Mirco Bros Pty Ltd v Palermo Nominees Pty Ltd
[2002] WASC 145
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: MIRCO BROS PTY LTD -v- PALERMO NOMINEES PTY LTD [2002] WASC 145
CORAM: MASTER SANDERSON
HEARD: 28 & 31 MAY 2002
DELIVERED : 7 JUNE 2002
FILE NO/S: CIV 1963 of 1999
BETWEEN: MIRCO BROS PTY LTD (ACN 008 831 294)
Plaintiff
AND
PALERMO NOMINEES PTY LTD (ACN 008 871 618)
Defendant
Catchwords:
Practice and procedure - Application for leave to amend statement of claim - Turns on own facts
Legislation:
Nil
Result:
Leave refused
Category: B
Representation:
Counsel:
Plaintiff: Mr D L Barker
Defendant: Mr A Metaxas
Solicitors:
Plaintiff: Mackinlays
Defendant: Metaxas & Vernon
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
BP Refinery v Shire of Hastings (1977) 16 ALR 363
Briggs v Curtis Quick & Associates [1999] WASCA 139
Dare v Pulham (1982) 148 CLR 658
Eade v Jacobs (1877) 3 EXD 335
Hawkins v Clayton (1988) 78 ALR 69
Murchison Zinc Co Pty Ltd v Thiess Contractors Pty Ltd [2000] WASCA 267
MASTER SANDERSON: This is the plaintiff's application for leave to amend the writ and statement of claim. When the matter first came on for hearing the plaintiff sought leave to amend the statement of claim in terms of a minute of proposed amended statement of claim filed 16 May 2002. During the course of the hearing I indicated that I would allow certain of the amendments and not others. I then reserved my decision on whether or not to allow amendments to pars 10 and 39 of the minute. In the context of the action as a whole these paragraphs were of particular significance. Prior to the resumed hearing and without leave, the plaintiff filed a further minute of proposed amended statement of claim. This further minute addressed a number of concerns with respect to par 10 and removed an allegation of fraud which had been pleaded in the earlier minute. It nonetheless left live the issue between the parties as to whether pars 10 and 39 as they appeared in the later minute should be allowed.
To understand the nature of the dispute between the parties it is necessary only to touch briefly on the facts. At all material times the plaintiff and the defendant were partners in running the Rockingham Beach Resort Hotel. By agreement the defendant was charged with running the day to day affairs of the business on behalf of the partnership. It is pleaded by the plaintiff that the partners orally agreed that the defendant would manage the hotel and that "it would be paid out of profits a fee of $70,000 per annum" for doing so: see par 5.4. This agreement is referred to in the pleadings as "the Management provisions". The proposed par 10 is then in the following form. (I have omitted the marking up in the minute as it is not relevant to this dispute):
"10.It was implied in the management provisions that:
10.1The defendant would exercise reasonable care and skill in the management of the Business.
Particulars
The term is to be implied as a matter of law in agreements of this type.
10.2The defendant would not deprive the plaintiff of the benefit of the agreement.
Particulars
The term is to be implied as a matter of law.
10.3The defendant would not delegate its duties as manager.
Particulars
The agreement called for the exercise of skill and expertise and involved a relationship of confidence between the parties and the term is therefore to be implied as a matter of law.
10.4The defendant would render true accounts and full information of all things affecting the partnership.
Particulars
The term is to be implied by reason of Section 39 of the Partnership Act.
10.5The defendant would keep proper records of all income and expenditure and assets and liabilities.
Particulars
The term is to be implied by reason of the Corporations Law and the Income Tax Assessment Act, 1936 for the Business.
10.6Where profits without bring to account management fees were insufficient to pay in full the management fee the management fee be limited to the amount of such profit and where no such profits were made no management fee was payable.
Particulars
This is implied as it was expressly agreed that management fees were payable out of profits and further by law partners can only receive a share of profits. It was not within the contemplation of the plaintiff and the defendant that where profits were not made the plaintiff would either personally pay one half of management fees or alternatively be liable for any borrowings or liabilities made by the business to pay management fees.
10.7The defendant would cause repairs to be carried out in a timely manner to the buildings, fixtures and fittings.
Particulars
The term is to be implied as a matter of law in agreements of this type.
10.8The defendant would cause the repairs pleaded in paragraph 10.7 to be carried out to a standard that would maintain the attractiveness of the business to its patrons.
Particulars
The term is to be implied as a matter of law in agreements of this type.
10.9The defendant would cause the income of the business to be used to meet the cost of repairs or where the profits of the business were insufficient to call upon and join with the plaintiff to equally meet the cost of such repairs.
Particulars
The term is to be implied as a matter of law in agreements of this type."
The defendants raise a number of objections to this paragraph, most having to do with whether or not the terms pleaded by the plaintiff can be implied in the Management provisions. I have dealt with most of the defendant's objections. For present purposes, it is cl 10.7 which is relevant. It is said by the defendant that a clause such as this which carries positive duties could not be implied into the agreement. I am satisfied that it is open to the plaintiff to plead such an implied term. No doubt evidence of the surrounding circumstances will be necessary to determine just what, if any, agreement was reached between the plaintiff and the defendant. However, it is, in my view, at least arguable that if the defendant was to manage the premises then such an agreement contained an implied term that repairs would be carried out. Such a requirement is not inconsistent with proper management of the business. Whether such a term would be implied as a matter of law or to give business efficacy to the agreement is open to question. I am inclined to the view that it would be the latter. Nonetheless, I am satisfied that cl 10.7 should stand.
It is the plaintiff's case that the defendant breached its obligations under the Management provisions and inter alia failed to comply with the implied term pleaded in par 10.7. Paragraph 39 is in the following terms (again I have omitted the marking up):
"39.The defendant has not kept the buildings, fixtures and fittings to a standard that maintained the attractiveness of the business to its patrons.
Particulars
(a)Roofing and galvanised sheeting was not replaced;
(b)broken tiles over the lounge room and hotel area were not replaced;
(c)the guttering and down piping was not maintained or repaired;
(d)the Lounge Bar carpeting was not replaced and the floor was not repaired;
(e)the exterior of the building was not repainted;
(f)the female toilets were not properly maintained or repaired;
(g)water leaks were not repaired.
(h)the acoustics in the nightclub were faulty.
Particulars
(a)Patrons of the nigh club complained to the defendant of adverse echoes and undesirable reflections in the night club which made amplified speech and music difficult to understand;
(b)In or about late March of 1996 the Defendant contacted Alan Herring of Herring Storer for advice as to the cause of the patron's complaints.
(c)On or about 26 March 1996 Alan Herring advised the Defendant of the necessity for sound absorptive materials to be affixed to internal surfaces to reduce reverberation.
(d)In or about November 1997 the defendant caused the acoustics in the night club to be repaired."
It is par 39(h) to which the defendant takes objection. It was submitted that a plea of faulty acoustics had nothing to do with a requirement to maintain the premises to a certain standard. Clearly that is right. It is one thing to require a manager to ensure that the gutterings are maintained in good order and condition, but it is quite another to require a manager to take steps to rectify faulty acoustics. It is simply not a matter which is covered by requirements of routine maintenance. It bespeaks a positive duty to do something to enhance the amenity of the hotel.
It is possible to envisage a situation where poor acoustics could result from a failure to maintain the building. For instance, if wiring to speakers used to amplify music failed, then it might be incumbent upon the manager to repair the faulty wiring. But the particulars that are provided to par 39(h) make it plain that the problems with acoustics were not of such a nature. They required enhancement of the building. They went beyond what could conceivably be covered by the implied term of the agreement.
At first glance it may seem that to draw this distinction is to take an excessively technical approach to pleading. However, the proposed amendments have the capacity to make a profound impact upon the length of the trial. Paragraphs 40 to 42 plead the alleged consequences of the faulty acoustics. It is alleged in these paragraphs that the plaintiff suffered losses of over $1 million as a consequence of the defendant's alleged breach of this aspect of the management provisions. Counsel for the defendant estimated that if this aspect of the claim proceeded, the trial would take 10 days rather than two days. Even the most cursory consideration of the losses claimed shows that the matters to be proved would be extensive. There is no reason to doubt counsel's estimate of the increased hearing time. While any increase in hearing time cannot in and of itself be grounds for refusing an amendment, it does mean that the amendment must be framed with care and must be consistent with earlier pleading. In my view, the proposed amendments to par 39 do not achieve that end.
I would refuse the plaintiff leave to amend par 39 in terms of the latest minute. However, I appreciate the significance of this matter to the plaintiff and I would be prepared to allow the plaintiff the opportunity to reformulate its claim.
I will hear the parties as to the precise form of orders and as to costs.
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