“Pleading” your case in court

A dispute before the Court (generally referred to as litigation) is an expensive, time-consuming and uncertain process. Despite legal professionals recommending their client(s) to consider an early resolution of any dispute and avoid any court proceedings, it is not always possible and it may result in a dispute in court.

Pleadings mean how you (as a Claimant or Defendant to a civil claim) write or state your story or case to a judge. There is no “right” or “wrong” way to plead your case and no simple formula to ensure that your pleading is perfect. It is important that the pleadings set out an unambiguous and unequivocal story of what occurred. The pleadings must conform to rules of the relevant court as failure to do so may lead to significant legal costs and an unsatisfactory outcome.

This article narrates details of a recent matter in which my timely vigilance in ensuring that my client puts forth his unambiguous story before the court resulted in my client saving significant legal costs and achieving satisfactory outcomes.

The “Story” or ”Pleadings”

The claim involved a dispute between liquidators of an insolvent company and two previous officers of the insolvent company with my client being one of the previous officers. The liquidators claimed that both defendants failed to comply with their respective statutory and fiduciary obligations resulting in the company’s funds being diverted to bank accounts of unrelated entities. The liquidators claimed that both defendants must repay the monies paid from the insolvent company’s bank accounts to unrelated entities.

The Corporations Act 2001 (Commonwealth) sets out specific obligations on officers employed in a company, however small or large the company may be. Any officer of a company must be vigilant in performing his/her role, however at times he or she may be faced with difficult circumstances wherein other officers may have inappropriately dealt with the funds held by the company.

In circumstances where officers (like my client) become subject of future court proceedings, they must plead their case or narrate their story of what occurred at the relevant point in time based on evidence to substantiate their story.

The co-defendant in this case, also a previous employee of the company, put forth a defence that my client transferred the funds and was responsible to repay the monies to the liquidators.

My client’s unequivocally pleaded in his defence that:

1. he was an officer of the insolvent company and was never an authorised signatory of the insolvent company’s bank accounts;

2. due to lack of access to insolvent company’s bank accounts he could not transfer monies to any unrelated entities and never participated in transferring monies to unrelated entities; and

3. specific persons, who were office-bearers of the insolvent company, had access to and controlled the insolvent company’s bank accounts transferred the insolvent company’s funds to unrelated entities.

On being served with a copy of my client’s pleadings, the co-defendant amended his defence. The co-defendant stated that he agrees with my client’s defence as to specific persons, excluding both defendants, transferred the funds to unrelated entities.

The effect of “Proper” Pleadings

The parties to the claim subsequently attended a mediation in court. The liquidators conceded that my client’s pleadings compelled them in making a decision to settle the dispute on reasonable terms and conditions rather than to proceed to trial given the difficulties they may have in proving their story / pleadings.

Getting your client’s pleadings right the first time is a more efficient and cost effective. The court procedures generally allow parties to amend their pleadings; however, it is important to ensure that all available information is taken into account the first time when preparing any pleadings for your client.

At the very least, it will reduce the legal costs in unnecessarily amending pleadings and could ultimately avoid the dismissal of a meritorious claim. Giving adequate time and consideration to prepare your client’s pleadings correctly from the beginning positively impacts the cost, efficiency and outcome of any court proceedings.

Please note that any information included in this article is general information only and does not constitute legal advice. Please contact us to discuss your particular circumstances.

Archana Luktuke12 November 2019

Mr and Mrs Joe Bloggs contacted me to seek legal advice on a proposed commercial lease provided by the real estate agent for their upcoming coffee shop in suburban Perth.

Mr and Mrs Bloggs were being rushed into signing the proposed lease, which they were not comfortable with. They started by explaining how their friend, who runs a hair dressing salon, was provided with extensive written information and a proposed lease to review before executing it. This was in stark contrast to a small seven-page template that they received by way of a proposed lease from their letting agency. I explained to Mr and Mrs Bloggs that their friend and they are subject to separate leasing legislation, however their due diligence before signing the proposed lease will assist them in the long run. In Western Australia, leases for commercial premises can be categorised as retail leases and commercial leases. It is important to note that all commercial leases in Western Australia are not governed by the same legislation.

A summary of the safeguards that a potential lessee of a commercial lease must consider is discussed below.

Retail Leases

Retail leases are governed by Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (the “Retail Shops Act”) and are limited to premises:

(a) with a lettable area of 1,000 m2 or less;

(b) used for carrying on a business and that are in a retail shopping centre (a group of premises, 5 or more) or otherwise; and

As at 1 January 2013, 'specified businesses' are limited to:

(a) dry cleaning;

(b) hairdressing;

(d) shoe repair (which includes key cutting and engraving); and

(e) sale or rental of videos tapes, DVDs, electronic games and other similar amusements.

Any landlord, whose commercial premises is governed by the Retail Shops Act, is bound by significant number of obligations as to the information he/she needs to disclose to a potential lessee prior to executing the lease. In comparison landlords, whose premises is governed by the Transfer of Land Act 1893 (WA) and the Property Law Act 1969 (WA), are not bound by any specific obligations as to the information he/she needs to disclose to a potential lessee prior to executing the lease.

The Retail Shops Act did not apply to Mr and Mrs Bloggs proposed lease. Therefore, began Mr and Mrs Bloggs’ due diligence journey before executing their commercial lease.

Commercial Leases

The real estate agent provided Mr and Mrs Bloggs with two documents – the Commercial Lease with Annexures and General Terms and Conditions of the Lease. Mr and Mrs Bloggs were seeking advice as to whether both these documents captured the terms and conditions of the agreement between the landlord and them.

Typically, most real estate agents would fill in the details in a Commercial Lease template published by Real Estate Institute of Western Australia (REIWA) and provide it along with the General Terms and Conditions of Lease, also published by REIWA, to any potential lessee.

The General Terms and Conditions of Lease document sets out the obligations and liabilities of the landlord and the potential lessee, however any potential lessee must review whether the following key details have been included in Commercial Lease document provided to him/her:

(a) whether the potential lessee and the landlord have been accurately identified (is the potential lessee and/or the landlord an individual or a company);

(b) whether any guarantors have been included in the lease;

(d) whether any other items (such as equipment) owned by the landlord are being included with the lease;

(e) the term of the lease;

(f) whether the potential lessee has an option or multiple options to renew the lease;

(g) the amount of rent and the frequency of payment of rent;

(h) the mechanism and frequency of rent review;

(i) what are the types of outgoings that the potential lessee is to pay and an estimated amount per month;

(j) whether a security deposit or bank guarantee will be held and for what amount;

(k) permitted use of the premises;

(l) whether the landlord has obtained approvals for the intended use and signage from the local council and the strata management (if applicable);

(m) whether the potential lessee has been provided with copies of approvals for intended use;

(n) insurance requirements to be complied with by the potential lessee; and

(o) how the agreement can be terminated and what is the notice period.

Mr and Mrs Bloggs proposed lease document had the following inadequacies:

(a) incorrect details of the proposed lessee – Mrs Bloggs was named as a lessee in place of the potential lessee company;

(b) the landlord had not obtained any approvals from the local council and the strata management for the intended use and signage although the terms stated otherwise;

If Mr and Mrs Bloggs would have signed up a lease with the inadequacies mentioned above, they would have put themselves in a financial predicament as the incorrect person would have been bound to comply with terms of the lease without any approvals to run the business at the premises and with no estimate of the costs towards outgoings.

Takeaway Message

Caveat emptor – buyers (in this case potential lessees) beware:

The clear message for any individual or entity considering a commercial (non-retail) lease is to undertake adequate due diligence and seek independent legal advice before executing any commercial (non-retail) lease.

Please note that any information included in this article is general information only and does not constitute legal advice. Please contact us to discuss your particular circumstances.