Moon v Mun
[2012] NSWSC 973
•24 August 2012
Supreme Court
New South Wales
Medium Neutral Citation: Moon v Mun [2012] NSWSC 973 Hearing dates: 12 July 2012 Decision date: 24 August 2012 Jurisdiction: Common Law Before: Schmidt J Decision: 1. The appeal is dismissed.
2. Unless the parties approach to be heard within 14 days, the plaintiffs are to pay the defendant's costs of the proceedings, as agreed or assessed.
Catchwords: APPEAL - leave to appeal and appeal from Local Court decision - whether judgment given on admissions - whether default judgments entered - whether his Honour erred in striking out the defence - whether judgment was wrongly given, on the admissions made - no error - appeal dismissed Legislation Cited: Civil Procedure Act 2005
Local Court Act 2007
Uniform Civil Procedure Rules 2005Cases Cited: Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570
Arnold v Forsythe [2012] NSWCA 18
Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; (2008) 227 FLR 1
Frinty Pty Ltd v Landmax Developments Pty Ltd [2010] NSWSC 734; (2010) 272 ALR 412
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Gregory's Transport Pty Ltd v Ray's Haulage Pty Ltd [2008] NSWCA 333
Peisley v Maddrell Management Pty Limited and Ors [2010] NSWSC 1477
Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109Category: Principal judgment Parties: Young Soo Moon (First Plaintiff)
Sung Shim Lim (Second Plaintiff)
Soon Sil Mun (Defendant)Representation: Counsel:
Mr J Hewitt (Plaintiffs)
Mr A Chee (Defendant)
Solicitors:
Dahan Lawyers (Plaintiffs)
KDL Legal (Defendant)
File Number(s): 2012/99913 Publication restriction: None
Judgment
In June 2011, the plaintiffs Mr Moon and Ms Lim, purchased a restaurant business from the defendant for $70,000. The written agreement provided for the payment of the purchase price at specified dates. The final payment was not made. In the Local Court, the defendant Ms Mun sought to recover the outstanding $29,000, as well as rent paid for the period after Mr Moon and Ms Lim went into possession, a total sum of some $29,916.67. The claim was defended.
At the hearing the defence was struck out and orders were made in favour of Ms Mun. On appeal Mr Moon and Ms Lim complained that Bradd LCM had erred in striking out the defence; in not allowing Mr Moon and Ms Lim the opportunity to rely upon an amended defence and cross-claim and in entering a verdict and judgment for Ms Mun. I am satisfied that their appeal must be dismissed because Ms Mun has established that judgment was entered against them on the basis of their admissions.
By their summons Mr Moon and Mrs Lim sought leave to appeal and appealed from the judgment given by Bradd LCM. In written submissions it was explained that leave to appeal was pressed on the basis that the judgment was an interlocutory judgment, under s 40(2)(a) of the Local Court Act 2007 and in the alternative under s 39, as raising a question of law. At the hearing it was common ground that final judgment had been given and that a right of appeal arose under s 39, in relation to the questions of law pressed by the plaintiffs on the appeal.
The cases pressed by the parties on appeal
By their defence Mr Moon and Ms Lim admitted the contract; the payments made; their refusal to pay the sums claimed; and that they had entered into occupation with the consent of the landlord. They also claimed that:
"4. The Defendants have refused to pay further funds to the Plaintiff as the Plaintiff has fundamentally breached the Contract, has failed to deliver to the Defendant the inventory of assets and utensils and has not complied with terms which the parties had agreed upon.
Particulars of Breach
a) Failure to provide equipment and implements as agreed.
b) Failure to provide Council Approval/DA for business to operate.
c) Failure to provide Liquor Licence and Transfer documentation.
d) Failure to provide any financial records of the business.
e) Failure to provide a formal Contract for Sale of Business.
f) Failure to maintain the working of the business and to maintain the goodwill of the business and to carry on the business in a proper and businesslike manner as a "going concern".
g) Closing the business unilaterally on the 16 July 2011.
h) Failure to provide a 2 week training period before Settlement.
i) Failure to provide a 2 week training period after Settlement.
j) Failure to provide a list of Suppliers and Contacts for the business to continue to operate.
k) Failure to provide a Greasetrap, Sewerage and Drainage in accordance with Council requirements.
l) Failure to maintain the equipment in the same state as at the Contract date.
m) Further particulars of breaches will be provided prior to the Hearing."
The appeal was pressed on a number of bases, including arguments not advanced below. They included that the application for judgment ought not to have been made at the commencement of the hearing, without motion or supporting affidavit; that Ms Mun's amended statement of claim was deficient, because it did not plead that Ms Mun had fulfilled her promise to transfer the business to Mr Moon and Ms Lim; that Ms Mun was not entitled to summary judgment, because the General Steel test had not been satisfied (see General Steel Industries Inc v Commissioner for Railways(NSW) [1964] HCA 69; (1964) 112 CLR 125); that having decided to strike out the defence, Bradd LCM should have separately addressed the question of whether Mr Moon and Ms Lim had a reasonably arguable defence, which should have gone to trial; that they should not have been deprived of the opportunity to have a hearing of the questions raised by their defence; that the amended statement of claim did not properly plead a claim in debt, because it did not plead the material facts demonstrating an entitlement to $70,000 and as pleaded, could not support a judgment in Ms Mun's favour (see Arnold v Forsythe [2012] NSWCA 18 at [57]); that it had not been admitted that the purchase price was due and payable; that Mr Moon and Ms Lim were not obliged to plead matters such as the discharge of their obligation to pay money under the contract, or as to the termination of the contract, given their defence that Ms Mun had fundamentally breached the agreement on which they relied; that Ms Mun had not pleaded that she had provided the quid pro quo of the payment of the purchase price; there was not substantial or any compliance with the obligations under the contract, and that there was no power to enter judgment under Part 16 of the Uniform Civil Procedure Rules 2005, because the application was not supported by an affidavit (see Gregory's Transport Pty Ltd v Ray's Haulage Pty Ltd [2008] NSWCA 333 at [22]).
It was also contended that the Magistrate had erred in concluding that the amended defence did not adequately plead the terms relied on by Mr Moon and Ms Lim, that it did not specify particulars of the alleged fundamental breach of the agreement; or that Ms Mun had not been given adequate notice of the grounds of the defence. In oral submissions in reply, it was also submitted, for the first time, that there had been a total failure of consideration. This, it was submitted, would be inferred notwithstanding that the first two payments provided by the contract had been made.
It was also argued that Ms Mun was not entitled to retain the purchase price, having failed to take the necessary steps to transfer the business, the subject of the contract, to Mr Moon and Ms Lim. It was also submitted for Mr Moon and Ms Lim that default judgment had been entered, contrary to the requirements of Rule 16 of the Uniform Civil Procedure Rules. Reliance was placed on what was observed in Gregory's Transport, where it was observed:
"21 Having struck out the appellant's defence was the magistrate in these circumstances empowered by Rule 16.6 to give the money judgment that he gave in favour of the respondent?
22 Rule 16.3 sets out the procedure applicable where a defendant is in default. Subrule (2) leaves no doubt that any application for judgment to be given under the relevant Part (being the Part in which Rule 16.6 falls) is to be accompanied by an "affidavit in support", "unless the Court orders otherwise". Rule 16.6 does not expressly refer to an application for judgment being made by the plaintiff but it is implicit that any judgment to be given by the Court under that subrule will be made upon an application, express or implied, of the plaintiff. Subrule (2) of Rule 16.6, as has been stated earlier, contemplates that there will be an "affidavit in support". This reflects the express requirement in Rule 16.3. This requirement was applicable but not met.
23 There being no "affidavit in support", my view is that the magistrate was not relevantly empowered by Rule 16.6, unless reliance can be placed upon the ability of the Court under subrule 16.3(2) to order "otherwise".
24 I do not consider that the respondent is entitled to rely upon that provision as the magistrate did not purport to do so and any proper reliance by him on it, if error of law were not to occur, would have required reference to the provision and an expression of reasons as to why he was prepared to exercise the discretion conferred by it. It can be inferred from the absence of reference to the provision that the magistrate did not turn his mind to it. In any event, it is difficult to identify circumstances that would have warranted an exercise of that discretion favourable to the respondent where no evidence at all had been admitted by the magistrate at the hearing, (although certain material had been filed at the Court prior to the hearing)."
Ms Mun's case was that judgment had been entered in her favour on the basis of the admissions made by Mr Moon and Ms Lim in the defence and orally at the hearing. The defence raised claims which could only be pursued in the proceedings by a properly pleaded cross-claim. Ms Mun objected to the claims raised by the defence being dealt with on the basis urged for Mr Moon and Ms Lim, as denying her procedural fairness, given the deficiency of the pleaded defence. That objection was accepted. She had made no application for default judgment and no such judgment was given, with the result that accordingly, the appeal had to be dismissed.
Judgment on Admissions
Rule 17.7 of the Uniform Civil Procedure Rules provides for judgment to be given on admissions. The Rule provides:
"17.7 Judgment on admissions
(cf SCR Part 18, rule 3; DCR Part 15, rule 3; LCR Part 14, rule 5)
(1) If admissions are made by a party, whether by his or her pleadings or otherwise, the court may, on the application of any other party, give any judgment or make any order to which the other party is entitled on the admissions.
(2) The court may exercise its powers under this rule even if the other questions in the proceedings have not been determined."
Admissions may be express or implied. In the case of pleadings, admissions may be made expressly, or by a failure to plead, for example where a defence does not traverse a claim advanced in a statement of claim. In Frinty Pty Ltd v Landmax Developments Pty Ltd [2010] NSWSC 734; (2010) 272 ALR 412, Ball J observed:
"8 There appears to be no decided case dealing with this rule. However, the predecessors to the rule are in substantially similar terms: see r 130 of the Consolidated Equity Rules of 1902, considered in Termijtelen v Van Arkel [1974] 1 NSWLR 525, and Pt 18 r 3 of the Supreme Court Rules 1970, considered in Kelly v Mawson [1981] 1 NSWLR 184. It is clear from those decisions that the power granted by UCPR r 17.7 is discretionary. In exercising that discretion, the court should take account of the nature and quality of the admission. In Termijtelen v Van Arkel, for example, the court refused the application where the admission was deemed to have been made in the absence of an appearance.
9 In exercising its discretion, the court must also now have regard to s 56 of the Civil Procedure Act 2005, which relevantly provides:
"(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
(2) The court must seek to give effect to the overriding purpose when it exercises any overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court."
In that case his Honour gave judgment on the pleadings, notwithstanding that there were other matters lying between the parties still to be decided in the proceedings, because he took the view that:
"14 In my opinion, this is an appropriate case in which to exercise the discretion conferred by UCPR r 17.7. The admission on which the plaintiffs rely arises from the defendants' pleading. That pleading contains a conscious, deliberate and clear admission by the defendants. The admission is sufficient to establish that the debt is due and payable now.
15 There are other reasons for making the order sought by the plaintiffs. Many of the claims brought by the plaintiffs seek to recover the $347,200 on other bases. For example, the plaintiffs seek to recover that amount as damages for breach of contract and as damages under s 82 of the Trade Practices Act. If an order is made, it is likely that it will simplify the proceedings significantly. That, in turn, is likely to save time and costs - which is a matter that is of particular relevance having regard to s 56 of the Civil Procedure Act 2005."
Default judgments
Part 16 of the Rules deals with default judgments. Rule 16.3 permits a plaintiff to seek a default judgment if a defendant is in default. That is dealt with in Rule 16.2, which provides:
16.2 Definition of "in default"
(cf SCR Part 17, rule 2; DCR Part 13, rule 1; LCR Part 11, rule 1)
(1) A defendant is in default for the purposes of this Part:
(a) if the defendant fails to file a defence within the time limited by rule 14.3 (1) or within such further time as the court allows, or
(b) if the defendant fails to file any affidavit verifying his or her defence in accordance with any requirement of these rules, or
(c) if, the defendant having duly filed a defence, the court orders the defence to be struck out.
Rule 16.6 deal with the requirements for obtaining a default judgment. It provides:
"16.6 Default judgment on debt or liquidated claim
(cf SCR Part 17, rule 4; DCR Part 13, rule 1; LCR Part 11, rule 1)
(1) If the plaintiff's claim against a defendant in default is for a debt or liquidated claim or for a claim for unliquidated damages of the kind referred to in rule 14.13 (2), judgment may be given for the plaintiff against the defendant for:
(a) a sum not exceeding the sum claimed, and
(b) interest up to judgment, and
(c) costs.
(2) The relevant affidavit in support:
(a) must state the amount due to the plaintiff, in respect of the cause of action for which the proceedings were commenced, as at the time the originating process was filed, and
(b) must give particulars of any reduction of that amount, and costs, as a consequence of any payments made, or credits accrued, since the time the originating process was filed, and
(c) must state the source of the deponent's knowledge of the matters stated in the affidavit concerning the debt or debts, and
(d) must state the amount claimed by way of interest, and
(e) must state whether costs are claimed and, if so, how much is claimed for costs, indicating:
(i) how much is claimed on account of professional costs (not exceeding the amount fixed by the regulations made for the purposes of section 329 of the Legal Profession Act 2004), and
(ii) how much is claimed on account of filing fees, and
(iii) how much is claimed on account of the costs of serving the originating process, and
(f) must state when and how the originating process was served on the defendant."
An application was made for judgment on admissions
In pressing her application for judgment to be entered in her favour Ms Mun did not rely on any affidavit directed to the matters dealt with in Rule 16.6(2). Nor did she make an application to have the defence struck out.
It is clear from a fair reading of the application made at the commencement of the hearing below and the oral and written submissions advanced by the parties, that what was sought was judgment in favour of Ms Mun, on the basis of the admissions which had been made in the defence. That was the application to which Mr Moon and Ms Lim responded, albeit unsuccessfully. Neither party addressed any submissions to default judgment or the requirements of the Rules in relation to an application for entry of default judgment.
Mr Chee, counsel appearing for Ms Mun, made an application for judgment on admissions orally at the commencement of the hearing, on the pleadings alone. The application was made by reference to the claims advanced in the statement of claim and the admissions made in the defence as to those claims. Written submissions were provided and addressed orally in support of the application. The contractual terms and the outstanding amount pursued by Ms Mun were submitted to have been admitted.
As to the alleged breaches of the agreement raised by Mr Moon and Ms Lim in their defence, it was submitted for Ms Mun that payment of contractual entitlements could not be avoided by an allegation of other breaches of the contract. The allegations which they advanced as to breaches of the contract, at paragraph 5 of the defence, were submitted not to be an allegation that Ms Mun had repudiated the contract, or that Mr Moon and Ms Lim, as innocent parties, had accepted that repudiation, thereby terminating the contract, so that they were no longer liable to pay the balance of the purchase price. If the breaches alleged were sufficiently serious to have permitted Mr Moon and Ms Lim to terminate the contract, they had the right to elect to terminate the contract; or to insist on further performance (see Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 at [58]).
It was further argued that Mr Moon and Ms Lim's defence made clear that they had gone into occupation and had traded the business, rather than terminating the contract. In those circumstances it was submitted that Ms Mun was entitled to judgment in relation to the debt which she pursued by her summons and that Mr Moon and Ms Lim were not entitled to pursue their claims by way of defence. They could only be pursued in the proceedings by a properly pleaded cross-claim. The inadequacy of the way in which the claims sought to be advanced in the defence where pleaded and the failure to comply with the applicable rules were also addressed.
It was submitted that the claims for damages advanced by Mr Moon and Ms Lim in their defence were not properly particularised. They were claims that there were additional contractual terms, which had been breached by Ms Mun. Particulars of the alleged oral terms were not provided. The damages pursued in the defence were not pleaded by reference to any clause of the written contract, nor were they quantified. It followed, it was submitted, that if there had been breaches of additional terms, as alleged, the Court would have to assess the damages claimed, they could not simply be pursued by way of any set off. In the result, there being no properly pleaded cross-claim, the alleged breaches raised by the defence were simply irrelevant to the application for judgment on admissions.
In the written submissions, it was explained why Mr Moon and Ms Lim were not discharged from their obligation to pay the outstanding part of the purchase price, by the alleged 'fundamental breaches' on Ms Mun's part of the contractual terms. It was noted that the defence did not plead that the contract had been terminated as the result of those breaches, let alone that there had been a termination of the contract, before the obligation to pay the disputed $29,000 fell due.
As to the need for a cross-claim, reference was made to s 21 of the Civil Procedure Act 2005 and the requirements of the rules as to pleadings, including as to material facts on which reliance was placed (see Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109). It was submitted that the claim in [2] of the defence, that the written contract contained implied and oral terms, without pleading the actual terms, was embarrassingly deficient.
There was no reference in any of the submissions advanced for Ms Mun to Rule 17.7 of the Uniform Civil Procedure Rules, which permits a judgment on admissions to be given. That, however, was clearly the application being pressed for Ms Mun, as the oral and written of which both parties made clear. There was no application made for Ms Mun that the defence should be struck out and a default judgment entered, under Part 16 of the Rules. Nor were any submissions advanced for Mr Moon and Ms Lim, as to such an application.
The application for judgment on admissions was not objected to by Mr Moon and Ms Lim, even though no motion or supporting affidavit had been filed for Ms Mun. It is too late on appeal to raise that complaint. The application was opposed, the case advanced for Mr Moon and Mrs Lim being that notwithstanding the admitted deficiencies in their defence and their failure to bring a cross-claim, as the Rules required, the Local Court should decide the equity of all of the disputes lying between the parties.
It was submitted for Mr Moon and Ms Lim that the written contract provided for an agreed purchase price of $70,000 for the purchase of the business, on certain terms as to payment. There were also claimed to have been managerial or operational aspects of the agreement. It was accepted that it may have been appropriate to deal with the claims advanced as to those matters by cross-claim or a set off, but the practicality was that the matter was ready to be heard. It was also later put that 'technically', there could be some merit in what was submitted for Ms Mun, as to the need for the matters alleged in paragraph 5 of the defence to be pursued by Mr Moon and Ms Lim by way of a cross-claim. Nevertheless, it was submitted that the defence clearly set out the position of Mr Moon and Ms Lim, whose case was that they had not received what they had bought. In those circumstances it was submitted that the entirety of the dispute between the parties should be decided as a matter of commonsense, on the evidence which was ready to be heard.
It was also submitted that it would be accepted that Ms Mun was clearly aware of the case which she had to answer as to those matters. In dispute were 'certain contractual clauses of an oral nature which were fundamental to their purchase and as to how they arrived at the figure of $70,000, including provision of equipment and implements and council approval and liquor licences', as particularised at [5] of the defence. The $29,000 claimed by Ms Mun was argued to be in issue, with the defendants alleging that they had not received $29,000 of contractual matters.
From the way in which the submissions were advanced, it is apparent that there was no dispute that $29,000 of the purchase price was unpaid. Mr Moon and Ms Lim sought to pursue a claim that there were other terms of the contract which Ms Mun had breached. They were seeking to resist payment of the entire $29,000, having in mind the damages which they sought to recover in respect of these breaches.
The judgment
His Honour's judgment was shortly given, he having adjourned to consider the cases which the parties had advanced. It is convenient to quote it in its entirety:
"In the matter of Soon Sil Mun, M-U-N, and first defendant, Young Soo Moon, and the second defendant, Sung Shim Lim. I have read the amended statement of claim which is that on about 6 June 2011, the plaintiff as vendor and the first and second defendants as purchasers entered into a contract for the sale of a business at 10 Bridge Street, Lidcombe. The particulars being the price of $70,000 and the payment schedule, and the term of the contract relating to payment of rent from 25 July 2011. The statement of claim alleges that the first and second defendant failed to pay the amount, and there was a balance owing at 18 June 2011 of $29,000, and also there is an amount owing of $916.67 in relation to rent payable for the eleven days including 26 July to 5 August.
In answer to that amended statement of claim, the amended defence states that the defendants are not indebted as alleged. The defendants admit that they entered into a contract. The contract, as referred to in para 1 of the statement of claim, says that the contract incorporated terms that were implied, oral and in writing. The defence does not go on to stipulate what those terms are alleged to be. The defendant in para 3 denies that the contract was for a takeaway business but says it was for an ongoing restaurant with relevant approvals. The defendants admit making payments totalling 41,000 and state that they have refused to pay further funds to the plaintiff as one plaintiff has fundamentally breached the contract. The particulars for the fundamental breach are not set out. Paragraph 7, the defendants claim damages against the plaintiff for rectification work required by council. And para 6, the defendants claim damages in relation to a breach of council rules relating to the EPA Act. In the defence, the defendants claim damages against the plaintiff. No cross-claim has been served and filed.
So the defence is deficient in a number of respects. Firstly, that the terms or the oral terms that were implied, oral and in writing are not stipulated, the fundamental breach is not stipulated, and there is no provision in - or the defendants to claim damages within a defence. There is no pleading as to the defence discharging its obligations to pay the moneys under the contract. There is no pleading as to any termination of contract. So the defence is deficient in a number of significant ways.
It has been put to me that this is the Local Court. The Uniform Civil Procedure Act applies to all courts. And failure of the defendants to properly plead their case has led to a lack of procedural fairness, so the plaintiff has not been properly put on notice of the defence, and as such there is no pleadings which the plaintiff is required the answer.
THEREFORE THE DEFENCE IS STRUCK OUT AND THE VERDICT IS FOR THE PLAINTIFF. THE JUDGMENT IS THE JUDGMENT SUM OF $29,916.67 CENTS. A JUDGMENT INTEREST IS CALCULATED FROM 26 JULY 2011."
Having in mind the respective cases which the parties had advanced, why his Honour struck out the defence is not clear. Ms Mun's application was for judgment in her favour on the basis of the admissions made in the defence. There was no application that the defence be struck out. There were submissions made by the parties in relation to the claims for damages advanced in the defence, which it was accepted for Mr Moon and Mrs Lim had not been adequately pleaded and ought to have been brought by way of a cross-claim. The inadequacy of the pleading of those claims was accepted by his Honour. That may explain the order striking out the defence, his Honour thereby rejecting the application made for Mr Moon and Ms Lim, that the claims which they ought technically to have advanced by way of a properly pleaded cross-claim, should nevertheless be heard and determined on the basis of the claims advanced in the defence, the absence of a cross-claim being treated on a technicality.
In the circumstances, his Honour was clearly entitled to reject that application. The way in which the defence was pleaded could not be overlooked, given the requirements of the Rules as to the way in which claims which ought to be advanced by way of cross-claim must be pleaded. The necessary particulars of those claims were not provided. The claimed additional terms were not even specified.
Judgment was given on admissions
On appeal it was, nevertheless, urged that it would be concluded that the orders made were orders for default judgment under Part 16 of the Uniform Civil Procedure Rules, which required that there be an affidavit in support satisfying the requirements of Rule 16.2 (see Gregory's Transport). That submission may not be accepted.
Firstly, it may not be overlooked that there was no such application made below. None of the parties nor his Honour referred to such an application. While the defence was struck out, his Honour did not make any order for entry of default judgment. It is apparent from the cases which the parties respectively advanced and the conclusions which his Honour reached, that he intended to give judgment for Ms Mun on the basis of the admissions made in the defence and to refuse Mr Moon and Ms Lim's application that their claims be dealt with, notwithstanding the absence of a properly pleaded cross-claim.
While no reference was made by the parties to Rule 17.7, the application pressed was clearly an application for judgment on admissions made in the pleadings. The case put for Mr Moon and Ms Lim accepted that various admissions had been made, and made further admissions, but urged that their claims for damages for breach of contract should be heard, notwithstanding the 'technicality', that they had not brought any cross-claim.
In those circumstances there can be no question that his Honour had power to enter judgment, if the relevant admissions had been made. Under Rule 17.7(2) that discretion was available to be exercised, even if his Honour had taken the view that other questions lying between the parties in the proceedings had not be determined. He also had to determine whether or not Mr Moon and Ms Lim's claims could be heard, in the circumstances which had arisen for consideration at the hearing, namely that they had not advanced any cross-claim in relation to the breaches of the contract which they alleged.
His Honour clearly did not accept that the failure to put on a cross-claim was a mere technicality, which could be overlooked. While his reasons were shortly given, it is also apparent that his Honour accepted the case advanced for Ms Mun as to judgment in her favour on admissions.
Having outlined the claims advanced in the statement of claim and what was pleaded in the defence, including by way of admission, his Honour took the view that the claims sought to be advanced by the defendants by their defence, were inadequately pleaded, so as to give rise to a lack of procedural fairness for Ms Mun, if the application made for Mr Moon and Ms Lim were to be accepted. He concluded that the defence did not plead anything which Ms Mun should be required to answer. That conclusion rested on his view that the defence did not stipulate the asserted implied oral and implied terms on which the defendants relied and that refusal to pay the $29,000 claimed, rested on a claimed breach of fundamental terms of the contract, particulars of which had not been provided.
His Honour also noted that the defence did not plead either any discharge of the obligation to pay the money due under the contract, or the termination of the contract. It was on that basis that he came to the conclusion that judgment should be entered for Ms Mun. In the circumstances confronting his Honour, these conclusions were clearly open.
His Honour accepted the case advanced for Ms Mun, that in those circumstances she was entitled to judgment on admissions. It follows that the submission that his Honour made an order for default judgment, may not be accepted, notwithstanding that he ordered the defence to be struck out.
The admissions
There were plainly admissions made in the defence on which Ms Mun was entitled to rely. That was not disputed below for Mr Moon and Ms Lim, in the submissions advanced on their behalf. To the contrary, there were further admissions made in those submissions, even though the defence claimed that Mr Moon and Ms Lim were not indebted as Ms Mun alleged.
The written contract for the sale of the business was admitted. The pleaded defence and the submissions advanced below made it clear that it was not in issue that the agreed price was $70,000; that the contract required payment of parts of the sale price on specified dates; that Mr Moon and Ms Lim had entered into occupation of the premises and later conducted a restaurant business there; that part of the purchase price had been paid; and that the amount claimed remained outstanding; Mr Moon and Ms Lim having refused to make the payments due.
The defence claimed that Ms Mun had breached implied and oral terms of the contract. It did not plead that those breaches amounted to a repudiation of the contract, which Mr Moon and Ms Lim had accepted, thereby bringing the contract to an end. Instead, what was pursued was damages for alleged breaches of unspecified implied and oral terms. By that claim it was conceded that the contract remained on foot.
On appeal reliance was placed on what was observed in Arnold. That was a case concerned with default judgment entered after a defence was struck out and a cross-claim dismissed. It was not concerned with judgment entered on admissions. There it was observed:
"57 It may be that if the statement of claim had pleaded that the respondents had fulfilled their promise and that the promise was the quid pro quo for the appellant's obligation to pay a specified amount, the respondents' claim would have been for a liquidated sum. This is consistent with the principles to which I have referred ([46]-[47] above). It is also consistent with the general principle applicable to contracts for the purchase of land that:
"on the failure or refusal of a purchaser to complete an executory contract for the purchase of land the vendor is not entitled to sue for the purchase money as a debt. He is entitled merely to sue for specific performance or for damages for the loss of his bargain. It is only when the contract has been completed by the execution and acceptance of a conveyance that unpaid purchase money may become a debt and can be recovered accordingly."
McDonald v Dennys Lascelles Ltd [1933] HCA 25; 48 CLR 457, at 473, per Dixon J (citing Sir John Salmond). The same principle applies to the sale of goods: McDonald v Dennys Lascelles, at 473-474.
58 However, the statement of claim does not plead that the respondents' promise was the quid pro quo for the appellant's obligation to pay an agreed sum of money. More importantly, it does not plead that the respondents fulfilled their promise, thus enlivening the appellant's obligation. In these circumstances, the statement of claim does not plead a claim for a debt or liquidated sum within the meaning of UCPR r 16.6(1)."
The contract in question in Arnold did not provide for payment to be made on specified dates or for specified amounts. It was an agreement by which a partnership was dissolved, which provided for how the parties' interests and liabilities in the partnership would be divided and the payments which would be made between them. Sackville J considered the claims advanced in the statement of claim in question, from [48], observing that:
"... specification of a precise amount does not convert what is otherwise a claim for unliquidated damages into a liquidated claim: Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; (2008) 227 FLR 1 at 385 [81]. It is therefore necessary to examine the appellant's statement of claim to determine whether it can be characterised as pleading a claim for a debt or liquidated claim so as to satisfy r 16.6(1)."
For reasons which his Honour explained, he concluded at [54] - [55] that:
"54 Mr Horowitz sought to obtain comfort from the fact that the appellant's defence (which was subsequently struck out) appeared to demonstrate an understanding of how the amount claimed in the statement of claim had been calculated. It can be accepted that the appellant was able to follow how the respondents had arrived at the figure included in the statement of claim. But that does not establish that the pleaded claim was for a liquidated amount.
55 It follows from what I have said that the respondents' statement of claim should be read as alleging that the appellant incurred a binding obligation under the Separation Agreement to pay the respondents $203,459.31 if and when he acquired the interests referred to in sub-para 3(b). It follows that his obligation to pay this sum, as pleaded in the statement of claim, was dependent upon the respondents taking the steps necessary to assign or otherwise vest the relevant interests in the appellant."
Issues of this kind did not arise in this case. There was here no issue between the parties that Ms Mun claimed the balance outstanding of the $70,000 purchase price, which was due to be paid on dates fixed in the written contract. There were no steps taken by Mr Moon and Ms Lim to terminate the contract, notwithstanding Ms Mun's alleged fundamental breaches of the agreement. Instead, on their own admissions, Mr Moon and Ms Lim went into possession and conducted a restaurant business there. In the circumstances there is no question that Ms Mun's claim was for a liquidated sum. Contrary to the circumstances dealt with in Arnold, the claim advanced in the statement of claim here in question was clearly a claim that Mr Moon and Ms Lim had a binding obligation to pay Ms Mun a total of some $29,916.67 under the express and implied terms of the written contract, as to the final part of the purchase price, on a specified date and in relation to the rent, in respect of the period that Mr Moon and Ms Lim went into occupation of the premises. By their defence and the submissions advanced at the hearing, they admitted that the payments had not been made, even though they had gone into occupation and operated the business.
As was explained below for Mr Moon and Ms Lim, what they sought to do by their defence was to avoid the payment of all of the amount in issue, by advancing other claims for unspecified damages in respect of alleged breaches of other oral and implied terms of the agreement. The defence did not allege that there had been a total failure of consideration, nor was that advanced below. It was only in oral submissions in reply on appeal, that it was submitted for the first time that there had been such a failure and that the defence should be so understood.
That submission was advanced in order to meet the submission that Mr Moon and Ms Lim had not pleaded a total failure of consideration which could only be advanced in respect of a contract discharged for breach or failure (see Peisley v Maddrell Management Pty Limited and Ors [2010] NSWSC 1477). As there discussed by Johnson J, such a claim is usually precluded when part of the agreed return has been received.
Not only was this not an argument advanced below, it clearly cannot be accepted on the facts, which were not in dispute below. The written contract expressly required payment of parts of the purchase price on specified dates. Payment due was not made even though Mr Moon and Ms Lim went into possession in respect of a period of time for which Ms Mun claimed she had paid rent for which they were liable. This was not denied and so by operation of Rule 14.26 was taken to be admitted. Their claims that other unwritten terms of the contract had been breached by Ms Mun, did not relieve them of the obligation to make the payments due under the contract.
Mr Moon and Mrs Lim were not entitled to pursue a claim for damages by way of the defence filed
It was also complained for Mr Moon and Ms Lim that their defence ought not to have been struck out.
There was power to strike out the defence under Rule 14.28, as disclosing no defence to Ms Mun's claims, if it had a tendency to cause prejudice or delay the proceedings, or if it was otherwise an abuse of process. That was not an application made for Ms Mun, who rather sought judgment in her favour on the basis of the admissions there made. Mr Moon and Ms Lim complained that his Honour's order had the result that they were deprived of a hearing in relation to the claims which they sought to advance by way of the defence, as to Ms Mun's alleged breach of her obligations under the contract,
Under s 22 of the Civil Procedure Act they were entitled to bring a cross-claim in the proceedings, in relation to the claims they wished to advance as to Ms Mun's alleged breaches of their agreement. Under the Uniform Civil Procedure Rules, as was submitted for Ms Mun below, such claims could not be advanced by way of a defence, they had to be pursued by way of cross-claim. No error has been shown in his Honour's refusal to deal with the claims advanced in the defence. They were not adequately pleaded, as the Rules required. This was not a mere technicality which his Honour was obliged to ignore.
Even when the order striking out the defence was made, it was possible for Mr Moon and Ms Lim to seek leave to file a cross-claim and to have the judgment entered in favour of Ms Mun stayed. There was no such application. In the circumstances it is apparent that even if his Honour erred in striking out the defence, it has not been shown that his error vitiated the decision. It has not been shown that the judgment was wrongly given in favour of Ms Mun, given the admissions made. It follows that the appeal must be dismissed.
The usual order as to costs is that they follow the event, with the result that an order should made in favour of Ms Mun, as agreed or assessed. Unless the parties approach within 14 days, this will be the Court's order.
Order
1. The appeal is dismissed.
2. Unless the parties approach to be heard within 14 days, the plaintiffs are to pay the defendant's costs of the proceedings, as agreed or assessed.
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Decision last updated: 24 August 2012
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