State Mercantile Pty Ltd v Oracle Telecom Pty Ltd
[2016] QDC 261
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- Unreported Judgment
- State Mercantile Pty Ltd v Oracle Telecom Pty Ltd[2016] QDC 261
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State Mercantile Pty Ltd v Oracle Telecom Pty Ltd[2016] QDC 261
State Mercantile Pty Ltd v Oracle Telecom Pty Ltd[2016] QDC 261
DISTRICT COURT OF QUEENSLAND
CITATION: | State Mercantile Pty Ltd v Oracle Telecom Pty Ltd [2016] QDC 261 |
PARTIES: | STATE MERCANTILE PTY LTD ACN 108 116 445 (Plaintiff) v ORACLE TELECOM PTY LTD ACN 125 411 547 (Defendant) |
FILE NO/S: | 3275/13 |
DIVISION: | Civil |
PROCEEDING: | Application |
DELIVERED ON: | 14 October 2016 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 11 October 2016 |
JUDGE: | Bowskill QC DCJ |
ORDER: | Paragraphs 1, 2 and 3 of the plaintiff’s application filed 6 October 2016 are dismissed. |
COUNSEL: | A Collins for the Applicant/Plaintiff S Hogg for the Respondent/Defendant |
SOLICITORS: | Burns & Associates for the Applicant/Plaintiff JHK Legal for the Respondent/Defendant |
- [1]These are the Court’s reasons for refusing the orders sought in paragraphs 1, 2 and 3 of the plaintiff’s application filed 6 October 2016.
- [2]Although the terms are the subject of dispute, there was an agreement of some kind between the plaintiff (State Mercantile), as customer, and the defendant (Oracle), as the provider, for Oracle to provide telecommunications services to State Mercantile.
- [3]As appears from its amended statement of claim (filed 12 July 2016) State Mercantile contends that the agreement took the form of a Retainer, which was in place between 2005 and July 2012 (para [3]), the terms of which included, for example, that Oracle agreed to provide telecommunications services to State Mercantile “at the best and lowest prices available in the market” and that Oracle agreed to charge State Mercantile “its best prices from time to time” (para [4]). As an alternative, it is pleaded that representations to that effect were made, with the intention of inducing State Mercantile to enter into a contract for the supply of services with Oracle (para [7]), which State Mercantile relied on in doing so. It is pleaded that Oracle breached the terms of the retainer (para [5]); or alternatively, that the representations were false, misleading and deceptive (para [8]) – because, for example, Oracle did not provide telecommunications services at the best and lowest prices available (etc). State Mercantile pleads that it has suffered loss and damage as a result, being the amount which it says it has paid in excess of that which it otherwise would have had to pay for telecommunications services (para [9B]). The amount of the loss and damage, for breach of the Retainer, or alternatively under the Trade Practices Act / Australian Consumer Law is said to be at least $175,471.56, for the period March 2009 to July 2012.
- [4]Prior to August 2016, Oracle had defended State Mercantile’s claim on the basis that the “retainer”, as pleaded by State Mercantile, did not exist; and that the representations alleged were not made. Oracle pleaded that the terms that governed the relationship between it and State Mercantile were as pleaded in paragraphs 1 to 28 of its counterclaim, which includes reference to application forms, as well as a “Standard Form of Agreement” published by the defendant (by reference to part 23 of the Telecommunications Act 1997 (Cth)) (referred to as the “Agreement”). In its counterclaim Oracle pleaded that the Agreement provided for a Minimum Term of the Agreement, of 36 months. Clause 12.3 of the Agreement provided for State Mercantile to terminate the Agreement, on 30 days written notice. Clause 12.4 provided that in the event of a termination under clause 12.3, State Mercantile was to pay Oracle all charges incurred up to the date of termination, as well as an early termination fee. Oracle pleaded that:
- (a)the Agreement was terminated by State Mercantile without notice on or about 19 July 2012 (para [18]);
- (b)as at 19 July 2012 the amount of $25,118.86 was owing to Oracle, for services rendered to that date (para [19]), and an invoice for that amount was issued on 31 July 2012 (para [20]);
- (c)the Agreement was terminated by State Mercantile prior to the expiration of the Minimum Term (para [21]); and
- (d)as a consequence, under clause 12.4.1.6 of the Agreement, State Mercantile was liable to Oracle for the “early termination fee” (para [22]), in respect of which invoices were issued on 19 July 2012 and 31 July 2012, in amounts totalling $63,799.26 (paras [23] and [24]).
- [5]Oracle counterclaimed against State Mercantile for a combination of the amounts referred to at (b) and (d) above.
- [6]The early termination fee is defined in the Agreement (cl 20.1.15) by reference to a calculation set out in Annexure A to the Agreement, which in turn refers to calculations involving the “minimum monthly commitment”, multiplied by the number of months remaining under the contract.
- [7]By way of reply and answer (albeit this was filed on 30 October 2013, in response to the original defence and counterclaim), State Mercantile puts in issue the terms of the agreement between the parties (reiterating its position, as to the Retainer); and denies that it unilaterally terminated the agreement between the parties on 19 July 2012, in breach of that agreement (because of its position that it validly terminated the Retainer, as pleaded in the statement of claim). State Mercantile also pleads that it is not obliged to pay the early termination fee because it should properly be regarded as a penalty (para [20]).
- [8]That matter was put in issue by Oracle, in its reply to the answer to the counterclaim, filed in December 2015, on the basis that the early termination fee is not a penalty, but is a genuine pre-estimate of Oracle’s loss.
- [9]The proceedings have been on foot for over 3 years, having been commenced in August 2013. In May 2016, the defendant, Oracle, made an application that it be placed on the commercial list, and in that context, made submissions that Oracle wanted to see the matter progress to a trial without further delay. That was not opposed by the plaintiff, State Mercantile, and the order was made, on 13 June 2016, along with other directions for amended pleadings, supplementary disclosure, and ultimately listing the matter for trial, for 3 days from 21 November 2016. The trial remains so listed.
- [10]On 9 August 2016, Oracle filed a “further further further amended defence”. Paragraph 18 remained in its original form, pleading that “The Agreement was terminated by the Plaintiff without notice on or about 19 July 2012 (date of termination)”. But a new paragraph 21A was added, pleading that “By reason of the breach pleaded in paragraph 18 above the Plaintiff is liable to indemnify the Defendant (by reason of the matters pleaded in paragraph 13(vi) above) for the loss and damage it has suffered being the loss of profit for the remaining term of the Agreement in the amount of $288,227.51 (including GST)”. Paragraph 26 pleaded that Oracle is owed that amount pursuant to the Agreement by way of indemnity. (Paragraph 13(vi) is a reference to clause 14.1 of the Agreement, which provides that State Mercantile will “indemnify us [Oracle] and will keep us … indemnified against any loss, cost, expense, damage or other liability … arising out of … your breach of this SFOA”.)
- [11]It is fair to say, as counsel for State Mercantile does, that although the directions made in June 2016 provided for amendments to pleadings, no substantial amendment of the kind later made to the counterclaim was foreshadowed by the defendant at that time. It is reasonable to infer – not only from that, but also from submissions that were made by counsel for Oracle on 13 September 2016 – that it was something that occurred to a legal representative for the defendant at a later time.
- [12]In any event, that amendment prompted an application by State Mercantile to strike out paragraphs 21A and 26 of the further further further amended defence and counterclaim. That was heard by me on 13 September 2016. In the course of that hearing, counsel for the defendant indicated that further amendments were proposed, to plead more clearly a breach of the Agreement, but also to plead a further alternative argument that the Agreement had been repudiated.
- [13]On that occasion, although I expressed reservations about the strength of those alternative arguments, in light of the express terms of the Agreement, I did not consider there was a basis on which to prevent the defendant from amending its pleading as it sought to do. Orders were made for a further amended counterclaim to be filed within 7 days (20 September). Disclosure issues were also agitated at the hearing on 13 September, but those issues were effectively put off until the amended pleading was prepared.
- [14]Another version of the defence and counterclaim was then filed on 20 September 2016 (called the “further further further further amended defence”). The counterclaim now pleads, relevantly (with marking up removed, but the newest allegations shown in italics):
“18. In breach of clause 12.3 of the Agreement, the Agreement was terminated by the Plaintiff without notice on or about 19 July 2012 (date of termination).
18A.In the alternative to the pleading at paragraph 18 herein:
(a)On or around 19 July 2012, the Plaintiff caused the landline services it had with the Defendant to be transferred to another telecommunications service provider; and
(b)On or around 31 July 2012, the Plaintiff caused the mobile phone services it had with the Defendant to be transferred to another telecommunications service provider.
18B. The Plaintiff effected the transfers pleaded at paragraph 18A herein without notice to the Defendant.
18C. In the premises of the matters pleaded at paragraphs 18A and 18B herein, the Plaintiff repudiated the agreement.
18D. The Defendant accepted the Plaintiff’s repudiation of the Agreement and elected to terminate by issuing the Plaintiff with the invoices pleaded at paragraphs 23 and 24 herein.
- As at 19 July 2012 the amount of $25,118.86 was owing to the Defendant by the Plaintiff pursuant to the Agreement in respect of services rendered by the Defendant to the Plaintiff, at the Plaintiff’s request prior to the date of termination.
- On 31 July 2012 the Defendant issued an invoice to the Plaintiff for the amount of $25,118.86 in respect of the accrued service charges outstanding to the defendant and owing under the Agreement.
Particulars
Invoice number 219494-119 dated 28 July 2012
- The Agreement was terminated by the Plaintiff prior to the expiration of the Minimum Term (as that term is defined under the Agreement). Indeed there was a further twenty nine (29) months and six (6) days remaining under the Minimum Term of the Agreement as at the date of termination.
21A. By reason of the breach pleaded in paragraph 18 above, or alternatively by reason of the Plaintiff’s anticipatory breach pleaded in paragraph 18A above, the Plaintiff is liable to indemnify the Defendant (by reason of the matters pleaded in paragraph 13(vi) above) for the loss and damage it has suffered being the loss of profit for the remaining term of the Agreement in the amount of $288, 227.51 (including GST).
Particulars
[Table setting out particulars of calculation of the loss of profit omitted].
- Further or in the alternative to paragraph 21A above, pursuant to clause 12.4.1.6 of the Agreement and for the reasons pleaded at paragraph 21 hereof, on account of the Plaintiff terminating the Agreement prior to the expiration of the Minimum Term, the Plaintiff was liable to the Defendant for Early Termination Fees.
- On 19 July 2012 the Defendant issued an invoice to the Plaintiff for the amount of $58,794.12 in respect of the Early Termination Fees owing to the Defendant under the Agreement.
Particulars
Invoice number 613 dated 19 July 2012
- On or about 31 July 2012 the Defendant issued a further invoice to the Plaintiff for the amount of $5,005.14 in respect of the Early Termination Fees owing to the Defendant under the Agreement and pursuant to the applications pleaded at paragraphs 14, 15 and 16 hereof.
Particulars
Invoice number 616 dated 31 July 2012
- Pursuant to the relevant terms of the Agreement and for the reasons pleaded herein, the Defendant is owed the amount of $25,118.86 by the Plaintiff pursuant to the Agreement, particulars of which have been previously provided by the Defendant to the Plaintiff.
- Further, the Defendant is owed the amount of $288,227.51 (including GST) pursuant to the Agreement by way of indemnity.
- Further, or in the alternative to paragraph 26 above, the amount of $63,799.26 due from the Plaintiff to the Defendant pursuant to the Agreement for early termination fees.”
- [15]The damages claimed, by paragraph 21A, are calculated by reference to an amount of average monthly profit alleged to have been earned by Oracle, from its Agreement with State Mercantile, based on figures from June 2011 to May 2012, multiplied by the remaining 29.2 months of the term of the Agreement.
- [16]By application filed on 6 October 2016, the plaintiff, State Mercantile, now seeks to strike out paragraphs 18A to 18D, 21A and 26 of this further amended counterclaim, on the grounds that they fail to disclose a cause or action or otherwise have a tendency to prejudice or delay the fair trial of the proceeding (relying on rule 171(1)(a) and (b) of the Uniform Civil Procedure Rules).
- [17]The exercise of the discretionary power to strike out a party’s claim must be exercised with considerable caution.[1] The relevant principles were summarised by the Full Court of the Federal Court in Young Investments Group Pty Ltd v Mann (2012) 293 ALR 537 at [6] as follows:
“In an application to strike out a pleading, all of the facts alleged in the relevant pleading are to be accepted as true, and it is to be taken for granted that, on all other points, the pleading is unassailable. Provided that a pleading fulfils its basic function of identifying the issues, disclosing an arguable cause of action and apprising the other party of the case that it has to meet at trial, the pleading should be allowed to stand and the proceeding should be allowed to go to trial...”
- [18]In Kordamentha Pty Ltd v LM Investment Management Ltd [2016] QSC 183 at [26]-[27] Applegarth J observed that:
“The authorities emphasise that a court should be careful and only strike out a pleading for failing to disclose a cause of action in a clear case. The power to strike out a sufficiently pleaded statement of claim cannot be exercised ‘once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it’.
A pleading also may be struck out on the ground that it has ‘a tendency to prejudice or delay the fair trial of the proceeding’. A pleading may be deficient, and liable to be struck out on this ground, because it fails to fulfil the function of a pleading which is ‘to state with sufficient clarity the case that must be met’ and thus define the issues for decision. A pleading will lack sufficient clarity if it is ‘ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him’.”[2]
- [19]The arguments on behalf of State Mercantile are that, firstly, the amendments should be struck out “as the claim for breach of contract is not maintainable, is embarrassing as an inconsistent plea, and is not the part of a sustainable plea” and, secondly, that given the proximity of the trial date, the amendments should be disallowed because they, among other things, “substantially add great time and costs to the trial because it may necessitate both parties obtaining expert evidence”.
- [20]As to the first point, counsel for State Mercantile is critical of the form of the amendments to the pleading, essentially submitting that the alternative pleas are not clearly set out, but rather are mixed up in a way that is not consistent with the requirement in r 156 of the UCPR. More substantively, State Mercantile submits that the (new) claim for damages is not maintainable because:
- (a)termination of the Agreement was contemplated by clauses 12.1 and 12.3, with the consequences dealt with in clause 12.4 of the Agreement (in the form of the early termination fee), and as such there is no basis on which a separate entitlement to damages, or an indemnity can be said to arise;
- (b)up until the August amendment, Oracle’s case had proceeded on the basis that it was State Mercantile which had terminated the Agreement, and it is on that basis the invoices for the early termination fee were issued by Oracle;
- (c)the amended plea, on the basis that the transfer of State Mercantile’s telephone services to another provider is repudiatory conduct, which was accepted by Oracle by the issuing of the invoices (and on that basis, the Agreement was terminated by Oracle), is entirely contradictory to the case which has been put by Oracle since 2013 – and the claim for the early termination fee is entirely inconsistent with the now proposed claim for damages;
- (d)in any event, transfer of the services to another provider “does not necessarily constitute a ‘repudiation’ of the contract”, because the contractual obligation (which is disputed) was to pay monthly instalments.
- [21]The second point is tied up with State Mercantile’s complaints about the (in)adequacy of disclosure made by Oracle, in particular in relation to the amended damages claim.
- [22]Counsel for the defendant, Oracle, submits that the amended claim is “a simple loss of bargain claim” of the kind recognised in Progressive Mailing House v Tabali (1985) 157 CLR 17 at 31 and more recently in Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237.[3] It is submitted that the amendments to the counterclaim put an alternative claim (to the existing claim to recover the early termination fee) which relies on the common law right of a promisee (here Oracle) to claim loss of bargain damages, in circumstances where the promisor (State Mercantile) has either breached the Agreement, or alternatively repudiated (or renounced its obligations under[4]) the Agreement, entitling Oracle to terminate the Agreement. As a matter of pleading, it is submitted that all the elements for the claim that State Mercantile repudiated the agreement, and Oracle elected to accept that and terminate the contract, are pleaded. As a matter of law, it is submitted there is no reason in principle why Oracle cannot maintain a claim for damages at common law, outside the provisions of the Agreement for an early termination fee.
- [23]There do seem to be some – possibly fairly significant – hurdles to the success of the alternative claim, including:
- (a)The conduct said to amount to repudiation (transferring the landline and then mobile services to another telecommunications provider) is the same conduct which is relied on as breach of cl 12.3 (terminating the Agreement without 30 days’ notice). This is apparent from particulars provided on behalf of Oracle.[5] But as counsel for Oracle acknowledged at the hearing on 11 October, breach of cl 12.3 – that is, failing to give 30 days’ notice – could not be said to give rise to damages for loss of the bargain, of the magnitude now sought to be claimed.
- (b)The conduct said to amount to repudiation (transferring services to another service provider) in itself does not involve breach of any term of the Agreement (the obligation under the Agreement is to pay the monthly charges). As acknowledged in Oracle’s written submissions on 11 October, it could only arguably be characterised as a renunciation of State Mercantile’s obligations under the Agreement, at a time that precedes the time for performance (that is, an anticipatory breach[6]). What is relied on as acceptance of that anticipatory breach, and an election by Oracle to terminate the Agreement, is the issuing of the invoices for the early termination fee. But the right to recover the early termination fee is dependent upon termination by State Mercantile under, relevantly, cl 12.3 having occurred (which would seem to be inconsistent with a characterisation of those invoices as indicating acceptance of repudiation, and election by Oracle to terminate).
- (c)In any event, even if there be a right to recover damages, consequent upon termination by Oracle for State Mercantile’s repudiation, given that the Agreement confers on State Mercantile a right to terminate, with 30 days’ notice, for any or no reason, it is difficult to contemplate an entitlement to loss of bargain damages, of the magnitude claimed by the defendant, being established – as opposed to some far lesser amount, reflecting the loss as a result of not being given 30 days’ notice.
- [24]Notwithstanding those matters, as a matter of law, the alternative claim sought to be made by Oracle is arguable. The principles which apply on an application to strike out under r 171 are clear. The amended pleading does fulfil the basic function of identifying the issues relied upon in making the alternative claim; does disclose an arguable cause of action; and does apprise State Mercantile of the case it has to meet at the trial. In the circumstances, it should be allowed to go to trial, and be dealt with on its merits, on the basis of full argument as to the application of the relevant legal principles, to the facts as they are established at trial.
- [25]As already noted, in the course of argument, counsel for Oracle did acknowledge that the alternative claim for loss of bargain damages, pleaded in paragraph 21A, ought to be limited to the anticipatory breach/repudiation case, because of the acknowledgment that breach of clause 12.3 would not be such as to give rise to an entitlement to loss of bargain damages, at common law. On that basis, it would seem appropriate that the words in the first line of [21A] of the amended counterclaim ought to be struck out, so that it reads “By reason of the Plaintiff’s anticipatory breach…”. In the interests of saving time and cost, I will suggest to the parties that this simply be done by hand, on the filed copy of the amended document (filed on 20 September 2016).
- [26]Otherwise, as frustrating as it may be for the plaintiff to have this matter raised so late in the course of the proceedings, I am unable to conclude that the amendments have a tendency to prejudice or delay the fair trial of the proceeding, for the purposes of r 171(1)(b) of the UCPR. It is possible to sufficiently understand the alternative cases which are put. There is still some 5 weeks until the trial, and it is clear the legal representatives for State Mercantile have been giving consideration to the alternative counterclaim since it was first raised in August.
- [27]It remains to deal with the plaintiff’s complaints about disclosure, which I will address with the parties, after delivering this ruling on the strike out application.
Footnotes
[1]Spencer v The Commonwealth (2010) 241 CLR 118 at [24].
[2]References omitted.
[3]See also Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd (2005) 218 ALR 1 at [52]-[62] per French CJ.
[4]See Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [44].
[5]See annexure RK-2 to the affidavit of Rhonda King filed 9 June 2016.
[6]See Wight v Foran (1987) 11 NSWLR 470 at 484-5 per McHugh JA (as his Honour then was).