Melville v Gibbs - [2012] WASCA 207

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: MELVILLE -v- GIBBS [2012] WASCA 207

CORAM: NEWNES JA
MURPHY JA

HEARD: 14 AUGUST 2012

DELIVERED : 14 AUGUST 2012

PUBLISHED : 19 OCTOBER 2012

FILE NO/S: CACV 8 of 2012

BETWEEN: CLIVE STEWART MELVILLE
Appellant
AND
ROBIN BRUCE GIBBS AS EXECUTOR OF THE WILL OF PAULINE DELYS MELVILLE
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :KENNETH MARTIN J
Citation  :MELVILLE -v- ROBIN BRUCE GIBBS as Executor of the will of PAULINE DELYS MELVILLE [2011] WASC 357
File No  :CIV 3122 of 2009

Catchwords:

Practice and procedure - Appeal against dismissal of application to strike out parts of statement of claim - Approach to be taken where pleading is alleged to be irrelevant or disclose no arguable cause of action or defence - Appellant failed to establish substantial prejudice if pleading not struck out - No error by primary judge

Legislation:

Nil

Result:

Leave to appeal refused
Appeal dismissed

Category: B

Representation:

Counsel:

Appellant: Dr P R MacMillan
Respondent: Ms W F Gillan

Solicitors:

Appellant: David Rawlinson
Respondent: Forward Law Legal Services

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

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060
Carantinos v Magafas [2008] NSWCA 304
Dering v Earl of Winchelsea [1775 ‑ 1802] All ER Rep 140; (1787) 29 ER 1184
H Stanke & Sons Pty Ltd v O'Meara [2007] SASC 246; (2007) 98 SASR 450
Kation Pty Ltd v Lamru Pty Ltd [2009] NSWCA 145; (2009) 257 ALR 336
Melville v Gibbs [2011] WASC 357
The State of Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40
Wilson v Metaxas [1989] WAR 285

JUDGMENT OF THE COURT: This is an appeal against a decision of Kenneth Martin J dismissing the appellant's application to strike out certain paragraphs of the respondent's (first defendant's) substituted defence and counterclaim: Melville v Gibbs [2011] WASC 357.
As the appeal is against an interlocutory decision, the appellant requires leave to appeal: Supreme Court Act 1935 (WA), s 60(1)(f). On 20 February 2012, Pullin JA ordered that the application for leave to appeal be heard with the appeal.
On 14 August 2012, we refused leave to appeal and dismissed the appeal. We said we would provide reasons for our decision. These are the reasons.

Background

The proceedings concern a dispute between the appellant and other members of his family regarding the appellant's entitlement to certain property at Cowaramup, in the south‑west of the State. The properties concerned had been operated as a farm by the parents of the appellant and his siblings. The properties in issue are described in the action as Lot 3, the 'Home Block' and Location 4088 (together 'the Cowaramup properties').
Following the death of the appellant's father on 30 June 1992, the appellant's mother (Mrs Melville) became the sole registered proprietor of the Cowaramup properties. Mrs Melville died on 23 January 2009. A week earlier she had made her will in which (relevantly) she left the Cowaramup properties in equal shares to the appellant, his sister Ena, his three brothers Ronald, Brendon and Roger, and his uncle Neil and aunt Faye.
The respondent is executor of Mrs Melville's will.
On 17 December 2009, the appellant commenced an action against the respondent, as executor of the will, and against his uncle and aunt and each of his siblings. On 7 April 2010, the action was admitted to the CMC List, to be managed by the primary judge.
In the action, the appellant claims, in effect, an absolute entitlement to certain portions of the Cowaramup properties. The appellant says that in the period 1994 to 2006, seven oral representations were made to him by his father or mother, or both, in relation to his entitlement to portions of the land and he had acted to his detriment in reliance upon those representations.
The first three alleged representations related to Location 4088 and, put broadly, were to the effect that if the appellant built or established improvements on Location 4088 he would be entitled to the land on which that was done. The appellant said that, in the period 1984 to 1986, upon the basis of the representations he expended the sum of $31,200 and 2,000 hours of labour in the construction of various buildings and other improvements on a portion of Location 4088 comprising approximately 12 acres (described in the statement of claim as 'the 1984 fenced area').
The appellant alleges that the fourth and fifth representations occurred in 1990 and early 1991 respectively. He says by the fourth representation he was told by his parents that he would receive an area comprising the 1984 fenced area plus a share in the remaining farming lands as his inheritance. By the fifth representation, he says he was told that he would receive as his inheritance what is described in the statement of claim as 'the Promised Lot', being the south western portion of Location 4088 less the portion occupied by his uncle Neil. The appellant says that in reliance upon those representations he carried out a number of improvements to those portions of the Cowaramup properties, expending the sum of $126,850 and in excess of 2,750 hours of work.
The sixth and seventh representations were allegedly made by Mrs Melville following her husband's death. The sixth representation was to the effect that upon her death the farming lands would be equally divided between her children. The seventh representation was to the effect that the Promised Lot was the appellant's. The appellant says that in reliance on those representations he expended money and labour on improvements to the Promised Lot.
The appellant pleads that contrary to the representations, Mrs Melville gave the Cowaramup properties, including the Promised Lot, to his siblings. He alleges that it was unconscionable for Mrs Melville, and it would be unconscionable for the respondent, to depart from the expectations or assumptions induced in the appellant by the representations. The appellant pleads, in the alternative, that it was the common intention of his parents that he would be the beneficial owner of the 1984 fenced area and a share of the farming land, alternatively of the Promised Lot. He says that, accordingly, the respondent holds that land on an implied or constructive trust for the appellant. In a further alternative plea, the appellant says the respondent would be unjustly enriched at his expense if the respondent were to retain the beneficial interest in the whole of the land and therefore holds the interests claimed by the appellant on constructive trust.
There are other pleaded claims which are not relevant for present purposes.
The appellant seeks (relevantly) the following relief:
1.A declaration that the [appellant] is the beneficial owner of the Promised Lot, alternatively the 1984 fenced area;
2.An order that the [respondent] do transfer to the [appellant] the Promised Lot, alternatively the 1984 fenced area free of all encumbrances upon the [appellant] obtaining approval for the subdivision of the Promised Lot, alternatively the 1984 fenced area;
3.…
4.Alternatively an order that the [respondent] do transfer to the [appellant] a one‑half share of Location 4088, alternatively a one‑sixth share of the farming lands, as tenant in common with the second, third, fourth and fifth [respondents], free of all encumbrances;
5.Alternatively, judgment against the [respondent] in the sum equivalent to the value of the Promised Lot, alternatively the value of one‑half share of Location 4088, alternatively one‑sixth of the farming lands, alternatively the 1984 fenced area.
The respondent filed a minute of substituted defence and counterclaim on 31 October 2011. In substance, the respondent does not admit the second and third representations and denies the other representations. The respondent denies that the appellant's parents agreed or intended that the appellant would be solely entitled to any portion of the Cowaramup properties or that the appellant did anything in reliance upon any representation to that effect.
The respondent pleads that any improvements the appellant made to the land were pursuant to an agreement between his father and all of the children. That agreement was to the effect that each of the children would be permitted to build a house and improvements on a portion of the Cowaramup properties and to reside in the house rent free, but that the underlying land would remain the father's and upon his death Mrs Melville would be free to deal with the Cowaramup properties as she saw fit.
The contentious part of the minute of substituted defence is then pleaded in pars 19A to 48. It is alleged that if the appellant is otherwise entitled to any equitable relief against the respondent, that relief should be denied because of the appellant's conduct. In support of that contention it is alleged that, in January 2008, the appellant borrowed for his own purposes the sum of $750,000 from a financier against the security of Lot 3 and Location 4088 without the knowledge or consent of Mrs Melville. It is alleged that the appellant did so by obtaining the loan in the names of himself, his wife and Mrs Melville, the signature of Mrs Melville being forged by the appellant on the loan documents and a mortgage of Lot 3 and Location 4088. The mortgage was not registered but absolute caveats were lodged on the titles of Lot 3 and Location 4088 to protect the lender's interests.
It is further alleged that, in August 2008, the appellant borrowed a further sum of $778,000 from the financier in the same manner. The respondent again says that a mortgage of Lot 3 and Location 4088 was executed, in the manner described above, but not registered.
The plea as to the forging of the documents is identical in each case and as follows (pars 29 and 42):
Based on the Horton Forensic Evidence:
(a)Mrs Melville did not sign the … Loan Documents; and
(b)the [appellant] forged Mrs Melville's signature on the … Loan Documents.
In par 30, the Horton Forensic Evidence is said to consist of four reports of John Horton & Associates.
The respondent pleads that Mrs Melville did not become aware of the loans until late 2008 and the caveats were not withdrawn until in or about August 2009, some seven months after her death. The mortgage for the second loan was not discharged before Mrs Melville's death. The respondent pleads that, accordingly, Mrs Melville was not in a position at the time of her death to fulfil the alleged representations. (We should note that in his written submissions on the appeal the respondent said that, in February 2012, the financier confirmed that both loans had been repaid in full in August 2009.)
There is a further plea in pars 49 to 51 of the defence concerning a deed of family arrangement and a plea in pars 52 to 63 that the relief claimed by the appellant exceeds the relief necessary to do equity between Mrs Melville's estate and the appellant. In the latter connection, the respondent pleads, among other things, the benefit which he says the appellant gained from the loans referred to above (par 58). There are also a number of claims against the appellant made by way of counterclaim which are not relevant for present purposes.
The appellant applied to strike out, relevantly, the pleas in pars 19A to 48 of the respondent's minute on the ground that they disclosed no arguable defence. The application was argued on the basis that the minute was to be treated as the respondent's substantive pleading as leave was not required to amend the defence and counterclaim. The primary judge dismissed the application.

Findings of the primary judge

The primary judge rejected the appellant's submission that pars 19A to 48 did not disclose an arguable defence and were irrelevant. His Honour noted that it was common ground on the application that in order to make out an 'unclean hands' defence the impropriety complained of must 'have an immediate and necessary relation to the equity sued for' [14].
His Honour pointed out that the appellant claimed an unencumbered entitlement to the various portions of the Cowaramup properties. The respondent's defence in pars 19A to 48 was that it was the appellant's dishonest conduct which had caused the land to be encumbered and therefore put it beyond the capacity of Mrs Melville to bequeath to him the interests he claimed. His Honour concluded that for the purposes of a strike out application the alleged conduct of the appellant (if proved) arguably had a sufficiently 'immediate and necessary relation' to the equitable relief claimed by the appellant [59].
The primary judge also accepted a submission by the respondent that at an interlocutory stage it was appropriate to leave 'unclean hands' allegations in a pleading if they were 'relevant to the general question of the equitable relief to be granted that should be left for the consideration and determination of the trial judge', referring to H Stanke & Sons Pty Ltd v O'Meara [2007] SASC 246; (2007) 98 SASR 450 [64]. His Honour considered that although the appellant relied on conduct of his parents from early 1984 up to about 2006, it would be arbitrary and artificial to draw an evidentiary line at 2006, particularly where it is alleged that there were relevant dealings between the appellant and Mrs Melville until just prior to her death in January 2009. It was therefore also appropriate to leave the plea in the defence on that basis.

The grounds of appeal

The appellant relied upon the following grounds of appeal:
1.The learned trial judge erred in law in finding the appellant's conduct in 2008, which caused the farming lands or part of them to be encumbered, made it impossible for Mrs Melville to leave to the appellant an unencumbered interest in the relevant land, in that:
a.there was nothing in fact or law to prevent Mrs Melville from fulfilling the appellant's assumption by leaving the relevant land to him in her will; and
b.had Mrs Melville done so, the appellant would have taken the relevant land subject to any encumbrances, if any (s 28 Wills Act 1970 (WA)).
2.The learned trial judge erred in law in finding there is an immediate and necessary connection between the conduct the subject of the allegations so pleaded and the equity relied upon by the appellant, in that:
a.the respondent pleads the connecting factor between the disentitling conduct and the equity sued upon as the appellant's failure prior to Mrs Melville's death to withdraw the caveats and discharge the first mortgage, and discharge the second mortgage, thereby precluding Mrs Melville from fulfilling the appellant's expectation;
b.any failure on the appellant's part in that respect did not preclude Mrs Melville from so acting;
c.the detriment the appellant claims is the loss of the relevant land;
d.the appellant prior to the issue of proceedings and by 31 August 2009 caused the caveats to be removed and the mortgages to be discharged;
e.the circumstances in which the relevant encumbrances were created is relevant only if the appellant claims the relevant land in circumstances where:
i.the encumbrances remained in place; or
ii.the appellant sought to take the relevant land without accepting liability pursuant to the encumbrances.
3.The learned trial judge erred in the exercise of his discretion not to exclude the application of the unclean hands maxim in that he failed, further to grounds 1 and 2, to take into account that:
a.the allegations are, in effect, of fraud:
i.as they are pleaded late and advanced on a conditional basis: that is, if the Court accepts the expert evidence of a document examiner;
ii.it is inappropriate that the first defendant be permitted to advance such serious issues on this basis;
b.it is inappropriate that the scope of the proceedings be substantially widened to include an issue which is:
i.inappropriately pleaded;
ii.of no relevance to the disposition of the issues bona fide in contention between the parties.

The disposition of the appeal

It is convenient to turn immediately to the question of leave to appeal.
The ultimate question on an application for leave to appeal against an interlocutory decision is whether, in the circumstances, it is in the interests of justice to grant leave: The State of Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40, 56, 57, 74. Generally, however, a party seeking leave to appeal will have to establish that the decision appealed from is wrong or attended with sufficient doubt to justify a grant of leave, and that a substantial injustice would result if the decision remained unreversed: Wilson v Metaxas [1989] WAR 285, 294.
It is well‑established that an appellate court will be slow to interfere with a discretionary decision on a matter of practice and procedure: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170, 177. As the plurality pointed out in that case, unless particular caution is exercised in such circumstances the result could be that whenever a litigant has a deep pocket or is of a particularly litigious nature, the case will be subject to interminable delay and ever mounting costs as all exercises of discretion in interlocutory applications are taken on appeal (177).
Where a party seeks to appeal against a refusal to strike out a pleading, or part of a pleading, the question whether a substantial injustice will result if the decision remains unreversed requires close scrutiny. While it is highly desirable that pleadings are precisely formulated and strictly limited to matters that are reasonably arguable, experience has shown that too often attacks on pleadings are time‑consuming and costly distractions which ultimately serve no useful purpose in the proper resolution of the litigation. Where the complaint is that an allegation in a pleading is irrelevant or discloses no arguable cause of action or defence, the time and costs involved in resolving that question not infrequently turn out to be no less, and sometimes even more, than the time and costs that would be involved in the trial of the pleaded issue. That is quite apart from the disruption to the orderly disposition of the litigation which such pleading disputes inevitably cause.
In the present case there is nothing to suggest that if the matters pleaded in pars 19A to 48 of the defence remain in the pleading there would be substantial injustice to the appellant. Taking into account the scope of the other pleaded issues, it is not apparent from the pleadings that those matters would substantially increase the duration or cost of the action. There is no affidavit evidence to suggest that they would and the appellant does not assert any other form of prejudice. On the hearing of the appeal, counsel for the appellant accepted that the issues arising under pars 19A to 48 would occupy a relatively small part of what is likely to be a lengthy trial.
In any event, we are not persuaded that the primary judge was wrong or that his decision is attended with sufficient doubt to justify a grant of leave. In that connection, it is necessary to bear in mind the burden which lies upon a party who seeks to strike out a pleading on the ground that it discloses no reasonable cause of action or defence. The test to be applied has been expressed in various ways but it is clear that a pleading will be struck out only in the 'clearest of cases', where the court is satisfied there is a 'high degree of certainty' that the pleaded cause of action or defence would fail if permitted to go to trial: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57].

We do not consider his Honour erred in concluding that the appellant had failed to satisfy that burden.
It is unnecessary to canvass the law relating to the defence of 'unclean hands' in any detail. For present purposes the issue can be dealt with quite shortly. The conduct which the respondent relies upon is the alleged encumbering by the appellant, by means of forged documents, of properties in respect of which he claims that, on Mrs Melville's death, he was entitled in equity to an unencumbered interest.
It was, as we have mentioned, common ground before the primary judge that the disentitling conduct must have an 'immediate and necessary relation to the equity sued for': see Meagher RP, Heydon JD and Leeming MJ, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (4th ed, 2002) [3‑130]; Dering v Earl of Winchelsea [1775 ‑ 1802] All ER Rep 140; (1787) 29 ER 1184, 1185. What is sufficient to constitute an 'immediate and necessary relation to the equity sued for' is a matter which is not settled in the authorities (see, for instance, the discussion in Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060; Carantinos v Magafas [2008] NSWCA 304; Kation Pty Ltd v Lamru Pty Ltd [2009] NSWCA 145; (2009) 257 ALR 336). Whether the necessary connection exists in this case is a debate which, as the primary judge found, is properly left to trial where the facts can be fully explored. At this interlocutory stage, we respectfully consider the primary judge was correct in declining to strike out the plea as unarguable.
In addition, the allegations pleaded in pars 19A to 48 are also arguably relevant to the pleas in pars 31 and 40 of the statement of claim that Mrs Melville's conduct in failing to leave to the appellant the interests he claims was unconscionable. That is a further reason why pars 19A to 48 should not be struck out.
As to the third ground of appeal, we do not consider the allegations in pars 29 and 42 of the defence as to the alleged forgery are pleaded in a conditional way. They undoubtedly could have been better pleaded but we understand the pleas to be an assertion that the documents were forged and the reference to the expert reports to be a reference to the evidence upon which the respondent will seek to rely to prove that allegation. In any event, any doubt there might have been as to the nature of the pleas was put to rest on the appeal, where the respondent, by his written submissions, made it clear that the pleas were not conditional but were intended to be express pleas that the documents were forged by the appellant. Nothing was sought to be made of the contention that the plea was late.
The respondent filed a notice of contention seeking to uphold the decision of the primary judge on other grounds. It is unnecessary to deal with that.

Conclusion

It was for those reasons we refused leave to appeal and dismissed the appeal.