Federal Court of Australia|1991-11-04|Before: French J

Re Sea Culture International Pty Ltd v John Allibon Scoles; Gayleen Morea Meehan; Ocean Foods International Pty Ltd and Vapac Limited (In Receivership) [1991] FCA 523; (1991) 32 FCR 275 (4 November 1991)

And: JOHN ALLIBON SCOLES; GAYLEEN MOREA MEEHAN; OCEAN FOODS INTERNATIONAL PTY

Practice and Procedure - abuse of process of court - allegations in pleading by corporation inconsistent with allegations by director in other proceedings in Industrial Relations Commission - principles underlying power to stay or dismiss for abuse of process - confidence in or respect for authority of courts - restraint in exercise of power - pleadings - vague and embarrassing - inadequate material facts - not cured by particulars - striking out orders made - general leave to amend.

Lawrance v Lord Norreys (1890) 15 App Cas 210

Burton v Shire of Bairnsdale [1908] HCA 57; (1908) 7 CLR 76

Solicitors for the Applicant: Messrs Picton-Warlow and Co.

On the first, second and third respondents' motion filed 19 September 1991:

1. Paragraphs 10, 12, 17, 19 and 20 of the amended statement of

claim be struck out.

2. The applicant have leave to amend the amended statement of

claim generally.

3. The applicant pay the respondent's costs of the motion.

On the first, second and third respondents' motion filed 25 September 1991:

1. The motion is dismissed.

2. The first, second and third respondents pay the applicant's

costs of the motion.

Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

On 19 September 1991, John Allibon Scoles, Gayleen Morea Meehan and Ocean Foods International Pty Ltd ("OFI"), the first, second and third respondents, filed a motion in these proceedings seeking to strike out the amended statement of claim in whole or as to particular parts on various grounds, including failure to disclose any reasonable cause of action. A second motion filed 25 September seeks to stay or dismiss the application generally as an abuse of process. Both motions were listed for hearing on 23 October 1991 and judgment on them reserved until today. The second motion, in which it is contended that the action is an abuse of process, raises a threshold issue which should be dealt with first. The general nature of the dispute was outlined in my reasons for judgment published on 23 January 1991 when the earlier version of that pleading was struck out. What follows is a summary only of what appears in the amended statement of claim. It does not involve any finding of fact.

2. OFI is a company incorporated in Western Australia with its office in East Fremantle (para 2). It is alleged that Scoles and Meehan were at all material times directors of OFI (para 3). Vapac is a company with its registered office in Perth. A receiver was appointed to Vapac on 23 November 1988 (para 4). The applicant alleges that in September 1987, Scoles and Vapac agreed that Scoles would provide consultancy services to Vapac in connection with the establishment and operation of aquaculture projects in Western Australia, including oyster and scallop farming (para 5). On 1 May 1988, Scoles signed a deed in which he covenanted with Vapac that he would not, except as specifically authorised or required by that company, disclose to any person any information or data relating to or resulting from the operation, products, production methods, techniques, processes or research and development works of Vapac and/or relating to its organisation, business, finances or affairs excluding information which became generally available to the public (para 8). It was said to be a further term of the confidential information agreement that Scoles would, if required, deliver up to Vapac any papers or records in his possession or control containing or in any way relating directly or indirectly to the confidential information (para 8). Between 18 July 1988 and 30 May 1989, Scoles became an employee of Vapac (para 6). During the currency of the consulting agreement and his employment by Vapac, he is said to have become privy to confidential information (para 9). What are said to be particulars of this information are given in the amended statement of claim.

3. In September 1989, it is said that Dr. George Melville purchased from Vapac's receiver for $60,000 all of Vapac's rights to what is rather inelegantly pleaded as "information relating to research and development on or concerning all aspects of undertaking oyster and scallop farming projects on a commercial scale in Western Australia". This included the information and data particularised in para 9 of the pleading as information to which Scoles had become privy. (para 13).

4. Vapac continued its operations to the extent that it obtained, through a subsidiary called Sea Culture Ltd, a fish farm licence to enable Sea Culture to undertake the culture of flat oysters in Princess Royal Harbour and Oyster Harbour at Albany (para 10). The statutory basis of the licence and the precise identity of the authority granting it is not pleaded beyond a reference to the Fisheries Department. Scoles was involved in the application for the licence on behalf of Sea Culture (para 11). Vapac is also said to have "further planned to make applications for similar licences at sites" which are defined only in the particulars to para 9 (para 12).

5. In April 1990, Dr. Melville is said to have transferred to the applicant all his rights in relation to the information acquired from Vapac under the agreement of 8 September 1989 and to have assigned to the applicant Vapac's right in its confidential information agreement with Scoles (para 15). In July 1990 however, Scoles' company, OFI, applied to the Fisheries Department for permits to establish an aquaculture hatchery and leases for oyster cultivation at Albany on areas which Vapac had identified as appropriate for oyster farming projects. Particulars of these permits and leases are given (para 16). The application was allegedly based upon confidential information which had become the confidential information of the applicant because of Melville's acquisition and assignment of it (para 17). OFI was granted hatchery and cultivation leases by the Department over areas of Princess Royal Harbour and Oyster Harbour (para 18).

6. It is also said that in July 1990 OFI through Scoles and Meehan applied to the Albany Shire Council to lease what is described as the Emu Point site previously selected by Vapac as one of its Albany sites and made a similar application to the Jaycees Community Foundation in respect of a site at Whale World (para 19). The applications made to the Department, the Albany Shire Council and Jaycees Community Foundation could not have been made without disclosure by Scoles to OFI or Meehan of the confidential information said to have been acquired by Scoles during the consultancy agreement and/or his employment with Vapac (para 20). It is alleged that OFI and Meehan were well aware, or ought to have known, that the information supplied by Scoles to enable the applications referred to to be made was confidential to the applicant. The particulars set out in support of this alleged knowledge are that they were told by Melville and by Vapac's receiver or otherwise became aware of the fact that the applicant had purchased the relevant information from Vapac (para 21). It is alleged that in the circumstances Scoles, Meehan and OFI were under a duty of confidence to the applicant in respect of the information which had been obtained by Scoles and/or Meehan and supplied to OFI. Neither Scoles, Meehan nor OFI were entitled to use or disclose such information without the consent of the applicant and they acted in breach of the obligation of confidence (para 22). And by reason of his disclosures to Meehan and OFI, it is said that Scoles also acted in breach of the terms of the confidential information agreement (para 23).

7. The applicant claims to have suffered loss and damage by the acts of Scoles, Meehan and OFI (para 24). Notwithstanding letters of demand from Vapac and the applicant it is said that Scoles has not desisted from using the confidential information and has not complied with the requirement to deliver up documents which he holds (para 25). It is alleged that unless Scoles, Meehan and OFI are restrained they will continue to use confidential information referred to in para 9 of the amended statement of claim unlawfully for their proposed farming activities and other aquaculture farming activities thereby causing the applicant to suffer further loss and damage. Claims are made for damages and for injunctive relief, including an order for delivery up of documents and materials in the possession of the respondents.

8. The abuse of process point arises out of proceedings commenced by Dr. Melville against Vapac in the Western Australian Industrial Relations Commission, being matter number 705 of 1991. In further amended particulars of claim filed in the Commission on 27 August 1991, Dr. Melville contended that he entered into a written service agreement with Vapac dated 17 February 1987 under which he agreed to provide professional services on terms and conditions set out in that agreement. It was alleged that on 23 November 1988, David John Coates was appointed receiver and manager of Vapac by Broadlands Financial Services and on being appointed agreed to continue to employ Dr. Melville on terms and conditions contained in the service agreement. It was said that he undertook verbally and in writing that he would accept liability for all of Dr. Melville's wages, holiday pay and long service leave entitlements. Relying upon that undertaking it was said that Melville agreed to remain an employee. On 28 September 1989, they agreed to the termination of the service agreement. Various claims for moneys payable pursuant to the agreement are made in the particulars.

9. By a further amended defence filed in the Industrial Relations Commission, Vapac's receiver alleged, inter alia, that Dr. Melville agreed with him on or about 28 September 1989 to terminate the service agreement. He further contended that in discharge of all claims that Melville might have against either himself or Vapac, whether arising under the terms of the service agreement or another agreement which is not material for present purposes, Melville accepted in full and final satisfaction certain property of Vapac which was said to have included:

"8.5 The right title and interest of Vapac in a

company known as Sea Culture Pty Ltd and an oyster

project developed by Vapac and conducted in the South

West of this State."

In an amended reply to this amended defence filed on 12 August 1991, Dr. Melville pleaded:

"The Applicant denies the contents of paragraph 8 of

the Amended Defence and states that he and the

Respondent entered into negotiations with the intent

to reach an agreement for the acquisition of the

assets set out in that paragraph but denies that there

was an agreement and in particular states that the

parties failed to agree upon a fundamental term of the

proposed contract namely a requirement of the

Respondent that the Applicant give the Respondent an

indemnity against any future claims from previous

employees of Vapac Ltd which said indemnity the

Applicant declined to give."

And in para 5 of the amended reply he also contended that if the Commission should find that there was a contract as pleaded in para 8 of the amended defence, then such contract was void as being a breach of ss.3 and/or 6 of the Truck Act 1899-1904.

10. The respondents say that the position taken by Dr. Melville in the reply filed in the Commission is quite inconsistent with the claims made in these proceedings by the applicant of which he is a director. Evidence was provided of company documents which indicate that he was appointed as a director of the applicant on 9 April 1990, although at that time the applicant's name was Hanwood Pty Ltd. Its name was changed to Sea Culture International Pty Ltd on 24 May 1990. As at 24 September 1991, Dr. Melville continued as a director. The other director appears to be his wife, Elizabeth Kaye Melville.

11. In an affidavit filed in these proceedings on 22 October 1991, Dr. Melville said that he has instructed his solicitor to file an amended reply in relation to the claim in the Industrial Relations Commission. By that amended reply he denies the content of para 8 of the amended defence and alleges that in September 1989 he agreed with Vapac that he would accept certain property from it in partial satisfaction of the debt owed to him. The property was that set out in the sub-paragraphs to para 8 of the amended defence together with shares in Sea Culture Pty Ltd. All of this property was to be sold by Vapac to him for a value of approximately $60,000, the value of which property was eventually agreed as $64,372. He says it was the intention of the parties that the terms of their agreement would be recorded in writing. In April 1990 however, he alleges that Vapac informed him that the shares in Sea Culture should not be transferred and asked that he accept in lieu shares in Hanwood Pty Ltd. He agreed to this variation and with the assistance of Vapac changed the name of Hanwood Pty Ltd to Sea Culture International Pty Ltd. In September 1990 he says that Vapac's solicitor delivered to his solicitor a draft agreement purporting to set out the terms of the agreement. The draft did not record the terms of the agreement in that it sought a covenant from Dr. Melville indemnifying Vapac against future claims from former staff of Vapac connected with the project. Subsequently, he alleges, Vapac sought to alter the terms of the draft to provide that he would accept the property as full satisfaction of the debt due from Vapac to himself for his wages. He refused to accept these additional terms and the negotiations to reduce the agreement to writing broke down. During the course of those negotiations and following upon the verbal agreement, Melville says he entered into possession of the property and that certain of it has been assigned by him to the applicant. He also alleges that the contract of employment between himself and Vapac insofar as it purported to provide for the satisfaction of his wages by delivery of goods belonging to Vapac, was subject to the Truck Act and to that extent void by virtue of ss.3 and/or 6 of that Act. No explanation is offered in the affidavit of the reason for the change or the inconsistency that appears from the amended reply filed in the Industrial Relations Commission.

12. The Court is empowered by O.20 r.2 to stay or dismiss a proceeding where it appears to the Court that it is an abuse of its process. Even without the benefit of that rule there is little doubt that the Court has an implied incidental power to control its own process and to prevent misuse of it. It is a power which ought to be very sparingly exercised and only in exceptional cases - Lawrance v Lord Norreys (1890) 15 App Cas 210 at 219 (Lord Herschell); Burton v Shire of Bairnsdale [1908] HCA 57; (1908) 7 CLR 76 at 95 (Isaacs J.). The possible varieties of abuse of process are only limited by human ingenuity and the categories are not closed. An unmeritorious claim brought merely in order to put pressure on a respondent for commercial or other reasons would no doubt be treated as an abuse. Such a claim might also be attacked as frivolous or vexatious or as disclosing no reasonable cause of action. Those designations are not mutually exclusive. An attempt to litigate in the Court a dispute or issue which has been resolved in earlier litigation in this or another court or tribunal may also, according to the circumstances, constitute an abuse of process even if not attracting the doctrines of res judicata or issue estoppel.

13. Underlying the power that courts have assumed to stay or dismiss proceedings for abuse of process, is a policy of preventing waste of judicial resources and their use for purposes unrelated to the determination of genuine disputes. There is, in my opinion, another element to be considered and that is the necessity to maintain confidence in and respect for the authority of the courts. If a party in litigation in this Court makes a formal and public allegation by way of its pleading which is inconsistent with a formal and public allegation in another forum, then such an issue may arise. No doubt most questions of statements made by a party out of court inconsistent with its plea in court are to be resolved as matters of evidence going to credit and not upon an application for summary disposition. In most such cases there will, in any event, be room for debate about the precise extent and significance of the alleged inconsistency which can only be resolved by a consideration of all the evidence and the circumstances surrounding the alleged inconsistent statement.

14. In my opinion, the amended reply filed in the Industrial Relations Commission raises a question of credit which will no doubt be explored at trial. But the difference in the nature of the proceedings in this Court and those in the Industrial Relations Commission, the different issues that are to be determined in the two forums and the possibility that an argument may be available to support the plea in the statement of claim notwithstanding that in the Industrial Relations Commission, lead me, although not without some hesitation, to consider that this is not a case in which I should take the drastic remedy of striking out or staying the proceedings as an abuse of process. That is not to say that real questions of credibility do not arise particularly having regard to the range of matters raised in the initial statement of claim in these proceedings and the substantial changes which have occurred in the applicant's case since it was begun here, and the changes made in the position adopted by Dr. Melville in the Industrial Relations Commission. In the event I am satisfied that the motion to dismiss or stay the proceedings as an abuse of process should be dismissed.

15. I do not propose to consider at length the various objections taken to different elements of the amended statement of claim. It is still in many respects an irritating and unsatisfactory document. A number of matters concerning the pleading were canvassed in the course of argument and some concessions made accepting a need for amendment in certain respects.

16. I propose to make orders in respect of certain aspects of the amended statement of claim which are unduly vague or embarrassing. Coupled with those orders, I will allow general leave to amend in the hope that some of the other matters which do not constitute strike out points can be attended to without undue additional expense.

17. Paragraph 10 alleges that Vapac, through its subsidiary Sea Culture Pty Ltd, obtained a fish farm licence to enable Sea Culture to undertake the cultivation of flat oysters. The true position taken by the applicant as emerged in argument, is that Sea Culture applied for and obtained the licence. The word "through" suggests some involvement by Vapac which is not defined. In fact, no involvement is alleged beyond the fact of the holding company-subsidiary relationship. The reference to a fish licence also gives no clue to the nature of the right being sought. In my opinion paragraph 10 should be struck out and repleaded.

18. Paragraph 12 alleges that Vapac, to Scoles' knowledge, "further planned to make application for similar licences at the sites and to develop large scale oyster and/or scallop farming at one or more of the sites". The similar licences are not defined, their statutory basis remains a mystery. The time at which Vapac "further planned" is not apparent. If it is contended that Vapac intended to do certain things, that should be pleaded as should the basis of Scoles alleged knowledge. Paragraph 12 should also be struck out.

19. Paragraph 17 alleges that OFI's application to the Department for various permits and leases was based upon and/or contained confidential information which had become the confidential information of the applicant. Reference is made back to para 9 in this regard. Paragraph 9 was not separately attacked in the motion but, in my opinion, gives quite inadequate particulars of the confidential information which is said to be relied upon. In para (a) of the particulars the information and data is identified as that "relating to, or resulting from research and investigations into oyster and scallop farming on a commercial scale in Western Australia" and further as information and data "in relation to submissions prepared and made by the Fourth Respondent to the Fisheries Department". Other information and data said to be "included" is set out in para (b) of the particulars. In my opinion para (a) does not identify any confidential information and para (b) requires further narrowing to indicate precisely what research, advice and analyses are relied upon. Both paras 9 and 17 should be repleaded to incorporate as material facts the definition of the confidential information said to have been acquired in the first place and wrongly used by OFI in the second. The motion seeks to strike out para 17, and I will order that it be struck out in its present form.

20. Paragraph 19 makes reference to sites which were the subject of application by OFI to the Albany Shire Council and the Jaycees Community Foundation. These sites are not defined in any pleading of material fact in the amended statement of claim although they are referred to in particulars to para 9. It is a well established proposition that a pleading which does not adequately set out material facts cannot be cured by the provision of particulars. Nor should material facts be pleaded which depend for their interpretation upon particulars provided in another paragraph. In my opinion, para 19 does not adequately define the sites referred to and should be struck out and repleaded.

21. Paragraph 20 makes reference to confidential information acquired by Scoles "during the consultancy agreement or during his employment with the Fourth Respondent". This does not adequately define a period in respect of which the alleged confidential information was acquired. Presumably what is referred to is the time during which his relationship with Vapac was defined by a consultancy agreement as distinct from the later period in which he was an employee. However, this needs to be made clear and para 20 should also be repleaded.

22. As I have indicated, the above criticisms are not exhaustive and there were a number of other matters which require attention in order that the Court and the parties have a clear picture of the detail of the applicant's allegations. For the present however, I will simply order that paras 10, 12, 17, 19 and 20 be struck out. There will be general leave to amend the amended statement of claim.

Re Sea Culture International Pty Ltd v John Allibon Scoles; Gayleen Morea Meehan; Ocean Foods International Pty Ltd and Vapac Limited

At a glance

Court

Decision date

Before

Source

Judgment (35 paragraphs)

Re Sea Culture International Pty Ltd v John Allibon Scoles; Gayleen Morea Meehan; Ocean Foods International Pty Ltd and Vapac Limited (In Receivership) [1991] FCA 523; (1991) 32 FCR 275 (4 November 1991)

Parties

Legislation Cited (1)

Cases Cited (2)