AMP Crossroads Pty Limited v Homewares Depot Pty Limited

Supreme Court of NSW|2010-06-17|Before: Pembroke J, Mason CJ, Gaudron J, McDougall J, Barrett J, Nicholas J

CITATION : AMP Crossroads Pty Limited v Homewares Depot Pty Limited [2010] NSWSC 657

CATCHWORDS : AMENDMENT - discretion - leave to file third amended defence - defendants self represented - plaintiff well resourced commercial litigant - pleading policy and principle - exacting standards of precision not required

LEGISLATION CITED : Contracts Review Act 1980 (NSW) Trade Practices Act 1974 (Cth)

PARTIES : AMP Crossroads Pty Limited Homewares Depot Pty Limited

COUNSEL : A R R Vincent - Plaintiff/Respondent Craig Kelly - Second Defendant/Applicant (in person)

SOLICITORS : Norton Rose - Plaintiff/Respondent

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2008/282168 AMP CROSSROADS PTY LIMITED v HOMEWARES DEPOT PTY LIMITED

1 HIS HONOUR: This is an application by the first and second defendants for leave to file a third amended defence pursuant to a notice of motion filed on 27 April 2010. The first defendant is a company of which the directors were at all material times the second and third defendants. The first defendant went into occupation of premises in a shopping centre in November 2003. An agreement for lease was entered into in August or September 2003. The first defendant paid rent for several years but then ceased to pay rent although continuing in occupation. In about August 2007 the first defendant was forced to vacate the premises. These proceedings were commenced in December 2008. 2 The second defendant is representing himself and the first defendant. He believes that he has a genuine grievance in relation to the conduct of the plaintiff landlord in connection with the leased premises. If a number of his allegations are established, he is correct. 3 The third defendant is not before me on this application because default judgment has been obtained against him. He has moved to set aside that default judgment before the Registrar. That application will be heard in a few weeks time.

Procedural History 4 I should say something about the unfortunate procedural history. After the filing of the statement of claim on 22 December 2008, the first, second and third defendants filed a defence on 10 February 2009. On 3 April 2009 the first and second defendants filed an amended defence. On 24 April 2009 the plaintiff moved to strike out that amended defence. On 1 June 2009 Justice McDougall made orders that the amended defence be struck out. On 30 June 2009 the first and second defendants filed a second amended defence. On 20 July 2009 the plaintiff filed a notice of motion seeking to strike out paragraphs of the second amended defence and a cross-claim which had also been filed. On 28 July 2009 Justice Barrett made orders, among others, that paragraph 19 of the second amended defence be struck out. On 22 September 2009 Justice Nicholas refused leave to file a cross-claim in the form that was then proposed. Policy & Principle 5 The underlying principle which applies in connection with a pleading dispute such as this is that, above all else, the material facts must be pleaded - concisely, briefly and explicitly: Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 per Mason CJ and Gaudron J. And the pleader must set out those facts in such a way as to enable the plaintiff to understand the factual case to be met. However, I do not think that the sometimes exacting standards of precision expected of experienced legal practitioners should be applied with the same rigour in a case such as this. A pleading is merely a means to an end. Its function and purpose is to inform the opposing party of the material facts relied on. In this case, the material factual elements of the dispute have been laid out in the proposed third amended defence in a way that ensures that they are readily capable of comprehension. There may be room for argument about the correctness of the pleader's legal analysis, but the factual position is sufficiently clear. 6 Except where it is necessary to prevent injustice, for example, where a confused pleading merely disguises what in truth is an unarguable case, disputes about the form of the pleading should not be allowed to undermine the speedy and efficient resolution of the issues in dispute. Courts will naturally be wary of well resourced litigants using arguments of increasing refinement and complexity to deconstruct the pleading of a self represented litigant. This is especially so if such pleading disputes will delay the hearing of genuine grievances which, it is obvious, will not go away and which must inevitably be ventilated. Different considerations will arise where it is apparent that the litigant in person really has no case at all. 7 I do not regard it as being in the interests of justice, or in the interests of the parties, that there be any further interlocutory disputation about the form of the defence of the first and second defendants. It is clear to me from the dialogue which I have had with the plaintiff's counsel during the course of submissions that the underlying substantial complaints of the first and second defendants are well understood by the plaintiff's legal representatives. Whether all of those matters will suffice to amount to a defence is a matter which will need to be determined at the final hearing. 8 Nonetheless, I do not propose to grant leave in respect of the whole of the proposed third amended defence. I have taken the view that a number of paragraphs should not be permitted because it is apparent that they are conceptually unsound or otherwise objectionable. There would be no point in allowing them to go to the final hearing and it is not in the interests of the first and second defendants, let alone the plaintiff, that any hearing time and expenditure should be devoted to them. The Plaintiff's Objections 9 I will deal with the submissions of the plaintiff in relation to the paragraphs to which it objects in the order in which they were put to me. Withdrawal of Admissions 10 The first category concerns the withdrawal of admissions. I reject paragraphs 6(d), 9(f) and 17 of the proposed third amended defence. These allegations purport to retract admissions clearly pleaded in the earlier defence. The reasons for seeking to withdraw the previous admissions seem to be insufficient to justify the exercise of my discretion to allow the change now sought. The first and second defendants are not prejudiced in any event because the admissions previously made are either patently correct and harmless or do no prevent them from putting the legal arguments they wish to make. 11 Paragraph 13 is in a different category and I will allow it. This involved the contention by the plaintiff that the first and second defendants were seeking to withdraw an admission previously made that the first defendant was permitted to continue in possession of the premises and paid monies due to the plaintiff in part performance and consideration of what the plaintiff describes as the "Varied Lease". 12 It is clear from the preceding paragraphs that the first and second defendants deny that there was a Varied Lease in the sense used by the plaintiff. In my view, it follows as a natural inference that the pleading in paragraph 13 maintains that denial and presupposes it. This was the clear understanding of counsel for the plaintiff. Given that the purport of the proposed new paragraph 13 was understood in that way, I propose to allow it. I do not think that it causes any prejudice or confusion. Embarrassing & Unarguable 13 The second category relates to a number of paragraphs which are said to be embarrassing or unarguable. The first objection is to the prefatory words at page 2. I reject those words. Paragraphs 19.1.1 (a), (b) (c) & (d) 14 The substance of this objection, and the issue which took up a considerable amount of time during argument, was the objection to paragraph 19.1.1. I will deal with it in several tranches. The first tranche relates to 19.1.1(a), (b), (c) and (d) and I will allow those paragraphs. Each of those allegations in turn incorporates a large number of subsidiary allegations from page 52 through to page 111 of the proposed third amended defence. 15 The overriding allegation in paragraph 19.1.1 is that the first defendant has no liability or obligation to the plaintiff in connection with the lease by virtue of either breaches of the Trade Practices Act by the plaintiff, or breaches of the terms of the agreement to lease, or breaches of the terms of the lease and Annexure A of the agreement to lease, or breaches of certain implied terms. 16 In many respects these matters constitute the substance of the complaints by the first and second defendants about the allegedly wrongful conduct of the plaintiff. The contentions as to misleading conduct, misrepresentation, breach of express terms and breach of implied terms are clearly expressed and readily comprehensible. They alert the plaintiff to the matters to be ventilated. They reflect the usual sorts of complaints that one would expect in a case between tenant and landlord in connection with a retail shopping centre lease. In substance the first and second defendants complain about representations as to the features and attractions of the shopping centre on which they relied in entering into the agreement for lease. 17 I was told that these allegations will be replicated in the cross-claim of the first and second defendants which will mirror the relevant allegations in the defence. The cross-claim will allege damages, or entitlement to relief under the Trade Practices Act (1974) (Cth) or Contracts Review Act (1980) (NSW), the effect of which will be to meet the plaintiff's claim or relieve the first and second defendants of liability. Much of the argument in relation to whether these allegations should be allowed was concerned with whether the pleader had sufficiently pleaded the requirements for relief which would flow if these allegations were proved - so as to amount to a defence. 18 In relation to the Trade Practices Act claims, counsel for the plaintiff acknowledged that his point was to some extent a semantic one which could be cured by a simple sentence. Nonetheless he said that the first and second defendants have not done what is necessary under the Trade Practices Act to constitute a proper pleading. He said however, that he eschewed taking semantic points against a self represented litigant. 19 The view I have reached is that the pleading in 19.1.1 (a), (b), (c) and (d) is not so substantially misguided that it should be disallowed. In effect, it sets out, in a way which is clear for the plaintiff to understand and respond to, what, I suspect, will be the major area of disagreement at the hearing. It pleads what representations were made to induce the first and second defendants to take up the agreement for lease and what breaches of the agreement for lease were allegedly made while the first defendant was in occupation. 20 It is not altogether uncommon, where a defendant seeks to rely upon wrongful conduct by the plaintiff, for that wrongful conduct to be set out in a defence but then to be repeated in the cross-claim, where the relief will be pleaded. That relief then completes the pleading so as to make clear why the wrongful conduct should amount to an answer to the plaintiff's claim. I see no harm in allowing those paragraphs to remain. Paragraph 19.1.1 (e) 21 A different category is that which consists of paragraph 19.1.1(e). This is a claim based upon alleged breaches of implied warranties by the plaintiff. In his judgment given on 28 July 2009, Justice Barrett identified a defect in the reliance by the first and second defendants on this issue. He said that the necessary criteria had not been pleaded to show that the first defendant was a consumer within the meaning of Section 74 of the Trade Practices Act. This required a pleading that the value of certain services provided by the plaintiff was less than $14,000. 22 The first and second defendants have sought to address that defect specifically by pleading as follows in paragraph 19.25.3: The price paid by the first defendant and/or the value of each of the individual services provided to the first defendant by the lessor of

(i) operating, supplying and maintaining the lighting of The Centre;

(ii) providing, operating and maintaining the signs of The Centre and

23 The plaintiff contended that no apportionment was given and that only an assertion was made that the services were less than $40,000. This seems to me to be more a matter of particulars than substance. The essential allegation is made that each of the services was less than $40,000. I was informed that there will be evidence of accounts from the plaintiff showing a separate line item for each of those services and demonstrating that their value was less than $40,000. I am not in a position to determine that question of fact on this application but I am prepared to assume the correctness of that proposition. In any event, the quality of the services provided by the plaintiff will be in dispute in the hearing generally. I will therefore allow paragraph 19.1.1(e) and the consequential paragraphs which are incorporated by it. They are paragraphs 19.25.1 to 19.27.1. Paragraph 19.1.1 (f) 24 Another category involves the allegations in paragraph 19.1.1(f). This is an allegation of unconscionable conduct which is also said to entitle the first defendant to be exonerated from further liability or obligation in connection with the lease. For the reasons explained in relation to paragraphs 19.1.1(a), (b), (c) and (d), I will allow these paragraphs with four exceptions. I do so on the basis that they expose the central factual allegations which will be replicated in the cross-claim where the relief which is said to flow from the allegations of unconscionable conduct will be pleaded. 25 However, I reject paragraphs 19.28.6, 19.28.7, 19.28.8 and 19.28.9. Those allegations would permit an unnecessary expansion of the forensic enquiry which will have to be undertaken at the hearing for no good purpose. Paragraphs 19.28.6 and 19.28.7 involve a comparison between the first defendant's ability to acquire equipment and services for persons other than the plaintiff and the plaintiff's conduct in similar transactions between it and other lessees of retail shops. These allegations are not particularised by reference to any other merchant or entities with whom the comparison should be made. They give rise to a concern on my part that they will unnecessarily result in further hearing time and expenditure by the parties which will achieve nothing for the first defendant. 26 The substance of the complaints of the first and second defendants seems to me to be confined to the conduct of the plaintiff towards the first defendant and should not be allowed to go beyond the dealings between them. There is no proper basis revealed by this pleading for doing so. 27 Paragraph 19.28.8 is unsound. It involves the unsustainable proposition that the plaintiff failed to disclose to the first defendant the risks inherent in its intended wrongful conduct. Paragraph 19.28.9 is in a different category. It is an allegation of failure to act in good faith. However, on its face it does not go anywhere near far enough to reveal conduct which could conceivably amount to a failure to act in good faith and are rejected. Paragraph 19.1.1 (g) 28 A related category is paragraph 19.1.1(g). This is a substantive good faith allegation and its content is set out in paragraphs 19.29.1, 19.29.2 and 19.29.3. These allegations no longer have any content as I have rejected paragraph 19.28.9 and they should also be rejected. Conditional Obligation 29 Another category is that constituted by paragraph 25.1. This is an allegation that the payment of rent was conditional on the plaintiff complying with its obligations. Implicit in this contention is an argument that, as a matter of construction, the obligation to pay rent is a conditional obligation. 30 I do not need to determine this issue now. It repeats facts already pleaded and does not raise new factual material. It is a narrow issue and it may well be a weak issue. However, the pleading sufficiently identifies the area of legal discourse and I do not think there is any prejudice to the plaintiff if I allow paragraph 25.1. I will however reject paragraph 25.1(d) which seeks to revise the good faith proposition which I have earlier rejected. 31 Paragraph 26.1 is in a similar category to paragraph 25.1 and for the same reasons I will allow it. But I will reject paragraph 26.1(g) which again seeks to maintain the good faith allegation. Contracts Review Act (1980) (NSW) 32 Another category consists of those paragraphs concerned with the Contracts Review Act. This is not an appropriate occasion on which to determine whether the first defendant will be able at the final hearing to establish its entitlement to relief under the Contracts Review Act. The factual basis on which it is said the relationship is one which should give rise to such an entitlement is clearly exposed. However I have concerns, indeed scepticism, about some of the allegations which seek to involve a comparison with other shopping centres and other tenants. I do not think that they are justified. Indeed, I think they are doomed to fail and will involve an unnecessary expansion of the evidentiary enquiry at the hearing. I will therefore reject paragraphs 27.4.9(g) and 27.4.10. Objections Not Pressed 33 Then there was a category of paragraphs to which the plaintiff no longer pressed its objection. Those paragraphs are 6(f), 7, 9(g), 9(i) and 14.1 to 14.4 inclusive. Release of Guarantee 34 A further category of paragraphs is that which relates to the contention that there has been a release of the guarantee of the second defendant arising as a result of an alteration to a principal obligation. These are new allegations which in my view are conceptually unsound. They have no reasonable prospect of success and I therefore reject paragraphs 14.5 to 14.13.8 inclusive. Miscellaneous Objections 35 Then there was a category of miscellaneous objections which no longer require my determination. They include paragraphs 16 and 19 to which the plaintiff no longer presses its separate objections. They have otherwise been dealt with by me. The first and second defendants do not press paragraph 24.9 and the plaintiff no longer presses its separate objections to paragraphs 25.1, 26.1 and 26.2. Failure to Mitigate 36 A further category of objections relates to the pleaded allegations of failure to mitigate. These consist of wide ranging allegations of failure to mitigate over a number of different periods. I indicated that I would allow the opening words of paragraph 26.3, paragraph 26.3(k) and paragraphs 26.13.1 to 26.13.9 inclusive. These paragraphs deal with the alleged failure to mitigate on and from 22 August 2007 when the first defendant was required to vacate the premises. 37 I reject the pleading of all other allegations of failure to mitigate. Much of it involved the somewhat surreal allegation that the plaintiff could have reduced its loss by terminating earlier than it did because of the first defendant's wrongful conduct. In other words, to take one example, because the second and third defendants allegedly did not give the guarantees that they were obliged to provide, the plaintiff should have terminated the lease earlier so that the damages payable by the first defendant as well as the damages payable by the second and third defendants should be reduced. 38 I therefore reject paragraph 26.3, except the opening words, and subparagraph (k), paragraphs 26.3.1 to 26.5.9 inclusive and 26.6.1 to 26.12.9 inclusive. Other Objections 39 There is another category of objections to certain paragraphs dealing with the guarantees. I reject paragraph 27.2 because it seeks to reagitate the claim for discharge of the guarantees because of the alleged alteration of a principal obligation. The second defendant accepted that my earlier reasoning necessitated the rejection of this paragraph. 40 I also reject paragraph 27.3 because I do not think that it has any separate work to do. There is nothing in the pleading which suggests a proper factual foundation for an allegation that the second defendant may have been misled quite separately from the first defendant of which he was a director. 41 I reject paragraph 27.6.1 because it involves conceptual and logical difficulties which in my mind make it unsustainable. It involves an allegation that there was an implied term of the guarantees requiring the plaintiff to act in good faith towards the guarantors. It is said that the implied term was breached by allowing the first defendant to continue to occupy the premises if the first defendant failed to pay rent. I do not regard this allegation as having any reasonable prospect of success. 42 There was then a group of further miscellaneous objections. I will allow paragraphs 28 and 29. They do not take the case any further but, in my view, they are harmless and must be read subject to what remains in the proposed pleading. 43 The objection to paragraph 32 is not pressed by the plaintiff. I reject paragraphs 32.3 and 33. They are confusing and add nothing by themselves. The efficient hearing of the genuine complaints of the first and second defendants will be assisted if they are not part of its defence.

References to Third Defendant 44 The final category of objections relates to certain paragraphs which contain references to the third defendant. As I mentioned at the outset, the position of the third defendant is different procedurally but may be identical in substance if he is allowed back into the proceedings. That will depend on whether he is able to set aside the default judgment which was given against him. But the fact remains that the allegations concerning the third defendant in a large number of paragraphs do not constitute material facts in relation to the second defendant's defence. The third defendant should plead what is appropriate to him. It is not for the second defendant to do so. The second defendant conceded that it would not hurt his case to delete each unnecessary reference to the third defendant. Conclusion 45 The first and second defendants have multiple grievances about the conduct of the plaintiff towards them in connection with the leased premises. Having now rejected a number of paragraphs of their proposed defence in an attempt to confine the first and second defendants to what I regard as the material substance of their case, I hope that I have cleared the decks in a way which will allow this proceeding to go forward. 46 The proceedings will not move forward however until the first and second defendants have filed their cross-claim. I will make certain directions about that. I make it clear that, other than in connection with the legal consequences which are alleged to flow from the pleaded facts, the cross-claim should not introduce new factual allegations. And it should adhere to the principles which I have endeavoured to explain in these reasons.

Costs 47 Each party has had substantial success on the application. I therefore think that in the circumstances it is appropriate that the costs of the notice of motion should be costs in the cause. Orders & Directions 48 I will make orders pursuant to the notice of motion filed by the first and second defendants on 27 April 2010 as follows:

(a) I grant leave to file a third amended defence in the form attached to the notice of motion with the exception of the following:

(1) paras. 6(d), 9(f) and 17; (2) paras. 19.28.6, 19.28.7, 19.28.8 and 19.28.9; (3) paras. 19.1.1.(g) and 19.29.1, 19.29.2 and 19.29.3; (4) paras. 25.1(d) and 26.1(g); (5) paras. 27.4.9(g) and 27.4.10; (6) paras. 14.5 to 14.13.8 inclusive; (7) paras. 26.3 except the opening words and sub-paragraph (k); (8) paras. 26.3.1 to 26.5.9 inclusive; (9) paras. 26.6.1 to 26.12.9 inclusive; (10) paras. 27.2, 27.3 and 27.6.1; (11) paras. 32.3 and 33; and (12) unnecessary references to the third defendant wherever appearing.

(b) I order that by 6 July 2010 the first and second defendants file and serve a revised form of third amended defence which accords with these reasons;

(c) I give the following additional directions: (i) a cross-claim which substantially repeats the relevant allegations in the defence which I have allowed and sets out the legal consequences that are said to flow from those allegations, as well as the relief to which the first and second defendants claim to be entitled, should also be filed and served by 6 July 2010; (ii) to avoid confusion and to limit the size of the documents, both the proposed amended defence and the proposed cross-claim should not include prior allegations which have been superseded or rejected and should not contain crossings out. oOo

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Trade Practices Act 1974(Cth)

At a glance

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Judgment (21 paragraphs)

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