Natoli v Leverett [No 3]
[2022] WADC 53
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: NATOLI -v- LEVERETT [No 3] [2022] WADC 53
CORAM: DEPUTY REGISTRAR HEWITT
HEARD: 13 MAY 2022
DELIVERED : 7 JUNE 2022
FILE NO/S: CIV 2749 of 2019
BETWEEN: RACHEL MARGARET NATOLI
First Plaintiff
MARCO ANDREA NATOLI
Second Plaintiff
AND
VICKI MARIE LEVERETT
First Defendant
DREW GRAHAM LEVERETT
Second Defendant
VICKI MARIE LEVERETT
Plaintiff by counterclaim
RACHEL MARGARET & MARCO ANDREA NATOLI
Defendants by counterclaim
Catchwords:
Practice and procedure - Application to strike out defences and counterclaim - Turns on its own facts
Legislation:
Nil
Result:
Application dismissed
Representation:
Counsel:
| First Plaintiff | : | Ms T Forde |
| Second Plaintiff | : | Ms T Forde |
| First Defendant | : | Mr P G McGowan |
| Second Defendant | : | Mr P G McGowan |
| Plaintiff by counterclaim | : | Mr P G McGowan |
| Defendants by counterclaim | : | Ms T Forde |
Solicitors:
| First Plaintiff | : | L J Michelmore |
| Second Plaintiff | : | L J Michelmore |
| First Defendant | : | Rowley Legal |
| Second Defendant | : | Rowley Legal |
| Plaintiff by counterclaim | : | Rowley Legal |
| Defendants by counterclaim | : | L J Michelmore |
Case(s) referred to in decision(s):
Palermo v Palermo [2015] WASCA 49
Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161
DEPUTY REGISTRAR HEWITT:
Introduction
In this matter I am required to determine an application by the plaintiff to strike out the whole of each of the defendants' defences and a counterclaim filed by the first defendant. In order to understand the context in which the application is brought, it is necessary to know something of the facts of the matter, although there is some dispute in regard to those facts as will later appear.
First defendant's defence
The first named defendant and her husband ran a building company named Build West Pty Ltd (Build West). From about 2012 onwards the first defendant and her husband took a lesser involvement in that company and as a consequence it was mismanaged and ultimately Build West ceased to operate and was wound up in 2016. The first defendant and the second defendant were the registered proprietors as tenants in common of a piece of land subject to a registered mortgage. There was a building on the land the subject of an unfinished renovation which had been undertaken by Build West.
The first plaintiff and the first defendant reached an agreement that they would complete the renovations and use the building which was renovated as a show home for an enterprise which they intended to pursue through a company which they intended to register which would pursue small scale premium residential building construction and renovation works in the Perth metropolitan area. That company, which I shall call the new company, was duly incorporated and the first plaintiff and the first defendant were the directors of it.
Renovations were undertaken to the property but the ambition to go into business as a building company was thwarted because it could not obtain builders indemnity insurance.
In about May or June 2017 the plaintiffs undertook considerable work on the property to complete the renovations on the basis that in the event that the property was sold the mortgage would be discharged, various expenses met, the defendants would receive a sum representing the unrenovated value of the property, the monies expended by the plaintiffs on the renovation would be repaid to them, and the balance of any profit divided equally between the parties.
It is the case of the plaintiffs that the work was undertaken by them placing faith in the agreement and representations made to them by the first defendant that the only encumbrances against the property were the mortgage registered on the title, whereas in fact the property was the subject of collateral securities which effectively meant that on the sale, the total of the securities including the mortgage absorbed almost all of the proceeds of sale. The action is based on the representations said to have been made by the first defendant as to the level of encumbrance attached to the property.
Once the new company was unable to engage in construction work due to its inability to obtain insurance, the property was put on the market, sold and the outcome was that neither the plaintiffs nor the defendants received any significant proportion of the proceeds of the sale.
The attitude of the defendants appears to be that the losses which were made by the parties in regard to the proposed venture into construction and renovation work were visited on both sides and that there was no agreement such as is alleged by the plaintiffs, nor was there any misrepresentation as is alleged by them and there is no basis for the action pursued against them. Both the statement of claim and the defences are lengthy documents requiring significant effort to distil the essence of the claim and defence. From that overview, I now turn to the specific paragraphs which have been challenged.
First defendant's defence
The first challenge mounted by the plaintiffs concerns par 2.3 of the re‑amended statement of defence of the first defendant dated 19 October 2021 (first defendant's defence) in which she describes the second plaintiff as a de facto or shadow director of the new company. Allied with that paragraph is par 6.4 which sets out in detail the matters which she alleges supports that description of the second plaintiff. It is argued that the allegation is not supported by material facts. I do not agree. Whilst the allegations are in a number of instances of a general nature, the best in my view that can be said to support the attack is that they might be susceptible to a request for further and better particulars. Some however are complete, such as an allegation that the second plaintiff entered a lease contract in the name of the company without consultation with or instructions from its directors. If there are defects in the matter they could be cured by particulars and if those particulars were wanting, then perhaps a strike out might be appropriate, but it is certainly not appropriate on the case as it is presented to me.
The next paragraphs under attack are pars 1.4 and 2.5 of the first defendant's defence. Those paragraphs respectively allege that the first plaintiff and the second plaintiff were trustees and beneficiaries of the Natoli Family Trust. The relevance of that proposition is not apparent to me, but it is hardly worthy of a strike out. The proposition is either right or wrong. It can be admitted or denied as the plaintiff chooses. Put simply, it is not a matter worth pursuing and certainly adds nothing to the proposition that the whole of the pleading should be struck out.
The next matter requiring consideration are pars 6.1, 6.5, 6.7, 7.2 and 13.4 of the first defendant's defence, and pars 20 and 35 of the re‑amended counterclaim dated 19 October 2021 (counterclaim), all of which were directed to the proposition that the first plaintiff and the first defendant had entered an arrangement in the nature of a partnership. It is alleged that the pleading is so deficient in material facts that the offending paragraphs should be struck out. In my view the existence of an agreement, possibly in the nature of a partnership which intends to achieve its objectives using a corporate structure does not run counter to the proposition that there was indeed a partnership or some agreement of that kind in existence. In that regard I rely on the authority of Palermo v Palermo [2015] WASCA 49.
In my opinion the existence of a partnership agreement or an arrangement similar to a partnership agreement is not precluded by the fact that the parties chose to conduct the business which they had agreed should commence through the medium of a company. In my view the allegations which are advanced by the plaintiff in support of the strike out do not justify the order sought.
I next turn to consider pars 4.2, 4.3 and 4A and 20.1 of the first defendant's defence. These paragraphs are directed to the proposition that the second defendant held his interest in the land as a trustee of the first defendant and as such had no claim to any share of the sale of that land. The paragraphs are challenged on the basis that inadequate material facts are pleaded to establish that to be the case. The pleading makes it clear that the second defendant was added to the title as a matter of convenience, and it was agreed between the defendants that the first defendant was the sole beneficial owner. Were it to be a contest between the first defendant and the second defendant as to who was the beneficial owner there might have been some reason to debate whether sufficient material facts were supplied. That is not the case. There is no contest of relevance to this case as to whether or not the first defendant was the beneficial owner of the relevant property. It simply does not matter and as a consequence I do not accept this is a strike out point.
I next deal with the objections to pars 1.3 and 2.4. Those paragraphs deal with the fact that the first plaintiff is alleged to have been a shareholder of a company called Devcon Projects Pty Ltd (Devcon) and that the second plaintiff was also a director and secretary of that company. That plea is of relevance because Devcon was an entity which was involved in the arrangements in place for the renovation works and as such has relevance to the proceedings.
The next paragraph under attack is par 13.9. That paragraph is a challenge, essentially a non‑admission, of the plaintiff's allegations of the amounts that they spent on renovating the property and alleging that the plaintiffs were working on other projects at the relevant time and charged tools to the company bought for personal use. If there is anything wrong with the paragraph it could be cured by an appropriate worded request for particulars, but in truth it puts the plaintiffs to proof of their allegation and raises an issue in opposition.
The next paragraphs under attack are pars 3.2, 5.14, 5.16, 16.7 and 16.8. Paragraph 3.2 is an admission and the objection to it is not obvious. Paragraph 5.14 is an allegation that the plaintiffs were aware of the first and second defendants' financial position and gives a description of the basis upon which it is alleged they became aware of that material. It may be that a legitimate request for further particulars could be made, but that is not a strike out point at least at this stage in the proceedings. Paragraph 5.16 is a comprehensive list of information which the first defendant alleges the plaintiffs were aware of. It may well be that further and better particulars may be required of this pleading but that is not a strike out point at this stage. Paragraph 16.7 is an allegation that the relationship between the first plaintiff and the first defendant was deteriorating and that by reason of the fact that they worked in proximity in the same office, the first plaintiff was aware that the first defendant was coming under increasing pressure from Westpac to sell the property. Paragraph 16.8 is an allegation that the first plaintiff was aware the first defendant was struggling to service the Westpac loan and that by virtue of the first plaintiff controlling the accounts of the company that the first defendant had no income from the company.
Although there may well be a need for further and better particulars in some aspects of these pleadings, that would not justify striking out the entire pleading at this stage.
The next paragraph under attack is par 5. That paragraph alleges that the first plaintiff was aware of certain matters outlined in pars 5.1 ‑ 5.18 which had been explained to them by the first defendant. There may well be a legitimate request for particulars, but there is nothing before me which would justify the orders which are sought.
The next matter requiring consideration is par 4A.5. That paragraph alleges that the defunct company Build West had begun to renovate the property as a show home but the work had stopped after the initial stages of demolition. It is alleged that the first defendant told the plaintiffs of that fact. The paragraph seems quite innocuous to me and although there may be some legitimate request for particulars, it is hardly a strike out point.
The next paragraph under attack is par 6.5. That paragraph refers back to par 6.1 which refers to oral agreements between the plaintiffs and the first defendant and expresses the first defendant's view of what had been agreed between the parties. Again, there may be room for a legitimate request for particulars, but I am unable to see a legitimate strike out point in the paragraph as it is framed.
The next paragraph under attack is par 9.8. That paragraph outlines how the process for the design and obtaining quotes for the proposed renovation proceeded. There is nothing in it that I can see that is objectionable, certainly nothing deserving of a strike out.
Paragraph 21.3 is next under attack and that paragraph simply alleges that following the sale of the property and repayment of secured loans there was a surplus of $36,656.50. I cannot see anything objectionable in that paragraph at all.
Paragraph 21.4 is next under attack and that paragraph refers to what is shown in various bank statements and alleging that those monies were channelled to the first plaintiff and none of it was received by the first defendant. It would be more usual to plead the receipt of the monies as a fact rather than referring to the bank statement, but I am unable to see any harm being caused by that reference. It simply alerts the plaintiffs to the means by which the first defendant intends to demonstrate the allegation to be true. It does not require the intervention of the court.
The next paragraph under attack is par 28.2. That is a challenge to various invoices which are relied upon by the plaintiffs, the allegation being that of the monies alleged to have been spent by the plaintiffs on the property, only $183,802.90 were in fact so spent. It may be that a claim for particulars would receive a positive result but it is not a strike out point.
The next paragraph under attack is par 4.5(b). That paragraph alleges that prior to the renovation the relevant property was worth $625,000 and that figure was arrived at by a valuation from Opteon Property Group on 3 June 2016 and that that sum was sufficient to discharge all loans owned by the second defendant to Westpac. The manner by which the first defendant concluded an appropriate valuation is irrelevant. What really matters is what was a true valuation, and if the second defendant is able to produce proper evidence to support the claim if the matter went to trial the point would be properly made. The paragraph simply puts the plaintiffs on notice of its allegations as to the value of the property and presumably the first defendant's intention to call admissible expert evidence to support that valuation. It does no harm to the plaintiffs and in fact is to their advantage since it is informed of the basis upon which the allegation is made.
The next paragraph of the first defendant's defence which is under attack is par 13.7. The paragraph deals with the first defendant's response which broadly speaking describes the monies which the plaintiffs outlaid to carry out the renovation works on the building earlier described. Paragraph 13.7 of the first defendant's defence in essence states that she did not know how much money was being spent renovating the property, nor was she consulted for her approval until the task was substantially completed. In truth I am unable to identify a complaint in the plaintiff by counterclaim's submission about this item, nor am I able on my examination of the relevant paragraphs of the amended statement of claim filed 24 August 2021 (statement of claim) and the first defendant's defence, able to discern anything which is a cause of concern.
The next matter requiring attention is par 16.4 of the first defendant's defence. That paragraph contains an allegation that the first plaintiff regularly checked the listing of the property on the internet. In truth, that pleading is largely irrelevant and does not take the defence anywhere. In my view it is innocuous and not worthy of further attention.
There is next a challenge to a catch bag of paragraphs, those being pars 4.1, 4A.2, 9.11 - 9.14, 24.5 and 24.6. Paragraph 4.1 of the first defendant's defence alleges the second defendant was not a direct shareholder or employee of the new company and declined invitations to become a director. Paragraph 4A.2 again repeats that the second defendant had no benefit or interest in the property and no interest in joining the company and had declined offers to do so. Paragraphs 9.11 ‑ 9.14 again underline the proposition that the second defendant was not interested in or involved in any of the matters concerning the renovation and the operations of the new company. Paragraph 24.5 is to the same effect and par 24.6 is a denial that the second defendant required or accepted the benefit of work carried out by the second plaintiff. These are no doubt matters which will feature in the second defendant's defence but are also relevant to the first defendant's defence. There are not separate actions brought by the plaintiffs against each defendant, there is a single action against them both. The involvement of the second defendant has a bearing on whether the matters upon which the plaintiffs rely entitle them to a judgment not only against the first defendant but also the second defendant and also whether the issue of estoppel which is pleaded is relevant to them both. The action is an action against them jointly and it therefore seems to me that either as a defendant is entitled to rely on matters concerning the other. At the worst, the pleadings challenged might be redundant but they certainly do not add weight to an application to strike out the whole of the pleading.
I now turn my attention to the challenge to pars 6.2 ‑ 6.5, 7.1 and 7.2. Paragraph 6.2 ‑ 6.5 are relevant to par 6 of the statement of claim. That paragraph refers to the first plaintiff and the first defendant establishing the new company for the purposes of carrying out building construction. That paragraph is admitted, but the first defendant then goes on to say that the second plaintiff advised that he was not permitted by the Builders Registration Board to be a director of the company and par 6.3 stated that as a consequence he was only able to participate as a building supervisor. Paragraph 6.4 and its subparagraphs allege the actions of the second plaintiff effectively created him a shadow director of the new company and par 6.5 has an allegation as to the contribution of the first defendant to the functioning of the company which it is alleged amounted to the first defendant's contribution to future profits of the partnership which she alleged to exist between her and the first plaintiff. None of this seems to me to be objectionable and I turn to the challenge to par 7.1. That paragraph admits that the first plaintiff and the first defendant were the sole directors but that the second plaintiff was barred from being a director. Paragraph 7.2 is to the effect that because the second plaintiff could not be a director, that his efforts as a registered supervisor should be regarded as part of the plaintiffs' contribution to the partnership entitling the plaintiffs to share half the net profit generated by the company. These allegations go to support the contention by the first defendant that there was a partnership agreement or some agreement akin to a partnership between herself and the first plaintiff and adds support to those propositions. I see no reason why they should be regarded as offensive and lead to the pleading being struck out.
The next paragraph under attack is par 21.5. That paragraph is an allegation as to the normal profit margins in building contracts. It is based, it is alleged, on the experience of the first defendant. Whether the views of the first defendant have any prospect of being admitted as evidence in this case is open to question. I have no idea whether the first defendant has sufficient experience and understanding to be accepted by a court as an expert witness. If the first defendant wishes to pursue the matters alleged in the paragraph she would need to be accepted by the court as an expert witness and additionally leave would be required to adduce that evidence. These are all obstacles in the path of the first defendant in running this aspect of her defence, but they are not a reason to strike it out.
The next paragraph under attack is par 14 of the first defendant's defence. That paragraph explains why the new company was unable to obtain builders indemnity insurance and the connection between that and the second plaintiff. The paragraph explains why the ambitions of the first plaintiff and the first defendant in forming the new company were frustrated which is in its turn important to understand why the property was placed on the market since the ambitions of the parties to enter the construction industry were thwarted through lack of insurance.
I next turn to pars 9.1 and 24.2. Paragraph 9.1 is relevant to the defendant's denial of par 11 of the statement of claim which alleges that the plaintiffs entered an agreement to arrange and pay for the renovation of the property to be used as a display home for the new company and sold at a later date to be agreed. Paragraph 9.1 of the first defendant's defence simply produces her version of the conversations which the plaintiffs allege formed a binding agreement between the parties. Paragraph 24.2 is an admission that it was agreed that the property be renovated by the company. The paragraph is challenged on the basis that there is a conflict between the two propositions, but I am unable to see the matter in that light. The first paragraph is a denial of the contract alleged by the plaintiffs. The second paragraph under attack is the first defendant's response to an allegation in par 25 of the statement of claim that the defendants accepted the benefit of the work carried out by the plaintiffs. The first defendant admits that she accepted the benefit but the paragraph goes on to say that the work was carried out by the company, that she agreed that the property would be renovated by the company and she has not accepted the proposition that the second defendant accepted the benefit of the work. That seems to me to be a coherent pleading and one which is not vulnerable to the attack made upon it.
The next paragraph under attack is par 9.6 of the first defendant's defence. That paragraph is a denial that there was a contract between the company and any of the parties to the proceedings as to any work to be carried out on the property by the company. That pleading is to my mind consistent with the propositions being advanced by the first defendant. The first plaintiff and the first defendant agreed that the renovations should be carried out and it should be the company that did the work. There was not a formal contract between the company and the plaintiffs as is alleged but simply an agreement between the first plaintiff and the first defendant that the renovation should proceed and that work should be done using the company. That is a different thing to a formal contract existing between the plaintiffs and the company and I see no problem with the first defendant making that contention in her pleading.
The next objection concerns pars 2.2, 5.6, 12, 6.5, 7.2, 13.4 of the first defendant's defence and pars 20 and 35 of the counterclaim. The first defendant in her submissions complains that the objection which has been made is not understood and in truth I have sympathy with that proposition, I do not fully understand the submission at all. It would appear that the reason lies in the fact that the relationship between the plaintiffs and the defendants evolved in the first defendant's defence to an agreement that she and the first plaintiff would form a partnership to carry out construction work and that work would be performed by a company which they intended to and did incorporate. It was part of that proposal that a building owned by the defendants should be renovated and used as a display home. The plaintiffs allege that there was a contractual arrangement between themselves and the defendants for that renovation work to be carried out. The first defendant contends that was not the case and it was the intention of the parties that the work would be carried out by the company. The company was not able to commence construction work because it was not possible to obtain the necessary insurance. The plans and ambitions of the partners were therefore modified and whilst it appears to have been contemplated that the renovated home would ultimately be sold, since there was no need for a display home it was decided to place it on the market immediately. That has created a complex situation with two agendas. The first agenda was to incorporate the company and for the first plaintiff and the first defendant to operate a building construction enterprise through that company which would be conducted as a partnership between them. The next matter was the renovation of the property which the first defendant denies was the subject of any agreement with her and/or the second defendant or the company but an investment into the partnership by the plaintiffs to be recognised from profits generated by the building company and ultimately through any profits generated by the sale of the building. It is alleged that there are inconsistencies in the pleading which need to be addressed. I agree that the situation is complex and messy, but I do not agree that the defence in this regard of the first defendant is flawed and that flaw should lead to the pleading being struck out.
The next paragraphs under attack are pars 2.2, 5.6 ‑ 5.12 and 6.5. It will be noted that this largely parallels the previous objection, and I repeat my answer in respect of it.
Second defendant's defence
I now deal with the plaintiffs' application in so far as it seeks to strike out the second defendant's defence.
The first attack is made on pars 3.1, 9.16 and 18(b) of the re‑amended statement of defence of the second defendant dated 19 October 2021 (second defendant's defence). Paragraph 3.1 contains the propositions on which the second defendant relies to establish that he was a trustee of the property for the first defendant and had no beneficial interest in it. Paragraph 9.16 alleges that he authorised the first defendant to sell the property and he did so on the basis that he held his interest as trustee for the first defendant. Paragraph 18(b) is a denial that he became entitled to the net proceeds of sale as he was a trustee on behalf of the first defendant. I see nothing remarkable in the paragraphs nor anything that would warrant a strike out application. It goes to the issue of whether the second defendant would or could be personally liable to the plaintiffs in the event that they are successful in the action. The allegations are consistent with both the first defendant's defence and the plaintiffs' statement of claim as to the role which was occupied by the second defendant in regard to these matters. Exactly what ramifications might flow were he to be established to be a trustee holding his share of the property for the first defendant are not at all clear, but it may well impinge upon the misleading and deceitful conduct aspect of the claim and the claim for unjust enrichment and therefore in my view these pleadings should remain.
The next paragraphs which are attacked are pars 3.3, 3.4 and 4.5. These paragraphs are again reflective of the second defendant's claim that he held his share in the property on trust for the first defendant and had no claim to any amount of the sale price achieved when it was sold and there was no benefit to him by any renovation work carried out by the plaintiffs. That to me seems relevant to the claim of unjust enrichment, although I do not overlook the fact that the liability of the second defendant under the terms of the mortgage registered against the property was reduced. The main thrust however of the plaintiffs' claim relates to undisclosed securities which were satisfied from the sale price. It was within the contemplation of the parties that upon the sale of the property the Westpac mortgage would have to be repaid and it is difficult to see how payment of other obligations secured against the property acted to the benefit of the second defendant, such that he might be held to be unjustly enriched. Such matters are in my opinion relevant and the paragraphs have a place in the proceedings and should not be disturbed.
The next paragraph under attack is once again par 3.3. That paragraph alleges the second defendant was requested by the first defendant to sign the mortgage as a co‑owner and he did so but had taken no other part in the borrowings. Paragraph 3.3 is challenged apparently on the grounds that it is not sufficiently particular. I struggle to imagine what additional particulars might be required to support the proposition which has been advanced at par 3.3. In my view the paragraph is adequate and should not be disturbed.
The next paragraph attacked is par 14 which explains that the second defendant has no knowledge of the matters pleaded in par 17 of the statement of claim, that they were not discussed with him by the plaintiffs or the second defendant, neither the first defendant nor the plaintiffs sought his consent to the sale of the property prior to signing the contract for sale, that the second defendant was never present at any meeting when the sale was discussed, and he did not discuss the sale nor to whom the property was being sold until he signed a contract when asked to do so. The paragraph should not be disturbed.
The next paragraph under attack is par 8A.1. That paragraph alleges that the partial renovation which had been carried out before the first plaintiff and the first defendant had embarked upon their business venture was of value. In truth it hardly matters whether it was or was not. It will have no bearing on the outcome of the case and as far as I can see it is harmless.
The next paragraph under attack is par 9.8. That paragraph is probably irrelevant and pleads that the second defendant's preference was for the property to be sold in its unrenovated condition as the existence of the Westpac loan was an impediment to his own business activities. Again, probably irrelevant, but no basis for striking out the whole of the defence is demonstrated.
The next paragraph identified is par 9.14. That is a denial of the allegation that he indicated to the second plaintiff that he was happy with the way that he had solved a height issue with part of the house and had further discussions about certain aspects of the building. The general thrust of the paragraph is that the second defendant alleges that he had no interest in the building and took no part in its renovation or in discussions about its renovation. These are clear cut propositions, easy to understand and do not require particulars to amplify them.
The next matters under attack are pars 4.6 and 23.3. Paragraph 4.6 alleges that the value of the unrenovated property provided sufficient equity to pay the debts secured by the mortgage registered against it. Again, par 23.3 is a denial that the second defendant received any benefit from any renovation work which was untaken by the plaintiffs, again because the equity in the property was sufficient to repay any liability which he might be exposed to in regard to the property. Once again, that is a clear proposition, it is easy to understand and it does not need particulars. It is a matter of evidence.
The next items under attack are pars 4.6 and 8B.1. Paragraph 4.6, I have already commented on and further comment is not necessary in regard to this matter. As to par 8B.1, the second defendant alleges that he has no knowledge of the matters alleged in par 10 of the statement of claim and consequently cannot plead to it. There is really nothing to say about such a plea and certainly no need to take strike out action.
The next paragraphs under attack are pars 9, 12, 22.2, 23.7 and 28. Paragraph 9 is a denial of par 11 of the statement of claim and a series of propositions advanced in pars 9.1 ‑ 9.16 in answer. Various of these paragraphs have already been dealt with and the objection is not raised with sufficient clarity for me to properly understand what is being contended and why this paragraph should lead me to strike out the whole of the defence. Paragraph 12 contains an admission that he was aware that the property was being renovated as a show home for the company and those renovations were completed the date of which he cannot recall; he has no knowledge of the other matters which are pleaded in par 15 of the statement of claim. That is an unremarkable paragraph and I see no reason to interfere with it. Paragraph 22.2 follows on a denial of par 24 of the statement of claim that alleges that the defendants at all times were aware of the renovation works and the works undertaken by the plaintiffs as particularised in par 11 of the statement of claim. Paragraph 22.2 repeats the assertions which the second defendant made in par 5.2 and adds a certain rhetoric to that material by way of argument. That is not good pleading practice, adds nothing to the defence, but is harmless in the context of the action. Paragraph 23.7 repeats the second defendant's denial that he received any benefit from the work carried out by the plaintiffs but says if any such benefit was received that work was unsolicited by him and by virtue of the operation of s 42 sch 2 of the Competition and Consumer Act 2010 (Cth) is not liable to make any payment therefore. A fairly simple proposition: he received no benefit, but if he did, it was unsolicited and he has a defence under the statute. The next paragraph is par 28 which is a denial of pars 32 ‑ 37 of the statement of claim followed by a series of paragraphs identifying specific representations which he denies making and a denial that he authorised the first defendant to make any such representations on his behalf. That paragraph should not be disturbed.
The final objection is to pars 5.2, 7, 14, 22 and 23. Paragraph 5.2 alleges that the second defendant has never been a director, shareholder or employee of the company, did not make any decisions or participate in any discussions with the plaintiffs and the first defendant in respect of the property, and he understood that the property was to be a show home for the company when renovated. Of course the understanding of the second defendant is not properly in the pleading but that pleading is consistent with virtually every other pleading in this case and to strike it out would be pointless. Paragraph 7 is an admission that the first plaintiff and the first defendant were directors of the company but that he was unaware that the second plaintiff was appointed to be the registered supervisor of the company other than through his participation in the present proceedings. The proposition is straightforward, it is easily understood and it is simply a matter of evidence not objection. Paragraph 14 is a denial with which I have earlier dealt in this decision. Paragraph 22 has likewise been the subject of comment, and par 23 has likewise been dealt with elsewhere.
Counterclaim
It is clear that the applicant plaintiffs rely on the defences of the first and second defendants to the initial action being struck out which would have the inevitable effect of carrying the counterclaim with them to the grave. The basis of the application is clearly that if the defence of the first and second defendants to the original action are struck out the counterclaim must follow them to the grave. I am not prepared to strike out either of those defences and as a consequence the application insofar as it concerns the counterclaim will fail.
Overall comments
On many occasions in this decision I have referred to the use of a request for further and better particulars. I am aware that such a request has been made but it was not put before me or referred to in argument, other than to allege its existence. Whether or not the request was answered properly and whether or not the questions were such to overcome what the plaintiffs perceive as deficiencies in the defences remains unresolved. I have simply dealt with the arguments which are before me and the pleadings which are before me and have not involved myself in any inquiry as to what may have happened in regard to requests for further and better particulars.
My overall impression is, as in most instances of a lengthy pleading, there are some deficiencies. For the most part those deficiencies may be cured by a request for further and better particulars. I have found nothing in the defences under attack justifying the wholesale slaughter which is contemplated by the application which has been brought. In my view this application is an instance of the problems which were referred to by Chief Justice Martin in the case of Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161 [2]. In that case in the second paragraph his Honour made the following remarks:
Before dealing with this specific application, I would observe that both I and the other members of this Court are firmly of the view that interlocutory disputes of this kind must be actively discouraged. In many cases, interlocutory disputes, particularly disputes relating to pleading issues, consume very substantial amounts of time and expense on the part of both the parties and the Court. In many cases, the time and expense involved in the consideration and resolution of the interlocutory dispute is entirely disproportionate to its significance to the just and effective resolution of the case as a whole by mediation or trial. For this reason, this Court will use the existing powers available under the Rules of the Supreme Court ('the Rules') and if necessary amend the Rules to actively discourage disputes of this kind. In very general terms, interlocutory disputes of this kind will only be entertained by the Court if the time and expense involved in their resolution is proportionate to the significance of the dispute to the just and effective resolution of the case. This principle is, in my view, already inherent in the provisions of the Rules when read as a whole, including in particular O 1 r 4A and r 4B, O 29 and O 29A.
This is a classic of the kind of situation to which his Honour was referring. This application took almost two days to argue. The costs involved will be considerable. Very detailed materials have been filed, particularly by the plaintiffs, but also to a lesser extent by the defendants. What is in truth at issue is whether the plaintiffs were misled into renovating the property relying on assurances that the mortgage registered on the property was the only encumbrance to it and in the event that the property was sold there would be sufficient for them to be reimbursed their expenses together with some share of a profit figure. That is an easy concept to understand but sadly it has been largely buried and obscured by the pleadings rather than elucidated by them. My conclusion therefore is that the application should be dismissed. Leave was required to bring the application and that leave is granted. The application is otherwise dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
FN
Associate
3 JUNE 2022
0
2
0