Joyce v Palassis

[2007] WASC 156

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   JOYCE & ORS -v- PALASSIS & ANOR [2007] WASC 156

CORAM:   LE MIERE J

HEARD:   23 APRIL 2007

DELIVERED          :   24 JULY 2007

FILE NO/S:   CIV 2134 of 1998

BETWEEN:   NEIL KEVIN JOYCE

KEITH GRAEME LINGARD
NICK CHRISTOU
First Plaintiffs

STANTON PARTNERS
Second Plaintiff

AND

STAN MICHAEL PALASSIS
First Defendant

CHATTOCK HOLDINGS PTY LTD (ACN 009 357 895)
Second Defendant

FILE NO/S              :CIV 1061 of 2002

BETWEEN             :KEITH GRAEME LINGARD

NICK CHRISTOU
NEIL KEVIN JOYCE
Plaintiffs

AND

STAN MICHAEL PALASSIS
Defendant

Catchwords:

Contract law - Deed of settlement and release - Construction of terms of deed - Whether deed permits plaintiffs to amend pleadings in a related action

Legislation:

Nil

Result:

Declaration that deed does not prevent plaintiffs amending pleadings in terms proposed

Category:    B

Representation:

CIV 2134 of 1998

Counsel:

First Plaintiffs                :     Ms G S Pitt

Second Plaintiff             :     Ms G S Pitt

First Defendant              :     Mr M H Zilko SC

Second Defendant         :     Mr M H Zilko SC

Solicitors:

First Plaintiffs                :     Williams & Hughes

Second Plaintiff             :     Williams & Hughes

First Defendant              :     Solomon Brothers

Second Defendant         :     Solomon Brothers

CIV 1061 of 2002

Counsel:

Plaintiffs:     Ms G S Pitt

Defendant:     Mr M H Zilko SC

Solicitors:

Plaintiffs:     Williams & Hughes

Defendant:     Solomon Brothers

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

Nil

1. LE MIERE J:  The plaintiffs have applied by originating summons under O 58 r 10 for the determination of a question of construction arising under a deed ("the Deed") and for a declaration of the rights of the plaintiffs.  The question of construction concerns the right of the plaintiffs to amend their statement of claim in CIV 2134 of 1998 in which the plaintiffs are the first plaintiff and the defendant is the first defendant.  I will first refer to that litigation.

CIV 2134 of 1998

1. According to the statement of claim in CIV 2134 of 1998, the plaintiffs and the first defendant ("Mr Palassis") are accountants who used to practice together as Stanton Partners.  Palassis was the managing partner of Stanton Partners.  Chattock Holdings Pty Ltd is an entity related to Mr Palassis.  Chattock owned a building at 5 Ord Street, West Perth.  In or about 1992 Palassis proposed to the plaintiffs that Stanton Partners should take a lease of premises at 5 Ord Street ("the Premises").  Thereafter the plaintiffs and Palassis (together the Partners) and Chattock negotiated for the terms of a lease.

2. The plaintiffs allege that throughout the negotiations Palassis acted, amongst other things, for and on behalf of, and as agent of, Chattock.  The plaintiffs say that Palassis, for and on behalf of and as agent of Chattock, made oral proposals to the plaintiffs in respect of the rent and outgoings payable under the proposed lease, for the payment to the Partners of management fees in respect of the management of the building and in respect of rights of pre‑emption which the Partners would have over the shares in Chattock and the building ("the Proposals").

3. Between November 1992 and January 1993 Palassis delivered to the plaintiffs a written statement of certain of the Proposals ("the Written Proposals").  The Written Proposals did not include certain of the Proposals namely the "Right of Pre‑emption Proposal", the "Rent Proposal" and the "Shares Proposal".  The Right of Pre‑emption Proposal was that the partners would have a right of pre‑emption over the shares in Chattock in that each of the shareholders in Chattock would grant the Partners the first right to purchase their shares in Chattock if they wished to sell them.  The Rent Proposal was that if the total rent received in respect of the building should exceed the sum of $450,000 plus unrecoverable outgoings per annum (the Excess) then the partners would receive 74.27 per cent of the Excess.  The Shares Proposal was that at the expiration of each calendar year, Chattock would allot 100 fully paid ordinary shares in itself for each $10,000 by which the gross income received or receivable in respect of the building exceeded $450,000 and Stanton Partners was to receive 37.14 per cent of the allotted shares.  The plaintiffs say that they and Palassis orally agreed to the Proposals and on 7 February 1993 entered into occupation of the Premises and commenced to pay rent and, by reason of those matters, the Partners and Chattock entered an agreement for lease ("the Agreement for Lease").  The plaintiffs say that the terms of the Agreement for Lease included the Right of Pre‑emption Proposal, the Rent Proposal and the Shares Proposal.

4. The plaintiffs say that Palassis, in breach of the fiduciary duties he owed to the plaintiffs, and to the knowledge of Chattock, did not ensure that a lease was prepared and executed containing the terms of the Agreement for Lease.  The plaintiffs say that in or about 1997 Marjoe Nominees Pty Ltd (who at the time owned one half of the issued shares in Chattock) sold its shares in Chattock without offering to the Partners the first right of refusal.  The plaintiffs say that at some time the total rentals received or receivable in respect of the building exceeded $450,000 but Chattock has not paid the 74.27 per cent of the Excess or any sum to the Partners.  The plaintiffs further say that in the financial years ending 30 June 1997 and 1999 Chattock received gross income in respect of the building in a sum exceeding $450,000 but Chattock has not issued any shares to Stanton Partners.  The plaintiffs allege accordingly that Palassis breached fiduciary duties he owed to the plaintiffs and Chattock breached the terms of the Agreement for Lease.  The plaintiffs claim damages for breach of the Agreement for Lease.

5. The plaintiffs further alleged that between February 1993 and December 1996, without their knowledge or consent, Palassis paid various sums from the Partners' bank account to Chattock.  The first payments are said to be payments of rent, variable outgoings and rates and taxes that exceeded the rental, variable outgoings and rates and taxes payable to Chattock in accordance with the Written Proposals and/or the Agreement for Lease.  The second payment was the sum of $69,587.56 allegedly paid gratuitously.  The third payment was the sum of $167,031.29 to discharge liabilities owed by Chattock to third parties.  The plaintiffs say that each of the payments was made by Palassis in breach of the fiduciary duties he owed to the plaintiff and were made with the knowledge of, and for the benefit of, Chattock.  The plaintiffs claimed against each of Palassis and Chattock an account of profits or equitable compensation.

6. In November 2000 Palassis' defence was set out in a re‑amended defence filed on 23 March 2000.  Palassis said that in or about 1992, acting as managing partner of Stanton Partners, he proposed to the plaintiffs that the partnership take a lease of the Premises.  Palassis denied that he acted for or on behalf of, or as agent of, Chattock.  Palassis denied that he made the Proposals but says that between about November 1992 and February 1993, acting as managing partner of Stanton Partners, he made oral proposals to the plaintiffs as to rent and outgoings payable under the proposed lease and as to management fees in respect of the building.  Palassis admits that he subsequently delivered a written statement and that the written statement did not include all of the Proposals.  Palassis admits that Stanton Partners entered into occupation of the premises but denies that it entered an agreement for lease on the terms of the Agreement for Lease alleged by the plaintiffs.  Palassis denied that any Agreement for Lease was made, denied that it was breached and denied any obligation to the plaintiffs as alleged by the plaintiffs.  Palassis denied the plaintiffs' claims in relation to the payments between February 1993 and December 1996 to Chattock.

7. In November 2000 Chattock's defence was in the form of a further re‑amended defence filed 21 March 2000.  Chattock denied that the plaintiffs or Stanton Partners were entitled to the relief claimed against Chattock or any relief.  The defence of Chattock was different from that of Palassis in one important respect.  Chattock admitted that Palassis acted for and on behalf of, and as agent of, each of Chattock, the plaintiffs and Stanton Partners in making proposals and during negotiations for a lease.

Other litigation

1. The Deed makes reference to other litigation between the plaintiffs and Palassis.  The Deed refers to Supreme Court CIV 2025 of 1998, described as the Proceedings and Supreme Court CIV 1616 of 1999, described as the Affiliation Action, as well as CIV 2134 of 1998.

The Deed

1. The Deed is dated 10 November 2000.  The parties to it are Palassis and the plaintiffs.  The recitals to the Deed provide scant information about the circumstances leading to the Deed.  It is recited that the parties were formerly partners of a partnership which was dissolved effective 30 September 1998 by deed dated 21 January 1999 and described as "Dissolution Deed".  It is recited that the parties to the Deed wish to record that, on a without admission of liability basis, the plaintiffs in consideration of the sum of $850,000, provide the release in cl 4.1 on the terms set out in the Deed.  Finally, it is recited that the parties further record that Palassis, in consideration of the release given by the plaintiffs in cl 4.1 provides the release in cl 4.2 on the terms set out in the Deed.

2. Clause 2 of the Deed sets out the following settlement.  First, the plaintiffs agree to discontinue the Proceedings.  Secondly, Palassis agrees to discontinue the Counterclaim, that is Palassis' counterclaim in the Proceedings, and the Affiliation Action.  Thirdly, each of the plaintiffs and Palassis agree to execute or procure the execution of minutes of consent orders annexed at schedule 1 and schedule 2 of the Deed and to file them in the Proceedings in the Affiliation Action.  The minutes of consent orders at schedule 1 and schedule 2 provide for the Proceedings and the Affiliation Action to be discontinued.

3. By cl 4 each of the plaintiffs and Palassis give mutual releases and discharges in favour of each other.  The plaintiffs release and discharge all claims which they have or at any time in the future may have or but for the Deed could or might have had against Palassis arising out of, directly or indirectly, the Claim.  The Claim means all "claims, issues and matters alleged or raised by [the plaintiffs] in the Proceedings and/or in the Affiliation Action and all claims, issues and matters alleged or raised at any time in CIV 2134 of 1998 excluding the Surviving Claims as defined in cl 6.1".

4. Clause 6.1 defines the Surviving Claims to be the claims by the plaintiffs in CIV 2134 of 1998, limited to the causes of action and material facts pleaded in:

   (a)paragraphs 12.1, 12.2 and 12.3 of the plaintiffs' minute of amended further re‑amended statement of claim in CIV 2134 of 1998 annexed as schedule 3 (the schedule 3 Minute); and

   (b)paragraph 18 of the schedule 3 Minute.

   Clause 6.1 further provides that no other cause of action or material facts will be pleaded in CIV 2134 of 1998.

5. Clause 6.2 provides that the plaintiffs will amend the statement of claim in CIV 2134 of 1998 in the form of the schedule 3 Minute.  Clause 6.3 provides that Palassis and Chattock will sign a minute of consent orders in the form annexed as schedule 4 of the Deed.  That minute provides that the plaintiffs have leave to amend their statement of claim in terms of the schedule 3 Minute.

6. Clause 6.4 provides that once the court has given leave for the plaintiffs to amend their statement of claim in CIV 2134 of 1998 in the form of the schedule 3 Minute, the plaintiffs will not make any amendments to the schedule 3 Minute to plead any other cause of action or material facts, but may amend their particulars or give further particulars as they see fit, provided those particulars are limited to loss or damage.

7. Clause 6.5 is in these terms:

   "If [Palassis] or [Chattock] makes any amendment to his or its defence in CIV 2134 of 1998, [the plaintiffs] may amend their Statement of Claim in CIV 2134 of 1998, provided that the need to make the amendment fairly arises from and is consequential to the amendment to [Palassis'] defence or [Chattock's] defence (as the case may be) and provided that [the plaintiffs] shall not in any circumstance plead any cause of action or plead any material fact raised in the Claim."

8. The Deed contains other provisions which it is not presently necessary to refer to.

Subsequent pleading amendments

1. On 14 November 2000 the parties filed a memorandum of consent orders in CIV 2134 of 1998 providing for the plaintiffs to have leave to amend their statement of claim in terms of the schedule 3 Minute.  On 7 December 2000 a Registrar made orders that the plaintiffs have leave to amend their statement of claim in terms of the minute dated 14 November 2000, that is the schedule 3 Minute, and the defendants file and served amended defences by 22 January 2001.  The amended statement of claim gives effect to the settlement effected by the Deed.  In particular, the plaintiffs deleted their claims in respect of the payments Palassis allegedly caused to be made from the Partners' bank account to Chattock between February 1993 and December 1996.

2. On 22 January 2001 each of Palassis and Chattock filed further re‑amended defences purportedly pursuant to the order of the Registrar made on 7 December 2000.  The further re‑amended defence of the first defendant is non‑contentious for present purposes.  However, the further re‑amended defence of the second defendant withdrew the admission that Palassis, for and on behalf of, and as agent of, Chattock proposed to the plaintiffs that the partnership should take a lease of the Premises that the partners and Chattock entered into negotiations for the terms of a lease and that throughout the negotiations Palassis acted, amongst other things, for and on behalf of, and as agent of, Chattock.

3. The plaintiffs subsequently applied to disallow the amendments to Chattock's defence on the grounds that the amendment was not authorised by the order of the Registrar of 7 December 2000 and alternatively that Chattock should not be permitted to withdraw its earlier admission because to do so would cause undue prejudice to the plaintiffs.  Chattock maintains that its amendment of 2001 is valid but has recently made an application to amend its defence in the terms of the further re‑amended defence filed on 22 January 2001.  Those applications are not decided in the present judgment.

4. The plaintiffs have foreshadowed that if Chattock has validly amended its defence, or is given leave to amend its defence, in accordance with the further re‑amended defence of 22 January 2001 then the plaintiffs propose to amend the statement of claim by the addition of pars 18A – 18E of a minute dated 15 January 2007 and entitled "second minute of substituted statement of claim" put before the Court on the hearing of this originating summons.  The proposed amendments to the statement of claim amount to adding a plea of breach of warranty of authority to the existing plea of breach of fiduciary duty by Palassis, if Chattock is correct in contending that Palassis had no authority to negotiate or deal on its behalf.  It is necessary to set out the proposed amendments in full:

   "18A.Further and or in the alternative, Chattock did not authorise Mr Palassis to:-

   (a)make the proposals referred to at paragraph 8;

   (b)conduct the oral discussions referred to at paragraph 9;

   (c)deliver to the First Plaintiff the written proposals (referred to at paragraphs 10 and 11);

   (d)make the further proposals referred to at paragraph 12; or

   (e)make the agreement for lease referred to at paragraphs 13 and 14.

   18B.By his conduct in:-

   (a)making the proposals referred to at paragraph 8;

   (b)conducting the oral discussions referred to at paragraph 9;

   (c)delivering the written proposals referred to at paragraphs 10 and 11;

   (d)making the further proposals referred to at paragraph 12;

   (e)making the agreement for lease referred to at paragraphs 13 and 14,

   Mr Palassis represented to each of the First Plaintiffs that he was duly authorised to act as agent for Chattock and in particular to make the agreement for lease for and on behalf of Chattock.

   18C.Mr Palassis, as a director of and person concerned in the management of Chattock, knew that he did not have Chattock's authority to make the representations referred to at paragraph 18B or the agreement for lease.

   18D.By reason of the premises referred to at paragraphs 18A 18B and 18C, Mr Palassis breached the fiduciary duty referred to at paragraph 7.1.  By reason of the said breach of duty the Plaintiffs and each of them have suffered loss and damage.

   PARTICULARS OF LOSS AND DAMAGE

   18D.1The Partners have paid rental to Chattock which they would not otherwise have paid.  The Partners have also paid contributions to the maintenance, upkeep and the provision of services to the Building which they would not otherwise have paid:

   (a)the Partners paid rent at a rate of $97.50 per square metre (that is $56,783.88) per annum together with variable outgoings and rates and taxes for the period 1 February 1993 – 30 June 1995, which amounted to $84,362.53 for the period;

   (b)thereafter, the Partners paid rent at the rate of $195.00 per square metre (that is $113,548.56) per annum together with variable outgoings and rates and taxes, from 1 July 1995 – 30 October 1998;

   (c)on or about 20 January 1999, the Partners entered into a lease of 1 Havelock Street, West Perth, and:

   (i)for the period 1 December 1998 – 30 November 1999, paid rent at the rate of $125.00 per square metre together with variable outgoings and rates and taxes;

   (ii)for the period 1 December 1999 – 31 January 2000 paid rent at the rate of $150.00 per square metre together with variable outgoings and rates and taxes;

   (c)had the Partners not entered into the Agreement for Lease, then they would have entered into a lease of alternative premises at a net effective rent of $70.00 to $80.00 per square metre per annum over a seven year term.

   18E.Further or alternatively, by reason of the premises referred to at paragraphs 18A, 18B and 18C Mr Palassis must account for his profits.

   PARTICULARS OF LOSS AND DAMAGE

   18E.1Chattock Holdings has received rent from the Partners which they would not otherwise have paid.  Paragraph 18D.1 is repeated.

   18E.2Paragraphs 3 and 4 are repeated.

   18E.3The Partners cannot provide further particulars at this time.  The precise amount by which Mr Palassis has profited is a matter within his peculiar knowledge."

5. Palassis contends that the Deed precludes the plaintiffs from amending their statement of claim in the terms proposed.

Construction of clauses 4 and 6 of the Deed

1. The plaintiffs' originating summons in CIV 1061 of 2002 is an application for a declaration that on a proper construction of the Deed, the plaintiffs may amend their statement of claim in CIV 2134 of 1998 in the terms set out above.

2. By cl 4.1 of the Deed the plaintiffs release Palassis from all claims against him arising out of all claims, issues and matters alleged or raised at any time in CIV 2134 excluding the Surviving Claims.  Clause 6.1 defines the Surviving Claims and provides that no other cause of action or material facts will be pleaded in CIV 2134.

3. The defendants rely upon the release and discharge to Palassis in cl 4.1.  Senior counsel for the defendants submits that the proposed amendments to the statement of claim are encompassed by "any and all claims, actions, suits, demands, costs, interests, expenses or proceedings which [the plaintiffs] have or at any time in the future may have or but for this Deed could or might have had against [Palassis] of whatever nature, or arising out of, wholly or in part, directly or indirectly, the Claim", that is all claims, issues and matters alleged or raised by the plaintiffs in CIV 2134 of 1998 excluding the Surviving Claims.

1. The claims previously made in pars 19 – 31 of the statement of claim were all related to claims that Palassis made or caused to be made payments from the Partners to Chattock without authority.  Insofar as the payments were payments of rent, variable outgoings and rates and taxes the payments were alleged to exceed the amounts payable to Chattock in accordance with the Written Proposals and/or the Agreement for Lease.  Insofar as the claims related to the payments of the sums of $69,587.56 and $167,031.29 previously referred to the payments were alleged to be made entirely without authority.

2. The claims made in the proposed new paragraphs 18A to 18E are different.  They do not relate to or arise out of the payments pleaded in the deleted paragraphs 19 to 31.  In the proposed par 18D the plaintiffs plead that by reason of Palassis' breach of fiduciary duty they suffered loss and damage.  The loss and damage is the difference between the rent, variable outgoings and rates and taxes paid by the Partners and the amounts they would have paid if they had entered into a lease of alternative premises at a lower rent.  In par 18E the plaintiffs claim that Palassis must account for his profits.  The profits do not arise from nor are they related to the claims previously made in pars 19 – 31 of the statement of claim.

3. The basis for the loss and damage claimed in par 18D and the profits claimed in par 18E is the alleged breach of warranty of authority by Palassis which is said to constitute a breach of his fiduciary duty to the plaintiffs.  It is a different claim from that previously made in pars 19 – 31 of the statement of claim.  In summary, the proposed amendments to the statement of claim do not plead any cause of action or material fact raised in CIV 2134 excluding the Surviving Claims, that is they do not plead any cause of action or material fact raised in the released and discharged claims previously pleaded in pars 19, 20 and 21 of the statement of claim.

Clause 6.1

1. Senior counsel for the defendant relies primarily on cl 6.1 of the Deed and in particular the provision in that clause that "no other cause of action or material facts will be pleaded in CIV 2134 of 1998".  The contentions of the parties give rise to a number of issues concerning the construction of clauses 6.1 and 6.5.

Clauses 6.1 and 6.4 are subject to 6.5

1. The first construction issue is whether or not the provision that "no other cause of action or material facts will be pleaded in CIV 2134 of 1998" in cl 6.1 is subject to the provisions of cl 6.5 which permit the plaintiffs to amend their statement of claim if Palassis or Chattock makes any amendment to his or its defence provided that the need to make the amendment "fairly arises from and is consequential to the amendment to [Palassis'] defence or [Chattock's] defence (as the case may be) and provided that [the plaintiffs] shall not in any circumstances plead any cause of action or plead any material fact raised in the Claim".

2. I find that cl 6.1 is subject to cl 6.5.  Clause 6.5 specifically permits the plaintiffs to amend their statement of claim in CIV 2134 of 1998 if Palassis or Chattock makes any amendment to his or its defence, subject to the limitations set out earlier.  Clause 6.5 is a specific provision dealing with the consequences of Palassis or Chattock amending his or its defence.  Clause 6.1 is a general provision in defining the Surviving Claims and providing that no other cause of action or material facts will be pleaded in CIV 2134 of 1998.  The principle that provisions of general application give way to specific provisions when in conflict is usually applied to the resolution of internal conflicts between sections within an Act.  However, the approach is also applicable to the resolution of internal conflicts between clauses of a deed.  A deed may well contain provisions of a general nature and also provisions relating to a particular subject matter.  It is commonsense that the drafter will have intended the general provisions to give way should they be applicable to the same subject matter as is dealt with specifically.  The Deed must be read as a whole and this has the effect of making all the provisions subject to one another.

3. Secondly, as a general principle, the court should construe the deed so that, where possible, all words in the deed should be given effect.  Clause 6.5 would be superfluous and have no effect if the plaintiffs are precluded from pleading any other cause of action or material facts even where Palassis or Chattock makes an amendment to his or its defence in CIV 2134 of 1998.  Accordingly, cl 6.1 is to be read subject to cl 6.5.  If the words "no other cause of action or material facts will be pleaded in CIV 2134 of 1998" are taken literally it would apply to Palassis and Chattock as well as the plaintiffs.  That is, taken literally the words would preclude Palassis or Chattock from amending its defence so as to plead material facts not pleaded in their defences as at the time of execution of the Deed.  That is inconsistent with the apparent intention of the parties expressed in cl 6.5.

4. For the same reasons, cl 6.4 must also be read subject to cl 6.5.

Clause 6.5

1. Consequently, it is cl 6.5 which determines whether or not the plaintiffs are precluded by the Deed from making the proposed amendments to their statement of claim in CIV 2134 of 1998.  The defendants submit that cl 6.5 precludes the plaintiffs from making the proposed amendments to their statement of claim in CIV 2134 of 1998 for a number of reasons.

The "distributive" argument

1. First, the defendants submit that it is not open to the plaintiffs to amend the claim against Palassis as a result of an amendment to Chattock's defence.  That is because, they submit, an amendment against the first defendant could only be made if the need to do so fairly arose from and was consequential to an amendment by that defendant of his defence in CIV 2134, and an amendment by another defendant in the action would not entitle the plaintiffs to amend their claim against the defendant Palassis.  The defendants submit that cl 6.5 of the Deed, on its proper construction, operates "distributively".  That is to say, the words "(as the case may be)" in cl 6.5 have the effect that it is only a pleading amendment by the defendant Palassis which may justify an amendment of the plaintiffs' claim against that defendant.

2. Clause 6.5 does not have the meaning submitted by the defendants.  The words "as the case may be", do not have the meaning or effect submitted by the defendants.  I do not think that the meaning of the clause intended by the parties is made any clearer by saying that cl 6.5 of the Deed operates distributively, that is referring to each individual of a class, not the class collectively.  The second edition of Fowler's Modern English Useage (1965) says of the word "case" that there is "perhaps no single word so freely resorted to as a trouble‑saver, and consequently responsible for so much flabby writing".  Fowler's says that the words "in the case of" can often be simply struck out.  The literal meaning of the words "as the case may be" is nothing more than "according to the situation".  That is, if Palassis or Chattock makes any amendment to his or its defence, the plaintiffs may amend their statement of claim provided that the need to make the amendment fairly arises from and is consequential to the amendment of whichever defence has been amended.

3. It is unlikely that the parties intended to restrict the right of the plaintiffs to amend their statement of claim in the manner submitted by the defendants.  First, Palassis but not Chattock is a party to the Deed.  That is so notwithstanding that cl 6.3 provides that Chattock, as well as Palassis, will sign a minute of consent orders.  The Deed contains a discharge and release in favour of Palassis but not in favour of Chattock.  It is unlikely that the parties intended that if Palassis amended his defence the plaintiffs would not be able to amend their statement of claim to make further or different allegations against Chattock notwithstanding that the need to make the amendment fairly arises from and is consequential to the amendment to Palassis' defence.  Secondly, the defendants' construction would potentially result in the plaintiffs amending their statement of claim against Palassis in consequence of an amendment by Palassis of his defence but not being able to amend their statement of claim in respect of Chattock even though that might result in the plaintiffs pleading inconsistent allegations against Palassis and Chattock.  The plaintiffs might then advance at trial a case against Chattock that is inconsistent with its case against Palassis.  That is an inconvenient result and one unlikely to have been intended by the parties.

4. For those reasons I find that on the proper construction of cl 6.5 if Chattock makes an amendment to its defence the plaintiffs may amend their statement of claim against Palassis provided that the need to make the amendment fairly arises from and is consequential to the amendment to Chattock's defence and provided that the plaintiffs shall not in any circumstances plead any cause of action or plead any material fact raised in CIV 2134 excluding the Surviving Claims.

Proposed amendments may plead new cause of action

1. The second basis on which the defendant submits that the plaintiffs' proposed amendments to their statement of claim are not permitted under the Deed is that the proposed amendments claim damages for loss of payment of rent and contributions to the maintenance, upkeep and provision of services to the building, that is, relief that extends beyond damages for the alleged loss of the rights of pre‑emption, the excess rent and the shares in Chattock provided for in the plaintiffs' paragraphs 12.1, 12.2, 12.3 and 18 of the statement of claim.

2. The defendants submit that that represents an attempt to plead a new cause of action.

3. The prohibition on pleading a new cause of action is found in cl 6.1 and cl 6.4.  However, as I have found, each of those clauses is subject to cl 6.5.  Clause 6.5 allows the plaintiffs to amend their statement of claim if the specified circumstances are met but the plaintiffs may not plead any cause of action or plead any material fact raised in CIV 2134 excluding the Surviving Claims.  On its proper construction cl 6.5 permits the plaintiffs to amend their statement of claim to plead a new cause of action if the amendment fairly arises from and is consequential to the amendment to Chattock's defence provided that the new cause of action or material facts pleaded were not raised in CIV 2134 excluding the Surviving Claims.

Proposed amendments do not plead released claims

1. Thirdly, the defendants submit that the proposed amendments to the statement of claim seek to assert causes of action and facts which were connected, directly or indirectly, with the released and discharged claims.  That is, they submit that the plaintiffs seek relief on the basis of the breach of the fiduciary duty in par 7.1 of the existing statement of claim and that that, directly or indirectly, stems from the particular breaches of fiduciary duties previously pleaded in par 19 and which were settled by the Deed.  Further, or alternatively, the defendants submit that the facts raised in the proposed amendments relate directly or indirectly to the matters the subject of the released claims, that is pars 19, 20 and 21 of the statement of claim before it was amended to delete those paragraphs.

2. For the reasons previously stated the proposed amendments to the statement of claim do not plead any cause of action or material fact raised in CIV 2134 excluding the Surviving Claims; that is, they do not plead any cause of action or material fact raised in the released and discharged claims previously pleaded in par 19, par 20 and par 21 of the statement of claim.

Proposed amendments do not plead released relief

1. Fourthly, the defendants submit that the proposed amendments to the statement of claim seek to claim relief that was the subject of the released and discharged claim.  They submit that pars 19, 20 and 21 which were the subject of the release, claimed compensation and/or an account of profits in respect of payment of rent, variable outgoings and rates and taxes to Chattock.  The defendants submit that the plaintiffs now claim damages and/or an account of profits for rental and contributions to the maintenance, upkeep and provision of services to the building and that the new relief sought is, in substance, the same as the relief the subject of the release.

2. For the reasons I have previously stated the relief claimed in the proposed amended statement of claim is not, in substance, the same as the relief the subject of the release.

Proposed amendments are a necessary consequence of Chattock amendment

1. Fifthly, the defendants submit that the proposed amendments are not a necessary consequence of the amendments made by Chattock.

2. The statement of claim, as it presently stands, claims damages for breach of the Agreement for Lease, and interest and further or other relief.

3. Paragraph 7 of the statement of claim pleads that Palassis owed fiduciary duties to the plaintiffs.  Paragraph 8 pleads that in or about 1992 Palassis, for and on behalf of, and as agent of, Chattock proposed to the plaintiffs that the Partnership should take a lease of the Premises, that the Partners and Chattock entered negotiations for the terms of a lease and that throughout the negotiations Palassis acted, amongst other things, for and on behalf of, and as agent of, Chattock.  Before the amendment of 20 January 2001 Chattock's defence at par 11 admitted par 8 of the statement of claim except for the fact that Palassis acted for and on behalf of, and as agents of, each of Chattock, the plaintiffs and Stanton Partners in making proposals and during negotiations.

4. In par 9 of their statement of claim the plaintiffs pleaded that during the course of a number of oral discussions which occurred between about November 1992 and January and February 1993 Palassis, for and on behalf of and as agent of Chattock, made the (oral) Proposals.  Chattock in its defence denied each and every allegation contained in par 9 of the statement of claim except for the fact that oral discussions took place between November 1992 and January and February 1993 between Palassis and the plaintiffs, and Palassis and Chattock regarding the Partners taking a lease of part of the building.  In par 10 of their statement of claim the plaintiffs pleaded that between November 1992 and January 1993 Palassis delivered to the plaintiffs the Written Proposals.  Paragraphs 11 and 12 plead the content of the Written Proposals, including what was not included within the Proposals.  Paragraph 13 then pleads that the plaintiffs and Palassis, as Partners, orally agreed to the Proposals and by reason of the matters pleaded earlier the Partners and Chattock entered the Agreement for Lease.  In its defence Chattock denied each and every allegation in par 10 of the statement of claim, denied most of par 11 of the statement of claim and denied that the right of Pre‑emption Proposal and the Rent Proposal were ever made and that the plaintiffs and Palassis orally agreed to the Proposals and that Chattock and the Partners entered into the Agreement for Lease but admits that the Partners entered into occupation of the Premises on 7 February 1993 and commenced to pay rent.

5. Counsel for the defendants submitted that Chattock's admission of par 8 of the statement of claim was an admission only that in or about 1992 Palassis, for and on behalf of and as agent of Chattock, proposed to the plaintiffs that the partnership should take a lease of the Premises and that thereupon the Partners and Chattock entered negotiations for the terms of a lease.  Counsel submitted that Chattock's denial of par 9 of the statement of claim was a denial that Palassis made the Proposals for and on behalf of and as agent of Chattock.  Counsel further submitted that Chattock's denial of par 13 of the statement of claim was a denial that Palassis agreed to the Proposals for and on behalf of and as agent of Chattock.

6. I do not accept that interpretation of Chattock's defence.  The last sentence of par 8 of the statement of claim pleads that throughout the negotiations Palassis acted for and on behalf of, as agent of, Chattock.  That was admitted by Chattock.  Chattock's denial of pars 9 and 13 of the statement of claim, in the context of the pleadings, was a denial that Palassis made the Proposals and that Palassis agreed to the Proposals.  Chattock admitted that throughout the negotiations Palassis acted for an on behalf of, and as agent of Chattock.  What Chattock denied was the content of those negotiations not that Palassis was acting as Chattock's agent during them.

7. On 22 January 2001 Chattock amended, or purported to amend, its defence.  It withdrew its admission of par 8 of the statement of claim and instead denied each and every allegation contained in par 8 of the statement of claim.  That is, Chattock now denies that Palassis acted as its agent throughout the negotiations and discussions between Palassis and the plaintiffs concerning taking a lease of the Premises.  That is a significant amendment.  If Chattock is permitted to amend in those terms and succeeds in that part of its defence, then the plaintiffs would fail in their action against Chattock.

8. It is in those circumstances that the plaintiffs wish to amend their statement of claim.  The proposed new statement of claim (the substituted statement of claim) pleads at par 18A, in the alternative, that Chattock did not authorise Palassis to make the Proposals, conduct the negotiations, deliver to the plaintiffs the Written Proposals, make the further proposals pleaded in par 12 or make the Agreement for Lease.  In par 18B the plaintiffs plead that Palassis represented to the plaintiffs that he was authorised to act as agent for Chattock and in particular to make the Agreement for Lease for and on behalf of Chattock.  At par 18C the plaintiffs plead that Palassis knew that he did not have Chattock's authority to make the representations referred to or the Agreement for Lease.  At par 18D the plaintiffs plead that by reason of the matters referred to at pars 18A, 18B and 18C, Palassis breached the fiduciary duties he owed to the plaintiffs and the plaintiffs have suffered loss and damage.  At par 18E the plaintiffs claim alternatively that Palassis must account for his profits.

9. Chattock has amended, or purported to amend, its defence so as to plead the facts, which if established, will defeat the plaintiffs' case against Chattock.  The plaintiffs could amend their statement of claim so as to plead further facts which answer or negate the new defence pleaded by Chattock.  Such an amendment might fairly be described as one where the need to make the amendment fairly arises from and is consequential to the amendment to Chattock's defence.  However, in this case the plaintiffs wish to plead additional, or alternative, facts not to negate the new facts pleaded by Chattock but, to put forward a case that the new facts pleaded by Chattock found a case of breach of fiduciary duty by Palassis.  Such an amendment may fairly be described as one where the need to make the amendment fairly arises from and is consequential to the amendment to Chattock's defence.

Proposed amendments do not plead released claim

1. Clause 6.5 of the Deed permits the plaintiffs to make the proposed amendments to the statement of claim provided that the proposed amendments do not plead any cause of action or plead any material fact raised in the Claim.  The Claim means all claims, issues and matters alleged or raised by the plaintiffs in, relevantly, CIV 2134 of 1998 excluding the Surviving Claims.  The proposed amendments do not plead any claim, issue or matter alleged or raised by the plaintiffs in CIV 2134 of 1998 excluding the Surviving Claims.  The plaintiffs have not previously pleaded in CIV 2134 that Palassis breached any warranty of authority in the course of conducting the negotiations for a lease of the Premises.  The plaintiffs' claims that were deleted as a result of the Deed are different from those that are sought to be made by the proposed amendments.

Conclusion

1. For the reasons stated the Deed does not preclude the plaintiffs from amending their statement of claim in accordance with the substituted statement of claim.  I will hear the parties in relation to the orders that should be made to give effect to these reasons.