Forde v Electrodry NZ (1992) Limited HC Auckland Ap140-Sw00

[2001] NZHC 260

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY AP140-SW00

BETWEEN JAMES VINCENT FORDE and KAREN LEE FORDE
Appellant

AND ELECTRODRY NZ (1992) LIMITED
Respondent

Date of hearing: 2 April 2001

Counsel: J Clearwater for Appellant
J Bergseng for Respondent

Judgment: 6 April 2001

(RESERVED) JUDGMENT OF MORRIS J

[1] This is an appeal from a reserved decision of the District Court dated 30 August 2000, which dealt with a dispute over a franchise agreement and its operation.

[2] Following the completion of evidence the Judge asked for written submissions on three points raised by counsel for the plaintiffs. They were:

[a] Does a limitation period apply under the Fair Trading Act?

[b] Should relief now being sought by the defendants pursuant to the Contractual Remedies Act have been pleaded?

[c] Are the defendants estopped by their conduct from being able to rely on the alleged misrepresentation?

[3] It is only point [b] which is the subject of the current appeal. The Judge in the District Court decided this point by stating:

“[36] What occurred here quite clearly was that the problem contemplated by the Fordes regarding the possibility of competition arose almost immediately. Mr Forde says that he complained to Mr Alder but he certainly did nothing more formal than that. That is by putting his complaint in writing. What the defendants have done was to file a statement of defence acknowledging their Fair Trading Act defence, but nothing more.

[37] Again, at the conclusion of the hearing the defendants made submissions pursuant to the Contractual Remedies Act 1979 and Mr Clearwater said:

‘Although not expressly pleaded in the statement of defence nevertheless the defendants are still entitled to rely on the provisions of the Contractual Remedies Act 1979.’

[38] Again I think Mr Bergseng is correct in saying the defendants are seeking to use the Contractual Remedies Act 1979 as a counterclaim without pleading it as such. This they cannot do.”

[4] The appellant submits there is no authority at all for the contention relief pursuant to the Contractual Remedies Act 1979 must be expressly pleaded.

[5] The respondent, on the other hand, argues while in some instances the Contractual Remedies Act 1979 may provide a defence to a claim, in the current circumstances the appellant is seeking to use it as a Counterclaim without pleading it as such. The Contractual Remedies Act 1979, the respondent submits, needs to be separately pleaded from the Fair Trading Act as it would impose different considerations which would need to be considered by the respondent in any defence of such claims.

[6] At no time has the appellant made any counterclaim against the respondent. The appellants have only pleaded their Statement of Defence. There is no mention of a Counterclaim, or any prayer for relief. The respondents argue, therefore, the appellants have failed to meet the requirements of District Court Rules 168, 170, 172(2) as nothing pleaded by the appellants gave the respondents, or the Court, notice of any Counterclaim.

[7] The respondent submits the appellant’s submission would require a plaintiff to imagine all possible defences which could arise in the course of a proceeding, and any possible claim a defendant could bring against them, and then call evidence to deal with such issues or causes of action. If accepted such a submission, the respondent argues, would greatly increase the length and cost of the litigation, and effectively mean the pleadings become meaningless as a way of defining a claim, so that issues could be determined by the Court.

[8] To allow such a submission, the respondents argue, is clearly contrary to the interests of justice. It would be impossible to conduct hearings which were confined to the issues in dispute. A considerable amount of unnecessary evidence may then need to be called.

[9] I disagree.

[10] Halsbury’s Laws of England, Vol 36(1), 4th edition reissue, paragraph 14
states:

“As a general rule inferences of law should not be pleaded, but only the facts from which such inferences are sought to be drawn ... Where a party states the legal consequences inaccurately or incompletely in his pleadings, he will nevertheless not be prevented from arguing points of law which arise on the pleaded facts, assuming that the facts have been correctly pleaded. Moreover, where a party has set out in his pleadings not only the material facts on which he seeks to rely but also the legal consequences which he seeks to draw from those facts, he is not precluded at the hearing from seeking to draw different legal consequences from the facts pleaded.”

As Lord Denning L.J. put it in Karsales Harrow Ltd v Wales [1956] 2 All ER 866,
869:

“The only real difficulty that I have felt in the case is whether this point is put with sufficient clarity in the proceedings. It is not put as clearly as one could wish. Nevertheless, I have always understood in modern times that it is sufficient for a pleader to plead the material facts. He need not plead the legal consequences which flow from them. Even although he has stated the legal consequences inaccurately or incompletely, that does not shut him out from arguing points of law which arise on the facts pleaded. Looking at this defence, it is quite plain that the defence pleaded all the material facts which I have mentioned, and it is, I think, sufficient.”

And finally, Scrutton LJ noted in Lever Brothers Ltd & Ors v Bell [1931] 1 KB 557,
583:

“In my opinion the practice of the Courts has been to consider and deal with the legal result of pleaded facts, though the particular legal result alleged is not stated in the pleadings, except in cases where to ascertain the validity of the legal result claimed would require the investigation of new and disputed facts which have not been investigated at the trial.”

On the facts of that case, Scrutton LJ concluded:

“In my opinion, therefore, the question as to mutual mistake needs no further evidence to elucidate its legal effect, and can be dealt with on the facts admitted and found by the jury or inferred by the Judge without any amendment of the pleadings.”

[11] In the present case, it does not appear that facts, which would have supported relief pursuant to the Contractual Remedies Act 1979, have been correctly pleaded in the District Court.

[12] This, however, is not the end of the matter. Section 9 of the Contractual Remedies Act 1979 provides:

“9 Power Of Court To Grant Relief

(1) When a contract is cancelled by any party, the Court, in any proceedings or on application made for the purpose, may from time to time if it is just and practicable to do so, make an order or orders granting relief under this section.” (My emphasis added).

[13] The contract in issue was cancelled by the plaintiff (respondent). It is also clear that during submissions the defendants made an application for relief pursuant to the Contractual Remedies Act 1979. Counsel for the defendant said:

“Although not expressly pleaded in the statement of defence nevertheless the defendants are still entitled to rely on the provisions of the Contractual Remedies Act 1979.”

[14] In these circumstances the appellant should not be prevented from arguing he is entitled to relief. The section does not require that the relief be pleaded. It is a power given to the Court to be used if it is “just and practical” for the Court to do so. This was clearly the situation here.

[15] The appropriate course of action is to remit this matter back to the District Court for determination of whether relief should be granted pursuant to the Contractual Remedies Act 1979.