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- Unreported Judgment
DISTRICT COURT OF QUEENSLAND
Clancy v Carlson  QDC 164
JOHN EDWARD CLANCY
TESSA JANE SEDDON CARLSON
District Court, Southport
17 July 2020
26 June 2020
Kent QC, DCJ
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLE CAUSE OF ACTION OF DEFENCE – where the applicant agreed to sell real property to the respondent – where the respondent paid the deposit but failed to pay the balance of the purchase price – where the applicant terminated the contract and sued the respondent for damages – where the respondent seeks, by way of counterclaim, return of the deposit – where the respondent argues that the contract had been mutually abandoned by the parties – where the applicant contends that the pleaded defence is bad in law and should be struck out – whether the court should exercise its discretion to strike out the pleaded defence and counterclaim – whether there should be leave to re-plead.
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCNES TO ACTION FOR BREACH – DISCHARGE BY AGREEMENT – where the applicant agreed to sell real property to the respondent – where the respondent paid the deposit but failed to pay the balance of the purchase price – where the applicant terminated the contract and sued the respondent for damages – where the respondent argued that the contract had been mutually abandoned by the parties – whether the parties’ conduct constituted a mutual abandonment of the contract in the circumstances.
Morgan Clarke for the Applicant
Michael Bland for the Respondent
CJM Lawyers for the Applicant
QBM Lawyers for the Respondent
Nature of application
- The plaintiff is applying for a number of orders: that a number of paragraphs of the amended defence of the defendant be struck out without leave to re-plead; a number of other paragraphs be struck out with leave to re-plead; the amended counterclaim be struck-out without leave to re-plead; and consequential orders such as costs.
- The facts are to a degree uncontentious (although in some ways obscure, as set out below). In the context of a contract for the sale and purchase of real estate which was allegedly breached, the amended defence pleads mutual abandonment of the contract, which the plaintiff argues is without merit and should be struck out. Thus the central issue is whether the pleading should stand, and if not, should there be leave to re-plead. The matter is to be determined on the pleadings; there is no filed affidavit material relevant to this application.
The facts as pleaded
- The parties entered into a contract on 25 October 2018 whereby the plaintiff agreed to sell to the defendant real property described as residential lots in a community titles scheme, namely a unit in a complex on the Gold Coast Highway at Miami. The purchase price was $1,105,000 and a deposit of $75,000 was paid. The settlement date was 28 June 2019. The defendant paid the deposit, however, she failed to pay the balance of the purchase price. This is pleaded to be a breach of an essential term of the contract and entitled the plaintiff to affirm or terminate the contract. The plaintiff’s case as pleaded is that he terminated the contract by notice in writing on or about 18 November 2019.
- The plaintiff accordingly claims damage and loss as a result, including the difference between the purchase price and the relevant market value; legal fees associated with the contract and agent’s commission. He reserves his right to claim for contractual damages constituted by a shortfall on resale should that occur.
- The defendant went into possession of the property prior to the proposed settlement, from 29 March 2019, in respect of which occupation she was to pay a $900 per week licence fee to the plaintiff. It seems common ground that the defendant moved out of the property in early July 2019 and thereupon ceased paying the licence fee. Thus the plaintiff also claims the licence fee on a weekly basis up until termination of the contract, which was 18 November 2019, on the plaintiff’s case. Other damages are claimed for restitution of the property after the defendant vacated.
- The amended defence and counterclaim pleads firstly that the plaintiff purported to tender settlement of the contract and hold the defendant in breach thereof on and from 28 June 2019 (this was the settlement date of the contract). It is then pleaded that on 28 August 2019 the plaintiff gave notice to the defendant of his termination of the contract (as set out above, this is not the date relied on by the plaintiff). Notably, in paragraph 2 of the amended reply and answer to the counterclaim, this allegation is not responded to; the plaintiff instead pleads that as paragraph 26(a) of the amended defence admits the allegations in paragraph 6 of the statement of claim, and the matters in paragraph 22 are not relied on in support of the allegations in paragraph 24 (particulars of the mutual abandonment), the allegations are confusing or embarrassing and thus he does not plead to them. This immediately creates something of a mystery; is it correct or not that there was a notice of termination on the 28th August? If so, what is its relationship to the admitted purported termination by notice in writing of the 18th November (paragraph 8 of the statement of claim, paragraph 26(b) of the amended defence and counterclaim)? Did the plaintiff terminate twice? Further, what if anything was happening in the meantime? Neither side has filed any evidence, for example correspondence, addressing this point or what was happening in the interim.
- The amended defence then pleads that subsequent to 28 August 2019 the parties by conduct each accepted that the contract was at an end and thereby mutually abrogated the contract.
- The particulars of the mutual abandonment are pleaded in subparagraphs to paragraph 24 of the amended defence. They include the plaintiff relisting the property for sale (the pleading is silent as to when, and again there is no evidence about it); the defendant vacating the property on about 5 July 2019; the plaintiff demanding the release of the deposit in September 2019 and that the defendant pay damages resulting from the termination of the contract; the defendant applying for and obtaining a refund of stamp duty; and, perhaps importantly, the defendant authorising the payment of the deposit to the plaintiff. Again, the reply does not join issue with any of these matters, preferring to argue that they cannot and should not be responded to. The plaintiff is entitled to take that stance and make this application when his position is that the pleaded defence is not viable; but the consequence is that again the true state of the factual dispute is somewhat obscure.
- The defendant goes on to admit that she did not pay the balance of the purchase price. In relation to the termination on 18 November 2019 she pleads that the contract was already at an end at that stage by reason of the mutual abandonment previously pleaded.
- As to her authorisation of the release of the deposit to the plaintiff, it is pleaded that the defendant did this upon threats of legal proceedings from the plaintiff which were wrongly made thus the defendant pleads that there was no breach of the contract by her, rather the contract was mutually abandoned in the circumstances outlined above. The counterclaim is, in the circumstances, for return of the deposit.
- It is primarily the pleading of a defence of mutual abandonment which is attacked by the plaintiff in this application.
The applicant’s submissions
- As outlined above, the plaintiff submits that the relevant passage in the defence discloses no reasonable defence, has a tendency to prejudice or delay the fair trial of the proceeding, is unnecessary and/or frivolous (UCPR 171). Further, it is said that the plaintiff cannot properly plead to the amended defence and counterclaim.
- On the topic of mutual abandonment the plaintiff argues firstly that the defendant admits having breached the contract on 28 June 2019 by failing to pay the balance of the purchase price at settlement. Thus he submits that the pleaded conduct relied on, which was giving the notice of termination of 28 August 2019, relisting the property for sale and demanding the release of the deposit and payment of damages, is simply consistent with a termination of the contract for the defendant’s breach and, so the argument proceeds, inconsistent with a mutual abandonment (although the plaintiff did not terminate until November). It is further argued that the two concepts are mutually exclusive. Further, the applicant argues that it is important that there was no significant delay by the plaintiff in taking these actions.
- The plaintiff submits that none of his conduct could support a finding of abandonment, and thus the pleading is bad in law. The applicant refers to Caffrey v AAI Limited. Justice Applegarth there said of the strike out power (at p 3);
“The principles governing an application to strike out on the ground that a pleaded matter is bad in law have been well established. The relevant principles were conveniently summarised by Justice Bond in Lee v Abedian  QSC 92. These principles derive from seminal cases such as General Steel Industries v Commissioner for Railways (1964) 112 CLR 125, and Dey v Victorian Railway Commissioners (1949) 78 CLR 62 at 91. As was said by Justice Dixon in Dey:
The power cannot be exercised once it appears that there is a real question to be determined, whether of fact or law, and that the rights of the parties depend upon it.
Various expressions have been used in this context. Sometimes it has been said that the matter must be so obviously untenable that it cannot possibly succeed or not admit of argument. Often these expressions are used in the context of applications to strike out claims, but the same principles apply in relation to applications to strike out defences….
(At p 4) The discretion to strike out should not be lightly exercised. It is a power which can be exercised in a matter in which prolonged argument is necessary in order to expose the lack of a claim or the lack of a defence. However, it is a discretionary matter. As was said by Lord Templeman in Williams and Humbert Ltd v W & H Trade Marks  1 AC 368 at 435 to 436, following earlier authority:
if an application to strike out involves a prolonged and serious argument, the judge should, as a general rule, decline to proceed with the argument unless he not only harbours doubts about the soundness of a pleading but, in addition, is satisfied that striking out will obviate the necessity for a trial, or will substantially reduce the burden of preparing for a trial, or the burden of the trial itself.”
- Thus the plaintiff argues he ought not to be obliged to plead to the amended defence and proceed to trial on the present state of the pleadings. He submits that paragraph 24, the paragraphs that rely on it and the counterclaim ought be struck out so that the matter can proceed to a just and expeditious resolution of the real issues and without undue delay and expense, in reference to Rule 5 of the UCPR; this would reduce the burden of preparing for, or conducting, the trial and is a proper case for the considered exercise of the discretion.
The defendant’s submissions
- Firstly, the defendant submits that, as noted above, the terms “mutual abandonment” and “mutual abrogation” are interchangeable, in reference to DTR Nominees Pty Ltd v Mona Homes Pty Ltd. As I have noted above, this need not be the subject of further examination, as the matter has proceeded.
- The defendant argues that the particulars relied upon do exemplify conduct which tends to show that the parties accepted that the contract was at an end which, so it is submitted, is sufficient. The defendant does not contend that the abandonment occurred on a specific date, rather it is said to have occurred by conduct engaged in by those parties over an extended period of time.
- There are various submissions made by the parties as to the other contentious paragraphs of the defence. However, those matters are all in a different category to the idea of mutual abandonment, in that the plaintiff does not resist leave to re-plead, if necessary, and they are far less central to the merits of the action. Of course, as the parties recognise, if the central plank of the defence of mutual abandonment is struck out without leave to re-plead, it is tantamount to, in substance, a summary judgment in the plaintiff’s favour, because the defendant would have no defence remaining as to the central issue in the case.
- (a)Plaintiff’s Arguments
- The central concept in resolution of this matter is the nature of the defence of mutual abandonment in a contractual case. The plaintiff argues, in essence, that the concept is reserved for a situation where the parties essentially ignore the contract, for an extended period of time, often many years, such that they can be regarded as having each mutually abandoned it; in effect the contract is terminated by mutual agreement. He refers in particular to Fitzgerald & Anor v Masters. The High Court there considered a case where a contract had been entered into for the purchase of an interest in a farm in 1927, from which point the farm was to be worked in effect as a partnership but the actual transfer of the interest in the land was not to take place until the plaintiff had paid in full. The matter proceeded in that way for some time but in 1932 the plaintiff left the farm. Between then and 1948 the plaintiff had no apparent connection with the working of the farm, but then began corresponding with the other party and that continued until the latter’s death in 1951. The proceedings by the plaintiff were not commenced until 1953, and constituted a suit for specific performance against the defendant’s executors. The High Court held that although the partnership seemed to have been dissolved, the contract had not been abandoned and thus the discretionary remedy of specific performance should be granted. This was on the basis that the plaintiff had an equitable interest not destructible by mere inaction not amounting to release or abandonment and that there were no circumstances apart from delay why the court should refuse the remedy. The delay (though obviously lengthy) did not prejudice the parties.
- The applicant referred to a passage at page 432 of the judgment of Dixon CJ and Fullagar J:
“Is abandonment, then, to be inferred from the long silence and inactivity that followed? In considering this question, we think that the period to be regarded is a period of about sixteen years – from 1932 to 1948. For, although the respondent’s solicitors, when they wrote to the deceased in 1948, made no reference to the contract of sale, we agree with McLelland J that their letter should be regarded as an intimation that the respondent intended to assert his rights, whatever they might be.
There can be no doubt that, where what has been called an ‘inordinate’ length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them, it may be inferred that the contract has been abandoned. A good example is to be found in Pearl Mill Co Ltd v Ivy Tannery Co Ltd. See also Mathews v Mathews and G W Fisher Ltd v Eastwoods Ltd per Branson J. What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that (in the words of Rowlatt J) ‘the matter is off altogether’.
It is impossible, in our opinion, to infer a discharge of the contract in the present case …” (citations omitted)
- Thus the plaintiff argues that where the doctrine of mutual abandonment could not be founded in the set of facts in Fitzgerald v Masters where the apparent dormancy of the parties’ pursuit of the contract was for some 16 years, the facts as pleaded in the present case – being much factually weaker than Fitzgerald - simply do not raise any reasonable ground of defence and thus should be struck out.
(b) Defendant’s arguments
- The defendant submitted that sufficient particulars of the allegations are provided in paragraph 24 of the amended defence such as to give rise to a proper ground of mutual abandonment, i.e. an inference is available of discharge by mutual agreement. The contract in the present case was intended to be of shorter duration than Fitzgerald (it seems about 8 months), so perhaps the reasoning is less applicable; less delay, proportionally, could give rise to the doctrine, particularly with the unexplained delay between the first (pleaded) termination in August and the later one (relied on by the plaintiff) in November. It is noteworthy that the plaintiff pleads that the deposit was forfeited but does not say when; the defendant pleads, unanswered, that it was in response to a letter dated 24 September. There seem to be a number of events, and possibly actions – or inaction – by the parties which are not catalogued in the present pleadings or revealed by any evidence.
Conclusion re: mutual abandonment
- The concept of mutual abandonment is difficult to adapt to the defendant’s pleaded position. It is thus described in Heydon on Contract (at ):
“An agreement to terminate can be inferred from the abandonment of the contract by one party and concurrence in that course by the other. The inference can be drawn from long delay.Dixon and Fullagar JJ said: "What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that (in the words of Rowlatt J) 'the matter is off altogether'." But it is difficult to draw the inference where neither party has done anything to carry out an arbitration agreement.
It is difficult, but not impossible, to establish "tacit abandonment by both sides". As Robert Goff J (speaking also for Griffiths and Stephen Brown LJJ) said: "[T]o entitle one party, A, to rely on abandonment, he must show that the other party … so conducted himself as to entitle A to assume, and … A did assume, that the contract was agreed to be abandoned sub silentio." (citations omitted, but the learned authors referred to a number of cases including DTR Nominees Pty Ltd v Mona Homes Pty Ltd and Fitzgerald v Masters (supra) as well as Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2013) 45 VR 79)
- Thus understood, the concept of mutual abandonment in my conclusion simply does not arise on the pleaded facts in this case – the plaintiff did not engage in any abandonment, tacit or otherwise, there was no acceptance of such by the defendant, and the case does not feature long or inordinate delay; there is nothing, on the present pleading, amounting to discharge by mutual agreement. This part of the plaintiff’s application must succeed. However I do not conclude that the matter is clearly so untenable that there should not be leave to re-plead, particularly where, as I have noted, there is a mystery about the events between August and November which the plaintiff has not clarified in his reply. It may be distracting to focus too much on pure effluxion of time; the question is whether the inference of discharge by mutual agreement is sensibly open, although delay is obviously an important fact in that exercise. It may be possible for the defendant to amend, add to or clarify the present particulars such as to give rise to the required inference of discharge by agreement, or it may not. However where the facts are presently not completely clear, in my conclusion she should have a further opportunity, rather than summarily deciding this central issue against her. I give leave to re-plead within 28 days.
- The application then attacks a number of other paragraphs or subparagraphs of the amended defence, on a number of different bases.
- This is challenged because the basis on which it is alleged that commission “ought” not to be payable is not pleaded.
The defendant’s response
- The defendant expressly pleads that the agent is not, or alternatively ought not to be entitled to commission on the basis that the sale to the defendant did not proceed (on the defendant’s case, by mutual abandonment). This is referrable to part of paragraph 11 of the statement of claim which claims the real estate agent commission. In my view this again rises or falls with the primary contention as to a mutual abandonment, and this part of the application ought to be allowed. As I have noted, leave to re-plead is not opposed; the defendant should have 28 days to do so.
- This paragraph pleads that the plaintiff has not mitigated his loss. Again it is said that the basis of this is not pleaded. The defendant responds that a failure to mitigate is a question of fact, thus the plaintiff’s challenge is essentially an assertion that the relevant subparagraph lacks particulars. However, paragraph 29(e) is pleaded by way of an explanation for a denial and particulars of such matters are not required; in any case further particulars are promised after disclosure. In my conclusion, this part of the application should fail. The defendant is entitled to rely on a failure to mitigate as pleaded.
- The challenge to this subparagraph is that the basis of the implication of a term is not pleaded. However, the defendant’s response is that relevant particulars were given in a r 445 letter; this is permissible (and if the pleading is to be further amended, the particulars can be incorporated therein). In my conclusion this part of the application should also fail.
- The applicant contends that costs should be awarded on an indemnity basis, given the nature of the deficiencies and the conduct of the parties.
- Although I have found the primary merits of the matter to be against the defendant, in my view she made a genuine attempt to plead a relevant defence, although found lacking after extended argument. Further she has had some success on other parts of the application, and I have given leave to re-plead. My conclusion is that indemnity costs are not appropriate.
- The orders will be as follows:
- Paragraphs 21, 22, 24, 26, 27 and 29(a) of the amended defence filed on 19 February 2020 are struck out pursuant to r 171 of the Uniform Civil Procedure Rules with leave to re-plead within 28 days.
- The counterclaim filed on 19 February 2020 is struck out pursuant to r 171 of the UCPR with leave to re-plead within 28 days.
- Paragraph 29(c) of the amended defence filed on 19 February 2020 is struck out pursuant to r 171 of the UCPR with leave to re-plead within 28 days.
- The defendant is to pay the plaintiff’s costs of the application.
- The defendant is to pay the plaintiff’s costs thrown away by reason of the relief granted.
 Statement of claim, document 2 on the Court file, para 8.
 Paragraph 12 of the statement of claim.
 Document 6 on the Court file.
 Statement of claim, paragraph 4(a)
 It was accepted by the parties at the hearing of the application that the terms “abrogated” and “abandoned” are interchangeable and any semantic difference between the two is of no significance in the determination of the application.
 Paragraph  of the defence.
  QSC 339 .
 (1978) 138 CLR 423 at 434.
 (1956) 95 CLR 420.
- Published Case Name:
Clancy v Carlson
- Shortened Case Name:
Clancy v Carlson
 QDC 164
17 Jul 2020