Wilson v Robert Norman Francis as trustee for the Francis Unit Trust - [2007] WASC 141

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: WILSON & ORS -v- ROBERT NORMAN FRANCIS AS TRUSTEE FOR THE FRANCIS UNIT TRUST [2007] WASC 141

CORAM: MASTER SANDERSON

HEARD: 11 JUNE 2007

DELIVERED : 2 JULY 2007

FILE NO/S: CIV 1206 of 2005

BETWEEN: PETER ERIC MCKENZIE WILSON
First Plaintiff
KAREN LOUISE BRICE
Second Plaintiff
TERESA MARIA HOLMES
Third Plaintiff
AND
ROBERT NORMAN FRANCIS AS TRUSTEE FOR THE FRANCIS UNIT TRUST
Defendant

Catchwords:

Practice and procedure - Application for leave to amend statement of claim - Turns on own facts

Legislation:

Nil

Result:

Amendment allowed

Category: B

Representation:

Counsel:

First Plaintiff                  :     Mr G A Rabe
Second Plaintiff             :     No appearance
Third Plaintiff                :     No appearance
Defendant:     Mr R A Zilkens

Solicitors:

First Plaintiff                  :     Stables Scott
Second Plaintiff             :     No appearance
Third Plaintiff                :     No appearance
Defendant:     Zilkens & Co

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

Commission for the New Towns v Cooper (Great Britain) Ltd [1995] 2 All ER 929

MASTER SANDERSON: This matter raises a short but significant pleading point. To put the dispute in context, it is necessary to say something about the facts.
From 1 March 2004, the first plaintiff was employed as the Chief Executive Officer of Nu‑West Developments Pty Ltd ("NWD"). The defendant was a director of NWD. Until 22 September 2004, the first plaintiff was Trustee of the Peter Wilson Family Trust (the "Trust"). As at 12 August 2004, NWD was indebted to the first plaintiff for an amount of approximately $460,000. The way in which this alleged indebtedness arose is as follows. In about March 2004, one Garry Huggins ("Huggins"), an agent for NWD and for the first plaintiff, agreed that the first plaintiff would loan NWD the sum of $300,000. Security for the loan would be an interest in a property in Bassendean. The loan was to be for a term of six months and the interest rate was to be 20 per cent per annum. It was agreed that a deed would be prepared to reflect the terms of the oral agreement. This agreement is referred to in the pleading as the "First NWD Oral Agreement". Pursuant to that agreement, the first plaintiff advanced to NWD $300,000 on or about 30 March 2004. This advance is referred to in the pleading as the "Wilson Principal".
In or about mid‑April 2004 but before 28 April 2004, Huggins on behalf of NWD, informed the first plaintiff that NWD wished to vary the First NWD Oral Agreement by NWD charging its interest in a property in Mount Street, West Perth, rather than its property in Bassendean. The first plaintiff agreed to the variation. A deed setting out the First NWD Oral Agreement, together with the variations, was entered into between the parties ("the First NWD Agreement").
In June 2004, a second oral agreement referred to in the pleading as the "Second NWD Oral Agreement" was entered into. This agreement provided for the first plaintiff to loan NWD $142,000, the security would be the Mount Street property, the loan was for a term of six months and the interest rate was 20 per cent. On 8 June 2004, pursuant to the Second NWD Oral Agreement, the first plaintiff advanced the sum of $142,000. Once again, this agreement was reduced to writing in a deed prepared in August 2004 ("the Second NWD Agreement").
It is alleged by the first plaintiff that NWD failed to make payment of principal or interest in relation to both agreements and notices of demand were subsequently issued.
It is alleged that by 12 August 2004, the first plaintiff became aware that prior to the advance of the Wilson Principal, the Mount Street property had been offered as security to two other parties. This led to a further oral agreement, this time between the first plaintiff and the defendant. That agreement is referred to in the pleading as the "Seaforth Oral Agreement". The terms of the Seaforth Oral Agreement were that the defendant would be jointly liable as a principal debtor with NWD for payment to the first plaintiff of the Wilson Principal and interest; the defendant would charge his interest in a property in Seaforth Avenue, Gosnells, as security for payments due under the First NWD Agreement and that the first plaintiff would, in consideration of the defendant's actions, not take immediate action to recover from NWD the amounts due under the First and Second NWD Agreements. It was further agreed that this oral agreement would be reduced to writing.
On 13 August 2004, it is alleged that one Mark Wege ("Wege"), an accountant employed by NWD acting for the defendant, attended on the first plaintiff at the first plaintiff's office. He is alleged to have told the first plaintiff that the defendant had asked him (Wege) to deliver to the first plaintiff a document and arrange for him to sign it. He said the defendant had already signed the document and that it contained the agreement made between the first plaintiff and the defendant on 12 August 2004 - that is to say, the Seaforth Oral Agreement. The first plaintiff signed the document and returned it to Wege ("the Wilson Agreement Document"). There then follows par 6 and par 7 of the pleading. Because of their importance, I will quote them in full. (Under par 7 there are particulars of knowledge. For present purposes, these can be omitted.)
"6.When the Plaintiff signed the Wilson Agreement Document:
(a)he did so in reliance on the representation of Wege acting on behalf of the Defendant that it contained the terms of the Seaforth Oral Agreement;
(b)he believed that it incorporated the terms of the Seaforth Oral Agreement and his belief in this regard was mistaken in that the Wilson Agreement Document:
(i)erroneously provides for the Plaintiff to advance a further sum of $300,000 to the Defendant;
(ii)fails to provide for the Defendant to be jointly liable to the Plaintiff for the sums due by NWD under the first NWD Agreement; and
(iii)fails to provide for the Defendant to charge the Seaforth Property as security for the sums due to the Plaintiff under the first NWD Agreement.
(c)he did not read the Wilson Agreement Document but scanned it and observed that it stated that the Defendant would pay to the Plaintiff the money due to the Plaintiff, that the Seaforth property would be additional security and that the Defendant had signed it;
(d)it appeared to him to have been drawn up by the solicitors for the Defendant, namely Zilkens & Co by reason that that firm's details appeared on the front cover thereof;
(e)he did not take legal advice; and
(f)he trusted the Defendant to act honestly and fairly by reason that he was then an employee of NWD, a company of which the Defendant was a director.
7.The Defendant knew that the Wilson Agreement Document mistakenly did not record the Seaforth Oral Agreement, which mistakes would operate in his favour, namely:
(a)it provides for the Plaintiff to advance a further sum of $300,000 to the Defendant;
(b)it does not provide for the Defendant to be jointly liable to the Plaintiff for the sums due by NWD under the First NWD Agreement; and
(c)it does not provide for the Defendant to charge his interest in the Seaforth Property as security for his joint liability for the payment of the sums due to the Plaintiff pursuant to the first NWD Agreement."
The defendant's complaint is that he says the first plaintiff is actually pleading fraud. That is to say, actions which, to quote the cases, show actual moral turpitude. If that is so it is said, it is up to the first plaintiff to set out material facts which, if proved, establish that the defendant intended to deceive the first plaintiff. It is common ground that such facts are not pleaded. The defendant says that absent such facts the pleading cannot stand. The defendant's position can be further explained in this way.
If the first plaintiff pleads a unilateral mistake, then rectification will only lie if the unilateral mistake was induced by fraud, misrepresentation, sharp practice or some other unconscionable conduct. In support of that proposition, reference is made to the decision of the English Court of Appeal in Commission for the New Towns v Cooper (Great Britain) Ltd [1995] 2 All ER 929. The first plaintiff does not take issue with that statement of principle.
In par 6(b) of the minute, the first plaintiff pleads that the terms of the Wilson Agreement Document provided for a further advance of $300,000, does not provide for joint liability of NWD and the defendant and does not provide for a charge over the Seaforth property. That plea, the first plaintiff says, leads to two consequences. First, when the first plaintiff was scanning the document, he cannot have observed that the document stated that the defendant would pay the first plaintiff "the money due to the plaintiff" if the reference to the "money due" is a reference to the Wilson Principal. The Wilson Agreement Document provides for a further advance of $300,000 and that is what must be paid. Secondly, the first plaintiff cannot have observed that "the Seaforth property would be additional security" if that is a reference to the defendant being jointly liable under the First NWD Oral Agreement because the Wilson Agreement Document does not provide for such joint liability, nor for the Seaforth property being an additional security for the Wilson Principal.
It is then said that the plea in par 7 that the defendant knew the Wilson Agreement Document mistakenly did not record the Seaforth Oral Agreement is based on false logic. First, it is said that the defendant negotiated the Seaforth Oral Agreement. Second, it is said that the defendant prepared (or caused to be prepared) the Wilson Agreement Document and thirdly, it is said that the terms of the Wilson Agreement Document contradicted the Seaforth Oral Agreement. It must follow then that the defendant knew of the mistake. That being so, the defendant says that in reality the allegations put against him are as to a deliberate course of conduct that can only be described as fraud and the first plaintiff must plead fraud.
Counsel for the first plaintiff, for his part, relied upon what was said by Lord Justice Stuart‑Smith in the Commission for the New Towns case (supra). His Lordship said (at 946):
"… I would hold that where A intends B to be mistaken as to the construction of the agreement, so conducts himself that he diverts B's attention from discovering the mistake by making false and misleading statements, and B in fact makes the very mistake that A intends, then notwithstanding that A does not actually know, but merely suspects that B is mistaken, and it cannot be shown that the mistake was induced by any misrepresentation, rectification may be granted. A's conduct is unconscionable and he cannot insist on performance in accordance to the strict letter of the contract; that is sufficient for rescission. But it may also not be unjust or inequitable to insist that the contract be performed according to B's understanding, where that was the meaning that A intended that B should put upon it."
That, to my mind, sums up this case. Perhaps there is an entirely innocent explanation available to the defendant as to why it is that the Wilson Agreement Document does not embody the Seaforth Oral Agreement (assuming of course that is the case). But it is equally open to the first plaintiff to allege that what took place was sharp practice and even if there was no fraud, he is entitled to rectification of the agreement. That being so, in my view, the statement of claim should be allowed to stand and I will make orders accordingly.
I will hear the parties in relation to costs.