WOOMERA CO. LTD. AND ANOTHER v. PROVIDENT CENTRE DEVELOPMENT LTD.

 

Courts practice and procedure - amendment of pleadings to introduce a claim which has been abandoned - construction of agreement

Where Counsel has made it clear that a party is abandoning a particular cause of action, there is no rule of law that precludes the claim from being introduced by an amendment to the relevant pleading: the Court has a discretion, to be exercised on ordinary principles, to allow such an amendment.

Upon the true construction of a clause in the particular agreement between the parties (which set out the rights of the vendor in the event of its determination) the parties had not intended it to be a complete code of the vendor's rights and his right to claim damages at common law had not been excluded.

BETWEEN

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JUDGMENT

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Kempster, J.A.:

1. By 100 agreements all dated 7th March 1981 the defendants agreed to sell to and the second plaintiffs agreed to buy from them 100 separate units in Block 4 of a development at North Point. By 100 agreements all dated 17th March 1981 the defendants agreed to sell to and the first plaintiffs agreed to buy from them 100 units in Block 3 of that development. Each agreement was in similar terms. In due course both plaintiffs declined to complete and the question arose between the parties as to responsibility for the failure to discharge each of these agreements by performance.

2. The plaintiffs commenced the proceedings by issue of Writ and Statement of Claim on 23rd December 1982. The Statement of Claim was subsequently amended, re-amended and finally re-re-amended on 21st March 1984; the first day of trial. A little later during that trial, on 27th March, the defendants obtained leave to re-re-amend their Defence and Counterclaim to show that the damages which they counterclaimed derived from and were calculated in accordance with the provisions of Clause 16 of the common form contract and were limited to 54 of the 200 contracts. In the course of that application leading counsel for the defendants, not the leading counsel who appeared before us, specifically abandoned any counterclaim for damages at common law. The judge gave leave and, when taken to appeal, his order was upheld. But the Court of Appeal ordered a separate trial of the issues raised by the defendants' re-re-amended pleading.  27th February of this year was fired for that hearing. When judgment was given on 29th June 1984 following trial of the claim it was held that responsibility for the breakdown of the contracts rested with the plaintiffs.

3. On 14th January 1985, perhaps emboldened by the judgment on the claim, the defendants, issued a summons further to re-re-amend their Counterclaim so as to claim damages at common law for the breach of all 200 contracts. On 13th February Liu J. gave them leave so to do. Against that order the plaintiffs appeal to this Court.

4. The order of the learned judge is criticised on two grounds. First that in so far as the amendments purport to allow a counterclaim for damages at common law they are immaterial and useless and, therefore, on well known principles should not have been allowed and, secondly, that it was wrong to allow the revival of an abandoned claim or counterclaim.

5. In support of the submission that the amendments are immaterial and useless it was contended both before the learned judge and before us that Clause 16 of each of the agreements was to be regarded as comprehensive of the defendants' remedies for any breach by the plaintiffs and, by necessary inference, precluded a claim to damages at common law. Alternatively it was submitted that any breaches there may have been by the plaintiffs were never accepted by the defendants as repudiating the several contracts so as to allow counterclaims for damages calculated on that footing at common law.

6. Subject to considerations applicable to penalties it is as much open to the parties to a contract to agree on the amount of damages payable on breach or as to the way they shall or may be calculated, being secondary obligations, as it is to determine for themselves what primary obligations they will accept: Cellulose Acetate Silk Co. v. Widnes Foundry⁽¹⁾.

Further, any agreement relative to damages is material even when the contract has been treated as rescinded.

"..... breaches of primary obligations give rise to substitute or secondary obligations on the part of the party in default ..... The contract, however, is just as much the source of secondary obligations as it is of primary obligations; and like primary obligations that are implied by law, secondary obligations too can be modified by agreement between the parties, ...."

per Lord Diplock in Photo Production v.   Securicor Ltd.⁽²⁾ at pp.848-849. And, by analogy, a passage from the speech of Lord Hodson in Suisse Atlantique Societe d'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale⁽³⁾ at p.410 -

"I would adopt the language of Atkin L.J. in The Cap Palos,

 

'	I am far from saying that a contractor may not make a valid contract that he is not to be liable for any failure to perform his contract, including even wilful default; but he must use very clear words to express that purpose....'

 

This passage has the support of Lord Parmoor in Cunard Steamship Co. Ltd. v. Buerger⁽⁴⁾ at p.13."

By the same token parties to a contract may agree that the innocent party may be put to his election between specified and common law damages or, as regards different types of damage, may resort to both. That is why the problem which faced Liu J. and now faces us is to a great extent a matter of construction.

7. Clause 16 of the agreements for the purchase and sale of units in the development reads as follows:-

"Should the Purchaser fail to observe or comply with any of the terms and conditions herein contained or if the Purchaser should fail to make the payments in accordance with the said Second Schedule whether of the deposit or the balance of the purchase price or of any. instalment thereof or of any interest within seven days of the date stipulated for payment of the same in the said Second Schedule the Vendor may (subject to Clause 2(ii) hereof) give to the Purchaser notice in writing calling upon the Purchaser to make good his default and in the event of the Purchaser failing within twenty one days from the date of such notice fully to make good his default the Vendor may by a further notice in writing forthwith determine this Agreement and he shall thereupon become entitled to re enter upon the said premises and repossess the same free from any right or interest of the Purchaser therein and he shall be I entitled to forfeiture of the deposit and to receive from the Purchaser as occupation rent a sum equal to interest at the rate of 15 per cent per annum on the whole of the purchase price for the period during which the Purchaser was in occupation. Upon determination of this Agreement the Vendor may resell the said premises either by public auction or by private contract subject to such stipulations as the Vendor may think fit and any increase in price on resale should belong to the Vendor. On a resale any deficiency in price shall be made good and all expenses attending such resale shall be borne by the Purchaser and such deficiency and expenses shall be recoverable by the Vendor as and for liquidated damages provided always that the Purchaser shall not be called upon to bear such deficiency or expenses  unless the said premises are resold within six months of the determination of this Agreement. The balance (if any) of the monies paid by the Purchaser under this Agreement after deduction of all sums due to the Vendor under this Clause shall be repaid to the Purchaser without interest costs or compensation within one month after such balance has been ascertained. .............."

8. In my view the foregoing clause gives the vendor a cumulative series of options in the event of any breach by the purchaser whether or not such breach could be regarded as a renunciation of the contract at common law. The first two of these options are:-

Lord Diplock envisaged such a provision in Photo Production v. Securicor Ltd. ⁽²⁾ at p.849.

9. I cannot for a moment accept that after the exercise of the second option, by letter specifically referring to Clause 16, the agreement could be regarded as extant in the sense that either party might be-required or would be entitled to perform any primary obligations thereby provided. Accrued rights would survive. But the secondary obligations and rights of the parties as expressly defined by this clause would survive by analogy to any arbitration or choice of forum clause even if such clause or clauses were to be regarded as involving primary obligations: Hayman v. Darwins⁽⁵⁾; Lep Air Services v. Rolloswin Ltd. ⁽⁶⁾ at p.350. Thus the vendors could forfeit the deposit, claim an occupation rent and resell. If they sold at a price higher than that provided by the contract they could keep it. If they sold it for less they could claim from the purchasers the difference together with the expenses of resale providing that the resale took place within 6 months of the date of determination. If the premises were sold at a price equal to or higher than the contract price the purchasers would be entitled to the return of the ten percent of that price which they had paid pursuant to Clause 2. If the premises were sold for less the purchasers would be entitled to credit for such monies against the vendor's loss and to the return of any balance. The critical question is whether the vendors would be entitled to claim common law damages appropriate to compensate them for any breach committed by the purchasers in the alternative. Here failure to complete is alleged.

10. As I construe the clause with its references to what "may" be done and to "entitlement" it is permissive rather than restrictive or comprehensive and not susceptible of a construction which, after the exercise of the second option, would preclude a claim to damages based on the purchasers' repudiation at common law. Whether claiming such damages or under the provisions of Clause 16 the vendors must rely upon the determination of the contract. In the circumstances pleaded in the Counterclaim and after irrevocable election at trial the vendors would be entitled to the difference between the contract price and the market price of the several units at the contractual date for completion. It is conceded that the vendors could, in appropriate circumstances, seek the remedy of specific performance or, alternatively, damages on the principles expressed in Lord Cairns' Act which could only differ from common law damages for repudiation in so far as the date for assessment might differ: Johnson v. Agnew⁽7) at p.400 per Lord Wilberforce.

11. I am satisfied that, as a matter of law, the vendors were entitled to claim damages at common law for the purchasers' failure to complete once and howsoever the contracts had been determined. The further re-re-amendment allowed by Liu J. cannot be categorised as "immaterial and useless".

12. When, on 21st March 1984, the defendants elected to counterclaim damages as calculated pursuant to Clause 16, they urged on the judge hearing their application to re-re-amend and on the Court of Appeal that such a limitation of their counterclaim was to the plaintiffs' advantage. Upon this election the plaintiffs base the second limb of their argument.

13. There is a line of authority starting with Cargill v. Bower⁽⁸⁾ to the effect that when a plaintiff omits in his Statement of Claim some relief claimed on the writ he will be deemed to have abandoned it and may, as a matter of discretion, and I am satisfied that it is a matter of discretion, well be refused leave so to amend his pleading as to restore it; especially when a substantial period of time has elapsed between the apparent abandonment and the attempted revival and certainly if the plaintiff has acted to his prejudice in reliance on the express or tacit abandonment or the plaintiff's bona fides are suspect. But no material prejudice which cannot be compensated by an award of costs was suggested before Liu J. or has been suggested before us and no attempt has been made to impugn the defendants' good faith. The terms of R.S.C. Order 20 rule 8, which applies as well to pleadings as to other documents, are cogent:-

"(1)        For the purpose of determining the real question in controversy between the parties to any proceedings, or of correcting any defect or error in any proceedings, the Court may at any stage of the proceedings and either of its own motion or on the application of any party to the proceedings order any document in the proceedings to be amended on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct."

In the context of discretionary relief Mr. Charles Ching for the defendants, not for the first time, has reminded us of the principles explained by Lord Diplock in Hadmor Productions v. Hamilton ⁽⁹⁾ at p.220 when, considering an appeal from an order made on application for an interlocutory injunction, he said-

".....the discretion whether or not to grant it is vested in the High Court judge by whom the application for it is heard. Upon an appeal from the judge's grant or refusal of an interlocutory injunction the function of an appellate court, whether it be the Court of Appeal or your Lordships' House, is not to exercise am independent discretion of its own. It must defer to the judge's exercise of his discretion and must not interfere with it merely upon the ground that the members of the appellate court would have exercised the discretion differently. The function of the appellate court is initially one of review only. It may set aside the judge's exercise of his discretion on the ground that it was based upon a misunderstanding of the law or of the evidence before him or upon an inference that particular facts existed or did not exist, which, although it was one that might legitimately have been drawn upon the evidence that was before the judge, can be demonstrated to be wrong by further evidence that has become available by the time of the appeal; or upon the ground that there has been a change of circumstances after the judge made his order that would have justified his acceding to an application to vary it. Since reasons given by judges for granting or refusing interlocutory injunctions may sometimes be sketchy, there may also be occasional cases where even though no erroneous assumption of law or fact can be identified the judge's decision to grant or refuse the injunction is so aberrant that it must be set aside upon the ground that no reasonable judge regardful of his duty to act judicially could have reached it. It is only if and after the appellate court has reached the conclusion that the judge's exercise of his discretion must be set aside for one or other of these reasons, that it becomes entitled to exercise an original discretion of its own."

14. In no sense could the reasoned and thorough judgment given by Liu J. on this application be described as "sketchy". The learned judge took into account the earlier abandonment of any possible counterclaim for damages at common law and also that expert evidence would be required to assist in an assessment of damages on that basis. He found that there was no complaint about the availability of witnesses and that discovery would necessarily be enlarged. He took no irrelevant consideration into account. For my part I see no ground upon which we would be entitled to interfere with his discretion and, therefore, take the view that the second limb of the plaintiffs' argument also fails.

15. I would dismiss this appeal.

Sir Alan Huggins, V.-P.:

16. The judge was of opinion that he case before him was essentially a matter of discretion and he made his decision upon that basis. I think he was right to do, so and that we ought to interfere only if satisfied that his decision was plainly wrong.

17. It was argued first that the proposed amendment to the counterclaim should have been refused because it was intended to raise a claim which could not succeed. The argument was based upon the construction of cl.16 of the Sale and Purchase Agreement. The judge declined to decide the true construction of this clause, because he thought it was too difficult a matter to be decided upon an application, for leave to amend: he was not prepared to hold that the clause did make the amendment useless, but equally was not prepared to hold that it did not. He thought that, unless he was convinced that the amendment would be useless, the plaintiff had failed to make good this ground of opposition to the amendment but that he should not give a final ruling on the construction point. Before us it has been argued that he ought to have gone on to make a final ruling and we were asked to do so.  It goes without saying that the judge should not, as a general rule, in interlocutory proceedings make a final decision upon a disputed issue of fact. Upon a application under O.14 he should not, however, be reluctant to make a final decision even upon a difficult question of law if the matter has been fully argued: Cow v Casey 1949 1 K.B.474, 481. The same principle applies to other interlocutory proceedings where the point has been fully argued. It is not the difficulty of the point but the risk of reaching a decision per incuriam which should be the governing factor. The judge was not sure that he had "seen all round" the point, and he declined to say more than seemed to him necessary. I think he was right, but we cannot excuse ourselves on the basis that the matter has not been fully argued, and I think we are bound to decide it.

18. The plaintiff Purchasers contend that c1.16 was intended as a complete code which sets out all the rights of the Vendor in the event of a determination of the particular agreement and, by implication, excludes any rights which the Vendor would have had at Common Law. It is common ground that the clause neither expressly excludes nor expressly includes those Common law rights. However, the courts will always lean against the exclusion of Common law rights save where an intention to exclude is clear. Mr. Ferris submits that such an intention is clear from the terms of the clause itself and, in particular, from the emphatic terms of the proviso: he says that the clause gives the Purchaser additional protection which would not be available at Common law and that the Vendor cannot obtain both remedies - which latter point is, of course conceded.

19. I am not persuaded that there is anything which prevents us from holding that the Common Law remedy has not been excluded. I see that clause as providing the Vendor with an alternative remedy to his remedy at Common Law - a remedy which on the one hand is limited by the conditions contained in the clause and on the other hand is more readily available and also enables the Vendor to obtain a liquidated sum more speedily than he could obtain unliquidated damages at Common Law. It might even be that the speedy remedy under cl.16 could be worked out by solicitors acting for both parties, without the necessity of their being separately represented. It was conceded in argument that, if this be the correct view, it would in many cases be possible for a vendor to serve the necessary notices, and to plead, without committing himself to either remedy, although at the trial he would have to elect which remedy he would take. It is said that this conclusion would make a mockery of the clause, but I do not think it does. The "protection" it affords to the Purchaser is protection available only where the Vendor seeks the remedy granted by the clause.

20. There is one question which may arise hereafter and which it is not necessary for us to decide, namely whether a determination of the agreement under cl.16 will in every case leave open an alternative right to damages at Common Law, even though the default is of such a minor nature that it would not constitute a repudiation. Mr. Ferris suggested that a contract which was determined for some purposes might nevertheless remain on foot for other purposes. I would find it difficult to accept such an argument. As it seems to me, once the primary rights and obligations of the parties have been brought to an end by An effective act of termination they cease to exist for all purposes. The parties then have their secondary rights and obligations, whether those exist by virtue of the contract or by virtue of the Common Law. However, unless the default upon which: it was based was such that it constituted a repudiation at Common Law, no secondary right to damages at Common Law will arise upon service of a determination notice under cl.16 beyond the right to damages which would have existed without determination of the contract.

21. Then it is argued that, by its conduct, the Vendor has already elected to limit itself to the remedy under c1.16. It is said that everything it has done points to its having decided to abandon the Common Law remedy. Certainly the notices served are consistent with an intention to pursue the contractual remedy. The "default notices" given in the letters of 4th December 1982 expressly state an intention to "exercise its rights under Clause 16 of the said Agreement" and the "determination notices" given by the fetters of 30th December 1982 were given "in accordance with Clause 16 of the Sale and Purchase Agreement". However, a representation of intention is not binding unless it gives rise to an estoppel, and no prejudice is alleged to have resulted from the form of the notices. It is true that the judge found that the Common Law remedy had been "expressly abandoned", but he qualified that by adding that the abandonment was "by not proceeding with" it. With respect I think that was a confusion of two aspects of the case, the suggested implied abandonment and the alleged express abandonment. I am satisfied that there was no implied abandonment.

22. The alleged express abandonment was by counsel at the hearing, on 27th March 1984, of a previous application for leave to amend the counterclaim. Counsel then appearing for the Vendor made a virtue of the fact that the amendment he was seeking to make had the effect of limiting his client's claim to the contractual remedy and that, in consequence, his client would be able to claim only in respect of the "deficiencies" resulting from the sales of 54 flats, which took place on or before 30th June 1983. It was implicit in what counsel said that he was dropping a claim which he had previously made and not merely refraining from making a claim which had never been made. That constitutes an abandonment.

23. Is an abandonment of a claim irreversible where there is no final judgment inconsistent with its being pursued? None of the cases cited to us is authority for holding that it is. It is true that Harman, J. in Cellular Clothing Co. Ltd. V G. White & Co. Ltd.(1952) 70 R.P.C.9, 12(1.45) refused leave to amend the statement of claim because the plaintiffs had, deliberately, taken the course they did and had announced to the world and to the defendant on what they were going to rely, saying

"In my judgment, it would be quite wrong to allow an amendment of this sort under those circumstances".

That case was very similar to the present in that counsel had drafted the Statement of Claim without including a claim for infringement of a trade mark, because he felt that he had no case for it. Nevertheless, the, judge thought it was a matter of discretion: Idem 1.49. If that be right, as I think it is, the court must consider all the circumstances. In that case the amendments proposed involved alleging facts which had been omitted from the Statement of Claim and they were facts which the judge suspected were untrue, because they would have been material to the case already pleaded as well as to an alternative course of action now sought to be relied upon. In Perestello E Companhia Ltda v United Paint Co. Ltd.1969 1 W.L.R.570 the judge refused to allow an amendment because of "certain difficulties which this late application would create for the defendants". The Court of Appeal considered a number of features relevant to the manner in which the discretion should be exercised and declined to interfere with the decision of the judge.

24. I therefore turn to consider the circumstances of the present case and to inquire whether Liu J. can be said to have erred in his consideration of theme. Unless he erred, it is not open to us to substitute our discretion for his. The strongest objection to the amendment appears to me to be the incontestable volte face nearly one year after counsel decided "to put forward a case fairly and squarely within clause 16". That the judge appreciated the force of the objection is clear: he said

"Mr. Ferris highlighted the following: that by these amendments the defendant sought to raise and rely on a wholly transformed new case, both in law and on fact, that the common law claim had long been known to the defendant, that the defendant made a conscious and deliberate election for Clause 16 damages, that this belated application was not made with expedition, that the proposed material amendments represented yet a further shifting of front and the plaintiffs had lost an opportunity of appropriately reacting to the defendant's application for its last amendment to the Counterclaim which was met on the basis of finality."

He observed that there had been three previous amendments by the Defendant and went on to consider how the delay would affect the Plaintiff. He recognized that the hearing of the Counterclaim must suffer a further delay, but he took the view that

"Discovery can only be of sales documents of the same categories, and investigation by the plaintiffs, though more extensive, would not differ much in nature."

It is suggested that in this last passage possibly lies the only flaw in what I would respectively describe as an otherwise admirable judgment, for the investigation of a claim to unliquidated damages at Common Law would involve the valuation of 200 flats - although that does not mean that each will necessarily be valued at, a different figure. No valuation of any kind will be required for settlement of the cl.16 claim. Whether the word "much" is apt to describe such a difference is debatable, but it is significant that the judge did not overlook the importance of the availability (inter alia) of "experts" as witnesses, and I think he must have had in mind expert valuers. Whether or not the judge was right in holding that the revival of an abandoned claim is "the same" as withdrawing an inadvertent admission seems to me immaterial. The situations are at least analogous, and similar considerations apply. The delay which has occurred in the making of this application for leave to amend after the need for amendment became apparent is a factor to which another judge might have attached more weight, but it was not decisive.

25. In the event I am not persuaded that the judge erred in making what must have been a very difficult decision, and I, too, would dismiss the appeal.

Fuad, J.A.:

26. I have had the advantage of reading in draft the judgments prepared by my Lords Sir Alan Huggins, V.-P. and Kempster J.A. I agree with them and with their conclusion that this appeal fails.

18th March 1985 

(1)    [1933] A.C.20

(2)    [1980] A.C. 827

(3)    [1967] 1 A.C. 361

(4)    [1927] A.C. 1

(5)   [1942] A.C. 356

(6)    [1973] A.C. 331

(7)   [1980] A.C. 367

(8)    (1878) 10 Ch.D. 502

(9)   [1983] 1 A.C. 191