Sunraysia v State of NSW

SOLICITORS : Mr M Twohill Crown Solicitor (Defendant)

CATCHWORDS : Strike out statement of claim - Misfeaseance in public office LEGISLATION CITED : Supreme Court Rules - Part 13 r 2 & Part 15 r 26 Food Act (NSW) 1989 Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 Air Services Australia v Zarb (NSWCA unreported, 26 August 1998) Dey v Victorian Railways Commissioners (1949) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Webster & Anor v Lampard (1993) 177 CLR 598 CASES CITED : Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 Gibson v Parkes District Hospital (1991) 26 NSWLR 9 Sanders v Snell [1998] 72 ALJR 1508 Elliot v Chief Constable of Wiltshire & Ors, Sir Richard Scott, The Times Law Reports 5.12.1996 Northern Territory v Mengel (1995) 185 CLR 307 Wickstead v Brown (1992) 30 NSWLR 1 DECISION : (1) The defendant's notice of motion filed 2 November 2001 is dismissed; (2) As the plaintiff amended its statement of claim the plaintiff should pay the costs thrown away by the amendment including those of 7 December 2001, otherwise the defendant is to pay the plaintiff's costs of the motion.

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

13482/2001 - SUNRAYSIA NATURAL BEVERAGE COMPANY PTY LIMITED v THE STATE OF NEW SOUTH WALES

JUDGMENT (Strike out statement of claim; Misfeaseance in public office) 1 MASTER: By notice of motion filed 2 November 2001 the defendant seeks an order that the statement of claim filed 3 October 2001 and the proceedings be struck out or permanently stayed pursuant to Part 13 r 2 or Part 15 r 26 of the Supreme Court Rules (SCR). The defendant relied on the affidavit of Mark Anthony Twohill sworn 2 November 2001. The plaintiff relied on the affidavit of Michael John Zwar sworn 1 August 2001. On 7 December 2001 I ordered that the plaintiff was to file and serve an amended statement of claim on or before 21 December 2001. On 30 January 2002 an amended statement of claim was filed. The defendant submitted that the amended statement of claim was also defective. 2 The plaintiff alleges that the Food Branch for the New South Wales Department of Health (who is sued as the State of New South Wales, the defendant) breached their statutory duties by circularising a letter dated 9 December 1999 to the Supermarkets Institute of Australia threatening prosecution of retailers who continued to offer for sale the manufactured fruit juice products of the plaintiff on the grounds of an alleged breach by the plaintiff of the New South Wales Food Act. The plaintiff alleges that as a consequence of the letter, supermarket retailers in New South Wales, and in particular, GJ Coles withdrew the plaintiff's products from their supermarket shelves resulting in long term economic harm to the plaintiff.

The law in relation to summary judgment 3 Part 15 r 26 provides: "(1) Where a pleading - (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings; or (c) is otherwise an abuse of the process of the Court, the Court may at any stage of the proceedings, on terms, order that the whole or any part of the pleading be struck out. (2) The Court may receive evidence on the hearing of an application for an order under subrule (1)." 4 Part 13 r 5 says: "(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings- (a) no reasonable cause of action is disclosed; (b) the proceedings are frivolous or vexatious; or (c) the proceedings are an abuse of the process of the Court, the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings." 5 In Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 the High Court held at 57 that:

"Ordinarily a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way." 6 According to their Honours, this is because:

"It would be wrong to deny a plaintiff resort to the ordinary processes of a court on the basis of a prediction made at the outset of a proceeding if that prediction is to be made simply on a preponderance of probabilities" (at 58). 7 Similarly, in Air Services Australia v Zarb (NSWCA unreported, 26 August 1998) Rolfe AJA found it useful to remind himself of the highly demanding test imposed on a party seeking summary judgment. His Honour referred to Dey v Victorian Railways Commissioners (1949) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 and Webster & Anor v Lampard (1993) 177 CLR 598. I have reproduced some of the passages quoted in Zarb. 8 In General Steel Barwick CJ, who heard the application alone stated at 130: "Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed." 9 Barwick CJ also said at 129: "It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of cause of action - if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'." 10 In Webster Mason CJ, Deane and Dawson JJ reinforced the rigorous testing stating, at 602: "The power to order summary judgment must be exercised with 'exceptional caution' and 'should never be exercised unless it is clear that there is no real question to be tried."' 11 According to Rolfe AJA in Zarb at 15-16: "The demanding nature of the test is in no way lessened in circumstances where there are the potential for difficult factual and legal issues to arise. Rather, as the decision in Webster made clear, it is heightened: see also Wickstead & Ors v Browne (1992) 30 NSWLR 1 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241." 12 Master Allen (as he then was) in Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 at 373-374 said: "…It is not by any means rare in the history of the development of the common law that a high appellate court, in enunciating a novel development in the law, albeit one avowedly based on a miscellany of old cases, has chosen to use general words of imprecise limits in meaning to facilitate the arrival, in later cases, of the final form of the development without the need to overrule what earlier had been stated. That being so I am of opinion that a court at first instance should be particularly astute not to risk stifling that development of the law by summarily throwing out of court actions in respect of which there is a reasonable possibility that it will be found, in the development of the law, still embryonic, that a cause of action does lie. The risk of injustice to the plaintiff, which summary termination of his claim would entail, is real. One cannot predict, with firm assurance, what the future holds as the final formulation of the new development." 13 This passage was quoted with approval by Justice Badgery-Parker in Gibson v Parkes District Hospital (1991) 26 NSWLR 9 at 35.

Statement of claim 14 At paragraph 6 of the amended statement of claim (ASC) it is alleged that in forwarding the letter of 9 December 1999 and in seeking to remove the said beverages from sale, the Crown, through Mr John McMahon, acted ultra vires. 15 Paragraph 6 ASC also pleads that the only express power to remove the said beverages from sale arises from ss 44 and 45 of the Food Act (NSW) 1989. Such power can only arise if the Director General has reasonable grounds to believe such removal is necessary to prevent or mitigate a serious danger to public health. This power was not implemented. According to the plaintiff, the Australian Supermarkets Institute is an Australia wide body and its membership is not limited to New South Wales, and to threaten prosecution against members of an Australia wide body is not implied or otherwise reasonably incidental to the Crown's power of prosecution. 16 At paragraph 7 of the amended statement of claim the plaintiff pleads that in forwarding the letter and in seeking to remove the said beverages from sale, the Crown, through Mr John McMahon, knew, or alternatively was recklessly indifferent to whether, it was acting beyond the scope of its power under the NSW Food Act 1989 or otherwise. At paragraph 8 the plaintiff pleads that in forwarding the letter and in seeking to remove the said beverages from sale, the Crown, through Mr John McMahon, intended to cause harm to Sunraysia or otherwise acted from malicious intent. The damages are pleaded in paragraphs 10 and 11. 17 Part 2 (ss 9 to 14 inclusive) of the Food Act 1989 (NSW) refers to the unlawful practices of preparation or sale of adulterated or sub-standard food; sale not complying with purchaser's demand; tender or dispatch of food etc adulterated or falsely described; sale of food wrongly packed; food or food packages to be correctly labelled; and false advertising of food. These unlawful practices can be carried out by a person who prepares, sells or tenders or dispatches the food. These sections are intended to place obligations on the manufacturers, distributors and sellers of food and make them liable to prosecution should they fail to meet their statutory obligations. 18 Prior to the 9 December 1999 letter, the subject of these proceedings, there had been correspondence between the plaintiff's solicitor and the defendant. Relevantly on 16 March 1999 the defendant wrote to the plaintiff and drew to its attention to what it considered constituted breaches of the Food Act, namely statements made on the labels of Diet Cran Drink, Diet Lemon Squash, Traditional Australian Blackcurrant, Cranberry Drink and Prune Juice. On 29 March 1999 the plaintiff replied and stated most of the concerns were in the process of being rectified. This letter then referred to the progress of a complaint concerning a competitor and expressed a general view that enforcement of the code was haphazard at best. A letter from the defendant to the plaintiff dated 1 September 1999 concluded by stating "our requirement for your client to redress the breaches indicated in our letter dated 16 March 1999, stands and immediate action is required. Action is also required to remove the reference to the endorsement by the International Diabetes Institute Sunraysia on the new label for Sunraysia Diet Lemon Squash. Failure to comply will result in enforcement action, without further notice." Thus the plaintiff had been given a warning that it was subject to enforcement action without further notice. As previously stated, no orders were made by the Director General. 19 Sections 44 and 45 of the Food Act 1989 (NSW) provide: "44 Making of order

An order under this Division may be made only when the Director-General has reasonable grounds to believe that the making of one or more such orders is necessary in order to prevent or mitigate a serious danger to public health.

(1) By an order under this Division, the Director-General may do any one or more of the following: (a) prohibit the production, preparation, sale, supply or advertisement of any food or appliance of a class or description specified in the order,

(b) prohibit the cultivation, taking, harvesting or obtaining, from an area specified in the order, of any food or of any food of a class or description so specified,

(c) give directions, in respect of any food of a class or description specified in the order: (i) for the recall of such of the food as may have been consigned or distributed for sale or sold, or

(ii) for the impounding or isolation of the food, or

(iii) for the destruction or other disposal of the food,

(d) prohibit the removal of any food the subject of a direction under paragraph (c) for the impounding or isolation of the food. (2) In connection with any prohibition or direction mentioned in subsection (1), an order under this Division may specify methods of analysis (not inconsistent with methods prescribed by the regulations) of any food or of any food of a class or description specified in the order.

(3) An order under this Division may prohibit absolutely the carrying on of an activity in relation to food or may permit the carrying on of the activity in accordance with conditions specified in the order.

(4) An order under this Division may be varied or revoked by the Director-General in the same way as the order was made." 20 If an order was made pursuant to s 45, the parties are to be served with a copy of it (s 46). The aggrieved person has a right to appeal to the District Court (s 47). No order was made by the Director General. 21 After that letter was sent the defendant took two further steps. The first was that, as forewarned, the plaintiff was prosecuted in the local court for 10 offences under the Act. Two of the offences were proved - see judgment May 2001, Lulham LCM (Ex B)). The second step was that a letter was forwarded to the Australian Supermarkets Institute. 22 On 9 December 1999, the letter by the defendant to the Australian Supermarkets Institute. "… This is to confirm our recent discussions about the range of products marketed by The Sunraysia Natural Beverage Company Pty Ltd. As discussed, the labelling of these products is in breach of the requirements of the NSW Food Act 1989 and the Food Standards Code. The breaches are detailed in the attachment to this letter. Sunraysia has been warned, in writing, of these breaches on two occasions, the last on 1 September 1999. In both cases, the company was warned that enforcement action would be taken unless steps were taken to correct the breaches. The company appears to have addressed some of the labelling breaches, but not the major issue of health claims and advice of a medical nature. Further, the company chose to include in their new labels new advice of a medical nature, in the form of a logo from the International Diabetes Institute and a new name - 'Healthstyle', which is in contravention of another clause of Standard A1(19) of the Food Standards Code. We wish to advise the Supermarket Institute that NSW Health is not prepared to tolerate such a situation and enforcement action will take place. As Sunraysia is based in Victoria, direct action against the company is difficult for NSW Health. Action is therefore likely to be taken against a retail outlet selling the products in question." 23 Although the letter does not specify that the plaintiff's stock should be removed from supermarket shelves it does give a warning that sellers of the plaintiff's product may be prosecuted. It is the forwarding of this letter which the plaintiff alleges to be ultra vires.

Misfeasance in public office 24 In Sanders v Snell [1998] 72 ALJR 1508 at 1517, the High Court observed that the precise limits of this tort are still undefined. In Elliot v Chief Constable of Wiltshire & Ors, Sir Richard Scott The Times Law Reports 5.12.1996 similarly stated that the boundaries of this cause of action had not yet been precisely defined. 25 In Northern Territory v Mengel (1995) 185 CLR 307 at 345 the High Court stated: "…the weight of authority here and in the United Kingdom is clearly to the effect that it is a deliberate tort in the sense that there is no liability unless either there is an intention to cause harm or the officer concerned knowingly acts in excess of his or her power." 26 In Mengel, the majority of the High Court held that: "The cases do not establish that misfeasance in public office is constituted simply by an act of a public officer which he or she knows is beyond power and which results in damage. Nor is that required by policy or by principle. Policy and principle both suggest that liability should be more closely confined. So far as policy is concerned, it is to be borne in mind that, although the tort is the tort of a public officer, he or she is liable personally and, unless there is de facto authority, there will ordinarily only be personal liability. And principle suggests that misfeasance in public office is a counterpart to, and should be confined in the same way as, those torts which impose liability on private individuals for the intentional infliction of harm. For present purposes, we include in that concept acts which are calculated in the ordinary course to cause harm, as in reckless indifference to the harm that is likely to ensue, as is the case where a person, having recklessly ignored the means of ascertaining the existence of a contract, acts in a way that procures its breach." 27 This principle was reaffirmed in Sanders. 28 Misfeasance in public office is an intentional tort. Thus, to plead the cause of action of misfeasance in public office, it must be alleged that in addition to the public officer committing an act which he or she knows is beyond power, and results in damage, that ultra vires act must be done knowingly or there must be an intention to cause harm. 29 It has been alleged that an officer acted beyond power which resulted in damage. It has also been alleged that the officer knew that he was acting beyond the scope of his power. Further it has been alleged that the officer acted from malicious intent (paras 6, 7, 10 and 11 ASC). The officer's state of mind is one which can be more appropriately ascertained at trial - see Wickstead v Brown (1992) 30 NSWLR 1 at 11. 30 It is my view that these cause of action should be permitted to go to trial. It cannot be said that the plaintiff's case is clearly untenable or hopeless. The notice of motion is dismissed. Costs are discretionary. Costs should follow the event. 31 The court orders:

(1) The defendant's notice of motion filed 2 November 2001 is dismissed.

(2) As the plaintiff amended its statement of claim the plaintiff should pay the costs thrown away by the amendment including those of 7 December 2001, otherwise the defendant is to pay the plaintiff's costs of the motion. **********

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