Endeavour Health Care Holdings Pty Ltd v Westpoint Financial Services Pty Ltd
[2008] WASC 240
•27 NOVEMBER 2008
ENDEAVOUR HEALTH CARE HOLDINGS PTY LTD -v- WESTPOINT FINANCIAL SERVICES PTY LTD [2008] WASC 240
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WASC 240 | |
| Case No: | CIV:2302/2004 | 17 OCTOBER 2008 | |
| Coram: | MASTER SANDERSON | 26/11/08 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Leave to amend refused Counterclaim struck out in part | ||
| B | |||
| PDF Version |
| Parties: | ENDEAVOUR HEALTH CARE HOLDINGS PTY LTD WESTPOINT FINANCIAL SERVICES PTY LTD (ACN 074 148 324) ENDEAVOUR HEALTH CARE HOLDINGS PTY LTD (ACN 093 152 106) ENDEAVOUR HEALTHCARE LTD (ACN 091 428 125) |
Catchwords: | Practice and procedure Application to amend defence and counterclaim Turns on own facts |
Legislation: | Nil |
Case References: | Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 Robinson v Harman (1848) 1 Ex 850 Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
WESTPOINT FINANCIAL SERVICES PTY LTD (ACN 074 148 324)
Defendant
(BY ORIGINAL ACTION)
WESTPOINT FINANCIAL SERVICES PTY LTD (ACN 074 148 324)
Plaintiff by Counterclaim
AND
ENDEAVOUR HEALTH CARE HOLDINGS PTY LTD (ACN 093 152 106)
First Defendant by Counterclaim
- ENDEAVOUR HEALTHCARE LTD (ACN 091 428 125)
Second Defendant by Counterclaim
(BY COUNTERCLAIM)
Catchwords:
Practice and procedure - Application to amend defence and counterclaim - Turns on own facts
Legislation:
Nil
Result:
Leave to amend refused
Counterclaim struck out in part
Category: B
Representation:
Original Action
Counsel:
Plaintiff : Mr S M Davies
Defendant : Mr P J Hannan
Solicitors:
Plaintiff : Blake Dawson
Defendant : Mony de Kerloy
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Counterclaim
Counsel:
Plaintiff by Counterclaim : Mr P J Hannan
First Defendant by Counterclaim : Mr S M Davies
Second Defendant by Counterclaim : Mr S M Davies
Solicitors:
Plaintiff by Counterclaim : Mony de Kerloy
First Defendant by Counterclaim : Blake Dawson
Second Defendant by Counterclaim : Blake Dawson
Case(s) referred to in judgment(s):
Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50
Robinson v Harman (1848) 1 Ex 850
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
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1 MASTER SANDERSON: This application began life on 6 June 2008 when the plaintiff and defendants by counterclaim filed an application to the case management registrar seeking to strike out par 10 of the defendant and first plaintiff by counterclaim's counterclaim. That document is dated 18 March 2005. The time for making a strike out application has long since expired. In the end, for reasons which will become apparent, the application for the extension of time to bring the application was not opposed by the defendant.
2 For ease of reference, I will refer to the plaintiff by original action as the 'plaintiff'. I will refer to the defendant by original action as 'WFS'. I will refer to Westpoint Corporation Pty Ltd, which was the second plaintiff by counterclaim, as 'Westpoint Corporation'. I will refer to the second defendant by counterclaim as 'Endeavour'. A settlement agreement was reached between Endeavour, the liquidators of the plaintiff, and the liquidators of Westpoint Corporation in October 2007. The counterclaim of Westpoint Corporation was discontinued by orders made on 22 October 2007.
3 The plaintiff's claim is relatively simple. It has remained in the same form since the writ was lodged (originally in the District Court) on 21 October 2003. The plaintiff pleads that by written agreement dated 1 August 2000, the plaintiff agreed to purchase, and WFS agreed to sell, the issued shares in the capital of Startune Holdings Pty Ltd and Pinewood Enterprises Pty Ltd held by WFS for the sum of $11,251,000. The terms of the agreement are particularised. It is said that the consideration of $11,251,000 was allocated between the various entities being purchased. It is also pleaded that the agreement included terms which would allow for an adjustment of the purchase price to take into account certain liabilities of the various companies. The agreement anticipated the preparation of accounts and a payment in cash by WFS to the plaintiff based upon those accounts. It is further pleaded that the accounts were prepared and they showed that WFS was indebted to the plaintiff in the sum of $193,000. Demand was made by the plaintiff of WFS and WFS declined to pay.
4 It is convenient at this point to mention the procedural history of the matter. A defence and counterclaim was first filed on 26 March 2004 after the plaintiff brought an unsuccessful application for summary judgment in the District Court. Given the quantum of the counterclaim, the matter was remitted to this court by order of Muller DCJ on 2 July 2004. An amended reply and defence to counterclaim was filed on 15 September 2005. The matter then proceeded at a leisurely pace until
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- the bringing of this application. The bringing of this application was prompted by the settlement between the plaintiff and the liquidators of Westpoint Corporation. That settlement changed the dynamic of the case. Counsel for WFS appreciated that fact and quite properly did not oppose the extension of time to bring the application.
5 When the application was called on for hearing on 28 August 2008, counsel who appeared for WFS produced a proposed amended defence and counterclaim, a copy of which had been provided to the plaintiff's counsel either late the day before the hearing or on the morning of the hearing itself. There was no point in proceeding to deal with the pleading which was to be replaced. I therefore adjourned the matter and made programming orders requiring WFS to file any further amended pleading by 18 September 2008. (At the hearing on 7 October 2008 counsel had foreshadowed that the amended document then produced may not, in fact, be the final version of the pleading. Counsel was being consulted.) In fact, a further amended pleading was prepared and filed, but this did not prove to be the end of the matter. At the resumed hearing, WFS sought leave to amend in terms of a minute of proposed re-amended defence set-off and counterclaim which was dated 6 October 2008. Although counsel for the plaintiff had had limited opportunity to consider the amended pleading, he was prepared to deal with the application. So in the end, what had begun life as an application to strike out by the plaintiff was dealt with as an application for leave to amend by WFS.
6 Turning to the proposed pleading (which I will refer to as the minute), the agreement pleaded by the plaintiff is, in large measure, admitted. However, WFS refers to other terms of the agreement. In particular, par 2.2.6 is in the following terms:
Pursuant to clause 4.1(f), completion under the Share Purchase Agreement in relation to purchase of the Startune shares was conditional on Westpoint Financial or its nominee and Endeavour Healthcare Holdings also executing and entering into a property development agreement (the 'Condition Precedent').
7 It is then pleaded that in compliance with the condition precedent 'Westpoint Financial's nominee (Westpoint Corporation)' entered into what is defined as the 'Property Development Agreement' with the plaintiff. The terms of that agreement are pleaded.
8 By par 9 of the minute, WFS pleads that the plaintiff breached the implied term of the condition precedent. The alleged breaches are three in number. First, it is said that the plaintiff breached cl 3.1 of the Property
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- Development Agreement because it did not give notice of any property or properties to be developed by the plaintiff. Second, it is said that in breach of the Property Development Agreement, the plaintiff refused to assist Westpoint Corporation (not WFS, but Westpoint Corporation) to secure the funds required to undertake property developments contemplated by the Property Development Agreement. Thirdly, it is said that in breach of the Property Development Agreement, the plaintiff terminated that agreement. It is important to note that the Property Development Agreement was entered into between the plaintiff, Endeavour and Westpoint Corporation. WFS was never a party to that agreement. Quite what the reference to Westpoint Corporation as WFS's 'nominee' found in par 2.5 means is nowhere elucidated in the minute.
9 By par 10, WFS alleges that as a consequence of the plaintiff's alleged breaches of the Property Development Agreement, WFS has suffered loss and damage. So what is being put forward is that WFS, who is not a party to the agreement, has suffered loss and damages as a consequence of breach of that agreement. Particulars of the alleged loss and damage are provided. I will quote these in full (marking up has been omitted):
10.1 Each of the three property developments to be completed under the Property Development Agreement would have generated a net profit of $2,000,000.
10.2 Pursuant to clause 3.8(a) of the Property Development Agreement, Westpoint Corporation would have received 75% of the $2,000,000 for each of the three developments, being $4,500,000.
10.3 The purchase consideration under the Share Purchase Agreement was reduced by the amount Westpoint Financial's nominee (Westpoint Corporation) would receive under the Property Development Agreement.
10.4 In the premises, Westpoint Financial has suffered loss and damage of $4,500,000.
10.5 Alternatively:
10.5.1 Westpoint Financial lost the opportunity to sell the shares sold under the Share Purchase Agreement to an alternative party on terms which did not include entering into a property development or with a party who would fulfil its obligations under any property development agreement;
10.5.2 accordingly, Westpoint Financial lost the opportunity to sell the said shares for $4,500,000 more than the cash
- consideration to be paid under the Share Purchase Agreement;
- 10.5.3 alternatively, Westpoint Financial lost the opportunity to earn $4,500,000 under a property development agreement, the terms of which were fulfilled.
10 The plaintiff's complaint may be summarised in this way. Damages for breach of contract are compensatory. The principle is that 'where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed': see Robinson v Harman (1848) 1 Ex 850, 855 (Parke B). Following on from that, the plaintiff says that even if as pleaded in pars 10.1 and 10.2 Westpoint Corporation would have received $4,500,000, it is not a loss to WFS. As to par 10.3, it is said that even if it was the case that the purchase consideration under the Share Purchase Agreement was reduced by $4,500,000, that does not mean that WFS has suffered a loss of $4,500,000 by reason of the plaintiff's failure to comply with the Property Development Agreement.
11 On WFS's case, the plaintiff promised WFS, by an implied term in the Share Purchase Agreement or by collateral contract, to comply with the Property Development Agreement. If the plaintiff breached the promise, then the measure of damage in contract is the loss suffered by WFS as a consequence of the plaintiff's breach of contract. The alleged reduction of the purchase price in consideration of obtaining a contract promise is not such a loss.
12 On behalf of the plaintiff it was submitted that parties who are negotiating to enter into a contract may have many matters in mind as they arrive at the terms for their bargain. One or other of the parties may be prepared to make promises in relation to particular terms to secure other terms that are important to that party. However, once the bargain is struck, these are not matters that a court enquires into when assessing damages for breach of contract. Therefore, the alleged reduction of the purchase price may be the price paid for the promise. But once the bargain has been struck, if the promise is breached, the promisee needs to prove the damage that is suffered as a consequence of the breach.
13 As to par 10.5, the plaintiff says that it is infected with a similar problem. The allegation is that WFS lost the opportunity to sell the shares under the Share Purchase Agreement to an alternative party for a greater consideration because of a breach of that agreement by the plaintiff. It is submitted that such an argument does not lead to a claim for damages in
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- contract. It was said that in a breach of contract case, a plaintiff may claim damages for loss of a chance:
(a) where the main object of the contract, from the plaintiff's perspective, was to provide the chance of obtaining a benefit;
(b) where an express or implied term of the contract amounted to a promise by the defendant of a chance to obtain a benefit; and
(c) in any other case where a business opportunity is lost as a consequence of the defendant's breach and the loss of opportunity is within the rules on remoteness of damages.
14 It was submitted that there was no authority for the proposition that WFS ought be compensated for a chance WFS chose not to pursue by entering into the contract in the first place.
15 Recent practice in this court has discouraged strike out applications. The view has been taken that endless interlocutory skirmishing does nothing but delay resolution of the dispute. Far better that the matter proceed to trial and weaknesses in a case disclosed by the pleading can be sorted out in the context of the trial. In this instance, the plaintiff is concerned that if WFS's claim for damages as pleaded in par 10 is allowed to stand, the case will be delayed because a raft of evidence will be necessary to make out the damages claim. By way of example, in par 10.1, it is said that each of three property developments completed under the Property Development Agreement would have generated a profit of $2,000,000. Evidence would need to be produced which justified that claim. It is not difficult to imagine such evidence would be extensive, costly to obtain and would ensure that the trial was lengthy. The plaintiff takes the view that if par 10 can be struck out now, its relatively simple claim can be heard and determined expeditiously. It is not difficult to sympathise with the plaintiff's approach.
16 The difficulty with the plaintiff's position is that by attacking par 10, it leaves hanging the allegation in par 9 that the plaintiff breached the implied term of the condition precedent. It is only if that allegation is sustained that the question of loss or damage arises. One way to approach the matter may be to have a separate trial on the question of liability with damages, if any, to be assessed at a later date. The plaintiff's response to that proposition (and it was not a possibility discussed during the course of submissions) is that it would leave open the possibility of damages being claimed on the basis set out in par 10 when, on the plaintiff's case, such damages cannot be awarded. That may be so. But it also may be possible to craft an approach which allows determination of the basis
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- upon which damages are to be assessed without actually dealing with the damages question directly.
17 In his written submissions, counsel for WFS provides a spirited defence of the minute. He makes the point that a contract between X and Y whereby Y promises X to confer a benefit on Z may be the subject of a suit for specific performance by X against Y: see Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460, 478 (Barwick CJ). The damages which X suffers as a result of Y's breach of contract in failing to confer the agreed benefit on Z may not be necessarily nominal. That may well be so. But this is a different case. Here, the party in the position of Z seeks to sue X. The Coulls decision does not support such a cause of action. Nor does any other authority. That effectively rules out any claim as pleaded in pars 10.1 and 10.2 of the particulars.
18 The attack on pars 10.3, 10.4 and 10.5 are essentially the same. WFS's answer to the plaintiff's complaint is to say that expenditure made in anticipation of a contract, but before the contract is formed, may be recovered. A common example is pre-contractual 'tooling up': see GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50. It is said that consistent with that authority, a reduction in the price that would otherwise have been insisted upon is, in essence, the same as pre-contractual expenditure.
19 The case referred to by WFS is an entirely different situation to that which applies here. As was submitted by the plaintiff, recovery of costs of tooling up incurred prior to the contract might logically be recoverable. But here, the plaintiff and WFS entered into a bargain each for their own reasons. But having struck that bargain and reduced it to writing, they are left with its consequences. To say that WFS has suffered loss as a consequence of a breach of contract between the plaintiff and Westpoint Financial is going too far. Such a claim is not maintainable under the law as it presently stands. Nor is there anything to suggest that the law will develop in the future such as to allow a claim of this nature to be made.
20 As a result, pars 10.1 to 10.5 ought be struck out. The case has now reached the point where, as par 10 cannot be properly particularised, that too should be struck out.
21 WFS then proposes extensive amendments in the minute in terms of pars 11A through to 11ZC. These claims are for misleading and deceptive conduct, contrary to the Trade Practices Act 1974 (Cth) and/or the Fair Trading Act 1987 (WA). A new plea in par 11B(ii) is proposed to the
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effect that an officer of the plaintiff made an oral representation to an officer of WFS that the plaintiff would comply with its contractual obligations to Westpoint Corporation under the Property Development Agreement. This alleged representation, on the way the case is pleaded, must have been made prior to 1 August 2000. The damage allegedly suffered by reason of the representation is said to be that set out in the particulars to par 10. It is the plaintiff's position that any such action is statute-barred. It was submitted that the damage could not have been suffered any later than the date of entry by Westpoint Corporation into the Property Development Agreement.
22 I would not strike out the plea on this basis. The dangers of determining limitation questions at an interlocutory stage were discussed by the High Court in Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514. The decision contains a warning directed at all those dealing with such questions on an interlocutory basis. The plaintiff should, if it wishes, plead the time bar and that is a matter which can be dealt with by the trial judge.
23 The plaintiff has other more substantial complaints about the pleading. Essentially, it is said that the pleading fails to disclose a cause of action. The representation allegedly made is said to be a representation with respect to a 'future matter'. WFS relies on s 51A(2) of the Trade Practices Act and s 9(2) of the Fair Trading Act to transfer the 'onus' to the plaintiff. Whether a representation as to a future matter is misleading and deceptive is to be judged at the time the representation is made. The usual issue is whether, at the time a representation as to a future matter is made, there were reasonable grounds for making the representation.
24 On behalf of the plaintiff the following points were made. First, it was said that not all contractual terms are to be regarded as representations. For example, a contractual promise to pay under a contract, without more, does not necessarily amount to a representation that the party responsible for payment will be in a position to pay when the time comes. Similarly, a promise to 'comply with its contractual obligations to Westpoint Corporation under the Property Development Agreement', without more, does not amount to a representation that the party responsible for compliance will be in a position to do so when the time comes.
25 Secondly, it is said by the plaintiff that WFS does not make any positive plea to the effect that at the time of making the alleged representations as to a future matter, the plaintiff did not have reasonable
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grounds for making the representation. WFS merely pleads that it relies on the so-called 'onus'. In the absence of a positive plea, the proper inference is that WFS presently has no evidence to support an allegation that at the time of the representation the plaintiff did not have reasonable grounds for making the representation. This, it is said, indicates that the claim is speculative.
26 Finally, whether or not a contractual promise amounts to a representation as to a future matter for the purposes of the two Acts, such a representation does not transmogrify into a 'duty' to comply with the representation. Many of the paragraphs in par 11A through to par 11ZC refer to the plaintiff having a 'duty to ensure' that it complied with the Property Development Agreement. Whatever the intent of those pleas, no such duty can arise.
27 On this point, there is a curious plea in the minute - par 11H. The paragraph refers to the parties entering into the agreement and the alleged representation, and alleges that the plaintiff owed WFS 'a duty to ensure that the term of the Share Purchase Agreement … was not breached'. Under the particulars, it is said that 'the pleaded duty is a common law duty in tort'. As was submitted by counsel for the plaintiff, no such duty is known to the law and no authority was quoted by WFS to support such a plea. In no circumstances could par 11H stand. Not, of course, that that would make any difference to WFS's case as a whole. What must be pleaded are material facts, not causes of action. Paragraph 11H is, in reality, a plea of a cause of action.
28 In any event, I am not satisfied that the amendments should stand. I accept the submissions by the plaintiff that the contractual promise, without more, does not amount to a representation that the party will be in a position to meet the contractual promise when the time comes. That is effectively what the plea says. It discloses no cause of action. In my view, amendment should not be permitted.
29 In the end, then, I would refuse leave to amend in terms of the minute. I would strike out par 10 of the presently existing pleading. The parties may need to consider how the matter progresses from this point in light of my determination. I will hear the parties as to what orders should be made and as to costs.
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