Paccar Financial Pty Limited v David Menzies
[2011] NSWSC 1255
•05 October 2011
Supreme Court
New South Wales
Case Title: Paccar Financial Pty Limited v David Menzies & Anor Medium Neutral Citation: [2011] NSWSC 1255 Hearing Date(s): 4 October 2011 Decision Date: 05 October 2011 Jurisdiction: Common Law Before: Walmsley AJ
Decision: (1) Order the amended defence be struck out.
(2) Grant the defendants leave to file and serve an amended defence to the amended statement of claim drafted in accordance with pt 14 of the Uniform Civil Procedure Rules 20.05, on or before 26 October 2011. Dispense with the need to comply with r 19.5(2).
(3) Order the first cross-claim be struck out and give leave to the defendants to file and serve an amended cross claim on or before 26 October 2011. Dispense with the need to comply with r 19.5(2).
(4) Order the defendants pay the plaintiff's costs of and incident to the motion of 18 August 2011.Catchwords: PLEADINGS - principles involved in pleading defence - striking out defence - costs - whether successful party entitled to order for assessment forthwith
Legislation Cited: Competition and Consumer Act 2010
Contracts Review Act 1980
Corporations Act 2001 (Cth)Cases Cited: Fiduciary Ltd & Anor v Morningstar Research Pty Ltd & Ors (2002) 55 NSWLR 1
Richards v Kadian (No 2) [2005] NSWCA 373Texts Cited: Hamilton, Lindsay, Morahan and Webster, New South Wales Civil Procedure Handbook 2011 (2011)
I H Jacob, Bullen and Leake and Jacob's Precedents and Pleadings (12th ed 1975)Category: Interlocutory applications Parties: Paccar Financial Pty Limited (Plaintiff, cross-defendant)
Ian David Menzies (First defendant, first cross-claimant)
Colleen Anne Menzies (Second defendant, second cross-claimant)Representation - Counsel: D Rayment (Plaintiff, cross-defendant)
W Washington (Defendants, cross-claimants)- Solicitors: Hopkins Lawyers (Plaintiff, cross-defendant)
Hall Partners (Defendants, cross-claimants)File number(s): 2010/377702 Publication Restriction:
JUDGMENT
The questions for resolution are whether I should strike out the defendants' defence to the amended statement of claim, and whether I should also strike out their cross-claim.
On 23 June 2011 the defendants filed a defence to the plaintiff's amended statement of claim. By two letters of 14 July 2011, the solicitors for the plaintiff complained to the defendants' solicitors that there were technical defects with their pleading. Among other matters, it was said that it had pleaded matters which were really matters of evidence and was in breach of UCPR 14.7, it was too long, it was repetitive, it was prolix, and it was hard to understand. Details of a number of the asserted defects were set out.
Following the sending of those letters the defendants filed a cross-claim, purportedly with leave, although as I take Mr W Washington (who appears for the defendants) to concede, leave had not in fact been given. Pursuant to leave which was in fact given on 9 August 2011, the defendants then filed a further defence, called an amended defence, to the plaintiff's amended statement of claim.
Before me yesterday was a motion for the striking out of both the cross-claim and the amended defence, together with consequential orders.
Mr Washington opposed the orders sought. Mr D Rayment, for the plaintiff, attacked the amended defence on a number of bases. He did also, to a lesser degree, attack the cross-claim. But in the end, I took Mr Washington to concede that if the amended defence were struck out, it should follow that the cross-claim should also be struck out.
It is necessary now to say something of the facts giving rise to the dispute, because they are relevant to the resolution of the pleading issues.
The claim arises from the lending by the plaintiff, a finance company, of money to a company, which is now in liquidation, and of which the defendants were the directors. The purpose of the loan was to permit the company to buy two prime movers and semitrailers. The company, it is said, defaulted under its agreements with the plaintiff. There is said to be a large sum outstanding. It is alleged that the company failed to comply with certain demands, and that the defendants, who had guaranteed the company's obligations, failed to comply with demands served on them.
The plaintiff alleges also that it had a charge on the equipment, that the liquidator disclaimed any interest in it under s 568A of the Corporations Act 2001 (Cth) (the Act), and that although it is now entitled to take possession of the equipment, the defendants, when required to hand it over, declined to do so.
The plaintiff alternatively avers that the defendants disposed of the equipment without its consent, and, among other orders, asks for a vesting order under s 568F of the Act.
As appears from the amended defence, the defendants agree that the plaintiff lent money to the company but say that the loan agreement made was not the one sued on. They say they were misled about the terms of the agreement they did make. They complain about the circumstances in which the loan documents were executed.
For example, they allege that they signed blank attestation pages without seeing what they would be attached to, and that employees of the plaintiff later attached the pages they had signed, to other pages, which they had not. They say the agreement they made with the company, being one different from that sued on, was one which involved money being lent to the company to permit it to buy the semitrailers and prime movers, the company then being obliged to repay the debt. But under that agreement the company had the right to have repayments revised or suspended, to accommodate the company when business was slow, or when there occurred what was described as a "downtime event". The requirement for repayments, it was said, would then be given flexibility, and applied in a commonsense way, so as to accommodate any change in circumstances of the company.
The defendants allege that on 24 June 2008 Mr Menzies (the first defendant) suffered a neck fracture, and that caused what was called a "downtime period", which was not accommodated by the plaintiff in the way the agreement the defendants and the company had contemplated. In not permitting the company to operate in that commonsense and flexible way, the plaintiff itself was in breach of the agreement, and the company had no obligation to repay the money; they, accordingly, also had no obligation.
In substance then, the defendants' version of the agreements was that they did not sign the agreement sued on and the money they concede was lent was lent on quite different terms from those alleged by the plaintiff.
The defendants say further that by reason of what they were told by an employee of the plaintiff as to the availability of flexible payments and an understanding approach when there were downtime events, they were misled, and the plaintiff was in breach of s 18 Pt 2-1 Ch 2 of the Competition and Consumer Act 2010 or, alternatively, the Contracts Review Act 1980, and they are entitled to consequential relief.
The plaintiff attacked the amended defence on a number of grounds. The grounds are based on long established principles of pleading, and the UCPR rules of pleading which reflect those principles.
In the 12th edition of Bullen and Leake and Jacob's Precedents and Pleadings at p 73 the learned authors said this under the heading "Function of the defence":
"The function of the defence is to state the grounds and the material facts on which the defendant relies for his defence. The primary object of the defence is to inform the plaintiff precisely how much of the statement of claim the defendant admits and how much he denies, and what grounds and facts the defendant relies on to defeat the claim of the plaintiff. In his defence the defendant must deal specifically with every material allegation contained in the statement of claim, traversing it or admitting it or admitting it with some stated qualification. He may object, if he wishes, that the statement of claim or some special part of it is bad in law. He must state in a summary form the material facts on which he relies for his defence, but not the evidence by which he will seek to prove those facts at the trial. He may plead any set-off or counterclaim which he desires to set up."
The reference to "counterclaim" of course in this jurisdiction ought be read as a reference to a cross-claim.
At p 431-432 of the Thomson Reuters publication, New South Wales Civil Procedure Handbook 2011, the learned authors say this:
"A defence generally takes one or more of the following forms: a traverse, i.e. a denial or non-admission of the plaintiff's allegations; a confession and avoidance (admission of the facts alleged by the plaintiff with an allegation of other facts which excuse or justify them); an objection in point of law, or a plea that the statement of claim discloses no cause of action."
Having regard to those principles and the arguments put to me by Mr Rayment and Mr Washington, I have formed the view that the amended defence should be struck out but that the defendants should have leave to file a further amended defence.
Often when a court looks at a pleading, including one in reply or response to a previous one, such as this one, it is possible to formulate orders which permit amendments which, when incorporated in or grafted on to an existing pleading, can bring about clarity and a conformity with relevant pleading rules and principles.
Unfortunately, the difficulties with this pleading are so extensive that I do not consider that is an appropriate course here. Among other difficulties, the pleading has these defects:
(1)There is a lack of uniformity in the numbering system. Most paragraphs have brackets around them, but not all of them. None of the paragraphs in the amended statement of claim which it purports to respond to, have bracketed numbers. The presence of the brackets is a relatively minor matter, but the lack of uniformity threatens to puzzle the reader. The puzzle increases at paragraphs 26G onwards. Paragraphs 26G through to 26K read as follows:
"26G. Admit.
26 H and 26I. Refer 26G above.
26J Admit.
26K Admit.
26K and 26L Refer 26J."These are probably all making admissions, but because of the use of expressions such as "Refer 26J" the matter is left, to my mind, in a state of some uncertainty.
(2)Although it is traditional for the pleader to respond paragraph by paragraph, or at least refer by number to the paragraphs of the previous pleading, and this amended defence does to a large extent do this, it does not do so uniformly. For example, the amended defence responds appropriately to paragraph 1 and, to a degree, with paragraph 2. But then in paragraph 3, which otherwise purports to respond to paragraph 3, it begins by saying, "In further answer to paragraph 2". In response to paragraph 2, which alleges money was lent upon certain written terms, rather than admitting money was lent but avoiding the averral by denying it was lent on the alleged terms, the defendants have simply denied the whole paragraph and then have gone on to assert money was lent but upon representations being made that the plaintiff would be understanding about re-negotiating contractual terms and that on two separate occasions the defendants were asked to sign blank attestation pages which were not attached to any loan agreement but that the plaintiff later put them together with loan and charge documents, the effect being that the defendant did not in fact execute the documents sued on.
(3)It is not unusual, and it is not inconsistent with pleading practice, for an answering pleading to confess and avoid, explaining, as was done here, why avoidance is sought. But the defendants thereafter represented a number of times over, and to a varying degree and in varying forms, the formula of words used in answer to paragraph 2. The later versions may be found on five occasions, namely at paragraphs (3)(d)(v), at (3)(5)(i), at (6)(i), at (12) and (14)(ii). The particulars are quite dense and the variations in language might suggest differences of meaning which the author probably did not intend to present. These additional versions were unnecessarily repetitive and made the pleading excessively verbose: see UCPR 14.8. Their appearance at various stages of the pleading makes reading the pleading an unnecessarily onerous task.
(4)
(a)In paragraph 3 of the amended statement of claim the plaintiff alleges that its loan agreements contained certain loan agreement terms, which it specified, such as the granting of a fixed charge over the equipment. The amended defence, I consider, could have admitted that the documents put forward by the plaintiff as representing the alleged loan agreement contained all of the pleaded provisions Yet in response to 3(b), (c), (d) and (e), those allegations were denied, in each case the denial being accompanied by very lengthy allegations, many of which were not responsive to the amended statement of claim at all. For example, paragraph 3(d) of the amended statement of claim said:
"Pursuant to the Loan Contracts, Menzies Haulage agreed that if an Event of Default occurred, the Plaintiff would be entitled to:
i. take possession of the Equipment; and/or
ii. terminate the Loan Contract; and/or
iii. declare how much is payable by Menzies Haulage pursuant to the Loan Contract and demand immediate payment of that amount ('Termination Amount"); and/or
iv. sue Menzies Haulage for the Termination Amount and production of a certificate as to the Termination Amount would be sufficient evidence of that fact."(b)At 3(d)(iv) of the amended defence this was said:
"Admit that Paccar Financial purported to terminate the loan contracts by refusing to accept a payment of $5,610.00 when tendered by Menzies Haulage on 12 December 2008, and also by demanding that Menzies Haulage deliver up the trucks to it, on or about 6 December 2008, when the parties relationship was the subject of an instalment agreement."
(c)As is apparent, however, from paragraph 3(d) of the statement of claim, the plaintiff did not assert that it had purported to terminate any loan agreements.
(d)Paragraph 3(d)(v) is, in the main, not responsive, unnecessarily lengthy, and repetitious, among other problems. Some, although not many, sub-paragraphs in the amended defence, had no adjacent numbers or letters to identify them.
(5)
(a)Certain matters of a factual kind were alleged, which were irrelevant to the case pleaded by both parties, and which raised unnecessary disputes. For example, at paragraph 13 of the amended statement of claim this is said:
"On 3 September 2009, Menzies Haulage was wound up in insolvency under the Corporations Act 2001 (Cth) by order of the Federal Court of Australia."
(b)Clearly that was alleged to permit the plaintiff to seek certain relief, and I would regard that allegation as an uncontroversial averral and one to be admitted, there being no issue between the parties, as I understood the argument yesterday, about the fact that the company had in fact been wound up on the basis of a failure to comply with a statutory demand to pay a debt. But the defendants, in response to that paragraph, said this:
"(i) Admit that Menzies Haulage was wound up by the Federal Court of Australia on 3 September 2009, but deny for the purposes of these proceedings that Menzies Haulage was insolvent;
(ii) Say that Menzies Haulage was wound up consequent upon the issue of a creditors statutory demand issued by Paccar Financial in which it claimed as a debt due the same debt as is the subject of these proceedings, but say that Menzies Haulage failed to commence proceedings within time, so as to set aside the demand;
(iii) Otherwise say that the debt the subject of the demand was and is genuinely disputed and that Menzies Haulage was entitled, (had it filed proceedings within time), to have the demand set aside."
(c)An alternative and perhaps far more appropriate way to deal with that would simply have been to say: "The allegations in paragraph 13 are admitted." The response I have quoted was, unfortunately, not atypical of the pleading itself.
(6)It has long been the practice of the pleader to indicate the amendments in a pleading by underlining. The practice is recognised in UCPR 19.5. Unfortunately, although the amended defence did in this way underline amendments, it did not underline all amendments. For example, the document contains amendments to (3)(d), (5)(ii)(f) and (5)(ii)(g) which are not underlined. There are other examples.
The amended statement of claim could have been responded to, I would have thought, somewhat more simply than has occurred, by admitting, as the defendants have done, paragraph 1, denying paragraphs 2, 3, 4 and 5 but asserting in response to paragraph 2, by way of further defence, the agreement sued on was not enforceable because the defendants did not sign or adopt the relevant documents and, further, while there was a loan from the plaintiff to the company it was not on the terms alleged by the plaintiff but on different terms, namely, that the plaintiff would be flexible at times of financial crisis and would re-negotiate to give reasonable extensions of time for repayments.
Matters averred such as sending of letters (see paragraph 8), I would have thought, ought be admitted since they are not in issue. If the agreement alleged had been denied at an early stage of the responsive pleading, then admitting matters such as the service of letters of demand would present no danger of unnecessary admissions, and ensure only matters truly in issue go to trial.
Many of the problems in the pleading stem from an apparent concern that an earlier denial of matters alleged may not be seen as a general denial, thus giving rise to more repetition.
Mr Rayment submitted that the pleading suffered from having pleaded matters of evidence rather than simply material facts (UCPR 14.7). He gave as examples 2(6) and 2(10) and 2(18).
It is not always easy to make this distinction. At times in a pleading there is a greater need for particularity under the heading "particulars" than at others. The vice in the paragraphs identified is, however, I consider, that they do not appear as particulars but as averrals, therefore to be pleaded to. I accept Mr Rayment's submission that they should, if they appear, be presented as particulars.
Mr Rayment submitted as to paragraphs 26Q to R in the defendants' pleading that they pleaded "without prejudice" matters. In my view, the paragraphs are not responsive to what they purport to respond to. They allege that the defendants had offered to pay for the equipment but that the plaintiff declined their offer. Yet on the face of both pleadings, this matter is not relevant to any issue. So at least on that ground, and not necessarily by reason of the "without prejudice" argument, they should not appear in the pleading.
It is by reason of the above matters, I have decided that the plaintiff is entitled to an order that the amended defence be struck out.
It was not suggested that there is not a bona fide defence. Indeed, I can see that a bona fide defence may well be present. It would be in the interests of justice, I think, in the circumstances, to permit, as I do, the defendants to re-plead, by filing a further amended defence.
Mr Washington, as I have earlier observed, conceded that the cross-claim should also go if I strike out the defence.
For the reasons I think it appropriate to give the defendants leave to file an amended defence, I consider they ought also have leave to file an amended cross-claim. I propose to allow the defendants three weeks to file both their amended defences and their amended cross-claim.
In making that observation, I decline to accept Mr Rayment's submission made yesterday that I ought not give the defendants leave to file an amended cross-claim until one has been served on the plaintiff's solicitors. If any amended cross-claim suffers any pleading defects then the plaintiff will, when it is served, have its remedy.
Mr Rayment conceded that I ought dispense with the need for the defendants to comply with r 19.5(2), and I agree. I dispense with the need for the defendants to comply with r 19.5(2) for both the amended defence and the amended cross-claim. The reason is obvious. Each will be an entirely new document. The defence, I trust, will be much shorter. The cross-claim will have a pleading relationship with the defence.
Mr Washington conceded that his clients should be ordered to pay the costs of the plaintiff if this application succeeds, as it does, and I propose making that order.
Mr Rayment sought an order under UCPR 42.7(2) that the plaintiff have leave to have costs assessed forthwith. He referred me to Fiduciary Ltd & Anor v Morningstar Research Pty Ltd & Ors (2002) 55 NSWLR 1.
It was not contested by Mr Washington that at least some of the difficulties with his pleading were drawn to the attention of the defendants' solicitors by letter before the motion. He put to me, however, that this is not an appropriate matter in which to make an order that costs be paid forthwith: it is a complex matter, and his clients did not behave unreasonably; when certain shortcomings in an earlier version of the amended defence were raised by the plaintiff's solicitors, they were taken into account when the later version was settled; it will not be an inordinate time before the matter gets on for trial.
In Fiduciary Ltd & Anor at pages 4 and 5, Barrett J referred to what is now UCPR 43.7(2) and listed categories of case where such an order would be appropriate as:
"[W]here the application or aspect in respect of which the particular costs order is made before conclusion of the proceedings represents the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect.
...
[Where] some unreasonable conduct on the part of the party against whom costs have been ordered.
...
[And where] as it was put by Giles J in Doran Constructions Pty Ltd v University of Newcastle (Giles J, 16 December 1994, unreported) at 21, that "there was much to come in these proceedings" and "one can see a fairly long time before the proceedings are disposed of"."But as his Honour noted at paragraph 7, the demands of justice, in the end, are the only determinant.
I decline to order that the defendants pay the costs of the motion before the conclusion of these proceedings. First, the ordinary rule is that they are paid at the end of the proceedings. Secondly, this was, after all, a pleading dispute. It is not indicative of any bad conduct in the litigation on the part of the defendants. Thirdly, there is no evidence that the case will not now get on for hearing reasonably promptly. Fourthly, I contemplate that there may be orders before the matter goes to trial or perhaps at trial, going different ways: Richards v Kadian (No 2) [2005] NSWCA 373 at [7]. Fifthly, I also take into account that if the allegations of the defendants are accepted by the trial judge, then they have a genuine grievance and perhaps a genuine defence. Finally, the argument took a little over half a day, and was not what could be regarded as a substantial interlocutory matter.
The orders I make are these:
(1)I order that the amended defence be struck out.
(2)I grant the defendants leave to file and serve an amended defence to the amended statement of claim drafted in accordance with pt 14 of the Uniform Civil Procedure Rules 20.05, on or before 26 October 2011. I dispense with the need to comply with r 19.5(2).
(3)I order that the first cross-claim be struck out and give leave to the defendants to file and serve an amended cross claim on or before 26 October 2011. I dispense with the need to comply with r 19.5(2).
(4)I order that the defendants pay the plaintiff's costs of and incident to the motion of 18 August 2011.
**********
0
2
3