New South Wales District Court CITATION: Andrew Hennessey v Architectus Group Holdings Pty Ltd [2010] NSWDC 61 JUDGMENT DATE: 26 February 2010 JURISDICTION: District Court of New South Wales JUDGMENT OF: Cogswell SC DCJ DECISION: I grant the order sought in paragraph 4 of Mr Hennessey's amended notice of motion of 10 November 2009, namely I strike out para 25 of Architectus' defence on the grounds that this court does not have the jurisdiction to make the order sought in para 25. CATCHWORDS: CIVIL LAW - employment terminated contrary to term in employment contract - does the claim fall within the equitable jurisdiction of District Court of NSW - what amounts to a "ground of defence" in Law Reform (Law and Equity) Act 1972 - striking out part of Defence-is there a defence of mistake - application of principles ie strike out LEGISLATION CITED: District Court Act 1973 s 134 Law Reform (Law and Equity) Act 1972 s 6, s 7 Bates (Thomas) and Son Limited v Wyndhams (Lingerie) Limited [1981] 1 WLR 505 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 CASES CITED: Misiaris v Saydels Pty Ltd (NSWSC, unreported, 10.5.89) Taylor v Johnson (1983) 151 CLR 422 United Telecasters v Hardy 23 NSWLR 323 Yahl v Bridgeport Customs Pty Ltd (NSWSC, unreported, 31.7.84) PARTIES: Andrew Hennessey Architectus Group Holdings Pty Ltd FILE NUMBER(S): 3629/09 COUNSEL: Mr Berwick for the plaintiff Mr Foster for the defendant JUDGMENT 1. Mr Andrew Hennessey had discussions with Architectus Group Holdings Pty Ltd regarding a job with them. In a letter Architectus offered him the job. They said the employment agreement was included with the letter but by an oversight it was not. Mr Hennessey started work anyway. He was given a written agreement which he signed. It was called an 'Employment Deed'. After less than a year, Architectus had to reduce its staff because of what they described as "tough times". Mr Hennessey became a casualty and his employment was terminated with a month's notice. 2. The terms of employment in the Employment Deed then became the focus of attention. One of the terms in the Employment Deed was that Architectus "must not terminate your employment without cause before the second anniversary" of Mr Hennessey starting his job. In other words, the Employment Deed appeared to provide for not a month's notice but two years' notice. But Mr Hennessey was given only a month. 3. Accordingly, Mr Hennessey is suing Architectus in this Court for the balance of his salary which he would be owed if he were given the two years' notice. He relies in his statement of claim, commencing his case, on the written Employment Deed. 4. Architectus has filed a defence. Mr Hennessey says that the defence transparently lacks substance. Mr Hennessey says that there need not be a trial in this case and that I can strike out the substance of the defence filed by Architectus at this stage. That claim to strike out the defence is made in an amended notice of motion filed by Mr Hennessey on 10 November 2009 and which I heard argument about on 4 February 2010. I had considerable assistance from both counsel, Mr Berwick for Mr Hennessey and Mr Foster for Architectus, both in their oral and written submissions. 5. Mr Berwick, on behalf of Mr Hennessey, raises the two principal issues which were argued before me. They are these: whether I have jurisdiction sitting as a District Court Judge to grant the relief which Mr Berwick says is claimed by Architectus in its defence and whether I should strike out the defence in any event as lacking substance. 6. I turn first to the issue of whether or not I have jurisdiction. In para 25 of its defence Architectus asserts that the Employment Deed is void and "seeks declarations" from this Court to that effect. Architectus secondly asserts that the employment deed "ought to be rectified" so as to remove the clause providing for two years' notice. By his notice of motion, Mr Hennessey asks me to strike out para 25 on the basis that this Court "does not have the jurisdiction to make the order sought". 7. The point being made by Mr Hennessey concerns the equitable jurisdiction of the District Court. The equitable jurisdiction of this Court is the subject of s 134 of the District Court Act 1973. The only two provisions which would appear to have any arguable relevance are s 134(1)(b) and (1)(h). Section 134(1)(b) is not available in this case because the case does not involve the sale or purchase or lease of property. Subsection (1)(h) is not available in my opinion because the "claim" referred to in that provision is for recovery of money. In that regard I accept Mr Berwick's submissions that that is clearly the meaning of the provision. What Architectus, however, is claiming in its defence is rectification of the contract and a declaration. 8. In any event, Mr Foster on behalf of Architectus, does not appear to challenge the argument to the effect that s 134 of the District Court Act does not assist him. He relies, so far as the claim for rectification in the defence is concerned, on s 6 of the Law Reform (Law and Equity) Act 1972. Section 6 of the Law Reform (Law and Equity) Act provides as follows: "6. Every inferior court shall in every proceeding before it give such and the like effect to every ground of defence, equitable or legal in as full and ample a manner as might and ought to be done in the like case by the Supreme Court under the Supreme Court Act 1970." 9. Mr Berwick on behalf of Mr Hennessey argues that Architectus is asking the court to rectify the contract between Mr Hennessey and Architectus and this does not amount to a "ground of defence" so that s 6 of that Act is not available to Architectus. Mr Berwick argues that para 25 of the defence is a claim for rectification and not a "ground of defence". Mr Berwick relies upon a passage in the fourth edition of Meagher, Gummow and Lehane's Equity Doctrines And Remedies (2002) as well as on the decision of the New South Wales Court of Appeal in United Telecasters Sydney Limited v Hardy (1991) 23 NSWLR 323. 10. In that case the late Samuels JA, then Acting President of the Court of Appeal and with whom Clarke and Meagher JJA agreed, referred to with apparent approval, over 332-333, a passage from the second edition of Equity Doctrines And Remedies by Meagher, Gummow and Lehane (1984). That passage did not vary in the relevant substance from the corresponding passage in the fourth edition of the same publication relied upon by Mr Berwick. The Court of Appeal emphasised in its judgment the distinction between equitable relief being sought and an equitable defence being relied upon. 11. The learned authors in the fourth edition confirm the view expressed by them in the earlier edition that the term "equitable ground of defence" is "referable to an equity such as unclean hands or laches, which was developed in equity as a disentitlement of the plaintiff from relief in that jurisdiction." The authors then refer to what they call an equitable "defence" of another kind, which "is essentially a claim asserted by the defendant to independent relief which must be made out before he can defend the action of the plaintiff in the current proceedings." 12. The authors rely upon other arguments for their view that the reference in s 6 of the Law Reform (Law and Equity) Act to an equitable defence should be construed narrowly rather than having a wider operation. They refer to the fact that the section extends beyond the District Court to other inferior courts which have otherwise no equitable jurisdiction. They also refer to s 7 of the same Act which provides that the Act does not "enlarge the jurisdiction of any court as regards the nature or extent of the relief available in that court." Effectively it is those passages and arguments which, to my mind, appear to attract the approval of the Court of Appeal in United Telecasters v Hardy. 13. Mr Foster, on behalf of Architectus, points to the examination of the argument advanced by Meagher, Gummow and Lehane by Master Allen, as his Honour then was, in Yahl v Bridgeport Customs Pty Ltd (NSWSC, unreported, 31.7.84), a case in which the Master compared those arguments with a broader interpretation given to the corresponding provision in the English legislation by the Court of Appeal in England. As Mr Foster pointed out, Master Allen pointed to room for doubt as to which of the constructions is to be preferred. However Master Allen's judgment was delivered in 1984 and preceded by nearly seven years the judgment of the Court of Appeal in United Telecasters Sydney. 14. In my opinion Mr Berwick's submissions are right. It seems to me that the relief sought by Architectus in para 25(a) and (b) are infected by the same jurisdictional problem. Both clauses seek a form of equitable relief, the first a declaration and the second rectification of the contract. Adopting what was said in the fourth edition of Meagher Gummow and Lehane regarding another kind of equitable defence, in my opinion the forms of relief sought by Architectus amount to "essentially a claim asserted by the defendant to independent relief which must be made out before he can defend the action of the plaintiff in the current proceedings." 15. Architectus also argues that essentially Architectus by pleading the defence of mistake, which is one of the defences it relies upon, is relying upon matters in the nature of unclean hands. It refers to an allegation made by it in its defence that Mr Hennessey knew or ought to have known that the employment deed was mistakenly entered into by Architectus. Alternatively Architectus relies upon what it says is an unconscionable reliance by Mr Hennessey on what he says is a common mistake. 16. Neither of those in my opinion amounts to an equitable defence. It may be in a sense that Architectus is relying upon "unclean hands" but this has nothing to do with a resistance to any equitable relief being sought by the plaintiff. The plaintiff is seeking a straightforward form of relief at common law under what it claims to be a contract. The defendant resists that by relying upon the doctrine of mistake but the relief which it seeks is clearly in my opinion equitable. 17. In my opinion this court does not have the jurisdiction to grant the relief sought by Architectus in para 25 of its defence. 18. Although no longer necessary to decide, in deference to the extensive and helpful arguments addressed by both counsel to the question whether the certain clauses in the defence should be struck out, I will express my views upon those submissions. Those views which I express may or may not become relevant. 19. The central component of Architectus' defence is pleaded over paras 22 to 25. Architectus pleads that the Employment Deed was entered into under a common mistake between the parties. Alternatively it says that the deed was entered into under a unilateral mistake on its own part: that pleading appears in para 22. It goes on to plead that because of those mistakes the Employment Deed does not embody the agreement earlier reached between the parties: that appears in para 23. In para 24 Architectus says that Mr Hennessey provided no consideration for the term in the deed providing for two years' notice. Finally in para 25 Architectus seeks relief by way of declarations and rectification. 20. In his notice of motion Mr Hennessey asks that para 22 of the defence "be struck out on the grounds that the matters raised in para 22 are irrelevant and embarrassing." This ground does not appear to be the focus of Mr Berwick's submissions. As Mr Foster points out rather "the submissions are predicated on the fact that para 22 of the pleading is correct but that the pleading does not go far enough to justify what is sought by the defendant." 21. In essence what Mr Hennessey is arguing is that Architectus' defence discloses no basis upon which his claim can be resisted. His argument is developed by Mr Berwick through a careful and comprehensive analysis of the state of pleadings and the legal doctrines relied upon by Architectus. Mr Berwick closely analyses the law as well as equitable doctrines associated with unilateral and common mistake. 22. I would make the following three observations about the pleadings and the authorities referred to. The first is that Architectus has verified its pleadings. Hence there stands as evidence in this case the assertion that there was a unilateral mistake which "was known to the plaintiff". Secondly, the plaintiff verified his statement of claim but it contains no assertion regarding his state of knowledge at any relevant time. Thirdly, the cases referred to by Mr Berwick about the law of mistake and equitable remedies emphasise the importance of the state of knowledge of one ore more of the parties where equitable relief is being sought. 23. For example in Taylor v Johnson (1983) 151 CLR 422 Mason ACJ and Murphy and Deane JJ said that a mistaken party will be entitled in equity to rescind the contract "if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension" (at 432). 24. In another case referred to by Mr Berwick, Misiaris v Saydels Pty Ltd (NSWSC, unreported, 10.5.89), Young J, as his Honour then was, expressed the view that "it is enough that the defendant strongly suspects that the plaintiff has made a mistake of a fundamental nature about the contract for the court to provide the remedy of rectification." Young J referred to the decision of the English Court of Appeal in Bates (Thomas) and Son Limited v Wyndhams (Lingerie) Limited [1981] 1 WLR 505. His Honour referred to the judgment of Buckley LJ at 516 where his Lordship spoke of circumstances where equity would intervene to grant relief where there has been a unilateral mistake. One of the circumstances was that the non-mistaken party "was aware of the omission or the inclusion and that it was due to a mistake on the part of" the mistaken parties. 25. In both of the Australian cases Taylor v Johnson and Misiaris v Saydels Pty Limited the respective courts were required to apply the legal principles to factual findings. For example in Misiaris Young J reviewed the evidence and made findings of fact, some of which depended upon his observation of a witness. In Taylor v Johnson their Honours said at 426 that to "no small extent, the issues between the parties on the argument in this court are issues of fact." Their Honours went on at the following page to draw "a general inference which flows from the evidence" that the parties "each believe that the other was acting under a mistake or misapprehension". 26. Having made those observations, for the following reasons I express the view that there is much force in the plaintiff's argument that the defence pleaded by the defendant is weak, even threadbare. 27. First, I think there is little substance in the argument about the Employment Deed lacking consideration. The Employment Deed not only contains promises by Architectus such as the two year notice period but extra responsibilities on the part of Mr Hennessey contained in, for example, clauses 4, 9 and 10. I expect that the parties did not discuss sick leave or compassionate leave before entering the Employment Deed but Architectus could hardly claim that such leave was not available to Mr Hennessey because Mr Hennessey offered no consideration. 28. Secondly, Mr Foster on behalf of his client argues that if Mr Hennessey had been terminated before the Employment Deed, the notice period would have been one month's reasonable notice. He says that would have been an implied term. That is probably right. But it seems to me the correct analysis is that after the parties entered into their verbal agreement that agreement was varied to the extent that the written document differed from the verbal agreement. Both parties assumed obligations which were previously unstated. 29. Thirdly, Mr Foster argues that the inclusion of a two year notification period "goes so far beyond what was (or ought to have been) within the reasonable contemplation of the parties, that it was (or ought to have been) evident to the plaintiff upon receipt of the employment deed, that the inclusion of this two year notice term was a mistake." I do not think that the assertion that the two year notice period went well beyond what was in the reasonable contemplation of the parties stands comfortably with a letter written by Architectus to Mr Hennessey on 2 September 2008 where Architectus said that it regarded the job "as a long term role" and that "you will work with us for many years". I think that letter also impacts unfavourably upon Architectus's argument that "the silence of the plaintiff in the circumstances amounts to grounds upon which rectification can be granted." 30. The test which I have to apply in deciding whether or not to strike out the grounds of defence which Mr Hennessey asks me to strike from the Architectus defence are well settled. The case often referred to - and referred to in these proceedings - is General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, a decision of Barwick CJ at first instance. It is by reference to the criteria in that authority that I express the views that I am about to express. 31. I think the likely outcome of these proceedings is the result which is pointed to by Mr Hennessey. However Mr Hennessey wants to terminate these proceedings at the outset. Adapting words referred to by Barwick CJ in General Steel Industries from Sir Owen Dixon's judgment in Dey v Victorian Railways Commissioners (1949) 78 CLR 62, Mr Hennessey wants to invoke the summary intervention of this court to prevent Architectus submitting its case for determination in the appointed manner by the court. 32. Architectus seeks this relief in a case which turns very much on the state of knowledge of Mr Hennessey in circumstances where Mr Hennessey has not gone into evidence at this stage about his state of knowledge. It seems to me on balance that it is not an appropriate remedy to grant at this stage. Architectus should be afforded at least the opportunity to administer interrogatories. To my mind this case does not fall within the class of case appropriate for this peremptory remedy described by Barwick CJ in General Steel Industries at 129. His Honour there described the test as being variously expressed in terms such as "so obviously untenable that it cannot possibly succeed", "manifestly groundless", "so manifestly faulty that it does not admit of argument", "discloses a case which the court is satisfied cannot succeed", "under no possibility can there be a good cause of action" and "be manifest so that to allow the pleadings to stand would involve useless expense". 33. Nevertheless, as I say, these are just views which I express and which may or may not become relevant or helpful to anyone in the future. 34. Accordingly I grant the order sought in paragraph 4 of Mr Hennessey's amended notice of motion of 10 November 2009, namely I strike out para 25 of Architectus' defence on the grounds that this court does not have the jurisdiction to make the order sought in para 25. 35. All right they are my reasons, and I should add I otherwise refuse the relief sought by Mr Hennessey in his amended notice of motion. HIS HONOUR: Mr Atkinson, you probably want to consider your position about what you want to do - is there anything I can do now - I'm thinking of s 7 of the Law Reform (Law and Equity) Act about you going somewhere where you can claim that relief. What do you want to do? ATKINSON: Your Honour I must confess my principal in Melbourne must have mislaid, missed the date. I got a call this morning-- HIS HONOUR: That's right you're not in a position to argue-- ATKINSON: I'm not really in a position to raise those matters, only as I understand it there may - and Mr Wilson correct me if I'm wrong given that I was given limited instructions, that there is an agreement for costs to be costs in the cause or determined at another time. WILSON: Your Honour there'll need to be an argument about costs. The practicalities are that this matter is in for directions on Monday. What I propose your Honour is that I have a discussion with my friend's principal during the course of the day about what directions will need to be made on Monday. Those directions may be to stand the matter over for a week or two so that my friends can consider-- HIS HONOUR: Their position. WILSON: --what application, if any, needs to be made. Your Honour when will a - can I ask when a transcript of this judgment - this helpful judgment will become available? HIS HONOUR: I direct that a transcript be taken out of this judgment and be made available to me as soon as possible. WILSON: Your Honour for practical reasons I think the parties would benefit from having this - from having the transcript of this judgment available-- HIS HONOUR: I agree with you. WILSON: --which may determine what happens. HIS HONOUR: No, I see your point. I'm just thinking of giving a time for the transcript. If you were to, at the Directions, stand it over for two weeks instead of one week, I could ask for a transcript say by next Thursday which I could revise - perhaps next Wednesday, which would give me two days, I'll see if I can revise it by the weekend, get it to you by Friday of next week. WILSON: Thank your Honour. HIS HONOUR: So then you've got a week with the judgment. I direct the transcript to be made available to me on or before next Wednesday 3 March 2010 and I'll revise that with - and I'll ask my associate to remind me that I will try and get the revised version to you through the transcript people by close of business on Friday the 5th. She'll put a note in her diary. You'll need to go to the registry, she reminds me and tell the registry what your email addresses are so that the transcript can be sent to you. If in doubt she'll explain it to your after I adjourn. WILSON: Can I ask whether your Honour has any more clout with the powers that be than do I, so that for instance does your Honour or his associate have any ability to park the matter with your Honour, if I can use that inelegant term, to save me an appearance at the directions hearing on Monday? HIS HONOUR: That's all right provided you don't mind coming to Parramatta where I'm sitting in crime. WILSON: Thank your Honour. HIS HONOUR: Is that okay? WILSON: That's not helpful. I'll undertake to mention the matter on - I'll speak to my friend and stand it over for two weeks. HIS HONOUR: I think that's a good idea. WILSON: Thank your Honour. HIS HONOUR: That gives us time to get the transcript organised without too much - I don't want to ask the transcript people to have it ready on Monday. I think that's a but unreasonable, but Wednesday and I'll try to get it to you by Thursday. Now then what do you want to do after that? So all I've done is strike out para 25. I've expressed views about the others rather than give judgments about them or orders in case the defendant wants to go elsewhere. WILSON: I understand your Honour. HIS HONOUR: If he doesn't, then you've heard my views and I'll make orders - no, I did, didn't I? Actually dismissed - I dismissed your other relief. WILSON: My thoughts your Honour are that if the matter can come back before you in say two weeks at a time convenient to you at that stage, we should then be able to give your Honour an indicating of whether my friend's principal - or whether the defendant stays in this court or goes elsewhere. If he stays in this court, appropriate orders can then be made. The matter - your Honour can either refer the matter to the directions hearing which will be in the following week so that a timetable can be handed up for the appropriate conduct of the remainder of the matter, which will be along the lines of either administration of interrogatories more likely, plaintiff file his affidavit, defendant respond and we'll work towards a day. HIS HONOUR: I must say I think that despite what I've said in my judgment about the jurisdictional point, I had thought that that meant that I had no jurisdiction at all in the matter, but that was wrong. That's why I qualified what I had said about the balance of the relief; that it was not necessary for me to rule on that and I should now say that I was wrong about that. I will - I can see that I can grant, because the relief you seek Mr Wilson is quite specific. That is that certain paragraphs be struck out and the view I have taken is that you're right about para 25. I have struck that out. But you're not right in the balance about paras 22, 23 and 24 and I have refused your relief. Does that make sense to you? WILSON: Yes your Honour. HIS HONOUR: so look if you're both happy, what I'll do is in revising the judgment, I might make my judgment reflect the views which I have now just expressed; that it is appropriate for me to grant the balance of the relief, that is to refuse your relief on paras 1, 2 and 3, but grant your relief in para 4. Because it's not as if I have no jurisdiction whatsoever. I was labouring under that misapprehension. I do have jurisdiction. WILSON: That's the view I took your Honour. HIS HONOUR: Thank you, good. I was just a bit muddled in my thinking about it, but I now realise that once I got to making the orders which I should have looked at first, I realised that I was labouring under that misapprehension. So my judgment will reflect the views that I have more recently expressed, which sound as though they're consistent with your views. ATKINSON: Sorry your Honour, just to clarify. You've granted the orders sought in paras 4 and 5? HIS HONOUR: No. The amended notice of motion I have granted the order sought in para 4, which is to strike out para 25 of the defence. so para 25 of your defence is gone because I have no jurisdiction to grant it, the relief sought. ATKINSON: I understand that. 36. I refuse paras 1, 2 and 3 of the amended notice of motion. HIS HONOUR: So your paras 22, 23 and 24 of your defence are still in place. They have not been struck out. Does that make sense? ATKINSON: It does your Honour. I apologise. I'm trying to get on top of this. HIS HONOUR: It's important to clarify. Now gentlemen do you want a date? I can offer half an hour. I mean if it's going to be a costs argument it should be no more than half an hour. WILSON: And it can probably be prefaced by some short submissions your Honour. HIS HONOUR: That's a good idea. ATKINSON: The only difficulty is that I don't have at present my instructing solicitor's availabilities. Would it be possible for the parties to approach your associate by facsimile or email next week? HIS HONOUR: Yes, email is best. She'll give you her card, she'll have her - yes, not fax. Don't use her fax because we're at Parramatta. Use her email. It's sensible if you copy each other in to any emails, reply all and I know you probably won't do this, but occasionally she finds legal practitioners arguing the point in setting these dates. It's not for her to resolve that. You need to come up with an agreed date, which I am sure you will. If you can't, then it's not for her to resolve that. She will expect you to email in - you can email each other to try to find the date and see what's available, but if there's some problem it's not for her to resolve, but usually I find these things work out by the email including everyone. Everybody finds a date that suits everybody else. It'll be at Parramatta. We may make it 9.30 if I have a jury trial so that we can not interfere too much with the trial and I'll give you time to get those dates. ADJOURNED ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.