Khong v Renov8withus Pty Ltd [No 2] - [2023] WADC 26

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION:   PERTH
CITATION:   KHONG -v- RENOV8WITHUS PTY LTD [No 2] [2023] WADC 26
CORAM:   MACLEAN DCJ
HEARD:   21 OCTOBER 2022
DELIVERED          :   15 MARCH 2023
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:

Strike out application - Does defence meet primary task of informing plaintiffs of case

Legislation:

Nil

Result:

Appeal 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):

JWH Group Ltd v Buckeridge [No 3] [2009] WASC 271
Khong v Renov8withus Pty Ltd [2022] WADC 36

MACLEAN DCJ:

This is an appeal against a decision of a deputy registrar.
The learned deputy registrar dismissed an application to strike out various paragraphs in an amended statement of defence and counterclaim (ASDC).
I understand that I must consider the matter afresh. Helpfully, both parties referred me to the reasons of the learned deputy registrar in support of the outcome they sought in this appeal and I have read the reasons: Khong v Renov8withus Pty Ltd [2022] WADC 36.
Ms Khong and Mrs Wong engaged Mr Khaira to build residences for them. The terms were recorded in a construction contract dated 26 June 2018 (Contract).
In the course of the endeavour $300,000 was paid to Renov8withus Pty Ltd (Renov8withus).
In the substantive proceedings the issue is:
(a)whether or not an amount of $300,000 paid to Renov8withus was a deposit on account of future monies payable; or
(b)whether it was payment for the allocation of shares to Mr Ken Wong in Renov8withus, by way of an unwritten share sale agreement (SSA).
Mr Wong is not a party to these proceedings.
The application to strike out parts of the defence concerns two matters asserted in the ASDC:
(a)the SSA; and
(b)an amendment to the Contract (Amended Contract).
With regard to the Amended Contract, the issue is whether the amendment, said to have taken place on 10 December 2018, operated to discharge Mr Khaira, from principal responsibility as builder under the Contract and instead for Renov8withus to become a party to the Contract and be the party responsible for undertaking the construction.

Ms Khong and Mrs Wong's submissions

Ms Khong and Mrs Wong contend a defence is a responsive document and that in the earlier application, the decision‑maker was caught up with the defendants' framing of matters as being accepted and so was led to error.
They say there are two critical matters:
(a)the existence and manner in which a share sale agreement is pleaded as a defence; and
(b)the manner in which the primary document in the claim was amended.
At its heart according to Ms Khong and Mrs Wong this claim is a claim for money had and received. Namely payments in two amounts of $180,000 and $120,000 paid on 28 June 2018 and 4 July 2018 respectively.
Ms Khong and Mrs Wong assert in the substituted statement of claim (SOC) 'we gave you money, and we want it back'.
According to Ms Khong and Mrs Wong this is how every single thing ought to be framed in this dispute.
Ms Khong and Mrs Wong allege that they entered into the Contract with Mr Khaira and the manner in which the Contract is said to have been amended, purportedly to put the burden of performance on Renov8withus in place of Mr Khaira, is not properly pleaded.
Renov8withus and Mr Khaira's position is that someone gave them money for a 15% share in Renov8withus. They say it does not matter who gave the money. The issue is what it was paid for.
In the trial of these claims, Ms Khong and Mrs Wong will have to establish:
(a)that the money was paid; and
(b)it was paid as an advance payment toward the Contract.
Renov8withus and Mr Khaira have, on the basis of the current pleadings, taken on an onus of establishing that a payment of $300,000, which Renvo8withus accepts they have received, was received as a purchase toward shares of 15% in Renov8withus.
There is no suggestion that the payment of $300,000, being the same amount received at the same time as alleged by the plaintiffs, is a gift.
Counsel for Ms Khong and Mrs Wong asserted:
… And I don't know how many times I've tried to say that in the past in this matter, but if I say 'I gave you the money' and your response is 'someone gave me the money' that's not a defence if I prove that I gave you the money and I want it back.
And continued:
… And if you substitute 'they paid with the plaintiffs' money', the substance of the share sale agreement pleading falls away. It becomes nothing but an assertion that an agreement was performed with someone else's money, and without a lawful justification for why they can retain the money, that's not a defence.
I do not agree that the submission applies in this case. Having regard to the issues in this case the defence does assert an arguable basis for a lawful justification as to why Renov8withus might retain the money.
It is arguable that the agreement referred to in the submissions set out above, may not have been between Renov8withus, Mr Khaira and Ms Khong and Mrs Wong. However, having regard to the totality of allegations and the issues raised in the pleadings, there is a clear argument for supporting the case that Mr Wong was agent for Ms Khong and Mrs Wong. Whether or not this is so, is a matter that should be resolved at trial and is raised by the pleadings.
Ms Khong and Mrs Wong assert that the agreement has nothing to do with the plaintiffs. This may be, but it is a matter which abides the outcome of the proceedings.
Counsel for Ms Khong and Mrs Wong assert:
… although I note we don't have to have it under money had and received. The plaintiffs don't have to prove that it was paid for the purposes of the contract, they just have to prove it was paid and they received it.
With respect, I do not accept this assertion. A nuance of this case includes the allegation that Mr Wong had a degree of involvement and control in the performance of the obligations between the parties.
Ms Khong and Mrs Wong complain that the defendants do not admit the $300,000 came from them. If admitted, according to them, that would fall within an acceptable pleading position, namely: 'You did give us money, but we have some lawful basis to retain it'.
I find, with respect, that this misses the point. Renov8withus and Mr Khaira may not know who it was that gave them the $300,000. This might make for an unimpressive assertion at trial that it was from Mr Wong and it was for shares. This is not the point at this moment. It may be that they simply are not able to say with precision where it came from. They know that they have it. They know why. They say that they do not have to pay it back to Ms Khong or Mrs Wong. It was payment for shares in Renov8withus.
The allegation 'we gave you money' might be as material as it gets but it is Ms Khong and Mrs Wong's job to demonstrate, since identity of the payer seems in issue, where the money came from with the consequential forensic points, or otherwise, that establishment of the fact results in.
It might be an impressive forensic point if Ms Khong and Mrs Wong are able to demonstrate that we gave you money in answer to Renov8withus' and Mr Khaira's position that the payment was for shares in Renov8withus. It may make risible the defendants' position that this was a payment so that a person who was not either Ms Kong or Mrs Wong might acquire shares in Renov8withus. Alternatively, it might be a compelling demonstration of the degree of Mr Wong's agency and direction insofar as the management of the performance of the Contract between the parties. This is a matter for trial following all the evidence.
Ms Khong and Mrs Wong assert:
… the defence is a responsive document. It is not a chance to simply shout a different narrative. You can do that but you first and foremost must respond to the document that is put to you.
They assert that there are only two kinds of defence. 'It either didn't happen or it did happen and other things happened that make it okay'.
Ms Khong and Mrs Wong assert that:
[W]hat you can't do is you can't say both. You can't say it didn't happen, but if it did happen, when obviously it's a fact, whether they got money or not, you can't say, 'We didn't get it. But if we did get it, then here's some other excuse as to why we don't have to give it back'.
In my view Renov8withus and Mr Khaira do not say both. They do not say we did not get it. They say, by their pleading:
[W]e deny it was from Ms Khong and Mrs Wong. Therefore you prove it. The Advance Payments, that is the $300,000 were made. But they were made pursuant to a Share Subscription Agreement. They were caused or procured by a person, Mr Wong, who happens to be Mrs Wong's husband and an authorised agent for the plaintiffs under the Contract, it was the purchase price for the acquisition of shares.
By their particulars and perhaps compellingly, perhaps not, it is a matter for trial, the payments described as Advance Payments were made, on Renov8withus' and Mr Khaira's position, without report to Ms Khong and Mrs Wong's financier. Additionally, the Advance Payments were not made following an assessment or approval by Ms Khong and Mrs Wong's quantity surveyor. This could be because they were Advance Payments toward the Contract or because they were toward the purchase price of shares in Renov8withus.
There is no issue that there is the same $300,000. The issue is what it was paid for. Ms Khong and Mrs Wong complain that what the defence says is unclear. They assert it appears that the defendants have made a bet each way. With respect, I cannot agree. The identity of the payer is not admitted. It does not need to be. Ms Khong and Mrs Wong might prove that they paid the $300,000 themselves. If so, that would not resolve the issue of what it was for. The defence might still prove that it was for shares. They might not. These are matters for trial in which an assessment of the credibility of the witness called or the likelihood of the facts established by inferences each party calls for to be drawn from the evidence led, will be a significant task.
In their written submissions Ms Khong and Mrs Wong assert:
The plea that a payment was not made is fundamentally inconsistent with any plea that the same payment was made. … The Defendants are not at liberty to try and reserve an argument that 'the payment was not made, but if it was, it was for a share sale agreement'.
This would be accurate if the plea was that the payment was not made and the defendants were reserving an argument in the event that it was established that Ms Khong or Mrs Wong made the payment. However, this is not the position. The defendants accept that a payment was made. They do not say from who, but they say what it was for. There is no suggestion, apparent from the pleadings, that they are trying to have an each way bet or to reserve a position.
Ms Khong and Mrs Wong describe the defendants' position as absurd; since it maintains a blanket denial that the Advance Payments were from them. However, it is not disputed that Renov8withus did receive the Advance Payments: ASDC, par 11.2(c)(iii). The issue is what it was for.
In the SOC at par 10 Ms Khong and Mrs Wong assert:
… the Second Defendant directed the Plaintiffs to make any payments to the Second Defendant in respect of the Contract to the First Defendant's bank account.
Particulars
The Second Defendant directed Mr Gia Gian Wong (known as Ken Wong) by telephone and the Second Defendant sent the First Defendant's Bank details to Ken Wong by Whatsapp message on 28 June 2018.
Ms Khong and Mrs Wong submit that their absence:
… from the SSA in paragraphs [10.2] and [10.3] is stark, as is the absence of any explanation as to how their payment can be 'pursuant to' an agreement that is completely alien to them. The immediate upshot is that [11.2(c)] has no content and is embarrassing.
I do not accept this submission. Whether the SSA is completely alien to Ms Khong and Mrs Wong is a matter to be resolved at trial. Raised as issues on the pleadings, are:
1.Mr Wong was Ms Khong's and Mrs Wong's authorised agent under the Contract.
2.Mr Wong was in communication with Renov8withus about payments to it.
3.Mr Wong was instrumental in whether progress payments would be made and the amount of those payments: SOC, par 15.
All parties agree that $300,000 was paid and received. The identity of the receiver is not a matter of moment. The scope of Mr Wong's authority will be a matter for trial.

Contract amendment defence

Ms Khong and Mrs Wong submit:
5The 'amendment' defence fails because it does not contain any plea inter alia that the 'amendment' includes:
(a)a term discharging any or both of the defendants from liability under the original Contract;
(b)a term assigning the benefit of the Contract to the First Defendant; and
(c)the plaintiffs agreed to either or both of these things.
6Furthermore, the plaintiffs are otherwise left to guess what the defendants' case might be. …
Ms Khong and Mrs Wong further submit:
8The 'amendment' defence should be struck out because it is vague, incomplete, and fails to disclose the nature of the defendants' case. The SSA defence is embarrassing because it cannot account for the plaintiffs' payment to the First Defendant because the plaintiffs' payment is never linked to the SSA. Even if the implication that the plaintiffs' money is involved is accepted, the SSA Defence collapses to an unexplained assertion that the Defendants used the Plaintiffs' money for a third party purpose. …
I disagree. The amended defence does disclose a defence to the claims by Ms Khong and Mrs Wong. Renov8withus received $300,000. That was not an advance payment under the Contract. It was a payment for a 15% share in Renov8withus.
Ultimately this is a case on credit. On one view Ms Khong and Mrs Wong, together with their authorised agent Mr Wong, have engaged in sharp practice in buying a 15% interest in Renov8withus and now claim this as an Advance Payment on the Contract - which they want to claim back following termination or repudiation [as the case may be] of the Contract. Alternatively, the defendants have engaged in a discreditable course of behaviour in procuring payment from or on behalf of the plaintiffs, accepting that payment knowing it was toward the Contract and claiming that it was for an interest in Renov8withus, on the basis of an unwritten agreement. These matters arise from the pleadings. They are arguable and capable of being resolved at a trial and turn on the veracity of the evidence presented at trial.
As presently framed, Ms Khong and Mrs Wong complain the Amended Contract defence is inadequate because a proper factual foundation is not pleaded to allow the conclusion contended for.
Ms Khong and Mrs Wong allege that they entered into the Contract with Mr Khaira and the manner in which the contract is said to have been amended, purportedly to put the burden of performance on Renov8withus in place of Mr Khaira, is not properly pleaded.
Ms Khong and Mrs Wong assert:
Each defence has material facts in order to make it up. … If the full set is not there, there's no cause of action. If the full set's not there, there's no defence. So an orphan fact doesn't disclose a cause of action. It might be a material fact heading in that direction if the others were present. But alone, it becomes a thing that should be struck out.
These submissions were directed specifically to par 4.2(f) of the ASDC. This claims:
on or about 10 December 2018, Mr Wong, acting as agent for the Plaintiffs, directed Mr Khaira to strike out Mr Khaira's name on the Contract and to replace it with Renov8withus, which amendment was accordingly then made by the Defendants, and thereafter Mr Wong took the amended contract to the Plaintiffs to be countersigned by them, which they duly did (Amended Contract).
Ms Khong and Mrs Wong assert:
… legal conclusions are the sum of material facts … and to put the plaintiffs on notice of what it is that they say the defence is they must be stepped out. …
Ms Khong and Mrs Wong assert that novation is a legal conclusion and that I will:
… either accept that they actually are required to tell us what their case is by way of material facts, or that the defendants are allowed to say, 'Any inference that can be drawn on the basis of this happening that we say is a material fact is open slather for us'. …

Defendants' position

The defendants submit, by their written submissions in pars 25, 26, 28, 30 and 31:
25.… Order 20 rule 8 of the Rules of the Supreme Court states that pleadings must only contain a statement of material facts. All statements of law are therefore unnecessary and should be excluded from pleadings.
26.[the plaintiffs' submissions] require the Defendants to elect from a variation, assignment or novation … at a premature juncture.
…
28.… the matters that are alleged to be missing from paragraph 4.2(f) of the ASDC are evidence of the background circumstances, not material facts. … evidentiary matters ought not be the subject of pleadings. …
…
30.… the material facts alleged in paragraph 4.2(f) of the ASDC clearly support a novation of the Building Contract. …
31.… The question at this stage is not whether there is actually a novation, assignment or variation - that is an issue which must be left until the final determination of this matter. ... the question is whether the Defendants' pleadings disclose material facts which are sufficient to ground one of those defences …
(footnotes omitted)
I accept these submissions.
As noted at the outset of these reasons both parties referred to reasons of the learned deputy registrar. The joint references to the reasons of the learned deputy registrar were useful in identifying the issues and background circumstances of the history of the matters between the parties. Insofar as resolving the complaint that the amended contract defence is inadequate, I cannot express that resolution better than the learned deputy registrar who said:
2In 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.
3It 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.

Principles governing striking out pleadings

I accept the submission that the court's jurisdiction to strike out pleadings must be exercised sparingly and that the test for striking out pleadings has a high threshold.
The defendants refer to JWH Group Ltd v Buckeridge [No 3] [2009] WASC 271and I agree that the jurisdiction to strike out a pleading should only be exercised where the court concludes that the pleading is so clearly untenable that it cannot possibly succeed.
In this case I have not reached that conclusion.
The existence, or otherwise, of the SSA, not recorded in writing, entered into not by either plaintiff, may be thought unlikely. But this is a commercial matter. Commercial matters involve people making decisions and each matter is different. The trial will turn on the court's acceptance or otherwise of the evidence called. Alternatively, the assertion of the SSA having nothing to do with the plaintiffs, where a party to the SSA is married to one of the plaintiffs and on the plaintiffs' case was [directing the defendant] and on the evidentiary materials produced by the defendants was [an authorised agent] of the plaintiffs, may seem plausible. The unlikelihood or plausibility of either scenario are questions of fact for the trial judge and are raised by the ASDC as presently framed.
The pleading does fulfil the basic function of identifying the issue; which is whether the payment of $300,000 paid to Renov8withus was intended as a payment for work to be completed or was the payment for 15% of the shares in Renov8withus, and disclosing an arguable defence and which apprises the plaintiffs of the case which has to be met.
The plaintiffs' application is dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
JH
Associate to Judge MacLean
14 MARCH 2023