Practice and procedure - Application for leave to amend statement of claim - Turns on own facts

Blair v Curran [1939] HCA 23; (1939) 62 CLR 464

Bridgetown-Greenbushes Friends of the Forest Inc v Executive Director of Conservation and Land Management (1997) 18 WAR 126

Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410

Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337

Con-Stan Industries Pty Ltd v Norwich Insurance Ltd [1986] HCA 14; (1986) 160 CLR 226

Day v William Hill (Park Lane) Ltd [1949] 1 KB 632

De L v Director-General, NSW Department of Community Services [1997] HCA 14; (1997) 190 CLR 207

Fidelitas Shipping Co v V/O Exportchleb [1966] 1 QB 630

Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215

Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22; (2002) 188 ALR 353

Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446

Leppington Pastoral Co Pty Ltd v Commonwealth (1997) 76 FCR 318

Mackay v Dick (1881) 6 App Cas 251

Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 546

Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589

Re Martin; ex parte Amtron Australia Pty Ltd (1996) 62 FCR 438

Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289

Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596

Westpoint Corp Pty Ltd v Fieldmont Holdings Pty Ltd [2000] WASC 319

1 MASTER SANDERSON: This is the plaintiff's application for leave to amend in terms of a minute of proposed further amended substituted statement of claim filed 5 December 2002. (As at the date of the hearing the plaintiff sought leave to amend in terms of a minute of proposed substituted statement of claim dated 23 September 2002. In his outline of submissions counsel for the plaintiff accepted a number of points made on behalf of the defendants in their submissions. This required slight amendment of the minute. It did not prevent the application proceeding. Counsel undertook to file a fresh minute including further amendments made as a consequence of his concessions. The result was the filing of the minute of 5 December 2002. It is convenient to refer to that minute as being the subject of the application.)

2 The defendants objected to the terms of the minute. Their prime objection was that the minute proposed to plead the plaintiff's claim in precisely the same form as an earlier pleading which I struck out. The defendants said this was an abuse of process or, alternatively, that there was an issue estoppel. On behalf of the plaintiff it was said that the cause of action was now pleaded in a slightly different way and the pleading was, in all respects, proper.

3 The place to start is with the original statement of claim. That document was dated 14 August 2001. The pleading identified the parties and referred to certain land which it defined as "the Lot". It was pleaded that by contract for sale dated 20 May 1999 the plaintiff agreed to purchase the Lot from the then registered proprietor for $1,250,000. It is further pleaded that through the agency of a finance broker, the defendants lent to the plaintiff $400,000 to assist in the purchase of the Lot. It is then pleaded that as a consequence of discussions between the finance broker and the defendants, an agreement was reached between the plaintiff and the defendants. This agreement is referred to in the pleading as "the Loan Agreement". Paragraphs 11 and 12 of the statement of claim were in the following terms:

"11. At all material times by reason of the Loan Agreement there were common purposes between the parties in that:

11.1 the borrowing was to obtain finance for the purposes of subdivision into seven blocks for the purpose of resale of those blocks;

11.2 the mortgages would require to be varied and/or novated so that new titles could issue for each block to effect the subdivision.

12. By reason of the matters pleaded in paragraph 11 there were implied terms of the Loan Agreement in that:

12.1 the lenders would consent to variations to conditions imposed by statutory authorities in the course of approval for subdivision;

12.2 further and in the alternate the lenders would co-operate with the Plaintiff in consenting to such reasonable amendments or variations to the mortgage which were required to assist the Plaintiff to effect the subdivision;

12.3 further and in the alternate the lenders would act reasonably to assist the Plaintiff to facilitate the subdivision;

12.4 further and in the alternate the Defendants would act reasonably to co-operate with the other lenders in doing such acts or things to assist the other lenders in fulfilling their obligations to facilitate the subdivision;

12.5 further and in the alternate the Defendants would not do any act or thing refuse to act or do anything to frustrate or deny any common purpose or the benefit of the Loan Agreement to the Plaintiff and the other lenders.

Such acts are implied by law in order to give efficacy to the Loan Agreement and the common purposes between the parties pleaded in paragraph 11."

4 It is pleaded that the defendants duly advanced the $400,000 to the plaintiff and the loan was secured by registered mortgage. Application was the made to the Shire of Murray for subdivision approval. Approval was granted on certain terms and conditions. One of these terms and conditions was that an easement over the Lot (or the land when subdivided) would be granted to Western Power. When the plaintiff approached the defendants seeking their consent to the easement the defendants refused. As a consequence, subdivisional approval could not obtained and the plaintiff alleged it suffered loss and damage.

5 The defendants took objection to the statement of claim. They said that the pleaded Loan Agreement was inconsistent with the terms of the mortgage. In particular, reference was made to cl 3(4) of the mortgage which was in the following terms:

"Provided the Mortgagee acts in good faith the Mortgagee may exercise the Mortgagee's Powers at the absolute discretion of the Mortgagee and shall not be liable to the Covenantor for any purported exercise or non-exercise of the Mortgagee's Powers."

6 The defendants said that the Loan Agreement and its implied terms could not stand against the clear terms of the written mortgage agreement. The defendants rely upon the decision of the High Court in Hoyt's Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133.

7 I accepted the defendants' argument. In a judgment delivered extempore on 22 November 2001, I said:

"The difficulty with the pleading of the Loan Agreement, in my view, is that the terms sought to be implied run directly counter to the terms of the mortgage which was entered into between the parties. In particular, cl 3(4) of the mortgage gives the mortgagee the right to exercise such powers as it has in its absolute discretion, provided that those powers are exercised in good faith.

In my view, what is pleaded in par 12 and 13 and what is referred to as a Loan Agreement is properly construed as a collateral contract, the terms of which are inconsistent with the express agreement to be found in the mortgage document. Once that conclusion is reached and on the authority of Hoyt's Pty Ltd v Spencer, the pleading cannot stand and, in my view, the statement of claim in its present form ought be struck out."

8 There is no dispute that the minute of proposed further amended substituted statement of claim seeks to plead a collateral agreement. What was "the Loan Agreement" in the statement of claim is now referred to as "the contract". The pleading of the contract is, with respect, more elegant than was the pleading of the Loan Agreement, but the same elements appear in both. Paragraph 11 of the minute is in the following terms:

"It was a term of the contract implied by law to give the contract business efficacy that the defendants would do all things reasonably necessary to enable the plaintiff to perform its obligation of achieving subdivision of the land into 7 lots and/or for the plaintiff and the defendants to have the full benefit of the contract including subdivisional approval of the land."

9 By par 21 it is pleaded that the refusal by the defendants to consent to the easement was a breach of the contract. That is the same plea that was made in the original statement of claim. I cannot see any real difference between the matters raised in the two pleadings.

10 Once that point is reached it is clear that the amendment cannot be permitted. I need go no further than refer to the decision of the Full Court in Nationwide News Pty Ltd v Wiese (1990) 4 WAR 263 per Wallace J at 266 - 267. If the plaintiff took the view that my decision to strike out the statement of claim was wrong, it was open to it to appeal. It has not done so. It now cannot plead in exactly the same way matters which were earlier struck out. For that reason I would not give leave to amend in terms of the minute.

11 But even were I to reconsider my earlier decision, I would nonetheless have reached the same conclusion. There can be no doubt that the defendants could have, if they had wished to do so, consented to the easement being registered over the Lot. They had the power to do so under the mortgage. Put another way, the power to consent to the registration of the easement was, properly viewed, one of the mortgagee's powers. It was a power which arose pursuant to the terms of the mortgage. Its exercise, or non-exercise, is then covered by the provisions of cl 3(4) of the mortgage. The defendants can only be liable to the plaintiff if the power or the refusal to exercise the power was not done in good faith.

12 In par 21(b) of the minute the plaintiff appears to plead that the defendants did not act in good faith. However, that plea is not made in the context of cl 3(4) of the mortgage. When I struck out the original statement of claim I allowed the plaintiff the chance to replead because I was satisfied that it was open to the plaintiff to run its case on the basis that there was a lack of good faith on the part of the defendants. That is still the position. It may even be that the particulars provided to par 21(b) could properly be regarded as particulars of an allegation that the defendants did not act in good faith. But at present the pleading is not structured in such a way as to recognise cl 3(4) of the mortgage and found a cause of action on breach of that term. If that is done, then there can, I think, be no objection in principle to the plaintiff's cause of action. Of course, the defendants may still take objection to the form of the pleading; but that is a different question to the matters of substance raised by the defendants in this application.

13 For these reasons I would refuse the plaintiff's leave to amend its claim in terms of the minute of proposed further amended substituted statement of claim dated 5 December 2002. The plaintiff should have leave to bring in a fresh minute. I will hear the parties as to the precise form of orders and as to costs.