Khong v RENOV8WITHUS PTY LTD - [2022] WADC 36

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   KHONG -v- RENOV8WITHUS PTY LTD [2022] WADC 36
CORAM:   DEPUTY REGISTRAR HEWITT
HEARD:   21 APRIL 2022
DELIVERED          :   5 MAY 2022
FILE NO/S:   CIV 3692 of 2019
BETWEEN:   SUET MEI KHONG
First Plaintiff

LI RU WONG
Second Plaintiff

AND

RENOV8WITHUS PTY LTD
First Defendant

PARAMJEET SINGH KHAIRA
Second Defendant

RENOV8WITHUS PTY LTD
PARAMJEET SINGH KHAIRA
Plaintiff by counterclaim

SUET MEI KHONG
LI RU WONG
Defendant by counterclaim

Catchwords:

Practice and procedure - Application to strike out defence and counterclaim - Turns on its own facts

Legislation:

Nil

Result:

Application dismissed

Representation:

Counsel:

First Plaintiff	:	Mr C G Thorpe
Second Plaintiff	:	Mr C G Thorpe
First Defendant	:	Mr P Mendelow
Second Defendant	:	Mr P Mendelow
Plaintiff by counterclaim	:	Mr P Mendelow
Defendant by counterclaim	:	Mr C G Thorpe

Solicitors:

First Plaintiff	:	Edwards Mac Scovell Legal
Second Plaintiff	:	Edwards Mac Scovell Legal
First Defendant	:	Williams & Hughes
Second Defendant	:	Williams & Hughes
Plaintiff by counterclaim	:	Williams & Hughes
Defendant by counterclaim	:	Edwards Mac Scovell Legal

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

Nil

DEPUTY REGISTRAR HEWITT:

The matter which is before me for determination in this case is the application by the plaintiffs seeking to strike out the defence which has been filed by the defendants in its entirety or alternatively to strike out certain nominated paragraphs of that defence. The paragraphs are so numerous that in effect the second alternative is the equivalent of the first.
In order to understand my decision it is necessary to know something of the circumstances which gave rise to this case. The plaintiffs are the owners of a piece of land who entered a contract on 26 June 2018 or thereabouts with the second defendant for the completion of eight partly constructed units on their property. It was the intention of the second defendant that payments which were made pursuant to the contract which he had entered would be paid to the first defendant. The building project was the subject of a finance agreement between the plaintiffs and a financier, and that financier raised an objection to paying progress payments to any party other than the party who had entered the contract, namely the second defendant.
It therefore followed that the contract could not be fulfilled until that obstacle was overcome and consequently a Mr G Wong approached the second defendant and proposed that the difficulty should be overcome by striking out the name of the second defendant on the contract and substituting the name of the first defendant in its place. That amendment was made and the contract so amended was presented to the plaintiffs who initialled the changes which had been made. There has been some contention as to whether that process created a novation, the argument being advanced by the plaintiffs was that a novation requires three parties and the process which I have described only involves two, namely the plaintiffs and the second defendant. That overlooks the fact that the second defendant was at the time the sole director of the first defendant and would have had authority in that capacity to enter contractual arrangements with the plaintiffs, and therefore could properly be regarded as wearing two hats in this arrangement, the one being himself personally, and the other being as the representative of the second defendant. Insofar as the strike out application relies on the fact that there was not an enforceable novation of the contract by these arrangements from the second defendant to the first defendant, I think that what is presented is capable of being regarded as a novation by the court if this matter comes to trial. Therefore, insofar as an attack is launched on the pleading on the basis that the matters pleaded are not capable of establishing that a novation took place, I disagree. In my view, the facts as they have been explained in the defence under attack are quite capable of supporting that conclusion.
The real issue in this case however lies elsewhere. The defendants suspended work and issued a notice of termination to the plaintiffs by reason of their failure to pay a progress payment which was submitted. In answer to that, the plaintiffs say that they made a substantial payment, at the request of the second defendant, as an advance on monies payable under the terms of the building contract. I am a little puzzled as to that proposition since it appears to be the case that the building was being funded by a financier to whom progress claims were made and by whom those claims were assessed and paid. Exactly why advance payments would be required and particularly the amount of $300,000, is not clear. An amount of $300,000 is a very substantial portion of the total quoted price for the works to be undertaken by way of the building contract.
The explanation offered by the defendants in the defence is that the monies were received as a payment for the allocation of 15% of the issued share capital of the first plaintiff to Mr G Wong. Although not identified in the current statement of claim, in an earlier version of the statement of claim he is identified as Mr Gia Gian Wong, also known as Ken Wong. In the first iteration of the statement of claim he appears identified as a party which had significant involvement in the matter on behalf of the plaintiffs. Whether he was an agent or whether he was not is probably not relevant in this case because the document upon which the defendants rely was initialled by the plaintiffs after the insertion of the name of the first defendant in place of that of the second defendant and the issue of whether any actions were taken by Mr G Wong of contractual significance is in my view largely irrelevant.
The matter therefore comes down to a simple proposition. The first defendant purported to terminate the contract on the basis of non‑payment of one of its progress claims. The plaintiffs say that they had deposited a substantial sum of money with the first defendant to cover such claims and that the termination was invalid, but was nonetheless accepted by them as a repudiation of the contract. As earlier outlined, the first defendant says such monies as were paid to it were paid as consideration for the allotment of 15% of its issued share capital to Mr G Wong, which allotment was made.
Complaint is made by the plaintiffs that it is not clear from the pleading exactly who transferred the money and that that is a fatal flaw in the pleading. It is not usual to strike out pleadings which can be cured by the granting of particulars. If indeed the plaintiffs are confused as to the source of the funds paid to the first defendant, they can ask for particulars of the payment and overcome any confusion which they may feel. Again, it may well not be relevant who paid the money to the first defendant, since the real issue is whether that payment was moneys due for the allocation of the shares in the first defendant. Even if that money flowed from the plaintiffs, if it was the intention that it be in payment of the money due for the shares, it is not relevant that it came from the plaintiffs.
Although a myriad of criticisms has been made of the defence and counterclaim, the purpose of a defence is to inform the opposing party of the issues which the defence intends to raise so that the plaintiffs have a proper opportunity to understand that defence and respond to it. In my view this pleading satisfies that requirement.
I have read the pleading and it seems to me quite clear what the issue in this case is. To repeat, the issue is whether or not the $300,000 paid to the first defendant was in fact a deposit on account of future monies payable or whether it was in fact payment for the allocation of shares to Mr G Wong. If it is the first of those alternatives, then presumably the termination by the first defendant was invalid or at least potentially so. If it was for the second alternative, then clearly the plaintiffs' case fails since the termination by the defendants was a valid termination within the terms of the contractual arrangements. For these reasons I am of the view that the application which has been brought by the plaintiffs should be dismissed.
I pause to mention the criticism which has been made by the plaintiffs against the defence in counterclaim, namely that it is unduly lengthy and for that reason should be disallowed. The defence is in fact double spaced and occupies some 23 pages. It may be that the defence is rather longer than it might have been, but allowances have to be made for the individual style of the lawyer who prepares such a document. It is certainly true that some of the propositions which are contained in the amended defence and counterclaim could have been more succinctly expressed, but I see that as little reason for striking it out. By way of passing comment, I note that the plaintiffs' statement of claim is single spacing and occupies five pages, basically then, the defence and counterclaim is twice as long as the statement of claim. The original statement of claim in fact occupied 12 pages of single spaced material and in practical terms was approximately the same length as the amended defence and counterclaim. No suggestion has been made that the original statement of claim should have been struck out because it was too long. The reduction in the length of the substituted statement of claim is largely due to the fact that the plaintiffs chose to abandon certain propositions which would appear to have been of more help to the defence than to the plaintiffs.
In conclusion therefore, I consider that the pleading which is before the court in the form of the amended defence and counterclaim satisfactorily fulfils the requirements for such a document and it is not appropriate to strike out it in whole or in part. If there are some deficiencies, they can be cured by a request for particulars.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
FN
Associate
4 MAY 2022