Hutcheson v KELARIS Pty Ltd - [2000] WADC 126

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: HUTCHESON & ANOR -v- KELARIS PTY LTD [2000] WADC 126

CORAM: COMMISSIONER REYNOLDS

HEARD: 28 APRIL 2000

DELIVERED : 25 MAY 2000

FILE NO/S: CIV 2807 of 1998

BETWEEN: ALAN JOHN HUTCHESON
JOAN HUTCHESON
Plaintiffs
AND
KELARIS PTY LTD
Defendant

Catchwords:

Appeal - Application to strike out statement of claim - Whether the pleadings disclose a cause of action - Order 20 r 19 Supreme Court Rules

Legislation:

Nil

Result:

Appeal upheld. Leave for plaintiff to file another statement of claim with liberty to apply to the defendant

Representation:

Counsel:

Plaintiffs: Ms J Pinnington
Defendant: Mr A C McIntosh

Solicitors:

Plaintiffs: Lawton Gillon
Defendant: Murie & Edward

Case(s) referred to in judgment(s):

Hart-Roach v Public Trustee, unreported; SCt of WA; Library No 980044; 11 February 1998
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589

Case(s) also cited:

Robinson & Ors v Adshead & Ors (No 2) (1995) 12 WAR 577
Kimberley Downs Pty Ltd & Ors v State of Western Australia & Anor, unreported; SCt of WA; Library No 6461; 25 August 1986
Packard v Transport Trading & Agency Company Ltd (1912) 14 WALR 191
General Steel Industries Inc v Commissioner For Railways (NSW) & Ors (1964) 112 CLR 125
Dalgety Australia Ltd & Anor v de Vahl Rubin & Ors, unreported FCt SCt of WA; Library No 5485; 24 August 1984
Pezzano v Hoffman & Anor [1999] WASC 231

COMMISSIONER REYNOLDS: This is an appeal against a decision of a Deputy Registrar dated 18 August 1999 by which he ordered that the plaintiffs have leave to file an amended substituted statement of claim. The order was made on the application by the defendant by way of chamber summons dated 29 October 1998 for an order that the plaintiffs' substituted statement of claim be struck out because it failed to disclose a cause of action.
The plaintiffs filed a writ of summons with a statement of claim on 29 July 1998. A memorandum of appearance was filed on 7 August 1998. On 20 August 1998 the defendant made an application by way of chamber summons seeking an order that the plaintiffs' claim be struck out because it failed to disclose a cause of action. On 16 October 1998 orders were made by consent on the defendant's application including orders that the plaintiffs file and serve a substituted statement of claim within seven days and that the defendant have leave within 21 days of the date of service to issue a fresh chamber summons pursuant to O 20 r 19 of the Rules of the Supreme Court of Western Australia ("RSC").
The plaintiffs' substituted statement of claim was filed on 16 October 1998. On 29 October 1998 the defendant applied for it to be struck out because it failed to disclose a cause of action. On 26 May 1999 a Deputy Registrar ordered inter alia that the plaintiffs file and serve a minute of a proposed amended substituted statement of claim ("the Minute"). The plaintiffs filed the Minute on 3 June 1999. When the defendant's application was heard by a Deputy Registrar on 18 August 1999 it was ordered inter alia that the plaintiffs have leave to amend in terms of the Minute subject to two alterations which I will refer to later and which do not cause this decision to go one way or the other.

A summary of the plaintiffs' claim

On 11 June 1993 the plaintiffs agreed to purchase a residential and farming property in Goomalling comprising Avon Location 2565 ("the property") from Morton William Schell ("the vendor"). The defendant carries on business as a settlement agent and acted on behalf of the plaintiffs in the settlement of their purchase of the property from the vendor. The settlement took place on 21 June 1993.
The water source for the property was located on a parcel of land comprising Avon Location 2564 ("Location 2564") which is east of the property and one parcel of land removed from the property. In between Location 2564 and the property is a parcel of land comprising Avon Location 6267 ("Location 6267") which is owned by Schell Holdings Pty Ltd ("Schell Holdings").
When the plaintiffs purchased the property a pipe from the water source on Location 2564 traversed part of Location 2564 and continued across Location 6267 and onto the property. The plaintiffs have pleaded that the document evidencing their purchase of the property expressly provided that the vendor was aware that access for scheme water to the property was registered over Location 2564. It is also pleaded that before and at the time of settlement no such easement was actually registered over Location 2564.
On 25 April 1994 an earth tremor damaged part of the pipe on Location 6267 and the plaintiffs allege that the owner of Location 6267, Schell Holdings, denied them access to repair the damage to that part of the pipe on Location 6267. The plaintiffs allege that as a result of such access being denied they had no water supply to the property and were thereby forced to leave the property which resulted in loss and damage including relocation expenses, rental expenses on another property, loss of stock and the cost of repairing buildings and yards comprising part of the property which had deteriorated during their absence from the property.
The plaintiffs' claim against the defendant is based on breach of contract and/or negligence. They allege that the defendant proceeded to settlement and settled their purchase of the property without finding out and advising them that there was no easement granting them access to water registered over Location 2564. They plead that if they were so advised then they would have realised that there was no easement granting them access to that part of the pipe which traversed Location 6267. They further plead that they would have then been able to reconsider their position and have either withdrawn from the purchase or insisted on the registration of easements to protect their position. Thus if the owner of Location 6267 denied them access to part of the pipe on Location 6267 they could have relied on the easement registered over Location 6267 and enforced their right to access and repair the pipe and thereby maintained water supply to the property.

Key provisions of the amended substituted statement of claim

Paragraphs 2, 3, 4, 5, 8, 9, 10, 11, 12 and part of 13 of the amended substituted statement of claim for which leave was granted provide as follows:
"2.The aforesaid property is more particularly described as Avon Location 2565, and comprises the whole of the land contained in Certificate of Title Volume 1338 Folio 786 (hereinafter referred to as "the Property").
3.The Property's eastern boundary adjoins land more particularly described in Certificate of Title Volume 991 Folio 168 and hereinafter referred to as "Avon Location 6267".
4.Avon Location 6267's eastern boundary adjoins land more particularly described in Certificate of Title Volume 1338 Folio 785 and hereinafter referred to as "Avon Location 2564".
5.A special condition of the Purchase Agreement was that the Vendor was aware that access for scheme water to the property was registered over Avon Location 2564.
…
8.Unbeknown to the Plaintiffs at all material times, the Vendor of the Property did not have a registered easement, nor any legal estate or interest of a like nature to enable the Plaintiffs or their successors in title to enjoy water pipe-line access (through a pre‑existing water pipe-line supplying water to the Property) across an adjoining property owned by one Schell Holdings Pty Ltd and being more particularly described as a portion of Avon Location 6267 and being a portion of the land comprised in Certificate of Title Volume 991 Folio 168 ("the Adjoining Property") Avon Location 6267.
9.Had the Plaintiffs been aware that there was no registered easement against Avon Location 2564, they would have been alerted to the fact that there was no registered easement against Avon Location 6267 and owing to the breach in the Special Conditions of the contract they would have been in a position to withdraw from the sale or insist upon the registration of easements against Avon Location 2564 and/or Avon Location 6267.
10.At all material times, the said water pipe-line access was the only permanent source of water supplied to the Property.
11.It was an implied term of the Defendant's appointment as settlement agent for the settlement of the Purchase Agreement that it would exercise all proper skill and care, diligence and competence in or about the settlement and completion of the purchase of the Property.
12.Further or alternatively, the Defendant owed a like duty in tort independent of and additional to the said duty in contract pleaded in the previous paragraph herein.
13.In breach of contract or alternatively negligently, the Defendant failed to exercise all proper skill and care, diligence and competence in or about the settlement and completion of the purchase of the said Property.
PARTICULARS
……"
The particulars in para 13 set out eight breaches which are mainly concerned with failure to discover that no easement was registered over Location 6267, failure to adequately investigate generally and specifically failure to investigate the title of the property in relation to the right of access to water in favour of the proprietors of the property and failure to notify and advise the plaintiffs of their rights and obligations in relation to access to water.
Paragraph 14 sets out that the plaintiffs entered into physical possession of the property on or after 20 September 1993.
Paragraph 15 sets out that on or about 25 April 1994 an earth tremor damaged part of the pipe on Location 6267 and that Schell Holdings denied the plaintiffs access to Location 6267 to repair the damage to the pipe.
Paragraph 16 sets out that on or about 26 April 1994 the plaintiffs discovered that there was no easement registered over Location 6267 on which they could rely to access Location 6267 and repair the pipe.
Paragraph 17 provides that from about 29 June 1994 until on or about March 1996 Schell Holdings obstructed the plaintiffs from accessing Location 6267 for the purpose of repairing the pipe.
Paragraph 20 sets out that on 6 June 1995 the plaintiffs commenced proceedings against Schell Holdings in the Supreme Court of Western Australia seeking inter alia an order for access to Location 6267.
Paragraph 21 sets out that on or about 13 May 1996 Schell Holdings granted an easement to the plaintiffs for water pipe-line access and ancillary rights over Location 6267 and on 20 August 1996 the action in the Supreme Court of Western Australia was dismissed by consent.
Paragraph 23 sets out that on or about 17 September 1996 the plaintiffs were issued with a fresh certificate of title for the property which made reference to the easement over Location 6267.
Paragraph 24 provides as follows:
"By reason of the breaches pleaded in paragraph 13 herein, the Plaintiffs have suffered loss and damage.
PARTICULARS OF LOSS AND DAMAGE
……"
I previously mentioned that the Deputy Registrar made some variations to the proposed amended substituted statement of claim for which leave was granted. In the proposed amended substituted statement of claim as originally filed the words "an adjoining property owned by one Schell Holdings Pty Ltd and being more particularly described as a portion of Avon Location 6267 and being a portion of the land comprised in Certificate of Title Vol 991 Folio 168 ('the adjoining property')" in para 8 were lined through. The Deputy Registrar reinserted these words into para 8 of the amended substituted statement of claim. The other variation by the Deputy Registrar was to para 24 as amended and as set out above. In its original form the amended substituted para 24 made express reference to para 9. The Deputy Registrar changed this to an express reference to para 13.

Supreme Court action CIV 1510 of 1995

On 6 June 1995 the plaintiffs commenced proceedings against Schell Holdings in Supreme Court action CIV 1510 of 1995 ("the Supreme Court action"). The plaintiffs alleged that they and their predecessors in title of the property had been in adverse possession of land which formed part of Location 6267 and on which the pipe was constructed. The plaintiffs sought a declaration that they were the owners in fee simple in possession of that part of Location 6267 or alternatively a declaration that they were entitled to a right of way and/or a pipeline easement. The plaintiffs also sought an injunction restraining Schell Holdings from obstructing access by them to the pipeline easement. The plaintiffs also sought damages against Schell Holdings. In the plaintiffs' substituted statement of claim filed in the Supreme Court action they pleaded that Schell Holdings by its agent Terry Schell wrongfully obstructed their access to the pipeline and ordered that they discontinue using the pipeline. An affidavit of Terry Charles Schell ("Mr Schell") of Schell Holdings was sworn on 9 November 1995 and filed in support of an application to strike out the plaintiffs' statement of claim in the Supreme Court action. Mr Schell stated in his affidavit that at no time had the plaintiffs been restricted or prevented from their use and enjoyment of the pipeline. He also denied that the plaintiffs had a claim for or could show adverse possession. Mr Schell also stated that at all material times Schell Holdings was ready, willing and able to have a deed of easement executed. Mr Schell annexed to his affidavit copies of a deed of easement to the plaintiffs from Schell Holdings and a deed of easement from the registered proprietors of Location 2564 to the plaintiffs.
On 7 August 1996 a Registrar of the Supreme Court of Western Australia made orders by consent that the plaintiffs' action be dismissed and that there be no order as to costs.
Paragraphs 22 and 23 of the plaintiffs' amended substituted statement of claim in the proceedings in this Court set out that as a result of the compromise in the Supreme Court action Schell Holdings effected a transfer to the plaintiffs of a right of carriageway and right to enter upon Location 6267 for the purpose of exercising water pipeline rights as set out in an easement which was registered.
Damages sought by the plaintiffs against the defendant in this Court include the sum of $7500 for legal fees. I take it that this amount represents the plaintiffs' costs of the Supreme Court action.
It has been submitted on behalf of the defendant in this action that the material filed in relation to the Supreme Court action shows that it is not arguable in this case that the plaintiffs had a right to withdraw from the sale because Schell Holdings did not obstruct the plaintiffs and were ready, willing and able to register an easement in favour of the plaintiffs in relation to the water pipeline. It is further submitted on behalf of the defendant that in any event the plaintiffs compromised the Supreme Court action by agreeing to its dismissal and thereby compromised their rights against the defendant in this action in relation to all loss and damage pleaded in the Supreme Court action, their claim for legal costs of the Supreme Court action and any other matter that could have been pleaded by the plaintiffs in the Supreme Court action. Counsel for the defendant has referred to Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 in support of this submission.
I note that the parties in the Supreme Court action are not the same as the parties in this action. In particular the defendant in this action was not a party in the Supreme Court action. That may be sufficient basis for not applying the principle in Anshun's case to this case. In my opinion I do not have to decide this point because this appeal can be determined on a consideration of the pleadings in the amended substituted statement of claim. I should also add that my reference to the affidavit of Mr Schell is simply to show the position in relation to the Supreme Court action. Given the provisions of O 20 r 19(2) SCR I have not had any regard to its contents to determine this matter.

Grounds of appeal

The primary objection raised by the defendant is that there is no link between the plaintiffs' complaint that the defendant failed to advise them that no easement was registered and the loss pleaded in para 24. It is submitted that the loss pleaded in para 24 was suffered by the plaintiffs as a result of them entering into a legally binding contract or a third party not allowing them to enjoy the rights in an implied easement. It is submitted that the defendant's failure to advise does not break that chain of causation. It is submitted that the plaintiffs have attempted to overcome this problem by inserting para 9 into the amended substituted statement of claim.
There are a number of other grounds of appeal in relation to other paragraphs of the amended substituted statement of claim. For the moment I think that I need only concern myself with the primary objection raised by the defendant.

Relevant legal principles

In Hart-Roach v Public Trustee, unreported; SCt of WA; Library No 980044; 11 February 1998 his Honour Murray J referred to relevant authorities to an application under O 20 r 19 and commented as follows:
"It is convenient to commence my consideration of the defendant's application by referring to the nature of the application under O 20 r 19. Properly used, the rule will have considerable benefits in respect of the efficient disposition of litigation. At least it may, by ensuring that a pleading is in proper form, help to eliminate surprise and confusion at trial. The orders made on such an application may make more efficient the preparation for trial and reduce the cost of the litigation by disposing before trial of issues raised by the pleadings which are without merit. However, the court hearing such an application should not overlook the fact that it is ultimately the process of trial, at which evidence is heard, facts are found and issues of law determined, which will provide the litigants with a just result. As Barwick CJ put it in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130, although his Honour agreed:
'... that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality, a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.'
That observation will, of course, be particularly relevant where, as in this case, it is argued that there is no reasonable cause of action disclosed by the pleading. In Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91, Dixon J said that the power conferred by such a rule 'is not to be used in cases of doubt or difficulty or where the pleading raises a debatable question of law' or 'once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it'. In Packhard v Transport Trading and Agency Co Ltd (1912) 14 WALR 191 at 195, Burnside J said, 'It is obvious from the decisions that the rule is intended to apply only to cases which are really not arguable.'
Therefore, as Cross J put it in Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937 at 942, 'The mere fact that the case is weak and not likely to succeed is not a ground for striking out a validly formulated pleading.' On the other hand, as Malcolm CJ said in a rather different statutory context in Dempster v NCSC (1993) 9 WAR 215 at 262, 'an arguable case is one that is not merely capable of being argued, but one that is reasonably capable of being argued in the sense that it has an argument which has some prospect of success', so that a 'reasonable cause" is one "which has some chance of success'.
So far as the defendant's contentions that particular pleadings should be struck out depend upon the proposition that they are embarrassing, it is to be noted that the phrase employed in O 20 r 19(1)(c) is that the pleading 'may prejudice, embarrass or delay the fair trial of the action'. The phrase is a composite one. It imports the notion that the character of the pleading is such as to make the fair trial of the action so as to enable the court to do justice between the parties more difficult to achieve, that the trial will be unduly protracted or delayed, or the form of the pleading is in any other way calculated to prejudice the legal process. There are many cases in the books where, upon this ground, pleadings have been struck out because they are evasive, they conceal or obscure the real questions in controversy, they are ambiguous or not reasonably intelligible, they raise immaterial or irrelevant issues, they fail to confine the issues or state the case of the party in question …"

Whether the pleadings disclose a cause of action

Before I comment on para 9 I should first comment on para 5. On a first reading of the special condition set out in para 5 the question arises what does it mean? On reading the amended substituted statement of claim as a whole I take it that the plaintiffs' claim that the vendor represented to them that an easement granting the registered proprietor of the property and their successors in title access to scheme water was registered over Location 2564 and that this induced them to some extent at least to purchase the property. I also take it that the plaintiffs claim that such representation amounts to a special condition of the purchase agreement. As a matter of law a representation can amount to a condition of a contract.
In para 8 the plaintiffs plead that they did not know that the vendor did not have an easement over Location 6267 granting him access to the pipe on Location 6267. The pipe ran from Location 2564 and across Location 6267 to the property and thereby facilitated the supply of water from Location 2564 to the property. Therefore if the owner of the property did not have any right of enjoyment and access in relation to the pipe on Location 6267 there would be no link between the water source on Location 2564 and the property. In para 9 the plaintiffs plead that if the defendant had advised them that there was no easement on Location 2564 then they would have been alerted to the fact that there was no easement on Location 6267.
The plaintiffs have not pleaded that the vendor made any representation to them that there was an easement in favour of the owner of the property registered over Location 6267. The plaintiffs have also not pleaded that it was an express or implied term of their agreement with the vendor to purchase the property that the owner of the property had rights of enjoyment and access in relation to the pipe on Location 6267.
In para 9 the plaintiffs plead that if the defendant notified them that there was no easement over Location 2564 then they would have been in a position to do two things. The first of these two things is that they would have been in a position to withdraw from the sale. In my opinion whether or not the plaintiffs could have withdrawn from the sale is a conclusion of law. The plaintiffs have not pleaded any material facts to support this conclusion. On what basis do the plaintiffs claim that they could have withdrawn from the sale? Is it because there was an express or implied condition that there was an easement registered over Location 6267 in favour of the owner of the property and that as a matter of fact there was not? I have already mentioned that no such condition has been raised on the pleadings.
It seems that on the pleadings in their current form the basis relied on by the plaintiffs to withdraw from the sale is that no easement in favour of the owner of the property was registered over Location 2564. On my reading of the pleadings as a whole it seems fair to conclude that at no time after settlement did the owners of Location 2564 obstruct the plaintiffs from accessing water from the water source on Location 2564. On the pleadings it seems that the water supply to the property only became a problem when Schell Holdings denied the plaintiffs access to part of the pipe on Location 6267 and that when that issue was resolved the water supply to the property was restored. This raises the question what was the position prior to the settlement as between the vendor and the owners of Location 2564 or their respective predecessors in title in relation to the right to enjoy and access water on Location 2564 by the owner of the property.
If the owners of Location 2564 were ready, willing and able to allow the plaintiffs to take water from Location 2564 and agree to an easement to this effect being registered then clearly this would weigh against the plaintiffs being able to withdraw from the sale on the basis that no such easement was actually registered. In my opinion the attitude of the owners of Location 2564 to the plaintiffs taking water from Location 2564 is material to the issue of whether or not the plaintiffs could have withdrawn from the sale. The pleadings in their present form make no reference at all to this issue.
The second of the two things that the plaintiffs say they could have done if they were notified that there was no easement registered on Location 2564 is to insist upon the registration of easements against Location 2564 and/or Location 6267. The first comment I wish to make about this concerns the use of the words "and/or" between the references to each of Location 2564 and Location 6267. If the plaintiffs were only able to insist on an easement being registered against Location 2564 then that would not have prevented Schell Holdings from denying them access to the pipe on Location 6267. On the pleadings it is the conduct of Schell Holdings that the plaintiffs complain about and not that of the owners of Location 2564.
In my opinion whether or not the plaintiffs could have insisted upon the registration of easements against one or both of Location 2564 and Location 6267 is a conclusion of law. The plaintiffs do not plead any material facts to support this conclusion. On this point I consider it highly relevant that neither of the owners of each of Location 2564 and Location 6257 is a party to the sale. How then can it be said that the plaintiffs have some right against one or both of them pursuant to the sale agreement which is between the plaintiffs and the vendor?
The plaintiffs allege that they suffered loss and damage after Schell Holdings denied them access to part of Location 6267 to enable them to repair part of the pipe on Location 6267.
For all these reasons I am of the opinion that the pleadings as they presently stand do not give rise to a cause of action against the defendant because they do not provide the necessary link between the alleged failures by the defendant in para 13 and the plaintiffs' loss in para 24.
At this stage I am not inclined to bring the action to an end without giving the plaintiffs one last chance to plead their case. Of course whether the plaintiffs are in a position to take the chance and plead their case in such a way that gives rise to a cause of action is another matter.
I propose to uphold the appeal and to also make orders that the plaintiffs have leave within 14 days of the date of the order to file and serve a further amended substituted statement of claim and that the defendant has leave within 14 days of service of such further amended substituted statement of claim to file and serve a chamber summons pursuant to O 20 r 19 of the SCR. I will hear from the parties on what order I should make to cover the event that the plaintiffs do not file a further amended substituted statement of claim in time. Otherwise I will give the parties the opportunity of being heard on the question of costs.