Court of Appeal (WA)|2005-05-17|Before: Smith JA

Carpathian Resources Ltd v Geological and Corporate Management Pty Ltd [2005] WASCA 104 (17 May 2005)

CARPATHIAN RESOURCES LTD -v- GEOLOGICAL AND CORPORATE MANAGEMENT PTY LTD [2005] WASCA 104 (17 May 2005)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : CARPATHIAN RESOURCES LTD -v- GEOLOGICAL AND CORPORATE MANAGEMENT PTY LTD [2005] WASCA 104

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Practice and procedure - Interlocutory appeal - Pleadings - Request for further and better particulars - Objection taken to answering - Whether answers irrelevant and unnecessary - Turns on own facts

Brilliant Digital Entertainment Pty Ltd v Universal Music Australia Pty Ltd [2004] FCA 448

Freehill Hollingdale & Page v Bandwill Pty Ltd [2000] WASCA 150

Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101

Johnson Tiles Pty Ltd v Esso Australia [2000] FCA 1572; (2000) 104 FCR 564

Kenman Kandy Australia Pty Ltd v Registrar of Trade Marks [2002] FCAFC 273; (2002) 122 FCR 494

Wilson v Metaxas [1989] WAR 285

Anaconda Nickel Ltd v Edensor Nominees Pty Ltd [2004] VSCA 167; (2004) 50 ACSR 679

Bruce v Odhams Press Ltd [1936] 1 KB 697

Edensor Nominees Pty Ltd v Anaconda Nickel Ltd [2001] VSC 502

Goldsmith v Sandilands [2002] HCA 31; (2002) 190 ALR 370

Gray v National Crime Authority [2003] NSWSC 111

King v AG Australia Holdings Ltd [2003] FCA 543

McGellin v Mount King Mining NL (1998) 144 FLR 288

Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466

Smith v Maloney (1998) 19 WAR 209

St Michaels Golf Club v Bell [2002] NSWSC 61

Thompson v Thompson (1942) 59 WN (NSW) 219

Whitehouse v Capital Radio Network Pty Ltd [2004] TASSC 12; (2004) 48 ACSR 569

Woolworths Ltd v Kelly (1990) 22 NSWLR 189

1 ROBERTS-SMITH JA: This is an application for leave to appeal a decision of Acting Master Chapman made on 5 November 2004 dismissing the applicant Carpathian's application for an order that the respondent, Geological and Corporate Management Pty Ltd ("GCM") file and serve answers to certain particulars. Carpathian has filed a draft notice of appeal dated 26 November 2004 in the substantive action. Carpathian is the defendant and plaintiff by counterclaim. There are four specific requests for particulars, those being enumerated 6, 7, 8 and 9 of a request filed 13 July 2004. GCM, which is the plaintiff and first defendant by counterclaim, filed objections to answers on 13 July 2004.

2 The substantial dispute in the case is what is described as a management agreement between the parties. By its statement of claim GCM pleads, in part, that by a contract dated 1 May 2000 the parties agreed that the plaintiff would provide administration, technical and office services, office equipment and maintenance services to the defendant and develop company specific computer and accounting systems for the defendant. The terms of the management agreement included the following: that the plaintiff would provide the services and support pursuant to the agreement for an initial term of three years from 1 May 2000; that the defendant could, at its election, extend the term of the agreement for a further period of three years; that the defendant would pay the plaintiff an annual fee of $400,000 for the services provided under the agreement by way of equal monthly instalments in arrears at the end of each calendar month, and the annual fee was to be reviewed at the end of each 12 month period. There is pleaded a further contract dated 11 November 2002 extending the terms of the management agreement for a further period to expire 30 April 2006. That is described as the extension agreement. That effectively continued the original agreement.

3 By letter to the plaintiff dated 8 April 2004, so it is pleaded, the defendant's solicitors asserted that the management agreement and extension agreement were void and the defendant was not bound by either of them. It is then pleaded that that letter was a repudiation of the management and extension agreements, which repudiation was accepted by letter from Bennett and Co, solicitors acting on behalf of the plaintiff, dated 21 May 2004. The plaintiff claims damages, interest and any consequential orders.

4 In its defence and counterclaim Carpathian pleads that at all material times each of the second defendants by counterclaim, who are individuals by the names of Mr Johnson, Ms Wowesny and Mr Luplau, were the only directors of Carpathian and at all material times Johnson and Wowesny were directors and absolutely and beneficially entitled to all the shares in Geo Corp. Each of them owed fiduciary duties to Carpathian, so it is pleaded, those duties including not to place themselves in a position where their self-interest and/or duty to another party conflicted with their duties to Carpathian or where there was a real and sensible possibility of conflict, and there was a duty, so it is said, that they act in good faith in the interests of Carpathian.

5 Certain aspects of the Corporations Law are pleaded going as to the quorum at a meeting of directors, provisions for voting and the affixation of the common seal of the company together with provisions in Carpathian's constitution as to disclosure of interests.

6 Then it is pleaded that on or about 1 May 2000 Luplau and Johnson, to the knowledge of and with the encouragement of Wowesny, affixed the common seal of Carpathian to the management service and support agreement to which reference has already been made. They subsequently, it is pleaded, then affixed the common seal of Carpathian to the deed of variation.

7 There are pleas as to the validity or otherwise of the agreements as a result of the interests held by Johnson and Wowesny and it is said that their interests and positions had the result that the management agreement and extension were void and that their role in the voting and affixation of the common seal constituted a breach of their fiduciary duties to Carpathian.

8 A significant plea for present purposes is that Carpathian acknowledges it will give credit for a reasonable charge for management and other services provided by GCM between May 2000 and May 2004 but, it is said, until Johnson and Wowesny provide full details of the services provided, Carpathian does not know what a reasonable charge is.

9 GCM has filed a reply and defence to the counterclaim dated 9 July 2004. By that pleading the fiduciary duties owed by the directors of the defendant to the defendant are admitted, as is the plea of their duty to exercise their powers and discharge their duties as directors in good faith and in the best interests of the defendant and for a proper purpose.

10 The execution of the management agreement and extension agreement is acknowledged, as is payment of the fees of $400,000 per annum to the plaintiff, allegedly pursuant to the terms of the agreements. It is, however, pleaded that the interests of the first and second-named defendants to the counterclaim were fully disclosed by them prior to the execution of the agreements. Specifically they were disclosed, it is said, in the defendant's accounts and financial statements and the prospectus issued for the purpose of raising capital.

11 There are pleadings as to the quorum at particular meetings and as to the position of the directors voting. Then it is pleaded:

"Between 1 May 2000 and 31 March 2004, the defendant represented to the plaintiff that it agreed to the plaintiff providing services on the terms set out in the management agreement and extension agreement"

and particulars are given of the representation which is said to be a representation by conduct on behalf of or by the defendant in executing the management agreement, executing it, accepting the management, administration and secretarial service provided by the plaintiff, making payment to the plaintiff according to the terms of the agreement or both of them and confirming the terms of the management agreement and extension agreement in its annual accounts and in the prospectus. The plaintiff pleads that it relied on the representation to its detriment.

12 The particulars given in relation to the reliance issue are these:

"33.1 providing secretarial, management and administrative services to the defendant as required by the management agreement.

33.2 renting appropriate office space for the use of the defendant.

33.3 engaging appropriate management, administrative and secretarial staff to perform the services provided to the defendant."

13 Finally, in light of that it is pleaded that as a result of those matters, the defendant Carpathian is estopped from denying that there was an agreement between the plaintiff and the defendant on the terms set out in the management agreement and extension agreement.

14 Carpathian filed a rejoinder dated 21 July 2004. That is brief. For present purposes, it is sufficient to note that the representations relied upon as having been made by Carpathian or pleaded to have been made by, inter alia, Wowesny and Johnson who at all material times were directors of the plaintiff and first defendant by counterclaim and were absolutely and beneficially entitled to all the shares in GCM. It is pleaded that each of them knew that by reason of the matters pleaded, they had a material interest in the agreement and the extension and of the matters which caused them to breach the fiduciary duties and statutory duties referred to and which resulted in the agreements being void ab initio.

15 The request for particulars the subject of this application and the objections to them are as follows:

6. Of '... accepting the management, administrative and secretarial services provided by the plaintiff between 1 May and 31 March 2004 ...'

Kindly give full particulars of the management, administrative and secretarial services here referred to, sufficient to enable Carpathian to assess their value."

6. The plaintiff objects to the request for particulars on the grounds that they are unnecessary and irrelevant to the plaintiff's claim and defence to counterclaim. Particulars of the nature and extent of the management, administrative and secretarial services referred to are not required to support the plaintiff's plea that it has acted to its detriment."

16 Request 7 under [33.1] of "providing secretarial, management and administrative services to the defendant" - the request is made similarly to give full particulars of those. The objection is expressed in similar terms to that in respect of request 6.

17 Request 8 goes to [33.2] and specifically of "renting appropriate office space for the use of the defendant." Particulars requested are full particulars of the office space rented including its address and area and the rent paid. The objection again is made in the same terms as previously.

18 Request 9 relates to [33.3] and specifically of "engaging appropriate management, administrative and secretarial staff to perform the services provided to the defendant." Again, those particulars are requested and the objection is in similar terms to the previous objections.

19 It is accepted that this being an application for leave to appeal, leave will not be granted under O 63A of the Rules of the Supreme Court unless the Court is satisfied that the decision below is wrong or at least attended with sufficient doubt to justify the grant of leave and, in exercising its discretion, that a substantial injustice would be done if the decision remained unreversed: see Wilson v Metaxas [1989] WAR 285 at 294. So too the submission may be accepted that instances in which appeals will be allowed to be brought from procedural directions are rare because the broad discretion vested in case managers for the effective control of the conduct of litigation and the integrity of the case management process itself must be respected: see Freehill Hollingdale & Page v Bandwill Pty Ltd [2000] WASCA 150 at [33] and Johnson Tiles Pty Ltd v Esso Australia [2000] FCA 1572; (2000) 104 FCR 564.

20 I would also accept the submission that an appellate court should not interfere with a decision on a matter of practice and procedure unless clearly satisfied that a wrong principle has been applied or that injustice will result from the order. I accept the proposition that the requirement for leave to appeal is not to be given mere lip service. It is a requirement which is to be given proper force and effect, as explained by French J in Kenman Kandy Australia Pty Ltd v Registrar of Trade Marks [2002] FCAFC 273; (2002) 122 FCR 494 at [30]. That recognition will often, if not usually, require the application for leave to be dealt with separately from the hearing of the appeal, as Tamberlin J explained in Brilliant Digital Entertainment Pty Ltd v Universal Music Australia Pty Ltd [2004] FCA 448 at [19]:

"Generally, a leave application calls for a lower level of satisfaction, namely, sufficient doubt as to the correctness of the primary decision. Examination of this question can require a considerably more cursory examination of the material than that necessitated by the hearing of an appeal. In addition, there is the question on a leave application of whether it would be unjust to grant leave to appeal from the decision below. ... Too liberal an approach to the joint hearings of leave applications with appeals could mean that in many cases applicants will seek to have a trial run by arguing the whole matter under the guise of a leave application. That is not desirable if interlocutory appeals on questions of practice and procedure are to be generally discouraged." (Citations omitted)

21 There is reference in the following paragraphs of that judgment to a number of the considerations to which a court would have regard in determining whether to deal with the application for leave separately from the appeal itself. It is sufficient to say that issues of that kind do not arise here. The points in issue here are short. It would be wasteful of costs for the parties and of the Court's time and resources to deal with this matter otherwise than by hearing the application for leave and the appeal together. That is the way the matter was presented to us and, in my view, correctly so.

22 For Carpathian then it is submitted that GCM pleads an estoppel and that Carpathian is estopped from denying the existence of an agreement because in effect both parties had proceeded on the basis that it subsisted and GCM had provided performance under it. It is said that the particulars were sought because Carpathian proposes to prepare and adduce evidence at trial, including expert evidence, of the value of the work performed by GCM.

23 The evidence would support Carpathian's case that if there is an estoppel, the estoppel is satisfied (or at least the dictates of good conscience are satisfied) by its payment of a proper charge for the management services performed and that without the particulars it cannot prepare that evidence. It is pointed out that Carpathian has long been prepared to concede to GCM and pay, and has almost certainly already paid, a proper charge for the work performed and that the provision of the particulars would accordingly enhance the prospects of a settlement of the proceedings.

24 Carpathian submits that the proper or reasonable value of the services performed is the extent or outer limits of the estoppel contended for by [32], [33] and [34] of the defence to counterclaim. The payment of that sum satisfied the minimum equity to which the circumstances or dictates of good conscience give rise. An estoppel as to the subsistence of the agreement, it is submitted, should not enable GCM to retain sums paid under it if they are in excess of the proper, that is reasonable, value of the work performed.

25 It is submitted that if Carpathian is precluded by the absence of proper particulars from adducing evidence at trial on an issue alive on the pleadings, there is substantial injustice. On behalf of GCM, on the other hand, it is submitted that [32] of the reply and defence to counterclaim is part of an estoppel by conduct plea, a pleading of representation by Carpathian that an agreement existed between it and the respondent in terms of the management agreement.

26 The submission then is that where an estoppel is made out, there is a prima facie entitlement to relief based upon the state of affairs assumed to exist by the plaintiff. Reference is made in support of that to Commonwealth v Verweyan (1990) 170 CLR 394 at 445 - 446 per Deane J. In short, the respondent submits that if the estoppel by conduct is established, the applicant will be held to its representation and even in a case of provisionary estoppel, where relief based upon the state of affairs assumed to exist by a plaintiff exceeds what might be justified by the requirements of good conscience, holding a defendant to its representation represents the limit within which the relief appropriate to do justice between the parties should be framed.

27 It is then said that for the purposes of the representation and the plea of estoppel by conduct, the particulars requested by the applicant are unnecessary and were properly refused by the master. The objection maintained before us to the provision of the particulars is that they are unnecessary and irrelevant. Furthermore, Mr Shepherd submits on behalf of GCM that the proposition that in the absence of the particulars sought Carpathian will be precluded from adducing evidence at trial in support of its own assertion about the value of fees paid to the respondent, is insupportable - it is, it is said, a chimera created so that the applicant might assert, without foundation, that injustice will be suffered by the applicant if the decision of the master is not reversed.

28 Verweyan remains authoritative but the law in respect of equitable relief has developed further since then. It is not necessary, on an application at an interlocutory stage, to canvass the authorities in any detail. It is sufficient to acknowledge that the law now recognises the need to and importance of moulding equitable relief to the circumstances of the particular case having regard to the nature of the detriment suffered and the respective positions or circumstances of the parties: see Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101. I do not accept Mr Shepherd's submission that it is for Carpathian to prove this information as part of its own case. In my view Carpathian is entitled to particulars of what services were provided in return for the moneys paid.

29 The estoppel point, if successful at trial, would not necessarily limit the relief which may be given to the extent or in the manner asserted by GCM. It may be something less than enforcement of the representation. The scope of the detriment is squarely raised on the pleadings. Even in the event, therefore, that the estoppel point is successful, the particulars sought go to the potential relief; they go to the point of the worth of the services provided, that is the assessment of them.

30 The essential scope of the dispute between the parties is between the claimed contractual sum and the quantum meruit (or what would reasonable costs for the services have been). In my view the information sought by each of these particulars goes essentially to moulding its equitable relief should Carpathian succeed, either in whole or in part. It is central to the relief sought. Further, the interests of justice would best be served by provision of the information requested, both with regard to the proper conduct of the litigation directed to resolution of all relevant issues between the parties, bearing upon or arising out of the pleadings, and because it may encourage and facilitate settlement.

31 The "cards on the table" approach and the effect of the principles of case management in this context, as explained by Ipp J in Boyes v Colins [2000] WASCA 344; (2000) 23 WAR 123 at [64] to [72], militate strongly in favour of an order that the particulars be provided.

32 I accept the submission advanced by Mr Stone that the effect of not ordering GCM to provide the particulars requested would cause injustice because the applicant cannot prepare its case properly going to that issue.

33 In my view, the Master was in error in concluding that the answer to request 6 was unnecessary. He was also in error in accepting the respondent's submission (which he appears to have done) that the issue as to the extent of the management services provided raised by request 7 is really neither her nor there for the purposes of the estoppel case and that the particulars given in [33.1], [33.2] and [33.3] are adequate.

34 For the same reason, he was in error in respect of requests 8 and 9. The particulars sought were not unnecessary and irrelevant.

35 I am conscious of the restrictions on the granting of leave to appeal interlocutory applications as adumbrated by French J in Johnson Tiles v Esso (supra), particularly at [42], but it seems to me that the present case results in a substantial injustice to Carpathian if the particulars are not ordered.

36 It seems to me that as the appeal must succeed and given the considerations I have already mentioned which go not only to the question of leave but also to the question of the justice of the case and the discretionary considerations bearing upon it, the applicant has made out its case for leave to appeal and for an order for particulars.

37 I would grant leave to appeal. I would allow the appeal and I would order that the plaintiff's application before the Master be granted in respect of request for particulars 6, 7, 8 and 9.

38 MCLURE JA: I agree with the orders proposed by Roberts Smith JA for the reasons he gives.

Carpathian Resources Ltd v Geological and Corporate Management Pty Ltd [2005] WASCA 104

At a glance

Court

Decision date

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Catchwords

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Judgment (71 paragraphs)

Carpathian Resources Ltd v Geological and Corporate Management Pty Ltd [2005] WASCA 104 (17 May 2005)

CARPATHIAN RESOURCES LTD -v- GEOLOGICAL AND CORPORATE MANAGEMENT PTY LTD [2005] WASCA 104 (17 May 2005)

Parties

Cases Cited (10)