CWDS Practice - Practice and Procedure - action in contract

• deficiency in pleading building contract - long procedural history - orders made by Master striking out action, striking out statement of claim and refusing leave to amend statement of claim - appeal - no power to make order striking out action
• other orders not justified in the circumstances.

HRNG ADELAIDE, 20,23 July 1993 #DATE 30:11:1993 Counsel for appellant: Mr P A Mcnamara

Solicitors for appellant: David Black and Co Counsel for respondent: Mr R D Ross-Smith Solicitors for respondent:
Thomson Simmons and Co

JUDGE1 MULLIGHAN J This is an appeal from orders made by a Master refusing the application of the appellant for leave to file an amended statement of claim, that the statement of claim be struck out, that the action be struck out and that the appellant pay the respondent's costs. 2. In order to appreciate the issues raised on this appeal, it is necessary to say something about the history of the action. The respondent is the registered proprietor of land and improvements known as the Grand Hotel at Glenelg. The parties entered into a contract on 27th March 1990 pursuant to which the appellant agreed to erect for the respondent certain precast concrete panels for the construction of the Grand Hotel. Disputes between the parties arose in consequence of which the appellant's solicitor wrote a letter of demand to the construction manager of the respondent on 11th December 1990. Correspondence ensued and the dispute was not resolved. On 7th February 1991 a lien was registered on the various certificates of title with respect to the Grand Hotel. The appellant was obliged to commence legal proceedings to enforce the lien within 14 days pursuant to the Worker's Liens Act 1893 and it complied with that obligation by commencing this action on 19th February 1991. During that month the respondent lodged a strata plan over portion of the land to create 38 strata titled units which were then offered for sale. After negotiation, and by consent, the lien was modified so that it could be progressively discharged by the respondent making payments into Court in accordance with the terms of the agreement. The agreement is reflected in the order made by a Master on 27th March 1991. A consequence of the order of the Master striking out the action is that the appellant will lose the security provided by the lien and the monies already paid into Court. This consequence was not brought to the attention of the Master. 3. The respondent entered an appearance on 28th March 1991. On 24th May 1991 an application was made by the respondent to strike out the statement of claim, it being alleged that it did not comply with the Rules of Court as to pleadings and that it was embarrassing and prejudicial to the respondent. It was further alleged that the defects in the statement of claim were so extensive that a request for a more explicit statement of claim would not be appropriate. On 5th June 1991 a Master ordered the appellant to file an amended statement of claim within 14 days and the strike out application was adjourned to 4th July 1991. That order had not been complied with by that day and the Master set down the strike out application for hearing on 22nd July 1991. On 18th July 1991 the appellant delivered to the respondent an amended statement of claim in draft. On 22nd July 1991, after hearing argument, the Master made an order that the proposed amended statement of claim be filed within 7 days and the strike out application was adjourned to 12th August 1991 for mention. On 30th July 1991 the amended statement of claim was filed and served. On 12th August 1991 the Master ordered that the defence be filed within 10 days. On 15th August 1991 the respondent served upon the appellant a notice requesting a more explicit statement of claim. The Master made an order on 12th December 1991 adjourning the pre-trial proceedings to 12th March 1992 to enable the respective solicitors for the parties to confer. Particulars of many alleged defects in the amended statement of claim were given by the respondent's solicitors to the appellant's solicitors on 19th December 1991. On 20th February 1992 the appellant's solicitors delivered to the respondent's solicitors an undated further amended statement of claim, which it presumably wished to file, together with some 700 pages of documentation. On that day the matter again came on for hearing before the Master. The respondent submitted that the proposed amended statement of claim was also defective. The strike out application was adjourned to 12th March 1992 so that the parties could consider certain matters. On the next day the respondent's solicitors wrote to the appellant's solicitors giving particulars of the alleged defects in the proposed further amended statement of claim and advising of their intention to proceed with the strike out application. The appellant's solicitors responded by advising that they would oppose such an application. On 16th March 1992 the Master made an order that the appellant file and serve an affidavit exhibiting the proposed further amended statement of claim within 7 days and that within 7 days of receiving the affidavit, the respondent give notice of any objections. The strike out application was listed for hearing on 8th May 1992. The appellant filed the affidavit with the proposed further amended statement of claim on 24th May 1992. The application was heard on 8th May 1992 and the Master made the orders which are the subject of this appeal on 23rd September 1991. 4. In the amended statement of claim and in the proposed further amended statement of claim the appellant alleges breaches of contract. The heads of claim may be described in brief terms as follows:- Paragraph 19 - defective preliminary work. It is alleged that the panels prepared by the appellant did not fit into locations which had been prepared for them.

Paragraph 22 - delivery out of sequence. It is claimed that panels manufactured by another contractor were delivered out of sequence and therefore the appellant could not fit them into the contractual sequence. Paragraph 25 - insufficient craneage. It is alleged that because the respondent did not make a crane available to the appellant at particular times panels could not be lifted to the required places. Paragraphs 26-30 - wrongful deductions by the respondent. It is alleged that the respondent wrongfully withdrew the work, the subject of the contract, from the appellant at a particular

stage and gave it to another contractor. Paragraph 31 - loss of profits. 5. There are three main grounds of complaint about the orders of the Master. First, the orders, if permitted to stand, will cause the plaintiff irreparable prejudice by reason of the apprehended loss of the lien with the consequence that the appellant will become an unsecured creditor of the respondent. The appellant is concerned that the lien will cease by reason of the action having been struck out. Secondly, the Master exceeded the ambit of the application which was before him. The respondent sought an order that the amended statement of claim be struck out, not the action. Thirdly, some of the heads of claim had not been defectively pleaded and consequently it was inappropriate to strike out all of the statement of claim, let alone the action. 6. The learned Master did not discuss the power to make an order striking out the action or the consequence of such an order. There is no provision in the Supreme Court Rules 1987 which expressly empowers the Court to strike out an action. R.3.04(e) empowers the Court to strike out or dismiss any step in a proceeding which is vexatious, frivolous or an abuse of the process of the Court. It may be seen that such a power is confined in two ways. It is confined to steps in proceedings and in the context of steps which are vexatious, frivolous or an abuse of process. The power does not extend to striking out the proceedings. R.46.18 empowers the Court to strike out pleadings in the various circumstances there mentioned, but not to strike out an action with obligations under the Rules or disobeyed orders. Rule 57.06(1) provides for proceedings to be dismissed where a plaintiff defaults in compliance with an order and where a defendant is in such default to have the defence struck out and judgment entered accordingly. R.59.06 provides the same remedies where there has been failure to make discovery or produce a document according to any Rule or order. None of these Rules provide for an action to be struck out. The Rules do provide for an action or proceeding to be dismissed in various circumstances, including where a plaintiff is in default of pleading or has not complied. 7. The Court was not empowered under the former Rules of Court to strike out an action although there was the power to strike out any matter in any pleading: O.19, r.25. An action could be dismissed for want of prosecution in default of pleading: O.27, r.1. However, there was no power to strike out an action. The procedure in the Rules of the Supreme Court (UK) is similar: O.18, r.19. That rule draws the distinction between striking out a pleading and dismissing the action. 8. The former Local Court was empowered to order that an action be struck out. S.125 of the Local and District Criminal Courts Act 1926 (now repealed) provided that upon an action being struck out "no further proceedings shall be taken in the action unless a Judge or special magistrate reinstates it". The language of the section made it plain that the action was not dismissed as further proceedings in the action could be taken upon reinstatement. Striking out of an action simply meant that it was taken out of the list of cases from trial: Aiken v. Aiken [1941] VicLawRp 27; (1941) VLR 124, O.D. Transport Investments Pty. Ltd. v. Edson (1986) 131 LSJS 200 per Judge Bishop at p 212 and Edwards v. Patterson Full Court, unreported, 27th July 1987 at p 4. 9. Mr. Ross Smith contended that to "strike out" and to "dismiss" an action are, in effect, interchangeable terms and what the Master purported to do was to dismiss the action. He argued that the power to dismiss the action, in the present circumstances, is to be found in R.3.01 which provides:- "Subject to Rule 2 except where the Court otherwise orders no breach of or non compliance with a Rule which does not arise out of disobedience or contumacy in relation to a prior order of the Court shall cause any proceedings to abate or be dismissed out of the Court. In cases of disobedience or contumacy the Court shall not order that the proceedings abate or be dismissed unless there is no other way of securing obedience to or compliance with the orders of the Court. Nothing in this Rule

affects: (a) the inherent jurisdiction of the Court to dismiss proceedings which disclose no cause of action known to the law or cannot by amendment be made to disclose such a cause of action, or which are frivolous, vexatious or an abuse of the process of the Court; (b) the power of the Court to grant a stay of proceedings where the justice of the case so requires." 10. I think there is a difference between dismissing an action and striking out an action. The Rules provide for the former in limited circumstances but do not provide for the latter and there is no reason to suppose that two expressions mean the same thing. R.3.01 does not assist Mr. Ross Smith's argument. In effect the Rule provides that proceedings which disclose no cause of action may be dismissed as a last resort. A defaulting party is to be given every opportunity to make good the deficiency in the pleading so as to disclose a cause of action. So even if the Master did intend to dismiss the proceedings, he could only do so if the appellant was given the opportunity to make good any deficiency and, for reasons which I mention shortly, the appellant was not given the opportunity. 11. In my view the Master was not empowered to strike out the action and that order must be set aside. He was empowered to strike out the statement of claim for any of the reasons set out in r.46.18. I consider in a moment whether such an order was justified in the circumstances, but if it was, that Rule does empower the Court to take the next step of dismissing the action. In my view this order must be set aside. 12. I turn to the order striking out the statement of claim. The proposed amended statement of claim which was the subject of argument before the Master comprised 35 paragraphs supplemented by two lever arch folders of documents by way of particulars of paragraph 19 and, in part, of paragraph 22. The Master held that paragraphs 8(i) and (ii), 9, 18, 25 and 31 should be struck out. He also held that paragraphs 19 and 22 were deficient but he did not expressly say that they should be struck out. He rejected complaints about paragraphs 12, 13, 16, 17 and the formulation of loss and damage. So, it may be seen that the Master did not conclude that the pleading with respect to all of the heads of claim should be struck out. That, in itself, in my view, is sufficient reason not to strike out the whole pleading. There was no allegation or evidence of prejudice to the respondent in the conduct of the action thus far, despite the delays occasioned by the procedural history which I have related. 13. In my view the Master was in error in making the order that the statement of claim be struck out. He should have expressed his conclusions as to the defects in the pleading and given the appellant the opportunity to alter the proposed amended statement of claim so as to comply with those conclusions and to file and deliver a fresh statement of claim within a specified time. Had he done so he could have made orders for costs which, generally speaking, would have favoured the respondent. It is only in a rare case that a party should be prevented from amending a pleading before trial so as to cure defects and enable the true issues between the parties to be heard and determined. 14. I accept Mr. McNamara's argument that in essence the deficiencies found by the learned Master related to particulars. All necessary material facts were alleged: the contract, obligation, breach and damage. I reject the argument of Mr. Ross Smith that the history of the proceedings and the material before the Master discloses that the appellant had made it clear that it could not do any better in its pleading and could not provide any further particularity with the result that the respondent suffers incurable prejudice because it does not know, and will never know, what case it has to meet. It is argued that the appellant had disobeyed the orders of 5th June 1991 and 22nd June 1991 that it file an amended statement of claim, because what has been filed is inadequate, and therefore the strike out order is appropriate. I accept that there are deficiencies in the proposed amended statement of claim but it does disclose a cause of action. Despite the careful and detailed argument to the contrary, the deficiencies are in the realm of particulars. The order striking out the statement of claim should be set aside. 15. I do not think it is necessary to consider the detailed arguments of Mr. McNamara and Mr. Ross-Smith as to the alleged deficiencies in the statement of claim. I do not think there is much point at this stage in discussing each allegation in the pleading. In some instances some alteration is necessary and in others some further clarity and particularity is desirable. The appellant is now on notice of all of the allegations of the respondent as to deficiencies in the statement of claim. The pleader is aware of the conclusions reached by the Master. The appellant should have the opportunity, perhaps the last opportunity, to make good its pleading. If further particulars of some allegation cannot be given, the appellant should say so and why, in the statement of claim. When the new statement of claim is filed and delivered, the respondent should have regard to the detailed submissions made on this appeal when considering whether an even more explicit pleading should be requested. I think it is premature to consider all of the submissions of each party as to the sufficiency of the pleading, or otherwise, on this appeal because it became obvious during the course of argument that if the appellant is permitted to file a fresh statement of claim some further alteration will be made in order to remedy accepted deficiencies. 16. There is one further error in the reasoning of the Master. He concluded his reasons for decision by saying that he considered that the appellant had had ample opportunity to produce a statement of claim which complied with the Rules but had failed to do so. The history which I have set out suggests that the learned Master was correct in saying that the appellant had had much time in which to plead correctly and adequately but he gave the appellant no time after having set out his conclusions as to the deficiencies in the statement of claim to make them good. He published his reasons and made the orders on the same day. Such a course is inconsistent with R.3.01. Furthermore, there was no application before him to strike out the action. I think the appellant should have been given the opportunity to make the necessary amendments after the conclusion of the Master had become known to the parties. 17. I appreciate that it may be necessary for a Master to pass upon the sufficiency of the further amended statement of claim after it has been filed. That is a course which is preferable to discussion of each and every point taken by Mr. Ross Smith on this appeal in anticipation that a statement of claim may be filed in a particular form. No doubt the appellant will consider the conclusions of the Master, and the submissions of Mr. Ross Smith, when drawing the proposed further amended statement of claim. Such a detailed consideration is better given after that has occurred. 18. I allow the appeal and set aside the orders made by the Master. I shall hear the parties as to the orders which should now be made, but I have in mind that the appellant should have leave to further amend the statement of claim and should do so and file a further amended statement of claim with 21 days. I shall hear the parties as to costs.