Bruce J Small No 1 Pty Ltd v Minister for Natural Resources & Anor [1999] QSC 38

IN THE SUPREME COURT OF QUEENSLAND Brisbane Before Mr Justice Muir [Bruce Small No 1 P/L v Minister for Natural Resources & Anor] BETWEEN: No. 8396 of 1998 BRUCE J SMALL NO 1 PTY LTD (ACN 000 061 870) AND THE ISLAND BEACH CLUB PTY LTD (ACN 008 613 456) Plaintiffs AND: MINISTER FOR NATURAL RESOURCES First Defendant AND: STATE OF QUEENSLAND Second Defendant REASONS FOR JUDGMENT - MUIR J. Delivered the fifth day of March 1999 CATCHWORDS: INTERFERENCE WITH PERFORMANCE OF CONTRACT - OBJECTIVE TEST TO ASCERTAIN INTENT- INTENTION AN ESSENTIAL ELEMENT OF THE TORT OF INDUCING OR PROCURING BREACH OF CONTRCT - FAILURE TO PLEAD MATERIAL FACTS- STRIKE OUT APPLICATION Counsel: J. Bell Q.C. for the respondents J. Gallagher Q.C. for the applicant Solicitors: Reidy & Tonkin for the Respondents BT Dunphy, Crown Solicitor for the Defendants Hearing Date: 16 February 1999 [1999] QSC 38 -- 1 of 11 -- ( ( ') 'c 2 IN THE SUPREME COURT OF QUEENSLAND Brisbane Before Mr Justice Muir [Bruce Small No 1 PIL v Minister for Natural Resources & Anor] BETWEEN: No. 8396 of 1998 BRUCE J SMALL NO 1 PTY LTD (ACN 000 061 870) AND THE ISLAND BEACH CLUB PTY LTD (ACN 008 613 456) Plaintiffs AND: MINISTER FOR NATURAL RESOURCES First Defendant AND: STATE OF QUEENSLAND Second Defendant REASONS FOR JUDGMENT - MUIR J. Delivered the fifth day of March 1999 The applicant/defendants (the Minister for Natural Resources and the State of Queensland) apply to strike out the Statement of Claim delivered in the action by the respondent/plaintiffs (Bruce J. Small No. 1 Pty Ltd and The Island Beach Club Pty Ltd) on the grounds that it discloses no reasonable cause of action. The only relief claimed against each applicant is an injunction restraining the surrender of a special lease. The cause of action upon which the relief is based is an alleged inducement or procuration of breach of contract on the part of each of the applicants. The respondents contend that the Statement of Claim does not contain allegations of the material facts necessary to -- 2 of 11 -- 3 ( ( 4 \ 5 6 2 establish the necessary elements of the tort of inducing or procuring breach of contract in that the respondent has not pleaded that - • each of the applicants intentionally procured a breach of contract; and/or • each applicant has intentionally prevented the respondent from obtaining the performance of the contract in question by unlawful means. The allegations in the Statement of Claim The allegations in the Statement of Claim may be summarized in broad terms, as follows: The respondent's entered into a written agreement in December 1989 ("the agreement") to sell to Interpacific Resorts (Australia) Pty Ltd ("Interpacific") part of freehold land owned by the respondents on South Stradbroke Island. In February 1992 the first applicant on behalf of the second applicant granted to Interpacific Golf (Australia) Pty Ltd ("Golf') in its capacity as agent for Interpacific, a special lease of Crown land ("the Special Lease") for a term of 50 years from 1 February 1997. A clause of the special lease required the construction of a golf course on the land the subject of the lease by 1 February 1997. It was an implied term of the agreement, as varied, that Interpacific would proceed to construct a golf course on the Crown land as quickly as reasonably possible - "and in any event completion of construction of such golf course shall take place not later than the date provided for such completion in the Special Lease .,. [and] "act honestly and reasonably in taking steps necessary to construct .,. [such] ... golf course ... in conformity with the Special Lease". The first applicant is and has been aware of such contractual terms. The first applicant wrote to the respondents on 28 October 1997 stating inter alia - "Suffice to say that the Department of Natural Resources is in direct communication with Interpacific on the lessee's compliance -- 3 of 11 -- 7 , ( 8 ( 9 ( 11 3 with the lease conditions but if negotiations ultimately prove fruitless, a forfeiture of the lease may be an option that needs to be pursued." On 15 May 1998 the first applicant wrote to the respondents advising inter alia - " ... re-negotiation of the existing lease is not being considered as a surrender of the existing lease is still this Department's preferred position. " On or about 8 August 1998 the applicants advised the respondents that unless the respondents took action to prevent the applicants from surrendering the special lease they would surrender it. The applicant respondents have evinced an intention to voluntarily surrender the special lease and any such surrender would necessarily prevent Interpacific from performing its obligations under the agreement as varied. (Presumably, it was intended to allege that the respondents intended to accept a voluntary surrender.) Alternatively, any voluntary surrender of the special lease would hinder Interpacific in its performance of its obligations under the agreement. By letter dated 11 August 1998, the first applicant advised the respondents that the first respondent would put negotiations with Interpacific in abeyance for 28 days from the date of the letter and that - "After that time [the first applicant] proposes to accept the surrender of current Special Lease No. 52186 and to seek the issue of a new lease to Interpacific subject to certain conditions." The respondents' submissions The respondent's submissions may be summarized as follows- • o 22 r 1(1) requires a pleading to set out the material facts on which the pleading party relies to support its cause of action. It does not require the elements of a cause of action to be pleaded. -- 4 of 11 -- 4 • The tort is not confined to the procurement of a breach of contract but extends to the prevention or hindrance by a third party of performance by a party to it. 1 • A person directly interferes with a contract by performing deeds which disable the person with whom the plaintiff has contract from continuing with the performance of the contract. 2 12 It is pleaded that the voluntary surrender of the special lease will prevent Interpacific from performing its contractual obligations. ( Although intention has not been pleaded specifically there is authority for the proposition that an intention to harm "is necessarily involved if a person knowingly interferes with the ( enjoyment by another of a positive legal right ... " 3 \. 14 If a defendant does an act, the substantially certain consequence of which is directly to 15 16 bring about a breach of contract of which he or she is aware, then it will be presumed that the breach was intended and liability will ensue unless the presumption is rebutted. 4 The essential elements of the tort of inducing or procuring breach of contract are the knowing and intentional interference by the defendant with the plaintiff's contractual rights without lawful justification. 5 Applicable principles of law I accept that the existence on the part of the defendant of an intention to interfere with 1 Torquay Hotel Co Ltd v Cousins [1969]2 Ch 106 at 138 and Woolley v Dunford (1972) 3 SASR 243 at 267. 2 Balkin & Davis. The Law afTorts. 2nd Ed., 1996 at p 606. 3 Northern Territory v Mengel (1995) 69 ALJR 527 at 537-538 4 Balkin & Davis. The Law of Torts. (supra) at 613 and Woolley V Dunford (supra) at 272. Wooley v DuY{ford (1979) 3 SASR 243 at 266; Independent Oil Industries Ltd v The Shell Co ofAust Ltd (1937) 37 SRNSW 394 at 414-415;AllstateLife Insurance Co vAustralia and New Zealand Banking Group Ltd (1995) 58 FCR 26 at 42-43. -- 5 of 11 -- ( ( 17 ( 5 performance of a contract to which the plaintiff is a party or to procure a breach of it is an essential element of the tort. 6 The learned authors of Clerk & Lindsell (supra) state in para. 15-03 that the test of intention is objective. Greig v Insole (1978) 1 W.L.R. 3902 at 337-338 is cited as authority for that proposition. In that case, Slade J applied an objective test in order to ascertain intent, explaining at 337-338 - "In my judgment, the intentions of the ICC as at July 26, 1977, can only be judged by what it did that day and subsequently said to the outside world in its press statement of that day. As Lord Halsbury L.C. said in South Wales Miners' Federation v. Glamorgan Coal Co. Ltd (1905) AC. 239, 244, it is a principle of the law that 'people are presumed to intend the reasonable consequences of their acts.' The same principle must in my judgment apply a fortieri when judging the intentions of a large unincorporated association." That approach finds supports in other authorities. 7 It was said in the joint judgment in Northern Territory v. Mengel (1995) 69 AL.J.R. 527 at 537-8 - "Moreover, developments involving the so-called 'economic torts' (which the cause of action described in Beaudesert is sometimes said to be )38 have largely proceeded on the basis that liability depends on the intentional infliction of harm. However, the 'economic torts' emerged only in the second half of the last century39 and, even now, the law in that regard is far from settled. The first development of significance was the recognition, in Lumley v Gye, 40 of the tort of 6 7 38 39 40 Clerk & Lindsfell on Torts 16th Ed. para 15-02; 45 Halsbury's Laws of England 4th Ed. para 1518; Independent Oil Industries Ltd v The Shell Co. ofAust. Ltd (supra); Torquay Hotel Co ltd v Cousins (supra) and Merkur Island Shipping Corporation vLaughton (1983) 2 AC. 570 and Allstate Life Insurance Co. v. Australia and New Zealand Banking Group Ltd (1995) 58 F.C.R. 26 at 44. J.T. Stratford & Son Ltd. v Lindley (1965) AC. 269 at 296 per Pearson L.J.; White v Riley [1921]1 Ch.l; South Wales Miners Federation v Glamorgan Coal Co. [1905] AC. 239 at 250 per Lord James; Independent Oil Industries Ltd v The Shell Co. ofAustralia Ltd. [1937] SRNSW 394 at 415 per Jordan C.J.; Swiss Bank Corp. v Lloyds Bank Ltd. [1979] Ch. 548 at 580 and Emerald Construction Co. Ltd. v. Lowthian [1966] 1 WLR Ch.D. 1013 at 1019 per Diplock L.J. See, e.g. Balkin and Davis. op cit at p 625 et seq.; Luntz and Hambly, Torts Cases and Commentary (3rd ed, 1992) at p 812 et seq; Morison and Sappideen, Torts Commentary and Materials (8th eel, 1993) at p 166 et seq. Note, however, that the action per quod servitium amisit, the earliest record of which is in the printed reports of 1293, is sometimes classified as an economic tort. See Balkin and Davis, op cit at p 673 et seq; Jones, "Per Quod Servitium Amisit" (1958) 74 Law Quarterly Review 39 at 40, n 6. (1853) 2 EI & BI216 at 229-230, per Crompton J; at 233-234, per ErIe J; at 238, per Wightman J [118 ER 749 at 754, 756, 757]. -- 6 of 11 -- 18 ( ( ( i\ 19 6 intentional interference with contractual rights. Subsequent developments in the United Kingdom have, to some extent, impinged upon the intentional element of that tort. Liability does not depend on whether there is a predominant intention to injure 41 and it has been held that constructive knowledge of the terms of a contract is sufficient, so that a defendant may be liable if he or she recklessly disregards the means of ascertaining those terms.42 But it is still accurate to describe the tort as one that depends on an intention to harm for that is necessarily involved if a person knowingly interferes with the enjoyment by another of a positive legal right, whether such knowledge is actual or constructive." In Emerald Construction Co. (supra) Denning M.R. said at 1017 (1966 1 All E.R.) - "For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is a breach or not. Some would go further and hold that it is unlawful for a third person deliberately and directly to interfere with the execution of a contract, even though he does not cause any breach. The point was left open by Lord Reid in J. T. Stratford & Son, Ltd v. Lindle;?" Diplock L.J.'s formulation of principle at 1019, of Emerald Construction Co. accepted the necessity of establishing intent and addressed the means of establishing it - "The element of intent needed to constitute the tort of unlawful procurement of a breach of contract is in my view sufficiently established if it be proved that the defendants intended the party procured to bring the contract to an end by breach of it if there were no way ofbrining it to an end lawfully. A defendant who acts with such intent runs the risk that, if the contract is broken as a result of the party acting in the manner in which he is procured to act by the defendant, the defendant will be liable in damages to the other party to the contract. On the evidence as it now stands I think that the inference is irresistible that such was the defendants' intention. The one thing on which they were determined was that Emerald's work under its labour only sub-contract with the main contractors should cease. Whether this involved a breach of contract by the main contractors was a matter of indifference to them." The following passage from Denning M.R.' s judgment in Torquay Hotel Co. v. Cousins (supra) makes it plain that he did regard the above passage from his judgment in Emerald 41 42 3 See, egLonrhoPlc vFayed[1990] 2 QB 479 at 488-489, per Dillon U; at 491-492, per Ralph Gibson U; at 494, per Woolf U and the cases cited therein. Emerald Construction Co Ltd v Lowthian [1966]1 WLR 691 at 700-701, per Lord Denning MR. [1966 1 All E.R. 1012 at 1017] [1964]3 All E.R.. at p. 107; [1965] A.C. at p. 324 -- 7 of 11 -- 20 ( 21 ( ! \ 22 7 Construction Co. as suggesting that intention was not an essential element of the tort. "First, there must be inference in the execution of a contract. The interference is not confined to the procurement of a breach of contract. it extends to a case where a third person prevents or hinders one party from performing his contract, even though it be not a breach. Second, the interference must be deliberate. The person must know of the contract or, at any rate, turn a blind eye to it and intend to interfere with it: see Emerald Construction Co. v. Lowthian [1966] 1 W.L.R. 691." There is also substantial authority in support of the proposition that affirmative proof that the defendant did not in fact intend to induce a breach of contract will operate to prevent the elements of the tort from being constituted. Clerk & Lindsell on Torts 16th Ed. para. 15-03; White v Riley (1921) 1 Ch. 1 C.O.; Smith v. Morrison (1974) 1 W.L.R. 659 and Pritchard v. Briggs (1978) 2 W.L.R. 317. This consideration which, to my mind, does not sit happily with an objective test of intention, is not relevant for present purposes as, in my view, if a defendant wishes to rely on its subjective state of mind, it is obliged to plead it as a defence to the claim. Of more relevance is the question of whether the respondent's alleged misconduct constituted a direct or indirect interference with the contract. In order for the inducement or procurement to be actionable it must be either direct, or indirect and accompanied by an act wrongful in itself. D.C. Thomson & Co.Ltd v Deakin (1952) 1 Ch. 646 at 681 per Evershed M.R. and per Morris L.J. at 702; Torquay Hotel Co. Ltd v. Cousins (supra) at 138-139 per Denning M.R.; Wooley v Dunford (supra) at 267. There may be difficulty, at times, in ascertaining whether an alleged interference is direct or indirect. In Greig v Insole (supra) Slade 1. said at 342 - "I take it, however, that the phrase 'direct interference' covers the case where the intervener, either himself or his agents, speaks, writes or publishes words or does other acts which communicate pressure or persuasion to the mind or person of one of the contracting parties themselves while 'indirect interference' refers to the case where, without actually doing any of these things, the intervener nevertheless procures or attempts to procure a situation which will result or may result in a -- 8 of 11 -- 23 8 breach of the contract." A similar view of the meaning of I direct' appears to have been taken by Lord Pearce in J.T. Stratford & Son Ltd (supra) at 333; by Evershed M.R. in D.C. Thomson & Co Ltd. v Deakin (supra) at 678 and 682, per Jenkins L.J. at 695 and per Morris LJ. at 702 and in Torquay Hotel Co. Ltd. v. Cousins (supra). It also seems to be established that, in the case of indirect procurement or inducement, the tort will be constituted only if the alleged breach of contract has ensued as a necessary consequence of the alleged wrongful conduct. Thomson v Deakin (supra); ( Merkur Island Shipping (supra). Direct interference may be constituted by the defendants placing some physical constraint on a contracting party to prevent it from carrying out its contract with (,,' the plaintiff (Thomson v Deakin (supra)) or where the defendant deprives such party to the contract of "his only possible means of performing the contract (as for example, by removing the only available essential tools or by kidnapping a necessary or irreplaceable servant .. )" 24 ( 25 26 The authorities discussed above provide some support for the respondent's position. Although it has been consistently held that intention is a necessary element of the tort, intention may be established by application of the principle that people are presumed to intend the reasonable consequences of their acts. The respondent argues, in effect, that by pleading facts which show that the reasonable consequences of the respondents' acts will be to procure a breach of the agreement they have pleaded the essential material facts as the above principle oflaw, when applied to the facts, establishes intention. I am unable to accept that submission. "Intention" is an essential element ofthe tort on which the respondents rely to ground the relief they seek in the action. The existence of the requisite intention on the part of the applicants at relevant times is a material fact for the purposes of 0 22 r 1 of the Rules of the Supreme Court. Referring to 0 19 r 4 of the Rules of the Supreme Court, Scott L.J. in Bruce v Odhams -- 9 of 11 -- ( 27 ( 28 29 9 Press Ltd (1936) 1 K.B. 697 said at 712- "The cardinal provision in r. 4 is that the statement of claim must state the material facts. The word "material" means necessary for the purpose of formulating a complete cause of action; and if anyone "material" fact is omitted, the statement of claim is bad; it is "demurrable" in the old phraseology, and in the new is liable to be 'struck out' under Order XXV., r. 4: see Philipps v. Philipps (I); or 'a further and better statement of claim' may be ordered under Order XIX., r. 7." Those observations have met with approval in a number oflater cases. No doubt is cast on that expression of principle by the fact that the conclusion reached in Bruce that, in a statement of claim alleging defamation, the external facts relied upon to identify the plaintiff in the matter complained of should be pleaded as material facts, has not been accepted in this country since the decision in Turner v Bulletin Newspaper Co. Pty. Ltd. (1974) 131 c.L.R. 69. My conclusion as to the necessity to plead intention is consistent with the approach of the Full Court of the Federal Court in Allstate (supra) at 44-45. I have discussed relevant principles of law in order to show that they are not without difficulty and complexity. It is thus of even more than usual importance that the pleadings perform their role of defining the issues and thereby informing the parties in advance of the case they have to meet and so enable them to take steps to deal with it. 43 Unless intention is pleaded the applicants will not know whether it is alleged that they or either of them had an actual as opposed to a constructive intent. It will be unlikely that the statement of claim and the defence will identify the precise issues on which the outcome of the action will depend. As intention is a necessary element of the respondents' cause of action and a material fact necessary to establish that cause of action it is not appropriate that the deficiency in the pleadings 43 c.r. Farrell v Secretary ofState for defimce (1980) 1 W.L.R. 172 at 180 and Dare vPulham (1982) 148 C.L.R. 658 at 664. -- 10 of 11 -- 10 be remedied by the provision of particulars. 44 30 I am mindful of the authorities which establish that the power to strike out pleadings in so far as they fail to disclose a cause of action is to be sparingly exercised. It has been said that a case must be very clear to justifY the summary intervention of the court to prevent a party from submitting its case for determination. 31 I have concluded that there is a clear defect in the pleadings. 32 The applicants submit that the statement of claim should be struck out and that the ( respondents not be given leave to re-plead. That course is plainly inappropriate in circumstances in which the defect in the pleadings is of a somewhat technical nature and where it is by no means ( ~/ plain that the respondents, given the opportunity, will not be able to plead a sustainable cause of action. 33 The appropriate course to follow, in my view, is to: give the respondents leave to deliver an amended statement of claim within 21 days of the date hereof; order that the respondents pay the applicants' costs of and incidental to the application up to and including to-day's date to be ( taxed and to adjourn the application to a date to be fixed to be brought on on four days notice in writing by any party to the others. I will hear submissions on these proposed orders. 44 Bond Corporation Pty. Ltd. v. Thiess Contractors Pty. Ltd. (1987) 71 A.L.R. 615; Trade Practices Commission v. David Jones (Australia) Pty. Ltd. (1985) 7 F.C.R. 109 and H 1976 Nominees Pty. Ltd. v. Gaili and Apex Quarries (1979) 40 F.L.R. 242 at 246-7. -- 11 of 11 --