United Equipment Pty Ltd v Australian Portable Buildings Pty Ltd - [2016] WADC 13

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: UNITED EQUIPMENT PTY LTD -v- AUSTRALIAN PORTABLE BUILDINGS PTY LTD [2016] WADC 13

CORAM: REGISTRAR KINGSLEY

HEARD: 12 NOVEMBER 2015

DELIVERED : 4 FEBRUARY 2016

FILE NO/S: CIV 1506 of 2015

BETWEEN: UNITED EQUIPMENT PTY LTD
Plaintiff
AND
AUSTRALIAN PORTABLE BUILDINGS PTY LTD
Defendant

Catchwords:

Practice - Application to strike paragraphs of a reply - Turns on own fact

Legislation:

Nil

Result:

Application allowed in part

Representation:

Counsel:

Plaintiff: Mr J Cook
Defendant: Mr W C Zappia

Solicitors:

Plaintiff: Mendelawitz Morton
Defendant: Clayton Utz

Case(s) referred to in judgment(s):

Abbott v Hessen (1913) 15 WALR 80
Olsson v Dyson (1969) 120 CLR 365
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603
Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd (2015) 47 WAR 547
Vickery v Woods (1952) 85 CLR 336

REGISTRAR KINGSLEY: The defendant has brought an application seeking leave to strike certain paragraphs of the plaintiff's reply dated 29 June 2015.
The plaintiff's claim is on six Rental Agreements (the Rental Agreements). In May 2012 the plaintiff entered into the Rental Agreements with the defendant, for a period of 36 months, for the rental of items of equipment.
The plaintiff alleges breach of the Rental Agreements, or repudiation of the Rental Agreements, and has retaken possession of the equipment the subject of the Rental Agreements. The plaintiff claims that the balance of the unpaid rental payments in the sum of $433,051.45, and claims liquidated damages in that sum.
The defendant admits the Rental Agreements were entered into but pleads, amongst other matters, that those agreements were novated. The defendant pleads that, in or about January 2013, Britco acquired the manufacturing the business of the defendant. The defendant pleads that on or about February 2013, Britco informed all of the defendant's prior suppliers, by way of a Circular, that Britco had acquired the manufacturing business of the defendant and would do everything possible to ensure there was a seamless transition in Britco's accounts from the defendant to Britco.
The defendant goes on to plead that from March 2013 to July 2014 Britco made payments to the plaintiff in relation to invoices issued by the plaintiff for use of the equipment. Further, at various times in 2013 and 2014, the plaintiff sent to Britco a representative of the plaintiff to perform services on the equipment for the benefit of Britco.
By this conduct, the defendant pleads that each of the plaintiff, defendant, and Britco agreed to novate the Rental Agreements to the effect that each of those agreements was discharged and substituted with a new agreement on the same terms as the Rental Agreements. The defendant goes on to plead by way of alternative an implied novation and further, or in the alternative, a confirmation of the novation.
The paragraphs of the plaintiff's reply which are under attack by the defendant go to the issue of the purported novation. Summarised, the plaintiff pleads in the reply that:
•The plaintiff was unaware of the business sale agreement (Reply, par 5(a)(i)).
•The plaintiff did not understand that the Circular sent by Britco would affect the various Rental Agreements (Reply, par 5(b), pars 6.3 and 6.4).
•That the Board of the plaintiff did not appreciate the significance of the administrative level communications taking place between Britco and the plaintiff, until the plaintiff took legal advice in or about August 2014 (Reply, par 5(c)).
•The plaintiff continued to issue invoices to the defendant which the plaintiff assumed were being paid by the defendant (Reply, par 5(d)).
•Whilst a credit application issued by the plaintiff was executed by Britco, the plaintiff was not aware that this had any subjectively intended affect by the defendant upon the Rental Agreements (Reply, par 5(f)(ii)).
•That the Rental Agreements could only be varied with the actual knowledge and approval of the Board (Reply, par 5(f)(iii)).
•The administrative level employees of the plaintiff were oblivious to any intended effect upon the Rental Agreements (Reply, pars 5(f)(iv), 5(f)(vi) and 5(f)(vii)).
•That the administrative level employees were honestly duped into issuing invoices in the name of Britco (Reply, pars 5(f)(iv), 5(f)(vi) and 5(f)(vii)).
•The plaintiff was unaware of the separate legal existence of Britco (Reply, pars 5(f)(x) and 5(f)(xi)).
A novation comprises the formation of a new contract in place of the old contract. Accordingly there must be contractual intention and consideration for the new contract. Usually the consideration for the new contract is that the continuing party, in this case the plaintiff, releasing the original party, in this case the defendant, from the old contract and the new contracting party, Britco, standing in the shoes of the released party. A novation is not a transfer of liability but a replacement of the liability with another party. Novation requires the involvement of all parties to the new and old contracts (Olsson v Dyson (1969) 120 CLR 365, 388). Novation may be express, or implied from the conduct of the parties (Abbott v Hessen (1913) 15 WALR 80).
Where novation is to be inferred from conduct, the intention of the parties, as objectively assessed, can be considered. Thus acceptance of a novation may be inferred from conduct, and it is the disclosed intention of the parties that is the key (Vickery v Woods (1952) 85 CLR 336, 345).
Both counsel for plaintiff and defendant relied on Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd (2015) 47 WAR 547 for different reasons. In Vantage Systems the Court of Appeal held that a revised proposal for a new lease and licence, together with emails on a particular day, constituted a concluded and binding agreement between the parties. The Court of Appeal affirmed the objective theory of contract underpins the law relating to the formation, construction and interpretation of contracts.
Defendant's counsel relied on Vantage Systems for the proposition that the assessment to determine whether a completed agreement has been made is objective, and the search for an intention to create contractual relations is not a search for the uncommunicated subjective motives or intentions of the parties (pages 97 ‑ 106).
Plaintiff's counsel submits there are a category of exceptional cases where evidence may be given as to the actual or subjective intention in determining whether the parties intended to contract. The examples given in Vantage is where evidence shows that during negotiations the parties were jesting, joking or engaged in dramatic performance, the contact was a sham, or the actual state of mind of one or more of the parties was materially affected by mistake, misrepresentation, duress or undue influence (107). Thus plaintiff's counsel submits that evidence may be led as to the actual, or subjective, intention of a party in determining whether that party intended to contract.
In Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603, Campbell JA (Mason P agreeing) said, for the purpose of deciding whether parties have made a concluding and binding agreement, the 'objective intention' of the parties which the court seeks to ascertain is 'the intention that a reasonable person, with the knowledge of the words and actions of the parties, communicated to each other, and the knowledge that the parties have of its surrounding circumstances, would conclude that the parties had, concerning the subject matter of the alleged contract'. Campbell JA suggested the exceptional case is in fact an application of the objective theory of contract and not an exception to it. Campbell JA commented the only reason the subjective intention of a person is taken into account is because a reasonable person in the context in which the words in question are communicated, would realise they were not to be taken at face value (Ryledar [266]).
Bearing all this in mind I turn to the paragraphs of the reply under attack. Paragraph 5b pleads that the Circular issued by Britco was not acknowledged nor understood by the plaintiff to affect the Rental Agreements. Objectively the plaintiff is pleading that a reasonable person would not understand that the Circular issued by Britco was to be taken as a novation of the Rental Agreements. In my opinion par 5b is unobjectionable.
As to par 5(c), the plea is that administrative level communications taking place between Britco and the plaintiff did not affect the subject Rental Agreements. In my opinion that is stating an objective fact going to whether there has been the intention to create a new contractual arrangement by way of novation. However, in my opinion the defendant is embarrassed by the descriptor 'administrative employees'. Administrative employees may include any person in the plaintiff's employ who is undertaking an administrative function. The plaintiff should more specifically define the class of people communicating with Britco. For this reason par 5(c) is struck.
Further, par 5(c) goes on to plead the fact that the Board of the plaintiff did not appreciate the significance of events that had been taking place. That plea is goes to the subjective thinking of the Board and is, in my opinion, irrelevant. Further there is no plea of an express term of the Rental Agreements that any variation of the Agreement must be first approved by the Board. For these reasons I would strike par 5(c).
As to par 5d, the fact that the plaintiff continued to issue invoices to the defendant goes to the issue of mistake or misrepresentation. In that regard the plea is unobjectionable. However for the reasons given in par 5(c) regarding administrative employees, par 5(d) is struck.
As to par 5(f)(ii), this plea appears to plead the subjective motivations of the defendant which, in my opinion, is an improper plea. Further there is the plea that the Rental Agreements could only be varied with the plaintiff's Board's knowledge. That plea is irrelevant as I have expressed in relation to par 5(c). In my opinion par 5(f)(ii) ought to be struck.
For the reasons expressed under par 5(c), par 5(f)(iii) ought to be struck as it pleads the question of Board approval.
As to par 5(f)(iv) the plaintiff pleads that the administrative level employees of the plaintiff were oblivious to any intended effect and were honestly duped. The criteria whether a contract has not been entered into, is whether a reasonable person would conclude that the actual state of mind of the plaintiff was materially affected by mistake, misrepresentation, duress or undue influence. The plea in par 5(f)(iv) does not address those issues and accordingly is struck.
I do not understand the plea that administrative employees of the plaintiff were 'honestly duped'. If the actual state of mind of the plaintiff was affected by mistake or misrepresentation such that no contract was entered into, then this must be pleaded. In this case, what does duped mean: That there has been some kind of deception which, by reason of the word 'honestly' was not fraudulent. That deception may arise by way of a misrepresentation, in which case the defendant is entitled to know the material facts supporting that plea. For this reason par 5(f)(iv) is struck.
For the same reasons par 5(f)(vi) will be struck.
For the reasons in relation to the honestly duped plea, par 5(f)(vii) is struck.
Paragraph 5(f)(viii) pleads that both the defendant and Britco knew that at 13 May 2014 Britco was hopelessly insolvent and that the plaintiff was unaware of that fact. That plea clearly calls for particulars and the phrase 'and at 13 May 2014 both the defendant and Britco knew that Britco was hopelessly insolvent and that the plaintiff was unaware of that fact' is struck.
As to the plea in par 5(f)(ix) that a director of the plaintiff was unaware of the separate legal existence of Britco, that plea, in my opinion, goes to the state of mind of the plaintiff in relation to the question of mistake or misrepresentation regarding the novated contract. In my opinion par (f)(ix) is unobjectionable.
For the same reason, pars 5(f)(x) and 5(f)(xi) are not struck out.
As to the pleas in pars 6.3 and 6.4 of the reply, that the plaintiff had not understood the conduct of Britco to affect the Rental Agreement, that plea in my opinion goes to the state of mind of the plaintiff as to mistake. That plea is unobjectionable.
For these reasons pars 5(c), 5(d), 5(f)(ii), 5(f)(iii), 5(f)(iv), 5(f)(vi), 5(f)(vii), and 5(f)(viii) of the Reply are struck. I will hear counsel on the form of orders and costs.