Azzi & Ors v Volvo

CATCHWORDS : PROCEDURE - Amendment - Applications for leave to amend to raise new defences at outset of trial - no prejudice claimed - one new defence is jurisdictional - leave to amend granted - other is contrary to position previously adopted by defendant but not unarguable - whether waived or estopped - held new defence not waived or estopped, leave to amend granted

Civil Procedure Act 2005 (NSW), ss 57, 58, 64 LEGISLATION CITED : Industrial Relations Act 1996 (NSW), s 106 Jurisdiction of Courts (Cross Vesting) Act 1987 (Cth), s 8(1) Trade Practices Act 1974 (Cth), ss 51AC, 52

CASES CITED : Commonwealth v Verwayen (1990) 170 CLR 394 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

50146/03 Tony Azzi (Automobiles) Pty Limited (ACN 069 526 281) (First Plaintiff) Harissa Pty Limited (ACN 620 694 61905) (Second Plaintiff) Antonio Azzi (Third Plaintiff) Asialink Pty Limited (ACN 003 908 898) (Fourth Plaintiff) PARTIES : Volvo Car Australia Pty Limited (ACN 004 830 611) (Defendant)

50156/03 Tony Azzi (Automobiles) Pty Limited (ACN 069 526 281) (First Plaintiff) Harissa Pty Limited (ACN 620 694 61905) (Second Plaintiff) Antonio Azzi (Third Plaintiff) Volvo Car Australia Pty Limited (ACN 004 830 611) (Defendant)

COUNSEL : JL Trew QC & JE O'Sullivan (P) JN West QC & AR Moses (D)

SOLICITORS : McClellands Lawyers (P) Letherbarrow Lawyers (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50146/03 Tony Azzi (Automobiles) Pty Limited & 3 ors v Volvo Car Australia Pty Limited 50156/03 Tony Azzi (Automobiles) Pty Limited & 2 ors v Volvo Car Australia Pty Limited JUDGMENT (ex tempore) 1 HIS HONOUR: In mid-2000 the first plaintiff, Tony Azzi (Automobiles) Pty Limited, to which for the sake of convenience I will refer as TAA, in which the second plaintiff, Harissa Pty Limited, to which for the sake of convenience I shall refer as Harissa, holds 99 per cent of the shares, the other 1 per cent being held by the third plaintiff, Tony Azzi, who is the controlling mind of both companies, was appointed by the defendant Volvo Car Australia Pty Limited, to which for the sake of convenience I shall refer as Volvo, to be a Volvo dealer for the south-eastern Sydney region. 2 A letter entitled "Volvo Representation", which had evolved through several iterations, the last of which was dated 16 August 2000 and apparently executed by Volvo that day, was accepted by TAA on 16 September 2000. It provided, inter alia, as follows: 2. Requirement - dealer agreement. The initial dealer agreement will be for a period of one (1) year, which agreement will be replaced by a dealer agreement with a term of five (5) years, prior to the expiration of the one (1) year agreement. The conditions for renewal, non-renewal and termination will be clearly established within both the one-year and five-year agreements. 3 Also on 16 September 2000, TAA executed a one-year dealer agreement, which was expressed to commence with effect from 1 July 2000, which date corresponds with the time at which TAA began to sell Volvo cars. 4 After a year from 1 July 2000 had expired, and before any five-year agreement was executed, the relationship between Volvo and TAA deteriorated. Volvo raised complaints about the performance of TAA, which TAA denied. Volvo at first asserted that it was not bound to give TAA a replacement five-year agreement, though it was later to resile from that position. When it submitted a five-year dealer agreement for consideration by TAA, the draft included a provision for termination on 120 days notice. TAA contended that insistence on such a provision was inconsistent with the "Volvo Representation" letter of 16 August 2000 and treated it as a repudiation, which it purported to accept. Volvo, in turn, treated TAA's purported termination as a repudiation, which it in turn purported to accept. 5 In these proceedings, TAA alleges that there was a contract made between Volvo and it on or about 1 July 2000, the terms of which were subsequently incorporated in the "Volvo Representation" letter executed by TAA ultimately on 16 September 2000, including the provision about one-year and five-year terms which I have set out above. Alternatively, TAA contends that if there was no such contract at law, nonetheless there was an equitable estoppel of the type described in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, to the same effect. TAA alleges that - principally, though not exclusively, by including the 120-day notice provision in the draft five-year dealer agreement - Volvo repudiated the contract, and sues for damages for breach arising from that repudiation and determination.

6 In addition to those claims, TAA alleges that if there were not such a contract, then by making representations, in the "Volvo Representation" letter and elsewhere, that TAA would have in effect a six-year total term, Volvo engaged in misleading and deceptive conduct contrary to Trade Practices Act 1974 (Cth), s 52; and that by reason of those representations and other circumstances surrounding the making of the one-year dealer agreement in September 2000, Volvo engaged in unconscionable conduct contrary to Trade Practices Act s 51AC.

7 Further, TAA complains that by making representations after mid-2001 to the effect that TAA was not entitled to a further five-year term, when on TAA's case, it was, Volvo thereby engaged in other misleading and deceptive conduct contrary to Trade Practices Act s 52 by reason of which it is contended, amongst other things, third parties were influenced to the end that TAA lost the opportunity of participating in a float of its business in Hong Kong.

8 Finally, in proceedings which were initially instituted in the Industrial Relations Commission, but have been transferred to this court pursuant to Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), s 8(1), TAA contends that if the arrangements between it and Volvo did not include an obligation on Volvo and a right in TAA to a replacement five-year term, then those arrangements were unfair within the meaning of Industrial Relations Act 1996 (NSW), s 106. The unfairness, as I understand it, is primarily said to be the circumstance that the arrangements, on that hypothesis, by not providing for a right to the replacement term, both did not reflect the underlying negotiations between the parties upon which TAA had acted, and did not provide a reasonable opportunity for TAA to derive a fair return from the investment which it was going to make.

9 What I have just set out incompletely summarises TAA's case and completely omits at least two aspects of it, one being a claim in tort brought by Harissa, and the other a claim for restitutionary relief, but those claims are not relevant for consideration of the application for amendment to which this judgment relates. Nor do I pretend that I have encapsulated the entire basis of TAA's case in the above summary, but it suffices for the purposes of providing background to the present application.

10 This is an application by Volvo for leave to amend its defence in the Commercial Division proceedings (which were initiated in the Federal Court and transferred to this court under the Jurisdiction of Courts (Cross-vesting) Act (Cth)), and also for leave to amend its reply to the summons for relief under Industrial Relations Act s 106, originally filed in the Industrial Relations Commission. The proposed amendments involve two main aspects. The first is to raise by way of defence in the proceedings under Industrial Relations Act s 106 a jurisdictional issue, by contending that the contract, the subject of those proceedings, is not one whereby work is performed in an industry. For the sake of convenience, I shall call this the jurisdictional question. The second, which for the sake of convenience I shall call the contractual question, is to plead that the only contract between the parties was the one-year dealer agreement entered into in September 2000, and that it exclusively governed the parties' relationship. Implicit in this is that the "Volvo Representation" letter, though executed by both parties, was subsidiary to the one-year dealer agreement, and/or was void for uncertainty or incompleteness. 11 Applications such as the present are now governed by Civil Procedure Act 2005 (NSW), s 64, which provides that at any stage of proceedings the court may order that leave be granted to a party to amend any document in the proceedings. The section further provides that, subject to s 58, which is concerned with the court acting in accordance with the dictates of justice, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings. Relevantly, and consistently with the position before the Civil Procedure Act, the power to grant leave to amend may be exercised at any stage of the proceedings, and is to be exercised in such manner as the court considers necessary in the interests of justice, and not to punish a party for its pleadings. The power is subject to the overriding purpose referred to in s 56, and some of the relevant considerations are set out in Civil Procedure Act, ss 57 and 58.

12 As to the jurisdictional question, I am plainly satisfied that this issue is raised in good faith. The point which it seeks to raise is a fairly arguable one. Though it is not raised formally on the pleadings so far, it has, been articulated in the written pre-trial submissions, which the plaintiff has delivered shortly before the trial commenced. In the light of recent decisions of the Court of Appeal and matters pending in the High Court of Australia relating to the scope of Industrial Relations Act, s 106, which it can fairly be said are professionally notorious, it cannot have been supposed, and Mr Trew QC who appears for the plaintiff does not suggest otherwise, that the jurisdictional issue would not be raised in this case; nor does Mr Trew suggest that the plaintiff is unable to argue and meet the jurisdictional question. It is a purely legal point and does not apparently require further evidence. That it goes to jurisdiction counts strongly in favour of allowing it to be raised, and would do so even at a later stage than that at which it is sought to be raised now.

13 Mr Trew has submitted that the plaintiff is entitled to be told, with greater precision than a mere objection to jurisdiction on the basis that the subject contract is not one whereby work is performed in an industry, what the objection is. However, the difficulty with that submission is that before one can really identify with more precision what the objection is, the contract whereby work is performed in the industry needs to be better identified and particularised than it has been by the plaintiff. Although the precise basis on which it will be put that there is a contract whereby work is performed in an industry remains a little elusive, as does the precise basis of the argument that it was not such a contract, the onus lies on the plaintiff to articulate and particularise such a contract and when the plaintiff has done that, it may well be that the precise basis of the objection will become clearer.

14 I am satisfied that, on the plaintiff's pleadings as they stand, permitting the defendant to amend to introduce the jurisdictional question will not unfairly prejudice either party and will enable the case to proceed on a basis which realistically the parties, if they did not anticipate, ought, to have anticipated. After all, there is no necessity to set out, in pleadings, particulars of the legal arguments on which a party will rely, in respect of any legal points that may be taken in the pleadings. It is sufficient that the legal point be raised, as if on demurrer, without specifying with particularity the full legal argument to be deployed in its support.

15 Accordingly, I am satisfied that the defendant should be granted leave to amend to raise the jurisdictional question. 16 As to the contractual question, however, the position is more complicated, and comes with a history. In mid-2001, when Volvo began to raise complaints about TAA's performance as a dealer, it suggested that TAA was not entitled as of right to a further five-year term, and used words to the effect that a replacement five-year term was "not guaranteed". TAA immediately took issue with this, and after some debate Volvo appeared to concede that the arrangements between the parties were such that, at least subject to satisfactory performance during the first year, if not absolutely, TAA was entitled contractually to a replacement five-year term. Thus, in a letter from Volvo to TAA dated 7 September 2001, Volvo wrote: Nevertheless, we can confirm that: 1. The agreement between Volvo and Tony Azzi (Automobiles) Pty Limited (the "agreement") will remain unchanged until terminated in accordance with the terms of that agreement; ...

3. The original agreement, which had a one-year term, will be replaced by an agreement for a further five-year term on similar terms and conditions (other than any right to have the agreement extended for a further period of five years) operating from the date of expiration of the first agreement. 17 And on 12 September 2001 Clayton Utz, then acting for Volvo, wrote to Bamford Hogg, then acting for TAA, relevantly: We note that, pursuant to the terms of the letter from Volvo to your client dated 16 August 2000 (accepted by your client on 16 September 2000), the initial dealer agreement was to run for a period of one year, which agreement was then to be replaced by a dealer agreement with a term of five years. We confirm, as we informed you during our telephone conversation call on Monday afternoon, that we believe that the term of the first agreement ran until 30 June 2001 and that accordingly the term of the five-year dealer agreement commenced on 1 July 2001. In light of the application of the Franchising Code of Conduct the arrangements between our clients, and as we indicated during our telephone call on Monday, Volvo will provide your client with a disclosure document prepared in accordance with the Franchising Code of Conduct, before the parties execute an appropriate document reflecting the terms of the current agreement between the parties.

18 Further, on 13 September 2001, Clayton Utz wrote to Bamford Hogg, confirming that their client's position with respect to the further five-year term was clearly set out in their letter of earlier the same day. And on 11 October 2001, Messrs Letherbarrow Lawyers, who continue to act for Volvo, wrote to Blake Dawson Waldron, who were then acting for TAA: You assert (in the alternative) that Volvo has, in fact, entered into a five-year agreement with your client (the "agreement"). We agree. Volvo's preparedness to do so, notwithstanding breaches of the previous one-year agreement (in respect of which Volvo reserved its rights), was confirmed in Volvo's letter of 7 September 2001, which stated that the agreement would remain unchanged until terminated in accordance with its terms, and Clayton Utz letter of 12 September 2001 on Volvo's behalf to Bamford Hogg lawyers on behalf of your client. That letter drew attention to Volvo's obligations to comply with the Franchising Code of Conduct by providing a disclosure of a document to your client before the parties could execute an appropriate document reflecting the terms of the current agreement between them.

19 The reference to the "current agreement between them" in the context of the correspondence which preceded that letter was plainly enough to a five-year agreement commencing 1 July 2001.

20 Volvo's position on the pleadings to date in respect of the "Volvo Representation" letter and its effect is expressed at its highest in paragraph 14 of the reply to the summons for relief filed in the Industrial Relations Commission proceedings in which, in answer to the allegation in paragraph 14 of the summons - that the contractual arrangements between Volvo and TAA took the form of a one-year dealership agreement which endured until about 30 June 2001, and a five-year dealership agreement commencing from 1 July 2001 - Volvo pleaded that it had entered into a one-year dealer agreement with TAA, that pursuant to the "Volvo Representation" letter and the one-year dealer agreement, Volvo and TAA agreed that, upon or prior to expiry of the one-year agreement, it would enter into a new agreement for a term of five years, "which further agreement was subject to satisfactory performance under the one-year dealer agreement, the provisions of the Franchising Code of Conduct and subject to writing", and that by letter dated 7 September 2001 it informed TAA that, notwithstanding breaches of the one-year dealer agreement, an agreement for a further five-year term operating from 1 July 2001 would be entered into. Thus, in the pleadings as they stand, Volvo does not assert that TAA was not entitled to a replacement five-year term, and takes the position that TAA was in fact granted a replacement five-year term.

21 The proposed amendment can conveniently be highlighted by identifying what is proposed to be inserted in former paragraph 14 of the reply to the summons for relief, immediately preceding the provision which I have summarised above, which will then become an alternative pleading. The proposed insertion is as follows: Pursuant to the representation letter and the one-year dealer agreement, it was the intention of both TAA and VCA that a new agreement for a further five-year term would be entered into upon the expiry of the one-year dealer agreement subject to the parties agreeing upon the terms of any new agreement.

22 A somewhat similar provision, which rolls together the new paragraph set out above and the existing 14(b), is to be found in paragraph 34 of the proposed amended reply, which states: Pursuant to the representation letter and the one-year dealer agreement, VCA had agreed with TAA that upon or prior to expiry of the one-year dealer agreement, it would enter into a new agreement for a term of five years, which agreement was subject to satisfactory performance under the one-year dealer agreement, the finalisation of its terms, the provisions of the Franchising Code of Conduct and subject to writing.

23 It will be seen that a significant change in the pleading introduced by the proposed amendment is the suggestion that the five-year term was in fact subject to agreement as to its terms. As I have said, and as Mr West QC, who appears for the defendant has conceded, is implicit in that allegation that clause 2 of the "Volvo Representation" letter is void for uncertainty or incompleteness at least in part. It is also not only implicit but explicit elsewhere in the proposed amendments that Volvo asserts that the only extant contract was that contained in the one-year dealer agreement and, therefore, that the "Volvo Representation" letter was not contractual. Volvo wishes to submit that the "Volvo Representation" letter was entirely subsidiary to the one-year agreement.

24 When the proposed amendments were foreshadowed particulars of them were sought on behalf of TAA. The "usual particulars" were sought of the agreement which Volvo now proposed to plead, to the effect that the parties would enter into a new agreement for a term of five years subject, inter alia, to finalisation of its terms. The request made clear that a request for the "usual particulars" of a transaction was a request to the following effect: (a) if in writing, please provide a copy of the writing; (b) if oral, please state by whom, to whom, when and where it was said and the effect of the words stated; (c) if implied, please state all of the facts, matters and circumstances said to give rise to the implication

25 The only response to each request for the usual particulars of the agreement which Volvo wished to assert in the proposed paragraphs which I have set out above were, in both cases: We refer to the contents of the "Volvo Representation" letter.

26 Such an answer must be taken to be an answer to the effect that the transaction was written and only written, and contained in the "Volvo Representation" letter. The "Volvo Representation" letter contains no provision to the effect that a replacement agreement would be subject to agreement on the terms of any new agreement, nor to satisfactory performance under the one-year agreement, nor to finalisation of its terms, nor to the provisions of the Franchising Code of Conduct.

27 If the matter were left there, the contention that such a term was an express written term of the representation letter would be hopeless. However, I think it would be an unnecessarily technical view to leave the matter there, in circumstances where the argument, as Volvo wishes to advance it, has been spelt out in its pre-trial written submissions, and Mr West has articulated in the course of argument a basis upon which it is said that such terms should be implied in the "Volvo Representation" letter.

28 Mr Trew has also drawn attention to two letters which are said to counter any argument that the "Volvo Representation" letter was subsidiary to the one-year dealer agreement. One such letter from Volvo to Mr Azzi dated 26 July 2000 resubmitted an amended version of the Volvo letter and sought its execution, amongst other things, "to cover off the remaining items". Another, dated 17 August 2000, from Volvo to Mr Azzi addressed the "Volvo Representation" letter and amendments to it, and "trusted" that it clarified the outstanding issues. Further, the "Volvo Representation" letter and the one-year dealer agreement were executed on behalf of TAA contemporaneously on 16 September 2000.

29 It may well be that these matters raise significant objections to an argument that the "Volvo Representation" letter is to the one-year dealer agreement subsidiary, but Mr West says that his argument is not entirely dependent on the "Volvo Representation" letter being so subsidiary. As I understand it, the defendant's case encompasses the possibility that, even if the "Volvo Representation" letter is not subsidiary to the one-year dealer agreement, nonetheless upon its proper construction a number of conditions, including those raised by the proposed paragraphs of the defence referred to above, attended any right to a further five-year term. As I have come to the conclusion that, whatever obstacles there may be, such a construction of the representation letter is not entirely unarguable, it is better that I do not rehearse at any greater length the arguments which favour or counter that view. But I am, therefore, persuaded that leave to amend should not be refused on the ground that it can be seen now that it would be futile to grant it.

30 Mr Trew has submitted, albeit without elaboration, that in adopting the position which it adopted in September 2001 and then pleading the case in the way in which it has pleaded it to this point, Volvo has waived reliance on the defence which it now seeks to raise, so far as the contractual question is concerned, or is estopped from doing so, invoking the approach adopted in Commonwealth v Verwayen (1990) 170 CLR 394, or any one of those approaches.

31 So far as estoppel is concerned, before a defendant would be held estopped from pleading a defence it would be necessary to find some detrimental reliance on the part of the plaintiff on an expectation that that defence would not be pleaded. So much has not been established, at least at this stage.

32 While a reply of waiver would not necessarily require that the plaintiff show detriment, it would require evidence of a clear and unrequired determination on the part of the defendant to abandon forever the position which it is said to have waived. I have considered closely at the correspondence of September 2001, extracts from which I have set out above. It does not seem to me that that correspondence necessarily contains an unequivocal concession that Volvo was bound to give TAA a new five-year term, although it certainly does contain statements to the effect that it was giving or would give TAA such a term. But as to whether it conceded that it was bound to do so, that I think is a matter which remains open for argument.

33 It does not affect that this case involves more than a mere failure to plead a defence which might otherwise have been available, as distinct from a waiver of a defence. There was much more on the facts in Verwayen than there here, by way of communication of a deliberate decision on the part of the Commonwealth in that case not to plead the statute of limitations. Nothing that I have been taken to reveals any express statement on the part of Volvo that it would not plead the defence that it now seeks to raise, or a defence to like effect.

34 Although it is a minor matter, nonetheless I think it is of some slight significance on this application that relatively recently, on 18 February this year, TAA amended its claim in a manner which related to the construction of provision 2 in the "Volvo Representation" letter, which I have set out above. It is also germane that, by pleading that if there was not a contract to the effect alleged there is, nonetheless, a Waltons v Maher estoppel to the same effect, TAA has contemplated the possibility that it might be found that there was not a complete contract based on the "Volvo Representation" letter.

35 On any view, the construction of provision 2 in the "Volvo Representation" letter has always been at the heart of these proceedings. There was going to be debate about its meaning and content in any event. It is true that, until now, contentions that it was devoid of meaning so far as a replacement five-year term was concerned, or that it had no effect because the one-year dealer agreement exclusively governed the parties' relationship, were not expressly on the table. But what is clear is that the parties were going to have to debate, and the court was going to have to consider and decide, what, in the events that had happened, was the meaning and effect of that provision. In those circumstances, and in the absence of any claim for prejudice, which Mr Trew responsibly and properly does not make, it is artificial to exclude one potential construction of the clause from the scope of the debate.

36 Accordingly, I am persuaded that leave should be granted to the defendant to amend to raise the contractual question.

37 That said, it is plain - and Mr West does not dispute - that the answers which have been given so far to the request for particulars of the proposed amended claim are in a number of respects inadequate and unsatisfactory. I would expect that, as a condition of the leave that I propose to grant, the defendant will provide proper answers to that request for particulars.

38 Accordingly, I propose to make the following orders.

(1) In proceedings 50156 of 2003, I grant leave to the defendant to file an amended reply to the plaintiff's summons for relief under section 106 filed on 8 October 2002, in the form set out in annexure A to the motion filed on 6 March 2006.

(2) In proceedings 50146 of 2003, I grant leave to the defendant to file an amended defence to the plaintiff's further amended summons filed on 18 February 2006, in the form set out in annexure A to the motion filed in those proceedings on 6 March 2006.

(3) I order that the defendant pay the plaintiff's costs of both motions, insofar as they relate to the question of leave to amend.

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