| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : HERBERTSON -v- MORTON [2013] WADC 7 CORAM : EATON DCJ HEARD : 26 NOVEMBER 2012 DELIVERED : 18 JANUARY 2013 FILE NO/S : CIV 2383 of 2010 BETWEEN : DONALD ARTHUR HERBERTSON WENDY MARGARET HERBERTSON
Plaintiffs (Respondents)
AND
BETH SUZANNE MORTON
PHILLIP FRANCIS MORTON
Defendants (Appellants)
Catchwords: Appeal from a registrar - Partnership - Late application to amend a statement of claim - Whether leave should be granted Legislation: Nil Result: Appeal dismissed
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Representation: Counsel:
Plaintiffs (Respondents) : Mr C S Williams
Defendants (Appellants) : Mr M S Macdonald
Solicitors:
Plaintiffs (Respondents) : Solomon Brothers
Defendants (Appellants) : Macdonald Rudder
Case(s) referred to in judgment(s):
Advantage Credit Union Ltd v Rothnie [2005] WASC 63
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
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1 EATON DCJ: On 5 August 2010 the respondents (the Herbertsons) commenced an action in this court against the appellants (the Mortons), filing a writ of summons accompanied by a statement of claim. Their prayer for relief was for an order that the partnership as between the Herbertsons and the Mortons be wound up and that all necessary accounts and enquiries be taken and made.
2 On 1 October 2010 the Mortons filed their defence. Having regard to the terms of that pleading it was, from the outset, common ground that by an oral agreement made between the Herbertsons and the Mortons in or about December 2006 they agreed to acquire land known as 52 McLarty Street, Dwellingup as tenants in common in equal shares and to carry on there a business known as 'Dwellingup General Store'. It is common ground that it was an express term of that partnership that profits and losses be shared equally. The Mortons assert that the partnership commenced on or about 1 December 2006. Both parties accept that the partnership carried on the business until 31 October 2008 when the Mortons served a notice of dissolution of partnership dated 28 October 2008 on the Herbertsons. The Mortons further plead that the Herbertsons had the day-to-day conduct of the business and custody of the books of partnership from about November 2007. It is common ground that they carried on in the business after 31 October 2008. 3 The action was the subject of a case management hearing on 14 January 2011. A minute of declarations and orders for account to be made pursuant to O 43 r 16 was tendered. Deputy Registrar Kingsley made some further minor amendments to the minute at the request of counsel and made orders in terms of the amended minute on that day. 4 In the days following and pursuant to an exchange of correspondence between the parties and the court, the orders made were further amended pursuant to O 21 r 10. 5 In final form the order of 14 January 2011 represented agreement as between the parties to the effect that the partnership between them be dissolved on 31 October 2008, that the partnership be wound up and that accounts and inquiries be taken and made including: (a) an account of all dealings and transactions between the plaintiffs and defendants as co-partners or in relation to partnership property from the commencement of the partnership, including all such dealings and transactions after the dissolution of the partnership; and (Page 4)
(b) an inquiry as to what are the credits, property and effects of the partnership. 6 Deputy Registrar Kingsley further ordered that the Herbertsons file and serve an account of the partnership as from its inception verified on oath and that each party, following service of the account, give full access to the other of all documents in their possession, custody or power relating to the matters in question in the action or the account. He made further orders designed to deal with objections to items in the accounting and granted liberty to apply for payment of 'what should be due on the taking of the said accounts or for any other relief.' The matter was adjourned to a registrar to take the account on a date to be fixed. 7 On 28 January 2011 Donald Arthur Herbertson filed an affidavit purporting to verify the accounts of the partnership. On 6 May 2011 he filed a further supplementary affidavit verifying the accounts of the partnership. 8 On 1 July 2011 Deputy Registrar Kingsley granted the Mortons an extension of time within which to comply with the obligations cast upon them by the orders made on 14 January 2011. On 22 July 2011 Beth Suzanne Morton filed an affidavit sworn by her purporting to respond to the accounts presented by the Herbertsons. 9 On 16 September 2011 Deputy Registrar Kingsley ordered that the Herbertsons file and serve any response to the Mortons by 13 October 2011. In compliance with that order Donald Arthur Herbertson filed a further affidavit on 13 October 2011 sworn by him on 11 October 2011. 10 The final exchange of affidavits in the matter involved an affidavit sworn by one Nicholas Kevin Farrell on behalf of the partnership accountants on 30 November 2011, filed on 5 December 2011, and a responding affidavit sworn by Morton Stuart Macdonald, solicitor for the Herbertsons on 2 December 2011 and filed on 5 December 2011. 11 With all of the foregoing material then before the court the parties set about the business of listing the taking of accounts. 12 The matter was eventually set down for 25 and 26 June 2012 before a registrar. That listing was vacated by consent. The matter was again listed for two days to commence on 22 August 2012. On that day Deputy Registrar Hewitt made the following orders: 1. the account be adjourned sine die; (Page 5)
13 By notice of appeal filed on 3 September 2012 the Mortons seek to set aside leave to amend the statement of claim. 14 The minute referred to by the deputy registrar was filed by the Herbertsons on 22 August 2012. In essence it seeks to amend their statement of claim by pleading a further express term of the partnership agreement to the effect that the Mortons and Donald Arthur Herbertson would work full-time in the business, that in or about October 2007 the Mortons ceased working in the business and that, in or about April 2008, there was an oral agreement made by the Herbertsons and the Mortons that Donald Arthur Herbertson be paid a wage of $500 per week for running the business as from and including April 2008. 15 The minute contained no variation to the Herbertsons' prayer for relief. 16 Rule 15 of the District Court Rules 2005 provides that if a party is dissatisfied with a decision of a registrar the party may appeal to a judge. Such an appeal is to be by way of a new hearing of the matter that was before the registrar. 17 In written submissions the Mortons contend that the orders made by Deputy Registrar Kingsley on 14 January 2011 were made by consent following lengthy communication between the parties. The making of the orders was, they contend, the culmination of that process and reflected acceptance by the parties of the proposition that the pleadings disclosed no issues which warranted there being a trial. The orders, they contend, reflected an agreement between the parties to the effect that an account should be taken 'on the basis of the pleadings as they stood'. They contend that it is not, in those circumstances, open to the Herbertsons to resile from the agreement or for the court to make orders, in effect, varying consent orders. (Page 6)
18 On 14 January 2011, Deputy Registrar Kingsley ordered that the partnership be dissolved as at 31 October 2008 and that it be wound up. There were further orders to facilitate the taking of accounts. This was the remedy sought by the Herbertsons in their statement of claim. True it is that the Herbertsons pleaded, in the body of their statement of claim, that the Mortons were indebted to the partnership. In their defence the Mortons deny that they were indebted to the partnership. The Herbertsons did not, in their prayer for relief, seek judgment against the Mortons for any alleged indebtedness to them. The final liabilities of the partners to each other would, it seems, be resolved upon the taking of accounts. 19 The original statement of claim pleaded that it was an express term of the partnership agreement that the partners would share the profits and losses equally. There was no pleading as to wages. 20 Although the orders made by Deputy Registrar Kingsley on 14 January 2011 were not expressed to be by consent they were based on a minute dated 14 January 2011 expressed to be pursuant to O 43 r 16 of the Rules of the Supreme Court 1971. It was prefaced with the words 'the parties consent to the following orders and declarations'. It was signed by the solicitors for both parties. 21 Order 43 r 16 of the Rules of the Supreme Court provides that the parties to proceedings or their solicitors may file a written consent to the making of an order in those proceedings except in certain circumstances stipulated. Upon such a written consent being filed a registrar may settle, sign and seal the order without any other application being made. The order should state that it is made by consent and 'shall be of the same force and validity as if it had been made after a hearing by the court'. 22 It is the case that Deputy Registrar Kingsley, on 14 January 2011, made certain amendments to the document entitled 'declarations and orders for account – O 43 r 16' and, having done so, endorsed it as being orders made in terms of the minute as amended on that day. He signed the minute accordingly. 23 It appears that the order was subsequently extracted. By letter of 18 January 2011 the solicitors for the Herbertsons wrote to the associate to Deputy Registrar Kingsley referring to errors in the extracted order and requesting that the deputy registrar correct those errors under the slip rule. 24 By a further letter of 24 February 2011 those solicitors wrote again to the associate of the deputy registrar pointing to a further error in the extracted order. Both letters were copied to the Mortons' solicitors. (Page 7)
It appears that on 28 February 2011 the court issued orders amended pursuant to O 21 r 10 of the Rules of the Supreme Court which provides that clerical mistakes in judgments or orders, or errors arising therein from any accidental slip or omission, may at any time be corrected by the court upon motion or summons without an appeal. 25 I am satisfied that the orders and declarations made by Deputy Registrar Kingsley said to be on 14 January 2011 have the same force and validity as if they had been made after a hearing by the court. 26 The Mortons contend that consent orders may be characterised as falling into two categories, one representing an underlying agreement between the parties and the other reflecting a circumstance where one party applies for an order and the other does not oppose. I have some difficulty with the latter circumstance being characterised as a category of consent order. A party may apply for an order. The opposing party, without expressing consent, might simply not oppose or not wish to be heard. 27 In any event, the substance of the circumstance in which Deputy Registrar Kingsley found himself was that he had been presented with a minute of proposed orders and declarations signed by the solicitors for the parties and was asked to make orders in those terms. That circumstance represents, in my view, a meeting of the minds in terms of the formulation of the orders and declarations to be made and the form of words to express those orders and declarations. 28 Most importantly, the proposed orders and declarations did not deal only with procedural aspects of the action but rather with the substance of the Herbertsons' prayer for relief. To the extent that there were procedural aspects to the orders made, they related to the implementation of the order for the taking of accounts. To that extent, the issues raised on the pleadings as between the parties had apparently been resolved. 29 The order for an account of the partnership was made on 14 January 2011. As earlier indicated, there were several attempts to bring that about culminating in the listing of a taking of accounts before a registrar in chambers on 22 and 23 August 2012. On the first day of the hearing the account was again adjourned sine die with the Herbertsons having leave to amend their statement of claim in terms of the minute dated 22 August 2012. That minute was tendered to the deputy registrar on that morning. (Page 8)
30 Order 21 r 5 of the Rules of the Supreme Court 1971 provides that the court may at any stage of proceedings allow the plaintiff to amend a writ or pleading on such terms as to costs or otherwise as may be just and in such manner (if any) as the court may direct. The words 'at any stage of the proceedings' give the court power to grant leave to amend after judgment has been given. In Advantage Credit Union Ltd v Rothnie [2005] WASC 63 Master Newnes said: It was also argued on behalf of the defendants that an amendment under O 21 r 5 is not available after judgment has been entered. I do not accept that submission. There is nothing in the rule that would warrant reading it in such a limited way. O 21 r 5 provides that the Court may allow an amendment 'at any stage of the proceedings'. That, in my view, includes after judgment. If authority for that proposition be needed it is to be found in Singh v Atombrook Ltd (1989) 1 All ER 385, where the English Court of Appeal held in respect of an identically worded English rule that the Court had power to permit the correction of the name of the defendant even after judgment had been entered. That case has been followed in this Court in Boschetti v Carr [2000] WASC 228, in relation to an application to amend the statement of claim. 31 In oral argument before me there was some discussion as to whether the orders made by Deputy Registrar Kingsley on 14 January 2011 were final or interlocutory in nature. In the context of this case, not much turns on the point, the proceedings still being on foot until the completion of the taking of accounts and the formulation of precise orders, perhaps for liquidated amounts, consequent upon that exercise. 32 The contention of the Mortons is that the orders of 14 January 2011 'reflected an agreement between the parties to have the account taken on the basis of the pleadings as they stood'. In my view, to the extent that the minute tendered to Deputy Registrar Kingsley represented an agreement as between the parties it was to the effect that the partnership was dissolved on 31 August 2008, that it be wound up and that accounts be taken. There was agreement as to the process in respect of the latter. It is not appropriate, in my view, to liken such circumstances to that of contract such that a court might only interfere on the same grounds as it would with any other contract. There clearly had to be a taking of account and a formal dissolution of the partnership as at a particular date. Such agreement as there was between the parties was crystallised in the minute tendered to the deputy registrar. In such circumstances the operation of O 21 r 5 is not excluded. The leave granted by Deputy Registrar Hewitt to amend the statement of claim on 22 August 2012 did not and could not be regarded as interfering with, varying or departing from the orders of 14 January 2011. If the matter proceeds (Page 9)
there still will be a formal dissolution of the partnership and a taking of account. 33 Paragraph 2 of the original statement of claim pleaded an express term of the partnership that profits and losses be shared equally. The minute dated 22 August 2012 sought to add a further express term to the effect that the Mortons and Donald Arthur Herbertson work full-time in the business. It sought to plead that in or about October 2007 the Mortons ceased working in the business and that in or about April 2008 there was an oral agreement between the parties that Donald Arthur Herbertson be paid a wage of $500 per week for running the business as from and including April 2008. 34 In response to the appeal the Herbertsons have filed an affidavit by Jeremy Thomas London sworn 13 November 2012. He deposes to being the Herbertsons' solicitor and having had the conduct of the matter. He deposes that, prior to 20 August 2012, he 'did not appreciate the fact that the plaintiffs' account included a claim for wages'. He further deposes to being informed by Mr Macdonald that prior to 20 August 2012 he (Mr Macdonald) did not appreciate the fact that the plaintiffs' account included a claim for wages. Mr London said that, having taken detailed instructions from Donald Arthur Herbertson, he was informed of the Herbertsons' claim of an express term of the partnership that Phillip Francis Morton and Donald Arthur Herbertson work full-time in the business and each draw a wage of $500 per week, and that they subsequently agreed that the Mortons draw an additional $250 until they left the business on about 26 October 2007 without notice. 35 It does seem incomprehensible that the 'detailed instructions' referred to by Mr London were not taken prior to the issue of the writ and the formulation of the statement of claim which accompanied it. 36 The Mortons refer, in written submissions, to the principles applicable to late applications to amend pleadings as set out in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. They submit that the court must take proper account of the prejudice inflicted by a late amendment in necessitating an adjournment. The Herbertsons, they contend, were not at liberty to amendment the statement of claim as of right. Referring to the affidavit sworn by Jeremy Thomas London on 13 November 2012, the Mortons contend that the proffered explanation is inadequate. (Page 10)
37 The explanation is brief and unsatisfactory in that the solicitor, apparently having the conduct of the matter on behalf of the Herbertsons, 'did not appreciate that his clients' instructions included a claim for wages and only reached that appreciation after taking "detailed instructions" '. I infer that those detailed instructions were taken on 20 August 2012. The writ and statement of claim were filed slightly in excess of two years before on 5 August 2010. The explanation is unsatisfactory because it indicates a failure on the part of the Herbertsons' solicitors to take proper instructions prior to the issue of a writ and statement of claim and a continuing failure to do so thereafter for about two years. 38 In the Herbertsons' written outline of submissions is an acceptance of error on the part of their solicitors. They contend that if the proposed amendment is not allowed they will be denied 'almost half of their claim'. There never was a claim for a liquidated sum. There would appear now to be a clear factual dispute as to the question of wages. 39 Prior to the Herbertsons' application to amend their statement of claim, there was, apparently, no perceived need to resolve issues of fact in the context of a preliminary hearing and the giving of viva voce evidence. If the amendment, as now proposed, is allowed there will need to be, I expect, a hearing to resolve the factual dispute now apparent. Resolution of that dispute, consequent upon a hearing, will then bind the parties in the context of a taking of accounts. 40 To this point there has been no hearing of viva voce evidence. The matter has not been set down for trial. 41 The Herbertsons' claim, in their written submissions, that the Mortons have suffered no prejudice that could not be remedied by an order for costs. The Mortons, in their written submissions, do not seek to make a case for prejudice to them that cannot be remedied by an appropriate order for costs. They point to the absence of a satisfactory explanation, describing that proffered as being 'thin' and 'inadequate'. They point to other circumstances including the time the action has been on foot and the time elapsed since the orders on 14 January 2011 were made. They say that, against that backdrop, I should refuse to allow the proposed amendment in the exercise of my discretion. 42 Were the Herbertsons at fault, the exercise of my discretion might be different. It does appear, however, that if fault is to be attributed it should not be laid at their feet but rather at the feet of their solicitors who 'failed to appreciate' a vital aspect of their clients' instructions until more (Page 11)
detailed instructions were belatedly taken. In my view, the interests of justice, are best served, in all of the circumstances, by allowing the Herbertsons to amend in terms of the re-amended statement of claim filed 13 November 2012. The orders made by Deputy Registrar Hewitt on 22 August 2012 included a grant of leave to the Herbertsons to amend their statement of claim in terms of the minute dated 22 August 2012 and an order that they pay the Mortons' costs thrown away by the adjournment in the event. It does seem to me that I should revisit those orders in the context of my findings on appeal. As to leave to amend it may be appropriate to allow the Mortons leave to amend their defence and to set appropriate time limits and to order that the Mortons have not only their costs thrown away but also the costs of amending their defence should that be necessary. 43 It follows from the foregoing that I dismiss the appeal filed 3 September 2012 and will hear the parties as to appropriate orders and costs.
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