| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : WAINTER PTY LTD -v- JERMYN [2005] WADC 228 CORAM : PRINCIPAL REGISTRAR GETHING HEARD : 9 NOVEMBER 2005 DELIVERED : 29 NOVEMBER 2005 FILE NO/S : CIV 1370 of 2004 BETWEEN : WAINTER PTY LTD Plaintiff
AND
PETER GEOFFREY JERMYN
Defendant
Catchwords: Pleadings - Leave sought to amend defence - Lease - Surrender - Termination - Repudiation - Discretionary considerations
Legislation: Property Law Act 1969
Result: Application for leave to amend defence dismissed
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Representation:
Counsel:
Plaintiff : Mr D H Solomon
Defendant : Mr H R Robinson
Solicitors:
Plaintiff : Solomon Brothers
Defendant : Haydn Robinson
Case(s) referred to in judgment(s):
Ahern v L A Wilkinson (Northern) Ltd [1929] St R Qd 66
Broughton v Snook [1938] Ch 505
Cayne v Global Natural Resources plc [1984] 1 All ER 225
Foster v Robinson [1951] 1 KB 149
Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Leek & Moorlands Building Society v Clark [1952] 2 QB 788
Maridakis v Kouvaris (1975) 5 ALR 197
Marist Brothers Community Incorporated v Shire of Harvey (1994) 14 WAR 69
Metcalfe v Boyce [1927] 1 KB 758
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Shevill v Builders Licensing Board (1982) 149 CLR 620
Sinclair v James [1894] 3 Ch 544
State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146
Steve Christenson & Co Ltd v Furs & Fashions (NZ) Ltd [1971] NZLR 129
Wallis v Hands [1893] 2 Ch 75
Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105
Case(s) also cited:
Nil
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1 PRINCIPAL REGISTRAR GETHING: The application before me is brought by the defendant seeking leave to amend his defence.
2 The plaintiff's claim is against the defendant as a guarantor under a sub-lease for arrears of rent owed by the sub-lessee, Kingsmen Nominees Pty Ltd ("Kingsmen"). The plaintiff is the sub-lessor. The head lessor is another company, Wain Pty Ltd ("Wain"). 3 The initial defence was filed on 4 May 2005. On 18 August 2005, the defendant was ordered to provide further and better particulars of his defence. The particulars were filed on 13 September 2005. The provision of the particulars appears to have prompted the defendant to file an amended defence, also on 13 September 2005. As this defence was out of time and no leave had been granted, it is irregular. Subsequently, the defendant filed an application to amend on 21 September 2005. A minute of proposed amended defence was filed with the application on 21 September 2001, which I will refer to as the "Minute" in these reasons. 4 The plaintiff opposes the application for reasons which are set out below.
Relevant principles 5 The Court may grant leave to a party to amend its pleading at any stage of the proceedings (Rules of the Supreme Court (RSC) O 21 r 5). The discretion is unqualified, though r 5 does provide that leave to amend may be "on such terms as to costs or otherwise as may be just and in such manner as the court may direct". 6 The Court will not grant leave to a party to make an amendment which does not disclose a reasonable cause of action or defence: Sinclair v James [1894] 3 Ch 544 at 557. The pleading must disclose all material facts necessary for the purpose of formulating a complete cause of action: Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566 at 569, 574. Given the submissions made in this case, it is also pertinent to note that it is not the function of particulars to make good a pleading from which a material fact is omitted: Jingellic (Supra) at 574. 7 Neither will the Court grant leave to make an amendment which could be stuck out as defective on any of the grounds set out in RSC O 20 r 19(1)(b) to (d): see generally, Hooker Corporation Ltd v Commonwealth of Australia(1986) 65 ACTR 32 at 38. For example, the Court will not grant leave where the pleading is embarrassing in the sense
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that it places the opposing party in such a position that it neither knows what is alleged against it nor what it has to answer: Jingellic at 574. 8 The Court must also consider any application for leave to amend in the light of its case flow management principles. In this context, it is appropriate to note the comments of Dawson, Gaudron and McHugh JJ in State ofQueensland v JL HoldingsPty Ltd(1997) 189 CLR 146 at 154: "Case management is not an end in itself. It is an important and useful aid for ensuring the prompt and efficient disposal of litigation. But it ought always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim." 9 Their Honours continue (at 155). "Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties." 10 The reference to the attainment of justice in these passages, and the reference to "just" terms in RSC O 21 r 5, are to my mind are the key discretionary considerations. This conclusion is supported by the analysis of Kirby J in Queensland v J L Holdings Pty Ltd, 189 CLR, 167 - 172 and the analysis of Nicholson J in Jingellic at 573. 11 In other contexts, the considerations governing the exercise of a judicial discretion are referred to as the balance of the risk of doing an injustice: Cayne v Global Natural Resources plc[1984] 1 All ER 225 at 237; Kolbach Securities Ltd v Epoch Mining NL(1987) 8 NSWLR 533 at 536.
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Summary of the issues
12 As I have already noted, the plaintiff's claim is against the defendant in his capacity as guarantor for rent owed by Kingsmen. 13 The defendant in the Minute disputes this claim on three broad grounds of defence. The first is that at some point in time, as yet unpleaded, the sub-lease between the plaintiff and Kingsmen was mutually surrendered by operation of law. The second and third grounds assume that the plaintiff will establish at trial that the sub-lease was operative. In this alternative, the defendant says that the sub-lease was either: 14 In summary terms, the plaintiff opposes leave being granted to make these amendments on the basis that: (a) the proposed amendments do not disclose reasonable causes of action; (b) if they do, the pleadings have deficiencies such that they should not be allowed in their present form; and (c) in any event, in the exercise of the Court's discretion, and in the light of case management principles, the Court should refuse to grant leave to amend. 15 It is convenient to deal with the first two grounds of objection in relation to each of the three grounds of defence, and then to deal with the overall discretion and case management principles in relation to the objections taken as a whole.
Surrender 16 Surrender has been described as "a species of merger which occurs when a lessee gives up his leasehold interest to his immediate lessor and the lessor accepts it" (Bradbrook, MacCallum & Moore, "Australian Real Property Law"(3rd ed, Sydney, 2002), p 472, in turn quoting Helmore, "The Law of Real Property in New South Wales"(2nd ed, Sydney, 1966),
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p 107). There are various forms of surrender, but for present purposes, the relevant form is surrender by operation of law. 17 The learned authors of Bradbrook, MacCallum & Moore, "Australian Real Property Law" summarise the position as follows (p 473): "Surrender by operation of law is based on estoppel by conduct and arises wherever the parties, by their conduct, show an intention to treat the lease as terminated, and where it would be inequitable for them to continue to treat the lease as valid. The conduct relied on must be unequivocal. There must either be the giving up of possession by the tenant and its acceptance by the landlord, or some other conduct consistent only with the termination of the lease. The most obvious illustration of this is where the landlord grants a new lease of the premises to a third party or changes the locks on the property. This situation must be distinguished from an assignment of the lease by the existing tenant, where surrender is an irrelevant issue, and where the landlord accepts rent from a third party. Other illustrations of surrender are where the landlord grants a fresh lease during the term of the lease for a shorter or longer fixed-term period, or where the tenant abandons the premises or leaves by agreement and the landlord re-enters the premises. Note, however, that mere abandonment by the tenant without re-entry by the landlord will not constitute surrender. The mere giving up of the keys to the premises to the landlord, and the signing by the tenant of a contract to purchase the reversion have also been held not to amount to a surrender by operation of law." (I have omitted the extensive footnotes which accompany this paragraph). 18 From par 4 of the Minute, the defence sought to be advanced by the defendant is that: (a) Kingsman did not occupy the property at any time; (b) five other entities, including the defendant, did occupy the property; (c) these five other entities, and not Kingsman, were invoiced for, and paid, rent during the relevant period; (d) at all material times, the plaintiff and the head lessor knew and consented to there five entities being "co-tenants" of the property and not Kingsmen.
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(e) as a result of (a) to (d), the sublease was surrendered by operation of law. 19 The plaintiff submits that for surrender by operation of law to arise, the plaintiff must have granted a lease to the five occupying entities that was inconsistent with the terms of the sub-lease with Kingsmen, citing in support Metcalfe v Boyce[1927] 1 KB 758, Wallis v Hands[1893] 2 Ch 75, and Maridakis v Kouvaris(1975) 5 ALR 197 at 199. As I read the authorities, while it is sufficient to amount to a surrender at law for a lessor to grant a lease on inconsistent terms, this is not the only way in which a submission at law may arise. As pointed out in the passage quoted above from Bradbrook et al, the key issue is one of estoppel, specifically, whether the parties, by their conduct, show an intention to treat the lease as terminated, in circumstance where it would be inequitable for them to continue to treat the lease as valid: Wallis [1893] 2 Ch at 82;Steve Christenson & Co Ltd v Furs & Fashions (NZ) Ltd[1971] NZLR 129 at 133;Foster v Robinson[1951] 1 KB 149 at 155;Maridakis, 5 ALR at 200. 20 In my view, this ground of defence is capable of being a reasonable one. I say "capable", as the defence as currently set out in the Minute is deficiently pleaded, or at least not sufficiently pleaded for the plaintiff to respond to it. Specifically, the following information needs to be in the pleading in order for the plaintiff to respond to it: (a) the details and terms of the "co-tenancy" with the five entities said to have occupied the property in question; (b) the date of the alleged surrender; (c) details about the invoices said to have been rendered by the plaintiff to the five occupying entities, and the payments made by those entities; (d) the specific facts it is said that the head lessor and the plaintiff knew about the "co-tenancy" of the five entities; and (e) the details as to how the head lessor and the plaintiff has the knowledge in paragraph (d). 21 Accordingly, par 4 of the Minute does not in its present form disclose a reasonable defence, at least not one which the plaintiff can respond to. 22 Two further comments need to be made to fully deal with the issues raised in argument. The first is that the defendant has sought to defer the
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provision of full particulars until discovery has been provided. This arises in relation to the details of the relationship between the plaintiff and the five occupiers. The defendant submits that deferral is reasonable on the basis that the specific facts are within the knowledge of the plaintiff. The Court will generally allow some latitude to a party to provide full particulars following discovery where the matters are in the knowledge of the other party: Jingellic at 70, 575. However, in this case, some of the information must be in the knowledge of the defendant as he is alleged to be one of the co-tenants. In this context, less latitude will be given the defendant to defer providing particulars until discovery has occurred. 23 The second is that the plaintiff submits that the defence of surrender by operation of law, to be properly pleaded, must plead: (a) that the grant of a new lease was not an assignment of the existing lease, citing Ahern v L A Wilkinson (Northern) Ltd[1929] St R Qd 66; and (b) that the new lease was between the plaintiff and the five entities on the plaintiff's own account, citing Maridakis, 5 ALR at 200 and Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 at 133. 24 It is the case that surrender at law will not arise where the lease was assigned or where the new lease was not to the lessor's own account. However, to my mind, these issues are issues that should be raised by the plaintiff by way of reply, as opposed to the being pleaded as part of the defence.
Termination 25 The second ground of defence is that the sub-lease between the plaintiff and Kingsmen was terminated by agreement, which agreement included the fact that "all obligations under the agreement were at an end at no cost to any of the parties". Significantly, this would include the obligation on Kingsmen to pay outstanding rent as pleaded in the statement of claim, and would thus impact the defendant's obligations as guarantor. 26 As a matter of law, a lease may be terminated, or perhaps more accurately, surrendered, by agreement (see for example, Wood Factory, 2 NSWLR at 133). In broad terms then, this ground of defence is capable of being a reasonable one.
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27 The plaintiff asserts that any express surrender of the sub-lease between the plaintiff and Kingsmen must be by deed to be effective by operation of Property Law Act 1969 (WA) s 33(1) and 33(2)(c) ("PLA"). Moreover, any agency pursuant to which the deed is executed must also be in writing. Direct evidence of writing is said to be necessary, relying on the authority of Marist Brothers Community Incorporated v Shire of Harvey (1994) 14 WAR 69 at 80.
28 At the outset, the question must arise as to whether a surrender of a lease involves the conveyance of a legal estate or the creation of one for the purposes of PLA s 33(1). A surrender is in the nature of a merger of rights. There is thus an issue to be tried as to whether PLA s 33 has any application. If the PLAdoes have application, PLAs 34 seems the more appropriate section as a surrender might be described as a "disposal" of an interest in land. Even then, as the learned authors of Bradbrook, MacCallum & Moore, Australian Real Property Lawnote (p 473): "… under the rule in Walsh v Lonsdale (1882) 21 Ch D 9(CA)…where the surrender is oral and value is given, the surrender will be effective if the tenant can adduce evidence of part performance or an informal written agreement". 29 Part performance is an exception to the requirements of PLAs 34 by PLAs 36(d). 30 The question for present purposes is whether the requirement to comply with PLA s 33 is for the defendant to plead as part of the defence, or for the plaintiff to assert as part of the reply, and the defendant to respond to by way of rejoinder. In this regard, the comments of Justice Farwell in Broughton v Snook[1938] Ch 505 at 512 - 513, in the context of the Statute of Frauds are apposite: "The plaintiff has to prove as a first step in the whole of the proceedings the existence of an oral contract. There must be clear evidence that there was such a contract. If there be evidence of such a contract, then he can enforce that contract unless the defendant sets up the Statute of Frauds. If the defendant sets up the Statute of Frauds, then it may be open to the plaintiff to avoid that difficulty by showing that there were acts which were referable only to the contract, which would render it a fraud in the defendant to take advantage of the contract not being in writing, and, if he can show that the
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defendant has done or stood by and permitted the plaintiff to do acts by which the plaintiff has altered his position, and such standing by and consent can only have been with reference to the oral contract, then the plaintiff has done all that he is bound to do to get himself out of his difficulty. If the defendant seeks to rely upon such a plea as fraud, evidenced by undervalue, or the mental or physical incapacity of the vendor or the purchaser, as the case may be, those are matters which the defendant must plead specifically and must prove, and it is not for the plaintiff to prove a negative. In the ordinary course, if the plaintiff pleads in his statement of claim an oral contract and the defendant sets up the Statute as an answer, the plaintiff then replies by pleading acts upon which he relies as part performance, and if the defendant desires to set up such a defence as I have suggested, then it is for him to seek to amend his defence by setting up those matters on which he relies in addition to the defence of the Statute." 31 In this case, the oral contract is raised by the defendant. By parity of reasoning, it is for the plaintiff in reply to raise issues of compliance with the PLA. The defendant can then respond in a rejoinder or by amending the defence. 32 Further, although it is not clear, it appears that in par 5(f) of the Minute there is a further plea of surrender of the lease by operation of law arising out of the conduct of the parties. If this plea is elaborated in the light of the principles I have set out above, then it forms a second basis for the argument that compliance with PLA s 33 is not necessary, surrender by operation of law being an express exception to PLA s 33, by s 33(2)(c). 33 The plaintiff also submits that one or two or more joint lessees cannot surrender rights jointly without authority from the other joint lessees, relying on the decision in Leek & Moorlands Building Society v Clark [1952] 2 QB 788 at 795. Here, the defendant proposes to plead that if the sub-lease between the plaintiff and Kingsmen was not surrendered, the five occupiers were sub-tenants. In this context, the nature of the relationships between the parties and the capacity in which people operated becomes significant. I agree with the plaintiff's submission that the Minute is defective as it fails to plead the necessary facts regarding the relationships between the various people referred to in par 5 of the Minute. The nature of the relationships between the parties, and the question of which persons were acting for which entities and in
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what capacity at the relevant time, is essential to the pleading of the agreement to terminate or surrender by operation of law. 34 Accordingly, I find that par 5(a) to (e) and (g) do not disclose a reasonable defence, at least not one that the plaintiff can respond to.
Repudiation 35 A lease may be terminated where there is a repudiatory conduct on behalf of one of the parties, which conduct is accepted as repudiation by the other: Shevill v Builders Licensing Board(1982) 149 CLR 620, Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623. The repudiatory conduct may be by the lessor as well as the lessee: Laurinda. 36 In Progressive Mailing House, Mason J, as he then was, said the following of repudiation (at 33): "What needs to be established in order to constitute a repudiation is that the party evinces an intention no longer to be bound by the contract or that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way". 37 Here, the alleged repudiatory conduct is a representative of the head lessor and plaintiff (being one in the same person) telling occupiers that all tenancy agreements would be vacated and that "tenants must pack their fixtures and fittings and shift out over the weekend". For present purposes, this conduct is capable of amounting to repudiatory conduct, thus this ground of defence is capable of being a reasonable one. 38 Again, what is missing is detailed pleadings of the relationships between the various people mentioned in the factual plea. Paragraph 5(f) of the Minute thus does not disclose a reasonable defence, at least not one which the plaintiff can respond to. This deficiency is the same deficiency as outlined in the pleading in relation to pars 5(a) to (e) and (g).
Discretion and case management considerations 39 For the reasons set out above, the Minute seeks to introduce pleadings which, in their present from, do not disclose a reasonable defence, at least not one which the plaintiff can plead to. Given that finding, the application must be dismissed.
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40 The relevant case management question is whether the defendant should be given leave to file and serve a further minute of proposed amended defence. As set out above, the defences which the defendant has sought to plead are capable of being made out at law. The defendant should have an opportunity to do so. The plaintiff has not drawn to my attention any specific prejudice it will suffer that could not be cured by a costs order.
41 Balancing the risks of doing an injustice, the defendant should be given leave to file and serve a further minute of proposed amended defence. 42 I will hear counsel on the form of the orders and costs.
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