Hopcroft v Edmunds

[2011] SASC 202

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

HOPCROFT & ANOR v EDMUNDS & ORS

[2011] SASC 202

Reasons for Decision of The Honourable Justice Blue

18 November 2011

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - AMENDMENT

Plaintiffs seek to amend their statement of claim on second day of trial - consideration of relevant factors - effect on trial.

Held: Amendment allowed.

Supreme Court Rules 2006  (SA) r 54, 3, 113, 116, 117; Limitations of Actions Act 1936 (SA), referred to.
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Channel Seven Australia Pty Ltd v Manock [2010] SASCFC 59, applied.
Abrook v Paterson (Unreported, Supreme Court of South Australia Full Court, Olsson J, 3 March 1995) 3 March 1995; Chapman v Australian Broadcasting Authority (2000) 77 SASR 181; Commonwealth Bank of Australia v Carotino (Australia) Pty Ltd [2011] SASC 42; JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432; Pillay v Lloyd [2000] SASC 208; Pope v Orchard [2010] SASC 354; Weldon v Neale (1887) 19 QBD 394; Wenlock v Moloney [1965] 2 All ER 871, considered.

HOPCROFT & ANOR v EDMUNDS & ORS
[2011] SASC 202

Civil: Ruling

1. BLUE J:   The trial in this matter commenced on 15 November 2011.

2. During the plaintiffs’ opening address, two issues arose concerning the constitution of the contract upon which the plaintiffs sue and the basis upon which the plaintiffs sue the fourth defendant Dadeeton Pty Ltd (“Dadeeton”).

3. On the morning of 16 November 2011, the plaintiffs applied for permission to amend their statement of claim.  The application is opposed by the defendants.

4. The application is made pursuant to r 54 of the Supreme Court Rules 2006.  It was common ground that I have a discretion whether or not to permit the amendment.  Counsel for both parties referred to the decision of the High Court in Aon Risk Services Australia Ltd v Australian National University,[1] the decision of the Full Court in Channel Seven Adelaide Pty Ltd v Manock,[2] and the decision of Kelly J in Commonwealth Bank of Australia v Carotino (Australia) Pty Ltd.[3]

   [1] (2009) 239 CLR 175; [2009] HCA 27.

   [2] [2010] SASCFC 59.

   [3] [2011] SASC 42.

5. In approaching the application, I bear in mind the provisions of rules 3, 113, 116 and 117 of the Supreme Court Rules 2006.  I take into account all of the factors identified by counsel for the parties, including the factors derived from Aon Risk Services Australia[4] and listed in Channel Seven Adelaide Pty Ltd v Manock by Bleby J (White J agreeing) at [46] and Gray J at [119].[5]

   [4] (2009) 239 CLR 175.

   [5] [2010] SASCFC 59.

   1.     Plea of contract

6. By paragraph 8 of the existing statement of claim, the plaintiffs plead that in about June 1995 the plaintiffs and the first, second and third defendants entered into a written agreement.

7. It is common ground, and has been known by the parties since prior to institution of the action in 2006, that a document entitled “Shareholders Agreement” (“the Document”) to which paragraph 8 refers was executed only by the plaintiffs and not by any of the defendants.  It follows that, on the plaintiffs’ case, the first, second and third defendants must have entered into the agreement by conduct other than by executing the Document. 

8. During opening address, the plaintiffs said that their primary case was that the first, second and third defendants entered into the agreement by their conduct in appointing each plaintiff a director of, and issuing one share to each plaintiff in, the third defendant (“Smoothpool”) on about 30 June 1995 and making payment of the sum of $4,000 after and by reason of receiving the Document executed by the plaintiffs.  They said that their alternative case was that the first, second and third defendants entered into the agreement by proffering the Document to the plaintiffs for their execution (and then its being executed by the plaintiffs). 

9. The plaintiffs seek permission to amend paragraph 8 by adding, by way of particulars, sub-paragraphs 8.1 and 8.2 broadly in accordance with the opening by their counsel.[6]

   [6]    In reverse order.

10. The defendants, in opposing the application, refer to the factors listed in Channel Seven Adelaide Pty Ltd v Manock.[7]  I have considered each of those factors, but address in these reasons only the principal factors identified by the defendants.

    [7] [2010] SASCFC 59 at [46] and [119].

11. The defendants refer to the interlocutory history in relation to the pleading of paragraph 8 and its predecessors.  The Court file shows that history, relevantly, is the original statement of claim[8] which pleaded at paragraphs 1 and 38 that the plaintiffs and first to third defendants entered into a written agreement in June 1995.  The statement of claim went on to plead at paragraph 39 that the parties had had communications by phone and post as to the terms of the agreement prior to its being reduced to writing.  On 4 December 2006, the defendants requested particulars of the phone and postal communications, but not of the manner by which the parties entered into the written agreement, and on 21 December 2006 the defendants took out an interlocutory application seeking an order for particulars as requested.  Subsequently, the plaintiffs propounded an amended statement of claim which substantially recast the pleadings, combined former paragraphs 1 and 38 into a single paragraph 8 and did not incorporate paragraph 39.  Due to the propounding of the intermediate statements of claim, the defendants had not pursued their application for particulars.  Ultimately on 15 January 2009, the defendants informed the Court that they did not oppose the grant of permission to amend the statement of claim and did not pursue an application for particulars, but foreshadowed that they would seek to strictly confirm the plaintiffs’ case to the content of that statement of claim at trial.  Effectively, this left up in the air the question as to the manner by which, on the plaintiffs’ case, the first to third defendants entered into the written agreement.  I do not consider that this interlocutory history precludes the plaintiffs now seeking permission to amend paragraph 8 to identify that manner.

    [8]    Filed on 20 November 2006.

12. The defendants in their defence and counterclaim plead in considerable detail the events and communications between Mr Noolan, Cowell Clarke, the defendants and the plaintiffs leading up to the execution by the plaintiffs of the Document,[9] that any agreement was constituted by much broader communications than the Document,[10] that any agreement was subject to conditions precedent,[11] and that any agreement was induced by misrepresentation by reason of which the first, second and third defendants rescinded it.[12]

    [9]    Paragraph 8.2 incorporating paragraph 30 and also paragraph 31.

    [10]   Paragraph 8.2 incorporating paragraph 30 and also paragraph 31.

    [11]   Paragraph 8.3 and paragraphs 30 and 31.

    [12]   Paragraphs 30 to 33.

13. The existing defence and the defendants’ limited written opening, in a substantive sense, anticipate the case now sought to be pleaded in sub-paragraphs 8.1 and 8.2.  As to sub-paragraph 8.1, the defendants’ case, as appears from their defence and written opening, is that the Document (and earlier drafts thereof) essentially contained terms which the plaintiffs were prepared to agree as opposed to terms the defendants were prepared to agree, and the defendants never provided instructions to Cowell Clarke as to those terms or agreed to them.  As to sub-paragraph 8.2, the defendants’ case, as so appears, is that the appointment of the plaintiffs as directors of Smoothpool, issue of shares to them and payments to them were undertaken independently of the alleged agreement.  In addition, the defendants plead that, if there was a contract, it encompassed an overarching oral agreement pursuant to which agreement on and by the Document was subject to conditions precedent.

14. In this respect, the defendants plead a broader case concerning the existence and terms of a contract (both in time and scope) than the case sought to be pleaded (or currently pleaded) by the plaintiffs.

15. The plaintiffs have produced one volume of tender documents and the defendants have produced four volumes of tender documents.  Those documents range over an extensive time period leading up to 30 June 1995 and again over an extensive time period thereafter.  The defendants include in their tender books a copy of the entire Cowell Clarke file.  I was informed on an earlier occasion by counsel for the defendants that he estimated that the trial would take ten days (or more) and that he intended to address extensively the dealings between the parties over the years.  The joint estimate of the parties contained in the certificate of readiness is seven days.

16. It is apparent from the above matters that the evidence in the trial will in any event address the communications between the parties (and accountants and solicitors) leading up to the Document’s execution by the plaintiffs, and will also address the subsequent conduct of the parties (including the appointment of the plaintiffs as directors, issue to them of shares, and monetary payments made to the plaintiffs). 

17. I did not understand the defendants to contend that the proposed amendments to paragraph 8 alone, if permitted, would lead to a vacation of the trial.  In any event, I consider that they will not lead to a substantial change in the conduct of the trial, and that the interests of the defendants can be sufficiently protected without the necessity for a vacation or substantial adjournment of the trial.

18. The defendants in argument on the application identified reasons why they contend that the claim that a contract was entered into will fail and other reasons are pleaded in the defence and identified in the defendants’ written opening.  I did not understand them to contend that the contract case has no chance of success in the sense referred to in various decisions on the power to amend, but in any event I do not consider that it is bound to fail in that sense.  Having said that, I form no view on the strength or weakness of the plaintiffs’ case, and the plaintiffs will need to overcome various obstacles in order to succeed.

19. The defendants contend that there has been undue delay in making the application and no satisfactory reason for that delay  The explanation proffered by the plaintiffs for the delay in seeking to amend paragraph 8 is that it was not until the opening address that counsel understood that the defendants objected to the plaintiffs conducting the case on the basis on which he opened it and that he understood the necessity (or, he said, desirability) of making the amendment to define (and, he said, confine) the plaintiffs’ case as to the constitution of the contract.  While the plaintiffs are expected to have finalised their pleading well before trial in accordance with rule 113 and other rules and the expectation of the Court and while this is not a satisfactory explanation, I take into account that the plaintiffs are manifestly running a case based upon entry into a written contract which must of necessity have been entered into by the defendants (if at all) by conduct other than execution, coupled with the fact that the evidence in respect of the proposed sub-paragraphs is likely to be adduced in any event.

20. In all the circumstances, it is appropriate to grant permission to the plaintiffs to amend to introduce sub-paragraphs 8.1 and 8.2, subject to terms (as to which I will hear the parties).

    2.     Plea in Contract against Dadeeton

21. The existing statement of claim pleads as objective fact, and the defence admits, that Smoothpool was trustee of the Cliff Edmunds Family Trust (“the Trust”) until a date in 1982, when it was succeeded as trustee by Dadeeton.[13]

    [13]   See eg Abrook v Paterson (unreported, Supreme Court of South Australia Full Court, Olsson J, 3 March 1995); Pope v Orchard [2010] SASC 354; Chapman v Australian Broadcasting Corporation (2000) 77 SASR 181 [2000] SASC 146; Pillay v Lloyd [2000] SASC 208; Wenlock v Moloney [1965] 2 ALL ER 871; [1965] 1 WLR 1238.

22. The existing statement of claim pleads that:

    1.it was unknown to the plaintiffs that Dadeeton had succeeded Smoothpool as trustee of the Trust and thereby as the holder of the interest in the abalone licence the subject of action number 2452 of 1988 on trust for the Trust;

    2.it was unknown to the plaintiffs that Dadeeton subsequently became a party to action number 2452 of 1988 seeking relief against the defendants in that action in respect of the abalone licence;

    3.Mr and Mrs Edmunds controlled Smoothpool, Dadeeton and the Trust and were beneficiaries of the Trust;

    4.the plaintiffs seek by way of relief an order for payment by Dadeeton and the other defendants of a total of 15 per cent of the value of the abalone licence and of the monetary relief granted to Dadeeton as a result of the judgment in action number 2452 of 1988.

23. The only cause of action pleaded in the existing statement of claim is contract.  The existing statement of claim does not articulate the legal basis on which the plaintiffs are entitled to payment by Dadeeton pursuant to the alleged contract.

24. The plaintiffs seek permission to introduce a new paragraph 15 pleading, in essence, that Dadeeton is estopped from denying that it is bound by the alleged contract to make the payments to which the plaintiffs are entitled thereunder.  It does not seek to introduce a cause of action other than contract.

    3.     Proprietary claim

25. The existing statement of claim makes no proprietary claim against Dadeeton or any other defendant and only seeks orders for payment of monies by each defendant.

26. The plaintiffs seek permission to introduce a new paragraph 17 in Part 1 and a new paragraph 4 in Part 2 (Remedies) to plead and seek a declaration that, if Smoothpool is liable to the plaintiffs as pleaded, Smoothpool is entitled to a lien or charge over the assets held by Dadeeton as trustee of the Trust and the plaintiffs are entitled to be subrogated to that right of indemnity.  In addition, the plaintiffs seek to introduce a new paragraph 3 in Part 2 (Remedies) claiming a declaration that Dadeeton holds the abalone licence on constructive trust for the plaintiffs to the extent of 15 per cent of the net value of the licence.

27. The defendants oppose the proposed amendments referred to at paragraphs [24] and [26] on several grounds.  The defendants refer to the factors listed in Channel Seven Adelaide Pty Ltd v Manock.[14]  I have considered each of those factors, but address in these reasons only the principal arguments concerning those factors.

    [14] [2010] SASCFC 59 at [46] and [119].

28. The defendants argue that, for various reasons, proposed paragraph 15 of the statement of claim does not plead an arguable claim against Dadeeton based on estoppel.  I consider that the claim is arguable (on the relevant test on an application to amend).  Having said that, I form no view on the strength or weakness of the plaintiffs’ case, and the plaintiffs will need to overcome various obstacles in order to succeed.

29. The defendants contend that proposed paragraph 17 does not plead an arguable claim to a subrogated lien or charge and further that paragraph 15 does not plead an arguable claim to a constructive trust.  I defer consideration of those contentions for the time being.

30. The defendants contend that, if the claims for declarations as to constructive trust and/or equitable charge or lien subject to paragraphs 3 and 4 of Part 2 were permitted, it would be either necessary or desirable that all of the beneficiaries of the Trust be joined as parties so that issues of competing priorities could be determined.  In turn, the defendants submit that this would necessitate separate representation of the beneficiaries other than Mr and Mrs Edmunds and vacation of the trial.

31. The defendants referred to the interlocutory history principally in relation to the proposed amendment to paragraph 8.  However, I consider that history in relation to the other proposed amendments as well. 

32. The original statement of claim included Dadeeton as a defendant.  Ultimately, on 16 January 2009, the existing statement of claim was filed pursuant to permission granted on 15 January 2009.  The only cause of action pleaded against any defendant in the statement of claim was contract.  As observed above, on 15 January 2009, the defendants had informed the Court that they did not object to the amended pleading and did not propose to seek any further particulars, and would seek to strictly confirm the plaintiffs’ case to the content of that statement of claim at trial

33. On 17 February 2009, Dadeeton took out an application to strike out the claim against it.  The application was mentioned before a Master on 26 February 2009, and adjourned for mention only to 14 April 2009.  The application was apparently not pursued by Dadeeton on or after 14 April 2009.

34. The defendants contend that there had been undue delay in making the application and no satisfactory reason for that delay.

35. Different considerations apply to the amendments summarised at [24] and [26] above.

36. In relation to the proposed introduction of paragraph 15 leading to a claim for monetary relief against Dadeeton, the existing statement of claim already seeks such relief.  The first element of the estoppel sought to be pleaded by proposed paragraph 15 is essentially the conduct of the defendants in that Dadeeton had become the trustee of the Trust in lieu of Smoothpool and thereby had an interest in the abalone licence the subject of action 2452 of 1988, but this was not disclosed to the plaintiffs, and subsequently Dadeeton became a party to that action but this was also not disclosed to the plaintiffs.  Those facts are already pleaded (in a different context) at paragraphs 14.1.1 to 14.1.6 of the existing statement of claim.  In their defence, the defendants admit the trusteeships of the Trust and plead that the plaintiffs did know of Dadeeton’s joinder as a party to action 2452 of 1988 (which occurred on 25 September 1997).  It is apparent from the existing pleadings, that the evidence in the trial will address those facts, regardless of whether or not the proposed amendment is permitted.  There are also some supplementary facts sought to be pleaded at proposed paragraph 15 as the defendants’ relevant conduct which are not contained in existing paragraph 14. 

37. The reliance and detriment components of estoppel the subject of proposed paragraph 15 are the provision by the plaintiffs of assistance required by the alleged contract from 1995 to 2001 and the failure of the plaintiffs to receive the consideration intended pursuant to the alleged contract.  Factually, the question of what assistance was provided by the plaintiffs will be the subject of evidence and contentions in the trial independently of proposed paragraph 15. 

38. I consider that the introduction of paragraph 15 alone (leaving aside paragraph 17 and paragraph 3 and 4 of Part 2) would not lead to a need to vacate the trial, and that the interests of the defendants can be accommodated by a short adjournment and other orders. 

39. The explanation proffered by the plaintiffs for their failure to plead estoppel prior to the commencement of trial is that inadequate consideration was given to the basis of the claim against Dadeeton.  While the plaintiffs are in breach of rule 113 and this is not an adequate explanation, I need to assess this factor as part of all of the factors relevant to whether or not the amendment should be permitted. 

1. In all of the circumstances, I consider that the amendment to introduce paragraph 15 ought to be permitted to ensure that the dispute between the plaintiffs and Dadeeton as to whether the plaintiffs are entitled to contractual payments from Dadeeton be determined on the merits in this action.

2. In relation to paragraph 17 of Part 1 and paragraphs 3 and 4 of Part 2 of the statement of claim, different considerations apply.  There is no existing claim for proprietary relief against any defendant in the existing statement of claim.  I do not consider that proposed paragraphs 15 and 17 plead an arguable case giving rise to a constructive trust.  While I do not consider that it is unarguable that Smoothpool is or will be entitled to a lien or charge over the trust assets or that the plaintiffs are or will be subrogated to such a right of indemnity of Smoothpool in the event that Smoothpool is liable to the plaintiffs, those questions do not need to be determined in this action.  They are analogous (although different) to a plaintiff seeking a declaration that a defendant is entitled to indemnity from an insurer.  A plaintiff may or may not be entitled to such a declaration[15] and it might or might not be appropriate to determine the question of indemnity at the instance of the plaintiff as between two defendants, but, if it is not so determined, it can be determined in subsequent proceedings.  In the present case, the plaintiffs have not justified why it is necessary that this issue be determined in the existing action.

   [15]   See eg JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432.

3. The defendants contend that the introduction of paragraphs 15 and 17 would introduce a new cause or causes of action against Dadeeton not previously pleaded, in circumstances in which it is now out of time pursuant to the Limitations of Actions Act 1936 (SA), and this is precluded by the rule in Weldon v Neale.[16]  During argument on the application, it was agreed by the parties that it is appropriate that I do not determine that issue at this stage, but rather order (if I were disposed to grant permission to amend) that the amendments only take effect as from the date of the application, namely 16 November 2011. 

   [16] (1887) 19 QBD 394.

4. In all the circumstances, I refuse permission to introduce paragraph 17 and paragraphs 3 and 4 of Part 2.

   4.     Other Proposed Amendments

5. The plaintiffs also seek permission to amend Part 2 to introduce new paragraphs 2 and 5 seeking a declaration and directions.  This amendment is not opposed by the defendants and I grant permission to make it.

6. Finally, the defendants seek permission to introduce a new paragraph 8 into Part 2 seeking, by way of relief, and in the alternative, damages for breach of contract to be assessed.  However, there is no plea in Part 1 of the proposed statement of claim that the plaintiffs suffered damages by reason of alleged breaches of contract, nor identification of such damages.  In those circumstances, I refuse leave to amend in this respect.

   Conclusion

7. I will hear the parties as to the terms of an order granting permission to the plaintiffs to amend paragraph 8 of and introduce paragraph 15 into Part 1 and to introduce paragraphs 2 and 5 into Part 2 of the statement of claim.