McLeod v Munro & Anor [2005] NSWCA 378 | Case summary

The opponent sued the claimant in the District Court for debt. The Judge acting under DCR Pt 9 r 17 struck out the claimant's defence, refused leave to amend and entered judgment in favour of the opponent. The claimant argued that the Judge was not entitled to strike out his defence, should have given him leave to amend, and was not entitled to enter judgment for the opponent. He also argued that the promise sued on was joint and the other promisors were not joined, and the benefit of the promise was held jointly by the opponent and others and the other promisees had not been joined. HELD: (1) The claimant's continued delays in filing his evidence in breach of directions that he do so combined with the failure of his defence, after two amendments, to disclose a triable issue entitled the Judge to find that the defence was vexatious and an abuse of process so that DCR Pt 9 r 17(1)(a) and (b) were satisfied; (2) Non-joinder of parties did not defeat the judgment; (3) DCR Pt 9 r 12(1) which prohibits departure in pleading does not prevent amendments that are inconsistent with the pleading being amended. ORDERS

v. [Munro] to acknowledge that the payment of these funds satisfies all previous and future entitlements [Munro] may have with regard to GDK and associated entities including all Legal Charges outstanding to Kevin Munro and Associates." 4 Mr McLeod paid Mr Munro the $50,000 due on the Transfer Date, which was the date the agreement was signed, but did not pay the sum of $300,000 due on 30 June 2003. Mr Munro sued for this amount together with accrued interest. Mr McLeod's verified defence filed on 16 January 2004 contained in para 3 a plea in confession and avoidance as follows: "In relation to paragraph 3, the defendant admits clause 6 of the Agreement provided for the payment of the sum of $350,000 but also says that clause 6 contained other terms. The defendant relies on the entirely of the Agreement." 5 Paragraph 6 asserted that the Agreement was amended before 23 September 2003 and para 7 pleaded that Mr Munro was estopped from enforcing the Agreement by reason of negotiations between 30 June and 11 November 2003. 6 On 14 May Mr McLeod was given leave to amend his defence within 14 days. An amended defence was not filed in time. On 25 June he was again given leave to amend his defence on or before 28 June. An amended defence was not filed in time. On 28 June an amended defence was sworn, and this was filed on 1 July pursuant to an extension of time granted ex parte by Rolfe DCJ. 7 The second defence contained para 3 as before, and in paras 6-13 alleged breaches by Mr Munro of cls 3, 9 and 10 of the Agreement, and in para 14 it alleged that Mr McLeod's obligation in cl 6 to pay $300,000 was conditional upon performance of cls 3, 9 and 10 by Mr Munro. In paras 15-16 Mr McLeod pleaded a set-off of $472,414.53. 8 A notice of motion to strike out the first defence and enter judgment for the plaintiff was filed by Mr Munro on 22 July. This came before Rolfe DCJ on 5 August and was adjourned part-heard to 27 September. Mr McLeod filed a notice to motion on 25 August seeking leave to further amend his defence in terms of the draft annexed to the notice of motion. The notices of motion were heard on 27 September. 9 Mr McLeod's draft third defence pleaded non-performance by Mr Munro of alleged conditions precedent in cls 3, 14(iv) and 14(v) of the Agreement, which prevented the sum of $300,000 becoming due and owing to Mr Munro. It did not plead a contractual variation or estoppel and there was no defence of set-off. 10 The case had been case managed in the Court's Commercial List and on 13 February Mr McLeod was directed to file and serve "all evidence" on which he intended to rely by 7 May. He did not comply with this direction. A further direction for the filing of "all evidence" by Mr McLeod was given on 25 June, such evidence to be filed by 5 July. This direction was not complied with. On 5 August Rolfe DCJ directed Mr McLeod to serve by 16 August "all evidence relied on by the defendant in order to make out the defence" to be pleaded in any draft further amended defence. Affidavits by Mr McLeod were sworn on 7 and 16 August. The Judge found that these did not comply with the Court's direction. 11 The Judge dealt first with the motion for leave to amend the defence. The draft further amended defence relied on non-performance by Mr Munro of alleged conditions precedent. The Judge was not satisfied that the provisions relied upon were conditions precedent, but found that there was no evidence before the Court of any breach by Mr Munro of the clauses in question. This situation arose, at least in part, from the decision of counsel for Mr McLeod not to read the latter's affidavit of 4 August, or paras 1-19 of his affidavit of 16 August. He did attempt to read paras 20-21 but they were rejected because Mr McLeod, although given notice in good time to attend for cross-examination, did not do so and his absence was not explained. The Judge therefore refused leave to amend and dismissed Mr McLeod's motion. His decision to reject the two paragraphs was not seriously challenged. 12 The Judge then struck out the defence of 1 July under DCR Pt 9 r 17. He said he was doing this on the Court's own motion, but Mr Munro's amended motion sought the entry of judgment, and senior counsel appearing for him made an oral application for that defence to be struck out by the Court doing this of its own motion. 13 The Judge said that "in reality this was all about whether or not the defendant could establish to the satisfaction of the Court that there is at least some evidence to support his contention that there was a triable issue". He held that the defence of 1 July was an abuse of the process of the Court in the light of Mr McLeod's repeated failures to comply with directions of the Court and put on "any satisfactory or adequate evidence … to support his contention that there is some sort of breach of the Agreement by the plaintiff". 14 DCR Pt 9 r 17(1), so far as relevant, provides: (1) Where a pleading: (a) discloses no reasonable … defence …, (b) has a tendency to cause prejudice … or delay in the proceedings, or (c) is otherwise an abuse of the process of the Court, the Court may, on the application of a party or of its own motion, at any stage of the proceedings … order that … the pleading be struck out." 15 The defence of 16 January in substance admitted that, but for the contractual variation or estoppel relied on, the debt was due. Those defences were abandoned in the defence of 1 July which relied on non-performance of alleged conditions precedent in cls 3, 9 and 10 of the Agreement, and a set-off. The defence of set-off and reliance on non-performance of alleged conditions precedent in cls 9 and 10 were abandoned in the proposed third defence. It is evident that Mr McLeod and his advisers were having great difficulty in finding any defence. 16 In my judgment Mr McLeod's obligation under cl 6 to pay $300,000 to Mr Munro on or before 30 June 2003 was not subject to any conditions precedent in cls 3, 6, 9, 10, or 14. None of these were in terms or in substance a condition precedent to Mr McLeod's obligations in cl 6. The parties could have provided for a conveyancing type settlement under which payment by Mr McLeod was concurrent with and mutually dependent upon performance by Mr Munro and entities he controlled of some or all of their obligations under the Agreement. Compare Foran v Wight (1989) 168 CLR 385. This was not done. 17 Instead fixed sums were payable by Mr McLeod on or before fixed dates, and the sum sued for attracted interest from the Transfer Date if it was not paid by 1 March 2003. Where a contract for the sale of land provides that the purchase money or any part thereof is payable on a fixed date, not being the agreed date for completion, the vendor can sue for the price, or the instalment, if it is not paid on the due date: McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, 476 per Dixon J. This was not a contract for the sale of land but the same principles apply and with added strength. 18 In my judgment therefore those parts of the defence of 1 July which had not been abandoned in the proposed third defence did not disclose any defence to the action and the Judge was entitled to find that Pt 9 r 17(1)(a) and (b) were satisfied. This is not a case where the defence was "otherwise an abuse of the process of the Court" within para (c), but it is clear, both in substance and as a matter of construction, that the cases within paras (a) and (b) are also regarded as an abuse of the Court's process. 19 The Judge was therefore fully entitled to strike out the defence of 1 July under r 17(1), and under r 17(3) to grant leave to Mr Munro to have judgment entered on his behalf. 20 Mr Paterson argued that Mr McLeod's promise in cl 6 was not given to Mr Munro alone, but to him and his associated companies and trusts in accordance with the definition of Mr Munro (KM) in the Agreement. He also submitted, for similar reasons, that the promise of Mr McLeod was a joint promise made by him and his associated companies and trusts and the necessary parties are not before the Court on either side of the record. This point was not raised during the hearing on 27 September and it is too late to raise it in this Court. DCR Pt 7 r 7 provides: "(1) An action shall not be defeated by reason of the … non-joinder of any person as a party. (2) The Court may in any action determine the issues or questions in dispute so far as they affect the rights and interests of the parties." 21 If the non-joinder does not defeat an action, it certainly cannot defeat a judgment, and while the judgment stands the rights under cl 6ii are res judicata and no-one else can sue or be sued for the debt. 22 Senior counsel appearing for Mr Munro in the District Court relied on an alleged inconsistency between para 3 of the first defence and para 3 of the second and submitted that this involved a breach of DCR Pt 9 r 12(1). This provides: (1) A party shall not in any pleading make an allegation of fact, or raise any ground or claim, inconsistent with a previous pleading of his." 23 The reliance of Mr Munro's then counsel on r 12(1) was misconceived. The rule, as its heading indicates, is directed against departure in pleading. This normally occurs when a plaintiff's reply asserts facts which are inconsistent with his statement of claim. A departure of this kind was prohibited under the rules of Common Law pleading in use in this State prior to 1972 (Bullen & Leake, 3rd ed, pp 568, 733, 819). The rule against departure did not and does not inhibit amendments to a pleading which are inconsistent with a prior version of that pleading. In any event, as Mr Paterson pointed out, para 3 of the second defence was for all practical purposes in the same terms as para 3 of the first defence. However these errors do not affect the judgment and orders under challenge. 24 In my judgment therefore the proposed appeal would fail in substance and in these circumstances leave to appeal should be refused. I propose the following orders:

McLeod v Munro & Anor

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Judgment (26 paragraphs)

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