JWH Group Pty Ltd v Kimpura Pty Ltd - [2004] WASC 40

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: JWH GROUP PTY LTD & ANOR -v- KIMPURA PTY LTD & ANOR [2004] WASC 40

CORAM: PULLIN J

HEARD: 20 FEBRUARY 2004

DELIVERED : 20 FEBRUARY 2004

PUBLISHED : 17 MARCH 2004

FILE NO/S: CIV 2188 of 2003

BETWEEN: JWH GROUP PTY LTD
First Plaintiff
RURAL BUILDING COMPANY PTY LTD
Second Plaintiff
AND
KIMPURA PTY LTD (ACN 006 048 479)
First Defendant
J-CORP PTY LTD
Second Defendant

Catchwords:

Practice and procedure - Application to amend indorsement on the writ of summons - Application for leave to reopen case - No new point of principle - Turns on own facts

Legislation:

Nil

Result:

Application to amend and reopen granted

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr M H Zilko SC & Mr M S Van Brakel
Second Plaintiff            :     Mr M H Zilko SC & Mr M S Van Brakel
First Defendant             :     Mr M J McCusker QC & Mr B D Luscombe
Second Defendant         :     Mr M J McCusker QC & Mr B D Luscombe

Solicitors:

First Plaintiff                :     Clayton Utz
Second Plaintiff            :     Clayton Utz
First Defendant             :     Mallesons Stephen Jaques
Second Defendant         :     Mallesons Stephen Jaques

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

Banque Commerciale SA v Akhil Holdings Ltd (1990) 169 CLR 279
Hall Chadwick Corp Finance (WA) Pty Ltd v Axiom Properties Ltd [2002] WASC 179
Singh v Crafter, unreported, FCt SCt of WA; Library 8434; 15 August 1990
Smith v New South Wales Bar Association (1992) 176 CLR 256. ,
State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146

Case(s) also cited:

Nil

PULLIN J: The case for both parties closed on 3 February 2004. During the course of closing submissions by counsel for the plaintiffs, I was informed that one claim the plaintiffs brought was a claim for damages for breach of contract by Kimpura Pty Ltd ("Kimpura"), and I pointed out that there appeared to be no claim in the writ for damages for breach of contract. Counsel for the plaintiffs then said that he would like to consider whether a claim for damages was open under the indorsement in the writ and, if so, how the evidence revealed a breach of contract by Kimpura. I directed counsel for both parties to confer about this.
By letter of 4 February 2004, the plaintiffs' solicitor wrote to my associate, with a copy to the defendants' solicitor, proposing an amendment to the writ of summons and the indorsement contained in it. Relevantly, the plaintiffs sought to claim in a new par 5, "damages for breach of the contract between the second plaintiff and the second defendant for the purchase and sale of the RBC business".
On 12 February 2004, the matter was relisted before me and the plaintiffs orally applied to amend in those terms. During the course of making submissions in support of the application, senior counsel for the plaintiffs then moved to further amend by adding a new par 5(b) to read "damages for breach of the Deed between the first plaintiff and/or second plaintiff and the first defendant".
As there are two plaintiffs in the action, this must be read as a proposed claim by each for damages for breach of the Deed. Both of the proposed amendments were opposed by the defendants. As to par 5(b), it was said by counsel for the defendants that he was not prepared for this late application, and as a result the application to amend was adjourned for seven days with a direction that if the plaintiffs wished to proceed with the application, they should file a formal summons setting out the relief sought. The defendants also argued that par 5(b) was contrary to some understanding between the parties in the conferral which took place between the solicitors, but this was not sustained on the evidence which was put before me in the form of some letters. No contract was established in that correspondence; that is, there was not shown to be a contract supported by consideration. It was not suggested to me that there was a representation relied upon by the defendants' solicitors which produced any prejudice of any kind.
On 17 February 2004, the plaintiffs filed a chamber summons for leave to amend the indorsement of claim and to re‑open the case. The proposed par 5 had now been abandoned, and in its place an application was made to add a new par 5A to read as follows: "damages for breach of the Deed of Supply as a Going Concern." Paragraph 5B was still proposed as an additional paragraph, but today it was amended so that it now reads "damages for breach of the Deed between the first plaintiff and the first defendant". This is to be read as the first plaintiff claiming damages against Kimpura for breach of the Deed in failing to cause J-Corp to transfer the four disputed assets to the second plaintiff. I am also told that it constitutes a claim by the second plaintiff, even though it is not a party to the Deed; that is, the Deed Governing Sale.
By way of background, I should mention that this case was conducted in the Expedited List and the parties decided to proceed without pleadings. I believe this decision was taken before either of the senior counsel involved at trial were fully briefed.
There is a view about which suggests that pleadings should be dispensed with in most, or all, cases. However, the object of pleadings is to define the issues so that the parties come to trial ready to ventilate matters truly in dispute. See the comments about pleadings in Banque Commerciale SA v Akhil Holdings Ltd (1990) 169 CLR 279 at 286. Pleadings force a plaintiff's legal advisers to concentrate on the law in order to identify the material facts which have to be included in the statement of claim, and, once pleaded, the defendant is likewise obliged to consider the legal issues and plead material facts it wishes to raise by way of defence. The overall object is to promote efficiency in the conduct of the litigation.
This case provides a very good example of the importance of pleadings and the lack of efficiency which can occur following dispensation with pleadings. The parties have concentrated on what each perceived to be the issues. The perceptions of the parties have not always corresponded, and some critical issues were not identified by either party during the evidence in the trial. I suspect that much of the support for abandonment of pleadings is based on the fact that many poor pleadings are presented to the court, but, in my opinion, the system should not be judged by reference to those cases which are inefficiently pleaded. The system should be judged by reference to the many well‑drawn pleadings which are presented to the court.
The contract in question in this case (the "Deed") involved the first defendant, Kimpura, a shareholder in J-Corp Pty Ltd ("J‑Corp"), promising JWH Group Pty Ltd, the first plaintiff which was the other shareholder in J-Corp, that Kimpura would cause J-Corp to transfer certain assets owned by J-Corp to a party nominated by Mr Walter and Walter Holdings Pty Ltd. The nominee was the second plaintiff. The parties have concentrated most of their attention on issues about what assets were, and what assets were not, included in the sale without directing sufficient attention to what followed if the disputed assets were included in the sale. When I refer to "the sale", I mean the contract whereby Kimpura promised to cause J‑Corp to transfer assets to the second plaintiff.
The plaintiffs, in the outline of submissions before the trial commenced, and which were dated 13 January 2004, said in par 19:
"The parties' agreed list of issues and facts in dispute are contained in a document filed on 2 January 2004 by the plaintiffs' solicitors."
Paragraph 20 read:
"On a proper construction of the Deed, in particular clause 2.18 thereof and Schedule 6 thereto …, the intellectual property in the plans drawn by Mr Van der Struyf and Mr Kirkovski and in the name Urban Answers was transferred or assigned to RBC at Completion. …"
That immediately reveals the start of the problem, because the assumption behind that submission was that this was a contract between two parties where one party promised to transfer assets to the other, when, in fact, that was not the case.
The statement of issues which was referred to in par 19 of these submissions included pars 4 and 5, which read:
"4.Whether by the advertisement published by the first defendant in the Sunday Times on 28 September 2003 identifying the Disputed Designs as its own under the name 'Metro' and 'Hudson', in connection with the logo 'Urban Answers', the first defendant:
(a)was in breach of the Deed, the intellectual property rights of the first plaintiff acquired pursuant to the Deed or s115 of the Copyright Act? (sic)
(b)breached sections 52 and/or 53 of the Trade Practices Act?
(c)committed the tort of passing off?
5.Whether an account of profits or damages should be ordered."
The defendants in the outline of submissions filed before the trial commenced, stated in par 1: "The issue is whether, by clause 2.18 of the Deed Governing Sale … the second plaintiff acquired the business name 'Urban Answers' and the two disputed house designs." That also reveals a slipping into the idea that this was a contract which involved the transfer of assets from one party, or one group of parties, to the other.
In par 11 of those same submissions, which were dated 15 January 2004, it is said:
"It is clear that 'Urban Answers' was not part of the business conducted by RBC at the relevant date and it follows that designs being prepared for 'Urban Answers' were not either. They were the property of J-Corp and were not sold by it."
This is a reference to J-Corp's involvement but without any explanation as to how it became involved and once again, I suspect, reveals an approach by the parties which probably reflects the reality; that is, they treated one group as the Walter group of companies and the other group as the Buckeridge group of companies. The particular corporate entities did not much matter in relation to the resolution of the main dispute, which was about whether or not these four disputed assets were included in the words used by the parties in cl 2.18 of the Deed Governing Sale.
Only at the end of the case and during closing submissions was attention directed to whether or not the plaintiffs could claim damages if the assets claimed had not been transferred in accordance with the provisions of the Deed. If the disputed assets were included in the sale, and if Kimpura had not caused them to be transferred, then the consequence would be, on conventional analysis, that Kimpura was in breach of its obligation to cause that transfer to take place.
This exchange can be seen in various places in the transcript, for example at 724 and 726-728, where Mr Zilko SC for the plaintiffs said:
"PULLIN J: If there has been a breach of contract, who has breached it?
ZILKO, MR: I am sorry. You are quite right, your Honour. Yes, the first defendant has breached it. I accept that.
…
PULLIN J: 6 is the damages claim. That doesn't seem to say anything about breach of contract. So there's no breach of contract referred to in here, Mr Zilko.
ZILKO, MR:We certainly have intended that breach of contract always be part of the claim.
PULLIN J: Yes, but you can't intend it. This is the constitution for the litigation. We're without pleadings but you can't go outside the writ.
…
ZILKO, MR:We are suing Kimpura so we would say that Kimpura is in breach of the Trade Practices Act if it sells us something and then purports to use it itself.
PULLIN J: Kimpura is definitely not using it. It's J‑Corp that's using it.
ZILKO, MR:Yes. We have treated them collectively as the parties that have been using it and there has been no suggestion one way or the other as to the defendants - or the defendants have not suggested anything - - -
PULLIN J: All the evidence [is] that it's J‑Corp that's doing the advertising.
ZILKO, MR: Can we consider that overnight? I will have to consider that and see what our position is but I certainly haven't addressed that in my mind because we have treated them collectively. I guess this is the problem of not having pleadings. If pleadings had existed then clearly the issues would have been very clearly defined.
…"
At the end of 3 February 2004, to summarise the position that had been reached, I said:
"Mr Zilko, you are going to consider first whether or not any contract claim is open on the current writ, that is, a claim for damages for breach of contract, and if it is, how the evidence reveals any breach of contract by Kimpura Pty Ltd."
This exchange then resulted in the application to amend and to re‑open, which has unfolded in the way that I have described. The proposed par 5B seeks to include in the indorsement in the writ, a claim for damages for breach of contract, the contract being that contained in the Deed to which the first plaintiff and the first defendant were parties.
If the first defendant Kimpura did not cause the second defendant to sell and transfer to the second plaintiff, the disputed assets, then the failure to fulfil that promise would be a breach of contract, as I have already said. The claim regarding an alleged breach of contract by the first defendant was in issue between the parties, because the statement of agreed issues dated 2 January 2004 stated this to be so.
Only since 3 February 2004 has counsel for the defendants put forward an argument that the issue in pars 4(a) and 5 in the list of agreed issues was merely an issue about whether the advertisements, and the advertisements alone, were or were not a breach of contract. The defendants argue that there was no promise in the Deed Governing Sale not to advertise. It was submitted that the issue was understood in that way by the defendants.
I am afraid I am wholly unconvinced by that argument. If the defendants did believe that that was the position, then their closing written submissions would have said so. It would have been a very simple matter to have said that the Deed Governing Sale did not contain a promise not to advertise.
No such submission was made and, in my opinion, the parties, in a muddled way, agreed that it was an issue in the case whether Kimpura had breached the Deed and whether it should have to pay damages. I say "muddled", because both parties treated the Deed, as I have already said, as an agreement for sale between the two parties, not involving any other party, and that the only real issue was whether the disputed assets were included in the sale or not, and then they treated J‑Corp's advertisements as conduct inconsistent with the obligation in cl 2.18, namely the obligation on Kimpura to transfer the assets.
What is really involved in pars 4(a) and 5 of the agreed issues was an issue about breach of contract.
In Mr McCusker QC's closing submissions at t/s 583, when speaking of one of the disputed assets, he said:
"There are these questions that your Honour needs to determine: first, whether the business name Urban Answers was part of the property sold under clause 2.18 of the agreement for sale. Our submissions on that issue I have already made in opening I think. Essentially, that the business name is not referred to and that it cannot be said that it was part of the goodwill attached to the business name."
Then there are detailed submissions about why that was not contemplated as an asset to be transferred under cl 2.18, but my reading of the transcript reveals no suggestion that breach of contract was not an issue in any respect, and no suggestion that the breach of contract issue set out in the agreed issues was no longer an issue.
It appears, however, that both parties at some stage after the settlement of the statement of agreed issues forgot, or overlooked the fact, that the breach of contract claim (or even the claim the defendants now say is open under 4(a) and 5 of the statement of issues) was not open on the indorsement of claim. In my opinion, where the parties have agreed that there was an issue about damages for breach of the Deed Governing Sale, then the situation should, in the absence of any prejudice, be regularised by allowing an amendment to the indorsement to add the proposed par 5B.
As to whether or not there is prejudice, counsel for the defendants says that there is prejudice, because if par 5B is allowed, then the defendants would have lost the opportunity to raise a defence in the form of an estoppel formulated, as I understand it, in the following way. They say that if my finding is that there was a contractual obligation on Kimpura to cause J-Corp to transfer the four disputed assets, then the defendants would wish to lead evidence to show that at settlement, when the parties did what had to be done to implement the Deed Governing Sale, the plaintiffs did not call for a transfer of the four disputed assets.
The defendants claim that they would want to lead evidence from witnesses who would say that they inferred from this that the plaintiffs were representing that the four disputed assets did not have to be transferred, and, in reliance on this representation, that the second defendant proceeded to advertise the disputed designs, to use "Urban Answers" as a name, and use an "Urban Answers" logo in the two advertisements in the "Sunday Times".
I was informed that this would open up a substantial new area of evidence involving four to five witnesses. I would have thought that it might have been argued by the plaintiffs that such an estoppel plea was always open to the breach of contract claim, even in the form that the defendants now say that they understood it, and would always have been open in relation to the claims of breach of copyright and passing off, and that the plaintiffs would have argued that, in consequence, the defendants did not suffer prejudice at all. In fact, although the plaintiffs do not formally consent to the defendants raising an estoppel issue and leading evidence in relation to the estoppel, that course appears not to be strongly resisted by the plaintiffs.
That being the case, then I would be inclined to allow the estoppel issue to be raised and further evidence to be led, if that is what the defendants wish to do, providing it relates only to the breach of contract claim and the claim for breach of copyright, and for no other of the causes of action.
The provision which governs the plaintiffs' application to amend pleadings is set out in O 21 r 5(1). It provides that the court may at any stage allow a plaintiff to amend the writ on such terms as the court may direct. This confers a broad discretion on the court. An application to amend in the Expedited List is usually viewed with disfavour. It is the price of entry into the list. Caseflow management principles are of considerable importance. However, the overriding consideration in the exercise of the discretion to amend remains the interests of justice. See State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146, which was a case dealing with an application to adjourn a trial, but the principles are nevertheless the same.
Relevant to the application to amend at a late stage like this will be whether or not an adjournment would be likely to result if the amendment were allowed, and if that would be an advantage to the party moving the amendment. If so, then that would form the foundation for a decision not to allow amendment: see Hall Chadwick Corp Finance (WA) Pty Ltd v Axiom Properties Ltd [2002] WASC 179. If this amendment is allowed and the case is adjourned, this is no advantage to the plaintiffs, which have been the parties anxious at all times to have the case determined and who face a disadvantage because they are in the process of constructing houses at cost to them based upon the disputed designs.
The principles concerning an application to re‑open, are as follows. A party must ordinarily adduce all of its evidence when presenting its case. The court does, however, retain a discretion to allow a party to re‑open to adduce further evidence. The court must be cautious about the admission of fresh evidence, as injustice can be caused if the concept of finality of the trial process is eroded: see Singh v Crafter, unreported, FCt SCt of WA; Library 8434; 15 August 1990.

In Smith v New South Wales Bar Association (1992) 176 CLR 256 at 262, the High Court indicated that the inquiry should be made about why evidence which the party now wishes to lead after re‑opening, was not led before. A deliberate decision not to call evidence would normally be decisive against the application, but the lack of pleadings in this case, the fact that the trial has been expedited, and the implications in the defendants' case, intended or unintended, to the effect that the real issue to be decided was whether or not these assets were included in the contractual provisions, leads me to the view that if there is no prejudice to the defendants, the plaintiffs should be permitted to re‑open and lead what is likely to be very brief evidence to the effect that Kimpura has not caused any of the assets in question to be transferred to the second plaintiff. The claimed prejudice is the lost opportunity to plead estoppel. That prejudice disappears now that I have granted leave to the defendants to raise the estoppel issue and to lead further evidence in relation to it.
Paragraph 5A is a plea in the alternative to par 5B, and the plaintiffs have expressly said that this application is confined in the following way, namely, that if Kimpura did cause J-Corp to transfer copyright in the "Brighton" design, then the Deed of Supply is an assignment in writing (which is necessary to bring about an effective assignment of transfer of copyright). The Copyright Act makes it clear that an assignment or transfer of copyright is not effective without writing.
There must be an issue about whether or not, as a matter of construction, this document has that effect, but arguments about the construction of the document can follow at a later stage if I allow the amendment and allow re‑opening for the purpose of proving that document. On that very limited basis, the defendants, although they do not consent to the proposed amendment, do not allege any prejudice. Of course, I would understand that they would reserve any right to make submissions about whether or not the document does have the effect that the plaintiffs contend for.
Given the very limited basis on which the plaintiffs seek to lead evidence in support of par 5B, I would allow both the amendment and the application to re‑open to prove that document.
So the result is I would grant leave to the plaintiffs to amend the indorsement in the writ to add pars 5A and 5B. I would grant leave to the plaintiffs to re‑open to lead evidence in accordance with the statement of Mr Walter which has been proffered as an attachment to the chamber summons.