Kestell v Davey [No 2] - [2022] WASC 383

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   KESTELL -v- DAVEY [No 2] [2022] WASC 383
CORAM:   SMITH J
HEARD:   8 NOVEMBER 2022
DELIVERED          :   8 NOVEMBER 2022
PUBLISHED           :   11 NOVEMBER 2022
FILE NO/S:   CIV 1727 of 2021
BETWEEN:   TIMOTHY ARTHUR KESTELL
Plaintiff
AND
GRANT LAWRENCE BURNAFORD DAVEY
First Defendant
KAYELEKERA RESOURCES PTY LTD
Second Defendant
DAVEY HOLDINGS (AUS) PTY LTD
Third Defendant
DAVEY MANAGEMENT (AUS) PTY LTD
Fourth Defendant

Catchwords:

Procedure - Pleadings - Strike out application - Application to strike out paragraphs of a statement of claim - Grounds - Whether pleas are embarrassing and do not disclose a reasonable cause of action - Whether a paragraph pleads only past consideration - Whether plea refers to irrelevant or unrelated matters - Whether matters pleaded are capable of inferring an agreement

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Application allowed in part

Representation:

Counsel:

Plaintiff	:	Mr G D Cobby SC
First Defendant	:	Mr M L Bennett
Second Defendant	:	Mr M L Bennett
Third Defendant	:	Mr M L Bennett
Fourth Defendant	:	Mr M L Bennett

Solicitors:

Plaintiff	:	Tottle Partners
First Defendant	:	Bennett
Second Defendant	:	Bennett
Third Defendant	:	Bennett
Fourth Defendant	:	Bennett

Cases referred to in decision:

Day v William Hill (Park lane) Ltd [1949] 1 KB 632
Fazio v Fazio [2012] WASCA 72
Henderson v Curtis [2008] WASC 283
Inness v Waterson [2006] QCA 155
Kestell v Davey [2022] WASC 32
Pao On v Lau Yiu Long [1980] AC 614; [1979] 3 All ER 65
Southern Wine Corporations Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236
Vantage Holdings Group Pty Ltd v Donnelly [No 4] [2019] WASC 398

SMITH J:

1.0 The application to strike out and the result

By letter dated 28 October 2022, the defendants apply pursuant to O 20 r 19(1) of the Rules of the Supreme Court 1971 (WA) to strike out pars 20A and 20B of the amended statement of claim endorsed on the further amended writ of summons dated 14 October 2022 (Amended Statement of Claim) on the basis that pars 20A and 20B disclose no reasonable cause of action, are frivolous or vexatious, and may prejudice, embarrass or delay the fair trial of the action.
The defendants also seek to strike out consequential references to par 20B in pars 21, 22 and 34 of the Amended Statement of Claim.
Having heard counsel for the defendants and read their written submissions, it is clear that the defendants do not claim that the paragraphs sought to be struck out are frivolous or vexatious.
The two paragraphs of the Amended Statement of Claim sought to be struck out by the defendants were pleaded for the first time by the plaintiff in the Amended Statement of Claim.
The application to strike out was heard expeditiously by the court because the trial of the action is listed to commence on 5 December 2022.
After hearing counsel for the parties, I made an order that par 20A of the Amended Statement of Claim be struck out with leave to replead. I also made an order that the defendants' application was otherwise dismissed and that the defendants were to pay 80% of the plaintiff's costs of the application, to be assessed if not agreed.
The reasons why I made these orders are as follows.

2.0 The amended pleaded issues in the action

In the reasons for decision delivered on 28 January 2022 in respect of an application to set aside subpoenas, the issues pleaded in the plaintiff's statement of claim, contained in the amended writ of summons endorsed with a statement of claim dated 19 August 2021 and the defendants' defence dated 24 September 2021, were summarised.[1]
[1] Kestell v Davey [2022] WASC 32 [19] ‑ [36].
The plaintiff subsequently filed the further amended writ of summons indorsed with the Amended Statement of Claim on 14 October 2022, and the defendants filed an amended defence the same day (Amended Defence). Although the pleadings were both filed on the same day, the indorsed statement of claim in pars 20A and 20B responds in part to the matters pleaded in the Amended Defence, which raises issues of whether there was consideration for the agreement pleaded by the plaintiff that is sought to be enforced by the action in par 19 of the Amended Statement of Claim, and whether an agreement by 11 June 2019 could be inferred by a course of conduct over time.
In light of the amendments to the pleadings, the issues in dispute about the agreement the plaintiff claims he entered into with the first defendant, which are relevant to the application to strike out, can be summarised as follows.
The heart of the dispute between the parties is unchanged from the filing of the original writ and that is whether the plaintiff is entitled to 50,954,438 shares in Lotus Resources Ltd (held by the second defendant), or alternatively 22.5% of the issued shares in the second defendant. The defendants deny the plaintiff is entitled to any shares.
The plaintiff pleads in his Amended Statement of Claim that he entered into an agreement with the first defendant as follows:
(a)in par 8.2 the plaintiff pleads that matters were agreed about the possible acquisition and on‑sale of a company (Paladin Energy Ltd (PEL), which owned 85% of the issued shares in Paladin Africa Ltd (PAL), which owned a uranium project in Malawi and known as the Kayelekera Uranium Project (Project)) by pleading that:
8.In or about September 2018 Mr Kestell and Mr Davey:
…
8.2orally agreed that Mr Davey would:
(a)work together with Mr Kestell with respect to the possible acquisition and on-sale of PEL's interest in the Project;
(b)arrange for a review of the Due Diligence Information;
(c)subject to the result of the review of the Due Diligence Information and to a satisfactory agreement being reached with PEL for the acquisition of PEL's interest in the Project:
(i)undertake, with consultants, a site visit to the Project; and
(ii)seek out a listed company to acquire some or all of PEL's shareholding in PAL.
(d)share equally with Mr Kestell in any benefits arising from the on sale of PEL's interest in the Project.
(b)In pars 10, 10.1 and 10.2 the plaintiff pleads:
10.In or about late November 2018 or early December 2018 Mr Kestell and Mr Davey partly orally and partly in writing agreed that Mr Davey would seek a listed company to fund the acquisition of all of PEL's shares in PAL on the basis that:
10.1on acquisition the listed company would be entitled to a portion, but not all, of PEL's shares in PAL; and
10.2the remaining portion of PAL's shares in PEL would be divided (after providing, if necessary, shares for any third parties who became involved in the work required to secure the acquisition and on-sale of PEL's interest in the Project) between Mr Kestell and Mr Davey or their respective nominees in equal shares.
(c)in par 13, the plaintiff pleads that the agreement in par 10.2 was varied by a plea that:
13.In or about February 2019 Mr Kestell and Mr Davey partly orally and partly in writing agreed that the proportions referred to in paragraph 10.2 would be varied such that:
13.1Mr Davey would take the lead role in coordinating the acquisition of all of PEL's shares in PAL and the on‑sale of that interest to an appropriate listed shell; and
13.2the proceeds of the acquisition and on-sale, being the remaining portion of PEL's shares in PAL would be divided between Mr Kestell and Mr Davey or their respective nominees, and other interested persons, as to a three quarter share to Mr Davey or his nominee and other interested persons and a one quarter share to Mr Kestell or his nominee, so that Mr Kestell or his nominee would have a 5% interest in the Project.
Particulars
(a)text messages between Mr Davey and Mr Kestell dated 24 February 2019
(d)in par 19 the plaintiff pleads that:
19.On or about 11 June 2019 Mr Kestell on the one hand and Mr Davey on behalf of KRPL alternatively Davey Holdings and Davey Management on the other hand agreed that, conditional upon an agreement being executed with respect to the acquisition of PEL's shares in PAL and that acquisition being completed ('the Condition'):
19.1Mr Kestell or his nominee would be entitled, via Lily, to an interest equivalent to at least 3.5 percentage points of the 85% interest held by PAL in the Project;
19.2however, Mr Davey would endeavour to secure a greater interest for Mr Kestell or his nominee.
Particulars
(i)Email chain concluding with email from Grant Davey to Simon Andrew dated 11 June 2019 (P.084).
(ii)Email chain concluding with email from Grant Davey to Tim Kestell dated 18 June 2019 (P.132).
(iii)Email chain concluding with email from Grant Davey to S Andrew and T Kestell dated 12 June 2019 (P.093).
(iv)Email from G Davey to T Kestell dated 18 June 2019 with attachment (P.134).
In par 20A the plaintiff pleads the consideration for the agreement pleaded in par 19 was the conduct pleaded in pars 6 to 18, further and, in the alternative, the matters pleaded in pars 19.1 and 19.2.
In the alternative to the 'agreements' pleaded in pars 8.2, 10, 11, 13 and 19, the plaintiff pleads in par 20B:
[B]y reason of the communications, conduct and circumstances pleaded in paragraphs 6 to 19 above, an agreement can be inferred between Mr Kestell on the one hand and Mr Davey on behalf of KRPL [the second defendant] alternatively Davey Holdings and Davey Management on the other hand, made by about 18 June 2019, with the terms being as pleaded in paragraph 19 above.
In par 20 the plaintiff pleads:
At the time of this agreement and immediately prior, it was mutually known by Mr Kestell and Mr Davey that it was likely that some part of the proceeds arising from the on sale of PEL's interest in the Project would need to be provided to other interested persons.
In the Amended Defence, in respect of par 8 of the plaintiff's statement of claim, the defendants plead that there was an oral agreement reached between the plaintiff and the first defendant with respect to the possible acquisition and execution of the Project, subject to the first defendant being satisfied with the outcome of the preliminary due diligence pleaded in par 8.4 of the amended defence. They also plead in par 8.5.1 that the plaintiff and the first defendant orally agreed that any benefits of the acquisition and execution of the Project would be distributed based on the respective contributions of any parties involved in the acquisition and execution of the Project, including the plaintiff and the first defendant. In par 8.5.2 the defendants plead that the substance of the oral agreement in par 8.5.1 was an agreement to agree. It is then pleaded by the defendants in par 8.5.3 that the plaintiff's pleaded agreement in par 8.2 of the statement of claim is so vague and uncertain, in particular containing no specificity as to the consideration to be provided by the plaintiff and the first defendant, that it is to be in substance, no more than an agreement to agree, void for uncertainty, or unenforceable.
The defendants make a similar plea in respect of the matters pleaded by the plaintiff in par 10 of the statement of claim. The defendants plead in pars 10.1 and 10.2 of the Amended Defence that in or about late 2018 or early 2019 the plaintiff and the first defendant agreed that the agreement that the plaintiff had made with Paladin Energy Ltd would need to be renegotiated by the first defendant in order to make it more attractive for a junior private or listed company. The defendants then plead in pars 10.2 and 10.3 of the Amended Defence:
10.2if a suitable company, either listed or private, could be identified (Acquiring Company), the parties would negotiate with that company to fund the acquisition of PEL's shares in PAL for consideration that would be tailored to suit the particular vehicle; and
10.3in the event the agreement with the Acquiring Company involved acquisition of only part of PEL's shares in PAL, the remainder of those shares would be distributed between all parties that contributed to the acquisition of the Project (potentially including Mr Kestell and Mr Davey) in proportions equivalent to their contributions to the acquisition and subsequent execution of the Project.
The defendants then plead in par 10A of the Amended Defence that the substance of the oral agreement in par 10 of the Amended Defence was an agreement to agree, and in any event, the plaintiff's pleaded agreement in par 10 of the statement of claim is so vague and uncertain, in particular containing no specificity as to the consideration to be provided by the plaintiff and the first defendant, that it is to be in substance, no more than an agreement to agree, void for uncertainty, or unenforceable.
As to the plaintiff's plea in par 13 of the statement of claim, the defendants in par 13 of the defence deny that there was any variation to the terms of agreement to agree pleaded in par 8.5 of the Amended Defence and that the first defendant took a lead role in coordinating the acquisition of Paladin Energy Ltd's shares in Paladin Africa Ltd without the involvement of the plaintiff. The defendants further plead that, in any event, the plaintiff's pleaded agreement in par 10 of the statement of claim is so vague and uncertain, in particular containing no specificity as to the consideration to be provided by the plaintiff and the first defendant, that it is to be in substance, no more than an agreement to agree, void for uncertainty, or unenforceable.
As to the plaintiff's plea of the agreement reached on 11 June 2019, the defendants plead in par 19 of the Amended Defence that there was an oral agreement made between the plaintiff on behalf of the second defendant and that the plaintiff or his nominee would be entitled to a 17.5% share of the issued capital of the second defendant on specified conditions set out in pars 19.1 to 19.8 of the Amended Defence.
In the alternative, the defendants plead in par 19A of the Amended Defence that the plaintiff's agreement pleaded in par 19 of the statement of claim is so vague and uncertain, in particular containing no specificity as to the consideration to be provided by the plaintiff and the first defendant, that it is to be in substance, no more than an agreement to agree, void for uncertainty, or unenforceable.

3.0 Applicable principles

The principles that apply to a strike out application are well known and were summarised in Vantage Holdings Group Pty Ltd v Donnelly [No 4].[2] All of those principles need not be repeated in these reasons, other than the principles that are particularly relevant in this matter and they are:[3]
[2] Vantage Holdings Group Pty Ltd v Donnelly [No 4] [2019] WASC 398 [60].
[3] Vantage Holdings Group Pty Ltd v Donnelly [No 4] [2019] WASC 398 [60(e) and (i)] (footnotes omitted).
(e)in alleging no reasonable cause of action:
(i)the question to be decided is not whether the facts pleaded are in themselves sufficient to give rise to a cause of action. Rather, the question is whether it would be open to the party (on its pleadings) to prove facts at the trial which would constitute a cause of action; and
(ii)'reasonable' means reasonable according to law. If the facts pleaded conceivably give rise to relief, then the cause of action should be held to be reasonable;
…
(i)pleadings may be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the action 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 with reasonable particularity, or they raise a case in terms which are simply too general; …

4.0 The parties submissions and disposition

4.1 Paragraph 20A – Whether the plaintiff pleads past consideration

The defendants argue that the plea in par 20A is embarrassing, discloses no cause of action, and on this basis should be struck out.
The defendants argue that the plaintiff's plea relies upon consideration that can only be properly characterised as past consideration, which is unenforceable unless pleaded pursuant to the principle established by the Privy Council in Pao On v Lau Yiu Long; an act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise when:[4]
(i)the act was done at the promisor's request;
(ii)the parties understood that the act was to be remunerated either by a payment or the conferment of a benefit; and
(iii)the payment or conferment of a benefit was legally enforceable.
[4] Pao On v Lau Yiu Long [1980] AC 614, 629; [1979] 3 All ER 65.
The defendants contend that the principle in Pao On v Lau Yiu Long has no application to the plea at par 20A because none of the matters are pleaded to have been done at the first defendant's request (the promisor's request). They point out that the plaintiff pleads that it was the plaintiff who approached the first defendant to seek assistance to undertake due diligence for the opportunity to acquire the interest of Paladin Energy Ltd in the Project.
The plaintiff argues that the agreement pleaded in par 19 is not a new agreement, rather it is a further variation of the agreement pleaded in pars 8, 10 and 13; the variation being occasioned by the 'need' pleaded in par 20, that it was likely that some part of the proceeds arising from the sale of Paladin Energy Ltd's interest in the Project, would need to be provided to other interested persons (which need is admitted by the defendants in par 20 of the Amended Defence).
The plaintiff contends that the defendants are under a misapprehension of the plaintiff's case. The plaintiff's case is that there was a single agreement between the plaintiff and the first defendant, albeit some of its terms changed over time, as follows:
(a)commencing in September 2018, the plaintiff and the first defendant agreed to work together on the commercial opportunity identified by the plaintiff, namely the acquisition and sale of Paladin Energy Ltd's interest in the Project;
(b)they initially agreed to share the rewards from that effort equally;
(c)in or about February 2019, the two men agreed that the plaintiff's share of the proceeds of the Project would be reduced by half;
(d)in the context pleaded at par 20, on or about 11 June 2019 the two men agreed that the plaintiff's share would be reduced, if required, from 5% of the shares to be issued by Lily Resources Pty Ltd to no lower 3.5%, but the first defendant would attempt to keep that reduction to a minimum. The documents pleaded in pars (i) to (iii) of the particulars to par 19 record that in a series of emails sent by the first defendant on 11 June 2019, 12 June 2019 and 18 June 2019 he made statements to the plaintiff and to others that the plaintiff would be entitled to an interest equivalent to at least 3.5% of the 85% interest held by Paladin Africa Ltd in the Project.
The plaintiff is entitled to refer to these pleaded emails in defence of the application to strike out. This is because insofar as the defendants bring their application to strike out on grounds that the matters pleaded disclose no reasonable cause of action, although evidence is not admissible in determination of an application under O 20 r 19(1)(a), the court may refer to documents pleaded in the statement of claim.[5]
[5] Southern Wine Corporations Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236 [3] (McLure JA), [51] (Pullin JA), [1] (Wheeler JA agreed); Day v William Hill (Park lane) Ltd [1949] 1 KB 632, 639 (Singleton LJ).

The plaintiff argues that consideration for the promises the two men made in September 2018, and thereafter, was the reciprocal promises each gave the other. But even if the issue was not considered in that way, the plaintiff argues:
(a)the consideration for the change made to the agreement; that it was agreed that the two men would share equally in February 2019, whereby the plaintiff would now receive less than the first defendant, and the first defendant taking the lead role in the venture ‑ i.e. doing more of the work involved;[6]
(b)the consideration for the change made on or about 11 June 2019 was the plaintiff's agreement to receive less than the 5% of the shares to which he was entitled, if that were required to ensure the success of the project.
[6] Amended Statement of Claim pars 8.2 and 13.1.
The plaintiff also argues that the paragraphs complained of deal with the continued evolution of the agreements between the parties, in a context where the question whether the agreements between the parties evolved is partly admitted and partly positively asserted by the defendants, albeit that the defendants assert agreements on different terms to those contended for by the plaintiff.
In Inness v Waterson, Keane JA observed that consideration for a variation of contract for an extension of time for settlement of account contract for the sale of land requires consideration moving from each party which will be established by a fresh set of mutual promises rearranging generally the contractual milestones.[7] The principle in this case was applied by Beech J in Henderson v Curtis. In this matter his Honour relevantly observed that he accepted that an agreement by parties to a contract to vary the contract is to be treated as a contract itself. He then went on to observe that a promise by one party to vary a contract will only be enforceable if the promises are supported by consideration.[8] His Honour then went on to observe:[9]
… I do not accept that whether a promise is supported by consideration is to be determined solely by reference to whether a commercial benefit is derived or is likely to be derived from that promise. Rather, mutual promises are capable of being consideration each for the other.
When parties to a contract agree to vary the time or the quantum of an unconditional obligation owed by only one of the parties, then there will be no consideration for the promise by the other party to agree to that variation. A case such as D & C Builders Ltd v Rees [1966] 2 QB 617; [1965] 3 All ER 837, relied upon in the defendant's outline of submissions, falls into this category.
However, where parties agree to vary some other aspect of their contract, other than an unconditional obligation owed only by one party, the agreement by each party for the variation of the mutual rights and obligations of the parties will be consideration for the other party's promise. That is the position stated by the Queensland Court of Appeal in the other case relied upon by the defendant, Inness v Waterson [2006] QCA 155 [49].
In this case, the primary character of special condition 6 is as a non‑promissory condition subsequent to the continued enforceability of the contract. It provides a date by which a condition must be fulfilled, failing which each party will be entitled to treat the contract as being at an end. Consequently, in my opinion, the agreement of both parties to vary the date stipulated in special condition 6 is supported by consideration in the form of the mutual promise of each party to the other to vary each party's rights and obligations.
[7] Inness v Waterson [2006] QCA 155 [49].
[8] Henderson v Curtis [2008] WASC 283 [16].
[9] Henderson v Curtis [2008] WASC 283 [16] ‑ [19].
The plaintiff properly points out that, if par 19 is to be considered as a separate agreement, what is pleaded in pars 19.1 and 19.2 as consideration is:
(a)the plaintiff accepted a lesser entitlement of 3.5% of the Project than that to which he was entitled, being 5% of the Project as pleaded in par 13.2 of the Amended Statement of Claim; and
(b)the consideration given by the first defendant was his agreement to secure at least an entitlement to 3.5% of the Project and to endeavour to secure a greater interest for the plaintiff as pleaded in par 19.2.
On this basis, I am satisfied it would be open to the plaintiff to prove facts at trial of mutual promises which could be found to constitute consideration for the agreement pleaded in pars 19.1 and 19.2 of the Amended Statement of Claim.
In the alternative, if it found that consideration for the separate agreement pleaded in par 19 is not supported by the matters pleaded in pars 19.1 and 19.2, the plaintiff pleads the promises and conduct of the parties pleaded in pars 6 to 18 constituted consideration for the agreement pleaded in par 19.
The defendants argue that a number of matters said to support the consideration for the agreement in par 19 of the Amended Statement of Claim are not any recognised form of consideration by the plaintiff, such as:
(a)matters that occurred prior to the plaintiff and defendants' first meeting to discuss the Project, pleaded in pars 6, 6A and 7;
(b)matters that were solely performed by the plaintiff or his related entities outside of a request from any of the defendants, pleaded in pars 9A, 13A, 13B and 13C;
(c)matters that were solely performed by the first defendant or his related entities outside of a request by the plaintiff, pleaded in par 12; and
(d)the incorporation and shareholdings of various entities, pleaded in pars 15 to 18.
As to the remaining paragraphs referred to in par 20A, the defendants argue that to the extent there was any request made by a defendant for the plaintiff to undertake work (which is denied), those paragraphs either:
(a)do not refer to any consideration provided by the plaintiff; and/or
(b)would not be otherwise enforceable due to a lack of certainty as to terms, as they all stem from the vague assertions of 'work together' or 'share equally', contained in par 8 of the Amended Statement of Claim.
The difficulty with the defendants' submission is that if these paragraphs lack certainty as to terms, the defendants have not sought to strike out these paragraphs.
The defendants also raise an argument in reply that the agreement pleaded in par 19 cannot be supported by the matters pleaded in pars 6 to 18 because by the matters pleaded in par 19, the agreement must be a different agreement because the plea is of an agreement between the plaintiff and his nominee and the first defendant on behalf of the second defendant, or alternatively on behalf of the third and fourth defendants.
I agree that the matters pleaded in pars 6, 6A and 7 cannot constitute consideration because they are simply part of the narrative which pleads that the plaintiff had identified an investment opportunity which then became the subject of an agreement in par 8.2.
However, I do not agree that it is not open to plead on the basis of the agreements and conduct pleaded in pars 8 to 18 that acts which have occurred in the past constitute consideration for the agreement pleaded in par 19 if it is a separate agreement that is not past consideration. This is because I accept that it is open to the plaintiff to plead that there were mutual promises that still existed when the agreement pleaded in par 19 was entered into, and that what par 19 pleads together with par 20A is those mutual obligations that still exist as part of an ongoing evolving agreement to acquire an interest in the Project. Whether this plea will be successful or not is a matter for trial.
In addition, the defendants argue that the emails particularised in par 19.2 indicate that the plaintiff nominated his nominee, Desert Fox Pty Ltd (AFT Kestell Family Trust) on 18 June 2019. The defendants argue that the email shows that the nomination was complete and that it is evidence of an agreement with Desert Fox Pty Ltd and not the plaintiff; yet the nominee is not a party to the proceedings.
It is to be noted that the agreement pleaded by the plaintiff in par 19 is that the agreement was made on or about 11 June 2019, and the email chain referred to in par 19.2(ii) of the particulars indicates that a nomination was made on 18 June 2019. However, this is not an issue the defendants plead in their Amended Defence despite the plea in par 26 of the Amended Statement of Claim being pleaded in the statement of claim indorsed on the amended writ of summons dated and filed on 19 August 2021 as the agreement (as varied on or about 26 June 2019 to an interest equivalent to 4.5% of the Project)[10] in respect of which the plaintiff claims the first defendant repudiated.
[10] Amended Statement of Claim, pars 22 and 23.
Because par 20A of the Amended Statement of Claim pleads pars 6, 7A and 7 as consideration for the agreement in par 19, I made an order that par 20A should be struck out until leave to replead, because I was satisfied that by referring to these paragraphs the plea in par 20A obscured the real questions in the controversy.

4.2 Paragraph 20B – The plea of an inferred agreement

The defendants argue that none of the matters pleaded in pars 6 to 18 of the Further Amended Statement of Claim are capable of inferring an agreement in the terms pleaded in par 19. In particular, pars 6 to 18 deal with matters that are unrelated to the terms of the agreement pleaded in par 19, and pars 6, 6A, 7, 13A, 13B, 15, 16, 17 and 18 are irrelevant and or unrelated to any agreement.
In addition, the defendants argue that par 20B is silent on the parties conduct after the alleged agreement was formed and points to no evidence that positively indicates that both parties consider themselves bound by the agreement and, therefore, introduces a plea that discloses no reasonable cause of action. On this basis, the defendants contend that par 20B should be struck out.
In Fazio v Fazio, Murphy JA set out the established principles of inferring a contract which can be summarised from his Honour's reasons as follows:[11]
(a)strict adherence to the classical theory of contract formation is not necessary; a contract may be inferred in the absence of an identifiable offer and acceptance;
(b)a contract may be inferred from acts and conduct of parties, as well as in the absence of their words. The parties dealings with each other are relevant both 'for what was said and not said';
(c)the question is whether the parties conduct, viewed objectively, reveals a tacit understanding or agreement, or manifestation of mutual assent, which evinces an intention to create legal relations;
(d)the general principle is that subsequent conduct is not to be used as an aid in the construction of an instrument or written agreement. Where, however, an informal agreement (oral or inferred) is alleged to have been made on or by a certain date, the conduct of the parties, including conduct subsequent to the postulated date, may be considered in deciding whether a contract has been concluded. Such conduct may be considered for the purpose of inferring not only whether a binding agreement had been reached, but also its subject matter and the identification of its necessary terms.
[11] Fazio v Fazio [2012] WASCA 72 [188] ‑ [193] and the cases cited therein.
Consequently, even if no conventional offer or acceptance can be isolated, a contract can be found if it is possible to infer from the relevant facts the conclusion that the parties have agreed to incur reciprocal promissory obligations.[12]
[12] Heydon J, Heydon on Contract (2019) [2.110] and the cases cited in footnote 96.
In addition, circumstantial inferences can be drawn from the behaviour of the parties that a reasonable person in the position of the offeree at some point would have understood that the offeror had expressed willingness to contract on specified terms with the intention that those terms would become binding on acceptance by the offeree, and that thereafter the offeree did something which a reasonable person in the position of the offeror would have seen to be final and unqualified expression of assent to the terms offered.[13]
[13] Heydon J, Heydon on Contract (2019) [2.110] and the cases cited in footnote 98.
I do not agree that the matters pleaded in pars 6 to 18 are not capable of inferring an agreement in the terms pleaded in par 19. As the plaintiff points out in his written submissions, the following factual matters are pleaded by the plaintiff as circumstantial evidence which, if proven at trial, could give rise to a finding that the parties, by the conduct of the plaintiff and the first defendant, had agreed to incur reciprocal obligations:
(a)pars 6, 6A and 7A plead the conduct of the plaintiff that identified the subject of the agreement, that is the opportunity to acquire Paladin Energy Ltd's interest in the Project;
(b)par 8 pleads that that the plaintiff and the first defendant agreed that the first defendant and his team would review the due diligence information and conduct a site visit, and the plaintiff and the first defendant would share equally any benefits arising from the on‑sale of Paladin Energy Ltd's interest in the Project;
(c)par 9 pleads the steps that the plaintiff took to enable the first defendant to conduct the due diligence review, which is conduct capable of supporting a plea of part performance of the agreement;
(d)par 9A pleads an offer to Paladin Energy Ltd, made by the plaintiff's company Globalwide Corporation Pty Ltd, which is conduct capable of supporting a plea of part performance of the agremeent;
(e)par 10 pleads that the parties progressed their discussion regarding the actual percentage of the Project that they would be entitled to, and that portion would be the remaining portion after an ASX listed shell took its portion;
(f)pars 11 and 12 plead the steps taken by the first defendant through Matador Capital Pty Ltd for exclusive rights to acquire an 85% direct or indirect interest in the Project;
(g)pars 13, 13A, 13B and 13C plead the work performed by the plaintiff and the first defendant in order to find an ASX listed shell company, necessary for the acquisition of Paladin Energy Ltd shares in Paladin Africa Ltd, which is pleaded as a condition of the agreement in par 19; and
(h)pars 15 to 18 plead the facts relevant to the formation of Lily Resources Pty Ltd by the first defendant for the purposes of the acquisition of Paladin Energy Ltd's shares in Paladin Africa Ltd, which I accept could be construed if the facts are proven to support this plea as steps taken by the first defendant that are consistent with the expectation that the first defendant would be legally bound to share an interest in the Project with the plaintiff.

For these reasons, I was not satisfied that par 20B should be struck out.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TS
Associate to the Honourable Justice Smith
11 NOVEMBER 2022