Reliance Capital Pty Ltd v Caratti [No 6]
[2024] WASC 21
•5 FEBRUARY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RELIANCE CAPITAL PTY LTD -v- CARATTI [No 6] [2024] WASC 21
CORAM: LUNDBERG J
HEARD: 31 JANUARY 2024
DELIVERED : 5 FEBRUARY 2024
FILE NO/S: CIV 2283 of 2021
BETWEEN: RELIANCE CAPITAL PTY LTD
Plaintiff
AND
ALLEN BRUCE CARATTI
First Defendant
TINA MICHELLE BAZZO
Second Defendant
FILE NO/S: CIV 3136 of 2019
BETWEEN: RELIANCE CAPITAL PTY LTD
Plaintiff
AND
ALLEN BRUCE CARATTI
First Defendant
TINA MICHELLE BAZZO
Second Defendant
Catchwords:
Practice and procedure - Applications by defendants for leave to amend pleadings on the eve of trial - Applications heard on third day of trial
Practice and procedure - Applications for leave to amend defence in CIV 3136 - Consideration as to whether amendments are reasonably arguable - Consideration as to whether amendments should otherwise be refused on case management grounds - Application of Aon Risk Services Australia Ltd v Australian National University - Various amendments refused and certain amendments allowed - Turns on own facts
Practice and procedure - Applications for leave to amend defence and rejoinder in CIV 2283 - Consideration as to whether amendments are reasonably arguable - Consideration as to whether amendments should otherwise be refused on case management grounds - Application of Aon Risk Services Australia Ltd v Australian National University - Amendment as to effect of garnishee notice refused - Amendment to counterclaim allowed - Turns on own facts
Legislation:
Australian Securities and Investments Commission Act 2001 (Cth), s 12CB, s 12DA
Corporations Act 2001 (Cth), s 1041H
Rules of the Supreme Court 1971 (WA), O 20 r 8, O 20 r 9, O 20 r 19(1), O 37 r 6
Taxation Administration Act 1953 (Cth), s 260-5 of Schedule 1
Result:
Defendants' applications to amend pleadings disposed of in accordance with court's ruling dated 1 February 2024
Category: B
Representation:
CIV 2283 of 2021
Counsel:
| Plaintiff | : | Mr R J S French & Mr A J Tharby |
| First Defendant | : | Dr J T Schoombee & Mr A P Rumsley |
| Second Defendant | : | Dr J T Schoombee & Mr A P Rumsley |
Solicitors:
| Plaintiff | : | Bennett |
| First Defendant | : | Alan Rumsley |
| Second Defendant | : | Alan Rumsley |
CIV 3136 of 2019
Counsel:
| Plaintiff | : | Mr R J S French & Mr A J Tharby |
| First Defendant | : | Dr J T Schoombee & Mr A P Rumsley |
| Second Defendant | : | Dr J T Schoombee & Mr A P Rumsley |
Solicitors:
| Plaintiff | : | Bennett |
| First Defendant | : | Alan Rumsley |
| Second Defendant | : | Alan Rumsley |
Case(s) referred to in decision(s):
1110 Hay Pty Ltd as trustee for the Hay Street Trust v Metso Minerals (Australia) Ltd [No 4] [2019] WASC 146
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303
George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434
Koolan Iron Ore Pty Ltd v GHD Pty Ltd [No 2] [2022] WASC 442
Laundy Hotels (Quarry) Pty Limited v Dyco Hotels Pty Limited [2023] HCA 6
Luxer Holdings Pty Ltd v Glentham Pty Ltd [2007] WASCA 209
Scanlan's New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169
Walthamstow Pty Ltd v Caratti [2023] WASC 76
Walthamstow Pty Ltd v Caratti [No 2] [2023] WASC 363
Walthamstow Pty Ltd v Caratti [No 3] [2023] WASC 413
Walthamstow Pty Ltd v Caratti [No 4] [2024] WASC 1
Walthamstow Pty Ltd v Caratti [No 5] [2024] WASC 2
Table of Contents
A. Introduction
B. Overview of the amendments
The amendments in CIV 3136
The amendments in CIV 2283
C. The court's rulings on the amendments
The rulings on 1 February 2024
Clarification on 2 February 2024
D. Consideration of the amendments in CIV 3136
Paragraph 17 - extension of the loan agreement
Paragraphs 32, 33, 36 and 37 - invalidity of the demands
Paragraphs 35.8 and 35.8A - breach of duty and unconscionable conduct
E. Consideration of the amendments in CIV 2283
Paragraph 49(b) of the Defence - counterclaim amendments
Paragraph 4 of the Rejoinder - garnishee notice
F. Conclusion and orders
ATTACHMENT A Rulings delivered on 1 February 2024
LUNDBERG J:
A. Introduction
These reasons concern the applications made by the defendants to amend their pleadings in two actions, CIV 3136 and CIV 2283. The applications were heard on the third day of the listed trial. The applications were opposed by the plaintiff.[1] The defendants' application to amend in CIV 3136 was supported by the affidavit of Ms Bazzo sworn on 30 January 2024. In opposition, the plaintiff relied on the affidavit of one of its solicitors, Mr Howieson, affirmed on 31 January 2024. I have reviewed both affidavits.
[1] The name of the plaintiff has recently changed from Walthamstow Pty Ltd to Reliance Capital Pty Ltd.
The defendants objected to Mr Howieson's affidavit, on the basis that it had been sworn on information and belief and had not been sworn by Mr Masel, the director for the plaintiff. Mr Masel was available to attest to the matters the subject of the affidavit. As the affidavit was sworn in relation to an interlocutory application, it was permissible in my view for the plaintiff to rely on such an affidavit, although the weight to be attributed thereto was a matter of submission.[2]
[2] Rules of the Supreme Court 1971 (WA), O 37 r 6(2)(c) and r 6(3A).
Before descending into the detail of the applications, it is important to approach these reasons, and the applications themselves, with a sense of perspective as to the course these actions have taken over recent months in a procedural sense. The defendants' applications do not fall to be assessed in a vacuum. These reasons should thus be read together with the previous reasons published in these actions[3] and the matters set out below.
[3] Walthamstow Pty Ltd v Caratti [2023] WASC 76; Walthamstow Pty Ltd v Caratti [No 2] [2023] WASC 363; Walthamstow Pty Ltd v Caratti [No 3] [2023] WASC 413; Walthamstow Pty Ltd v Caratti[No 4] [2024] WASC 1; and Walthamstow Pty Ltd v Caratti[No 5] [2024] WASC 2.
On 16 March 2023, I ordered that the trial of the actions[4] be listed for the period 6 November 2023 to 17 November 2023. On 25 October 2023, following late applications for leave to amend pleadings and to serve witness statements, I vacated the trial. In my reasons delivered on 30 October 2023, I summarised the developments which led to the need to vacate the trial as follows:[5]
… in recent weeks there has been a flurry of activity from both the plaintiff and the defendants which has involved the extremely late filing of lay evidence by the defendants, late amendments to the defendants' pleadings, late amendments to the plaintiff's pleadings, late filing of further lay evidence by the plaintiff, the possibility of further expert evidence being required, and the possibility of further discovery being sought. To compound this, the solicitors for the plaintiff have changed twice in the last month or so.
[4] The orders initially included CIV 3016 of 2019.
[5] Walthamstow Pty Ltd v Caratti [No 3] [2(d)].
By orders made on 27 October 2023 and 8 November 2023, the trial was relisted to commence on 29 January 2024 for a period of 10 days. Since that time, the court has made arrangements to make an additional trial day available.
There have been various interlocutory applications and fixtures scheduled in these actions since October 2023. I refer in this regard to the following hearings: 20, 24 and 27 October 2023; 8 and 23 November 2023; and 15 and 22 December 2023. A chronology of those hearings is conveniently set out in an attachment to the reasons delivered on 5 January 2024. The applications and the hearings (including, in particular, the strategic conference held on 8 November 2023) have necessitated the parties and the court undertaking a close review of the pleadings in the actions.
In this context, the significant raft of amendments proposed by the defendants on the eve of trial was more than unexpected, and demands close scrutiny.
B. Overview of the amendments
The amendments in CIV 3136
In CIV 3136, the defendants first foreshadowed the amendments in their opening submissions for trial, which were filed on 19 January 2024 (in effect, five business days before the trial was due to commence). Those submissions foreshadowed that several allegations in the defence would be abandoned, namely the allegations that:
(a)the pleaded representation also constituted an enforceable agreement;[6]
(b)the plea that the plaintiff's conduct was misleading or deceptive contrary to s 12DA of the Australian and Securities Investments Commission Act 2001 (Cth) (ASIC Act) and s 1041H of the Corporations Act 2001 (Cth) (CA);[7] and
(c)the plea that a settlement agreement had been reached in May 2022.[8]
[6] Fourth Amended Defence in CIV 3136, [21.5], [26], [28], [32.1] and [37.1]; and Defendants' Opening Submissions in CIV 3136, [5].
[7] Fourth Amended Defence in CIV 3136, [32.3] and [37.2]; and Defendants' Opening Submissions in CIV 3136, [5].
[8] Fourth Amended Defence in CIV 3136, [40]; and Defendants' Opening Submissions in CIV 3136, [5] and [10].
The defendants' opening submissions also raised several new issues, which precipitated the filing of a set of reply submissions by the plaintiff on Friday, 26 January 2024 (a public holiday), highlighting those new matters. On the second day of trial, 30 January 2024, the defendants filed a minute of the proposed amendments to their defence, which was then replaced by a fresh minute on 31 January 2024. The amendments were described by counsel for the defendants, in some respects, as precautionary.
The principal amendments (which were opposed) were:
(a)an allegation that no further extension of the principal loan agreement (Exhibit 17) beyond 31 October 2015 has been pleaded or was in fact effected, so that the defendants as guarantors have no liability alternatively any liability incurred beyond the said date;[9]
(b)an allegation that the plaintiff's demand dated 20 September 2018 was invalid (Exhibit 167);[10]
(c)an allegation that the plaintiff's demand dated 31 May 2019 was invalid (Exhibit 179);[11]
(d)an allegation in relation to the Churchill Knight Information Memorandum (Exhibits 208 and 209) and the lapsing of the WAPC approval;[12] and
(e)an amendment to identify two versions of the Churchill Knight Information Memorandum and the price range, and an allegation that the plaintiff's failure to sell included not acting reasonably or conscionably in refusing to accept the offer (contained in Exhibit 178).[13]
The amendments in CIV 2283
[9] Fourth Amended Defence in CIV 3136, [17].
[10] Fourth Amended Defence in CIV 3136, [32] and [33].
[11] Fourth Amended Defence in CIV 3136, [36] and [37].
[12] Fourth Amended Defence in CIV 3136, [35.8] and [35.8A].
[13] Fourth Amended Defence in CIV 3136, [35.8] and [35.10].
In CIV 2283, similarly with CIV 3136, the defendants first foreshadowed the amendments in their opening submissions for trial, filed on 19 January 2024. Those submissions foreshadowed that several allegations in the defence would be abandoned, namely the allegations that:
(a)the plea that the plaintiff's conduct was misleading or deceptive contrary to s 12DA ASIC Act and s 1041H CA;[14]
(b)the pleas forming part of the counterclaim which concern the loan procured from Yanchep Investments Pty Ltd;[15] and
(c)the pleas forming part of the counterclaim concerning the inability to create individual titles which allegedly led to inability to sell the individual titles for a greater sum than was realised.[16]
[14] Third Amended Defence and Counterclaim in CIV 2283, [20.5], [23.5], [24.5], [27.6] and [28.6]; and Defendants' Opening Submissions in CIV 2283, [8].
[15] Third Amended Defence and Counterclaim in CIV 2283, [49(a)], [30(a)], Prayer for Relief A; and Defendants' Opening Submissions in CIV 2283, [46].
[16] Third Amended Defence and Counterclaim in CIV 2283, [49(c)], [30(c)], Prayer for Relief C; and Defendants' Opening Submissions in CIV 2283, [46].
To add to this, the defendants subsequently indicated that the pleas to the effect that the capitalisation representation also constituted an agreement were to be deleted.[17]
[17] Third Amended Defence and Counterclaim in CIV 2283, various sub-paragraphs in [4.3].
The defendants then filed a minute of proposed amendments to their rejoinder on 22 January 2024, seeking to introduce into that pleading an issue raised in the opening submissions concerning the alleged suspensive effect of the garnishee notice said to have been issued by the Australian Taxation Office (ATO) on 8 November 2016 (Exhibit 120).[18] This was opposed.
[18] Minute of Proposed Amended Rejoinder in CIV 2283, [4]; and Defendants' Opening Submissions [39].
Again, the defendants' opening submissions precipitated the filing of a set of reply submissions by the plaintiff on 26 January 2024, highlighting the new matters raised. On Sunday, 27 January 2024, the defendants filed a minute of the proposed amendments to their defence,[19] which was followed, on the second day of trial, 30 January 2024, with a further minute of the proposed amendments to their defence. The principal amendment was to amend part of the counterclaim that the plaintiff's conduct delayed completion of the subdivision of the first stage and resulted in a loss of profits (which included the introduction to the pleading of three additional lots, the deletion of one lot, changes to prices, cross‑referencing changes, and a change to the pleaded date for the contract price).[20]
[19] This version of the minute was quite unclear as to the amendments which were in fact being sought.
[20] Third Amended Defence and Counterclaim in CIV 2283, [49(b)] and Prayer for Relief B.
C. The court's rulings on the amendments
The rulings on 1 February 2024
Following the argument heard on 31 January 2024, and in order to permit the trial to continue, I delivered my rulings in relation to the pleading amendments sought by the defendants on the morning of 1 February 2024. I did so by providing to the parties a schedule which set out whether the amendments were refused or allowed, or whether no ruling was required (in the latter case, where the amendments involved an abandonment of an allegation or claim, or were minor or consequential). The schedule provided to the parties is attached as Attachment A to these reasons.
The following reasons (which have been prepared in a limited time period but in a relatively fulsome manner given the potential importance of the issues to both sets of parties) explain why I reached the conclusions which are embodied in the rulings delivered on 1 February 2024. The rulings and these reasons are confined to the amendments which were in dispute, and should not be regarded as final conclusions as to the merits of the balance of the plaintiff's claims or the defendants' counterclaim and defences, which remain a matter for trial.
As to the general principles applicable to the defendants' amendment applications, I had regard to the principles I set out in my recent decisions concerning the current matters.[21] Most importantly, I had regard to the following statement of principle of the plurality of the High Court, made almost 15 years ago, which ushered in something of a sea change in the manner in which case management considerations are brought to bear in modern commercial litigation:[22]
[111]An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future. (footnotes omitted)
[21] See the authorities summarised in Walthamstow Pty Ltd v Caratti [No 3] [12] ‑ [15] and in Walthamstow Pty Ltd v Caratti [No 5] [21] ‑ [25].
[22] Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 [111] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).
The application of these sentiments to commercial litigation was a point developed by Heydon J in the same decision. His Honour observed as follows:[23]
[137]The litigation thus commenced was commercial litigation. While in general it is now seen as desirable that most types of litigation be dealt with expeditiously, it is commonly seen as especially desirable for commercial litigation. Its claims to expedition may be less than those of proceedings involving, for example, extraordinary prejudice to children; or the abduction of children; or a risk that a party will lose livelihood, business or home, or otherwise suffer irreparable loss or extraordinary hardship, unless there is a speedy trial. But commercial litigation does have significant claims to expedition. Those claims rest on the idea that a failure to resolve commercial disputes speedily is injurious to commerce, and hence injurious to the public interest ….
Commercial life depends on the timely and just payment of money. Prosperity depends on the velocity of its circulation. Those who claim to be entitled to money should know, as soon as possible, whether they will be paid. Those against whom the entitlement is asserted should know, as soon as possible, whether they will have to pay. In each case that is because it is important that both the claimants and those resisting claims are able to order their affairs. How they order their affairs affects how their creditors, their debtors, their suppliers, their customers, their employees, and, in the case of companies, their actual and potential shareholders, order their affairs. The courts are thus an important aspect of the institutional framework of commerce. The efficiency or inefficiency of the courts has a bearing on the health or sickness of commerce.
[23] Aon Risk Services Australia Ltd v Australian National University [137] (Heydon J).
Subsequently, the High Court reiterated these observations, in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd.[24] The court stated:
[51]In Aon Risk Services Australia Ltd v Australian National University, it was pointed out that case management is an accepted aspect of the system of civil justice administered by the courts in Australia. It had been recognised some time ago by courts in the common law world that a different approach was required to tackle the problems of delay and cost in the litigation process. Speed and efficiency, in the sense of minimum delay and expense, are essential to a just resolution of proceedings. The achievement of a just but timely and cost‑effective resolution of a dispute has effects not only upon the parties to the dispute but upon the court and other litigants. The decision in Aon Risk Services Australia Ltd v Australian National University was concerned with the Court Procedures Rules 2006 (ACT) as they applied to amendments to pleadings. However, the decision confirmed as correct an approach to interlocutory proceedings which has regard to the wider objects of the administration of justice. (footnotes omitted)
[24] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303.
The principles of case management find embodiment in the Rules of this court through the goal and objects in O 1 r 4A and O 1 r 4B(1), which it is unnecessary to repeat. The goal and objects, and the principles explained by the High Court as identified above, cannot be gainsaid. They ought be applied in a manner which ensures they are given appropriate effect.
Clarification on 2 February 2024
During the course of the hearing on 1 February 2024, lead counsel for the defendants commenced his opening in relation to action CIV 3136. During the course of that opening, counsel for the defendants indicated he was not seeking to reargue the amendments.[25] However, I raised with counsel on several occasions the fact that counsel was opening on matters in respect of which I had ruled against the defendants.[26]
[25] ts 899.
[26] ts 901, 905, 930, 933.
On reflection, it occurred to me that it would be necessary to clarify the extent of my rulings, which were briefly stated and had not been accompanied by formal reasons. This appeared necessary for the benefit of all parties, and to ensure the conduct of the trial proceeded on a clearly understood basis.
Accordingly, at the commencement of proceedings on 2 February 2024, I provided clarification to the parties in the following terms:
(a)First, I referred to the ruling by which I had concluded that the amendment to [17] of the fourth amended defence in CIV 3136 be refused. The amendment sought to introduce a challenge to the extension of the loan agreement beyond 31 October 2015, it being contended that no further extension has been pleaded or in fact effected, so that the defendants as guarantors each have no liability, alternatively any liability incurred beyond the said date. I indicated to the parties that this ruling precludes the defendant from contending that the asserted absence of any extension between 31 October 2015 and 29 February 2016 has the effect of discharging the guarantors, particularly having regard to the consent to the assignment by the guarantors which is pleaded at [21.6] of the defendants' fourth amended defence (which is subject only to the contention concerning the Enforcement Representation) and is also pleaded at [10(b)] of the plaintiff's reply. The consent which is pleaded is found in the document which is presently marked as Exhibit 101, which is the Assignment Deed dated 29 February 2016.
(b)Second, I referred to the ruling by which I concluded that the amendment to [32] and [33], and also to [36] and [37], of the fourth amended defence in CIV 3136 should be refused. Those amendments raised a defence as to the validity of the demand dated 20 September 2018 and as to the validity of the demand dated 31 May 2019 (which are presently marked as Exhibits 167 and 179). I indicated to the parties that the ruling I had made precluded the defendant from raising defences as to the validity of either demand, whether under the rubric of the amendments to these paragraphs which appear in the paragraphs I have mentioned ([32], [33], [36] or [37]), or under the rubric of the phrase - 'purported demand' - which already appeared in the defence.
(c)Third, I referred to the ruling by which I concluded that the amendment to [35.8] (final sentence) and [35.8A] of the fourth amended defence in CIV 3136 be refused. The amendment sought to introduce an additional contention as to the lapsing of the WAPC approval. I indicated to the parties that the ruling I had made precluded the defendants from asserting that the lapsing of the WAPC approval, or any failure to highlight the lapsing date, or any failure to take steps to renew the approval, forms a basis for the contention that the plaintiff acted in breach of duty or in an unconscionable manner.
(d)Fourth, I referred to the ruling by which I concluded that the amendment to [4] of the rejoinder in CIV 2283 be refused. The amendment sought to introduce an allegation that the garnishee notice had the effect of frustrating or suspending the operation of the loan agreement and this thereby precluded interest from accruing for the relevant period which is pleaded. I indicated to the parties that the ruling I had made precluded the defendants from contending that the garnishee notice had the effect as set out in [4] of the rejoinder.
Against the above introduction and background, I will now turn to examine the principal amendments.
D. Consideration of the amendments in CIV 3136
Paragraph 17 - extension of the loan agreement
The amendment to [17] of the fourth amended defence which was sought by the defendants, which I refused, was in the following terms:
[17]The Defendants admit paragraph 17 of the statement of claim and say further to the extension of the term of the loan in the Loan Agreement until 31 October 2015 (as pleaded in paragraph 17 of the statement of claim and admitted) that no further extension has been pleaded or in fact effected, so that the Defendants as guarantors each have no liability alternatively any liability incurred beyond the said date.
The amendment directs attention to an apparent gap in the extensions of the principal loan agreement, in respect of which the defendants are sued as guarantors. The gap is said to be between 31 October 2015 and 29 February 2016. Counsel for the defendants submitted the statement of claim in CIV 3136 was itself deficient in failing to plead any such extension to cover this period.
The principal difficulty with the amendment is that the parties' pleadings have addressed this issue on a very different basis and understanding to this point in the proceedings.
Most importantly, the defendants pleaded their consent to an assignment of the guarantees in February 2016 (that is, after the alleged gap in the extension). That consent was pleaded to have been forthcoming from the defendants on the basis of the alleged Enforcement Representation, and only on that basis. The alternative argument to the effect that the asserted gap in the extension itself operated to impair the validity of the guarantees has not to date been pleaded or otherwise asserted by the defendants in this proceeding.
The relevant pleading in the plaintiff's amended statement of claim is found in [21], which asserts:
[21]On 29 February 2016, in consideration of the payment of the sum of $2,683,020.33, Angas Securities agreed to assign all its right, title and interest in the Loan Agreement, the Variation and Extension Agreement, the Mortgage and the Collateral security agreement (collectively, 'the Securities') to the plaintiff.
Particulars
The agreement to assign the Securities was contained in a deed of assignment duly executed by the parties including the defendants as guarantors on 29 February 2016 ('Assignment Deed').
The Deed of Assignment executed on 29 February 2016, which is Exhibit 101, was executed by both defendants. The recitals to the Deed state that the 'Borrower and the Guarantors have consented to the transfer and assignment of the Securities and Associated Rights to the Assignee'. The term 'Securities' is defined to include the 'Facility Agreement', which is the principal loan agreement (cl 1.1 of the Deed). The term 'Associated Rights' is broadly defined (cl 1.1 of the Deed).
In cl 8 of the Deed, the consent of the Borrower and the Guarantors is expressly given. The clause provides:
8.Borrower and Guarantor's Consent
The Borrower and Guarantors hereby consent to the transfer and assignment of the Securities and the Associated Rights by the Assignor to the Assignee in accordance with the terms of this Deed and acknowledge and agree that as from Completion:
(a)they will be bound to the Assignee for the due payment and performance of the obligations and liabilities referred to in the Securities;
(b)the repayment of the balance outstanding under the Facility will be secured to the Assignee by the Securities;
(c)by signing this Deed the Borrower and Guarantors acknowledge receiving notice of assignment of the debt due under the Securities to the Assignee pursuant to Section 20 of the Property Law Act (WA) 1969; and
(d)the Consideration represents the current outstanding amount under the Securities.
The affidavit affirmed upon by the plaintiff's solicitor produced correspondence contemporaneous to the Deed sent by the plaintiff to the borrower.[27] The correspondence had been discovered by the plaintiff. The letter dated 29 February 2016, from the plaintiff to the borrower, records the plaintiff's agreement to extend the term for a period of two years from 31 October 2015 to 31 October 2017. The letter records Ms Bazzo's signature and Mr Caratti's signature, albeit in the latter case, as an authorised representative of one of the companies. The signatures appear beneath the words:
We hereby agree and accept the abovementioned detail and extension terms.
[27] Affidavit of Samuel Neil Howieson affirmed 31 January 2024 at page 25.
The relevant pleading in the defendants' fourth amended defence is correspondingly found in [21], relevantly as follows:
[21]The Defendants admit paragraph 21 of the statement of claim and say further that:
[21.1]Extension of the term of the Loan Agreement, beyond its expiry on 31 October 2015, increased the potential liability under the guarantee pleaded in paragraph 11 of the statement of claim, with the consequence that the guarantee was discharged, unless the Defendants consented to the assignment of the loan to the Plaintiff;
[21.2]in January 2016, the First Defendant met with Steven Masel, a director of the Plaintiff, to discuss the proposed assignment of the Loan Agreement by Angas Securities Limited (ACN 091 942 728) (Angas Securities) to the Plaintiff;
[21.3]during the meeting, the First Defendant expressed concern about the assignment of the Loan Agreement, and expressly stated he and the Second Defendant (acting herein for the Second Defendant as well) did not consent to the assignment of the guarantee under the Loan Agreement;
[21.4]in response to which, Mr Masel said words to the effect that if the Defendants consented to the assignment of the guarantee, the Plaintiff would, in effect, exhaust its rights against the assets secured by the facilities (being 82 Treeby Road, Anketell in the State of Western Australia, more properly described as Lot 35 on Diagram 32446 being the whole of the land described as Certificate of Title 1718 Folio 747);
[21.5][now deleted]
[21.6]Further
or in the alternative to paragraph 21.5 above, Defendants at all material times relied on the Enforcement Representation in consenting to the assignment of the Loan Agreement including the guarantee there under, as reflected in Ex 0101, and would suffer material financial detriment if the Plaintiff were allowed to depart from or act contrary to the Enforcement Representation. In the premises, the Plaintiff is estopped from departing or acting contrary to the same, as further pleaded in paragraphs 28 and 37.1 below. (emphasis added)The plaintiff's reply, at [10(b)], pleads that the defendants expressly consented to the assignment to the plaintiff, and thereby the extension, of the loan agreement (including the assignment and extension of the guarantees) on 29 February 2016.
As noted, the basis on which the defendants have sought to impugn the assignment and extension has, to date, been based on the making of the representation pleaded at [21.4] of the fourth amended defence. Otherwise, the defendants have admitted the plaintiff's allegations in [21] of the amended statement of claim. The defendants do not seek to withdraw the admission. The admission, and the fulsome and clear terms of the Assignment Deed itself, have the effect that the defendants' contention as to the effect of the gap in the extension periods is not reasonably arguable.
As the amendment is not reasonably arguable, leave to allow the amendment should not be granted.[28]
[28] Koolan Iron Ore Pty Ltd v GHD Pty Ltd [No 2] [2022] WASC 442 [39].
This conclusion also precludes the defendants raising the issue in an indirect manner, by seeking to challenge the efficacy of the plaintiff's statement of claim. The matters in issue in a proceeding are not to be viewed by examining a statement of claim in some isolated fashion, without due regard to the issues which have been raised by the defendant through its own pleading. Regard must also be had to the surprise rule, contained in O 20 r 9(1)(a) RSC. That rule provides:
9.Matters which must be specifically pleaded
(1)A party must in any pleading subsequent to a statement of claim plead specifically any matter, for example, performance, release, any relevant statute of limitation, fraud or any fact showing illegality -
(a)which he alleges makes any claim or defence of the opposite party not maintainable; or
(b)which, if not specifically pleaded, might take the opposite party by surprise; or
(c)which raises issues of fact not arising out of the preceding pleading.
The operation of both r 9(1)(a) and (b) RSC required the defendants' contention as to the extension issue to be identified and properly pleaded by the defendants. The purpose of the rule is explained in the commentary as follows:[29]
The purpose of O 20 r 9(1) is to require any party who has a special ground of defence or who raises an affirmative case to destroy a claim or defence, as the case may be, to plead specifically the matter he relies on for this purpose so that, for reasons of practice, justice and convenience, that party must tell his opponent what he is coming to court to prove: Jeans West Corp Pty Ltd v Archer[2004] WASCA 132; BC200403777 at [12]. It is to prevent trial by ambush: Entwells Pty Ltd v National & General Insurance Co Ltd (1991) 6 WAR 68.
A pleading will not fulfil its basic function in informing the opposing party of the case it must meet unless it includes every material fact which, if not pleaded, might take an opposing party by surprise: Interstar Pty Ltd v Halston Capital Pty Ltd[2022] WASC 105; BC202202195 at [15]; Trackem Pty Ltd (ACN 168 532 269) v Revenue Partners (A Partnership)[2021] WASC 245; BC202106641 at [27].
A 'matter' in this context is not limited to matters of fact. If a matter of law is alleged to make the claim or defence of the opposite party not maintainable, then, as a result of O 20 r 9(1), it must be pleaded: Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd[2007] WASC 118; BC200704260 at [17].
[29] Gething M, Curwood M and Joseph R, Civil Procedure: Western Australia [20.9.3].
I should briefly comment on the interrelationship between O 20 r 9 RSC and O 20 r 8 RSC, lest it be thought that the defendants' contention might not be required to be expressly pleaded by reason of r 8. The latter rule requires that a pleading contain a statement in summary form of the material facts on which the party pleading relies for his defence, which thereby excludes the necessity to plead any conclusions of law. Derrick J explored the interrelationship between the rules in 1110 Hay Pty Ltd as trustee for the Hay Street Trust v Metso Minerals (Australia) Ltd [No 4].[30] His Honour concluded that:[31]
[18]Order 20 r 9(1) does not abrogate or limit O 20 r 8(1), but rather exemplifies its operation in pleadings subsequent to the Statement of Claim. The purpose of the rule is to require any party who has a special ground of defence or who raises an affirmative case to destroy a claim or defence, as the case may be, to plead specifically the matter relied on for this purpose. The rule requires a party to specifically plead as a defence any statutory defence to an action or any other statutory provision which may render the proceedings, or their ultimate objective, nonmaintainable. (footnotes omitted)
[30] 1110 Hay Pty Ltd as trustee for the Hay Street Trust v Metso Minerals (Australia) Ltd [No 4] [2019] WASC 146.
[31] 1110 Hay Pty Ltd as trustee for the Hay Street Trust v Metso Minerals (Australia) Ltd [No 4] [18].
My opinion is that the defendants' contention ought to have been pleaded and was not. Having now been identified, and an amendment sought, leave should not be granted by reason that the pleading would otherwise infringe O 20 r 19(1)(a) RSC as disclosing no reasonable defence.
In the event I am wrong in this regard, I am nonetheless of the view that the amendments should be refused on case management grounds and in the interests of justice. In this regard, I consider the explanation for the delay in giving notice of the amendments to be inadequate. To the extent to which the late amendment was based on the defendants' own late production of documents in its possession, as explained in Ms Bazzo's affidavit, that simply does not provide a proper justification.
I am of the view that the amendments would also likely operate to the prejudice of the plaintiff, in the sense that it would be required to investigate the issues raised, take further instructions and put on further evidence, during the midst of the trial. The introduction of the amendment thus had the real possibility of necessitating an adjournment of the trial in order to avoid a situation of procedural unfairness. Indeed, these concerns apply equally to most of the defendants' amendments, not only the amendment to [17] of the fourth amended defence. It is apparent from the affidavit affirmed by the plaintiff's solicitor, and the submissions made by counsel for the plaintiff, that further factual matters would need to be pleaded by the plaintiff in response, with the attendant impact of delay on the proceedings.
I do not overlook the apparent importance of the amendments to the defendants' case, as explained by counsel for the defendants. That is a factor to be weighed in the balance.
However, I am also acutely conscious that the amendments were being sought after several months during which the trial was adjourned and relisted, and during which the adequacy of the parties' respective pleadings had been dissected and evaluated in an intensive fashion. It must reasonably be expected that a party, in these circumstances, would give attention to its pleadings and its discovery obligations, in order to raise any new issues in a timely way. In those circumstances, the absence of a cogent explanation from the defendants to justify the late application is all the more significant, and the prejudice which I consider would flow to the plaintiff, is a matter of great weight.
Paragraphs 32, 33, 36 and 37 - invalidity of the demands
These amendments sought to raise a challenge to the validity of the two demands relied upon by the plaintiff, found in Exhibits 167 and 179. I refused these amendments.
The plaintiff submitted these challenges took them wholly by surprise. As I indicated during the course of the argument, these contentions were not apparent to me from my review of the pleadings and I could not find any prior reference to these issues in any of the preceding interlocutory hearings. So, in the course of the intensive case management of these actions since September 2023, there had been no suggestion that the defendants sought to attack the demands in this manner. The position is otherwise in CIV 2283, where the defendants plead that certain demands were invalid.[32]
[32] Third Amended Defence and Counterclaim in CIV 2283, [20.8] and [23.8].
The relevant pleadings is as follows (as to the demand which is Exhibit 167):
[32]The Defendants admit that a purported demand was issued dated 20 September 2018, deny it was a valid demand (as particularised below) or had the effect pleaded, deny they have any liability to pay the amount, repeat paragraphs 21, 24.1 and 28 above, otherwise deny paragraph 32 of the statement of claim and say further that:
…
Particulars of Invalidity of Demand
On the face of the document (TB 0167):
[32.5.1]It was addressed to the Second Defendant as mortgagor, not as guarantor.
[32.5.2]It did not specify 14 days to remedy the default relied upon but only 3 days, contrary to clause 15.2 of the Loan Agreement.
[32.5.3]The Default notice only claimed principal, interest on a running, daily basis in a stated sum, and a stated sum of legal fees. In the result the reasonable recipient had no way of understanding how the claimed sum was arrived at, or what should reasonably be paid.
[32.5.4]With reference to the items reflected to be claimed in Annexure A of the Statement of Claim (which is otherwise denied by the Defendants) the demand in any event did not cover legal fees (except as stated above) and other expenses, which had to be demanded to be payable, pursuant to clause 12.2 of the Loan Agreement.
[33]The Defendants admit that a purported demand contained terms to the effect pleaded in paragraph 33 of the statement of claim, but deny they have any liability to pay the amount demanded or any part thereof or that the demand was valid, and repeat paragraphs 21, 24.3, 28 and 32 above.
The relevant pleadings are as follows (as to the demand which is Exhibit 179):
[36]The Defendants admit that a purported demand was issued dated 31 May 2019, deny it had the effect pleaded or that it was valid (as particularised below), repeat paragraphs 21, 24.3, 28 and 32 above and otherwise deny paragraph 36 of the statement of claim.
Particulars of Invalidity of Demand
On the face of the document (TB 0179):
[36.1.1]It did not specify 14 days to remedy the default relied upon but only 7 days, contrary to clause 15.2 of the Loan Agreement.
[36.1.2]The Default notice claimed only one sum. In the result the reasonable recipient had no way of understanding how the claimed sum was arrived at or what should reasonably be paid in response thereto.
[36.1.3]With reference to the items claimed in Annexure A of the Statement of Claim (which is otherwise denied by the Defendants) the demand in any event did not cover legal fees and other expenses, which had to be demanded to be payable, as provided in clause 12.2 of the Loan Agreement.
[37]The Defendants admit that a purported demand contained terms to the effect pleaded in paragraph 37 of the statement of claim, deny it had the effect pleaded or was valid, deny they have any liability to pay the amount and repeat paragraphs 21, 24.3, and 28 and 36 above, otherwise deny paragraph 37 of the statement of claim and say further that: …
I accept that the amendments are at least arguable. A demand may be invalid if it is so misleading that the recipient could not identify the moneys he or she should properly pay. The defendants relied on Luxer Holdings Pty Ltd v Glentham Pty Ltd[33] in this regard. Any assessment of the validity of the demands would require an analysis of the principles expressed by the High Court in Bunbury Foods Pty Ltd v National Bank of Australasia Ltd.[34]
[33] Luxer Holdings Pty Ltd v Glentham Pty Ltd [2007] WASCA 209.
[34] Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491. See also, in the context of notices of demand for payment of a guaranteed debt, the observations of Mitchell J (as his Honour then was) in George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434 [262] ‑ [264].
However, I cannot accept the submission made by the defendants that the amendments were either apparent on the face of the pre‑existing pleading or would otherwise cause no material prejudice to the plaintiff if the defendants were permitted to pursue these arguments at trial.
A challenge to the validity of demands should be made apparent on the pleading. A failure to do so infringes the requirements in O 20 r 9(1)(a) and (b) RSC. As earlier noted, and in contrast, the defendants have pleaded a challenge to invalidity in CIV 2283, albeit in general terms. The plea in CIV 3136 that the demands were 'purported' demands is inadequate. I therefore do not accept that the plaintiff was on notice of this line of challenge.
Now that it has been raised, effectively on the eve of trial, it is quite apparent that the issue will require further investigation and require the plaintiff to amend its pleadings to develop its lines of response. As articulated by counsel for the plaintiff, that would at least involve estoppel and reliance contentions concerning in part, the conduct of the plaintiff in entering into possession as mortgagee. I refer in this regard to the matters detailed in Mr Howieson's affidavit at [12] which reveal the factual matters which would require investigation, including the assertion made by the plaintiff through Mr Masel that neither of the defendants had raised any issue with the validity of the demands at the time they were issued or thereafter.
Further, the principles expressed in cases such as Bunbury Foods Pty Ltd v National Bank of Australasia Ltd necessarily require a factual examination of the circumstances in which a demand was issued and received, the nature of any asserted defect and whether it was materially misleading, and whether the recipient has been permitted a reasonable time to meet the demand. I do not accept that the defendants' challenge to the validity of the demands would be wholly confined to an analysis of the demands on their face.
Again, I recognise this line of defence could be an important one for the defendants. I must weigh that against the prejudice to the plaintiff and in the context of the goal and objects in O 1 r 4A and O 1 r 4B RSC, and in light of the lack of cogency of the explanation for the late raising of the issue. In my view, when these factors are weighed, the interests of justice tells strongly against allowing the amendments. They should be refused.
Paragraphs 35.8 and 35.8A - breach of duty and unconscionable conduct
The defendants plead that the conduct of the plaintiff as mortgagee in possession was either in breach of its duties in this regard (which duties are admitted by the plaintiff), alternatively amounted to unconscionable conduct contrary to s 12CB ASIC Act.[35] Those pleas have been on foot since they were inserted by amendment in November 2022.
[35] Fourth Amended Defence in CIV 3136, [35].
The defendants now seek to amend the claims in two respects. First, by relying upon the lapsing of the WAPC development approval on 24 May 2020, as a basis for the breach of duty or unconscionable conduct. Second, by expressly asserting that the plaintiff's failure to sell whilst in possession included a failure to accept the only offer to purchase, being the offer said to have been made on 28 March 2019 for $4 million (which is found in Exhibit 178). It is pleaded that this offer was within the price range in the Information Memorandum prepared by the plaintiff's agent, Churchill Knight (found in Exhibits 208 and 209).
The relevant amendments were in the following terms:
[35.8]in or around November 2018, Churchill Knight issued an Information Memorandum in two versions (Ex 0208 and 0209), which advertised the Secured Property respectively for sale at a price of 4,200,000 [sic] and then $3,900,000 (herein the jointly Memorandum [sic]). Other than publication and distribution of the Information Memorandum, the Plaintiff and Churchill Knight did not take any active steps to genuinely or properly advertise and market the Secured Property for sale to obtain a proper price for the Secured Property. The Memorandum attached a letter of the WAPC which showed that the validity of the development approval of that body in respect of proposed development on the site would lapse (as was the case) on 24 May 2020.
[35.8A]After 24 May 2020 lapse of WAPC approval:
[35.8.1]rendered the Information Memorandum ineffectual and otiose.
[35.8.2]meant the basis on which the Secured Property was offered to sale in the Memorandum, namely with development potential backed by WAPC approval, had fallen away and would endure while the Plaintiff remained in possession.
[35.10]Between 5 October 2018 to 15 September 2022, the Plaintiff failed to take genuine and/or all reasonable steps to advertise, market and sell the Secured Property, whilst it was mortgagee in possession. The failure to sell included not acting reasonably or conscionably in refusing to accept the only offer to purchase obtained as reflected in Ex 0178 dated on or about 28 March 2019, which offer was for $ 4 million, within the price range of as per the Memorandum referred to in 35.8A above.
The conclusion I have reached is that these amendments are reasonably arguable.
As to the amendments concerning the advertised sale price and the failure to accept the offer in March 2019, I consider these represent a more precise articulation of the claim already pleaded and are not likely to cause any material prejudice to the plaintiff. I reach that view given this matter falls within the gravamen of the allegation put by the defendants, apparent on the pleadings for some time, that the plaintiff had failed to take genuine steps to advertise and market the property. Further, the subject matter of this offer and the plaintiff's response to it has been dealt with by the plaintiff in its own filed evidence. Accordingly, the amendment to the first sentence of [35.8] and to [35.10] should be allowed.
In contrast, however, the decision by the defendants to introduce matters concerning the lapsing of the WAPC approval represents a significant shift in the case, and would likely require the plaintiff to undertake further investigation of the facts, potentially obtain further evidence, which may include expert evidence. These amendments are found in the final sentence of [35.8] and in [35.8A]. So far as I can see, the specific issue of the effect and implications of the lapsing of the WAPC approval is not addressed in the evidence filed by the parties to date.
To further explain - the complexity of the new contention is not simply to be assessed by reference to the terms of the Information Memorandum, which I accept refers to the lapsing date on its face. The contention must be viewed through the prism of the ultimate allegations which are made, to the effect that the plaintiff's conduct breached its duties or amounted to unconscionable conduct.
These allegations would reasonably require the plaintiff to consider whether to resist the matter on the basis that the lapsing of the WAPC approval could be ameliorated or overcome in some fashion, which would likely need an assessment of the ability of either the plaintiff or a prospective purchaser of the property to pursue those strategies, and an assessment of the time and cost involved. I can reasonably infer that investigation of this issue, and engagement of expert assistance, would take some days if not weeks.
The fact that the lapse of the WAPC approval appears on the face of the Information Memorandum does not answer this point. The Information Memorandum contains a range of data and information concerning the subject land. It is not to be supposed that the plaintiff would investigate all of those matters for the purposes of the trial, where the points of contention have not been pleaded. This is especially so where the pleading to date has been directed, insofar as there are pleas as to the adequacy of the plaintiff's conduct whilst mortgagee in possession, to the experience of the plaintiff's agent and the steps taken to advertise or market the property, in the context of the asserted market value of the property.[36]
[36] Fourth Amended Defence in CIV 3136, [35.7], [35.8] and [35.10].
In my view, it is not in the interests of justice that such a late and significant amendment be permitted.
E. Consideration of the amendments in CIV 2283
Paragraph 49(b) of the Defence - counterclaim amendments
The plaintiff's counterclaim in CIV 2283 has been significantly altered by the new amendments. As earlier noted, two of the four heads of damage in [49] have now been abandoned. The defendants also propose a series of amendments to the table subjoined to [49(b)], which the plaintiff opposes.
My view is that the amendment to [49(b)] should be allowed given the amendments are intended to correct the pleading so it conforms with the evidence and documentary material which the defendants rely upon. Counsel for the defendants directed my attention to a number of exhibits (and documentary material) which I considered appropriately explained the bases of the prices and figures in the table. Whether those matters can be established as a matter of fact, and on admissible evidence, is not a matter which I can properly consider at this point. Counsel for the plaintiff highlighted in this regard a number of evidentiary issues with the material, but those are matters which can only be assessed at the conclusion of the trial.
It is in the interests of justice that the pleading be amended to ensure it conforms with the evidence and documentary material which the defendants intend to rely upon, and which appears to me to cause no particular prejudice to the plaintiff.
Paragraph 4 of the Rejoinder - garnishee notice
It does not appear to be in contest in the proceedings that the ATO issued to the plaintiff a garnishee notice dated 8 November 2016. That notice is found in Exhibit 120 (which I understand is identical to Exhibit 121).
The garnishee notice was issued pursuant to s 260‑5 of Schedule 1 of the Taxation Administration Act 1953 (Cth) (TAA). The opening paragraphs of the notice state:
WALTHAMSTOW PTY LTD, YOU are a third party who owes, or may later owe, money ('the available money') to TINA BAZZO ('the debtor'), of [address redacted], who, in terms of section 260‑5 of Schedule 1 of the Taxation Administration Act 1953 (TAA) has a debt payable to the Commonwealth of [sum redacted].
In exercise of powers conferred on me as Deputy Commissioner of Taxation by delegation from the Commissioner of Taxation under section 8 of the TAA, YOU, WALTHAMSTOW PTY LTD, ARE REQUIRED TO PAY TO THE COMMISSIONER OF TAXATION the sum of [redacted] or, if the available money is less than [redacted], the whole of the available money.
The plaintiff pleads a reference to the garnishee notice in [6(c)] of the reply in CIV 2283, and also pleads in [6(d)] that a telephone conversation took place between Mr Masel and a representative of the ATO in relation to the notice. The plaintiff pleads that Mr Masel was informed the plaintiff was not permitted to release any funds under the loan agreement that would be paid to the benefit of the second defendant, including paying any funds directly to the City of Wanneroo or to any other entity nominated by the defendants.
The defendants gave notice on 22 January 2024, some four business days before the trial was to commence, of their intention to seek leave to amend the rejoinder to plead a fresh issue concerning the garnishee notice. The proposed plea raises an issue of frustration, also described in the defendants' opening submissions as having the effect of 'at least suspend[ing] any obligation on the part of the lender to make repayments and, importantly, to pay interest'.[37]
[37] Defendants' Opening Submissions in CIV 3136, [39].
The relevant pleading is as follows:
[4]Alternatively, and in the event that the Court upholds the plea in paragraph 6(d) of the Reply, that the Notice had the effect in fact and law of prohibiting the Plaintiff from releasing any funds under the Loan Agreement that would be paid to the benefit of the Second Defendant (which is denied), then the Defendants say as follows. Such effect frustrated the Loan Agreement for the duration of the Notice (the Notice duration) by rendering its performance impossible in that payments otherwise due under the Loan Agreement could not be made, with the result that interest liability ceased to be incurred or become payable during such Notice duration under the Loan Agreement, and cannot in this matter be recovered by the Plaintiff in respect of the period of the Notice duration.
[4.1]The Notice duration was from the date of the Notice, 8 December 2016, until the objections to the assessments the subject of the Notice were allowed by the Administrative Appeals Tribunal 13 February 2023 (TB EX 0196).
The pleading thus asserts, as clarified by counsel,[38] that the performance of the loan agreement was impossible in that payments due (that is, payments to be made by the lender to the benefit of the borrower) could not be made. The corollary to this, according to the proposed pleading, is that any interest liability otherwise falling upon the borrower during this period ceased.
[38] ts 827.
The contention strikes me as highly novel.
It cannot, of course, be the case that a garnishee notice operates as a frustrating event with respect to the contract between the third party and the taxpayer, and that does not appear to be how the defendants intend to articulate the point. If the notice had the effect of frustrating the contract, in the technical sense of that term, it would operate to terminate the contract rather than merely to suspend. As an aside, it should also be borne in mind that Australian courts have not easily been persuaded that a contract has been terminated by a supervening event affecting its performance. There must be found to be a situation fundamentally or radically different from that in contemplation when the contract was made.[39]
[39] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.
Focusing then on the 'suspension' argument, that argument does not derive any support from the garnishee notice itself, nor from the text of the statutory provision which underpins the notice.
In support of the arguability of the plea and the asserted suspensive effect of the garnishee notice, counsel for the defendants drew my attention to a passage in Carter's text.[40] The passage refers to the possibility that an event which does not frustrate the contract may effectively suspend the performance of an obligation. The authorities cited arise from circumstances of war, government orders freezing assets, or long term employee illness. The text also identifies the circumstance of obligations being suspended through operation of force majeure clauses. None of these is apt to apply to the present circumstance.
[40] Carter JW, Contract Law in Australia (6th ed, 2013), [34-05].
Counsel for the defendants also referred to the recent decision of the High Court in Laundy Hotels (Quarry) Pty Limited v Dyco Hotels Pty Limited.[41] Counsel identified the passage at [24] of the High Court's reasons, which refers to the conclusion of Bathurst CJ in the NSW Court of Appeal.[42] His Honour was there in the majority with Brereton JA, with Basten JA dissenting. His Honour the Chief Justice is noted as having concluded that the public health order in that case operated as a supervening event, rendering the vendor's compliance with the instant clause illegal. By analogy with cases involving wartime restrictions and covenants in leases, Bathurst CJ considered that the supervening illegality suspended the relevant contractual obligation in the contract for sale.
[41] Laundy Hotels (Quarry) Pty Limited v Dyco Hotels Pty Limited [2023] HCA 6.
[42] ts 826.
As counsel for the defendants noted,[43] the High Court (Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ) overturned the decision of the NSW Court of Appeal and allowed the appeal. The court regarded the issue as being capable of resolution on the basis of the proper construction of the contract, holding that it was not necessary to have recourse to either the doctrine of implied contractual terms or 'the possible consequences of supervening illegality resulting in suspension rather than frustration of the contractual obligation' imposed by the contract.[44]
[43] ts 826.
[44] Laundy Hotels (Quarry) Pty Limited v Dyco Hotels Pty Limited [28].
Further, in determining the appeal in favour of the vendor, the High Court endorsed the observations of Latham CJ in Scanlan's New Neon Ltd v Tooheys Ltd[45] that 'a promisor takes the risk of an event happening which prevents [the promisor] from performing [the] promise'[46] and, further, a party is not 'excused from performance because the contract did not work out in the manner expected by one or even by both of the parties'.[47]
[45] Scanlan's New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169.
[46] Scanlan's New Neon Ltd v Tooheys Ltd (200).
[47] Scanlan's New Neon Ltd v Tooheys Ltd (192).
I do not therefore regard the decision of the High Court in Laundy Hotels (Quarry) Pty Limited v Dyco Hotels Pty Limited as supportive of the proposed amendment. Indeed, the court there made specific reference, in its concluding comments, to:[48]
… the difficulties and uncertainties associated with any supposed doctrine of the suspension of a contractual promise temporarily incapable of being satisfied by reason of supervening illegality. (emphasis added)
[48] Laundy Hotels (Quarry) Pty Limited v Dyco Hotels Pty Limited [51].
A pleading should not be refused solely because it is novel, of course. The development of the law should not be stifled. Nonetheless, the pleading must be reasonably arguable to ensure the issues to be tried in the case are not wasteful of time and costs. Having regard to the High Court's treatment of a similar contention as referred to above, I do not in the circumstances consider the defendants' contention as to the effect of the garnishee notice to be reasonably arguable. For that reason, the pleading should be refused.
In the event I am wrong in that regard, I nonetheless consider the amendment should be refused on case management grounds. The late amendment was not accompanied by any cogent explanation. Further, the raising of this contention by the defendants would require further investigation by the plaintiff as to its available responses at a factual level.
This would include, as counsel for the plaintiff outlined during argument, estoppel arguments, whether the defendants lost the right to rely on the argument by reason of its conduct since the notice was issued (being the period from December 2016 to February 2023)[49], and whether the defendants' contention might be defeated by asserting that any difficulties in the performance of the loan agreement were self‑induced. Self-evidently, these are matters requiring factual investigation and an opportunity to not only amend the pleadings but to put on additional evidence.
[49] This is the period identified in the proposed amendment to the rejoinder at [4.1].
In my view, the defendants did not discharge the heavy burden upon them of justifying this late amendment to the rejoinder to add this fresh contention.
F. Conclusion and orders
For the foregoing reasons, I reached the conclusions which are embodied in my rulings dated 1 February 2024. The parties have provided the court with a minute of proposed orders to give effect to the rulings. I will make orders in due course in terms of the minute.
ATTACHMENT A
Rulings delivered on 1 February 2024
Rulings in relation to the defendants' proposed amendments to the defence in CIV 3136
| Para | Summary of Proposed Amendment | Ruling |
| 17 | Allegation that no further extension of the Loan beyond 31 October 2015 has been pleaded or was in fact effected, so that the Defendants as guarantors have no liability alternatively any liability incurred beyond the said date. | The proposed amendment is not reasonably arguable and is refused. In any event, the amendment will be refused on case management grounds including delay and potential prejudice to the plaintiff. |
| 21.5 26 28 32.1 37.1 | The pleas to the effect that the representation also constituted an agreement are to be deleted, as foreshadowed by the defendants in their opening submissions. | No ruling required. |
| 21.6 | Consequential or minor amendments. | No ruling required. |
| 32 (chapeau and particulars) 33 | Allegation to the effect that the plaintiff's demand dated 20 September 2018 was not valid. | The amendment will be refused on case management grounds including delay and potential prejudice to the plaintiff. |
| 36 (chapeau and particulars) 37 (chapeau) | Allegation to the effect that the plaintiff's demand dated 31 May 2019 was not valid. | The amendment will be refused on case management grounds including delay and potential prejudice to the plaintiff. |
| 32.3 37.2 | The pleas to the effect that the plaintiff engaged in misleading or deceptive conduct plea are to be deleted, as foreshadowed by the defendants in their opening submissions. | No ruling required. |
| 35.8 (final sentence) 35.8A | Allegations in relation to the Churchill Knight Information Memorandum and lapsing of WAPC approval. | The amendment will be refused on case management grounds including delay and potential prejudice to the plaintiff. |
| 35.8 (first sentence) | Amendments to identify two versions of the Churchill Knight Information Memorandum and price range. | Amendment allowed. |
| 35.10 | Allegation that the plaintiff's failure to sell included not acting reasonably or conscionably in refusing to accept the offer contained in Ex 178. | Amendment allowed. |
| 35.11 | Consequential or minor amendments. | No ruling required. |
| 35.12 | Consequential or minor amendments. | No ruling required. |
| 39 | Amendment not pressed. | No ruling required. |
| 39.2 | Consequential or minor amendments. | No ruling required. |
| 40 | The pleas concerning an alleged Settlement Agreement in May 2022 are to be deleted, as foreshadowed by the defendants in their opening submissions. | No ruling required. |
Rulings in relation to the defendants' proposed amendments to the
defence in CIV 2283
| Para | Summary of Proposed Amendment | Ruling |
| 20.5 23.5 24.5 27.6 28.6 | The pleas to the effect that the plaintiff engaged in misleading or deceptive conduct plea are to be deleted, as foreshadowed by the defendants in their opening submissions. | No ruling required. |
| 4.3 (various paras) | The pleas to the effect that the representation also constituted an agreement are to be deleted, as foreshadowed by the defendants in their opening submissions. | No ruling required. |
| 49(a) 30(a) Prayer for relief A | The plea as to the loan procured from Yanchep Investment Pty Ltd is to be deleted, as foreshadowed by the defendants in their opening submissions. | No ruling required. |
| 49(b) | Amendment to claim that plaintiff's conduct delayed completion of the subdivision of the first stage and resulted in loss of profits, including introduction of three additional lots, deletion of one lot, changes to prices, cross-referencing changes, and a change to the pleaded date for the contract price. | Amendments allowed. |
| 49(c) 30(c) Prayer for relief C | The plea as to the inability to create individual titles which allegedly led to inability to sell the individual titles for a greater sum than was realised is to be deleted, as foreshadowed by the defendants in their opening submissions. | No ruling required. |
| 49(d) | Consequential or minor amendments. | No ruling required. |
| Prayer for Relief A and C | Consequential on earlier deletions. | No ruling required. |
Rulings in relation to the defendants' proposed amendments to the
rejoinder in CIV 2283
| Para | Summary of Proposed Amendment | Ruling |
| 4 | Allegation that garnishee notice had the effect of frustrating or suspending the operation of the Loan Agreement and this thereby precluded interest from accruing for the relevant period which is pleaded. | The proposed amendment is not reasonably arguable and is refused. In any event, the amendment will be refused on case management grounds including delay and potential prejudice to the plaintiff. |
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TL
Associate to the Honourable Justice Lundberg
5 FEBRUARY 2024
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