Parisi Industries Bathroomware Pty Ltd v Franco Mincone

The defendants in this matter have brought a motion seeking to have the plaintiff's Third Amended Statement of Liquidated Claim struck out pursuant to Pt8 rule 3 of the Local Courts (Civil Claims) Rules on the grounds that it discloses no reasonable cause of action. In the alternative, the defendants seek to have a number of paragraphs of the Statement of Liquidated Claim struck out as disclosing no cause of action or as having a tendency to cause prejudice and embarrassment. Finally, the defendants apply for a stay of proceedings on the grounds that the court has no jurisdiction as the cause of action arose outside of NSW and the defendants reside outside the State. Does the Statement of Claim disclose a reasonable cause of action?

The Third Amended Statement of Claim in fact pleads four alternative causes of action. This fact alone creates its own separate issues, with which I shall deal below, but the first and main cause of action pleaded alleges that the first and second defendants were directors of a company, Pebafix Pty Ltd ("Pebafix); that at Pebafix's request the plaintiff supplied goods for which the company failed to pay; that on 18 February 1999, an employee of the first and second defendants, Ms Tania Pellegrini, had signed an application for the plaintiff to supply goods to Pebafix on credit on terms that the directors of the company (the first and second defendants) would guarantee payment to the plaintiff; and, critically, that she did so as their agent or amenuensis, ie, as their scribe.

It is well established that before a pleading will be struck out as disclosing no reasonable cause of action the case must be obviously bad, untenable and transparently doomed to fail. The pleading must be obviously defective and hopeless. It is insufficient if there is merely a weak case. See Brimson v Rocla Concrete Pipes [1982] 2 NSWLR 937; Eden Constructions Pty Ltd v NSW (SC(NSW) BC 200307501.

In this case, while there appears to be some confusion in paragraph 5 as to whether the plaintiff means to assert that Ms Pellegrini was an employee of Pebafix or of the defendants personally, the gist of the pleading is clear: the plaintiff asserts that the first and second defendants, by their agent, agreed to provide a guarantee in their personal capacities as directors of the company for any debts incurred by Pebafix to the plaintiff. In that context, it is irrelevant whether Ms Pellegrini was employed by Pebafix or the first and second defendants provided that she was acting as the defendants' agent or scribe. At least one reasonable cause of action has been pleaded in that instance and the statement of claim should not be struck out on the basis that there is no cause of action disclosed. That, however, is not the end of the matter. Is the Third Amended Statement of Claim "embarrassing"?

The defendants also move to have the statement of claim struck out in its entirety or at least in part because they contend it is confusing and internally inconsistent and contradictory and, consequently, "embarrassing." How is "embarrassment" to be understood in this context?

In BWK Elders (Australia) Pty Ltd v Westgate Wool Pty Ltd (No 2) [2002] FCA 87. (at [2]-[3]) said: It is clear that the power to strike out a pleading should be exercised sparingly and only in clear cases… "Embarrassment"… involves pleadings which contain allegations which are vague or inconsistent, or which are confusing so that the purpose of pleadings are not properly served… although, of course, that description is not exhaustive. The purpose of pleadings is to define the issues so that the parties may know in advance of the hearing the case they have to meet… The pleadings must disclose a reasonable cause of action by alleging material facts which, if established at the trial, will enable the applicant to make out all the elements of the cause or causes of action. They must contain sufficient particularity to inform the opposing party of the case which is to be met.

More trenchantly, Bryson J in Northam v Favelle Favco Holdings Pty Ltd SC(NSW) Unrep 07/03/95 BC 9504276 remarked (at [10]): A pleading may be embarrassing even though it does contain allegations of material facts sufficient to constitute a cause of action if the material facts are couched in expressions which leave difficulties or doubts about recognising what is referred to, or if imprecise or slang words are used with unduly broad ranges of possible meanings or without clear meanings. What is referred to must be clearly stated showing, as appropriate, when and where an event happened, who participated, what was said, what was the relevant effect of any document and so forth. It is not fair to require a defendant to flesh out general expressions or indirect allusions by piecing together information in other documents such as affidavits or experts' reports. He might get it wrong, and the greater the complexities are, the more probable it is that he will understand what is alleged in some different way to what the plaintiffs rely on. Procedural justice can be upset just as much by opportunistic advocacy exploiting a choice among several possibilities as by an ambush from complete concealment. In the world of practicalities a defendant is unlikely to receive much protection when evidence is tendered which is an available meaning of a pleading if he has not attacked the pleading at an interlocutory stage.

To determine the motion, it is necessary to outline in greater detail the four causes of action advanced by the plaintiff in its Third Amended Statement of Claim. I have outlined the first above. The second alleges that the first and second defendants represented to the plaintiff that their employee, Ms Pellegrini, had their actual authority (although to do what is not particularised). It goes on to allege that she agreed in writing that if the plaintiff supplied Pebafix with goods, the first and second defendant would guarantee payment for those goods and that this agreement was "given to" the plaintiff in the course of trade or commerce.

In my opinion, this part of the statement of claim is fundamentally confused and confusing. It is not clear how the defendants are said to have represented that Ms Pellegrini had their authority. It is not clear what authority is alleged to have been given to Ms Pellegrini. One can reasonably assume (but it is only an assumption) that what the plaintiff intended to convey was that Ms Pellegrini had been authorised by the directors of the company to enter an agreement with the plaintiff on behalf of Pebafix for the purchase and supply of goods.

If that is so, she was then acting as the company's agent in forming a contract with the plaintiff. Ms Pellegrini, however, could not have entered an agreement with the plaintiff that the directors would provide their guarantees. That was a matter for them. It would seem that the plaintiff was only prepared to supply could if the directors' guarantee was provided. That is, its agreement was conditional upon the directors agreeing to provide a guarantee of payment for goods supplied. The pleading, however, bears the opposite sense: it reads as though Ms Pellegrini had set a condition.

Worse than this, however, the pleading appears to assert that somehow she had entered an agreement binding on the two directors. The fundamental flaw is obvious - only the directors had the capacity to enter agreements that they would provide guarantees. If she entered the agreement, as the pleading alleges, there was no privity of contract between the plaintiff and the defendant directors. It is noteworthy that Ms Pellegrini has not been joined in the proceedings. Paragraphs 9 to 11 appear to be an attempt, somehow, to restate in a different form, paragraphs 1 to 7 but they are highly confusing and lacking in particularity.

The remaining two causes of action pleaded are, in my opinion, taken in the context of the Third Amended Statement of Claim as a whole, even more confused and confusing. There are various things which create the confusion but the most striking are the material facts alleged in paragraphs 19 and 29. They assert that Ms Pellegrini had no authority to act for the directors of Pebafix. The defendants would be entitled to ask at this point whether the plaintiff asserts she did or did not have their authority and the answer pleaded is self-contradictory as the first and second causes of action plead that she did have authority.

This is, unfortunately, a poorly drafted pleading. It is replete with inexactitudes that it would be pedantic of me to outline item by item. I have already referred to some above. Nor are particulars provided in relation to Ms Pellegrini's authority (such as it is alleged to have been) and representations made by various defendants (or, for that matter, Ms Pellegrini). It was revealed at the hearing of this motion by counsel for the defendants that the representations relied on are those contained within the guarantee document. That document, however, refers only to the first and second defendants. What, if any, representations did the third defendant make, and how did he make them? How did the first and second defendants make the representations contained in the document? This has not yet been particularised. Nor have particulars been given as to how they made representations concerning Ms Pellegrini's authority or that she was a director. The statement of claim also invokes the Trade Practices Act but Pebafix is not joined in the action. These are merely some of the things that make the pleadings confusing. It is often possible to gain the sense of what the author of the document seeks to convey but there are, too frequently, alternative readings of various paragraphs and series of paragraphs, the net effect of which is create the problems Bryson J so swingingly criticised.

It is not for this Court to decide what the plaintiff's case really is or to refine it by striking out some or all of the various causes of action. On the limited material before me, the first cause of action appears to be the main focus of the plaintiff's attack on the defendants but the alternative causes of action pleaded seem to contradict that apparently straightforward case. It is clear that questions of agency and authority are at the heart of the case and the plaintiff seems to be trying to cover all angles.

While plaintiffs are certainly entitled to plead material facts that raise alternative causes of action, the function of pleadings - to clarify and specify the facts and issues in dispute - must always be borne in mind. The pleading of a multiplicity of causes of action may bring with it, as it has in this case, a tendency to confuse and obfuscate the issues and facts. It is important that all reasonable efforts be made to curb excessive costs being incurred in any proceedings, but in a court of limited jurisdiction such as the Local Court it is especially disturbing when costs become disproportionate to the amounts being claimed. Time is frequently wasted, at great expense to parties and the community, when trials proceed upon unclear pleadings. As a counsel of perfection, it seems to me that plaintiffs ought plead Statements of Claim that are clear, precise and properly particularised. While complex commercial transactions (such as in Northam) might lead to very complex pleadings, it will be rare in the Local Court for a party to need to file such documents. If it is done, there is all the more need for care and clarity. Most parties with confidence in their cases ought be able to draft a relatively straightforward pleading. It will frequently save more in costs if time is spent on refining pleadings before they are filed than in applying a patchwork of amendments at a later stage.

While I am reluctant to strike out the whole statement of claim, given that at least one reasonable cause of action is disclosed, and, for all I know, the plaintiff may well have a meritorious case when the evidence is considered. That said, however, the Third Amended Statement of Claim is, in my opinion, too confusing, too self-contradictory and too prejudicial to be allowed to stand in its present form. I do not think that discrete, cosmetic amendments of various paragraphs can suffice to cure the problems. The pleading needs major surgery and therefore must be struck out. Jurisdiction

The defendants also assert that the cause of action arose in Victoria and that the defendants reside in Victoria, that this court therefore has no jurisdiction and should stay the proceedings. The plaintiff asserts that, at least up to this point, the defendants have submitted to the jurisdiction of the NSW Local Court and that the proceedings ought not be stayed for lack of jurisdiction.

Section 17 of the Local Court (Civil Claims) Act 1970 defines this Court's jurisdiction. The Court has jurisdiction to deal with matters if a material part of a cause of action arises in NSW, if a defendant to a cause of action arising outside the State resides in NSW or where a defendant resides in Australia and the cause of action or a material part of it arose in NSW. Where, however, a defendant, files a defence in which it fails to contest jurisdiction, it will generally be taken to have submitted to the jurisdiction of the Court. See Howard v National Bank of New Zealand (2002) 193 ALR 688 If a party takes steps which are inconsistent with an objection to jurisdiction that is also a matter to be taken into account. Brealey v Board of Management of Royal Perth Hospital (1999) 21 WAR 79. In this case, it appears that the defendants only now have raised the question, despite the fact that there has previously been an arbitration. In my opinion, it is far too late now to take objection to this Court's jurisdiction. The proceedings will not be stayed.

1. The Third Amended Statement of Claim will be struck out.
2. The plaintiff to pay the defendants' costs of disposal of the motion.
3. The plaintiff to have leave to file a fresh Statement of Claim within 21 days.
4. Liberty to apply on 7 days notice.

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