RTA Pty Ltd & Ors v Brinko Pty Ltd & Ors [2011] NTSC 103

[1] This is an application by the Third Defendant seeking orders firstly, for summary judgment and, in the alternative, striking out the Plaintiffs' Statement of Claim.

[2] The application for summary judgment is made pursuant to Order 23.03 of the Supreme Court Rules ("the Rules") on the ground that the Third Defendant has a good Defence.

[3] The alternative order for a strike of the claim is sought pursuant to Order 23.02 of the Rules, in particular sub-paragraph 23.02(a) on the basis that the pleadings do not disclose a cause of action against the Third Defendant.

[4] The substantive claim arises out of an agreement for a sale of a business. The agreement was between the Plaintiff and the First Defendant. The Second Defendant was a Director of the First Defendant. The Second Defendant is the former spouse of the Third Defendant. The Third Defendant's case is that she was no more than an employee of the business but the Plaintiffs allege a greater, and actionable, involvement.

[5] The principal allegation in the Statement of Claim is that the purchase price paid for the business was excessive as a result of various representations. As against the Third Defendant the principal allegation is that she engaged in misleading and deceptive conduct contrary to both the Commonwealth Trade Practices Act ("TPA") and the Consumer Affairs and Fair Trading Act (NT), specifically that she provided information and made representations to the Plaintiffs concerning the turnover, the profitability and the extent of the customer base of the subject business.

[6] Although the Third Defendant concedes that she provided some information and material to the Plaintiffs, she denies having misled or deceived them. She says that the information was provided by her effectively as a conduit and on instructions from the Second Defendant, the Director of the First Defendant. The First Defendant was the proprietor of the business.

[7] Specifically the Third Defendant, in her affidavit sworn 15 September 2011 attests that:-

She has never been a director of the First Defendant;

She was employed at the business as a shop assistant and also kept the books and was paid a salary and management fee;

Although aware that the business was put up for sale by the First Defendant she was not materially involved in any aspect of the sale;

She met the Plaintiffs in the lead up to the sale when, on instructions from the Second Defendant, she provided the Plaintiffs with various financial documents of the business.

The documents she provided included one balance sheet which had been prepared by her. Otherwise none of the documents provided had been prepared by her although she had access to the documents in her role as the bookkeeper of the business;

She had no discussions with the Plaintiffs and made no written or oral representations beyond the production of the documents as aforesaid;

She was aware that the Plaintiffs would rely on the information provided given that it was requested in the course of due-diligence enquiries.

[8] The application before the Court is for summary judgment by a defendant. That is regulated by Rule 23.03. Applications by a plaintiff are regulated by Rule 23.01. Rule 23.02 deals with striking out of pleadings. Those Rules provide as follows:-

[9] In Nibbs v Australian Broadcasting Corporation[1] I discussed the authorities[2] relative to an application for summary judgment under both Rule 23.01 and 23.03. The authorities show that the test for the Third Defendant to meet, if she is to succeed with the application, is a high one. The exercise of the power to summarily deal with an action is to be reserved for actions that are absolutely hopeless and where the likely decision is beyond doubt if the matter proceeded to trial: Dey v Victorian Railways Commissioners[3] and Wilson v Union Insurance Co.[4] The onus is on a defendant to establish it has a good defence on the merits and that there are no triable issues: Wickstead v Browne.[5] A defendant is entitled to judgment only if it is inevitable that the Court would find for the defendant after a full hearing on the evidence: Camberfield Pty Ltd v Klapanis.[6] Lastly an order should not be made if there are important and difficult questions of law or issues of facts to be determined at trial Bayne v Baillieu.[7]

[10] The Third Defendant's argument commences with the observation that the pleadings allege that she has provided information and made representations. The evidence of the Third Defendant is that she has not made any representations. She says that she only provided documents, under direction of her employer, and that she was not involved in the preparation of those documents. It is therefore submitted that on the evidence the Third Defendant cannot be liable for misleading and deceptive conduct as pleaded.

[11] Mr Liveris for the Third Defendant acknowledged that determination of whether there is misleading of deceptive conduct is a question for determination by the Court having regard to all the circumstances. He submitted that when the position is assessed objectively having regard to all the surrounding circumstances, a Court could not find that her actions amounted to misleading and deceptive conduct. The circumstances referred to are that the Third Defendant was only an employed bookkeeper, who merely forwarded on business documents created by others, albeit that the documents were within her control as part of her employment.

[12] Mr Christrup for the Plaintiffs answered that with the proposition that a person can still be liable in law for misleading and deceptive conduct even if there is no intention to mislead or deceive, or even if they lacked knowledge that the conduct was misleading (Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre[8] and Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd[9]). He submitted that the relevant question was whether the conduct induced error or was capable of inducing error: Brown v Jam Factory Pty Ltd.[10] Further he submitted that silence can amount to misleading or deceptive conduct where someone who may act to their detriment as a result may be entitled to infer from that silence that no detriment existed: Winterton Constructions Pty Ltd v Hambros Australia Limited.[11]

[13] He pointed out that the Third Defendant's evidence that she only provided information was disputed but that in any event the case of Yorke v Lucas[12] deals with the situation of a person who simply passes on information. There it was held that if an intermediary merely passes on information making it clear that he or she is not the source of the information and disclaims belief in its truth or falsity then that person may not be engaging in misleading or deceptive conduct (emphasis added).

[14] Mr Christrup also relied on Trade Practices Commission v J & R Enterprises Pty Ltd[13] as authority for the proposition that if material is disseminated and it is misleading or liable to mislead, then the person responsible for that dissemination can, in appropriate circumstances, be in breach of the TPA.

[15] To the extent that the application depends on arguments on the law, in my view the Plaintiffs' position concerning the allegation of misleading and deceptive conduct is clearly arguable and open on the pleadings and on the evidence and is available at law. I am not satisfied that the Third Defendant has established that the Plaintiffs' case against the Third Defendant will inevitably fail. Therefore the application for summary judgment must fail on that basis at least.

[16] The application is also made on the merits. As to that the authorities require the Third Defendant to satisfy the Court that the Plaintiffs' case against the Third Defendant will inevitably fail after a full hearing on the evidence. To satisfy the test at this stage the Third Defendant is required to produce evidence in answer to the Plaintiffs' allegations in so far as they relate to the Third Defendant. Such evidence must be conclusive and is unacceptable for this purpose if the Court is first required to resolve a factual dispute. In essence the subject evidence must be undisputed to any significant extent.

[17] Leaving aside factual disputes for the moment, the evidence led by the Third Defendant for summary judgment on the merits is insufficient. The relevant allegation by the Plaintiffs against the Third Defendant is that the financial information she provided to the Plaintiffs was misleading and deceptive. The Third Defendant deposes that, as far as she knew, the information was correct. That is insufficient in light of the authorities previously referred to. The Third Defendant omits to depose to a lack of knowledge on her part that the financial information provided to the Plaintiffs overstated the sales given that data in respect of an area not the subject of the contract for sale was included. That omission renders the evidence insufficient to meet the threshold test. Indeed, there is evidence which may show the contrary.

[18] There are many factual disputes which require resolution in any event. Factual disputes are to be resolved following evidence at trial and not on affidavits and submissions in an interlocutory application for summary judgment. The effect of the existence of factual disputes in an application for summary judgment is that the party seeking the order cannot establish that inevitably a verdict in their favour would result if the matter proceeded to trial.

[19] There are a number of core factual disputes and credibility issues. A key aspect of the Third Defendant's case is that she was merely an employee, without an interest in the subject business and was merely acting on instructions from the Second Defendant, as she claims she was bound to do.

[20] Affidavit evidence put forward by the Plaintiffs, if accepted, indicates relevantly that:-

The Third Defendant held herself out as a director and shareholder of the First Defendant in the course of the negotiations for the sale of the business;

The Third Defendant's remuneration was the same as that of the Second Defendant;

The Third Defendant, along with the Second Defendant, received consultancy payments from the business;

The Third Defendant decided what documentation was to be provided to the purchasers as part of the due diligence process;

The Third Defendant acted as an "owner" of the business and signed letters for and on behalf of the business;

The division of the proceeds of settlement indicate payments to the Third Defendant inconsistent with her claim to simply being an employee;

The Third Defendant entered information into the First Defendant's accounting system and the information which was provided to the Plaintiffs erroneously included sales in respect of an area not the subject of the sale;

There is evidence that shows an early draft version of a contract of sale prepared by the vendor's solicitor named the Third Defendant as a party to the contract;

There is evidence that correspondence passing between the lawyers acting for the parties in the course of negotiations for sale where the vendor's lawyers referred to the Third Defendant as the client.

[21] The relevance of the evidence in sub-paragraphs 1-3, 5, 6, 8 and 9 of the preceding paragraph is that it challenges the Third Defendant's evidence of her interest in the relevant business. The evidence referred to in sub-paragraphs 4 and 7 challenges the veracity of the Third Defendant's claim that she was merely a conduit for the delivery of information from the First Defendant to the Plaintiff.

[22] I appreciate that all of the foregoing matters are of varying weight and may have an acceptable explanation. Mr Liveris purported to attempt to explain that was the case in the course of his submissions. However a summary judgment application is not the place to resolve those issues.

[23] For all of these reasons the Third Defendant's application for summary judgment is dismissed.

[24] As to the application for striking out of the Amended Statement of Claim, the only complaint about that pleading is with respect to paragraphs 16 and 17 and on the basis that it does not disclose a cause of action against the Third Defendant. There is no other complaint about the adequacy of those paragraphs in pleading terms. As the argument developed it became apparent that the issue is more that the allegations in those paragraphs are ambiguous and lack the necessary clarity. The ambiguity surrounds whether the provision of information referred to in those paragraphs is separate and distinct to the misrepresentations referred to there. Although not conceding the ambiguity, Mr Christrup confirmed that the representations referred to are the same as, and not separate and distinct from, the information that was provided by the Third Defendant. If that is the case then to that extent the pleading is embarrassing.

[25] The pleadings must clearly and therefore unambiguously inform the other parties of the case that must be met. That is a core function of pleadings.[14] The ambiguity in paragraphs 16 and 17 deprives those paragraphs of the required clarity. The Particulars filed on 6 March 2011 exacerbate the problem as they, more so than the Amended Statement of Claim, read as if the information is distinct to the representations. Further Particulars were provided on 16 November 2011 in response to a request from the Second Defendant but they do not add anything for the purposes of this application. Rectifying the defect is only a matter of clarification which can be achieved with a brief and simple amendment. I will allow the Plaintiffs leave to further amend paragraphs 16 and 17 of the Amended Statement of Claim to effect that.

[26] As there are now two sets of Particulars, I direct the Plaintiffs to incorporate all Particulars in any further amended Statement of Claim.

[27] I will hear the parties as to consequential orders.

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