McMurtrie v Calver

[2007] NSWSC 996

CITATION:	McMurtrie & Anor v Calver & Anor [2007] NSWSC 996
HEARING DATE(S):	22 August 2007
JUDGMENT DATE :	10 September 2007
JURISDICTION:	Common Law Division
JUDGMENT OF:	Associate Justice Harrison
DECISION:	(1) The first defendant's notice of motion filed 7 June 2007 is dismissed with costs; (2) The statement of claim is struck out; (3) The plaintiffs are to file and serve an amended statement of claim within 28 days; (4) Costs of the second defendant's notice of motion filed 26 June 2007 are reserved.
CATCHWORDS:	Strike out proceedings - set aside default judgment as against first defendant
LEGISLATION CITED:	Conveyancing Act 1919 (NSW) - s 54A Fair Trading Act 1987 (NSW) - s 42 Trade Practices Act 1974 - s 52 Uniform Civil Procedure Rules 2005 (NSW) rr 13.4, 14.28
CASES CITED:	Adams v Kennick Trading (International) Ltd & Ors (1986) 4 NSWLR 503 Agar v Hyde (2000) 201 CLR 552; [2000] NSWCA 41 Cohen v McWilliam (1995) 38 NSWLR 481 Commonwealth v Verwayen [1990] 170 CLR 394 Cuttle v Brandt (1947) 64 WN (NSW) 96 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; 109 ALR 57 Evans v Bartlam [1937] 2 All ER 646 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Global Sportsman Pty ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1998) 39 FCR 546 Jebeli v Modir and Golyaei [2005] NSWCA 184 Maher v Waltons (1987) 164 CLR 387 Nguyen & Anor v Taylor (1992) 27 NSWLR 48 Ronald Wallace Gould and Anor v Peter Vaggelas and Others (1984) 157 CLR 215 Vacuum Oil Pty Limited v Stockdale (1942) 42 SR (NSW) 239
PARTIES:	Mark McMurtrie & Rosemarie Elizabeth McMurtrie - Plaintiffs Erling Harold Calver - First Defendant Wendy Ann Jones - Second Defendant
FILE NUMBER(S):	SC 20031/2007
COUNSEL:	Mr J A Trebeck - Second Defendant
SOLICITORS:	Mr C L Stevenson - Plaintiff Parker Kissane - First Defendant Sanderson Partners - Second Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

ASSOCIATE JUSTICE HARRISON

MONDAY, 10 SEPTEMBER 2007

20031/2007 - MARK McMURTRIE & ANOR v
ERLING HAROLD CALVER & ANOR
JUDGMENT (Strike out proceedings; set aside
default judgment as against first defendant)

1 HER HONOUR: There are two motions before the Court at this hearing. There is a further notice of motion filed 21 August 2007 seeking to enter default judgment against the second defendant. This motion has been stood over pending the outcome of the second defendant’s notice of motion seeking to strike out the statement of claim as against her.

2 By notice of motion filed 7 June 2007 the first defendant Erling Calver seeks to have the default judgment, as issued by the Court on 10 May 2007, set aside.

3 By notice of motion filed 26 June 2007, the second defendant seeks firstly, an order that the proceedings as against her be dismissed pursuant to Rule 13.4(1)(b) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), on the ground that no reasonable cause of action is disclosed; and secondly, an order that the statement of claim as against her be struck out pursuant to Rule 14.28(1)(a) and (b) of the UCPR on the grounds that (a) it discloses no reasonable cause of action; or (b) has a tendency to cause prejudice, embarrassment or delay; or both.

4 The plaintiffs are Mark McMurtrie and Rosemarie Elizabeth McMurtrie. The first defendant is Erling Harold Calver. The second defendant is Wendy Ann Jones. The defendants were husband and wife. They are divorced. The plaintiffs relied on the affidavit of Mark McMurtrie sworn 21 August 2007. The first defendant relied on the affidavit of Sahm Rebbeca Ryder sworn 5 June 2007. The second defendant relied on the affidavit of Antonella Claudia Sanderson dated 11 July 2007.

(1) Setting aside default judgment

5 The first defendant Mr Calver seeks to set aside the default judgment entered against him on 10 May 2007.

6 The authorities on setting aside default judgment are Evans v Bartlam [1937] 2 All ER 646; Vacuum Oil Pty Limited v Stockdale (1942) 42 SR (NSW) 239; Cuttle v Brandt (1947) 64 WN (NSW) 96 at 97; and Adams v Kennick Trading (International) Ltd & Ors (1986) 4 NSWLR 503 and Cohen v McWilliam (1995) 38 NSWLR at 481.

7 For Mr Calver to succeed in his application to set aside default judgment, he must give an adequate explanation for the delay in filing his defence and show that he has a defence on its merits. A court, when hearing such an application, must be mindful of its fundamental duty to do justice between the parties.

8 On 2 April 2005, the solicitor for Mr Calver wrote to the plaintiffs enclosing a copy of a Notice of Appearance. The solicitor advised that Notice of Appearance would be filed in the Registry that day and a sealed copy would be served on them immediately. The penultimate paragraph of that letter advised the plaintiffs that the solicitors were in the process of finalising a request for further and better particulars.

9 On 3 April 2007, Mr Calver’s solicitors wrote to the plaintiffs seeking further and better particulars. Those particulars have never been answered. On 10 April 2007, a Notice of Appearance was filed in the Registry. On 10 May 2007, the Notice of Appearance was served on the plaintiffs by post. On 10 May 2007, the matter was also listed for directions in this Court. On that day the Registrar entered default judgment against Mr Calver. Three weeks later the first defendant filed this notice of motion seeking to set aside default judgment.

10 I accept the plaintiffs’ explanation for delay. However, the difficulty with the first defendant’s application to set aside the default judgment is that he has not articulated what defence he wishes to plead other than to say, in submissions, that he will deny the allegations. The stance that the first defendant’s representative took during the hearing of this motion was that the answers to particulars need to be supplied before he will be in a position to file the defence. I accept that Mr Calver may not have been able to file a complete defence due to the way the statement of claim is drafted. But without at least some points of defence I am unable to say that he has a defence on its merits. On the contrary, there is a letter from the first defendant in evidence whereby he [the first defendant] made an offer to the plaintiffs to lease the property at $100 per calendar month with an option to purchase the property (the text of this letter appears later in this judgment). There is also evidence that this offer was accepted by the plaintiffs. In the circumstances, I decline to set aside the default judgment entered on 10 May 2007. The first defendant’s notice of motion filed 7 June 2007 is dismissed.

(2) Summary judgment and strike out claim

11 The second defendant Ms Jones seeks to have the claims against her dismissed or alternatively struck out.

12 Rule 13.1(1) of the UCPR provides:

13.1(1) If, on application by the plaintiff in relation to the plaintiff’s claim for relief or any part of the plaintiff’s claim for relief:


(a) there is evidence of the facts on which the claim or part of the claim is based, and

(b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed,

the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires.”

13 Rule 13.4(1) of the UCPR provides that the court may dismiss proceedings generally, or in relation to any claim for relief, in three circumstances. These are if the proceedings are frivolous or vexatious, or no reasonable cause of action is disclosed, or the proceedings are an abuse of the process of the court.

14 Rule 14.28(1) of the UCPR provides that the Court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading firstly, discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; secondly, has a tendency to cause prejudice, embarrassment or delay in the proceedings, or thirdly, is otherwise an abuse of the process of the court. Rule 14.28(2) provides that the court may receive evidence on the hearing of an application for an order under sub-rule (1).

15 In the well known passage in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, Barwick CJ at 129 stated:

“It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ‘discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; ‘be manifest that to allow them’ (the pleadings) ‘to stand would involve useless expense.’”

16 In Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41, the High Court held at [57] that:

“…Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.” [footnotes omitted]

17 According to their Honours at [58], this is because:

“…it would be wrong to deny a plaintiff resort to the ordinary processes of a court on the basis of a prediction made at the outset of a proceeding if that prediction is to be made simply on a preponderance of probabilities...”

18 The plaintiffs claim they suffered loss and damage as a result of the defendants’ breach of contract, breach of the Fair Trading Act 1987 (NSW), unjust enrichment and estoppel (S/C 09/02/07).

19 The plaintiffs allege that they entered into a written contract dated 7 February 2005 with the first defendant, pursuant to which they agreed to rent the property at a rate of $100 per month up until such time as they were in a position to purchase the freehold at a price to be determined by a registered valuer. There is a letter by Erl Calver to Mr McMurtrie dated 5 February 2005, which is headed “Re: In Principal Proposal” before this Court. It relevantly states:

“Further to our discussions in relation the properly known as 190 Rileys Hill Road, Broadwater….

Thereon is my Home in my name plus a Registered Factory owned by Neon Advertising Pty. Ltd (currently in Liquidation…)

I make this offer to you as my best friend but on a Business Basis.

The Factory Building measuring 37 metres frontage (south side) 18 metres wide on the eastern side 30 metres on the rear (northern side) and 11 metres (western side) as know (sic) by you.

…


As mentioned to you I have negotiated with Knights to purchase the building as described above for an amount of $25,000. Please feel free to confirm this with Knights.

Although the factory building is located on the land owned by me I am prepared to lease an area of say 2 acres including the boat ramp and floating pontoon at a monthly rental of $100 per Callander (sic) month with an option to purchase subject to approved sub-division (see para 10 below).

…

Discussions have taken place with the Richmond Valley Council (They have suggested they have no problems with such a sub-division) to sub-divide an area of the factory building and an area up to the 2 acres as described above that would be offered to you at a value to be determined and agreed to by both parties. The valuation to be determined by a registered valuer.

The driveway area between Rileys Hill rd and the factory. house area will remain a common use area

In Principal Offer Between Erl H Calver and RE & M McMurtrie
For the lease of two acres of land at 19 Rileys Hill Rd Broadwater NSW”

20 By letter dated 7 February 2005, the plaintiffs agreed to pay a monthly rental of $100 payable in advance. They also accepted the offer to purchase the leased area (or an area to be determined by surveyors and approved by Council) for a fair and reasonable price to be fixed. On the 9 February 2005 a registered valuer valued the land as being worth $35,000 per acre. A copy of the valuation was provided to the plaintiffs.

21 The plaintiffs allege that they entered into the contract with the defendants on the basis of representations made by them that they would be able to lease the land until they were able to purchase it and that they would be able to operate their car modifying business immediately upon entering the premises. The plaintiffs allege that the defendants were aware of the plaintiffs’ intention to operate the business immediately and of the damage which would be caused if they were unable to do so.

22 On 17 February 2005 the first defendant gave written notice of his intention to breach the contract. He stated that the property was partly owned by his estranged wife and he would need to sell the property in order to meet claims in the Family Court arising out of the divorce between the first and second defendant. On the 23 December 2006 the defendants served on the plaintiffs a Notice to Vacate the two acre property, allegedly the subject of the contract.

23 Essentially the allegations made in the statement of claim are firstly, that the first and second defendants were co-owners of the property (more accurately they were tenants in common, the first defendant having severed the joint tenancy in 2004); secondly, the plaintiffs allege an agreement for lease granted by the first defendant to the plaintiffs, containing an option to purchase, granted on 7 February 2006; thirdly, the second defendant first became aware of the agreement for lease in August 2005; and fourthly, that between 1 August 2005 and 1 January 2007, the second defendant confirmed her intention to be bound by the terms of the contract and to be a party to the contract and ratified the contract. It alleged that the second defendant, by her conduct, acknowledged the existence of a contract between the plaintiffs and the first and second defendants.

24 The second defendant submitted that the statement of claim does not disclose a cause of action against her. Counsel for Ms Jones submitted that at the heart of the plaintiffs’ claim is the act of ratification, alleged in paragraph 29 of the statement of claim, and that the plaintiffs cannot make this out on the facts pleaded.

25 Paragraph 29 reads:

“Through her conduct between 1 August 2005 and 1 January 2007 the 2nd Defendant confirmed her intention to be bound by the terms of the contract and to be a party to the contract and ratified the contract.
PARTICULARS OF CONFIRMATION OF INTENTION
29.a: Telephone conversation between Plaintiffs and the 2nd Defendant.
29.b: Telephone conversation between Plaintiffs and the 2nd Defendants solicitor.
29.c: Letter to Plaintiffs acknowledging the existence of lease between the Plaintiffs and Defendants.
29.d: Conversation between the 2nd Defendant and the Plaintiffs at the Main Lot in early August 2005.”

26 Ratification is the adoption of a contract purportedly made by an agent on behalf of a principal, but without authority. The ratification is the adoption of the agent's act with the result that the grant of authority operates retrospectively.

27 According to the second defendant, the contract alleged was between the plaintiffs and the first defendant only, and there was never any question of the first defendant asserting he was acting on behalf of the second defendant. The second defendant submitted that in these circumstances it was impossible for the second defendant to have ratified the agreement, since it was never purportedly entered into on her behalf in the first place. The second defendant says that for her to be bound by the arrangement alleged between the plaintiffs and the first defendant, a new contract would have to come into existence.

28 The letter of offer is made on the letterhead of Erl Calver. It is expressed to be a “re in principal offer between Erl H Carver and R E McMurtrie”. The document itself seems to be referring to an offer between the plaintiff and the first defendant only. But it is alleged by the plaintiffs that while contractual negotiations were conducted between the plaintiffs and the first defendant, the first defendant was acting as agent for Ms Jones and, at times, under the instructions of Ms Jones’ solicitor. It is pleaded that Mr Calver was acting as Ms Jones’ agent. At paragraph 12(e) it is pleaded that the first defendant represented to the plaintiffs words to the effect “The land is mine and I can sell it if I want to.” This does not sit well with the assertion of agency. However, at paragraph 12(k) it is pleaded that in order to settle the matrimonial dispute between the defendant and retain his home the first defendant would have to sell both a vacant lot, and the two acres he had offered the plaintiff which could be subdivided from the main lot. Mr McMurtrie deposed that it was his understanding that the first defendant had authority to deal with the lands as he saw fit. These statements are different. Overall, whether the first defendant had authority to act as agent for the second defendant depends on the facts and circumstances which can only be ascertained at trial. The claim in ratification is arguable. It should not be struck out.

29 The second defendant also submitted that for the plaintiffs to succeed against the second defendant, they must assert an enforceable agreement with her, supported by consideration, and moreover, one which complies with s 54A of the Conveyancing Act 1919 (NSW).

30 The contract is in writing. It is signed by the first defendant who is alleged to have been acting as agent for the second defendant. But is it beyond doubt that s 54A(1) applies?

31 Section 54A (1) of the Conveyancing Act 1919 (NSW) reads:

“Contracts for sale etc of land to be in writing

(1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged.”

32 In Nguyen & Anor v Taylor (1992) 27 NSWLR 48 Sheller JA stated:

“It was argued on behalf of the respondent under his notice of contention that the contract was unenforceable for reason that the authority of the solicitor to exercise the option was not in writing and in this regard reliance was apparently placed on s 54 A . The short answer to that proposition is that s 54 A (1) provides that no action may be brought upon any contract unless the agreement is in writing and signed by the party to be charged. In this case the option is signed by the party charged namely the respondent. In addition I agree with Meagher JA that by contrast with the position in Western Australia there is no requirement in New South Wales that an authority given by the party to be charged to a solicitor to sign the contract on that party's behalf should be in writing.”

See also Maher v Waltons (1987) 164 CLR 387 in relation to estoppel.

33 It is not clear beyond doubt that s 54A(1) is applicable.

34 The second defendant also submitted that on the facts pleaded, this is a case of one of two co-owners, being one of two tenants in common, purporting to grant a lease of the whole estate to the plaintiffs. In these circumstances, while the lease is on foot it binds the first defendant, but does not bind the second defendant, whose rights to go onto and enjoy the land are unaffected. The option, if it is enforceable at all, does not bind the second defendant. That depends on whether there was ratification and whether the second defendant authorised the lease and what were the terms of the lease. These are matters for evidence.

35 The plaintiffs also allege that the second defendant engaged in conduct which suggested to the plaintiffs that she was intending to honour the contract and that this conduct amounts to misleading and deceptive conduct in accordance with s 42 of the Fair Trading Act (NSW) 1987.

36 The plaintiffs need to establish firstly, conduct on the part of the defendants; secondly, conduct that is misleading or deceptive; thirdly that there was reliance on the conduct; and fourthly, loss or damage caused by the conduct – see Ronald Wallace Gould and Another v Peter Vaggelas and Others (1984) 157 CLR 215 and Jebeli v Modir and Golyaei [2005] NSWCA 184.

37 In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546, Lockhart J, at 556, said of s 52 of the Trade Practices Act 1974, which is in identical terms to s 43 of the FTA, except that the s 52 applies to corporations:

“Misleading or deceptive conduct generally consists of representations, whether express or by silence; but it is erroneous to approach s 52 on the assumption that its application is confined exclusively to circumstances which constitute some form of representation. The section is expressed briefly, indeed tersely, in plain and simple words…[t]here is no need or warrant to search for other words to replace those used in the section itself. Dictionaries, one's own knowledge of the developing English language and ordinary experience are useful touchstones, but ultimately in each case it is necessary to examine the conduct, whether representational in character or not, and ask the question whether the impugned conduct of its nature constitutes misleading or deceptive conduct. This will often, but not always, be the same question, as whether the conduct is likely to mislead or deceive.”

38 As Lockhart J noted in leading up to this passage, in regard to its ordinary meaning in English (which is a “useful touchstone” as he put it), “mislead” can encompass leading astray or causing another to err. Conduct is “likely to mislead or deceive” if there is, as the Full Court of the Federal Court stated in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87, a “real or not remote chance” that it will do so. It is sufficient if the conduct is prone or has a propensity, or is liable to mislead or deceive, even though there is less than a 50% chance that this will in fact happen.

39 The plaintiffs have outlined Ms Jones’ conduct. They have set out the conduct that is alleged to be misleading and deceptive. However, the plaintiffs have not pleaded that they relied on Ms Jones’ conduct, nor have they specifically pleaded any damage caused by the her alleged conduct. In the statement of claim it is pleaded that they paid $25,000 to the liquidators of Neon Advertising. The defendants were directors of Neon Advertising. In oral submissions, Mr McMurtrie stated that Ms Jones received payment of rent while they were in occupation of the factory. This is denied by Ms Jones. The claim under s 42 of the Fair Trading Act needs to be repleaded.

40 The plaintiffs also allege that the defendants have been unjustly enriched by the payment of $25,000 to the liquidators of Neon Advertising Pty Ltd (the defendants’ business), which was subsequently distributed to the creditors of the defendants’ business. It is alleged that this payment was made under the bona-fide but mistaken belief that the first defendant was the sole proprietor of the property, which is subject of these proceedings.

41 Unjust enrichment can be defined as a benefit for which the recipient is required to make restitution to the person at whose expense it was obtained. An enrichment is unjust if for example, the enrichment was provided by mistake, under duress or undue influence, or the enrichment was obtained as a result of breach of fiduciary duty: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; 109 ALR 57. This pleading is adequate.

42 Finally, the second defendant submitted that the use of the label "estoppel" similarly adds nothing unless facts are alleged which give rise to an estoppel, and none do. The principle of estoppel is that an individual is prohibited from denying or alleging a fact because of that individual's previous conduct, allegation, or denial.

43 The claims as pleaded by the plaintiffs against the second defendant are hopeless. The doctrine of estoppel “provides that a court of common law or equity may do what is required, but not more, to prevent a person who has relied upon an assumption as to a present, past or future state of affairs, … which the other party has induced him or her to hold, from suffering a detriment in reliance upon the assumption as a result of the denial of its correctness” – Commonwealth v Verwayen [1990] 170 CLR 394 per Mason CJ and Maher. It is my view that the plaintiffs could have an arguable case in estoppel.

44 It is my view that this claim is arguable if repleaded. Overall, the statement of claim needs to be repleaded. While it is trite law, I remind myself that the purposes of a pleading is to inform the other party of the case it has to meet. That party should not be taken by surprise.

45 The statement of claim is struck out. An amended statement of claim is to be filed and served within 28 days. Costs of the second defendant’s motion are reserved.

The Court orders:

(1) The first defendant’s notice of motion filed 7 June 2007 is dismissed with costs.

(2) The statement of claim is struck out.

(3) The plaintiffs are to file and serve an amended statement of claim within 28 days.

(4) Costs of the second defendant’s notice of motion filed 26 June 2007 are reserved.
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