BURRUP FERTILISERS PTY LTD (Receivers and Managers Appointed)

Practice and procedure - Pleadings - Application to strike out amendment - Authority of agent - Ratification

Practice and procedure - Summary judgment - Leave to apply out of time

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175

Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union of Workers - Western Australian Branch v Bell-A-Bike Rottnest Pty Ltd [2005] WASCA 157

Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82

Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62

Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Jacobs v Morris [1902] 1 Ch 816

Kelner v Baxter (1866) LR 2 CP 174

Murchison Zinc Co Pty Ltd v Thiess Contractors Pty Ltd [2000] WASCA 167

Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45

Pancontinental Mining Ltd v Posgold Investments Pty Ltd [1994] FCA 983; (1994) 121 ALR 405

Peterson v Moloney [1951] HCA 57; (1951) 84 CLR 91

Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd [2005] FCAFC 131; (2005) 220 ALR 211

Ratnan v Cumarasamy [1964] 3 All ER 933

Tableau Holdings Pty Ltd v Joyce [1999] WASCA 49

Taylor v Smith [1926] HCA 16; (1926) 38 CLR 48

Wainter Pty Ltd v Freehills (a firm) [2008] FCA 562

1 ALLANSON J: These proceedings were commenced by writ with an indorsed statement of claim dated 5 May 2010, but filed on 7 May 2010. The three defendants entered appearances on 28 May 2010. In June 2010 they requested particulars of the statement of claim and on 6 July, they filed a joint defence to the claim.

2 The matter proceeded. On 2 December 2010, the plaintiff filed the witness statements of its three non-expert witnesses, Mr Zorzi, Mr Belcastro and Mr D'Ercole.

3 On 24 January 2011, the plaintiff applied for a freezing order over assets of the third defendant. On 1 February 2011, I heard and dismissed that application. In dismissing the application I found that the plaintiff had not demonstrated an arguable case for the orders it sought.

4 On 17 February 2011, the third defendant applied by chamber summons for summary judgment, alternatively, to strike out the statement of claim.

5 On 25 February, before the third defendant's application could be heard, the plaintiff filed an amended statement of claim. Under O 21 r 3 of the Rules of the Supreme Court 1971 (WA) (RSC), the plaintiff was entitled to amend its pleading without leave.

6 On 21 March 2011, the third defendant filed a proposed amended chamber summons seeking orders that:

(1) The third defendant have leave to apply for summary judgment against the plaintiff, pursuant to O 16 r 1(b).

(2) Summary judgment be entered against the plaintiff in favour of the third defendant pursuant to O 16 r 1(1), on the grounds that:

(a) the third defendant has a good defence on the merits of the proceedings;

(b) further, or alternatively, the plaintiff has no reasonable prospects of success as against the third defendant in the proceedings.

(3) (a) The third defendant have leave to file her application that the statement of claim dated 5 May 2010 be struck out as against the third defendant, pursuant to O 20 r 19(1)(a).

(b) In the alternative to order (2), pars 22 and 23 of the amended statement of claim dated 25 February 2011 be struck out as against the third defendant, pursuant to O 20 r 19(1)(a) and (b).

(c) In the further alternative to order (2), the statement of claim dated 5 May 2010 be struck out as against the third defendant pursuant to O 20 r 19(1)(a).

7 On 4 March 2011 I ordered that if the second defendant wished to apply to strike out the amendments made on 25 February 2011, he bring the application by 23 March 2011. The application was one day late. The plaintiff did not object, and I extended the time to 24 March 2011.

8 The second defendant seeks an order to strike out pars 22, 23, 24 and 25, all of which were added by amendment on 25 February 2011. The grounds of the application are that no cause of action is disclosed, alternatively that the pleading may prejudice, embarrass or delay the fair trial of the action.

9 The current proceedings are one of two actions between the same parties. In 2009, the plaintiff commenced an action (CIV 2867 of 2009) against the defendants for damages. In the 2009 proceedings, the plaintiff alleges that, on or about 7 May 2008, it and Worldwide Projects Pty Ltd (Worldwide) (now in liquidation) executed an agreement for lease in relation to part of office premises in Murray Street, West Perth. At the relevant time, each of the second and third defendants was a director, and each held one of the two ordinary shares constituting the issued share capital of Worldwide. In the 2009 proceedings, the plaintiff alleges that each of the first, second and third defendants engaged in misleading and deceptive conduct and thereby induced the plaintiff to enter into the agreement for lease and the lease. The plaintiff further alleges that each of the second and third defendants induced and caused Worldwide to repudiate and breach the agreement for lease and the lease.

10 The plaintiff alleges that in March 2010, the 2009 proceedings had not been listed for trial. On 23 March 2010, the first, second and third defendants entered into an oral contract with the plaintiff by which the 2009 proceedings were settled. Paragraph 21 of the statement of claim is in these terms:

1. On 23 March 2010 the first, second and third defendants entered into an oral contract with the plaintiff (Settlement Agreement). The Settlement Agreement contained the following express terms:

21.1 the first, second and third defendants would procure Burrup Holdings Limited (ACN 095 441 151) (Burrup Holdings) to enter into a deed of lease with the plaintiff of the Leased Premises on substantially the same terms as the Agreement to Lease and Lease;

21.2 the first, second and third defendants agreed to pay to the plaintiff all amounts due and owing under the Agreement to Lease and Lease, as if the Agreement to Lease and Lease had not been terminated, down to the date of the execution of the new deed of lease with Burrup Holdings;

21.3 the first, second and third defendants would pay all of Fairworld's legal costs of and in relation to the 2009 Proceedings, and the Agreement to Lease and Lease;

21.4 the plaintiff, and the first, second and third defendants, would execute or cause to be executed all documentation necessary to give effect to the above matters as soon reasonably possible.

Particulars

At a meeting on Tuesday 23 March 2010 attended by Mr Peter Belcastro, Mr Nick D'Ercole and Mr Walter Zorzi (on behalf of the plaintiff), and the second defendant and Mr Lindsay Allen (Mr Allen) (on behalf of the first second and third defendants) (Meeting), the second defendant said in substance that the first, second and third defendants wished to compromise the 2009 Proceedings on the basis set out in paragraphs 21.1 to 21.4 above. Mr Belcastro on behalf of the plaintiff said in substance the plaintiff agreed to compromise the Main Proceedings on that basis.

The amendments made on 25 February 2011 add the following pleas:

1. At the Meeting, the second defendant acted as an agent for the third defendant for the purposes and with the authority to compromise the 2009 proceedings on the third defendant's behalf on such terms as the second defendant deemed fit, pursuant to an express, alternatively an implied, agency.

22.1 the said express agency arose by virtue of a discussion or discussions between the second defendant and the third defendant in or about February and March 2010 in which the second defendant said words to the effect that he intended to meet with the plaintiff's representatives to resolve the dispute between the plaintiff and the first second and third defendants, being the subject of the 2009 Proceedings, on behalf of all defendants, and the third defendant said words to the effect that she assented to that proposed course of action and desired that the second defendant settle the 2009 Proceedings on her behalf; or alternatively acquiesced to that course of action.

22.2 If the agency was implied, then such implied agency arose by reason of the matters set forth in paragraph 22.1 above, and the following matters:

22.2.1 the third defendant was the second defendant's wife;

22.2.2 the second defendant customarily handled most of the business affairs of the second and third defendants on the defendant's behalf, including all matters concerning the Leased Premises, the affairs of Worldwide, and the 2009 Proceedings.

22.2.3 the only purpose and subject matter of the Meeting was to settle the 2009 Proceedings to which the third defendant was a party;

22.2.4 Mr Allen customarily provided advice and assistance to the third defendant in relation to the fit out of the Leased Premises, and in relation to a substantial house that the third defendant was in the process of building at 2 Bayview Terrace, Peppermint Grove in Perth.

1. Alternatively, the third defendant ratified the agency and the Settlement Agreement in that she received details of the Settlement Agreement immediately after the Meeting via an email or emails from the second defendant and in circumstances where she might properly have objected, but did not object and thereby acquiesced thereto.
2. At the Meeting, the second defendant also acted as an agent for the first defendant for the purpose and with the authority to compromise the 2009 Proceedings on the first defendant's behalf on such terms as the second defendant deemed fit, pursuant to an express, alternatively implied, agency.

24.1.1 the second defendant was at all material times an officer of the first defendant, namely its managing director;

24.1.2 The plaintiff was entitled to rely upon the assumptions set out in sections 129(3)(b) and 129(4) of the Corporations Act;

24.2 If the agency was implied, then such implied agency arose by reason of the matters set forth in paragraph 24.1 above, and because:

24.2.1 the only purpose and subject matter of the Meeting was to settle the 2009 Proceedings to which the first defendant was a party;

24.2.2 Mr Allen (through his company Design management Group Pty Ltd (DMG)) acted as a consultant and advisor to the first defendant in relation to the fit out of the Leased Premises for Worldwide.

1. Alternatively the first defendant ratified the agency and the Settlement Agreement in that its officers and executives received details of the Settlement Agreement immediately after the Meeting via an email or emails from the second defendant and in circumstances where they might properly have objected, did not object and thereby acquiesced thereto.

The plaintiff will provide particulars of the said email or emails, and the names of the officers and executives who received them, prior to trial.

The challenge to the amended statement of claim

11 Both defendants challenge paragraphs 22 and 23. The second defendant challenges all four added paragraphs.

12 The plaintiff questions the standing of the second defendant to apply to have the amendments struck out, because they do not plead a cause of action against him. In my opinion, the second defendant has standing. First, O 21 r 3 provides that a party served with a pleading amended under that rule may apply for any amendment in the pleading to be struck out. I can see no reason why the term 'party' should be restricted. Second, the second defendant applies to strike out on the ground that the amendments may prejudice, embarrass or delay the fair trial of the action. That is an issue on which all parties have an interest. The second defendant also submits that the plea that he acted as agent of the other two defendants could make him liable to a claim from one or other of those parties. It is not necessary to decide that issue as, in my opinion, the second defendant has standing on other grounds.

13 The test on an application of this nature, and the principles to be applied, are well known. The court will only strike out in a clear case: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 129 - 130; Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, 91.

14 On an application to strike out, it is now also necessary to consider the role of pleadings in the context of case management techniques, including the pre-trial exchange of witness statements: although see Wainter Pty Ltd v Freehills (a firm) [2008] FCA 562 [4] (French J). The court will seriously entertain criticisms of a pleading only where the defects complained of may significantly affect the proper preparation of the case and its presentation at trial: Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 [8]. Providing a pleading fulfils its basic function by identifying the issues, disclosing an arguable cause of action, and apprising the other party of the case it has to meet at trial, then the action should proceed: Murchison Zinc Co Pty Ltd v Thiess Contractors Pty Ltd [2000] WASCA 167 [38]; Barclay Mowlem Construction Ltd [5] - [9].

15 Different issues will arise on a strike out application depending on the cause of action, the complexities of the case, and the whole of the circumstances of the case. The court must consider all of those matters together in determining the level of detail and particularity required for a sufficient pleading.

16 The plaintiff pleads that at the meeting on 23 March 2010 the second defendant acted as the agent of the first and third defendants, so as to bind them in the agreement he made to settle the 2009 proceedings. The plaintiff pleads the second defendant had actual authority as an agent, either express or implied. Alternatively, the plaintiff pleads the first and third defendants ratified the acts of the second defendant.

17 I will deal first with the plea of express or implied authority. The question is whether it would be open to the plaintiff, upon the matters pleaded in paragraphs 21 and 22 (for the third defendant), and 21 and 23 (for the first defendant), to prove that the second defendant had authority as an agent to bind the first and third defendants to a settlement of the 2009 proceedings, and not simply authority to negotiate. In particular, on the facts pleaded would it be open to the plaintiff to prove that the second defendant had authority to bind them to the agreement that was in fact made, alternatively to an agreement as he saw fit.

18 The third defendant also submits that when you read the statement of claim as a whole, it sets out all of the facts said to ground the inference that the second defendant had the implied authority to make the settlement agreement, and that those facts are insufficient, even arguably, to give rise to the inference contended for: see Tableau Holdings Pty Ltd v Joyce [1999] WASCA 49 [33], [34].

19 The statement of claim pleads that the second defendant attended the meeting on behalf of the third defendant (par 21); that he had authority to compromise on such terms as he saw fit (par 22); and that the agency arose by virtue of the discussions pleaded in par 22.1. Whether the plaintiff will be able to prove what was said in those discussions is not in issue in this application. In my opinion, the plea is sufficient to give the defendants notice of the case they must meet, and discloses a reasonable cause of action because it would allow the plaintiff to lead evidence which would establish the express agency alleged. That, in my opinion, is the relevant test: see Pancontinental Mining Ltd v Posgold Investments Pty Ltd [1994] FCA 983; (1994) 121 ALR 405, 414; Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union of Workers - Western Australian Branch v Bell-A-Bike Rottnest Pty Ltd [2005] WASCA 157 [54].

20 Paragraph 22.2 pleads that there was an implied agency by reason of the discussions referred to in par 22.1 and the four matters set out in par 22.2.1 to 22.2.4. Those matters are to be read cumulatively.

21 The law relating to implied authority of an agent is conveniently summarised in the decision of the Full Court of the Federal Court in Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd [2005] FCAFC 131; (2005) 220 ALR 211 [124] - [125]:

Actual authority requires the consent of both the principal and the agent but the manifestation of consent may be express or implied. Regardless of the terms of the agreement between the parties, if the facts fairly disclose that one party is acting for another with that person's authority then agency is established. The scope of the agency is to be ascertained by applying the ordinary principles of construction of contracts but also by reference to any proper implication from the course of business between the parties.

In Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 at 150, Jordan CJ said:

Whether any authority has been given, and if so what is the scope of the authority, are questions of fact to be determined by evidence. Evidence that a person is purporting to do acts on behalf of a principal in some capacity in such circumstances that the knowledge and approval of the principal may fairly be inferred is evidence that the principal has authorised him to act in the particular capacity. If there is evidence justifying such an inference, it justifies the further inference that the person has authority to do such acts as would be done, as a matter of ordinary business practice, by a person acting in such a capacity. (references omitted)

22 I have some doubts about the relevance of the particular in par 22.2.4 (the role of Mr Allen) to the authority of the second defendant, but that does not need to be resolved in this application. The other matters pleaded - the discussions between the second and third defendants; the relationship between them; the prior occasions on which he had acted on her behalf; and that the meeting was to settle proceedings that had been brought against both defendants jointly - are directly relevant.

23 The question at this stage is not whether the court would draw the inference that the second defendant had authority to make the settlement agreement, but whether it is arguable that the inference could be drawn from the evidence that may be led on the present pleading. In my opinion, the plaintiff's position is not clearly unarguable, and I would not strike out the plea.

24 In par 24 the plaintiff pleads that, at the meeting on 23 March 2010, the second defendant also acted as agent for the first defendant pursuant to an express agency, alternatively, pursuant to an implied agency. The particulars of express agency refer to the second defendant's office as managing director of the first defendant and the assumptions set out in s 129(3)(b) and s 129(4) of the Corporations Act.

25 The second defendant submits that his office as a director of the first defendant cannot of itself support an express agency plea. In my opinion, the second defendant is correct. The directors of a company may confer on a managing director any of the powers that the directors can exercise: Corporations Act, s 198C. Simply to refer to the appointment of the second defendant as managing director says nothing about whether the directors have in fact conferred any particular power on him.

26 The plaintiff also relies on s 129(3)(b) which provides, relevantly, that a person may assume that anyone who is held out by the company to be an officer or agent of the company 'has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company'.

27 The statement of claim in par 2 states that the first defendant was duly incorporated, that it carried on business as a producer of anhydrous ammonium nitrate in the State of Western Australia, and where it had its registered office. There is nothing pleaded from which the inference could be drawn that the second defendant, as managing director, had the power to settle legal proceedings on behalf of the first defendant. The assumptions provided in s 129 of the Corporations Act do not assist the plaintiff where it is not possible to conclude, on the facts pleaded, that the power to settle proceedings is one customarily exercised by the managing director of a similar company.

28 Paragraph 24 pleads implied agency, with the further particulars (cumulative to those set out in par 24.1) that the purpose and subject matter of the meeting was to settle the 2009 proceedings; and that Mr Allen acted as a consultant and advisor to the first defendant in relation to the fit out of the leased premises, and was present.

29 Again in my opinion, the plea is insufficient. The fact that the second defendant holds office as managing director is relevant, but it is not enough. If the matters pleaded by the plaintiff were proved at trial, but nothing more, the plea of agency must fail. If the plaintiff is relying on some other facts to support its claim, the defendants must be given notice of them.

30 In pars 23 and 25 the plaintiff pleads that the third defendant and the first defendant ratified the second defendant's agency by acquiescing after they had received details of the settlement agreement made on their behalf.

31 A principal may be liable for acts done on his or her behalf, even if unauthorised, where the principal, having full knowledge of the relevant facts, adopts the acts, for example by taking the benefit of them: Jacobs v Morris [1902] 1 Ch 816, 832; Kelner v Baxter (1866) LR 2 CP 174; Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45.

32 Ratification is constituted by clear acts of adoption, approval or acquiescence by a principal who has full knowledge of the relevant facts: Taylor v Smith [1926] HCA 16; (1926) 38 CLR 48, 59; Dal Pont GE, Law of Agency (2nd ed, 2008) [5.19]. Only unequivocal words or acts will suffice to establish ratification: Peterson v Moloney [1951] HCA 57; (1951) 84 CLR 91, 101. Dal Pont at par 5.28 states:

The positive acts of the alleged principal may, aside from any express words, constitute sufficient evidence of ratification. This may be so where the fair inference to be drawn from a person's conduct, on an objective basis, is that the person consents to a transaction to which he or she might properly have objected. Put another way, ratification 'is implied from or involved in acts when you cannot logically analyse the act without imputing such approval to the party whether his mind in fact approved or disapproved or wholly disregarded the question'. (citations omitted)

33 The second and third defendants question whether the allegation that the third defendant acquiesced when she could have objected is an unequivocal act capable of constituting ratification. In particular, they refer to the relatively short period (23 - 26 March) before the defendants denied that the settlement agreement had been made. That is a question of fact that will require consideration of all of the circumstances that may be proved in the evidence, including any discussions between the defendants before the meeting, their relationship, and the previous occasions on which the second defendant had acted on behalf of the two of them. I am not satisfied that the question is so clear cut that I should, at this stage in the proceedings, prevent the plea in par 23 from going ahead.

34 In par 25 the plaintiff pleads that the first defendant also ratified the second defendant's agency and the settlement agreement, in that its officers and executives received details of the settlement agreement in circumstances where they might properly have objected, did not object and thereby acquiesced.

35 In my opinion, the plea cannot stand. First, it is not pleaded or otherwise apparent whether the power to approve a settlement agreement of this nature lay with the first defendant's board, or with the shareholders in general meeting that affects who may ratify the agreement. Second, even if the board had that power, it is not sufficient to say that the first defendant's officers and executives received details of the settlement agreement. Until such time as the board was in a position to consider the settlement agreement as a board, there is nothing from which the court could infer acquiescence by the first defendant.

36 The third defendant's application for summary judgment is based on the claim that the plaintiff pleaded before it amended the statement of claim on 25 February 2011. The only evidence filed in support of the application is an affidavit of the third defendant, affirmed 16 February 2011, in which she says that she did not attend the meeting on 23 March 2010 and did not authorise the second defendant, or anyone else, to appear or make any statements on her behalf at the meeting. She says nothing about any of the matters now pleaded in pars 22 and 23.

37 The application is over six months out of time under O 16. In an affidavit dated 17 February 2011, her current solicitor, Philip Jacob Hoser, states that his firm has been acting for the third defendant since 25 January 2011. Mr Hoser says that when his firm received instructions, it was the first time the third defendant had been represented in the proceedings separately from her husband. He says that, upon reviewing the documents, he reached the view that the plaintiff had not pleaded sufficient material facts to support its claim. No other explanation is given for the delay.

38 The court may give leave to the third defendant to bring her application out of time. The discretion to extend time is given for the purpose of enabling the court to do justice between the parties: see generally, Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458, 459. But there should be material before the court upon which it can exercise its discretion: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 [103]; Ratnan v Cumarasamy [1964] 3 All ER 933, 935. That material may be found in an affidavit explaining the delay, or may be found otherwise. I am not satisfied that there is either an adequate explanation or material to support an exercise of discretion in favour of the third defendant.

39 Further, the third defendant's application for summary judgment does not respond to the case now pleaded against her. I refuse leave and dismiss the application for summary judgment.

Delay in the third defendant's application to strike out

40 Under O 20 r 19(3) an application for an order to strike out a pleading must be made within 21 days of the service of the pleading to which the application refers. The third defendant's application to strike out the whole of the statement of claim dated 5 May 2010, and served at about that time, was not made until 17 February 2011. The plaintiff amended the statement of claim on 25 February 2011. I have held that, in its current form, the statement of claim is sufficient in its plea against the third defendant. I refuse to extend time to the third defendant to bring the application to strike out.

(1) the third defendant's application to strike out the amendments in pars 22 and 23 of the statement of claim is dismissed;

(2) the third defendant's application for an extension of time to apply to strike out the whole of the statement of claim dated 5 May 2010 is refused and the application to strike out is dismissed;

(3) the third defendant's application for leave to apply for summary judgment is dismissed;

(4) on the application of the second defendant, the amendments in pars 24 and 25 of the statement of claim are struck out;

(5) the second defendant's application is otherwise dismissed.

42 I will hear the parties as to consequential orders, including the costs of the applications.