A & M Investments Pty Ltd v Eastfire Pty Ltd [2002] QDC 218

DISTRICT COURT OF QUEENSLAND CITATION: A & M Investments Pty Ltd v Eastfire Pty Ltd [2002] QDC 218 PARTIES: A & M INVESTMENTS PTY LTD (appellant/defendant) V EASTFIRE PTY LTD (respondent/plaintiff) FILE NO/S: 2/02 DIVISION: District Court PROCEEDING: Appeal ORIGINATING COURT: Magistrates Court DELIVERED ON: 27 August 2002 DELIVERED AT: Maroochydore HEARING DATE: 21 June 2002 JUDGE: K S Dodds DCJ ORDER: Appeal allowed. Orders for judgment and for costs are set aside. CATCHWORDS: APPEAL – against Magistrate’s decision to refuse leave to withdraw admission in defence and to refuse leave to amend defence – whether Magistrate erred in exercising discretion Cropper v Smith (1884) 26 Ch D 700; Queensland v J & L Holdings Pty Ltd (1996-7) 189 CLR 146; Ridolfi v Rigato Farms Pty Ltd [2001] 2 Qd R 455. Uniform Civil Procedure Rules 1999, rr 149(2), 188, 190, 765, 785. COUNSEL: M Gynther for appellant G W Diehm for respondent SOLICITORS: Corrs Chambers Westgarth for appellant J J Riba & Company for respondent -- 1 of 9 -- 2 [1] This is an appeal by a defendant against a decision of a magistrate made on 1 November, 2001 giving judgment for a plaintiff pursuant to rule 190 of the Uniform Civil Procedure Rules (UCPR). This occurred after the magistrate refused leave sought by the defendant under rule 188 to withdraw an admission in its defence (an admission of paragraph 17 of the statement of claim) and further refused it leave to amend its defence. There was sworn evidence from the defendant’s solicitor that the admission was an error on his part due to time pressure to file the defence and a proposed amended defence was provided: Ridolfi v Rigato Farms Pty Ltd [2001] 2 Qd R 455. [2] The appeal is by way of rehearing: Rules 765 and 785 UCPR. [3] According to the plaintiff’s statement of claim the defendant owed the plaintiff $16 262.70 pursuant to an agreement for a lease. The $16 262.70 was made up of a ceiling allowance calculated by multiplying $25.00 by the lettable area of the leased premises and a shopfront allowance calculated by multiplying $900.00 by the lineal meterage of the shopfront of the leased premises. It alleged that on or about 30 July, 1999 the plaintiff received by post from the defendant a draft deed of agreement for a lease of the material premises containing the names of the defendant as lessor and the plaintiff as lessee. Clause 4.12 thereof provided for payment by the lessor to the lessee of the ceiling and shopfront allowance referred to above. Thereafter until 17 February, 2000 negotiations took place between the plaintiff and the defendant through their respective agents and solicitors. On or about 17 February, 2000 the defendant’s solicitors provided to the plaintiff’s solicitors lease documentation with a request the plaintiff sign and return the documents. On 2 March, 2000 the plaintiff signed the documents and on 7 March, 2000 paid a memorandum of fees of the defendant’s solicitors for preparation of the documentation and returned the executed documents to the defendant. Thereafter during the period 19 March, 2000 to 27 March, 2000 the plaintiff completed its fit- out of the leased premises and on or about 3 April, 2000 with the consent of the defendant took up occupation of the premises. In late April 2000 the defendant informed the plaintiff it would not pay the ceiling and shopfront allowance. On 25 May, 2000 the solicitors for the defendant advised the solicitors for the plaintiff that the defendant would be amending the agreement for lease prior to its execution by the defendant by deleting clause 4.12. This the defendant did in or about July 2000 and then lodged the agreement for stamping. The plaintiff alleged that as a result: • the provision of the lease documentation to its solicitor on 17 February, 2000 constituted an offer which it accepted by executing the documents and returning them to the defendant on 7 March, 2000; • the defendant by its silence thereafter until late April 2000 represented to the plaintiff that the lease agreement it had executed was to be the agreement between the plaintiff and the defendant; • the plaintiff in reliance upon that representation paid the memorandum of fees of the defendant’s solicitors, completed fit-out work, and entered into possession of the premises; • it was unconscionable for the defendant to resile from the terms of clause 4.12 of the agreement; -- 2 of 9 -- 3 • the defendant was estopped from asserting the contract between the plaintiff and the defendant did not include clause 4.12; • the defendant engaged in conduct which was misleading and deceptive or likely to mislead or deceive in that the defendant was not in fact prepared to execute a lease which included clause 4.12. [4] Clause 4.12 of the agreement for lease was in the following terms: “Ceiling and shop front installation allowance (a) Where the Lessee has: (i) complied with the terms of this Agreement; and (ii) duly installed in the Premises as part of the Lessee’s Works: (A) the ceiling (“Ceiling”); and/or (B) the shop front (“Shop Front”); the lessor must pay to the Lessee within 14 days of the Opening Date: (iii) a Ceiling Allowance being the sum that is derived by multiplying $25.00 by the Lettable Area of the Premises expressed in square metres; and/or (iv) a Shop Front Allowance being the sum that is derived by multiplying $900.00 by the lineal metreage of the Shop Front. (b) (i) Where in the opinion of the Lessor the area of the Ceiling is less than the Lettable Area of the Premises the Lessor may, at its option cause the Ceiling to be measured. (ii) A certificate produced by the Lessor under this clause shall be conclusive evidence except in the case of a manifest error. (iii) If the Lessor elects to cause the Ceiling to be measured the amount payable by the Lessor under clause 4.12(a) shall be that sum which is derived by multiplying the area expressed in square metres of the Ceiling stated in the certificate by the Lessor by $25.00. (c) The Ceiling and Shop Front form part of the Premises and shall become the property of the Lessor. [5] The agreement for lease which the plaintiff executed on 21 March, 2000 in addition to clause 4.12 contained a clause 4.12A as follows: “Contribution to Fit-Out 4.12A Where the lessee has: (a) complied with the terms of this agreement; (b) carried out the lessee’s works in accordance with the terms of this agreement; and -- 3 of 9 -- 4 (c) provided the lessor with invoices from the lessee’s contractors specifying the lessee’s costs of fitting-out the premises in such reasonable detail as the lessor requires the lessor agrees to pay the sum of $55 000.00 to the lessee within seven days of the last to occur of the above or the opening date.” [6] In its defence the defendant had included a paragraph which admitted a number of the paragraphs in the statement of claim including paragraph 17. It had also: • denied the plaintiff was entitled to the damages sought for breach of contract and/or pursuant to the Trade Practices Act 1974; • asserted in paragraph 10 thereof that the agreement for lease as signed by the plaintiff did not accurately reflect the agreement reached between the plaintiff and the defendant in referring to both clause 4.12 and clause 4.12A; • asserted that the agreement was that the defendant would contribute $55 000.00 towards the cost of the plaintiff’s fit-out not that the defendant would contribute an additional amount to the cost of the plaintiff’s shopfront and ceiling; • asserted the defendant had made a contribution of $55 000.00 to the plaintiff towards the cost of the plaintiff’s fit-out. [7] Paragraph 17 of the statement of claim read, “on or about 02/03/2000 the plaintiff accepted the offer of a lease by executing the lease documentation including the agreement for lease.” [8] There was no earlier reference in the statement of claim to the lease documentation sent by the defendant to the plaintiff on or about 17 February amounting to an offer of a lease on the terms therein. [9] It can be seen that paragraph 17 contains three assertions. The first is that the plaintiff executed the lease documentation including the agreement for lease. That was and is uncontentious. The second is that the provision of the documents in the circumstances constituted an offer by the defendant. The third is that by executing them the plaintiff accepted the offer. Both the second and third assertions were and are contentious. [10] Although it was not on the court file before the magistrate, paragraph 10 of the defence provoked a request by the plaintiff for further and better particulars dated 5 April, 2001. These were provided in a document dated 2 May, 2001. They disclosed the defendant’s contention that in negotiations between the parties prior to 17 February, 2000 it had been agreed that the defendant would subsidise the cost of fit-out by 50 percent based upon the approximate cost of fit-out determined from a quotation from shop fitters on or about 3 September, 1998. This cost was invoiced on or about 2 March, 2000 in an amount of $55 000.00 which included ceiling work. There was never any discussion between the parties of any additional shopfront and ceiling allowance. It was intended clause 4.12A was to replace clause 4.12. -- 4 of 9 -- 5 [11] The defendant had delivered an amended defence to the plaintiff on 31 October, 2001 which, if allowed, withdrew the admission of paragraph 17 of the statement of claim, denied paragraph 17 and asserted: • provision of the lease documentation on 17 February, 2000 did not constitute an offer; • that the plaintiff knew that the defendant would not be bound by the agreement for lease until its board approved it by execution; • that the plaintiff executed the agreement for lease knowing or suspecting that the retention of clause 4.12 was a mistake; • that the cost of fit out was determined in earlier negotiations between agents of the plaintiff and the defendant not in terms of an additional or separate contribution for cost of ceiling and shopfront installation but as reflected in clause 4.12A. It advised the plaintiff of the defendant’s intention to make an application at trial to withdraw the admission and file the amended defence. [12] The thrust of the amended defence could not have been new to the plaintiff. It had been aired in correspondence which had passed between solicitors for the parties the contents of which I will touch on later. The proposed amendments to the defence were not opposed by the plaintiff except to the extent withdrawal of the admission of paragraph 17 of the statement of claim was involved. Withdrawal of the admission was opposed. [13] In dealing with the application to withdraw the admission of paragraph 17, the magistrate found that the agreement for lease sent by the defendant’s solicitors to the plaintiff’s solicitors on 17 February, 2000 constituted an offer which the plaintiff accepted by executing the document and returning it to the defendant and that the plaintiff was allowed “possession of the premises”. In reaching that decision he appears to have been influenced by the last two paragraphs of a letter dated 17 February, 2000 from the defendant’s solicitors enclosing the agreement for lease (and other documents) which the plaintiff executed. [14] The paragraphs in the letter of 17 February, 2000 I refer to are the latter two of the three paragraphs from the letter set out below: “Please arrange for the documents to be completed, signed, and returned to us as soon as possible together with a cheque in payment of the estimated outlays of the bank guarantee for the amount specified in the documents (if any). Please note that any variation as to the terms of the documents are subject to final approval of the Board of our client proof of which will be evidenced by execution of the documents by our client. Access to the premises for fit-out purposes will not be allowed until we receive signed documents.” [15] After the magistrate refused leave to withdraw the admission, the defendant sought leave to amend its defence by adding a further pleading in the alternative to the -- 5 of 9 -- 6 effect that knowing or suspecting clause 4.12 was in the agreement for lease by mistake, it was unconscionable for the plaintiff to rely upon its purported execution of the agreement for lease to bind the defendant. Counsel for the defendant explained he had not included this amendment earlier because it had been considered that if the admission of paragraph 17 of the statement of claim was able to be withdrawn, the amended defence was all that was necessary for the trial of the defendant’s case. [16] This amendment was opposed by counsel for the plaintiff. [17] In dealing with the application to amend, the magistrate considered the plaintiff was disadvantaged not having prior notice of the proposed amendment and that to give leave to amend “would be to prolong the determination of the matter - - with the admission of late pleadings of which the plaintiff has had no prior warning and consequent lack of preparation in that regard”. [18] After the applications were refused, counsel for the plaintiff applied for judgment pursuant to rule 190 UCPR. The magistrate gave judgment for the plaintiff. [19] Correspondence between the parties, to which I referred earlier, was put before the magistrate during argument. It revealed that prior to 9 May, 2000 (by facsimile of 2 May, 2000) solicitors for the defendant were asserting that clause 4.12 of the agreement was in error and should have been deleted and that clause 4.12A was the only clause relating to the defendant’s liability for costs of fit-out which should have remained. See exhibit 6. In this letter the plaintiff’s solicitor asserted that the provision of the lease documentation to the plaintiff on 17 February, 2000 constituted an offer which was accepted by the plaintiff. [20] On 25 May, 2000 solicitors for the defendant responded to exhibit 6 advising that their instructions were that at no time during negotiations between the parties was there discussion about allowances for shopfront or ceiling. Rather, the defendant had agreed to pay $55 000.00 to the plaintiff as a contribution to complete its shop fit-out and a part of the invoice for $55 000.00 included ceiling and shopfront. It advised that the agreement would be amended by deleting clause 4.12 prior to execution by the defendant. See exhibit 5. The letter did not refer to the claim that the provision of the lease documentation amounted to an offer and there had been an acceptance of that offer by the plaintiff when it executed the agreement for lease. It is however implicit in the response that it was not accepted that claim resolved the matter. [21] On 26 September, 2000 the defendant’s solicitors wrote to the plaintiff’s solicitors advising they were acting for the defendant, that the defendant had been served with the statement of claim on 13 September, 2000 and that, “I am presently considering my client’s position and will revert to you shortly”. See exhibit 7. [22] On 9 October, 2000 the defendant’s solicitors again wrote to the plaintiff’s solicitors referring to exhibit 7 and enclosing a copy of the defendant’s notice of intention to defend and defence which included the admission of paragraph 17 of the statement of claim. See exhibit 8. [23] It is plain from the correspondence I have referred to that the defendant was consistently asserting that clause 4.12 should not have remained in the agreement -- 6 of 9 -- 7 but that clause 4.12A reflected the agreement between the parties about the defendant’s contribution to cost of fit-out. [24] Whilst the original defence admitted the allegations in paragraph 17 of the statement of claim (along with allegations in a further fifteen paragraphs of the statement of claim), in its other parts it asserted consistently with the earlier correspondence that the agreement between the parties was that the defendant’s contribution to the plaintiff’s fit-out costs was to be limited to $55 000.00. There is evidence of carelessness and/or haste in another part of the defence (see paragraph 10) for it pleads, inter alia, that the agreement for lease signed by the plaintiff, “does not accurately reflect the agreement reached between the plaintiff and the defendant in that: (a) clause 4.12 of the agreement for lease which is referred to in paragraph 13 of the statement of claim was intended to replace and not be addition to clause 4.12A of the agreement for lease”. [25] This was corrected in the further and better particulars I have referred to and in the proposed first amended defence. [26] It was submitted by the defendant that rule 188 UCPR applied only to an admission of fact, not what was submitted was involved in the admission of paragraph 17 of the statement of claim, an admission of a legal consequence. Thus the considerations set out in Ridolfi v Rigato Farms Pty Ltd did not inhibit exercise of the discretion to allow amendment involving withdrawal of the admission of the paragraph. It was submitted this Court on appeal should adopt the approach set out in House v R (1936) 55 CLR 499, further referred to in Queensland v J & L Holdings Pty Ltd (1996-1997) 189 CLR 146. [27] Because of the conclusion I have come to in any event, it is not necessary to pursue this submission. I note however that rule 149(2) UCPR contemplates a party pleading a conclusion of law so long as the party also pleads the material facts in support of the conclusion. [28] However, paragraph 17 of the statement of claim is categorised, whether as containing facts or facts and a conclusion of law, when regard is had to the pleading as a whole it is apparent it was prone to ambush an unwary responder. The application of rule 188 UCPR is not restricted by its terms or the terms of other rules only to admissions of fact in a pleading. Leave of the Court is required to withdraw an admission made in a pleading. I am not persuaded that the reasoning and considerations discussed in Ridolfi require it to be restricted only to applications to withdraw admissions of fact. True it may be that the law as understood at a particular point in time may alter due to, for instance, a binding decision of a superior court. That will be a relevant consideration for a court applying Ridolfi to an application. But it does not follow that Ridolfi does not apply. [29] The sworn evidence before the magistrate from the defendant’s solicitor was not inherently improbable. The inclusion of an admission of paragraph 17 of the statement of claim in the original defence was in all probability unintentional, in the sense that the drafter did not apply his mind to the inconsistency between admitting the rolled up allegations and his instructions which are reflected in other parts of the defence. -- 7 of 9 -- 8 [30] Whether or not to allow an amendment to pleadings or withdrawal of an admission involves the exercise of a discretion which must be exercised judicially. The exercise of such a discretion will not be lightly interfered with on appeal. The considerations involved received recent attention in the High Court in Queensland v J & L Holdings Pty Ltd. It was said they included, “demonstration of error in point of legal principle which is apparent on the face of the reasons or implicit in its result - - reaching a result which is plainly unreasonable or unjust and which demands appellant intervention - - special restraint will be exercised where the interlocutory challenged is one concerned with practice or procedure. But even such orders have a capacity to affect substantive rights. The appellate court will be slow to intervene. But if it is convinced that the primary judge’s discretion has miscarried and that has resulted in an injustice it will be its duty to do so”: Kirby J at p 173-4. Dawson, Gaudron and McHugh JJ referred with approval to the judgment of Bowen CJ in Cropper v Smith (1884) 26 Ch D 700 where His Lordship said, “now I think it is a well-established principle that the object of courts is to decide the rights of the parties and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights - - I know of no kind of error or mistake which if not fraudulent or intended to overreach a court not to correct if it can be done without injustice to the other party. Courts do not exist for the sake of discipline but for the sake of deciding matters in controversy”. In discussing case management their Honours said, “case management is not an end in itself. It is an important and useful aid for ensuring the prompt and efficient disposal of litigation. But it ought always to be borne in mind even in changing times the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim”: at page 154. [31] In refusing to allow withdrawal of the admission of paragraph 17 of the statement of claim, the magistrate evidently considered he could conclude from the material before him that the provision of the lease documentation by the defendant under cover of the letter of 17 February amounted to an offer and that execution of the agreement for lease by the plaintiff amounted to an acceptance of the offer resulting in a concluded agreement. Once he had concluded that there was obviously no point in allowing withdrawal of the admission. However, his conclusion paid insufficient account to other material before him about the prior negotiations between the parties, mistake, and the plaintiff’s knowledge or suspicion that the defendant had left clause 4.12 in the agreement for lease by mistake. [32] It would have been better if the defendant’s counsel had put all proposed amendments before the magistrate at the one time instead of holding that based upon Taylor v Johnson (1982-1983) 151 CLR 422 until after the magistrate had refused to allow the withdrawal of the admission. That would have assisted the magistrate to better appreciate the thrust of the defendant’s defences. [33] I cannot see any justifiable prejudice to the plaintiff in allowing the withdrawal of the admission, allowing the amendments, and allowing the issues between the parties to proceed to a hearing. If an adjournment was necessary because the amendments had truly taken the plaintiff by surprise so that it was not prepared to meet them, an order could have been made that the defendant pay the plaintiff’s costs thrown away by the adjournment. In truth the further amendment sought after refusal of the application to withdraw the admission pleaded no fact over and above what had already been exposed, rather, simply pleaded a further basis why the defendant said the plaintiff should not be permitted to rely upon its claim that a -- 8 of 9 -- 9 concluded agreement came into existence when it signed the agreement for lease. Moreover, the magistrate’s list of matters for the day of the hearing may have required adjournment of the trial in any event. [34] I find the magistrate’s discretion miscarried. The appeal is allowed. [35] The magistrate’s orders for judgment and for costs are set aside. -- 9 of 9 --