Noun v Pavey

Judgment 1This is an appeal from the judgment of Macready AsJ in which he declined summarily to terminate the cross-claim. 2Between October 2006 and April 2011, Alexander McIntyre Stewart Kennedy, the cross-claimant, and Tony Hassan Noun, the cross-defendant, were the directors of MS Cognosis Pty Ltd. 3In October or November 2006 MS Cognosis purchased part of the intellectual property rights to a screening test for breast cancer and thereafter took steps to commercialise that test. 4Over that period, Mr Noun represented to Mr Kennedy that he was a doctor when in fact he was not. 5On or about 17 March 2011, Mr Kennedy and Mr Noun made a presentation to the US Food and Drug Administration during which Mr Noun was described to the FDA as a qualified doctor. Mr Kennedy participated in the meeting at which the FDA was misled in reliance on Mr Noun's past misrepresentations to him to the effect that he, Mr Noun, was a doctor. 6On or about 18 March 2011, Mr Kennedy and Mr Noun made a presentation in San Francisco to a potential collaborator, Agilent Technologies Corp, during which Mr Noun was again described as a qualified doctor. Mr Kennedy participated in that meeting in which Agilent was misled in reliance on Mr Noun's past misrepresentations to the effect that he was a doctor. 7Dr Peter Malycha, a breast cancer surgeon from Adelaide, attended both presentations. In late March 2011, he questioned Mr Noun's status as a doctor. Before Macready AsJ, Mr Kennedy said he discovered the falsity of Mr Noun's representations when Dr Malycha questioned Mr Noun's credentials. 8On appeal, Mr Kennedy asserts that he became aware that Mr Noun was not a doctor following an investigation, the costs of which were personally borne by Mr Kennedy and not by MS Cognosis. I doubt that anything of substance turns on this change. 9The investigation that Mr Kennedy instigated was to instruct Margaret Anne Pavey, the first defendant and solicitor for MS Cognosis, to investigate Mr Noun's medical qualifications. 10After Mr Kennedy became aware that Mr Noun was not a doctor he and MS Cognosis retained US lawyers to advise them whether they had any potential legal exposure as a result of Mr Noun's false representations to the FDA and Agilent. Mr Kennedy was one of the clients under the retainer and he personally bore the costs of engaging the US lawyers. 11Mr Kennedy said he personally incurred further solicitors' fees in Australia as a result of matters arising from Mr Noun's misrepresentations. 12Mr Noun resigned as a director of MS Cognosis on terms and conditions contained in a resignation agreement. In terms of that agreement, Mr Kennedy retained solicitors to prepare a draft shareholder agreement between himself and REN Nominees Pty Ltd, a company controlled by Mr Noun, which was an equal shareholder in MS Cognosis with Mr Kennedy. 13Mr Kennedy decided, in furtherance of the interests of MS Cognosis, that he should make an offer to acquire REN's shareholding. Having made that determination, he engaged solicitors to represent him in negotiations. 14Thereafter, Mr Kennedy on behalf of MS Cognosis, instructed Ms Pavey to lodge a complaint with the Health Care Complaints Commission in relation to Mr Noun's misrepresentations. 15Like the old proceedings on demurrer, an application for summary termination is decided on the pleading. The applicant must accept the truth of all allegations in the opposing pleading and the ranges of meaning that the assertions of fact in the pleading are reasonably capable of bearing (Agius v State of New South Wales [2001] NSWCA 371 at [24]; La Trobe Asset Management Australia Pty Ltd v Hajar [2009] NSWSC 1413). 16An applicant for summary termination has a high onus. The case must be very clear to justify the prevention of a plaintiff submitting a case for determination in the usual way (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91). 17The court's powers of summary dismissal should not be exercised to deny a plaintiff access to the courts unless the lack of a cause of action is clearly demonstrated (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129). 18It is for the applicant to demonstrate that the cross-claim is beyond saving by legitimate amendment (Penthouse Publications Ltd v McWilliam (Court of Appeal, 14 March 1991, unreported) citing Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLR 628 at 631). 19There are two issues of substance in this application: whether the claim is that of Mr Kennedy or that of MS Cognosis; and whether the fact that the loss claimed, being the legal fees, were incurred after Mr Kennedy discovered the falsity of Mr Noun's representations implies that the loss was not caused by the misrepresentations.