MJPE Investments Pty Ltd v Finhaven Holdings Pty Ltd
[2006] VSC 182
•5 May 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST
No. 9560 of 2004
| MJPE INVESTMENTS PTY LTD (ACN 060 568 765) | Plaintiff |
| v | |
| FINHAVEN HOLDINGS PTY LTD (ACN 082 132 965) | Defendant |
| FINHAVEN HOLDINGS PTY LTD (ACN 082 132 965) | Plaintiff by Counterclaim |
| v | |
| MJPE INVESTMENTS PTY LTD (ACN 060 568 765) and PHILIP WATT | Defendants by Counterclaim |
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JUDGE: | HARPER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 3-5 MAY 2006 | |
DATE OF RULING: | 5 MAY 2006 | |
CASE MAY BE CITED AS: | MJPE INVESTMENTS PTY LTD v FINHAVEN HOLDINGS PTY LTD | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 182 | |
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PRACTICE AND PROCEDURE – Pleadings - Applications to strike out defence and counterclaim or, alternatively, to dismiss certain allegations – Alleged breach of contract, negligence and misleading and deceptive conduct.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/ Defendants by Counterclaim | Mr T. North SC with Mr J. Nixon | Mills Oakley Lawyers |
| For the Defendant/ Plaintiff by Counterclaim | Mr S. Wilson QC with Mr G. Meehan | Geoff Dillion & Co. |
HIS HONOUR:
The parties to this proceeding were contractual partners in a commercial and residential development in Hawthorn East. A "master agreement" was entered into on 26 June 2001. By that agreement the plaintiff agreed to the purchase of the relevant land. The balance was to be retained by the defendant. Five of a total of ten commercial units were to be constructed by the plaintiff on that land. The balance were to be constructed on the land acquired by the plaintiff, upon which the plaintiff was also to build twelve residential units, six of which were to be repurchased by the defendant on terms set out in the master agreement.
A builder ("Madisson") was engaged; but the works quickly fell behind schedule, and for this and perhaps other reasons the builder was dismissed. The defendant alleges that these circumstances gave rise to a right in it to rescind the master agreement. It was nevertheless persuaded to give the plaintiff another chance.
The defendant's decision not to rescind was, it alleges, reached in reliance upon representations made to it by the plaintiff through its authorised officer, a Mr Watt. According to the defendant, Mr Watt assured the defendant that a new builder ("Raline") had been secured to complete the work on time, within budget, and in accordance with those plans and specifications which were originally prescribed under the master agreement. There was thus to be no change to the original date by which the works were to be completed.
Consequent upon its decision to proceed, and (it maintains) in reliance upon the representations, the defendant on 18 September 2001 entered into an amended master agreement with the plaintiff. That agreement was in turn superseded on 18 January 2002 by a further agreement, called by the parties "the new master agreement".
The defendant's reliance was, it alleges, misplaced. The building works were not completed within the time allowed. The defendant further alleges that the building works were not completed in accordance with the original plans and specifications, although no relevant variations from these had been approved by the defendant. As a result, the defendant has suffered loss and damage. It has counterclaimed accordingly.
Questions have arisen concerning the sufficiency of the defendant's pleading. It asserts causes of action for breach of contract, breach of a collateral contract allegedly created by the giving and acceptance of the representations, and breaches of the Trade Practices Act. It also alleges that in making the representations, Mr Watt was in breach of a duty of care owed by him to the defendant. Mr Watt compounded his breach by, first, giving the defendant false assurances that he was fully qualified to act as the building superintendent pursuant to the new master agreement, and secondly, by his negligence in fulfilling that role. This negligence, so it is alleged, resulted in the delays about which the defendant complains as well as the failure by the builder to construct the works in accordance with the plans and specifications originally approved by the defendant in conformity with the original master agreement.
The plaintiff submits that the defence and counterclaim have been so badly pleaded as to warrant the whole being struck out. Alternatively, it submits that (a) the allegations of misleading and deceptive conduct pleaded in paragraphs 22E and 22F, and in paragraphs 58A-64, and (b) the allegations of breaches of the residential sale agreements pleaded in paragraphs 53, 54-56 and 58 should be dismised.
The plaintiff further submits that the claims made by the defendant against Mr Watt at paragraphs 65-67 for misleading and deceptive conduct, and those made against him at paragraphs 68-71 for breach of a duty of care, should also be dismissed, and that it should have its costs on an indemnity basis.
In my opinion the defendant has, on the basis of the allegations it seeks to raise in its counterclaim, arguable causes of action against the plaintiff in breach of contract. This is relevant, in particular, to what the plaintiff submits are allegations concerning supposed breaches of the residential sale agreements.
These agreements, as the plaintiff points out, were not in each case made between the plaintiff and the defendant. They were in three instances made between nominees of the defendant and the plaintiff. The plaintiff submits that, to this extent, there is no relationship upon which the defendant can rely in suing for breach of those residential sale agreements.
The defendant answers this by arguing that its claim in this respect is in fact for breach not of the residential sale agreements, but of the new master agreement, which according to the defendant, bound the plaintiff to adhere to each of the residential sale agreements, whether or not these latter were agreements to which the defendant was a party.
During the course of argument over the last two and a half days, the defendant, through its Senior Counsel, Mr Wilson QC, accepted, as I understand his position, that it was necessary for the pleading to make clear that in those instances where the defendant's claim included allegations in relation to the residential sale agreements, it was necessary to make clear that the claim was in fact based upon an alleged breach of the new master agreement. I accept Mr Wilson's assurance that when considering the further amended defence and counterclaim (which as a result of this hearing is to be prepared) he, his junior and his instructors will scrutinise the new document to ensure that to the extent the present pleading does not make the position clear, the new pleading will clearly delineate the position of the defendant in relation to, on the one hand the new master agreement and, on the other, the residential sale agreements.
The allegations concerning breaches of the Trade Practices Act 1974 are, in my opinion, such as to raise an arguable cause of action under that Act. The principal difficulty with the pleading as presently drafted is that it is perhaps deficient in the manner in which it pleads the damages that flow from the alleged breaches. It has been established in a series of cases, commencing with Gates v. City Mutual Life Assurance Society Ltd[1] that damages under the Trade Practices Act are to be assessed as if they were damages for a tortious breach, but are in that respect to be distinguished from damages assessed on the contractual basis. The difference, of course, is that when suing in contract, a plaintiff can claim damages based upon an assessment of the difference between the position it is in following the breach, and the position it would have been in had no breach occurred. By contrast, the tortious measure of damages is based upon an assessment of the deterioration in position suffered by the plaintiff as a result of the tortious conduct of the wrongdoer.
[1](1986) 160 CLR 1
It is in my opinion important that when preparing the envisaged fresh defence and counterclaim, the defendant bear the distinction between the approaches to the question of damage clearly in mind. That approach must, in the case of a Trade Practices cause of action, begin with the proposition that, were it not for the alleged false representations upon which the defendant relied, the defendant would have taken a position different to that which it in fact took: it would have exercised the right to rescind which arose on breach of the original master agreement. That being so, the defendant's damage must be assessed against the deterioration, or alleged deterioration, in its position following its decision not to rescind that agreement, but instead to enter into the amended master agreement and then the new master agreement. Otherwise, however, in my opinion the defendant has a cause of action that is reasonably arguable under the Trade Practices Act, and it ought be permitted to raise that cause of action in its counterclaim.
The next allegation with which I am concerned relates to Mr Watt. It is alleged that he did not act with appropriate care as the building superintendent, and that as a result the building works were not effected in accordance with the appropriate plans and specifications. That cause of action seems to me to be clear enough. It is also alleged against Mr Watt that he was negligent in making the representations about his own qualifications, and as to the conformity between the contractual arrangements entered into by Madisson and those entered into by Raline.
The two latter causes of action are, it seems to me, rather more difficult to plead than that alleging negligence in Mr Watt’s supervision of the building works. It is arguable that a duty of care was imposed upon Mr Watt by reason of the relationship which as building superintendent he had to the defendant. Whether ultimately the court is prepared to accept that by reason of his position Mr Watt had imposed upon him a relevant duty of care remains to be seen. In the meantime, however, in my opinion the defendant ought be permitted to raise this cause of action because it is not so clearly unarguable as to warrant its being struck out at this stage.
That I think covers the main points which were the subject of argument during the course of the present hearing.
The result is that at a number of points, both before the hearing commenced and during the course of the hearing, the defendant conceded, properly in my view, that the present pleading requires further attention. The defendant further conceded, again properly in my opinion, that the most convenient way to present the defendant's pleaded case was to replead the entirety of the defence and counterclaim. One reason for this is purely mechanical. A number of attempts have been made to plead the defence and counterclaim, and they have now reached the point where a document that attempted to cover in a composite way all the amendments since the first draft would be almost incomprehensible. It is undesirable in my opinion, that the court and the parties go to trial on a document that is difficult to follow, and in respect of which reference during the course of the trial in order to elucidate a point or make a ruling would perhaps be very difficult. The process would be much simplified if an entirely fresh document were prepared, one which did not contain the identification of portions of previous pleadings struck out or added. Accordingly, for that reason alone, it seems to me appropriate to require the defendant to replead by way of an entirely fresh document.
I do not, however, accept the plaintiff's submission that the pleading as presently drawn is so defective as to warrant it being struck out by order of the court. The defects and deficiencies in the present document are, in my opinion, not ones which go to the substance of the pleading in the sense that the present document discloses no cause of action, or fails to identify those causes of action upon which the defendant seeks to rely. It is true, as I have indicated, that there are deficiencies in the pleading. In the case of each of the proposed causes of action, however, it seems to me that at least arguably the relevant cause of action is one that the defendant ought to be able to bring to court for trial. The ultimate outcome in relation to any particular cause of action will of course have to wait the outcome of the trial itself.
It is now necessary to turn to the question of costs. It was submitted on the part of the plaintiff that it was necessary to bring the present arguments before the court because several attempts had been made by the defendant to plead its defence and counterclaim and none of these had been satisfactory. Not only that, but the plaintiff had, in accordance with appropriate practice, made known to the defendant its criticisms of the most recent draft. The defendant had then either failed to take these properly into account or had left other defects in the document which required the attention of the court. In my opinion, it was appropriate that these matters be litigated, and that a judge examine the pleading with a view to assisting the parties to come to court with an appropriate appreciation of the case which each would seek to make against the other. I take into account the circumstance that the relationship between the plaintiff and the defendant, and that between the defendant and Mr Watt, was a somewhat complicated one, and that there were inherent in that relationship difficulties in pleading the causes of action upon which the defendant now seeks to rely. Accordingly, it is not in my opinion surprising that those charged with the task of drawing the defence and counterclaim had encountered some problems in preparing a document that adequately formulated the cause or causes of action upon which the defendant will seek to base its counterclaim.
It nevertheless remains true that many of the criticisms made by the plaintiff in relation to the present pleading have substance, although not reaching the point where the pleading is so deficient as to warrant its being struck out. For the reasons I have attempted to elucidate, it seems to me that this is not the appropriate response to the pleading as presently drawn.
I have been assisted over the last two and a half days by the submissions put to me by counsel for each side. I trust that in turn the parties have been assisted by the dialogue that has ensued between bench and Bar table. I also trust that armed with the reasons that I have just set out, and with the transcript of the proceedings over the last two and a half days, the defendant will be in a position to appropriately approach the task of redrawing its defence and counterclaim, and the plaintiff will in turn be appropriately equipped to critically examine the fresh document that the defendant produces.
Given that the plaintiff was justified in seeking the intervention of the court, it seems to me that the plaintiff is entitled to the bulk of its costs of this hearing. At the same time, the plaintiff has not succeeded in persuading me that the present document is so defective as to warrant its being struck out by order of the court. In my opinion, an appropriate disposition of the costs of this hearing would follow were I to order, as I do, that the costs of the first two days be paid by the defendant to the plaintiff, and the cost of the final day, that is today, be paid by the plaintiff to the defendant. I will so order.
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