Kokos International Pty Ltd v Libra Motors Pty Ltd [No 3]

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: KOKOS INTERNATIONAL PTY LTD -v- LIBRA MOTORS PTY LTD [No 3] [2007] WASC 301

CORAM: JOHNSON J

HEARD: 30 JULY 2007

DELIVERED : 11 DECEMBER 2007

FILE NO/S: CIV 2477 of 2002

BETWEEN: KOKOS INTERNATIONAL PTY LTD (ACN 009 404 611)
Plaintiff
AND
LIBRA MOTORS PTY LTD (ACN 609 278 344)
WELLMAN ENTERPRISES PTY LTD (ACN 054 953 589)
Defendants

Catchwords:

Application under slip rule

Legislation:

Rules of the Supreme Court 1971, O 21 r 10

Result:

Defendants' application allowed

Category: B

Representation:

Counsel:

Plaintiff: Ms E C Hensler
Defendants: Mr D K Barker

Solicitors:

Plaintiff: Galic & Co
Defendants: Chalmers Legal Studio

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

Commonwealth v McCormack (1984) 155 CLR 273
Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400
Gould v Vaggelas (1983) 157 CLR 215
Hatton v Harris (1892) AC 547
Hunter v Chief Constable of West Midland Police [1982] AC 529
L Shaddock & Associates Pty Ltd v Parramatta City Council (No2) (1982) 151 CLR 590
Monaco v Arnedo Pty Ltd (1994) 13 WAR 522
Strand Nominees Pty Ltd v Pennywise Smart Shopping Australia Pty Ltd (1991) 103 FLR 290
Tak Ming Co Ltd v Yee Sang Metal Supplies Co [1973] 1 WLR 300

JOHNSON J: This application, brought by the defendants, seeks to amend a final order made by the court following the trial of the action. The amendment sought is to include a GST recovery clause in the court ordered lease to the plaintiff.
In addressing this application it will be necessary to refer to another action in which the defendant in this action is the plaintiff in the second action and the plaintiff in this action is the defendant in the second action. To avoid confusion I will refer to the plaintiff in this action as Kokos and the first and second named defendants, collectively, as Libra.

Background

The source of the following summary of relevant background circumstances is the judgment in the action.
Libra are the owners of the land and building at 113 ‑ 123 Murray Street, Perth (the property). Kokos leased a portion of the building (the leased premises). The circumstances by which Kokos became the tenant of a portion of the leased premises are somewhat convoluted. In or about February 1994, Eugene Lee entered into an undated lease stamped 20 February 1994 between the Hospital Benefit Fund of Western Australia Incorporated (HBF) as lessor and Mr Lee as lessee. The lease was varied by a written Deed of Renewal and Variation of Lease between the lessor and the lessee, undated but stamped 30 September 1998. For convenience, I will refer to these two documents, taken together, as the existing lease. On 9 October 1998 the property was transferred to Libra who became the lessors of the leased premises. The term of the existing lease expired on 14 November 2002.
In June 1999 whilst Mr Lee was still in possession of the leased premises, Kokos, through its agent, Mr Young, commenced negotiations with Mr Lee to purchase the business conducted at the leased premises which was a hostel or budget accommodation business. The evidence at trial was that a meeting took place on 17 June 1999 between Mr Young and the defendants' representative, Mr Baruffi. The details of that meeting were a matter of significant dispute between the parties but the purpose of the meeting was to address issues with respect to the lease of the premises. Mr Young's evidence, which was accepted, was that Mr Baruffi told him that he was agreeable to a five‑year extension of the lease on the same terms and conditions as the existing lease, subject to discussing the matter with his clients. Mr Baruffi also said that, if his clients were agreeable, there would be a variation to the existing lease extending its term by a further five years and Kokos would then take an assignment of the lease. Mr Young denied Mr Baruffi's assertion that at the meeting he told him that any extended term would have to be by way of a new lease.
The evidence at trial was that, following the 17 June meeting, Mr Baruffi spoke to Mr Lukman, a director of one of the defendant companies who indicated that he was prepared to grant the extension to the existing lease. He also indicated that he would approve the request for options but that this would have to be done by the creation of a new lease.
On 18 June 1999 Mr Baruffi sent a facsimile to Mr Young which referred to the meeting on the previous day and advised that the lessor was prepared to grant a five year extension to the existing Lease.
On 25 June 1999 Kokos entered into a written contract for the purchase of the business from Mr Lee, subject to the condition that the defendants would approve Kokos as an assignee of the lease which would include a five year option to renew the lease. On or about 1 July 1999 Kokos went into possession of the leased premises and commenced paying rent to the defendants. The purchase of the business was settled on 10 September 1999.
On or about 12 July 1999 Mr Young completed the details on a pro forma document which had been provided by Mr Baruffi, titled 'Application to Assign Commercial Premises' (the application to assign). When provided to Mr Young the application to assign had been partially completed. There was no reference in the document to any further term of occupation of the premises. When completing the application to assign Mr Young inserted the words 'five years' in Item 12 which dealt with details of any options applicable to the lease. Nowhere in the document was there any specific reference to extensions of the term of the lease, although there was a section in which special conditions could be written. The inclusion of the words 'five years' in Item 12 was Mr Young 's way of including the extra five year term in the assignment of the existing lease.
In the usual course of events, a five year extension of the existing lease would be achieved by a Deed of Assignment of Lease and Variation which would include a term varying the existing lease by extending the term by five years.
On or about 27 July 1999, a representative of the settlement agency, Ms Derksen contacted Mr Baruffi's office, spoke to Mr Baruffi's wife, who worked in the office and notified her that the draft assignment of lease did not contain an option for a further term. Ms Derksen was told to return the documents and that they would be sent back to the solicitors to have the five‑year option inserted. In her evidence Ms Baruffi agreed that there were also GST implications and an issue with respect to the Retail Tenancies Act which had come into effect by then. In a letter sent to Kokos on 27 July 1999 Ms Derksen mentions that Mr Baruffi's office had advised that the five-year option was not inserted 'due to an additional condition being required to accommodate the provisions of the GST'. In the letter Ms Derksen also advises of the offer of a new lease of five years plus two five year options.
On the same day Ms Baruffi sent a facsimile to the solicitors drafting the Deed of Assignment to the effect that she had been advised that the lease did not include a five‑year option period as stated in the lease application, 'thereby making it a Deed of Assignment and Variation'. On the office copy of the facsimile Mr Baruffi wrote a partially decipherable note to the following effect: 'Advised variation will make this a reviewable contract for GST purposes'. The conclusion drawn in the judgment about this note was that it appeared that Mr Baruffi had been advised that as a result of the variation to include the five‑year option period, GST would apply.
In a later conversation Ms Baruffi advised Ms Derksen that the defendants were willing to give Kokos a new lease for five years with two five‑year options. As a result of the conversation, on 28 July 1999 Ms Derksen wrote to Baruffi & Associates and advised that Kokos was willing to take a new lease of five years with two five year options. On 2 September 1999 Mr Baruffi wrote to Mr Young confirming that a new lease would be required to accommodate Kokos' desire to have further option periods available. He further proposed that, in order to ensure an early settlement of the premises, the existing lease be assigned and that an offer to lease, incorporating the terms set out in the letter, be executed.
It was apparent from this letter and from Mr Young's handwritten annotations on the letter that the new lease was to differ from the existing lease by containing clauses addressing specific issues, in particular, the provisions of the Retail Tenancies Act. The issues recorded did not include GST issues, despite the earlier reference to GST provisions applying.
On 14 October 1999 Mr Baruffi instructed his employee, Vicky Penn, to have the solicitors prepare another assignment of the lease. A file note handwritten by Ms Penn includes the following information: ' … assignment cannot have further 5‑year option term unless GST clause goes in as well'. Also included in the document is an entry handwritten by Mr Baruffi which states: 'Advised original assignment doc's as per original lease, - no 5‑year option'.
In an affidavit on which Mr Baruffi was questioned at trial he provided reasons for being unhappy with the terms of the existing lease. They were that the terms of the lease governing payment and calculations of outgoings were hard to understand; a desire to re‑develop the property at some future time necessitated the inclusion of a re‑development clause; and the wish to put in place a lease which was more suitable to the owner and which did not contravene the Commercial Tenancy and Retail Shops Act. Again, no mention was made of a GST clause.
On 1 November 1999 Mr Baruffi sent a Deed of Assignment of the lease to Kokos for execution. It was executed and lodged for stamping on 18 January 2000. Mr Young was not aware that the Deed did not provide for a five year extension of the existing lease.
Kokos and Libra were unable to agree to the terms for a new lease with two five year options. It was Mr Young's belief that the five year extension remained open to him despite his willingness to negotiate for an even further term of possession.
By letter dated 15 August 2002 Mr Young gave notice on behalf of Kokos of an option to renew the lease for a term of five years commencing on 15 November 2002. Libra responded by denying that Kokos was entitled to an option to renew the lease for five years or to an extension of the lease for five years.
The decision of the court was expressed in the judgment in these terms:
In view of my findings on the factual issues, I have no difficulty in concluding that the plaintiff assumed that the approval of his request for a five‑year extension would be fulfilled and that the defendants would not withdraw and would not be entitled to do so. The basis of that assumption is the circumstances of the 17 June meeting, as I have found them to be, together with the facsimile of 18 June 1999. On the basis of that assumption the plaintiff offered to purchase the business, went into possession of the business and completed the purchase. It was repeatedly made exceedingly clear to the defendants that the five‑year extension was the key to the purchase and without it the purchase would not proceed. In those circumstances, the defendants knew that the plaintiff would rely on any agreement with the request for the five‑year extension. Notwithstanding that knowledge, the defendants failed to complete the agreement by providing and executing an assignment of lease which reflected the agreement.
In the statement of claim Kokos sought a declaration that it was entitled to the grant of a lease on the same terms as the lease for a term of five years from 15 November 2002. It was apparent from the evidence adduced on behalf of Kokos at trial that the terms 'extension' and 'option' were used interchangeably in relation to the lease for a further period of five years and with the general meaning that Kokos would be entitled to occupy the premises for a further period of five years from 15 November 2002. It was also apparent that irrespective of how that was achieved, Kokos' understanding was that the lease for the further period would be on the same terms as the existing lease which did, however, provide for rent reviews over the period.
It is also apparent from the Statement of Claim that the term 'lease' in the prayer for relief is, in fact, a reference to the existing lease. An order was sought in the Statement of Claim directing Libra to grant such a lease to Kokos. In the Defence Libra pleaded, in the alternative, that if Kokos was entitled to an option for a further term, which was denied, then such option would be 'on the like conditions as those set out in clause 5.13 of the lease' and Kokos' conduct, as pleaded in the defence, would have disentitled Kokos to exercise the option. There is no pleading that any lease granted should include a GST recovery clause.
In cl 49 of the Amended Counterclaim, Libra further pleads that, if Kokos was entitled to an option, then the new term would have been upon the same terms and conditions as set forth in the lease, but with 'necessary date modifications'. Again, no mention is made of GST. In cl 43 of the Amended Counterclaim, Libra sets out Kokos' share of all outgoing for four separate periods: 1 July 1999 to 30 June 2000, 1 July 2000 to 30 June 2001, 1 July 2001 to 30 June 2002, 1 July 2002 to 14 November 2002. Included in the outgoings for the second period was an amount of $883.98 in GST. Kokos' defence to the counterclaim contained a general denial of cl 43 with no specific plea of any circumstance which would disentitle Libra from recovering GST from Kokos.
The basis of the order ultimately made after trial was the following extract from the judgment delivered on 21 September 2005:
In the case of both the equitable and statutory remedy, the making of the orders directing the defendants to grant the lease on the same terms as the existing lease for a term of five years from 15 November 2002 will be conditional on payment by the plaintiff of all arrears of rent calculated on the basis of the rental amount set out in the first and second notices.
It is apparent from the above summary of the evidence at trial that the issue of a GST clause in the lease had been raised by the agents for Libra although not on every occasion on which changes to the existing lease were being discussed. It is also clear that, at the time that an extension of the lease was under consideration, the appropriate way to achieve what had been promised to Kokos was considered to be to execute a Deed of Assignment and Variation which would contain a clause extending the term of the lease and could also contain a clause adding to the lease any further terms necessary to effect compliance with any statutory obligation or any term agreed between the parties.
On the date that the judgment was delivered, no orders were sought by either party and the matter was adjourned to another date. On my understanding, that was because it was necessary for counsel to consider the terms of the appropriate orders.
On 21 October 2005 the initial orders were made in the primary action. Orders 1 and 2 gave judgment, in part, for Kokos and judgment for Libra on the issue of rent review. Order 3 gave judgment for Kokos on the counterclaim except in relation to the percentage of outgoings applicable. Orders 4 to 6 identified the amounts of rent to be paid for specific periods. Each of these figures was stated to be inclusive of GST. Orders 4 to 6 were made in terms of the figures in a Minute of Proposed Orders (the Minute) supplied to the court by counsel for Libra and which also included the statement that the figures were inclusive of GST. To that extent, the terms of orders 4 to 6 were simply a reproduction of the information provided to me by counsel for Libra. No finding as to GST liability in relation to the amounts of money was made by me at any stage, as is apparent from the reasons for decision.
Order 7 required Kokos to pay, within 14 days, the difference between the rent actually paid for the relevant periods and those amounts of rent identified in orders 4 to 6. Counsel for Kokos indicated at the time that he had not had the opportunity to check the calculations but at no stage was the court advised that there had been a miscalculation or that there was any objection to the figures nominated by the defendants or that GST should not be included.
The issue of the payment of outgoings under the lease was not addressed in these orders. The intention was to put in place orders ensuring timely payment to Libra of all amounts of rent owed and arising from Kokos' previous and continuing possession of the premises.
An issue also arose about which the parties were invited to file written submissions. That issue was whether Kokos was entitled to withdraw, after judgment, its concession as to the percentage of outgoings to be paid by Kokos. As it was not then possible to make orders in relation to the payment of outgoings, the matter was adjourned to another date.
On 16 December 2005, having received submissions and heard oral argument, Kokos' application to withdraw the concession was dismissed. At this time, counsel for Libra also drew to the court's attention the fact that there was an error in the Minute on which the orders made on 21 October 2005 were based.
Three separate issues arose at this hearing. The first issue was an amendment which was required with respect to order (4), which purported to be inclusive of GST, when the relevant legislation had not come into effect at that time. The second issue was an error in the dates of the rent reviews, as a result of which an amendment was required both as to the dates referred to in the orders and to the total amount owed by Kokos.
The final issue arose from Kokos' failure to pay the amount set out in Order 7. Under order 7 of the 21 October orders, the final day for payment was 4 November 2005. Between the date of the orders and 4 November there was correspondence passing between the parties as to the correct amount of rent to be paid. As I understand the position, there was a difference of opinion between the parties as to whether the rent was to be calculated to 30 June in accordance with the pleading, which was Kokos' position, or to the date of trial, which was Libra's position.
Under order 7 the right to remain in occupation of the business premises was conditional on the payment of arrears of rent. On 4 November 2005, Kokos tendered to Libra a cheque for the amount of $36,232.56 which was the amount calculated by Libra to be due as at the date of trial. However, on 7 November 2005 Kokos stopped payment on that cheque and advised Libra of its action on 9 November 2005. On 10 November Kokos advised Libra that it would replace the cancelled cheque on 11 November. On 11 November, Kokos tendered a personal cheque as replacement; however, Libra took the position that replacing the cancelled cheque would not cure the default. Consequently, Kokos was, at least arguably, in default and in breach of the orders made on 21 October 2005.
On behalf of Kokos it was said that this situation arose from the fact that Mr Larsen‑Brahe, Kokos' manager, who had calculated the rent owing to a different date, became ill and when visited in hospital by Kokos' director, made the comment that the cheque was for the wrong amount and a replacement cheque should immediately be drawn. As a result of this remark, Kokos' director stopped the cheque which had been sent to Libra. On behalf of Libra it was said that this conduct demonstrated Kokos' unwillingness to pay arrears in rent and reflected Kokos' persistent endeavours to make its own determination as to what rent would be paid and when it would be paid. Kokos' position was that the court had no power to deal with post trial arrears of rent and argued against including in the payment ordered any post‑trial arrears of rent.

Counsel for Libra saw the issue for the court as being whether, in the circumstances, the court ought to exercise its discretion to extend the date of the conditional order made on 21 October 2005.
Kokos also raised an issue in relation to the outgoings which was believed to be an impediment to payment of the sum identified by Libra as due and owing with respect to outgoings. In response, counsel for Libra advised that they were prepared to waive all outgoings other than those relating to council rates, water rates, water usage, insurance and management fees.
In the following extract I made clear to counsel for Kokos, the rationale behind the requirement for it to pay all outstanding sums as a condition of the grant of the extended lease:
When I delivered my decision in October it was abundantly clear what the relevant rental rates were according to my decision. The issue that [the parties] had disputed had been resolved and it seems to me that any tenant who was bona fide would have immediately not only paid in accordance with my order the arrears of rent up to trial, but would have immediately advanced the rent that they owed to date.
This statement does no more than underline the impact of the equitable maxims when seeking equitable relief, as Kokos did in this case. The equitable maxims, 'He who seeks equity must do equity' and 'He who comes into equity must come with clean hands', both justify the requirement that Kokos, a lessee in possession, pay all amounts to which the lessor would be entitled before being granted, in equity, an extension of an existing lease.
Having explained my position to the parties an adjournment was granted to see if an agreement could be reached. An agreement was reached that Kokos would pay all arrears of rent to date. Libra sought a springing order that possession be given to Libra if the nominated amount of arrears of rent not be paid by the nominated date. A similar order was sought in relation to all arrears of outgoings, other than in relation to insurance payments which were disputed by Kokos. Kokos also raised an issue in relation to management fees. However, as Libra had already made concessions in relation to the amount of outgoings, Libra objected to excluding management fees from the springing order.
Although the original orders dealing with possession had isolated the arrears of outgoings from the arrears of rent, I formed the view that there was substance to Libra's submission. The conclusion drawn was that it was appropriate to make the springing order in relation to the outgoings on the basis that those payments were equally the basis upon which a tenant holds its right to possession of the premises. The amount due in relation to the remaining contentious payments was to be paid into court. Consequently, orders were made for the payment of certain amounts, either to Libra or into court, and a springing order made in the event of non‑payment.
In order to provide a complete history of this matter, it is necessary to refer to a related action, CIV 1212 of 2006 (the second action), brought by Libra against Kokos. In the second action, Libra alleges that Kokos failed to pay the rent due on 15 February 2006 and the rent remained unpaid for seven days. On 23 February 2006 Kokos terminated the lease for unpaid due rent. It is further alleged that Kokos has not paid rent for the period 15 February 2006 to 22 February 2006 nor outgoings from 1 January 2006 to 22 February 2006. It is said by Libra that Kokos wrongfully remains in possession and is liable for rent and outgoings until possession is delivered up. The prayer for relief claims possession of the premises, arrears of rent and outgoings to termination and profits from 23 February 2006 to the date of delivering up of possession, as well as interest and costs.
Kokos pleads in its defence that it paid the rent within seven days and was entitled to do so under a particular clause of the lease without being in breach of the lease. Kokos disputed that there had been a valid termination or, in the alternative, counterclaims for relief against forfeiture.
Libra has agreed not to pursue the claim for possession if Kokos pays all moneys owed by it. Apart from the counterclaim for relief against forfeiture, Kokos also seeks an inquiry to determine the amount owed to Libra.
On 20 February 2007 the court heard Kokos' application to amend its defence in the second action. The following submission was made on behalf of Kokos:
Having very recently been advised that GST was incorrectly sought by the Landlords and paid by Kokos, for the period between 1 January 2001 and 30 June 2005, in the sum of $35,029.56, under the mistaken belief that GST was payable, Kokos seeks leave to amend to raise this issue by way of defence (relying on equitable set off) or by way of counterclaim. By reason of the overpayment, Kokos was in credit, having effectively 'pre‑paid' rent and outgoings and could not have been in default in February 2006.
Apparently, between 1 January 2001 and 30 June 2005, Libra added 10% to the rent and outgoings payable by Kokos. According to Kokos, this occurred despite the fact that under the lease no provision allowed GST to be levied and neither Kokos nor Libra was liable for GST in that period. Libra relied on a provision of the lease allowing it to claim taxes but Kokos' submission was that the clause must be specific to GST. It was further submitted by Kokos that neither Kokos nor Libra were required to pay GST in relation to rental or outgoings paid by Kokos between 1 January 2002 and 30 January 2005 because the supply of lease premises was GST free until 1 July 2005, after which the benefit of s 13 of A New Tax System (Goods and Services Tax Transition) Act 1999 (the GST Transition Act) fails to have effect. In short, the amendment relates to overpayment due to the inclusion in both rent and outgoings of a GST component when the supply under the lease is said by Kokos to be GST free.
In addition to amending the defence to include the factual basis of Libra's case, Libra also pleads that so much of the overpayment as may be necessary should be set off against the claim for rent so that it may reduce or extinguish the claim. It is only the first of these issues that is relevant to the application under consideration.
In the reasons for decision on the application to amend in the second action I referred to the relevant provisions of the GST Transition Act. Section 13(1)(b) of the GST Transition Act provides that the section applies if the agreement, in this case the lease, was made before the day on which this Act received the Royal Assent which was 8 July 1999. Kokos' position was that all the agreements predate that date. However, Libra notes that there is an argument that the lease I granted was a new lease. The conclusion I drew was that it was arguable whether the current possession was under a lease which notionally came into existence on the date of the assignment of the original lease or whether under a lease which came into existence when judgment was delivered. The nature of the application did not require me to determine the issue.
Section 13(2) of the GST Transition Act states that the supply is GST free to the extent that it is made before the earlier of the following: firstly, 1 July 2005 and secondly, if a review opportunity arises on or after the day of Royal Assent, when that review opportunity arose. On the application to amend it was a relevant issue whether the rent reviews undertaken were review opportunities as defined in the Act. I concluded that the rent reviews were not review opportunities but that issue is not of any relevance to the current application.
In my reasons for decision on the amendment application I made the comment that I did not understand the lease granted under the judgment to be a new lease. I should note that this view was not the result of any analysis of the correct legal position; it was more the product of the specific wording of the relief sought and the declaration made and the fact that, notionally, the lease granted would run from the expiry of the then existing lease in 2002.

The application to amend

Libra now seeks to amend order 6 of the orders made on 16 December 2005, which is in the following terms:
In the event of the payment being made then [there will be] a declaration that the plaintiff is entitled to a grant of a lease on the same terms as in the statement of claim from 15 November 2002 for a period of 5 years and order the defendants to grant such a lease.
The words in parentheses have been added to correct the ungrammatical wording of the order.
The amendment which is sought by Libra is to insert, after the word 'lease' first appearing in the order, the words 'subject to the payment of GST but otherwise'.
Libra's application to amend order 6 is made under O 21 r 10, commonly referred to as the slip rule which is in the following terms:
Clerical mistakes in judgments or orders, or errors arising therein from any accidental slip or omission, may at any time be corrected by the Court on motion or summons without an appeal.
The following paragraphs of the written submission filed on behalf of Libra address the circumstances in which the slip is said to occur:
6.Counsel for the Defendants made a slip in not bringing to the Court's attention on 16 December 2005, that it was not the Plaintiff's claim that its entitlement to a lease arose by virtue of the provisions of the lease referred to in the Statement of Claim ...
17.Had the slip not occurred, the Defendant's Counsel would have submitted that based on the forgoing, the grant of a lease on equitable grounds of part of the Defendant's premises from 15 November 2002 for use as a residential hostel, would have made such a lease a taxable supply under the GSTA ...
25.But for the slip, the Defendant's Counsel would have submitted that the lease ordered to be granted ought to have included a GST recovery clause, otherwise the Defendants would have been liable to pay GST on all rent and outgoings paid by the Plaintiff ...
27.The attention of counsel for the Defendants was not drawn to the slip until the Court, in CIV 1212 of 2006, ruled that the inclusion of GST in orders 4, 5 and 6 made in this action on 21 October 2005 was not a determination that the lease referred to in the Statement of claim was subject to GST, as the orders did no more than determine that rent reviews had occurred.
The slip rule is a departure from the general rule that once an order has been sealed or a judgment entered up it may only be varied by an appeal. The slip rule operates to correct an omission due to the inadvertence of court officers, the court or a party's legal representatives: L Shaddock & Associates Pty Ltd v Parramatta City Council (No2) (1982) 151 CLR 590, 594 ‑ 595; Commonwealth v McCormack (1984) 155 CLR 273, 277. It is also the case that there is an inherent jurisdiction, quite apart from the slip rule, to rectify an order made or not made as a result of the inadvertence of counsel or a mistake made by a judge, in order to avoid injustice: Monaco v Arnedo Pty Ltd (1994) 13 WAR 522, 524; Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400, 407 per Malcolm CJ.
In considering an application of this type, the threshold factor is whether the time taken to bring the application operates as a bar to the relief sought: Gould v Vaggelas (1983) 157 CLR 215, 275 per Gibbs CJ, Wilson, Brennan and Dawson JJ.
In Strand Nominees Pty Ltd v Pennywise Smart Shopping Australia Pty Ltd (1991) 103 FLR 290, Asche CJ addressed the scope of the slip rule. Having referred to the remark of Gibbs CJ in Gould v Vaggelas at 275 that the jurisdiction was to be exercised sparingly, Asche CJ observed (at 294) that the borderline was not easy to draw and stated that 'it cannot be accepted that every oversight of court or counsel can be corrected in this manner'. His Honour noted (at 294) that many of the authorities on the operation of the slip rule related to ancillary questions rather than to the substantial issue between the parties.
In Gould v Vaggelas the High Court observed that the jurisdiction to amend orders should be exercised sparingly lest it encourage carelessness by a party's legal representatives and expose to risk the public interest in the finality of litigation: at 275 per Gibbs CJ, Wilson, Brennan and Dawson JJ.
The relevant circumstances in Gould v Vaggelas was that an order made by the Court of Appeal for interest at a higher rate was omitted from the orders of the High Court when it reinstated the orders of the trial judge. In granting the amendment, the court noted a number of considerations in favour of the application: at 275. It was said that the application did not come as an afterthought. The evidence was that the failure to advert to the question of interest in the High Court was an accidental omission on the part of the appellant's legal representatives due, at least in part, to the complexity of the legal issues and the facts. The High Court also considered it to be a matter of importance that an application had been made to the Full Court for a similar order relating to the substituted judgment and that, in the exercise of its discretion, the Full Court made such an order. The High Court further stated that the order appeared to be fair and just and there was no reason to doubt that had the matter been canvassed at the time of the hearing, the order now sought would have been made. The final factor referred to was the absence of delay.
In Esther Investments Pty Ltd v Markalinga Pty Ltd Malcolm CJ applied the principles identified by the High Court in Gould v Veggalas and by the Privy Council in Tak Ming Co Ltd v Yee Sang Metal Supplies Co [1973] 1 WLR 300. The circumstances in Esther Investments Pty Ltd were that counsel for the successful defendant who appeared at the delivery of reasons for judgment did not give consideration to the question whether or not the order as to costs sought and granted would be adequate: at 402. Malcolm CJ accepted that the omission was due to inadvertence: at 402. The time between the making of the costs order and the application to amend was some three and a half years. His Honour had far greater difficulty with this issue.
Malcolm CJ noted that the jurisdiction to add to or vary a judgment which has been delivered and which has been perfected by formal judgment being entered and extracted in the court is an unusual one: at 407.
Malcolm CJ considered (at 404) that it was a matter for the trial judge to determine as a matter of judgment whether, on the face of it, the amount of work done appears to have been reasonably done so as to constitute good and sufficient reason for making the order. His Honour observed (at 405) that the first question he should consider was whether the case was one in respect of which, had an application been made at the time judgment was delivered in the terms in which the application is now made, it would have been successful. He concluded that such an order was justified: at 406.
Malcolm CJ noted that the delay caused him the gravest difficulty and concluded that the delay was extremely gross and extraordinary and was not in any way justified: at 406. His Honour considered (at 408 ‑ 409) that the making of an order after such an inordinate period of delay would be to do something that would tend to 'bring the administration of justice to disrepute among right thinking people', a phrase his Honour noted was used in the judgment in Hunter v Chief Constable of West Midland Police [1982] AC 529. Malcolm CJ further observed (at 409) that there is an interest in the finality of litigation, and a party is entitled to order its affairs on the basis of a judgment regularly obtained, entered and perfected in the court.
In considering the decision in Gould v Vagggelas and, in particular, the reference to the fact that a similar application had been made to the Full Court for the order sought, Malcolm CJ observed (at 407) that the implication in the reasons is that it was part of counsel's instructions which he accidentally failed to carry out. It seems to me that the reference could also be interpreted as acknowledging that the issue was one which had been the subject of judicial determination following written submissions from the parties. It could be thought to be unlikely that a matter which required submissions from the parties and a determination from the court would properly be the subject of an amendment under the slip rule.
Among the matters referred to by Malcolm CJ in considering Tak Ming Co Ltd v Yee Sang Metal Supplies Co, was the view taken by the Privy Council in dismissing the appeal from the trial judge's decision to add an order for interest, that the considerable delay in making the application under the slip rule did not appear to have caused the appellants to take any step which they would otherwise have refrained from taking, or to omit any step which they would otherwise have taken, and there was no sufficient ground for interfering with the exercise of discretion made by the judge and affirmed by the Full Court: at 407 ‑ 408.
A further principle to be considered when dealing with an application under the slip rule was addressed in L Shaddock & Associates Pty Ltd v Parramatta City Council (No2). In that case, Mason ACJ, Wilson and Deane JJ observed (at 597) that an order under the slip rule is not available as a matter of course and there is a discretion in the court to refuse an order if something has intervened which would render it inexpedient or inequitable that it be made: see also Tak Ming Co Ltd v Yee Sang Metal Supplies Co at 35.
The factors to be taken into account when considering an application under the slip rule can be summarised as follows:
1.The jurisdiction is to be exercised sparingly lest it encourage carelessness by a party's legal representative and exposes to risk the public interest in the finality of litigation: Strand Nominees Pty Ltd v Pennywise Smart Shopping Australia Pty Ltd at 294; Gould v Vaggelas at 275; Esther Investments Pty Ltd v Markalinga Pty Ltd at 409.
2.Delay in bringing the application may operate as a bar to relief because amending an order after a period of delay would tend to bring the administration of justice into disrepute: Gould v Vaggelas at 275; Esther Investments Pty Ltd v Markalinga Pty Ltd at 408 ‑ 409; Hunter v Chief Constable of West Midland Police; see contra Hatton v Harris (1892) AC 547.
3.Whether the amendment sought relates to an ancillary question rather than a substantial issue between the parties, in which case the power to amend is more likely to be exercised: Strand Nominees Pty Ltd v Pennywise Smart Shopping Australia Pty Ltd at 294.
4.Whether something has intervened which would render it inexpedient or inequitable to make the amendment: L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) at 597; Tak Ming Co Ltd v Yee Sang Metal Supplies Co at 35.
5.Whether in the period before the application was brought the other party has taken any step which they would otherwise have refrained from taking, or omit any step which they would otherwise have taken: Tak Ming Co Ltd v Yee Sang Metal Supplies Co at 306; Esther Investments Pty Ltd v Markalinga Pty Ltd at 407 ‑ 408.
6.Whether the circumstances that now exist differ in any significant way from the circumstances immediately after the order was made: Hatton v Harris at 558.
7.Whether if the application had been made at the time judgment was delivered it would have been successful: Esther Investments Pty Ltd v Markalinga Pty Ltd at 405;
8.Whether the application to amend was the result of accident or inadvertence or has simply come as an afterthought: Strand Nominees Pty Ltd v Pennywise Smart Shopping Australia Pty Ltd at 295; L Shaddock & Associates Pty Ltd v Council of the City of Parramatta (No2); Commonwealth v McCormack.

Factors 4, 5 and 6 are essentially inter‑related, as the same circumstance could be addressed under each factor. However, the factors are identified separately in some authorities and they have been reproduced separately.
Dealing firstly with the time taken to bring this application, the order which is sought to be amended was made on 16 December 2005. The notice of motion seeking the amendment was filed on 4 July 2007. On any interpretation that is a substantial period of delay. However, as referred to in par 27 of the written submissions, the ruling which alerted counsel was the decision made by me in the second action on 21 February 2007. If the assertion contained in par 27 is accepted, then the application was brought some 4 1/2 months after the ruling.
Counsel for Libra submits that delay in making an application to correct an order is no bar to relief. Reliance is placed on the decision in Hatton v Harris where Lord Herschell remarked (at 558) that he could not see any difference in the circumstances of the case from what they would have been if the matter had arisen immediately after judgment was pronounced. His Lordship also placed reliance on the terms of the order which provided that a correction may be made 'at any time'. Order 21 r10 is in the same terms. Lord MacNaghten held the same view as Lord Herschell (at 564). His Lordship stated that 'lapse of time has nothing to do with the question'. He further noted: 'For all practical purposes, as regards the present question, the matter is in the same position as if the application had been made thirty years ago'. In Hatton v Harris the relevant order was for payment to creditors which was to be paid from a fund held by the court. However, time was considered to be relevant in the sense that, if through the lapse of time the circumstances differ in any significant way, that could operate against the making of the order: at 558.
In both Gould v Vaggelas at 275 and Esther Investments at 408 ‑ 409 delay in bringing the application was considered to be a relevant consideration, notwithstanding the specific terms of the slip rule. Further, there is considerable substance to the view that amending an order after a significant period of delay can bring the administration of justice into disrepute. In my view, the decision in Gould v Vaggelas is to be preferred and has the advantage of effectively incorporating into the criteria of delay, the criteria concerning the existence of any change in circumstances. In any event, the decision of the High Court is binding.
There are two factors which have influenced the conclusion I have drawn that the delay in this case does not operate as a bar to relief. The first is that, accepting the explanation in the written submissions, with respect to which no objection is taken, the omission did not come to the attention of counsel for the defendants until the decision on the interlocutory application in the second action. I do not consider a matter of 4 1/2 months is an unreasonable period of time in all the circumstances. The second factor is, as Lord Herschell observed in Hatton v Harris at 558, that the circumstances that now exist do not seem to me to differ in any significant way from the circumstances immediately after judgment was pronounced. All necessary information remains available and, as I conclude later in these reasons, no intervening factor has adversely affected the issue of whether the relevant order should include a GST recovery clause. Therefore, I do not see the delay in bringing this issue before the court as a bar to relief.
As to whether the amendment relates to an ancillary question or to a substantial issue, in one sense, the amendment sought does not address the entitlement to the lease but addresses the terms of the lease to be granted. In that sense I do not consider the issue to be purely ancillary.
If a defendant considers that the terms of the lease granted should be other than the terms sought by the plaintiff in the prayer for relief, it would be usual for that issue to be the subject of a specific pleading, evidence and submission. However, this was not a claim based in contract where it is necessary to determine whether an agreement came into existence and/or to identify the terms of the agreement. The claim in this case was in equity where the primary issue for determination was whether, on equitable grounds, Kokos was entitled to a lease of the premises which it then occupied. In such circumstances, the court is entitled to set out the circumstances in which it was prepared to grant equitable relief. In this case, I have made it abundantly clear on a number of occasions that the relief sought would only be granted if Kokos were to meet all the obligations of an entity in possession and to protect Libra from any prejudice arising from granting the lease granted.
In that sense, the GST issue is not a substantive issue which in this case was whether Kokos was entitled to a lease of the premises. As a condition of the grant of lease and something which does not result in a loss to Kokos, the issue to which the amendment relates is not strictly ancillary but is not, in my view, a substantial issue between the parties.
Neither is there any suggestion that Kokos has taken any step which they would otherwise have refrained from taking, or omitted any step which they would otherwise have taken, if the subject matter of the application had been dealt with at the first opportunity.
In opposing Libra's application, counsel for Kokos relies on the factor dealing with the existence of an intervening event which, it is said, renders it inexpedient to make the amendment. Counsel submits that, whether Kokos is liable to pay GST to Libra on supplies made under the lease is a matter in issue between the parties in the second action.
As I understand the position, Libra has been recovering GST from Kokos for some time. As a result of an amendment to the defence, the second action will resolve the issue of whether the lease granted by the court attracts GST, and hence whether the GST payments already made can be set‑off against the alleged arrears of rent. In my view this is a different issue to whether the lease granted in the first action should properly have included a GST recovery clause. Whilst the success of the application under the slip rule might resolve a particular defence to the claim brought in the second action, I do not consider that this fact renders it inexpedient, inequitable, unjust or unfair to make the order sought.
The next factor to be addressed is whether the application would have been successful if made at the first opportunity. In the Statement of Claim, the representation relied on by Kokos did not include any reference to GST or a GST clause: par 4. Further, the lease sought by Kokos was described in the Statement of Claim as a lease 'on the same terms' as the lease which was assigned to the plaintiff: see pars 4(b), 7, 15(b), 16, 19, 23, 27. The only reference to an alteration of the terms appears in par 15(a) which states that by the statements of Libra it was expressly or impliedly represented that Libra would grant to Kokos an extension of the lease for a further term of five years from 15 November 2002 on the same terms as the lease 'unless the terms of a new lease were to be agreed'. The claim made by Kokos was for a declaration that it was entitled to the grant of a lease 'on the same terms as the lease' for a term of five years from 15 November 2002.
In the Defence, all the paragraphs referred to were denied by Libra without any reference to whether, if granted, the terms of the lease should be the same as the existing lease. Libra denied that Kokos was entitled to the relief claimed or to any relief: par 41.1. An alternative plea to Kokos' claim was made in the following terms:
41.2in the alternative if the Plaintiff was entitled to an option for a further term which is denied then such option would be on the like conditions as those set forth in clause 5.13 of the Lease and that the Plaintiffs [sic] conduct pleaded in paragraphs 21.5, 27 and 33 hereof would have disentitled the Plaintiff to exercise the option and would have entitled the Defendant to refuse to grant a further term.
Clause 5.13 of the lease is as follows:
5.13 Option of Renewal
If the Lessee has duly and punctually observed and performed all of the Lessee's Covenants during the Term then on the written request of the Lessee made at least three (3) months before the expiration of the relevant Term the Lessor shall grant to the Lessee an extension of the Term for the extended term or terms referred to in Item 7 of the Schedule (together the "Extended Term") containing like covenants and provisos as are herein expressed and implied (save for the right of extension the subject of this Clause which right shall be expressly excluded from the Lease for the extended Term or from the Lease for the last extended term if there shall be more than one extended term as the case may be) and reserving to the Lessor a rent from the commencement date of and during each Extended Term to be calculated and determined in accordance with the rent review provisions contained herein. (Emphasis added.)
Even Libra's pleaded defence provides for a lease on the same terms as the existing lease with the exception of any further extension but expressly preserving the right to rent from the commencement date calculated and determined under the rent review provisions.
This consideration of the pleadings indicates that any lease to be granted was to contain the same terms as the existing lease. In the usual circumstances, any variation to the terms of the lease would be raised in the defence, as was done in relation to the claim that the plaintiff was disentitled to any option sought.
As I have noted in the summary of the background to this application, there was evidence at the hearing concerning the inclusion of a GST recovery clause. The evidence was in relation to the conversation on 27 July 1999 between Ms Baruffi and Ms Derksen. Ms Baruffi said she requested the documents be returned so they could be sent back to the solicitors to have the five-year option inserted. She also said that she was aware there were now GST implications which had come into effect. The letter of the same date from Ms Derksen to Mr Young mentions that Mr Baruffi's office had advised her that the five‑year option was not inserted 'due to an additional condition being required to accommodate the provisions of the GST'. There was no evidence of Kokos' attitude to the proposition that a GST clause was to be inserted.
On a facsimile sent by Ms Baruffi to the solicitors on the same day, Mr Baruffi wrote the annotation 'Advised variation will make this a reviewable contract for GST purposes'. On the evidence, after 27 July 1999 Libra did not again raise the inclusion of a GST clause, even when the issue of the need for additional clauses was being addressed.
Despite these references to GST, as I have noted above, the real issue in this case was whether Kokos was entitled to the equitable relief of the grant of a lease for five years and, if so entitled, the circumstances in which that relief should be granted. As is apparent from the judgment and the orders subsequently made, in this case I formed the view that the price of granting equitable relief to Kokos was for Kokos to make all and any payments which would protect the defendant from any prejudice arising from the granting of the lease.
I have expressed the rationale behind this view in different ways but the essence of it lies in the maxim that he who seeks equity must do equity. As equitable remedies are discretionary the court is entitled to impose conditions on a plaintiff which will protect the legal or equitable rights of a defendant as the price of granting relief: Meagher, Gummow and Lehane, Equity; Doctrines and Remedies (4^thed, 2002) 91.
Whilst Libra could not and, in the circumstances found, should not be protected from any loss arising from being prevented from renting the premises to another, it was my intention to ensure that Libra would be protected from any other loss as a condition of granting the relief sought by Kokos.
As I understand the position and putting to one side the issue to be resolved in the second action, after a particular date, GST applied to the provision of services which include the leasing of premises. Therefore, of the moneys received by Libra from Kokos under the lease, one‑eleventh must be remitted to the Australian Taxation Office in GST. If the lease does not allow the lessor to reclaim that money from the lessee, the prejudice to the landlord is that he loses one‑eleventh of the moneys received under the lease. Although the lessee must pay the GST to the lessor, the lessee is entitled to claim input tax credits which offset the payments to the lessor. In those circumstances, if the granting of the lease was conditional on protecting Libra from any adverse impact, other than the opportunity to rent to another, then the lease granted would have to be varied to include a GST recovery clause.
In those circumstances I am firmly of the view that, had the application been made at the time order 6 was made, and had I been advised of the impact on Libra if the lease granted was not made conditional on Kokos paying to Libra the GST arising from the lease, I would have made orders which required Kokos to do so.
The final factor for consideration is whether the application to amend was the result of accident or inadvertence. The explanation provided on behalf of Libra in par 27 of the written submissions indicates that the amendment was not sought because at the time it was considered that there was no need for it, the issue having already been determined. This position is in conflict with the explanation provided in the affidavit of Libra's counsel, Mr Barker. The filing of the affidavit occurred as a result of a submission made by counsel for Kokos that Libra had not filed any affidavit in support of the application setting out the circumstances in which the omission occurred. That submission was accepted and an order was made requiring counsel for Libra to file an affidavit addressing that issue. In his affidavit Mr Barker makes the following statement:
My instructions were that if the Plaintiff obtained a lease for a further term, then that lease was to be subject to the Defendants being entitled to recover GST from the Plaintiff. The recovery of GST for a further term is consistent with paragraphs 91 and 96 of the Reasons that the Defendants required any further lease to include GST being paid by the Plaintiff.
Paragraph 91 of the reasons for decision contains a reference to the content of a letter dated 27 July 1999 from Ms Derksen to Kokos that Mr Baruffi's office advised that the five‑year option was not inserted 'due to an additional condition being required to accommodate the provisions of the GST'. Paragraph 96 contains a reference to a handwritten note made by Mr Baruffi on a facsimile dated 27 July 1999 to the following effect: 'Advised variation will make this a reviewable contract for GST purposes'.
Mr Barker adds: 'Due to an oversight I did not move the Court for an order that the lease ordered to be granted, contain a clause entitling the Defendants to recover GST.'
The statement in the affidavit indicates that the failure to request the inclusion of a GST recovery clause was an oversight, whereas the statement in the written submissions indicated that the failure was due to an erroneous belief that the entitlement to recover GST had already been determined. In the latter circumstances, once counsel becomes aware that the belief was wrong, the need to correct the order made becomes evident. In my view, the realisation that the order requires correction is more properly described as an afterthought which, as Asche J concluded in Strand Nominees Pty Ltd v Pennywise Smart Shopping Australia Pty Ltd (at 295) is not properly a matter to be dealt with under the slip rule.
Of course, the affidavit explanation would come within the slip rule. Although one version of events is on oath and the other simply contained in written submissions, the explanation in the written submissions was the explanation relied upon by Libra and the only explanation before the court at the time the application was heard. As the onus is on the applicant to establish that the matter comes within O 21 r 10, in my view the existence of the conflict means that the court cannot be satisfied that the slip rule applies in this case.
However, that is not an end to the matter. The application under O 21 r 10 relied on inadvertence or a 'slip' on the part of counsel for Libra. However, on reviewing all the relevant circumstances it is apparent that the position in which Libra now finds itself was contributed to by the fact that I made an order for payment under the lease which also required the payment of GST, without turning my mind to whether it was appropriate to do so. Unfortunately, the inclusion of the words 'inclusive of GST' in the financial information provided by Libra's counsel did not cause me to consider whether it was necessary to address that issue in imposing conditions on the grant of relief and, unfortunately, the issue was not raised directly by either counsel. Further, the inclusion of the words 'inclusive of GST' contributed to counsel's belief that the issue had been addressed in Libra's favour.
In the circumstances I consider that an accidental omission has been made by the court which should be corrected by the slip rule. Although the jurisdiction is to be exercised sparingly, in the circumstances to which I have referred I consider it is appropriate to amend the order made to enable the defendant to recover GST from Kokos. However, as the basis upon which I have reached that view is somewhat different from the basis of the application made, I will hear the parties as to the appropriate wording of the order necessary to achieve that objective.

[2007] WASC 301

11 DECEMBER 2007

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