Henderson v McSharer

Henderson v McSharer - [2013] FCA 414 - FCA 2013 case summary — Zoe

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pleas of evidence 14 The respondents also draw attention to R 16.02(1)(d), which requires a pleading to state the material facts on which a party relies that are necessary to give the opposing party fair notice of a case to be made against that party at trial, but not the evidence by which the material facts are to be proved. 15 The respondents complain that numerous paragraphs or subparagraphs of the substituted statement of claim state evidence, rather than material facts, in contravention of this Rule. 16 The first example provided by the respondents is [6.14] of the substituted statement of claim that is pleaded in a long paragraph containing some 15 subparagraphs and dealing with the topic of "The York Farm Land". As I would apprehend it, the pleading concerning the York farm land is intended to provide context to their later pleaded financial dealings with the individual respondents and the circumstances in which the third respondent came to be formed or the parties came to gain some indirect or direct interests in it. 17 In that context, the various subparagraphs of [6] dealing with the York farm land are reasonably narrative. They have much to do with the fact that at some time prior to the applicants meeting the individual respondents, they had themselves obtained an extractive industries license in respect of the York farm land. In that regard, in the course of narrating material facts, [6.14] pleads that: Prior to 18 May 2010, DVC had provided Traffic Engineering drawings to Bonthorpe with regard to upgrading the entrance to the York farm from the Main Road, being the Great Southern Highway in Gilgering in the Shire of York. 18 In my view, one could spend quite some time debating whether or not that paragraph is a case of the stating of evidence rather than a material fact. In my judgment, [6.14] is part of the narrative that sets the context that is arguably relevant to the substantive causes of action which the applicants seek to press at the trial of this proceeding. 19 In those circumstances, I am not satisfied that [6.14] offends the Rules. 20 As to some 29 additional examples of where the respondents say evidence has been stated rather than material facts, suffice it to say that I have considered each of the examples given and by and large I am satisfied that none of those paragraphs should be struck out on the ground contended for. 21 In some cases, the impugned paragraph is expressed as a particular of a material fact, as for example in the second example offered by the respondents at [11.3]. 22 I would, therefore, decline to strike out the paragraphs mentioned in [6] of the respondents' written submissions on the ground contended for.

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alleged collateral contract in [21]-[24] 36 Due to their length it is unnecessary to set out the impugned paragraphs. By [20] the applicants plead entry into the collateral contract based on misleading and deceptive conduct. They then state in what, in effect, is a heading, that "the offer and the acceptance which formed part of the collateral contract" and the "promise of consideration by the respondents". Paragraphs [21] to [24] then follow. By [21], it is stated that the first respondent promised consideration, which is then pleaded out in some 12 subparagraphs. 37 Paragraph [21.13] then pleads that the second respondent promised consideration and that is pleaded out in some five subparagraphs. That paragraph is then followed by one dealing with "promise of consideration by the applicants". Paragraph [22] pleads out how the applicants were promised consideration in some 12 subparagraphs. Paragraph [23] then pleads what are called "further agreements reached between the applicants and the first respondent and the second respondent with regard to the establishment of the proposed new company". 38 At that point [24] is then pleaded under the heading "the collateral contract". It is pleaded in essence that a collateral contract exists between the applicants and the respondents pursuant to: The offers of the first respondent as pleaded in [21] which were accepted by the applicants. The offers of the second respondent as pleaded in [21] which were accepted by the applicants. The offers of the first applicant as pleaded in [22] which were accepted by the respondents. The offers of the second applicant as pleaded in [22] which were accepted by the applicants (this reference to "the applicants" is probably meant to refer to "the respondents"). The further agreements pleaded in [23] and reached with the consent of the individual parties. Further oral agreements reached at the "Childers Meeting" as pleaded in [23]. "Stock Purchase Agreement Version 3". 39 By [24.2] the applicants plead that pursuant to the representations made to them, they "in their vulnerable financial position" were induced into entering into a stock purchase agreement with the respondents. 40 By [24.3] the applicants plead that the terms of the stock purchase agreement provided that livestock belonging to their partnership were to be sold to the third respondent for $60,000. 41 By [24.4] the applicants plead that the sheep were valued at approximately $600,000. 42 The respondents submit that the terms of the alleged oral collateral contract in [21]-[24] must generally be consistent with the rights and obligations of the parties in the stock purchase agreement dated 24 August 2011, in accordance with the principle stated in Hoyt's Proprietory Ltd v Spencer (1919) 27 CLR 133 (Hoyt's). They say this does not appear to be the case as the third respondent under that agreement has the "unfettered right" to deal with the sheep, whereas the alleged collateral contract advances the third respondent's right to deal with the sheep only subject to certain conditions. 43 In my view, at this point of the proceeding, the outcome of the application of the principle in Hoyt's is uncertain. It may be open to argument that the collateral agreement merely regulates the contractual right granted under the stock purchase agreement and is not inconsistent with it. It is too early in the proceeding to make a definitive ruling in relation to the contention put on behalf of the respondents. It is a matter that should go to trial. 44 Accordingly, [21] to [24] should not be struck out on the ground contended for.

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issues with alleged undue influence claim at [19] 51 The respondents say similar objections arise in relation to the alleged undue influence claim at [19] as submitted on 1 March 2013, namely: (1) Whether the relationship between the parties is one where the law presumes undue influence is exercised? This does not appear to be the case as the applicants have only referred to the first respondent as a "business consultant". The applicants have also alleged that the first respondent is not a qualified lawyer; (2) Whether the relationship between the parties is akin to a relationship where the law presumes undue influence is exercised? Insufficient facts have been pleaded to be able to assess this; (3) Whether there was actual undue influence and whether the will of the applicants was overborne? This does not appear to be the case as the applicants plead that they were "persuaded" by the first respondent to do certain things. The applicants were therefore able to consider the matters for themselves, evaluate them and then make a judgment as opposed to their will being overborne: see [19.1.2] and [19.1.3]. 52 The respondents also contend that a number of events which are alleged as constituting undue influence only occurred after 24 August 2011, being the date of the stock purchase agreement (see [19.2], [19.3], [19.4], [19.5], [19.6] and [19.7]). 53 In my view while, as a matter of law, the various issues raised by the respondents may be relevant as submissions at trial, the pleading as it stands sufficiently raises the material facts and points of law that the applicants wish to agitate at trial and may be pleaded to by the respondents. 54 Paragraph [19.1] of the substituted statement of claim expressly pleads that the first respondent exercised undue influence "to pressure" the applicants to sign the stock purchase agreement. When the word "persuaded" is subsequently used, it is by way of a particular that supports the primary pleading in [19.1]. 55 Thus, in my view, the particular form of language used in subparagraphs like [19.1.3] should not be seen to diminish the primary plea in [19.1]. 56 Whether or not the relationship between the relevant parties at material times is sufficient as a matter of law either to presume a relationship of undue influence or otherwise to enable the applicants to seek relief on the basis that there was such a relationship which was abused, is in my view a matter for trial. 57 Similarly, if, as a matter of fact, some of the particulars relied upon are in relation to facts or events which post-dated the material date at which the stock purchase agreement was entered into, then that too would be a matter for trial. 58 In those circumstances I would not strike out [19] on the grounds contended for.

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issues with alleged unconscionable conduct claimed in [35] and [48] 59 The respondents submit that the claim for unconscionable conduct in [35] is defective as it is does not sufficiently identify whether the alleged conduct complained of occurred "in trade or commerce". 60 I have commented above that there would appear to be in a number of settings a need for the applicants to have regard to the components of the statutory causes of action in relation to their various claims and to assert, if it is the case, that the conduct complained of was "in trade or commerce". That paragraph should be struck out with leave to amend the substituted statement of claim. 61 The respondents further contend that the claim for unconscionable conduct in equity in [47] is defective as it does not plead with sufficient clarity the alleged "disability" which the applicants allegedly suffered from. 62 The respondents further submit that unconscionable conduct in equity only applies to the situation where a party has taken advantage of a disability suffered by another to get the party suffering from a disability to enter into a contract. 63 The respondents say, therefore, it is also questionable whether the conduct alleged in [47.5], [47.6], [47.8], [47.9], [47.10], [47.11] and [47.12] can constitute unconscionable conduct as they are not actions which led the applicants into entering a contract. 64 While the respondents' submissions refer to [47] of the substituted statement of claim, I understand that they in fact relate to [48], which deals with unconscionable conduct. 65 I am satisfied that the unconscionable conduct pleas in [48.1]-[48.4] are sufficiently clear in identifying the issue of law that the applicants wish to agitate at trial for the respondents to plead to. 66 As to the submission that it is questionable whether the conduct pleaded in [48.5]-[48.6] and [48.8]-[48.12] can constitute unconscionable conduct as they are not actions which led to the applicants entering into a contract, that may be arguable at trial but is not a ground which should lead to the striking out of those paragraphs at this point. 67 Rather, those subparagraphs may well be intended to identify the particular disadvantage that the applicants say they suffered at the hands of the individual respondents. 68 I would, therefore, not strike out [48] on the basis contended for.

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issues regarding unjust enrichment claim in [49] 69 While the respondents refer to [48] in their written submissions, the unjust enrichment claim is in fact pleaded in [49]. 70 By [49.1], the applicants plead that: By the actions and conduct of the First and Second Respondent, the Respondents have obtained unjust enrichment from the Applicants, causing the Applicants to suffer loss and damage. 71 One particular provided in [49.1.1] is that the third respondents obtained unjust enrichment by having obtained sheep worth $600,000 at a cost of $60,000, causing the applicants to suffer loss and damage. 72 Further particulars refer to the first and second respondents having acted unconscionably to deprive the applicants of their only income producing asset, being the sheep, and further that the first respondent knowingly and with intent manufactured an atmosphere of crisis to persuade the applicants to agree to the terms of the collateral contract, causing the applicants to suffer loss and damage. 73 To establish a claim to restitution for unjust enrichment, an applicant must establish: (1) That a benefit was obtained by the respondent; (2) That the benefit was obtained by the respondent at the applicant's expense and not at the expense of some other person; and (3) That there would be "injustice" (according to recognised circumstances developed in the cases) if the respondent were to receive (or retain) the benefit. 74 In [49.1.1], the first and second elements are pleaded by the applicants. 75 However, the respondents submit that the third element has not been pleaded. They say the unjust enrichment claim is misconceived as the fact that a party has received some benefit at the expense of another does not automatically mean that the party receiving the benefit has been unjustly enriched. Rather, the benefit must be received by the party under certain circumstances recognised by the law. Those circumstances have not been identified. 76 The circumstances in which "injustice" may be established include: Mistake: Australian and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662; Compulsion: Bryson v Bryant (1992) 29 NSWLR 188 at 223 (Sheller JA); Other "vitiating" factors (such as illegality: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 379 (Mason CJ, Deane, Toohey, Gaudron, McHugh JJ)); Total failure of consideration: Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 375 (Deane and Dawson JJ); Failure of condition: Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516; Partial failure of consideration in certain circumstances (in relation to a severable payment, if the failure relates to the whole of the agreed return for the payment; under certain statutes; or in relation to a payment the agreed return for which has failed merely partially); and Acceptance of benefit: Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221. 77 I agree with the respondents' submission that the applicants have not specifically pleaded what the "injustice" would be if the third respondent was to retain the sheep valued at $600,000, having paid only $60,000 for them. In this respect [49] is defective. 78 However, it may be that there are relevant facts which provide a basis for pleading the required "injustice", either already within the substituted statement of claim or not yet pleaded at all. As such, at this point I am not prepared to permanently strike out the applicants' unjust enrichment claim. 79 I would, however, uphold the objection to [49] but grant leave to the applicants to replead the paragraph.

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Cases Cited (7)