Jiona Investments Pty Ltd v Medihelp General Practice Ltd
[2009] QSC 216
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- Unreported Judgment
- Jiona Investments Pty Ltd v Medihelp General Practice Ltd[2009] QSC 216
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Jiona Investments Pty Ltd v Medihelp General Practice Ltd[2009] QSC 216
Jiona Investments Pty Ltd v Medihelp General Practice Ltd[2009] QSC 216
SUPREME COURT OF QUEENSLAND
CITATION: | Jiona Investments P/L & Ors v Medihelp General Practice Ltd [2009] QSC 216 |
PARTIES: | JIONA INVESTMENTS PTY LTD (first plaintiff) JOHN PETER FEROS (second plaintiff) VEOLA ISABEL FEROS (third plaintiff) v MEDIHELP GENERAL PRACTICE LIMITED (defendant) |
FILE NO/S: | BS6875 of 2004 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 7 August 2009 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 21 July 2009 |
JUDGE: | Martin J |
ORDER: |
Direction
|
CATCHWORDS: | PRACTICE – PLEADING – REPLY – PARTICULARS - ORDERS - AMENDMENT – Where defendant seeks an order that certain paragraphs of the plaintiff’s second amended reply be struck out – where, in the alternative, the defendant seeks an order for further and better particulars – whether paragraphs contained in the second amended reply are properly pleaded – whether paragraphs should be struck out – whether further and better particulars are required. COSTS – SECURITY FOR COSTS – Where defendant brought an application for security of costs – where application was settled – where there was delay in bringing the application – where an order for security of costs would have stultified the proceedings – whether costs should be awarded for the security for costs application. Uniform Civil Procedure Rules, r 166(4) Cape York Airlines Pty Ltd v QBE Insurance (Australia) Limited [2008] QSC 302 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd [2007] QSC 262 GEC Marconi Systems Pty Ltd v BHP Information Technology Ltd (2003) 128 FCR 1 Waltons Stores (Interstate) Ltd v Maher (1988)164 CLR 387 |
COUNSEL: | R G Bain QC and G D Beacham for the applicant/defendant J Sweeney and C Johnstone for the respondent/first and second plaintiffs |
SOLICITORS: | Macrossans for the applicant/defendant Hillhouse Burrough McKeown lawyers for the respondent/plaintiffs |
- In its application, the applicant/defendant (“Medihelp”) originally sought relief under five heads. Two of these have been resolved except as to costs. Medihelp seeks orders:
- That certain paragraphs of the second amended reply be struck out,
- Alternatively or in addition, for the provision of further particulars, and
- That it be permitted to call Adam Sevdalis to give expert evidence at the trial.
The Claim
- The plaintiffs seek damages for breach of contract. The first plaintiff (“Jiona”) sues as the trustee of certain trusts. The second plaintiff (“Dr Feros”) is a director of Jiona. The third plaintiff is deceased. They claim that in April 2000 they entered into an agreement (“the Merger Agreement”) with Medihelp whereby:
- Medihelp would receive the income of a business (Brisbane Westside Medical Group) which had been conducted by the plaintiff, and
- among other things, Medihelp would make certain payments to or for the benefit of the plaintiffs.
- It is alleged that Medihelp repudiated the Merger Agreement and that the plaintiffs terminated the agreement on the basis of that repudiation.
- Medihelp defends on a number of bases including:
- the Merger Agreement was incomplete and not binding,
- the Merger Agreement, if otherwise valid, was induced by Jiona’s misrepresentations,
- the plaintiffs breached the Merger Agreement, and
- the causes of action have been compromised.
- In their reply, the plaintiffs deny all the substantive matters raised in the defence.
Strikeout application – Second Amended Reply
Paragraph 5
- In paragraph 4 of the statement of claim, the plaintiffs plead:
“4.On or about 17 April 2000 the defendant and the plaintiffs entered into a contract in writing (“the merger agreement”), whereby in consideration, inter alia, of the defendant becoming entitled to receive the income of Brisbane Westside Medical Group upon and subject to the terms of the merger agreement, the defendant assumed the obligations, inter alia, pleaded below.
Particulars
(a)letter from the second plaintiff (in (sic) his own behalf and as agent for the third plaintiff and the first plaintiff as trustee of the trusts identified in paragraph 1(b), (c) and (d)) to Dr Clift dated 13 April 2000;
(b)an undated document sent by the defendant to the second plaintiff (in his own behalf and as agent for the third plaintiff and the first plaintiff as trustee of the trusts identified in paragraph 1(b), (c) and (d)) on 17 April 2000 called “Attachment To Medihelp – BMWG Merger Agreement - Profit Model for Calculation of Incentive Portion of Consulting Fees”; and
(c)an undated document entitled “Merger of Brisbane Westside Medical Group (BWMG) to become part of the Medihelp General Practice Limited (Medihelp System) agreement” executed by the first plaintiff (as trustee of the trusts identified in paragraph 1 (b), (c) and (d) herein and as agent of the second and third plaintiffs) and the defendant on or about 17 April 2000.”
- In the defence, Medihelp pleads to that in the following way:
“3.As to the allegations contained in paragraph 4 of the Statement of Claim, the defendant:
(a)denies that a contract was made between the plaintiffs and the defendant on or about 17 April 2000 as alleged, by reason of the matters set out below;
(b)says that the proposal in the letter of 13 April 2000 was rejected by the defendant's solicitors' letter dated 19 April 2000;
(c)says that the merger document referred to in paragraph 4(c) of the Statement of Claim was executed between the plaintiff, as trustee of the Feros Family Trust (hereafter "FFT"), and the defendant on or about 17 April 2000 (hereafter this document is referred to as "the merger agreement");
(d)denies that the merger agreement constituted a legally binding contract, by reason of the matters pleaded below;
(e)says that the attachment (referred to in paragraph 4(b) of the Statement of Claim) was not attached to the merger agreement at the time it was executed, and was not thereafter incorporated by the FFT and the defendant as part of the merger agreement.”
- As to paragraph 3(d) of the defence, Medihelp then pleads:
“4.At that time of execution of the merger agreement:
(a)no draft lease of the Warner premises was attached or otherwise agreed;
(b)no management and consultancy agreement to be entered into between the defendant and the second and third plaintiffs, respectively, had been entered into or otherwise agreed;
(c)an Investment Offer was not attached or otherwise agreed;
(d)Medihelp Doctor Agreements had not been entered into by the defendant with the second and third plaintiffs, respectively and had not otherwise been agreed;
(e)there was no agreed identification of the leases of other premises, leases of equipment, leases of computers or assets being transferred under the merger agreement;
(f)there was no agreed identification of the payments under leases or other expenses that the merger agreement obliged the defendant to meet.
- By reason of the matters pleaded in the preceding paragraph, the merger agreement was incomplete and did not constitute a legally binding contract.”
- The plaintiffs respond to that in the Second Amended Reply as follows:
“5.The following documents were documents incorporated into the merger agreement by citation or reference:
(a)the document in existence [and] referred to in clause 1 as “draft lease’, the terms of which were previously communicated;
(b)the document in existence and referred to in clause 1 as ‘job descriptions’, the terms of which were previously communicated;
(c)the document in existence and referred to in clause 2.2 as the ‘investment offer’ the terms of which were previously communicated;
(d)the document in existence and referred to in clause 2.2 as ‘Medihelp Doctor Agreements’ the terms of which were previously communicated.”
- Medihelp submits that the allegations that these documents were incorporated into the Merger Agreement by citation or reference constitute a direct inconsistency with the assertion in the statement of claim that the Merger Agreement comprised only three documents.
- The plaintiffs’ response to that argument was that they do not seek to erect a case that the agreement was comprised other than by the three documents pleaded by them in the statement of claim and that their pleading is, pursuant to r 166(4) of the Uniform Civil Procedure Rules, a direct explanation for their denial of Medihelp’s allegations. As was pointed out by Daubney J in Cape York Airlines Pty Ltd v QBE Insurance (Australia) Limited[1] the pleading of a direct explanation does not of itself constitute a further issue for determination at trial.
- The confusion arises in this case out of the use of the words in paragraph 5 of the Second Amended reply “incorporated into the merger agreement by citation or reference”. It was made clear that the plaintiffs do not intend to argue that those documents formed a part of the Merger Agreement. That being the case, the use of words such as “incorporated” does not properly express the intention of the plaintiffs and should be changed. I order that the words “incorporated into the merger agreement by citation or reference” be struck out of paragraph 5 of the Second Amended Reply and I give leave to the plaintiffs to amend to more accurately plead their intention with respect to those documents.
Paragraph 6
- Paragraph 6 of the Second Amended Reply provides:
“For the purposes of interpretation of descriptive terms or ambiguous provisions in the merger agreement, the contents of the communications and discussions prior to 19 April 2000 referred to in this pleading were objective background facts known to all parties.”
- This paragraph is objectionable for many reasons. It does not identify the “descriptive terms” or “ambiguous provisions” in the merger agreement which are said to be able to be interpreted by reference to “objective background facts”. Merely referring to contents of communications and discussions prior to 19 April 2000 “referred to in this pleading” is an insufficient pleading.
- It is argued on behalf of the defendant that any such negotiations (which are not properly identified in this paragraph) are not background facts but are admissible only to the extent that they establish that certain facts were known to both parties.[2]
- This paragraph does not, either alone or in conjunction with subsequent paragraphs, allow a reader to understand what the material is, what the particular matters in need of interpretation are, and how they are meant to be interpreted.
- Paragraph 6 of the Second Amended Reply is struck out.
Paragraph 7
- Paragraph 7 of the Second Amended Reply provides:
“On its proper interpretation, the merger agreement was intended to put the defendant in a position where, for at least three years, with the co-operation of Dr. Feros:
a)the defendant was entitled to control access to the Brisbane Westside Medical Group ("BWMG") tenancies, telephone numbers and BWMG patient medical files; and
b)the defendant could negotiate with existing or prospective BWMG general practitioners to secure to itself a proportion of their fee for service (“FFS”) income,
in order that the defendant would be able (in its accounts) to add that BWMG income to the revenue from the defendant’s other medical practices, so as to present the defendant as an entity with a substantial revenue stream and thus an attractive target for investment to potential shareholders, via a public float, or for acquisition by a listed ‘corporate general practice’ company.”
- This may be another example of a poor choice of words. An “agreement” cannot intend to do anything. It can be that if an agreement is carried out then it will have certain results. To plead that a “merger agreement was intended” to do certain things demonstrates a misunderstanding of the proper way of pleading the result which may have been intended.
- As it is currently pleaded that paragraph 7 can only be regarded as referring to the intention of the parties that certain things occur. If that is the case, then it is irrelevant. Similarly, if it purports to set out objective intentions of the parties, then that likewise is inappropriate. The question which arises is not the intention of the parties but, rather, what obligations were imposed by the Merger Agreement as properly construed.
- It would appear to be open to the plaintiffs to plead that on the proper construction of a particular part or parts of the contract certain consequences must follow. This paragraph is struck out.
Paragraphs 8 and 9
- These paragraphs provide:
“8.Further, on its proper interpretation, the merger agreement imposed on Dr Feros the obligation to use his best endeavours to assist in that float or acquisition.
- Further, on its proper interpretation, the legal rights and obligations of the parties with respect to the five medical practices under the merger agreement were that, between 2 May 2000 and 2 May 2003 (or at the plaintiffs option until 2 May 2006), or until agreed otherwise:
a)the defendant (by itself or by its subsidiary Medihelp BWMG Pty Ltd) was entitled to manage the five BWMG medical practices as it saw fit and to relocate or amalgamate same as it saw fit;
b)as manager, the defendant was obliged to attend to the engagement of staff for the practices (both administrative staff and doctors) and to negotiate contracts of employment or independent contractor relationships as it saw fit;
c)as manager, if the defendant wished to increase staff or doctor numbers (to replace staff or doctors who left, or were terminated, or with whom it could not come to terms as independent contractors) the defendant was obliged to source those staff and doctors;
d)the defendant (by itself or by its subsidiary Medihelp BWMG Pty Ltd) was entitled to the following income:
i)80% of the medical FFS income of the second and third plaintiffs;
ii)such percentage of the FFS of doctors working in the practices as the defendant might negotiate with such doctors (usually 50%);
iii)100% of income from any amalgamation grants;
e)the defendant was obliged to pay 100% of the expenses related to such FFS income including expenses as follows:
i)FFS percentage amounts negotiated with the BWMG doctors;
ii)wages of nursing staff as agreed from time to time with that staff;
iii)wages of administrative staff dealing with patient fees and attendances, medical history, fee and consultation analysis, billing, record keeping and debt collection from time to time with that staff;
iv)rent and outgoings applicable to the practice premises as they might be from time to time until any leases expired or were assigned or subleased, or otherwise disposed of, or as deemed appropriate;
v)medical equipment and consumables;
vi)payments due under all chattel leases referred to hereunder (save for motor vehicle leases for cars driven by the Feros family);
vii)utilities including power and water;
f)the defendant was entitled to keep the surplus between the said income and expenses, and obliged to bear any deficit between the said income and expenses;
g)there was to be no change of existing ownership of medical records;
h)there was to be no change of existing ownership of any assets;
i)the defendant was to pay the plaintiffs the amounts identified in the statement of claim.”
- These paragraphs are insufficiently particularised. The nature of the agreement alleged by the plaintiffs, in particular, the number of documents said to make up the agreement, impose upon the plaintiffs a requirement to identify with care the particular parts of the agreement which they say give rise to these obligations and, given the other parts of the pleading, whether any extrinsic evidence or mutually known facts are to be relied on. These paragraphs are struck out.
Paragraph 10
- This paragraph purports to be an answer to paragraphs 4(a) and 6(a) of the Amended Defence. Those parts of the Amended Defence plead that no draft lease of the Warner premises was attached or otherwise agreed and that the terms of the proposed lease of the Warner Medical Centre were uncertain.
- The defendant argues that the agreement to lease referred to in this paragraph is relied upon as a separately enforceable agreement in addition to the Merger Agreement. In my view, it does not. It is clearly an answer to those parts of the defence identified in the first part of paragraph 10.
- Alternatively, the defendant argues that this pleading leaves open the possibility that the documents and discussions relied upon are said to form part of the Merger Agreement itself. I do not agree. The pleading evinces a clear intention that these documents be understood as constituting the alleged agreement to lease.
- The pleading is defective, though, in that it does not set out the relevant terms of the alleged agreement to lease but rather asserts that they are “set out in the documents referred to in (a) and (f) hereunder”. That is insufficient. Neither an opposing party nor the court should have to trawl through documents in order to see what, if anything, might constitute the alleged agreement. This paragraph must be amended.
Paragraphs 11 and 12
- These paragraphs provide:
“11.As to paragraph 4(e) and 6(b) of the defence, by the following discussions, correspondence and conduct, by the relevant time, the parties had identified that the leases of premises other than Warner being dealt with by the merger agreement were those identified in paragraph 3 of the statement of claim:
a)fax from BWMG to the defendant and enclosed BWMG Practice Information dated 19 November 1999 (plaintiffs’ document 424);
b)the provision by the first plaintiff to the defendant of a document entitled “BWMG Current Rental Values at 30 September 1999” (part of defendant’s document 222);
c) the provision by the first plaintiff to the defendant of a List of Tenancies and Rentals (undated) (defendant’s document 64);
d)discussions on 24 March 1999 between Dr. Feros, Mike Fitzgibbon, Susan McDonald, Dr. Clift, Wendy Wright and Laurie Vass;
e)execution of the merger agreement itself.
- As to paragraph 4(e) and 6(b) of the defence, by the following discussions, correspondence and conduct, by the relevant time, the parties had identified that the chattel leases being dealt with under the merger agreement were those identified in defendant’s document 222:
a)the provision by the first plaintiff to the defendant of a document entitled “BWMG List of Items to be Financed” by fax the plaintiff to the defendant on 24 September 1999;
b)fax from Laurie Vass to Susan McDonald dated 9 November 1999 (plaintiffs’ document 416);
c)fax from BWMG to the defendant and enclosed Schedule of Fixed Assets dated 12 November 1999 (plaintiffs’ document 419);
d)the provision by the first plaintiff to the defendant of a document entitled “BWMG Listing of Lease Agreements Copied 30.09.1999” (part of defendant’s document 222);
e)execution of the merger agreement itself.”
- The defendant argues that, if this part of the pleading intends to assert that the discussions and correspondence should be used as extrinsic evidence to assist in the construction of part of a clause of a merger agreement then it fails to identify the relevant clause or clauses, the objective background facts and so on. This paragraph does not, as I read it, intend to do what the defendant suggests. It is intended to answer the identified paragraphs of the defence and to respond directly about the manner in which the parties had identified other leases. No amendment or further particulars are required.
- The same applies to paragraph 12 of the Second Amended Reply.
Paragraphs 13, 14 and 15(a)
- It is reasonably clear that these paragraphs are designed to plead that certain matters referred to in the Merger Agreement had in fact been concluded prior to entering into the Merger Agreement and therefore can be regarded as having been settled. There is no need for these paragraphs to be amended.
Paragraph 16
- This paragraph provides:
“As to paragraph 6(e) of the defence:
a)by the relevant time there was agreement regarding the matters listed in the 13 April 2000 letter, as in the letter notifying acceptance from Colwell Wright to Rose & Jensen bearing date 19 April 2000 (“acceptance letter”), the defendant rejected the matters listed in points 5 and 7 in the 13 April 2000 letter and expressed its conditional assent to the following points in the 13 April 2000 letter:
i)profit being calculated as gross fees including all Government Incentives attributable to the BWMG practices and doctors, less expenses attributable to the BWMG Practices and doctors and including a 6% Management fee applied by the defendant to the income of BWMG (a term implicit in the merger agreement in any event);
ii)the option referred to in clause 5 being for the plaintiffs benefit only (a term implicit in the merger agreement in any event);
iii)income generated prior to 2 May 2000 but received after that date being the property of the plaintiff (a term implicit in the merger agreement in any event); and
b)by its conduct after 2 May 2000 referred to hereunder, the defendant acted consistently with having assented to those matters.”
- This paragraph is in response to paragraph 6(e) of the Amended Defence which pleads that there was uncertainty in respect of the absence of agreement regarding the matters listed in the 13 April 2000 letter. This paragraph of the Second Amended Reply is a direct response to that allegation and is one which is properly answered in the reply. No amendment to this paragraph is required.
Paragraph 17a)
- This paragraph provides:
“As to paragraph 4(c), 6(d) and 6(j) of the defence:
a)by the following discussions, correspondence and conduct, the parties had by the relevant time agreed that the terms of any Investment Offer which might apply to a public float were as set out in the following documents:
i)email Dr. Clift to Dr. Feros dated 9 December 1999 attaching prospectus 7;
ii)Fax Dr. Feros to Dr. Clift dated 25 February 2000 (Plaintiffs document 475);
iii)fax Dr. Clift to Dr. Feros dated 1 March 2000 (Defendants document 120);
iv)as set out in the merger agreement itself;
b)there was no uncertainty as to the ‘merger shares’ and the ‘new vehicle’;
c)there was no uncertainty as to the charge to be held by the defendant.”
- This paragraph responds to allegations in the defence that there was uncertainty as to certain matters. Once again, this appears to be a direct reply to that assertion and nothing more. No amendment to this paragraph is required.
Paragraph 18
- This paragraph provides:
“As to paragraph 4(d) and 6(g) of the defence, by discussions, correspondence and conduct, by the relevant time, the parties had agreed that the terms of the Medihelp Doctor Agreements between the defendant and Dr. Feros and Dr. Viola Feros were to be the following:
a)the terms of the merger agreement itself;
b)the terms of the said discussions;
c)the terms of the document in existence and referred to in clause 2.2 3 of the merger agreement as “Medihelp Doctor Agreements” the terms of which were previously communicated; and
d)the terms of the document entitled “Package for Feros Group” authored by David Millhouse on 21 December 1999 (Defendants document 63).”
- This paragraph is unsatisfactorily pleaded. It should, but does not, set out the terms of the discussions which are said to form the basis of an agreement about Medihelp doctor agreements. In order to properly plead this it will be necessary for the actual terms of the said discussions which are to be relied upon to be set out. Particularisation of certain discussions and an informal summary of those discussions do not take the place of a proper enunciation of the terms of alleged agreements. This paragraph is struck out.
Paragraphs 20-25 and 27-33
- There are two forms of estoppel raised in these paragraphs:
- An estoppel by representation, and
- An estoppel by convention.
- With respect to both estoppels it is pleaded that they act to prevent the defendant from contending that the merger agreement does not constitute a legally enforceable and binding agreement (para. 21 of the Reply) or from resiling or departing from the assumption that the documents which were executed constituted a binding agreement (para. 28 and 33 of the Reply).
- The problem that faces the plaintiffs is that neither estoppel is said to arise unless there has been a finding that the merger agreement was incomplete or did not constitute a legally binding agreement. Assuming, then, that there are grounds for an estoppel, that does not answer the question: what contractual rights can the plaintiffs claim? The existence of either estoppel (as currently pleaded) does not provide any basis for the enforcement of a contract.
- This type of problem was considered by Brennan J in Waltons Stores (Interstate) Ltd v Maher where he said:[3]
“It has been said that estoppel in pais is merely a rule of evidence and not a cause of action (Seton v. Lafone (1887) 19 QBD 68; Low v. Bouverie (1891) 3 Ch 82; In re Ottos Kopje Diamond Mines, Limited (1893) 1 Ch 618) but that proposition needs some explanation. If the estoppel relates to the existence of a contract between the parties, the legal relationship between the parties is ascertained by reference to the terms of the contract which has been assumed to exist. If, in the assumed state of affairs, the contract confers a cause of action on the party raising the estoppel, the cause of action may be enforced. The source of legal obligation in that event is the assumed contract; the estoppel is not a source of legal obligation except in the sense that the estoppel compels the party bound to adhere to the assumption that the contract exists. Thus in Laws Holdings Pty.Ltd. v. Short (1972) 46 ALJR 563, a company which had led a supplier of goods to assume that it was the purchaser of goods in fact received by an associated company of similar name was held bound by a contract between itself and the supplier which its conduct had led the supplier to assume to exist. And in Spiro v. Lintern (1973) 1 WLR 1002; (1973) 3 All ER 319, a husband whose wife had made a contract in her own name for the sale of the husband's property without his authority was estopped from denying that she had made the contract with his authority. Specific performance was decreed against him. The assumed state of affairs to which a party may be bound to adhere may be more than a state of mere facts; it may include the legal complexion of a fact as well as the fact itself, that is, a matter of mixed fact and law. Thus in Sarat Chunder Dey v. Gopal Chunder Laha (1892) LR 19 Ind App 203 the subject of the estoppel was the validity of a conveyance, and in Yorkshire Insurance Co. v. Craine (1922) 2 AC 541 the subject of estoppel was the validity of a claim lodged out of time under a policy of fire insurance.
Equitable estoppel, on the other hand, does not operate by establishing an assumed state of affairs. Unlike an estoppel in pais, an equitable estoppel is a source of legal obligation. It is not enforceable against the party estopped because a cause of action or ground of defence would arise on an assumed state of affairs; it is the source of a legal obligation arising on an actual state of affairs. An equitable estoppel is binding in conscience on the party estopped, and it is to be satisfied by that party doing or abstaining from doing something in order to prevent detriment to the party raising the estoppel which that party would otherwise suffer by having acted or abstained from acting in reliance on the assumption or expectation which he has been induced to adopt. Perhaps equitable estoppel is more accurately described as an equity created by estoppel.”
- The point argued by Medihelp is a good one. The situation which would lead to the consideration of whether an estoppel exists or not requires that a finding be made that the contract is uncertain. What then, asks Medihelp, can be done by way of an order requiring actions consistent with a contract which has already been held to be uncertain?
- As to an estoppel by convention, the plaintiffs have only pleaded this: that the guiding minds of the respective parties proceeded on the basis of the underlying assumption that the documents that they had executed constituted a binding agreement between the defendant and each of the plaintiffs in the capacities necessary to give effect to the intended transaction.
- The difficulty with the current state of pleading is that, as the estoppel by convention will not be relied upon by the plaintiffs unless it is held that the contract upon which they sue is uncertain, then to plead that the estoppel by convention is based upon an underlying assumption that they had executed a binding agreement takes them nowhere. In order for an estoppel by convention to afford the plaintiffs any relief it would be necessary for them to plead the agreement which they say can be the subject of findings as a result of the estoppel. The plaintiffs referred me to the approval by Finn J of the following statements of principle:[4]
[426] In relation to equitable estoppel, Brennan J described its requirements in the following way in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 428-429:
‘In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.’
Of estoppel by convention, the New Zealand Court of Appeal said the following in National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548n at 550:
‘The authorities show that for an estoppel by convention to arise the following points must be established by the party claiming the benefit of the estoppel (the proponent):
(1)The parties have proceeded on the basis of an underlying assumption of fact, law, or both, of sufficient certainty to be enforceable (the assumption).
(2) Each party has, to the knowledge of the other, expressly or by implication accepted the assumption as being true for the purposes of the transaction.
(3) Such acceptance was intended to affect their legal relations in the sense that it was intended to govern the legal position between them.
(4) The proponent was entitled to act and has, as the other party knew or intended, acted in reliance upon the assumption being regarded as true and binding.
(5) The proponent would suffer detriment if the other party were allowed to resile or depart from the assumption.
(6) In all the circumstances it would be unconscionable to allow the other party to resile or depart from the assumption.’
I should add that I consider that this statement of the law sufficiently identifies the law of this country as well, save that in Australia the assumption of law may well be limited to one relating to ‘private legal rights’: Elsea Holdings Ltd v Butts (1986) 6 NSWLR 175 at 188ff; Riseda Nominees Pty Ltd v St Vincent's Hospital (Melbourne) Ltd [1998] 2 VR 70 at 77; Government Employees Superannuation Board v Martin, above. This qualification is not of present moment in that, insofar as the conventional understanding in question was one of law, it related to private legal rights.”
Where resort to an estoppel by convention only arises in the face of a determination that the contract otherwise sued upon is uncertain then the party relying upon the estoppel must plead the terms which it says are to be drawn from the assumptions and conduct which otherwise give rise to the estoppel. In fact, the plaintiffs have said that they do not rely on an active estoppel to establish any particular terms. It follows, then, that these estoppels (as pleaded) would not advance any matter which would allow an order in the plaintiffs’ favour. Paragraphs 20-25 and 27-33 are struck out.
- With respect to all the paragraphs which have been struck out, leave is given to replead.
Allegations of Agency
- Paragraph 26 of the Second Amended Reply provides:
“As to the allegations in paragraph 7 of the defence, the plaintiffs say as follows:
a)the first plaintiff entered into the merger agreement as trustee for, and with the actual authority of, those interested in the BWMG practices (J & V Feros Service Trust, the Feros Investment Trust, and the Warner Unit Trust) and with the authority of the second and third plaintiffs;
b)they repeat the estoppel plea above;
c)in the premises, the first plaintiff as trustee and authorised representative in each of those capacities and the second and third plaintiffs can enforce the merger agreement;
d)further, or in the alternative, during the negotiating period Dr. Feros told Dr. Clift to the effect that he was negotiating for the Feros Group (a reference to the entities concerned with the BWMG practices);
e)it was a matter of importance to the defendant to be inferred from use of the terms “the BWMG corporate structure”, “the Feros Group” in the merger agreement itself, that it reach agreement with each of the various entities concerned with the BWMG practices, whoever they might be;
f)in the premises, the first plaintiff as trustee and authorised representative in each of those capacities and the second and third plaintiffs can enforce the merger agreement.”
- It is a response to paragraph 7 of the Amended Defence. That paragraph reads:
“In the further alternative, if the merger agreement was otherwise a binding contract, the defendant says:
(a)the defendant entered into the contract with the plaintiff as trustee of the FFT as disclosed principal;
(b)if the FFT was purporting to enter into the agreement on behalf of the J & V Feros Service Trust, the Feros Investment Trust and the Warner Unit Trust and the second and third plaintiffs (as alleged in the amended Statement of Claim) that was not disclosed to the defendant;
(c)the identity of the FFT as the other contracting party was a matter of importance to the defendant;
(d)in the premises, the J & V Feros Service Trust, the Feros Investment Trust, the Warner Unit Trust and the second and third plaintiffs are not parties to the contract.”
The complaint of the defendant is that the allegation of authority is an essential element of the second plaintiff’s alleged cause of action and ought to have been pleaded in the statement of claim. That may be the case. It does not cause any detriment to the defendant in circumstances where it has already filed a rejoinder.
Request for further and better particulars
- In light of the numerous paragraphs which have been struck out I will adjourn consideration of this part of the application to a date to be fixed.
Can Mr Sevdalis be called to give expert evidence?
- It is not possible to assess the extent (if any) of this person’s relevant expertise in the absence of a report which deals with the particular subject matter. The question should, though, be dealt with prior to trial.
- I direct:
- that Medihelp file and serve a copy of the report from Mr Sevdalis upon which it would propose to rely at trial by 21 August 2009,
- that, by 28 August 2009, the plaintiffs tell Medihelp, in writing, whether they object to that report being received and the grounds of their objection, and
- that Medihelp file and serve any application with respect to this issue by 2 September 2009.
Costs of the Security for Costs application
- One of the matters which was settled was Medihelp’s application for security for costs. The outstanding issue is the costs of that application.
- In Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd [5] I listed a number of matters which can be taken into account when delay is a factor in making an application for security:
“[27] The principles to be applied in this respect seem to be:
• An application for security must be made promptly: Foss Export Agency Pty Ltd v Trotman (1949) 67 WN (NSW) 1; Buckley v Bennell (1974) 1 ACLR 301 at 308; Southern Cross Exploration NL v Fire and All Risks Insurance Co Ltd (1985) 1 NSWLR 114 at 123.
• It would be unfair to allow a defendant security if that defendant has stood by and allowed the plaintiff to work on its case and incur significant expense: Smail v Burton; Re Insurance Associates Pty Ltd (in liq) (1975) 1 ACLR 74 at 75; King v Commercial Bank of Australia Ltd [1921] VLR 48 at 54; Stack v Brisbane City Council (1996) 71 FCR 523 at 531.
• Although delay is a significant factor, there is no rule requiring refusal of an application on that basis alone. It is a factor to be taken into account with other discretionary criteria. Commonwealth of Australia and Another v Cable Water Skiing (Australia) Ltd (1994) 14 ACSR 760 at 762; Rhema Ventures Pty Ltd v Stenders [1993] 2 Qd R 326 at 332-3 per Lee J. For example, security for future costs was awarded to the defendant in Commonwealth v Cable where there had been a delay of 4 years after the proceedings had commenced.
• The issue of delay will weigh more significantly in some cases than others. Crypta Fuels Pty Ltd v Svelte Corporation Pty Ltd (1995) 19 ACSR 68 at 71. In Crypta Fuels Lehane J noted that the cases in which orders for security were made despite delay have usually involved one or both of two factors, those being:
a) “…that the hearing or resumed hearing was not immediately imminent…”; and
b) “…that there has been some forewarning: usually correspondence concerning the financial standing of those who might benefit from the success of an applicant or plaintiff, and often detailed correspondence foreshadowing an application for security for costs.” (at 71).
• To similar effect was the statement by French J in Bryan E Fencott P/L v Eretta P/L (1987) 16 FCR 497 at 514:
“The further a plaintiff has proceeded in an action and the greater the costs it has been allowed to incur without steps being taken to apply for an order for costs, the more difficult it will be to persuade the court that such an order is not, in the circumstances, unfair or oppressive.”
• In Buckley v Bennell (1974) 1 ACLR 301 at 309 Moffitt P put the matter as follows:
“The right to seek security for costs and to stay proceedings, with the possible result that a claim for damages is frustrated, is a powerful weapon. Therefore, the litigant who seeks to use it against his opponent is at risk of not having it available, unless the application is made and persevered with in circumstances involving the least oppression of his opponent. The primary reason why the application should be brought promptly and pressed to determination promptly is that the company, which by assumption has financial problems, is entitled to know its position in relation to security at the outset, and before it embarks to any real extent on its litigation, and certainly before it is allowed to or permits substantial sums of money towards litigating its claim.”
[28] When determining the weight to be afforded the effect of delay, the following issues need to be considered:
(a) is there an explanation for the delay and, if so, what is its weight? (Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136 at 144; where the length of the proceedings was not foreseen when they commenced (Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301 at 308); Thirteenth Corp Pty Ltd v State (2004) 50 ACSR 425; James v Australia and New Zealand Banking Group Ltd (No 1) (1985) 9 FCR 442 at 446; Stack v Brisbane City Council (1996) 71 FCR 523 at 532; per Drummond J.)
(b) the level of prejudice caused to the plaintiff if required to lodge security at a late stage (Rhema Ventures Pty Ltd v Stenders [1993] 2 Qd R 326 at 333)
(c) the timing of the application for security (James v Australia and New Zealand Banking Group Ltd (No 1) (1985) 9 FCR 442).”
- This action started in 2004. The first time the issue of security was raised was in May 2009. The defendant sought security in the sum of $204,000. The application was partly settled by the plaintiffs arranging for Dr Feros and his wife to provide personal guarantees to cover any liability Jiona might incur for Medihelp’s costs.
- It took five years for Medihelp to seek security. It says that the explanation for its delay arises out of the withdrawal by a third party of an indemnity in late October 2008 – some six months before it sought security.
- I do not accept that a change in the defendant’s funding arrangements should be regarded as an adequate explanation for delay. The factors which I regard as important are:
- This case is set down for hearing in November,
- Medihelp has stood by and allowed the plaintiffs to incur costs for a long time,
- As French J said: “The further a plaintiff has proceeded in an action and the greater the costs it has been allowed to incur without steps being taken to apply for an order for costs, the more difficult it will be to persuade the court that such an order is not, in the circumstances, unfair or oppressive.”
- The plaintiffs have demonstrated that an order for security in the sum sought would have stultified the proceedings.
- As Moffit P said: “The primary reason why the application should be brought promptly and pressed to determination promptly is that the company, which by assumption has financial problems, is entitled to know its position in relation to security at the outset, and before it embarks to any real extent on its litigation, and certainly before it is allowed to or permits substantial sums of money towards litigating its claim.”[6] The defendant has not acted promptly and, had the application gone to a hearing, then I would have on the material before me refused it with costs.
- Medihelp is to pay the plaintiffs’ costs of and incidental to its application for security for costs.
- I will hear the parties on any other costs orders.