Boral Resources (SA) Ltd v Civil Mining Solutions Pty Ltd - [2018] SASC 151

Supreme Court of South Australia
(Magistrates Appeals: Civil)
BORAL RESOURCES (SA) LTD v CIVIL MINING SOLUTIONS PTY LTD & ORS
[2018] SASC 151
Judgment of The Honourable Justice Doyle (ex tempore)
17 September 2018
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA
MAGISTRATES - COMMENCEMENT OF PROCEEDINGS - AMENDMENT OF INITIATING PROCESS
The plaintiff sought leave to amend its statement of claim to plead an alternative claim. The Magistrate declined the plaintiff’s application on the bases that the amendments involved: (i) an alternative case that was impermissible because it involved advancing factually alternative cases in circumstances where the plaintiff knows one of those is false; and (ii) an alternative case based upon the hypothesis of the defence case without pleading the material facts upon which it was based.
The plaintiff appeals the Magistrate’s refusal to grant leave to amend.
Held (per Doyle J) allowing the appeal:
1.       The Court’s obligation to promote the just, expeditious and economical resolution of claims requires that not too strict or technical an approach is taken to pleadings.
2.       The alternative case sought to be pleaded by the plaintiff was sufficiently clearly and adequately pleaded. It was not an impermissible alternative claim.
3.       Appeal allowed.
Magistrates Court (Civil) Rules 2013 (SA) rr 3, 80(1), referred to.
Hicks v Hicks (2016) 125 SASR 34; Riverland Fruit Cooperative Ltd (in liq) v 007 953 380 Pty Ltd [2008] SASC 258; Groves v Groves [2011] QSC 411, considered.

BORAL RESOURCES (SA) LTD v CIVIL MINING SOLUTIONS PTY LTD & ORS
[2018] SASC 151
Civil
DOYLE J (ex tempore):

This is an appeal from a decision of a Magistrate refusing the plaintiff permission to amend its statement of claim.
Background
The plaintiff’s claim relates to materials that it alleges that it supplied, on credit, to a customer on the standard form terms and conditions set out in a credit application and guarantee. The plaintiff claims that it provided materials to the value of $87,270.95 for which it has not been paid. It claims this sum (together with amounts for interest and costs) by way of debt or damages. It claims this sum from either the first defendant (Civil Mining Solutions Pty Ltd, or ‘CMS’) as customer, or the second or third defendants as guarantors.
More particularly, in its statement of claim, the plaintiff alleges that on 5 September 2013 CMS applied to the plaintiff to open a credit account, in relation to the supply of materials by the plaintiff to CMS, by submitting a completed application form. It further pleads that on or about the same date it agreed to open a credit account for CMS on the terms and conditions set out in the application; and the second and third defendants agreed to guarantee CMS’s payment obligations under that credit account.
The plaintiff then pleads that between November 2016 and February 2017 it supplied CMS with, and invoiced CMS for, materials to the value of $87,270.95. It pleads that in breach of the credit account agreement (in the case of CMS), and in breach of the guarantee (in the case of the second and third defendants), the amounts owing in respect of these materials have not been paid.
In their amended defence, the defendants admit the fact of the first credit account agreement and guarantee, but plead that they were subsequently “withdrawn” and “replaced” on or about 7 July 2015 by the provision of a second credit application executed by a related corporate entity by the name of Civil Mining Group Pty Ltd (CMG).[1] The defendants plead that the plaintiff acknowledged receipt of the second credit application and did not ever inform the defendants that it had been rejected. The defendants further plead that the invoices rendered after this date by the plaintiff were incorrectly addressed to CMS rather than CMG.
[1] A company subsequently placed into liquidation.
The defendants thus deny liability for the amounts claimed on the basis that the contractual arrangements relied upon by the plaintiff (that is, the credit account agreement with CMS, and the guarantees with the second and third defendants) were no longer in force at the time the goods in question were provided.
The amended defence also pleads that the initial guarantee was in any event unenforceable on the grounds that, at the time it was executed, the second and third defendants had not received legal advice and were not aware of its terms and conditions (apparently on the basis that they were illegible on the copy they executed). There is also an unparticularised allegation of coercion and that the amounts in the relevant invoices were excessive, incorrect and did not take into account the part payment of some of the invoices rendered to CMS by CMG.
The plaintiff has also filed a reply in these proceedings. Of relevance for present purposes is paragraph 2 of that reply. In that paragraph, the plaintiff pleads the provision of the second credit application form in June 2015, and that the application form contained what was described as a spousal requirement. The plaintiff further pleads that that requirement had not been completed or complied with.
Application to amend the statement of claim
In response to the defendants’ allegation that the first credit account agreement with CMS was withdrawn when it was replaced, or superseded, by a second credit application by CMG, the plaintiff sought permission to amend its statement of claim under rule 80(1) of the Magistrates Court (Civil) Rules 2013 (SA).
The proposed amendments to the statement of claim involve the inclusion of an alternative claim arising out of the provision of the second credit application to the plaintiff by CMG. In particular, they include allegations to the following effect:
·    On 7 July 2015, CMG applied to the plaintiff to open a credit account in relation to the supply of goods by the plaintiff by submitting a (second) completed application form.
·    The second application form included identical terms and conditions to the first application, including a guarantee. However, on this occasion the guarantee was signed only by the second defendant and not the third defendant.
·    The plaintiff “rejected” the second credit application and therefore “did not enter into” a second credit account agreement with CMG.
In the alternative, “if the Court finds in favour of the defendants on the issues set out in paragraphs 6 to 8 of the amended defence … namely that a new contract was entered into whereby the goods were to be supplied to [CMG] rather than to [CMS], then the second defendant agreed to guarantee payment of [CMG’s] account”.
In the balance of the proposed amended statement of claim, the plaintiff maintains its plea that the invoices have not been paid, alleging (in its primary case) that the amounts are owed by CMS as customer, and the second and third defendants as guarantors, or (in its alternative case) that the amounts are owed by the second defendant as guarantor.
The Magistrate’s reasons for refusing permission to amend
The defendants opposed the amendments on the ground of their unexplained late timing. However, the Magistrate rejected this ground, and the defendants have not sought to re-agitate it through a notice of contention. To the extent that the issue of timing was pressed at all in argument, it was only faintly pressed. In my view, there is no merit in this aspect of the defendants’ opposition to the amendments. The proposed amendments do not involve any significant enlargement of the factual substratum already in play in the litigation, but rather focus primarily upon the legal consequences of that factual substratum. There has, as yet, been no trial date that has been set, and hence the amendments will not jeopardise a trial date or otherwise occasion delay. The late timing of the amendments is, at least to some extent, explained by the matters arising out of the allegations in the defence. Finally, the proposed alternative case is plainly arguable. For these reasons, I consider that the interests of justice would point strongly towards the amendments being permitted, subject to the other matters considered by the Magistrate, to which I now turn.
The Magistrate refused permission to amend on two separate grounds.
The first ground for refusing permission was that the proposed amendments would introduce an impermissible alternative claim and hence would be liable to be struck out. It was said to be impermissible because it involved advancing factually alternative cases in circumstances where the plaintiff knows one of those alternatives is false, and hence would be an abuse of process based upon the observations of Blue J in Hicks v Hicks.[2] The Magistrate explained:
There is not necessarily a straightforward answer to the first question because the creation of a contract is the creation of a legal state of affairs based on underlying objective facts, namely the conduct of the parties constituting offer and acceptance. In the abstract, it may be possible for a party to plead alternatives relating to the offer or acceptance of a contract where the underlying conduct is ambiguous and a party may not genuinely know whether a contract has been formed or not. The proposed amended claim does not disclose any conduct which might indicate whether the contract was accepted or not. Rather, it asserts the plaintiff rejected the second application without particularising conduct which purportedly constitutes a rejection. It follows, there is nothing to suggest any ambiguity in the conduct of the plaintiff such that the plaintiff could genuinely not know whether or not a contract was accepted or not. Because of this, the plaintiff either knows or ought to know the second application was not accepted by it, and consequently cannot plead in the alternative on the basis that the second application was accepted.
[2] Hicks v Hicks (2016) 125 SASR 34 at [15]-[16].
The second ground for refusing permission was that the proposed amendments sought to introduce an alternative claim based upon the hypothesis that the second credit application had been accepted, but did not plead any material facts upon which the allegation was based. This was said to be contrary to the reasoning of Bleby J in Riverland Fruit Cooperative Ltd (in liq) v 007 953 380 Pty Ltd.[3] The Magistrate explained:
In my view the plaintiff has not pleaded any material facts upon which the Court might find that the second application was accepted by the plaintiff. If this is so then the consequence is, in accordance with the reasoning in Riverland the pleading would not be compliant with [the Rules] and would be liable to be struck out on that basis alone. Moreover, not only does the plaintiff rely on the amended defence at [6]-[8] to establish the material facts underpinning this alternative, the plaintiff appears to have misunderstood the nature of those paragraphs in the amended defence. Nowhere do the defendants plead that the second application was accepted by the plaintiff and so even if the plaintiff was able to rely on the material facts contained in the amended defence, the facts pleaded do not go to establishing the second application was accepted by the plaintiff. The material facts underpinning the plaintiff’s alternative argument would still not be established and would be liable to be struck out.
[3] Riverland Fruit Cooperative Ltd (in liq) v 007 953 380 Pty Ltd [2008] SASC 258 at [27]-[28].
Consideration
In my view, when addressing pleading disputes such as the present one, it is important to not to take too strict or technical an approach. To do so not only tends to give pleadings a status and function they do not deserve, but also tends to undermine the Courts’ obligation to do what they can to promote the just, expeditious and economical resolution of claims. In the case of the Magistrates Court, this obligation is contained in rule 3 of the Magistrates Court (Civil) Rules.
The function of pleadings is to define the issues in the case, and to ensure that the other party has fair notice of the case it is required to meet. Here, there is little doubt in my mind about the nature of the alternative case sought to be advanced by the plaintiff. Its primary case is that the agreement arising out of the first credit application remained in force at the relevant time; that there was no enforceable agreement arising out of the second credit application because it had “rejected” that second credit application. Its alternative case is that if there was an enforceable agreement arising out of the second credit application, then the second defendant is liable under the guarantee that formed part of that agreement.
There may have been a basis for requiring that the plaintiff to particularise its allegation that the second credit application form was “rejected”. But even if that were so, I do not think that was a sufficient basis for refusing the amendments in their entirety, as opposed to, for example, making permission to amend conditional upon particularisation of the “rejection”. In my view, the alternative case sought to be pleaded was an entirely orthodox plea which arose out of the defendants’ response to the plaintiff’s initial claim, and was adequately pleaded to warrant permission to amend being granted.
As to the Magistrate’s first ground for refusing permission to amend, I do not consider that the plaintiff’s proposed alternative case involved an abuse of process or was otherwise impermissible in the sense contemplated by the observations of Blue J in Hicks v Hicks relied upon by the defendants. Read in context, including having regard to the reply, I understand the plaintiff’s reference to it having “rejected” the second credit application to mean simply that it did not accept it in the sense necessary to give rise to an enforceable agreement, or to otherwise supersede the first agreement.
Whether the plaintiff’s conduct in respect of the second credit application was in fact sufficient to give rise to a second credit account agreement that was legally enforceable and superseded the first will be a matter for the Court to determine based upon a consideration of all of the surrounding circumstances. Those circumstances will include the matters already pleaded in the amended defence and the reply. Those relied upon by the defendants will presumably include the provision of a signed credit application form together with a signed guarantee, the plaintiff’s acknowledgement of receipt of that application, and the continued provision of materials. The plaintiff, on the other hand, presumably relies upon the absence of any communication of acceptance (as opposed to mere receipt) of the credit application, and the fact that subsequent invoices were rendered in the name of CMS rather than CMG.
But the important point for present purposes is not so much precisely what the relevant circumstances are, or which legal result they will produce, but rather that they involve an issue which is inherently a matter of construction and conclusion by the Court. Whether the circumstances surrounding the second credit application were sufficient to give rise to a second enforceable agreement, or to otherwise supersede the first agreement, will be a matter for the Court. I do not accept that this is a matter that is inherently within the knowledge of the plaintiff in the sense necessary to make the pleading of alternative cases an abuse of process or otherwise impermissible in the sense contemplated by Hicks v Hicks. The circumstances in this case are more akin to the alternative case held to be permissible in Groves v Groves.[4]
[4] Groves v Groves [2011] QSC 411.
I have not overlooked that the Magistrate’s reasoning in this respect focussed upon the allegation that the second credit application was “rejected” (or not accepted). While I accept that the notion of a credit application being “rejected” is capable of bearing a meaning that carries a factual connotation rather than a legal or conclusory connotation, I do not think too strict or literal an approach is appropriate in the circumstances of this case. I consider that the context suggests that it was intended in the legal or conclusory sense (that is, in effect as an allegation that there was no acceptance of the second credit application in the sense necessary to give rise to a legally enforceable agreement, as opposed to an allegation of some particular positive act of rejection).
But even if the pleaded reference to “rejection” was intended in the former sense, while it might have been appropriate to require particularisation of the positive act relied upon, I do not think it would involve an impermissible alternative plea. In other words, even if the factual circumstance or circumstances relied upon might have been inherently within the plaintiff’s knowledge, its or their legal significance in the context of the circumstances as a whole would not have been. The plaintiff might consider that its conduct (or lack of conduct) in respect of the second credit application was sufficient to constitute a rejection of that application that prevented it becoming a legally enforceable agreement. But whether that is so will ultimately be a matter turning on the Court’s view of the legal significance of the circumstances as a whole. It is thus permissible for the plaintiff to run a primary case in which its “rejection” of the second credit application had the result that the first credit agreement remained in force, and an alternative case which assumes its “rejection” was not sufficient to avoid a second credit agreement coming into effect and superseding the first credit agreement.
As to the Magistrate’s second ground for refusing permission to amend, I again consider that the Magistrate has taken too strict an approach to the proposed amendments. I can see no difficulty with the plaintiff adopting as the starting point for its alternative case the matters pleaded by the defendants in their amended defence; that is, the withdrawal of the first credit agreement by reason of the provision of a second completed and executed credit application and the acknowledgment of its receipt by the plaintiff. I can see no difficulty with the plaintiff contending, by way of an alternative case, that if this conduct gave rise to a new contract, then the second defendant remains liable as a guarantor under those new contractual arrangements. The plaintiff’s proposed amendments in this case do not give rise to ambiguity or gaps in the plaintiff’s case of the type or extent that existed in Riverland Fruit Cooperative Ltd (in liq) v 007 953 380 Pty Ltd.[5]
[5] Riverland Fruit Cooperative Ltd (in liq) v 007 953 380 Pty Ltd [2008] SASC 258 at [27]-[28].
It is true, as the Magistrate pointed out, that on a strict or literal reading of the amended defence the defendants have not pleaded that the second credit application was accepted and became legally enforceable. But, in my view, that is implicit or inherent in the defendants’ pleading and case. The defendants expressly plead that the first credit agreement was “withdrawn” and ceased to be legally enforceable by reason of the parties’ conduct in relation to the second credit application. The substance of the defendants’ case is that the first credit agreement fell away (or ceased to have legal effect) because it was replaced by a second legally enforceable credit agreement. This is reinforced by the plea in paragraph 8 of the amended defence that any amount sought by the plaintiff is due and payable by CMG.

I accept that it is at least conceivable that the parties’ conduct in relation to the second credit application resulted in the first credit agreement ceasing to have legal effect without itself being accepted and giving rise to a second enforceable credit agreement to replace the first. But even if this is so, and even if this is what the defendants intended to plead, I see no difficulty with the plaintiff’s alternative case taking as its starting point the parties’ conduct in relation to the second credit agreement and an assumption or additional allegation that it gave rise to a second legally enforceable credit agreement.
In summary, while the plaintiff’s proposed amendments to introduce an alternative case could have been more carefully or precisely pleaded, I consider that they are adequate to identify the issues raised by that alternative case and to provide the defendants with fair notice of the plaintiff’s case in that regard. And I do not consider there to be any impermissible inconsistency or ambiguity in the hypothesis underpinning the proposed alternative case. In my view, the interests of justice strongly favour the plaintiff having permission to amend to plead its proposed alternative case.
Conclusion
For these reasons, I consider it appropriate to allow the appeal.
I would have been inclined to make it a condition of the permission to amend that the plaintiff particularise its “rejection” of the second credit application insofar as it intended to rely upon any positive act of rejection (as opposed to a legal conclusion that it did not accept that that application in the sense necessary to give rise to a legally enforceable contract). However, events in this respect have been overtaken (or pre-empted) by the plaintiff’s application during the hearing of the appeal to replace its proposed allegation of rejection of the second credit application with an allegation to the effect that the plaintiff did not ever communicate acceptance of the second credit application and continued to supply goods pursuant to invoices addressed to CMS without complaint with the result that the materials were supplied under the first credit agreement. I consider this to be a useful clarification of the plaintiff’s proposed amendments and so propose to give leave to amend in those terms.
I make the following orders:
1.   Appeal allowed.
2.   Orders of the Magistrate dated 22 June 2018 set aside.
3.   The plaintiff has permission to amend its statement of claim in the terms of the proposed amended statement of claim exhibited to the affidavit of Ms Georges dated 23 January 2018, but with the variation proposed during the course of the hearing of this appeal.