Trade Practices Act 1974 s.52, s.82

Bullen and Leake and Jacob's Precedents of Pleadings 12th Edition (1975) at p 89-90

Meyers v Casey [1913] HCA 50; (1913) 17 CLR 90

Moody v Cox and Hatt (1917) 2 Ch 71

Solicitors for the Applicant: Freehill, Hollingdale and Page

Sub-paragraphs 14(b) to 14(e) inclusive of the defence be struck out.

The respondents to pay the applicant's costs of the motion.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Certain parts of the defence filed in these proceedings were struck out by order made on 25 July 1990. A re-amended defence was filed on 8 August and a motion to strike out the greater part of para.14 thereof on 17 August. The motion raises a question as to the scope of the defence of tender.

2. The action arises out of the proposed development of a shopping, office and parking complex on Stirling Highway in Claremont. The principal protagonists behind the corporate parties are Perth businessmen Lawrence Wilson and Charles Clifford. Wilson's family trust company, Holk Nominees Pty Ltd ("Holk"), claims that by a deed dated 8 December 1987 it agreed with Clifford's company, Pita Holdings Pty Ltd ("Pita"), to undertake in partnership the purchase of land at Claremont and the construction, development and operation on that land of a complex comprising shops, showroom, offices and carpark. Holk says that under the deed it lent the partnership money to buy the land which was registered in its name. It pleads a fiduciary duty owed by Pita, which Pita denies.

3. On 3 May 1989 Holk commenced proceedings in the Supreme Court of Western Australia against Pita seeking an order that the partnership be dissolved. According to Holk the parties negotiated an agreement on 31 August 1989 compromising the Supreme Court action. Under the terms of the compromise it was said that Pita had agreed to purchase the land for $2,600,000. However according to the statement of claim, a "second agreement" was made on 14 December 1989 in lieu of that made in August. Holk thereby agreed to sell the land to Pita for $2,350,000 and to pay the costs of relocation of a Telecom junction box up to $100,000. Settlement under this agreement was effected on 22 December 1989. On that day Pita onsold the land to a company called Galton Pty Ltd ("Galton") for $3,040,000. Pita's alleged failure to inform Holk that it proposed to onsell for an amount exceeding the $2,350,000 paid to Holk is said to have constituted a breach of its fiduciary duty. Holk also pleads that it was induced to enter into the second agreement by various false, misleading or deceptive representations on the part of Pita as to the value of the land, the purpose of the acquisition, Pita's intention in relation to on-selling and its awareness of a prospective purchaser. These representations are said to have constituted contraventions of s.52 of the Trade Practices Act 1974 to which Clifford was allegedly accessory. Remedies claimed include an account of profits, equitable damages, and damages under s.82 of the Trade Practices Act.

4. Pita pleads in its defence that under the original agreement with Holk in December 1987 it was entitled, if the development proceeded, to an 8% interest and an option to acquire "an additional interest of 2% in the development at a price to be agreed upon the development declaring a profit". As to the December 1989 agreement, it is common ground that Pita agreed to pay Holk $2,350,000 for its interest in the development. This was on the basis, it is said, that Pita would be free to continue the development by itself or with some third party or to sell it to a third party. Pita says that on 22 December 1989 it paid Holk $2,350,000 and was provided with an executed transfer of the land. It further says that it had entered into a written agreement to on-sell the land to Galton Holdings Pty Ltd for $3,040,000 on terms under which Galton would:

1. Pay Pita a deposit of $20,000.

2. Pay Holk on 22 December 1989 the sum of

$2,325,000.

3. Pay Pita on 22 December 1989 the sum of

$180,400.

4. Be indebted to Pita in the sum of $514,600.

5. Grant to Pita a second mortgage over the land

to secure the indebtedness.

6. Have an option to require Pita or an associate

of Pita to purchase four shops in the

development upon its completion.

A representative of Holk is said to have been present on 22 December 1989 during the execution and settlement of the Galton agreement and was aware of its terms.

5. A new para.13A inserted in the re-amended defence reads as follows:

"On 21 November, 1988 Polain for and on

behalf of Holk valued Pita's interest in

the development to be worth $450,000 ("the

Polain Valuation")."

Paragraph 14 in the re-amended defence then asserts:

"14. In respect of the relief claimed by Holk:

(a) the Respondents deny that Pita is obliged to account in the

manner claimed or at all;

(b) further and in the alternative, the Respondents say that:-

(i) in or about January 1990, Clifford for and on behalf of Pita

stated to Lynn and Trancone for and on behalf of Holk that the sum

obtained by Pita pursuant to the Galton Agreement, with the

expenses referred to in 10(e)(ii) hereof taken into account, was

the same as the Polain Valuation,

(ii) in or about January, 1990 Clifford for and on behalf of Pita

stated to Lynn and Trancone for and on behalf of Holk that Pita

would assign to Holk all of its interest under the Galton

Agreement for the sum of $450,000 being an amount the same as the

Polain Valuation,

(iii) say that in or about January, 1990 Lynn and Trancone for and

on behalf of Holk orally rejected the offer referred to in

14(c)(ii) hereof,

and that by virtue of these matters Pita has tendered to Holk the

profit obtained by Pita and that in these premises Holk is not

entitled to maintain these actions against the Respondents;

(c) further and in the alternative, the Respondents say that in the

premises and by virtue of the matters referred to in paragraph

14(b)(i) and (ii) hereof, the Respondents have fully accounted to

Holk;

(d) further and in the alternative, the Respondents say that if

(which is denied) either or both of them are obliged to account to

Holk and pay to Holk profits as claimed then as a condition to the

granting of any such order Holk should be required to pay to Pita

the sum of $450,000.00 being the agreed value between the parties

of the interest of Pita in the development;

(e) further, the Respondents say that in or about December, 1989 and

in relation to negotiations giving rise to the New Settlement

Arrangements Lynn and Trancone for and on behalf of Holk requested

Clifford for and on behalf of Pita that no moneys were to be paid

to Holk prior to the granting of an order of the Family Court of

Western Australia dissolving the marriage of Wilson and his then

wife so that Wilson's wife would not claim or be entitled to claim

any of the New Price under or pursuant to a property settlement

consequent upon the dissolution of her marriage with Wilson, and

that by virtue of his matter Holk is not entitled to the relief

claimed or any relief,

otherwise denies that Holk is entitled to the relief claimed or any

relief."

Sub-paragraphs (b) to (e) of para.14 are the subject of the applicant's strike out motion.

6. Sub-paragraph (b) is said to raise a defence of tender. Counsel for the respondents argues that the availability of the defence of tender has been traditionally limited to liquidated money claims because the Rules of Court in England and the Supreme Courts of the various States only allowed such a defence where there has been a payment in of the amount tendered. There was no reason in principle it was submitted, why the defence should be so limited and the Rules of the Federal Court allowed the requirement for a payment into Court to be dispensed with in the discretion of the Court.

7. In Bullen and Leake and Jacob's Precedents of Pleadings 12th Edition (1975) at p 89-90 it is said:

"If the defendant intends to rely on a defence of tender before

action, he must specifically allege in the defence that he made such

tender before action, and he must also plead in his defence that he

has paid into court the amount of such tender, and he must, in fact,

pay such amount into court and give notice of such payment in to the

plaintiff, for his tender will not be available as a defence unless

and until such payment into court has been made... The defence of

tender before action brought is a good defence only to an action to

recover a debt or liquidated claim, and it cannot be pleaded as a

defence to a claim for unliquidated damages."

The relevant provisions of the Federal Court Rules appear at O.11 r.11 and O.23 r.5. Order 11 r.11 provides:

"Where in any proceeding a defence of tender before the commencement

of the proceeding is pleaded, the respondent shall bring into Court

in accordance with Order 23 the amount alleged to have been

tendered, and the tender shall, unless the Court has dispensed with

compliance with this rule, not be available as a defence unless and

until the amount has been brought into Court."

"Where a respondent pleads or otherwise raises a defence of tender

before action the sum of money alleged to have been tendered shall

unless the Court otherwise orders, be paid into Court."

There is nothing in these rules to indicate anything other than an assumption that the defence of tender relates to the tender of a money sum. The dispensing power in each case does not undercut that assumption. In any event the plea of tender in this case is accompanied by a denial that the applicant is entitled to any payment at all. In the circumstances the plea of tender is bad and must be struck out.

8. As to sub-paragraph 14(c) I do not consider that the offer pleaded in sub-para.14(b)(i) and (ii) can constitute an account. While a plea of a settled account is a good defence to a claim for an account, the offer pleaded in this case does not constitute an accounting.

9. As to sub-para.14(d), no agreement is pleaded to support the contention that there was an agreed value. That sub-paragraph derives no support from the balance of the pleading and cannot stand.

10. I struck out sub-para.14(e) in the previous defence as patently irrelevant. Its new context does not alter that characterisation. Counsel for Pita submitted that it is pleaded as a discretionary ground for refusing equitable relief on the application of the principle that a party seeking such relief must come with clean hands. But the alleged request on the part of Holk that Pita defer payment of the purchase price for the land so as to defeat any claim that Wilson's wife might have to any part of the price under a property settlement consequent upon the dissolution of their marriage, is not said to have resulted in any agreement or to have any bearing upon the performance of the agreement that was reached. Nor does it have, on the pleadings, any bearing on the impugned conduct of Pita. In Meyers v Casey [1913] HCA 50; (1913) 17 CLR 90 at 123, Isaacs J. (Powers and Rich JJ. agreeing) said that the maxim has not an unrestricted application and referred in particular to the dictum of Eyre L.C.B. in Dering v Earl of Winchelsea 1 Cox 318 at 319:

"It is not laying down any principle to say

that his ill conduct disables him from

having any relief in this Court. If this

can be founded on any principle, it must

be, that a man must come into a court of

equity with clean hands; but when this is

said, it does not mean a general

depravity; it must have an immediate and

necessary relation to the equity sued for;

it must be a depravity in a legal as well

as in a moral sense."

Isaacs J. saw as coming within the maxim, cases when the right relied upon, and which the Court of Equity was asked to protect or assist, was itself to some extent brought into existence or induced by some illegal or unconscionable conduct of the plaintiff so that the protection for what he claimed would involve protection for his own wrong:

"No Court of Equity will aid a man to

derive advantage from his own wrong, and

this is really the meaning of the maxim."

(p 124)

In Moody v Cox and Hatt (1917) 2 Ch 71 (C.A.), a purchaser of property sued the vendor who was also his solicitor. The vendor had sold to him as trustee of a deceased estate and had allegedly failed to disclose material facts going to the value of the property. The purchaser had, in the course of negotiations, paid a bribe to the solicitor's clerk, Cox, who was handling the matter. It was argued that he was barred from the equitable relief of rescission because of his conduct. Lord Cozens-Hardy M.R. dismissed the contention shortly at 82 noting that the relief sought in no way depended upon the bribe. Warrington L.J. said at p 85-86:

"To use not the exact words, but the

substance of what was said in Dering v

Earl of Winchelsea, in order to prevent a

man coming for relief in connection with a

transaction so tainted it must be shown

that the taint has a necessary and

essential relation to the contract which

is sued upon and it is not enough to say

in general that the man is not coming with

clean hands when the relief he seeks is

not based on the contract which was

obtained by fraud, but is to have the

contract annulled on a ground which exists

quite independently of the fact that a

bribe has been given and received."

"....I think it is quite clear that the

passage in Dering v Earl of Winchelsea

which has been referred to shows that

equity will not apply the principle about

clean hands unless the depravity, the dirt

in question on the hand, has an immediate

and necessary relation to the equity sued

for. In this case the bribe has no

immediate relation to rectification, if

rectification were asked, or to rescission

in connection with a matter not in any way

connected with the bribe."

The conduct alleged in para.14(e) of the defence in the present case does not bear the immediate and necessary relation to the relief claimed that would attract the application of the clean hands maxim. Whatever the maxim does mean, it does not require that the plaintiff who comes to equity must do so with a character reference. In the circumstances the motion will succeed and sub-paras. 14(b) to (e) of the defence will be struck out.