree with the reasoning in Johnston which appears to me, with respect, to apply correctly the passage from Brambles Holdings approved in Krakowski . The result is that, where the Plaintiff cannot identify who on behalf of the Defendant had the malicious intent, the pleading in paragraph 12 of the Statement of Claim (in either its original or amended form) cannot be permitted. 16Accordingly, I make the following orders: