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[2007] WASC 146
Supreme Court of WA
2007-07-02
Beech J
Original judgment source is linked above.
1 BEECH J: There were initially three applications before the Court:
(a) the defendants' application to strike out pars 21 - 33 of the further amended statement of claim;
(b) the defendants' application to strike out various portions of affidavits; and
(c) the plaintiff's application for further and better discovery.
2 However, in view of the state of the pleadings the plaintiff accepted that it would be premature to press its application for further discovery.
3 The plaintiff's claim, as amended, is that an agreement reached between it and the first defendant on 7 July 2004 is void or should be set aside, and for judgment against both defendants for an amount of approximately $550,000. The claim against the second defendant is founded on the guarantee by him of the first defendant's liabilities to the plaintiff.
4 The plaintiff pleads that prior to July 2004 the plaintiff had contracted with the first defendant for the plaintiff to build a number of houses and units for the first defendant. The contract prices, as varied, for each contract are pleaded, as are the amounts said to have been paid by the first defendant.
5 The parties held a meeting on 7 July 2004 at which a representative of the plaintiff provided a written statement setting out the amounts due for each of the 10 contracts listed on the statement.
6 It is pleaded that there was an arithmetic error on the statement: the sum of the 10 amounts was shown on the statement as $1,074,736 whereas the correct sum was $1,628,182.
7 It is pleaded by the plaintiff, and is common ground, that at the meeting on 7 July 2004 an agreement was reached by which the first defendant agreed to pay a total of $925,000, by three instalments, in full payment of amounts due from the first defendant to the plaintiff. The plaintiff pleads that the agreement was reached after the statement was provided by the plaintiff to the defendant.
8 It is pleaded by the plaintiff that on 7 July 2004 neither party was aware of the mistake on the statement.
9 Paragraph 18 of the statement of claim pleads that the agreement of 7 July 2004 was reached on the basis of the "mutual mistake" that the total shown on the statement was the correct total.
10 In the course of oral submissions by counsel for the plaintiff it emerged that the plaintiff's case is that the same mistake was made by both parties to the contract, so that the appropriate characterisation of the mistake is as a "common" mistake rather than a "mutual" mistake (see, in this regard, Seddon and Ellinghaus "Cheshire and Fifoot's Law of Contract" (8th Aust ed), par 12.5; Carter and Harland "Contract Law in Australia" (4th ed) pars 1202 - 1204). Counsel for the plaintiff said in the course of argument that the plaintiff would move to amend the pleading by substituting the word "common" for the word "mutual" where it appears in pars 18 and 34 of the statement of claim.
11 It is pleaded that the plaintiff discovered the mistake in the statement the day after making the agreement and informed the first defendant of the mistake.
12 Paragraphs 21 - 32 of the further amended statement of claim refer to events and meetings from 8 July 2004 until 22 July 2004. The defendants object to those paragraphs, as well as to corresponding paragraphs in the reply (namely pars 4(k) - 4(v)). In substance those paragraphs plead as follows:
13 In par 33 it is pleaded that "in the premises, by its conduct as set out in pars 23, 25, 27, 29 and 32:
(b) alternatively, the first defendant waived the agreement;
(c) alternatively, the first defendant accepted that the agreement was vitiated by the mistake and is estopped from relying upon the agreement."
14 The defendants object to pars 21 - 32 on two bases. First, it is said that those paragraphs raise matters covered by the without prejudice privilege. Secondly, it is said that those matters are irrelevant to the plea of mistake and should be struck out on that basis.
15 The without prejudice privilege excludes from evidence admissions by words or by conduct made by parties in the course of negotiations to settle disputes which are the subject of litigation or which will become the subject of litigation if the dispute is not resolved: Field v Commissioner for Railways (1957) 99 CLR 285 at 291 - 292; Glengallan Investments Pty Ltd v Arthur Anderson [2002] 1 Qd R 233 at 248 - 250.
16 The defendants seek to strike out the plaintiff's proposed further amended statement of claim. So it is for the defendants to demonstrate that the paragraphs to which they object are manifestly untenable on the ground that they raise matters covered by the without prejudice privilege.
17 The defendants refer in their written submissions to the approach taken by Master Sanderson in Jovista Pty Ltd v FAI General Insurance [1998] WASC 298. There the question of without prejudice privilege was not raised in a pleading context. In that case, evidence relevant to an interlocutory application was objected to on the grounds that it was the subject of without prejudice privilege. The Master considered the evidence as to the circumstances in which the contentious documents had been provided and concluded that they had been provided in circumstances where the parties' solicitors were making genuine attempts to negotiate a settlement of the dispute between the parties. The decision does not involve the question of an attack upon a pleading based on the without prejudice privilege.
18 In support of their application to strike out parts of the pleading on the grounds that they raise matters which are covered by the without prejudice privilege the defendants filed an affidavit of Mr Sugiarso. In response, the plaintiff filed an affidavit of Mr Kinder. In the light of the evidence of Mr Kinder, and taking into account the interlocutory nature of the application, the defendants did not seek to rely upon the evidence of Mr Sugiarso in support of their application. Rather, the defendants contended that it was apparent from the statement of claim itself that the matters pleaded were the subject of the without prejudice privilege.
19 There is no suggestion, in the pleading or elsewhere, that any party stated, at the time of the various discussions and meetings during the period 8 - 22 July, that the discussions were to be without prejudice. Of course, that is by no means determinative (see, eg, Rodgers v Rodgers (1964) 114 CLR 608 at 614).
20 In support of their contention counsel for the defendants invited particular attention to pars 27, 29 and 32. Paragraph 27 refers to a meeting "for the purpose of discussing outstanding moneys owed by the first defendant to the plaintiff". Paragraphs 29 and 32 plead requests for a "discount" made by the first defendant. In my view, neither the language of "discussing outstanding monies" nor of requesting a "discount" is an unequivocal indication of the existence of a dispute. Each is consistent with one party simply wishing to request more time to pay or a reduction in what is accepted to be due.
21 I do not accept that those parts of the pleadings, or pars 21 - 32 as a whole, make it so clear that pars 21 - 32 raise matters covered by the without prejudice privilege that those paragraphs should be struck out. At trial, the question whether some or all of the evidence respecting the matters pleaded in these paragraphs is protected by the without prejudice privilege can be determined in the light of all the evidence at trial as to the context and content of the conversations.
22 For these reasons I reject the first ground of the first defendant's objection to pars 21 - 32.
23 I move to the second ground for the defendants' objection to those paragraphs, namely that they are plainly irrelevant and should be struck out on that basis.
24 It is well established that material is not struck out merely because it is unnecessary, and an unnecessary allegation will not be struck out if it is material, not as an essential ingredient to the cause of action, but in the sense that evidence could be led at trial to support it: Seaman "Civil Procedure Western Australia", [20.19.10].
25 In Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 at 84, the Chief Justice made the following observations of general application:
"[6] ... pleadings today can be approached in [the context of contemporary case management techniques and pre-trial directions] and therefore in a rather more robust manner, than was historically the case; confident in the knowledge that other systems of pre-trial case management will exist and be implemented to aid in defining the issues and appraising the parties to the proceedings of the case that has to be met.
[7] In my view, it follows that providing a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and appraising the parties of the case that has to be met, the Court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the Court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment.
[8] ... the advent of contemporary case management techniques in the pre-trial directions to which I have referred should result in the Court adopting an approach to pleading disputes to the effect that only where the criticisms of a pleading significantly impact upon the proper preparation of the case and its presentation at trial should those criticisms be seriously entertained."
26 Paragraphs 21 - 32 are said by the plaintiff to be material in four respects: first, to the plea in par 33(a) that the contract was discharged; secondly, to the plea of waiver in par 33(b); thirdly, to the plea of estoppel in par 33(c); and fourthly, to the plea of mistake (presently pleaded as mutual mistake but to be amended to be common mistake) in par 34.
27 Counsel for the plaintiff accepted in argument that the plea in par 33(a), of discharge of the agreement, could not stand in its present form. Paragraph 33 identifies, as the foundation for each of the legal conclusions in pars (a) - (c), conduct on the part of the first defendant. Counsel for the plaintiff accepted that as a matter of law the conduct of one party to a contract alone could not effect a discharge of the agreement. It was foreshadowed that the plea would be amended so as to allege that the matters in pars 21 - 32 gave rise to a discharge of the 7 July agreement by agreement between the parties.
28 Counsel for the plaintiff also accepted that the plea in par 33(c) could not stand in its present form. In particular, he accepted that a viable pleading of estoppel would require that reliance on the part of the plaintiff be pleaded and that there was no such plea in the statement of claim in its current form.
29 If pars 21 - 32 were otherwise material, for example to a plea of discharge by agreement, the question of whether those paragraphs were (also) material to the plea of waiver and of mistake would not have been of sufficient significance to the preparation and conduct of the trial to warrant detailed consideration and analysis (see Barclay Mowlem Construction Ltd (above)). However that is not the case. Moreover, the matters in pars 21 - 32 introduce additional factual matters which have a real potential to add substantially (in a relative sense) to the length of the trial.
30 It is pleaded in par 33(b) that the first defendant "waived the agreement". It was argued on behalf of the plaintiff that the conduct of the first defendant in requesting a discount (as pleaded in pars 29 and 32) involved an acceptance on its part that the "correct amount" was due and thus that the 7 July agreement did not control what was due between the plaintiff and the first defendant. This was said to amount to a "waiver" of the agreement.
31 Counsel for the plaintiff was not able to point to any authority for the proposition that the entirety of an agreement may be "waived" by the unilateral act of one party to the agreement. It was accepted that the application of the doctrine of consideration to the discharge of contracts made the plea of waiver a "difficult point", and "perhaps novel", but it was contended that nonetheless it ought not be struck out.
32 The application of the requirement of consideration to the discharge of contracts is well established (even if it is, from time to time, criticised): see, for example, Cheshire and Fifoot (above), pars 4.2 and 4.32; Carter and Harland (above), par 388. It is a requirement of long-standing, going back to before 1602 when Pinnel's case was decided. (For more recent authority see, for example, Commissioner of Stamp Duties (NSW) v Bone [1976] UKPCHCA 1; (1976) 135 CLR 223 at 229; Federal Commissioner of Taxation v Orica Ltd [1998] HCA 33; (1998) 194 CLR 500 at 544.)
33 Waiver is a term used in many different senses. At times it is used to mean an election between inconsistent rights; at other times it is used to describe what is now characterised as estoppel.
34 Beyond election and estoppel, the scope of waiver as an independent doctrine has been much debated: see, for example, the discussion by Steytler P in Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd [2005] WASCA 106; (2005) 30 WAR 290 at 305 - 306, and the cases referred to in [48] of his Honour's reasons.
35 Other specific contexts in which the doctrine of waiver appears to continue to have a role were identified by Steytler P in Wiltrading at [48] and by McHugh J in The Commonwealth v Verwayen (1991) 70 CLR 394 at 497. Those contexts are far removed from the present case.
36 In Lewis v Cook [2000] NSWSC 191; (2000) 18 ACLC 490 at 494 - 496 [26] - [36], Austin J considered and rejected an argument that a creditor had waived a debt by committing an intentional act with knowledge of abandoning its right to recover any part of the debt from the debtor. Austin J pointed out that a general doctrine of waiver of this breadth would encroach upon the operation of other well-established legal principles. His Honour concluded that there was no scope for the application of any doctrine of waiver to a case where a company had, by its directors, purported to forgive and release the rights comprising a debt owed to the company. Rather, the legal effect of a resolution of directors purporting to forgive and release the debt was to be assessed by reference to the legal principles governing the release and forgiveness of debts.
37 The analysis of Austin J was followed by Einstein J in Randall v Aristocrat Leisure Ltd [2004] NSWC 411 at [650] - [653]. So far as my researches reveal, the analysis by Austin J of the law of waiver and its relation to forgiveness or release of contractual debts or other obligations has not been doubted.
38 I agree, with respect, with the reasoning and conclusion of Austin J.
39 In my opinion there is no arguable scope for any doctrine of waiver to apply in such a way that a party to a contract who evinces an intention not to enforce or rely upon the contract has thereby "waived" the contract. It follows that par 33(b) does not disclose an arguable claim.
40 The fourth and final respect in which the plaintiff says pars 21 - 32 are material is that they are said to support the plea of mistake in par 34. In oral argument it was submitted on behalf of the plaintiff that the matters pleaded in pars 21 - 32 supported an inference that the defendant made the mistake pleaded by the plaintiff when it entered into the 7 July agreement. It was, of course, accepted that the question of whether the first defendant entered into the contract under a mistake was to be tested by reference to the first defendant's state of mind at the time of entering into the contract. Nonetheless it was contended on behalf of the first defendant that the subsequent events pleaded could support an inference as to the first defendant's state of mind at the relevant time.
41 On the face of things that appears to involve relying on the pleaded subsequent events by way of evidence rather than as material facts. Moreover, it is, I think, relevant that, at this stage, the defendants have not pleaded to the statement of claim. That being so, it is not yet known whether the defendants will admit or deny the plea that the first defendant entered the contract of 7 July under the pleaded mistake. If that plea were denied by the first defendant then the matters pleaded in pars 21 - 32 might well, as suggested by counsel for the defendants, be relied upon by way of particulars, under O 20 r 13, of matters relied upon by the plaintiff in pleading the state of mind of the first defendant.
42 However, in circumstances where the first defendant has not yet pleaded to the statement of claim I would not be prepared to allow pars 21 - 32 to stand as material to the plea of mistake. If the first defendant admits that it entered the contract under the mistake, the matters pleaded in pars 21 - 32 will not be material and (absent any other basis) evidence ought not be led in respect of those matters. However, if the plea of mistake were denied by the first defendant, nothing in these reasons would preclude the admission of evidence of the matters the subject of pars 21 - 32.
43 I would summarise my conclusions in respect of the pleading as follows. Paragraph 33(b) is not a viable plea in that the matters pleaded in pars 21 - 32 do not arguably give rise to a waiver in the respect pleaded. The matters pleaded in pars 21 - 32 are not material to the plea of mistake in par 34, at least unless and until the first defendant denies that it entered the contract under the pleaded mistake. Nor can it be said that those matters are (presently) material to pars 33(a) or 33(c) because those paragraphs are not maintained by the plaintiff, although they may be amended.
44 It follows from the conclusions I have reached that pars 21 - 32 are not, at this stage, material in any of the four respects contended by the plaintiff. I say "at this stage" because the plaintiff has foreshadowed amendments in respect of the pleas in pars 33(a) and (c). The matters pleaded in pars 21 - 32 may be material to those pleas as reformulated and nothing in these reasons should be thought to suggest otherwise.
45 However, at this stage, pars 21 - 32 are not material. In my opinion, upon application of the principles espoused in Barclay Mowlem Construction Ltd, those paragraphs should be struck out because if they remain in the pleading the scope of factual issues and length of the trial is likely to be substantially increased in circumstances where (as the pleading stands) those matters are immaterial.
46 The Court has power under O 37 r 7 to strike out from an affidavit material which is scandalous, irrelevant or otherwise oppressive or to order that an affidavit containing such matter be taken off the file. Here, the ground for striking out parts of various affidavits is said to be that they raise matters within the without prejudice privilege.
47 The affidavits the subject of the application were filed by each party in the course of an application for summary judgment which ultimately did not proceed. Thus the affidavits were never formally "read" or relied upon.
48 In the course of argument I enquired of counsel for the first defendant as to the practical consequences of an exercise of the power under O 37 r 7. Counsel submitted that the exercise of that power would have practical consequences in that it would preclude the parties from referring to the struck out portions of the affidavit in the course of cross-examination at trial. In my view, that is a matter better determined if and when such questions arise at trial.
49 In any event, the defendants put the argument for striking out the portions of affidavits on the same foundation as the application to strike out the pleading. In other words, the defendants relied upon the matters pleaded in pars 21 - 32 of the statement of claim and not upon any evidence. In the context of the application to strike out the pleading I have already found that pars 21 - 32 are not, on the face of the pleading, matters the subject of without prejudice privilege.
50 Accordingly, I would decline to exercise any power under O 37 r 7.
(1) pars 21 - 33 of the statement of claim ought be struck out with leave to replead; and
(2) the defendants' application under O 37 r 7 should be dismissed.
52 I will hear the parties as to costs but, on the face of things, the appropriate order would appear to be that the plaintiff pay the defendants' costs of the application. That would seem to be so given that the defendants succeeded in their objections to almost all of the paragraphs objected to and, further, in the course of the hearing the plaintiff abandoned its reliance on certain paragraphs and foreshadowed an intention to amend them.
(1957) 99 CLR 285
(1964) 114 CLR 608
(2006) 33 WAR 82
(1976) 135 CLR 223
(1998) 194 CLR 500
(2005) 30 WAR 290
(1991) 70 CLR 394