Hardie Finance Corporation Pty Ltd v Ahern
[2005] WASC 157
•25 JULY 2005
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: HARDIE FINANCE CORPORATION PTY LTD -v- AHERN & ANOR [2005] WASC 157
CORAM: MASTER NEWNES
HEARD: 27 JUNE 2005
DELIVERED : 25 JULY 2005
FILE NO/S: CIV 1426 of 2000
BETWEEN: HARDIE FINANCE CORPORATION PTY LTD (ACN 008 992 105)
Plaintiff
AND
MARCUS AHERN
First DefendantFERGUSON CORPORATION PTY LTD (ACN 008 943 646)
Second Defendant
Catchwords:
Practice and procedure - Application to amend defence - Whether proposed amendments disclose arguable defence - Relevance of delay - Turns on own facts
Legislation:
Fair Trading Act 1987 (WA)
Trade Practices Act 1974 (Cth)
Result:
Application to amend refused
Category: B
Representation:
Counsel:
Plaintiff: Mr M L Bennett
First Defendant : Mr G I Macnish
Second Defendant : Mr G I Macnish
Solicitors:
Plaintiff: Bennett & Co
First Defendant : Cocks Macnish
Second Defendant : Cocks Macnish
Case(s) referred to in judgment(s):
Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529
Hardie Finance Corporation Pty Ltd v Ahern [2003] WASCA 58
Henville v Walker (2001) 206 CLR 459
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109
Perre v Apand Pty Ltd (1999) 198 CLR 180
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515
Case(s) also cited:
Allesch v Maunz (2000) 203 CLR 172
Anthony Joseph Casella v Costin Pty Ltd, unreported; FCt SCt of WA; Library No 5416; 22 June 1984
Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616
Clough & Rogers v Frog (1974) 48 ALJR 481
Dare v Dietrich (1979) 37 FLR 175
Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62
Hutton v Meston [2004] WASCA 178
Melville v East End Holdings Inc [2003] WASCA 133
Project Planning & Management (WA) Pty Ltd v Kinrade Australia Pty Ltd (2003) 27 WAR 194
State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146
MASTER NEWNES: I have before me an appeal by the defendants against an order of a case management Registrar made on 18 February 2005, by which the case management Registrar dismissed the defendants' application for leave to amend their respective defences and ordered the defendants to pay the plaintiff's costs of the application in any event.
In fact, the amendments which the defendants sought to make to their defences on the hearing of this appeal were in somewhat different terms to the amendments which were before the learned case management Registrar, the respective minutes of proposed amended defence having been revised in the interim. In those circumstances, it seemed to me appropriate to treat the appeal as if it were an application for leave to amend the defences in terms of the current minutes, rather than an appeal against the decision of the case management Registrar in respect of the earlier, rather different, proposed amendments. Although counsel for the defendants did not seem entirely persuaded that that was necessary, it was not suggested by either party that they would be prejudiced by that course.
Such an approach is, of course, facilitated by the fact that an appeal from a case management Registrar is a hearing de novo and on the hearing before me both sides fully canvassed the matters that would ordinarily be covered in an application by the defendants to amend their defence. In the circumstances, I will treat the appeal as an application for leave to amend the defences.
As some of the objections by the plaintiff to the proposed amended defences go to matters of substance, rather than simply the form of the proposed amendments, it is necessary to set out the essential issues on the pleadings.
In the statement of claim, so far as relevant for present purposes, the plaintiff pleads that it is and was at all material times the owner of a property in South Perth on which was erected a multi-storey commercial building known as South Shore Piazza. On 21 May 1997, it leased part of the premises to Pac‑Am Restaurants WA Pty Ltd ("Pac-Am") for a term of nine years. Under the lease, Pac‑Am covenanted to carry on at the premises the business of a restaurant under the name Spageddies. Pac‑Am occupied the premises from 1 May 1997 and from that date until February 1998, paid to the plaintiff rent and outgoings pursuant to the lease.
The plaintiff pleads that, on Saturday, 21 March 1998, the first defendant, who is a solicitor, and the second defendant, which carries on the business of a furniture manufacturer and refurbisher, acting in concert, entered the premises occupied by Pac‑Am and forcibly removed Pac‑Am's property, damaging the premises in the process. The plaintiff pleads that the defendants withheld the seized property from Pac‑Am until compelled to return it by an order of this Court made on 25 March 1998. The plaintiff says the order was not wholly complied with until late on 26 March 1998. It is alleged that a number of items of property seized by the defendants were damaged by them either in the course of removing them from the premises or while they were in the defendants' possessions. It is also alleged that the defendants failed to return certain items of property despite the order of the Court.
The plaintiff pleads in par 11 of the statement of claim that, by reason of the defendants' removal and withholding of the property, and the damage to both the premises and the property, Pac‑Am's restaurant business was unable to trade and ceased operation from 21 March 1998 until about 3 April 1998. It is alleged that by their conduct, the defendants intentionally interfered with Pac‑Am's business and thereby intentionally inflicted economic harm on Pac‑Am.
It is pleaded in the alternative, in par 14 of the statement of claim, that by forcibly removing the property from the premises, the defendants represented to the public at large, to patrons of the restaurant, Pac‑Am's business associates, creditors, tradesmen and suppliers that:
"14.1the Defendants were performing a valid repossession of the Seized Property from Pac‑Am's Restaurant;
14.2that Pac‑Am had:
(a)failed; alternatively
(b)refused without good cause; alternatively
(c)was unable to;
pay due and owing debts;
14.3that the Defendants and each of them were entitled to perform the acts as described in paragraph 6 above; and that
14.4Pac‑Am was insolvent;
such representations being, in the circumstances, misleading and deceptive or likely to mislead or deceive in breach of section 52 of the Trade Practices Act 1974 (Cth) and section 10 of the Fair Trading Act 1987 (WA).
Particulars
(a)Pac‑Am was then solvent and was capable of paying all its debts as and when they fell due.
(b)Pac‑Am had validly disputed and addressed, in detail and in writing, all the second defendant's alleged outstanding accounts.
(c)The defendants had no right to perform the acts they did as described at paragraphs 6 to 11 herein."
It is alleged by the plaintiff that, prior to the removal of the property from the premises, the defendants knew that Pac‑Am was the lessee of the premises and that the plaintiff was the owner. It is pleaded that it was reasonably foreseeable that the plaintiff would suffer loss and damage by reason of the defendants' acts and accordingly there was at all material times proximity between the plaintiff and each of the defendants. It is also pleaded that the plaintiff's financial interest in the premises, being, among other things, its rights and entitlements under the lease, was susceptible to damage and interference by the type of actions and conduct engaged in by the defendants, and the plaintiff was thereby vulnerable to harm from the defendants' conduct. Accordingly, it is alleged, each of the defendants owed a duty to the plaintiff to take reasonable care to protect the plaintiff from economic loss in respect of the lease and the premises, and their conduct and actions in respect of Pac‑Am and the premises.
The plaintiff pleads that the defendants' conduct was in breach of that duty of care, in that the second defendant had negligently advised the first defendant that it could perform the acts referred to and the defendants had negligently performed the acts, causing foreseeable loss and damage to the plaintiff. The plaintiff alleges that the defendants had no right at law or otherwise to perform the acts.
As a result of the breach of duty, the plaintiff alleges that it suffered loss and damage in that, as a result of the defendants' conduct on 5 July 1999, Pac‑Am had an administrator appointed to it, on 15 July 1999 entered into receivership and on 28 September 1999 had a liquidator appointed to it. It ceased to carry on business on 1 June 1999. The plaintiff pleads that, as and from March 1998, Pac‑Am was unable to pay its rent and variable outgoings and other expenses to the plaintiff. It is alleged the plaintiff thereby lost the sum of $1,243,887.60, being the total rental income and variable outgoings lost and expenses incurred in seeking to re‑let the premises, less the proceeds from the sale of the fit‑out equipment. The plaintiff claims damages for negligence and trespass, and under the Trade PracticesAct1974 (Cth) and the Fair Trading Act 1987 (WA).
In the proposed amended defences of the defendants (which are relevantly in the same terms), the defendants seek to amend pars 14, 21 and 22 as follows.
In par 14 of their respective defences, the defendants plead to the representations alleged in par 14 of the statement of claim. Relevantly, for present purposes, the defendants deny the allegations in par 14 of statement of claim and then go on to plead (the proposed amendments being underlined):
"(e)says, to the extent that any representations of the nature pleaded were made to the public at large or to the other persons or entities pleaded in this paragraph ('the Public'), all of which are denied, those representations were made by:
(i)Pac‑Am or by Pac‑Am through its solicitors who, on behalf of Pac‑Am, sought the attention of the media and the Public and thereby published or caused to be published the matters of which complaint is made;
PARTICULARS
Articles were printed in the editions of the 'West Australian' on 25th March 1998, 26th March 1998, 6th April 1998 and the 23rd May 1998.
Further, Pac‑Am itself or through its solicitor published or caused to be published an apology in the edition of the 'West Australian' on the 27th February 1999;
Pac‑Am published, or caused to be published, a newsletter dated 4 April 1998 which it provided, or caused to be provided, to patrons of 'Spageddies'.
Pac‑Am published, or caused to be published, a letter dated 23 March 1998 which it provided, or caused to be provided, to its suppliers.
(f)says that but for the publications pleaded in sub‑paragraph (e) hereof, the Public would not have been aware of the matters of which complaint is made, all of which are, in any event, denied."
It was submitted by counsel for the plaintiff that the contents of the newsletter and the letter referred to in the proposed amendments, copies of which were produced in the course of the hearing, were not capable of giving rise to any of the representations pleaded in par 14 in the amended statement of claim.
The newsletter sets out a summary of Pac‑Am's claim against the defendants arising out of the "purported repossession of our restaurant's property", denies that the defendants were entitled to perform the repossession, states that the Supreme Court had ordered that the goods be returned, and states that proceedings had been commenced by Pac‑Am against the defendants for damages, in respect of which Pac‑Am had been advised they had strong prospects of success.
The letter states that Pac‑Am considers the second defendant's actions unwarranted and that Pac‑Am was obtaining legal advice to make claims for "trespass, theft, destruction of property, etcetera" and that "the police authorities have been advised and they are conducting the investigations". The letter goes on to advise that the closure of the restaurant was temporary and the group holds the franchise rights in Western Australia and has plans to open an additional five outlets within WA in the next three years.
Counsel for the defendants submitted that whether or not the publications were capable of conveying the representations was a question of fact for trial and not a matter appropriately dealt with on an application of this nature. What was clear was that the publications led to patrons of the restaurant and suppliers being informed of the repossession in circumstances where knowledge of it would otherwise have been much more limited.
The question, however, is not whether the publications led to patrons and suppliers becoming aware of the events concerned, but whether it is arguable that the publications made the representations pleaded in pars 14.1 to 14.4 of the statement of claim. In my view it is not. I am unable to see how statements to quite the opposite effect of the representations pleaded could be said to make those representations. I accept the submission of counsel for the plaintiff that the proposed amendment does not disclose a reasonable cause of defence and would refuse leave to make the amendment on that ground.
The plaintiff objected to the proposed addition to the defendants' respective defences of par 21, which in each case is in the following terms:
"21.As to the whole of the Statement of Claim, this Defendant says that if the Plaintiff suffered any loss or damage whether as alleged in paragraphs 19 and 20 of the Statement of Claim or at all, which is denied, the Plaintiff caused or contributed to its alleged loss or damage by:
(a)failing to permit Pac‑Am, despite a request from Pac‑Am on or about 16th April 1997, to sell 'take‑away food' from Shop 26 of the Premises ('Shop 26') which would have allowed Pac‑Am to earn additional revenue with which to pay its rent and other outgoings.
PARTICULARS
(i)By letter from Pac‑Am to the Plaintiff dated 16 April 1997, Pac‑Am informed the Plaintiff that:
(a)Pac‑Am desired to sell 'take‑away food' from Shop 26; and
(b)'Take-away food' is an integral part of the business of 'Spageddies' and 'to eliminate that source of revenue may be detrimental to the viability of Pac‑Am'.
(ii)By letter from the Plaintiff to Pac‑Am dated 22 April 1997, the Plaintiff refused to allow Pac‑Am to sell 'take away food' from Shop 26.
(b)failing to terminate its lease agreements with Pac‑Am prior to 21 March 1998, because of Pac‑Am's default thereunder, and to re‑lease the Premises."
Counsel for the defendants said that it was not sought to plead contributory negligence but rather the plea was one of causation. It was pleaded in par 21 that the plaintiff's failure to allow Pac‑Am to sell take‑away food, and its failure to terminate the lease with Pac‑Am prior to 21 March 1998 on the ground of earlier defaults by Pac‑Am and to re‑let the premises, were matters which caused the plaintiff's alleged loss, or caused the plaintiff to suffer greater loss than it would otherwise have suffered. It was submitted that it was an appropriate plea as to causation.
Counsel for the plaintiff submitted that par 21 was, in effect, a plea that the plaintiff was under some undefined duty to assist Pac‑Am to generate additional revenue to pay its rent and other outgoings, and to terminate the lease agreement when Pac‑Am defaulted and to re‑lease the premises. Neither duty was arguable.
It was submitted by counsel for the defendants that the plaintiff relied on its alleged vulnerability as giving rise to a duty of care on the part of the defendants. The question of vulnerability arose where a person was not in a position to take steps to guard against the loss which occurred. In the present case, it was pleaded in par 21 that the plaintiff was in a position to take steps to guard against the loss.
In Perre v Apand Pty Ltd (1999) 198 CLR 180, Gleeson CJ observed (at 194) that vulnerability was a significant factor in establishing a duty of care and it can arise from circumstances other than reliance, noting that in Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529 the obvious vulnerability of a specific plaintiff was influential in a number of the judgments. McHugh J considered the concept of vulnerability at 225 ‑ 226. His Honour said:
"In many cases, there will be no sound reason for imposing a duty on the defendant to protect the plaintiff from economic loss where it was reasonably open to the plaintiff to take steps to protect itself. The vulnerability of a plaintiff to a harm from the defendant's conduct is therefore ordinarily a prerequisite to imposing a duty. If the plaintiff has taken, or could have taken steps to protect itself from the defendant's conduct and was not induced by the defendant's conduct from taking such steps, there is no reason why the law should step in and impose a duty on the defendant to protect the plaintiff from the risk of pure economic loss."
McHugh J went on to say that in determining whether a plaintiff was vulnerable an important consideration will be whether the plaintiff "could easily have protected itself against the risk of loss by protective action". His Honour gave as an example, obtaining contractual warranties. McHugh J continued:
"Pecuniary losses are one of the ordinary risks of business and, for that matter, ordinary life. Business people frequently take, or are easily able to take, steps to minimise their business or economic losses. Taking these steps will often be a more efficient way of dealing with the risk of these losses and requiring defendants to have regard to the risk that others may suffer economic loss. The economic efficiency of society requires that the person best able to deal with or avoid the consequences of an economic risk from a cost view should be responsible for the risk and its consequences."
The concept of vulnerability has more recently been discussed in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515, where Gleeson CJ, Gummow, Hayne and Heydon JJ said (at 528):
"Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. 'Vulnerability', in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, 'vulnerability' is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant. So, in Perre, the plaintiffs could do nothing to protect themselves from the economic consequences to them of the defendant's negligence in sowing a crop which caused the quarantining of the plaintiffs' land. In Hill v Van Erp the intended beneficiary depended entirely upon the solicitor performing the client's retainer properly and the beneficiary could do nothing to ensure that this was done. But in Esanda Finance Corp Ltd v Peat Marwick Hungerfords, the financier could itself have made inquiries about the financial position of the company to which it was to lend money, rather than depend upon the auditor's certification of the accounts of the company.
In other cases of pure economic loss (Bryan v Maloney is an example) reference has been made to notions of assumption of responsibility and known reliance. The negligent misstatement cases like Mutual Life & Citizens’ Assurance Co Ltd v Evatthttp:// - JD_205-ALR-522fntxt47 and Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) can be seen as cases in which a central plank in the plaintiff's allegation that the defendant owed it a duty of care is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided. And it may be, as Professor Stapleton has suggested, that these cases, too, can be explained by reference to notions of vulnerability. (The reference in Caltex Oil to economic loss being 'inherently likely' can also be seen as consistent with the importance of notions of vulnerability.) It is not necessary in this case, however, to attempt to identify or articulate the breadth of any general proposition about the importance of vulnerability. This case can be decided without doing so."
The case that the defendants apparently seek to make by par 21 is that the plaintiff was in a position to protect itself from the consequences of the defendants' alleged negligence and was therefore not vulnerable to those consequences. Accordingly, the defendants did not owe the duty of care alleged by the plaintiff.
It seems to me that if that is the case the defendants seek to make, it is not the case as it appears from the current minute. In its terms, the plea in par 21 does not appear to be directed to the existence of the duty of care. It appears to be in the nature of a plea of contributory negligence. As the defendant's counsel put it in argument, the plea is that "the plaintiff itself brought about or caused or contributed to its own loss and to that extent should not be entitled to recover that part of the loss alleged against these defendants".
Moreover, the plea is directed to both par 19 of the statement of claim, which pleads loss by reason of the defendants' breach of duty, and to par 20, which pleads loss and damage by reason of the defendants' alleged breach of the Trade Practices Act and the Fair Trading Act. It was not suggested that concepts of vulnerability have anything to do with the claims under those Acts. In relation to the claims under the Trade Practices Act and the Fair Trading Act, the plea appears to be simply that the plaintiff's own negligence was a cause or a contributing factor to the losses that it suffered. I do not consider that such a plea is open in a claim under the Trade Practices Act. Once a causal link is shown between the injury and the contravention of the Act, the claimant is entitled to the loss or damage sustained. It is irrelevant that the contravention was only one of the factors which led to the loss and damage. In the present case, there is also no basis to reduce the amount to which the claimant is entitled by reason of the claimant's own carelessness: see Henvillev Walker (2001) 206 CLR 459; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd(2002) 210 CLR 109. The provisions of s 82(1B) of the Act have no application in the present case, any cause of action having arisen prior to 26 July 2004. There is similarly, in my view, no basis under the Fair Trading Act to deny or limit the amount to which the plaintiff is entitled because the plaintiff's own carelessness was a cause of, or a contributing factor to, the losses suffered.
Generally, in my view, the intended operation and effect of the plea is uncertain and I would not allow par 21 as it is currently formulated.
The next objection was to the proposed amendments to par 22 of the respective defences. In par 22, the defendants plead a failure by the plaintiff to mitigate its alleged loss and damage. Relevantly for present purposes, it is sought to amend par 22 to plead that the plaintiff failed to mitigate its loss by:
"(e)failing to register a charge against Pac‑Am's assets until on or about 24 December 1998 and then failing to appoint a receiver of Pac‑Am until on or about 15 July 1999 in circumstances where the Plaintiff knew or ought to have known that:
(i)from in or about August 1997 Pac‑Am was unable to, and in fact did not, pay rent as and when it fell due, or at all; and
(ii)tenants who operated restaurants from the Premises from time to time prior to 1997 had traded unprofitably and had been unable to pay rent as and when it fell due, or at all.
PARTICULARS
(i)Walbeck Investments Pty Ltd ('Walbeck') and Midland Bay Holdings Pty Ltd ('Midland') traded at Shops 28 and 40 of the Premises as:
(a)'Café de Paris' between about March 1989 and about March 1992; and
(b)'River Bank Restaurant' between about March 1992 and about November 1995.
(ii)Walbeck and Midland were placed into administration on or about 16 June 1995 and were ordered to be wound up on or about 14 July 1995.
(iii)Robenikee Pty Ltd traded as 'River Bank Restaurant' at Shops 28 and 40 of the Premises between about November 1995 and about March 1996.
(iv)Grayson Developments Pty Ltd ('Grayson') traded as 'Sardi's the Place for Ribs' at Shops 26 and 39 of the Premises between about February 1990 and about August 1995.
(v)Grayson was placed into administration on or about 8 May 1995 and was ordered to be wound up on or about 31 July 1995.
(vi)Lauranne Pty Ltd ('Lauranne') traded at the Premises as:
(a)'Monaghan's Bar and Restaurant' between about August 1995 and about September 1995; and
(b)'Il Fiume' between about April 1996 and about March 1997."
Counsel for the plaintiff did not pursue the objection to the plea up to the words "on or about 15 July 1999", in the third line. The plaintiff's objection was to the reference thereafter to circumstances where, it is alleged, the plaintiff knew or ought to have known the matters pleaded in (i) and (ii). In particular, objection was taken to the allegation in par 22(e)(ii) that tenants who had previously operated restaurants from the premises had traded unprofitably and had been unable to pay rent as it fell due or at all. Counsel for the plaintiff submitted that that would involve something in the nature of a "Royal Commission" into the premises from 1989 to March 1997. Moreover, there was nothing in the particulars of that paragraph to suggest that the cause of the matters set out in the particulars was unprofitable trading, or that there had been a failure to pay rent. The particulars simply referred to the various tenants who had conducted a restaurant business from the premises and that, in some cases, they had been placed into administration or wound up.
I accept the plaintiff's submission that the particulars do not arguably make out the substantive allegation in par 22(e)(ii). It may be inferred in respect of the tenants whom it is alleged were placed into administration or wound up that they had been unable to pay rent as and when it fell due, but there is nothing in the particulars to suggest that that was due to trading unprofitably.
I understood counsel for the defendants was prepared to remove the reference to "trading unprofitably". If that were done, and some connection made between the inability to pay rent and the matters set out in the particulars, I think it is likely the plea would be unobjectionable. But I would not allow it in its present form.
A further issue raised on the application was whether leave should be granted to the defendants to amend their defences at all, it being submitted that the delay in moving the amendments had not been sufficiently explained and that this was yet another incident of the defendants' delay in the proceedings.
I have had consideration to the affidavit evidence on the issue of delay and to what was said by Master Sanderson in an earlier decision concerning an application by the defendants for further and better particulars of the statement of claim: Hardie Finance Corporation Pty Ltd v Ahern [2003] WASCA 58. I accept that there has been substantial delay on the part of the defendants. It cannot be said, however, that the only delay has been that of the defendants. There has also been delay by the plaintiff, although I do not consider it can be said that that delay justifies the delay for which the defendants have been responsible.
Nevertheless, I do not consider that the defendants' delay would warrant refusing to allow amendments of the nature proposed to be made to their defences, in the absence of evidence that such amendments made at this stage would cause prejudice to the plaintiff which could not be remedied in costs. There is no evidence of that sort. In the circumstances, I do not consider that the proposed amendments to the defences should be refused on that ground. Whether, if other amendments are proposed, such an argument is open to the plaintiff is a matter that must await that occasion, if it arises.
For the reasons I have given, I would refuse leave to amend the defences in accordance with the minutes. If the defendants propose to bring in further minutes of proposed amendments, that should be done within a time to be fixed. I will hear the parties on that, if such a course is proposed, and on the question of costs.
0
5
2