Warren v Lawton [No 2]

[2014] WASC 293

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   WARREN -v- LAWTON [No 2] [2014] WASC 293

CORAM:   LE MIERE J

HEARD:   13 AUGUST 2014

DELIVERED          :   22 AUGUST 2014

FILE NO/S:   CIV 1372 of 2010

MATTER                :Claim for an order for the dismissal of 1st and 2nd named first defendant's application under Section 138B of the Transfer of Land Act 1893 for the removal of caveat

BETWEEN:   MARK DONALD WARREN

Plaintiff

AND

JOSEPH FRANCIS LAWTON
MOLLY ELIZABETH HALL
First Defendants

REGISTRAR OF TITLES
Second Defendant

Catchwords:

Practice and procedure - Application to disallow amendments to defence and counterclaim - Turns on own facts

Legislation:

Nil

Result:

Application granted in part

Category:    B

Representation:

Counsel:

Plaintiff:    Mr M J McPhee

First-named First Defendant     :    No appearance

Second-named First Defendant  :    Mr I A Morison

Second Defendant          :    No appearance

Solicitors:

Plaintiff:    M J McPhee Barrister and Solicitor

First-named First Defendant     :    No appearance

Second-named First Defendant  :    McAuliffe Legal

Second Defendant          :    No appearance

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

A Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555

Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301

Ballantyne v Phillot (1961) 105 CLR 379

JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435

Lopwell Pty Ltd v Clarke [2009] NSWCA 165

Shepperd v The Council of the Municipality of Ryde (1952) 85 CLR 1

Warren v Lawton [2014] WASC 59

1. LE MIERE J:  The plaintiff has applied to disallow amendments to the substituted defence and counterclaim of the second named first defendant, Ms Hall, which is dated 10 April 2014.  I will refer to that defence and counterclaim as the substituted defence and counterclaim.  The plaintiff applied to disallow amendments to Ms Hall's further re‑amended defence and counterclaim dated 14 August 2013 (the further re‑amended defence and counterclaim).  I disallowed the amendments to the further re‑amended defence and counterclaim:  Warren v Lawton [2014] WASC 59 (the first disallowance judgment). The background to this action and the pleadings are set out in the first disallowance judgment and I will not repeat them here. The second defendant, the Registrar of Titles, has taken no part in this action. I will refer to the first defendants as the defendants.

2. The plaintiff filed and served objections to a large number of paragraphs of the substituted defence and counterclaim.  Following conferral between the parties the defendant has conceded the objection to [27] to [34] and [38] to [49] and [10], [11] and [16] of the prayer for relief in the substituted defence and counterclaim.  The amendments to plead those paragraphs should be disallowed.    The plaintiff has not pressed some of his objections to paragraphs of the substituted defence and counterclaim and it is not necessary to further consider them.  I will consider only those paragraphs of the substituted defence and counterclaim which remain in contention.

Paragraph 8

1. Paragraph 8 pleads in answer to [4] of the amended statement of claim which pleads that on 17 January 1990 the plaintiff registered caveat E277602 over the first defendant's one undivided twentieth share in the Land.  In [8] of the substituted defence and counterclaim Ms Hall pleads that under the caveat the plaintiff claims an estate or interest in the Land as optionee by virtue of an option to repurchase contained in cl 13 of the written agreement; the defendants gave no written notice under cl 13 and hence no option arose.  In [8(4)] and [8(5)] Ms Hall further says that the plaintiff's nineteen undivided twentieth shares in the Land is an interest in the Land and not in the defendants' one undivided twentieth share, that on lodgement of the caveat the plaintiff had no option to purchase the defendants' one undivided twentieth share, had no interest in the defendants' one undivided twentieth share and therefore does not have the interest in the defendants' one undivided twentieth share claimed in the caveat.

2. The plaintiff says that [8(4)] and [8(5)] of the substituted defence and counterclaim are embarrassing.  The plaintiff says that the plaintiff and the defendants each had an undivided interest in the Land and Ms Hall's pleading in [8(4)] and [8(5)] are embarrassing and contrary to law.  I do not agree.  Those paragraphs set out Ms Hall's answer to the plaintiff's claim to maintain a caveat over the defendants' one‑twentieth undivided share.  Whether or not Ms Hall's argument will prevail is a matter for trial.

Paragraphs 15 to 17

1. In [15] to [17] of the substituted defence and counterclaim Ms Hall pleads a collateral contract.  Paragraphs 15 and 16 plead statements made by the defendants and the plaintiff and [17] pleads that those statements gave rise to a collateral contract whereby in consideration of the defendants entering into a contract for the purchase of the Land the plaintiff agreed that he would do nothing on the Land that would affect the peace and tranquillity of the Lawton Hall Lot (the tranquillity term).

2. The plaintiff objects to [15] and [16] essentially on the ground that they fail to give sufficient particulars of the statements or conversations Ms Hall says gave rise to the collateral contract.  It is the practice of the court to require the delivery before trial of witness statements which ensure the disclosure of all the evidence that will be adduced at trial.  If the pleading discloses the issues to be tried and identifies the case that has to be met it is not necessary to order further particulars.  In this case further particulars are not necessary.  The defendant has identified the statements alleged to give rise to the collateral contract, who made them and when and where they were made.  That is sufficient for the plaintiff to know the case he has to meet and prepare his case.

3. There are two objections to [17]. First, the pleading does not say that the statement of the plaintiff alleged to give rise to the collateral contract is promissory rather than representational. Secondly, the pleading does not sufficiently define the tranquillity term.

4. Ms Hall submits that the plaintiff's objections to [15] is not competent or should not be acceded to because the same objection was made and rejected in the first disallowance judgment.  As a matter of efficient case management, I consider it to be expedient to first consider the merits of the plaintiff's objections.

5. The plaintiff says that the collateral contract must be based on the pleas in [15(a)(iii)] and [16(b)] of the substituted defence and counterclaim that the plaintiff orally represented to the defendants that the area of land met the description, which included that it was and was likely to remain a quiet and tranquil place.  The plaintiff says that the description is an objective term and does not necessarily refer to what the plaintiff might or might not do.  I do not agree.  It is arguable that a statement by the adjoining owner that land is likely to remain a quiet and tranquil place is a statement that the adjoining owner will do nothing to cause the land to cease to be a quiet and tranquil place.  In Shepperd v The Council of the Municipality of Ryde (1952) 85 CLR 1 the plaintiff entered into a contract for the sale of land after Ryde had said that it would maintain an area of land which it owned located near the land purchased as a park. The High Court was satisfied that the plaintiff would not have entered into the contract but for the statement made, and also that Ryde was in fact promising to maintain the land in question as a park. The consideration for this promise was the plaintiff's entry into the contract of sale and the collateral contract was therefore satisfied. Here, Ms Hall pleads that the plaintiff orally represented to the defendants that the area of land met the description, which included that the land was likely to remain a quiet and tranquil place.

6. The plaintiff also says that the tranquillity term is inconsistent with the main contract.  The defendants say that any inconsistency will be overcome by the addition of the words 'other than as required by law'.  If those words are added it is arguable that there will be no necessary inconsistency.  This matter should be determined at trial.

7. There is an issue whether Ms Hall has sufficiently pleaded the collateral contract.  A statement will only support a collateral contract if the statement is promissory and not merely representational:  JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435. Whether a statement is a promise is determined objectively. A statement in non‑promissory form can be a promise if this was reasonably inferred: Ballantyne v Phillot (1961) 105 CLR 379, 396 - 397 (Menzies J). It is not necessary that a statement should be subjectively intended to be a term of a contract, it is sufficient that a reasonable person would conclude from what was said that it was being promised.

8. The substituted defence and counterclaim does not expressly state that the relevant statement by the plaintiff was promissory.  Counsel for the defendant explained in argument that the plea in [16(b)] that the plaintiff orally represented that the area of Land met the description, together with the plea in [17] that the plaintiff and the defendants thereby had entered into a collateral contract by which the plaintiff agreed that he would do nothing on the land that would affect the peace and tranquillity of the Lawton Hall Lot is intended to be a plea that the statement by the plaintiff was promissory and not merely representational.  I will permit the pleading to stand on that basis.

9. The plaintiff further objects that the tranquillity term is insufficiently defined.  The plaintiff says that it fails to identify what the tranquillity term required the plaintiff to do or refrain from doing on his exclusive use area of the Land.  In the first disallowance judgment I said:

   The content of the tranquillity term alleged by Ms Hall should be considered in light of the acts of the plaintiff which Ms Hall pleads constitute a breach of that term. It is not necessarily inconsistent with the plaintiff having exclusive occupation and use of the designated portion of the land that he should do nothing on the land that would affect the peace and tranquillity of the purchasers' designated exclusive use area [40].

   Rightly or wrongly, I held in effect that the pleading sufficiently defined the tranquillity term.  It is not appropriate that I make any different finding on this application.  The objections to [15] to [17] of the substituted defence and counterclaim are not upheld.

Paragraphs 18 to 20

1. These paragraphs plead the contract alleged by Ms Hall by which the plaintiff sold and the defendants purchased a one undivided twentieth share of the Land.  The plaintiff objects in essence that the pleading is not sufficiently particularised.  I find that the pleading is sufficient to disclose the issues to be tried and identify the case that the plaintiff has to meet.  The witness statements which will be delivered before trial will ensure the disclosure of all the evidence that will be adduced at trial.  To require further particulars to be given of the alleged contract and its express oral terms will add to the delay and costs of the proceeding and is unnecessary for its fair resolution.  The objection is not upheld.

Paragraph 21

1. This paragraph pleads that in the alternative to the plea of a collateral contract, the tranquillity term is an implied term of the main contract.  The implied term is sufficiently pleaded.  The objection is not upheld.

Paragraphs 23 to 26

1. These paragraphs plead that the contract should be rectified to include the Lawton Hall Lot term.  Paragraph 23 pleads that at the time of making the contract of sale it was the intention of both the plaintiff and the defendants that the contract would contain the Lawton Hall Lot term.  The plaintiff objects that Ms Hall has not given particulars of the common intention.  Counsel for Ms Hall submitted that the facts giving rise to the common intention are those pleaded in [15] and [16] of the substituted defence and counterclaim.  Ms Hall should have leave to amend [23] by giving particulars of the common intention, being the facts pleaded in [15] and [16].  On that basis the plaintiff's objections to [23] are not upheld.

2. Paragraph 24 of the substituted defence and counterclaim pleads in the alternative a case of unilateral mistake.  Where one contracting party knows that an instrument contains a mistake in his favour but does nothing to correct it, the party with knowledge will be precluded from resisting rectification on the ground that the mistake was unilateral and not common:  A Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555.

3. The plaintiff objects that Ms Hall has not pleaded the material facts to establish a case of rectification for unilateral mistake. The substituted defence and counterclaim does not, but should, plead that the plaintiff knew that the contract did not contain the Lawton Hall Lot term, the defendants believed that the contract contained the Lawton Hall Lot term and the plaintiff knew that the defendants believed the contract contained the Lawton Hall Lot term and permitted the defendants to enter into the contract. Further, the defendants should plead the facts giving rise to each of those states of mind. I uphold the objection to [24]. It should be disallowed in its present form. Ms Hall should have leave to re‑plead [24] to properly plead the elements of rectification for unilateral mistake and the facts on which the claim is based.

Paragraphs 35 to 37

1. These paragraphs plead breach of the tranquillity term. The plaintiff's objection is that the pleading has failed to sufficiently define the meaning of 'tranquillity'. I have dealt with this objection in considering the objections to [17]. The objection will be dismissed for the same reasons.

Paragraphs 54 to 59

1. These paragraphs plead that the plaintiff unconscientiously took advantage of Ms Hall's special disadvantage by causing her to pay a sum for the one undivided twentieth share that was in excess of its fair market value and causing her to sign a written agreement the terms of which were unfair, unjust and unreasonable.

2. The first issue is whether the special disadvantage pleaded in [54] and [55] is arguably capable of amounting to a special disadvantage giving rise to unconscionability.  The plaintiff says that the matters pleaded in [54] are not capable of giving rise to a relevant special disadvantage.  Ms Hall says that whether or not the matters pleaded constitute a special disadvantage are a matter for trial.

3. Equity grants relief against an unconscionable bargain when a transaction, considered in the light of the circumstances in which it was entered into, is so unconscionable that it cannot be allowed to stand.  In Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 Gray, French and Stone JJ said that under the rubric of unconscionable conduct, equity will:

   set aside a contract or disposition resulting from the knowing exploitation by one party of the special disadvantage of another.  The special disadvantage may be constitutional, deriving from age, illness, poverty, inexperience or lack of education:  Commercial Bank of Australia Ltd v Amadio.  Or it may be situational, deriving from particular features of a relationship between actors in the transaction such as the emotional dependence of one on the other:  Louth v Diprose; Bridgewater v Leahy (1998) 194 CLR 457 [48].

4. The factors pleaded in [54] of the substituted defence and counterclaim to give rise to Ms Hall's special disadvantage are, apart from [54(8)], matters of constitutional disadvantage, they relate to lack of knowledge or experience.  It is doubtful that those matters alone would be capable of constituting a relevant special disadvantage.  However, [54(8)] pleads that Ms Hall 'was dependent upon and was deferring to the plaintiff in all matters concerning the acquisition of the 1/20^th share including the terms of the written agreement'.

5. In Lopwell Pty Ltd v Clarke [2009] NSWCA 165 Macfarlan JA, with whom Ipp and Campbell JJA agreed, said:

   It is clear from the authorities cited above (see [42–45]) that a relevant 'special disability' need not arise out of 'sickness, age, sex, infirmity of body or mind, drunkenness [or] illiteracy' (these being some of the examples given by Fullager J in Blomley v Ryan: see [42] above).  Complete dependence upon a trusted adviser for financial advice can be just as much a disability for this purpose as the emotional dependence in Louth v Diprose and Bridgewater v Leahy. The question to be answered is whether, by reason of their total reliance upon an adviser who was, unbeknown to them, not independent, the Clarkes were not in a position to protect their own best interests. That they entered into this transaction gave rise to an inference that this question should be answered in the affirmative. There was a sound basis in the evidence for the primary judge's finding that the relevant transactions 'entered into on Unicomb's say so, without independent advice, bespeak an inability to judge as to what was in their own best interests' ([44] of the Judgment quoted in [34] above) [47].

   Macfarlan JA said at [5] that the primary judge was correct in finding that, by reason of the complete reliance upon their accountant, Unicomb, the Clarkes were subject to a special disability notwithstanding that Mr Clarke held Bachelor and Master of Agricultural Science degrees and Mrs Clarke a Bachelor of Agricultural Science degree and a Dip Ed and that they had operated a dairy farm through a family company of which they were the sole directors and shareholders.

6. The boundaries of unconscionability or unconscionable conduct remain undetermined under Australian law.  Ms Hall's claim that she was under a relevant special disadvantage by reason of the matters set out in [54] of the substituted defence and counterclaim and by reason of the unfair, unjust and unreasonable terms of the agreement is not so obviously untenable that it should be disallowed at the interlocutory stage.

7. Ms Hall's plea in [54(8)] that she was dependent upon and deferring to the plaintiff in all matters concerning the acquisition of the one undivided twentieth share is critical to this part of her case.  Ms Hall should give particulars of the facts, matters and things she relies upon to establish that she was dependent upon and deferring to the plaintiff in the way pleaded so that the plaintiff will know the case he has to meet.

Paragraphs 61 to 68

1. These paragraphs plead breach of fiduciary duty.  Paragraph 61 pleads that in the premises set out in [13], [14] and [15] the plaintiff was the purchasing agent of the defendants.  The plaintiff says that Ms Hall should give particulars of her allegation that the plaintiff was the defendants' purchasing agent.  Further particulars are not required.  Paragraph 61 of the substituted defence and counterclaim confines Ms Hall's case that the plaintiff was the defendants' purchasing agent to the matters set out in [13], [14] and [15].  The witness statements to be delivered by Ms Hall before trial will ensure the disclosure of all the evidence that will be adduced at trial.  Further particulars are not necessary.

2. The plaintiff further says that the matters pleaded in [61] and [62] of the substitute defence and counterclaim are not capable of giving rise to a fiduciary duty owed by the plaintiff to the defendants.  Ms Hall says that is a matter that should be determined at trial.

3. There is no single satisfactory test to identify a relationship as fiduciary.  A fiduciary relationship may be status based, that is fall within one of the established categories of fiduciary relationship, or fact based, that is arises from the particular facts of the case and the circumstances governing the relationship between the parties.  Agents are commonly fiduciaries and agency is usually listed as one of the established categories of fiduciary relationship.  The fiduciary obligation is inherent in an agency relationship but the extent and scope of the obligation will vary from agency to agency and would depend on the express and implied terms of the contract of agency.  In this case it is not pleaded that the defendants formally retained the plaintiff or contracted with him for him to find a property for them to buy.  The contract of sale between the plaintiff and the defendants was a contract of two principals.  Nevertheless, the existence of a fiduciary relationship may depend on the particular facts of the case.  Ms Hall's case is not so totally unarguable that it should be disallowed at the interlocutory stage.

Conclusion

1. Ms Hall conceded that [27] to [34] and [38] to [49] and [10], [11] and [16] of the prayer for relief should be disallowed.

2. Ms Hall will have leave to amend [17] of the substituted defence and counterclaim by the addition of the words 'other than as required by law' or words to similar effect.

3. Ms Hall should give particulars of the allegation in [23] of the substituted defence and counterclaim that it was the common intention of the plaintiff and the defendants that the contract would contain the Lawton Hall Lot term stating all facts, matters and things relied upon to establish the common intention.

4. Paragraph 24 of the substituted defence and counterclaim will be disallowed with leave to Ms Hall to re‑plead that the plaintiff knew that the contract of sale contained a mistake in his favour but did nothing to correct it, stating the material facts and any necessary particulars.

5. Ms Hall should give particulars of the allegation in [54(8)] of the substituted defence and counterclaim that she was dependent upon and was deferring to the plaintiff in all matters concerning the acquisition of the one undivided twentieth share including the terms of the written agreement stating all facts, matters and things relied upon to establish that she was dependent upon and deferring to the plaintiff in those matters.