ALLSTATE Plumbing Pty Ltd v Crouch Developments Pty Ltd [No 2] - [2011] WADC 60

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: ALLSTATE PLUMBING PTY LTD -v- CROUCH DEVELOPMENTS PTY LTD [No 2] [2011] WADC 60

CORAM: PRINCIPAL REGISTRAR GETHING

HEARD: 30 MARCH 2011

DELIVERED : 14 APRIL 2011

FILE NO/S: CIV 3314 of 2008

BETWEEN: ALLSTATE PLUMBING PTY LTD
Plaintiff
AND
CROUCH DEVELOPMENTS PTY LTD
Defendant

Catchwords:

Application to strike out proceedings - Abuse of process - No reasonable cause of action - Proportionality

Legislation:

Nil

Result:

Application allowed - Pleadings partially struck out - Limits placed on reamendment

Representation:

Counsel:

Plaintiff: Mr S J Blyth
Defendant: Mr B P Wheatley

Solicitors:

Plaintiff: Lewis Blyth & Hooper
Defendant: Mossensons

Case(s) referred to in judgment(s):

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [No 2] [2009] WASC 301
Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279
Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82
Batistatos v Roads & Traffic Authority of New South Wales (2006) 80 ALJR 1100
Brocx v Hughes [2010] WASCA 57
Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No5) (1997) 18 WAR 334
Commonwealth of Australia v Albany Port Authority [2006] WASCA 185
D & M (Australia) Pty Ltd v Crouch Developments Pty Ltd [2010] WASC 130
Dare v Pulham (1982) 148 CLR 658
Fletcher (as trustee for the Brian Fletcher Family Trust) v St George Bank Limited [2010] WASC 75
Frank Jasper Pty Ltd & Anor v Deloitte Touche Tohmatsu (a firm) & Ors [2006] WASC 24
Hunter v Chief Constable of the West Midlands Police [1982] AC 529
Jago v District Court of New South Wales (1989) 168 CLR 23
Kimberley Downs Pty Ltd v State of Western Australia (Unreported; WASC, Library No 6414, 25 August 1986)
May v Thomas [2008] WASCA 215
Neilson v City of Swan [2006] WASCA 94
R v Carroll (2002) 213 CLR 635
Ridgeway v The Queen (1995) 184 CLR 19
Rogers v The Queen (1994) 181 CLR 251
Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236
State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146
Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323
Walton v Gardiner (1993) 177 CLR 378
Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290

PRINCIPAL REGISTRAR GETHING: By application dated 6 December 2010 the plaintiff sought orders striking out par 11 to par 23 of the defendant's substituted defence dated 13 October 2010 pursuant to Rules of the Supreme Court 1791 (WA) (RSC) O 21 r 3(4). On 10 February 2011, I directed the defendant to file and serve a marked up version of its defence. The version of the pleading which was considered at the hearing before me is a document entitled Amended Defence, Set off and Counterclaim dated 25 February 2011 (Amended Defence).
The application takes as its context the plaintiff's claim for $155,554.30 for plumbing labour, materials and services provided by the plaintiff to the defendant in relation to the construction of a development at 90 Scarborough Beach Road, Mount Hawthorn. The defendant was the head contractor for the development. The owner and developer was a company by the name of D & M (Australia) Pty Ltd (D & M Australia). In the Amended Defence, the defendant accepts that the plaintiff was entitled under the contract to a sum of $89,422.30 based on the work it had actually completed. The counterclaim makes various allegations which are set out in detail below, which, if accepted, would entitle the defendant to an award of damages well in excess of the amount it says was otherwise due and payable under the contract.

History of the pleadings challenges

The version of the defence on the record prior to the Amended Defence is based on a minute dated 14 January 2010. By orders made on 4 February 2010, the court struck out par 11(b) and par 11(c) of the particulars to par 11 of the 14 January minute and otherwise ordered the minute to stand as the amended defence in the action.
By application dated 23 March 2010, the defendant sought leave to file and serve further and better particulars in relation to par 11(b) and par 11(c). That application was refused by orders made on 20 April 2010. By notice dated 4 May 2010, the defendant appealed from the 20 April 2010 decision.
When the appeal came on for hearing before his Honour Judge Birmingham QC on 21 July 2010, counsel for the defendant abandoned the appeal and instead made an oral application to amend the defence and counterclaim generally to deal with the deficiency that had been identified. There then followed some seven appearances before his Honour over a five month period at which eight minutes of proposed amended defence were considered. The final version of the minute was one dated 16 September 2010 (16 September Minute). At a hearing on 22 September 2010, his Honour dismissed the appeal and ordered the defendant to pay the plaintiff's costs of the multiple hearings, and of the review of the multiple minutes, on an indemnity basis, to be taxed and paid forthwith.
There is a disagreement as to the precise scope of his Honour's decision, a point to which I will return shortly. His Honour did state the following about a further application (ts 51, 57, 60):
BIRMINGHAM DCJ:   I suggest that the appropriate course in relation to this is the appropriate course is for your application for leave to amend will be adjourned sine die.
WHEATLEY, MR:   Very well, sir.
BIRMINGHAM DCJ:   In fact, what I might do is just simply make no order in relation to application for leave to amend. That won't foreclose you from bringing an application for leave to amend when it has been properly formulated with consideration of the matters that have been properly raised by counsel for the plaintiff.
….
I would, however, indicate that I would be prepared to grant leave to the defendant to seek - or to apply to amend in the ordinary way by application with a minute that has been properly formulated and settled with material facts being pleaded sufficient to identify the basis upon which the claim against the plaintiff is to be maintained. On the papers as they are presently filed that is not possible.
…
Mr Wheatley, I'll just make this observation that I think the pleading needs to come forward as a formal application. It was a bold effort to try and get it case managed to get there, but after five months I think it needs to be dealt with properly.

Appropriate basis for the current determination

Notwithstanding the comments of Judge Birmingham QC, the defendant filed an amended defence in reliance on RSC O 21 r 3. That rule, which was amended July 2010, provides (so far as it relevant):
(1)A party may amend any of its pleadings, without the leave of the Court, by filing its amended pleading not later than 7 weeks before the date fixed for the start of the trial of the case.
(2)A party served with a pleading amended under subrule (1) may make any amendment needed to any of its pleadings as a consequence of the amended pleading, without the leave of the Court, by filing its amended pleading within 10 working days after the date on which it is served with the amended pleading.
(3)A party served with a pleading amended under subrule (1) or (2) may apply to the case manager for any amendment in the pleading to be struck out.
(4)A party's application under subrule (3) must be made within 7 working days after the date on which the party is served with the amended pleading.
The operation of RSC O 21 r 3 was amended in its application to the District Court by amendment to District Court Rules 2005 (WA) coming into effect on 10 December 2010. In its amended form, r 48A relevantly provides:

(1)The RSC Order 21 applies, subject to this rule.
(2A)The RSC Order 21 rule 3 operates as if subrule (1) of it were replaced by subrule (2B) of this rule.
(2B)A party may amend any of its pleadings, without the leave of the Court, by filing its amended pleading —
(a)before any party files a certificate under rule 43(3a); and
(b)not later than 14 days before the date fixed for the first listing conference.

In the present action, there was a listing conference on 9 November 2009. Accordingly, had the Amended Defence been filed after 10 December 2010, the plaintiff would have had to seek leave to amend.
The parties proceeded on the basis that RSC O 21 r 3 applies, notwithstanding the comments of Judge Birmingham QC as to the appropriate way for the action to proceed.
The application pursuant to RSC O 21 r 3(3) was made on 6 December 2010, after the time limit prescribed in that rule. The defendant asserted that I should not extend the time within which this application was permitted to be made. This was on the basis that no explanation had been provided for the delay. In the context of the action as a whole, and given Judge Birmingham QC's comments, it is appropriate for the court to rule on the substance of the application. Accordingly, pursuant to RSC O 3 r 5 I will extend the time within which the plaintiff's application may be made until 9 December 2010, being the date of filing.
In the grounds accompanying the application, the plaintiff stated that the Amended Defence 'to all intents and purposes, does not disclose a reasonable cause of action and is, to all intents and purposes, a repetition of the same pleadings as pars 11 - 21 of the Minute of 16 September that were refused'. The plaintiff further submits that par 11 to par 23 of the Amended Defence constitute an abuse of process and ought to be struck out.
At the hearing before me on 30 March 2011, I stated that from a case management perspective I proposed to give the action a comprehensive review. This review would have three bases:
(a)whether the Amended Defence constituted an abuse of process;
(b)whether the Amended Defence complied with the rules of pleading; and
(c)what orders were warranted given the discretionary considerations I was required to consider in exercising the case management powers vested in me.
At the hearing, counsel for the defendant advised me that he did not appreciate that the issues to be argued went beyond the question of abuse of process. In response, I allowed the defendant an opportunity to file written submissions and drew the attention of counsel to two recent decisions in which I had considered the issue of discretion in the context of amendments to pleadings.
The defendant subsequently filed submissions dated 6 April 2011. The plaintiff filed submissions in reply dated 8 April 2011.

Abuse of process as a ground to challenge pleadings

A pleading, or part of a pleading, may be struck out if 'it is otherwise an abuse of the process of the Court': RSC O 20 r 19(1)(d). This is part of the wider power of the court to act to prevent its processes from being abused. This power has been described as 'the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people': Hunter v Chief Constable of the West Midlands Police [1982] AC 529, 536. This formulation was approved by the High Court in Walton v Gardiner (1993) 177 CLR 378, 393 and Court of Appeal in Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 [20].
The 'circumstances in which proceedings will constitute an abuse of process cannot be exhaustively defined and, in some cases, minds may differ as to whether they do constitute an abuse': R v Carroll (2002) 213 CLR 635, 657 [73]; also Batistatos v Roads & Traffic Authority of New South Wales (2006) 80 ALJR 1100, [6], [142]. The court may exercise its power in relation to an abuse of process 'as and when the administration of justice demands': Jago v District Court of New South Wales (1989) 168 CLR 23, 74; also Brocx v Hughes [2010] WASCA 57, [13]. 'What constitutes an abuse of process cannot be reduced to hard and fast rules or closed categories because notions of justice and injustice, as well as other considerations that bear on public confidence in the administration of justice, must reflect contemporary values and, as well, take account of the circumstances of the case': Brocx [79]; also Ridgeway v The Queen (1995) 184 CLR 19, 74 - 75; Batistatos [9]. Any procedural step in the course of proceedings that have been properly instituted is capable of being an abuse of the court's process: Rogers v The Queen (1994) 181 CLR 251,286; Batistatos [15]; Brocx [79].
I accept the proposition that it would be an abuse of process for a party to seek to amend a pleading by the inclusion of material that the court had previously ruled was deficient. If this were allowed, it would bring the administration of justice into disrepute. Parties have to accept that once the court rules on a point, subject to appeal rights, that ruling must stand for the purposes of the action.

Was the Amended Defence an abuse of process?

The issue of whether the Amended Defence amounts to an abuse of process depends on the scope of the decision of Judge Birmingham QC. The formal orders from the hearing only dismiss the appeal and deal with costs. The oral application for leave to amend was also dismissed. The reasons for decision appear in the transcript of the hearing on 22 September 2010. As the decision has not been published with a WADC reference, and as much turns on their scope, it is appropriate that I quote the key passages (ts 56 ‑ 57 - quoted in its unedited form):
…
A further minute was filed on 16 September 2010. When the matter came on today there is a fresh minute which again is subject to handwritten alterations in the course of the application. The minute of amended - of proposed amended defence and counterclaim has within it a number of new pleas which are objected to by the plaintiff.
The plaintiff quite properly identifies that the pleading is deficient in relation to material facts, particularly in relation to issues of knowledge and the manifest uncertainty created by the extent to which the defendant seems to wish to interchange by way of - by entity a party with whom the defendant was contracting, being in essence an entity which was controlled by Chinese investors who are members of a group, the group being members of the Chinese community in Perth involved in property development.
There are substantial deficiencies within the pleading and to the extent that the pleading has been objected to and the plaintiff has filed an outline of objections without specifically ruling on each of the matters pleaded, it is sufficient to say that the objections had merit such that to proceed with this application today would result in a pleading again or leave not being obtained.
As such, I have determined that it's no longer appropriate to allow this process to continue whereby the defendant is coming forward seemingly on a very regular basis and presenting new minutes in some hopeful expectation that ultimately the pleading will be right. …
In the present case there has been a failure to properly consider what is material factors and what are particulars. This is particularly so in a context where the measure of damage said to have been suffered by reason of the plaintiff is alleged to be breach of a subcontract agreement, extend beyond what might otherwise be seen to flow from that breach; namely, a loss of reputation and the loss of future contacts and additionally, costs incurred in relation to arbitration proceedings.
Whether these costs are too remote is a question to be decided after the facts of the case of the trial have been established. However, before there can be a trial it is important to ensure that the facts of the case which must be met by evidence are properly pleaded out to enable the parties to know the case they must meet. That is the fundamental requirement of the pleading.
On the pleadings as they have been put forward in the minute, I would not at this stage be prepared to grant leave to amend and accordingly, the application by the oral application by the defendant in relation to the amendments is refused.
I would, however, indicate that I would be prepared to grant leave to the defendant to seek - or to apply to amend in the ordinary way by application with a minute that has been properly formulated and settled with material facts being pleaded sufficient to identify the basis upon which the claim against the plaintiff is to be maintained. On the papers as they are presently filed that is not possible.
The defendant submits what I will refer to as the narrow view of the decision. On the narrow view, two issues are raised. The first issue is as set out in the paragraph just quoted commencing: 'In the present case there has been a failure…'. Its focus is on the damages flowing from the breach of contract claim, specifically whether those damages could extend to loss of reputation, loss of future contracts and costs incurred in an arbitration. These heads of damages were in par 13 of the 16 September Minute, but have been removed from par 13 of the Amended Defence as part of the breach of contract claim.
The second issue which the defendant says it has dealt with is the issue of knowledge. This is referred to in the paragraph quoted above commencing: 'The plaintiff quite properly identifies…'. The defendant says that par 11, dealing with knowledge, is now not relevant to the breach of contract claim, but only to the further claims pleaded. These claims refer to the knowledge pleaded in par 14 of the Amended Defence, which the plaintiff submits cure the defect identified.
The plaintiff submits what I will refer to as the wider view of the decision. This view is that the Judge referred to and endorsed the deficiencies identified in the outline of objections filed by the plaintiff. That document is a set of submissions by counsel for the plaintiff dated 21 September 2010. The key paragraph from the plaintiff's perspective is the paragraph quoted above commencing: 'There are substantial deficiencies…'.
I have read the entire transcript for the hearing on 22 September 2010. It seems clear to me that his Honour upheld all the objections to the 16 September Minute. There was no objection taken to par 1 to par 10 of the 16 September Minute (ts 28). At page 50 his Honour states: 'I'm prepared to allow those amendments to which there is no objection but I would otherwise uphold the objections made to the pleadings'.
It follows that if the defendant seeks to amend its defence without having addressed the detailed objections set out in the plaintiff's submissions dated 21 September 2010, that would be an attempt to file a pleading which contains objections accepted by Judge Birmingham QC. What his Honour clearly contemplated was that the defendant, if it wished to make yet another attempt at amending its defence, would make an application containing a minute of proposed amended pleading which addressed each of the objections set out in the 21 September submissions. The relevant question, then, is whether the defendant has done so. This requires me to review the Amended Defence in detail against the 21 September submissions.

Pleadings deficiencies – relevant law

In case I am wrong about the scope of the decision of Judge Birmingham QC, it seems appropriate that I review the amendments proposed in the Amended Defence to determine whether they ought to be struck out on the usual rules of pleadings.
When considering whether a pleading discloses a reasonable cause of action, all the facts alleged in the statement of claim must be accepted as true: Kimberley Downs Pty Ltd v State of Western Australia (Unreported; WASC, Library No 6414, 25 August 1986); Neilson v City of Swan [2006] WASCA 94 [18]. No evidence is admissible on an application of this kind: RSC O 20 r 19(2): Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236 [51].

Where the issue is whether the pleading sufficiently discloses the case that the opponent has to meet, the pleading must be reviewed on its face to determine whether it is sufficient. In determining the adequacy of the pleading, it is fundamental that a party is entitled to a statement of the opponent's case sufficiently clear to allow the party a fair opportunity to meet it: Dare v Pulham (1982) 148 CLR 658, 664; Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279, 286. A pleading may therefore be struck out where it is vague, ambiguous or pleaded at too greater a level of generality so as to leave the other party in doubt as to how to respond to the pleadings: Frank Jasper Pty Ltd & Anor v Deloitte Touche Tohmatsu (a firm) &Ors [2006] WASC 24 [11]. Where the amendment is made late in the life of the action, the amendment ought to be fully particularised: Fletcher (as trustee for the Brian Fletcher Family Trust) v St George Bank Limited [2010] WASC 75 [30].
In relation to function of particulars, the High Court in Dare stated (at 664, footnotes and references omitted):
Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it …; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial …; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings … But where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the evidence in a trial has closed …, though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon the facts actually established by the evidence…
As to the purpose of pleadings and particulars, in Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82, the Chief Justice stated (at 83 - 84 [4] - [8]):
It is, I think, important when approaching an issue of that kind to bring to mind the contemporary purposes of pleadings. The purposes of pleadings are, I think, well known and include the definition of the issues to be determined in the case and enabling assessment of whether they give rise to an arguable cause of action or defence as the case may be, and apprising the other parties to the proceedings of the case that they have to meet.
In my view, the contemporary role of pleadings has to be viewed in the context of contemporary case management techniques and pre-trial directions. In this Court, those pre-trial directions will almost invariably include; firstly, a direction for the preparation of a trial bundle identifying the documents that are to be adduced in evidence in the course of the trial; secondly, the exchange well prior to trial of non-expert witness statements so that non-expert witnesses will customarily give their evidence-in-chief only by the adoption of that written statement; thirdly, the exchange of expert reports well in advance of trial and a direction that those experts confer prior to trial; fourthly, the exchange of chronologies; and fifthly the exchange of written submissions.
Those processes leave very little opportunity for surprise or ambush at trial and, it is my view, that pleadings today can be approached in that context and therefore in a rather more robust manner, than was historically the case; confident in the knowledge that other systems of pre-trial case management will exist and be implemented to aid in defining the issues and apprising the parties to the proceedings of the case that has to be met.
In my view, it follows that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and apprising the parties of the case that has to be met, the Court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the Court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment.
Most pleadings in complex cases, and this is a complex case, can be criticised from the perspective of technical pleading rules that evolved in a very different case management environment. In my view, the advent of contemporary case management techniques and the pre-trial directions, to which I have referred, should result in the Court adopting an approach to pleading disputes to the effect that only where the criticisms of a pleading significantly impact upon the proper preparation of the case and its presentation at trial should those criticisms be seriously entertained.
Along a similar vein, Master Newnes, as his Honour then was, in Frank Jasper at [13] states the following:
The question of whether a pleading is so defective that it should be struck out is not, therefore, to be answered by any mechanical application of the rules of pleadings. It is generally to be answered by whether or not the pleading serves the fundamental objective of pleadings and whether any significant deficiencies in it can adequately be overcome by the provision of particulars or by some other means. While it is necessary that a pleading set out with reasonable clarity and detail the case that the other party must meet, the focus must be on whether the pleading is sufficient for the fair and proper disposition of the case, not whether it complies meticulously with the rules of the pleading.

Overview of the Amended Defence

The counterclaim set out in the Amended Defence has four components:
(a)breach of contract claiming damages for the cost of replacing or correcting incorrect sized water pipes, incorrect water metres and acoustic lagging - par 9, par 10 and par 13(a);
(b)breach of contract claiming damages for loss of profits in relation to the completion of the head contract for 90 Scarborough Beach Road – par 11, par 12, par 13(b) and par 13(c);
(c)breach of duty of care – par 14 to par 18; and
(d)misleading conduct – par 19 to par 23.
The plaintiff did not seek to challenge par 1 to par 10 of the Amended Defence. Neither is there any objection to par 13(a).

Breach of contract claim – head contract losses

The breach of contract claim in relation to losses arising out of the head contract is pleaded in the following terms:
11.At the time of making the Subcontract the Plaintiff was aware alternatively ought reasonably to have been aware that:
(a)the Defendant had entered into the Head Contract with the owner and developer;
(b)the owner and developer was controlled by Chinese investors who were and are members of a group of individuals in the Perth Chinese community involved in property development ('the Group');
(c)if the Plaintiff failed to carry out the Subcontract with reasonable diligence and expedition this would cause a dispute between the owner and developer and the Defendant with resultant loss to the Defendant or reputation and business opportunity particularly with members of the Group.
PARTICULARS
(i)Prior to 18 May 2006 Darrell Crouch on behalf of the Defendant advised Ray Beal on behalf of the Plaintiff that owner and developer with whom the Defendant had entered into the Head Contract was controlled by Chinese members of the Group;
(ii)the Plaintiff was aware from its previous contract with the Defendant for plumbing work for the construction of ten townhouses and seven commercial units at 401 Oxford Street, Leederville during 2005 and 2006 that the Defendant was regularly engaged as builder for projects such as construction of the premises pleaded in paragraph 2.
12.By reason of the Plaintiff's breach(es) of the Subcontract:
(a)a dispute arose between the owner and the developer and the Defendant;
(b)the owner and the developer did not pay the Defendant any further fees for the completion of the Head Contract.
13.By reason of the above, the Defendant has suffered loss and damage;
PARTICULARS
(a)Cost of replacing or rectifying the incorrect sized water pipes, incorrect water meters and acoustic lagging.
(b)Loss of opportunity to complete the Head Contract with a resultant loss of net profit of $18,750.
(c)Loss of the use of the sum of $18,750.
Paragraph 11(a), par 11(b) and par 11(c) were respectively par 11(a), par 11(b) and par 11(e) of the 16 September Minute. Paragraph 12 is new. Paragraph 13 is the same, save the claims for unrecoverable costs in related arbitration proceedings, payment of claims not made by the developer and loss of opportunity in relation to other contracts have been removed. The removal of these claims addresses concerns raised by Judge Birmingham QC.
It is convenient to deal with the issues of knowledge in relation to par 11 in the context of the negligence claim.
In relation to the claim for losses on the head contract, the plaintiff in the 21 September submissions drew the court's attention to a decision in relation to the head contract: D & M (Australia) Pty Ltd v Crouch Developments Pty Ltd [2010] WASC 130. This was an appeal from an arbitration in relation to the head contract. The plaintiff submitted that from these proceedings findings exist that:
(a)the costs of the defendant under the Head Contract were actual costs reasonably incurred, and therefore that as it was a 'cost plus' contract, costs of sub‑contractors including the plaintiff were actual costs reasonably incurred;
(b)items of defective work were the responsibility of the developer;
(c)the cause of any failure with respect to such items as incorrectly sized water pipes, defective water metres, failure to install acoustic lagging was the developer's wrongful termination of the head contract, which broke the chain of causation and therefore there is no obligation on the defendant (and therefore the plaintiff) in any event to undertake remedial works; and
(d)there is no basis to the complaint about the delay in completion.
The submissions go on to provide that there is an issue estoppel in relation to these findings or an abuse of process in pleading them.
In relation to the claim for losses under the head contract, there seems to have been a genuine attempt to address the issues raised by Judge Birmingham QC. The remaining claim is sufficiently pleaded and particularised for the plaintiff to know the case it has to meet. The issues arising out of the decision in D & M (Australia) can be dealt with by way of defence to the counterclaim and, if appropriate, a summary judgment application. I am not prepared to strike out par 12, par 13(b) and par 13(c) of the Amended Defence.

Amended Defence – Negligence claim

The negligence claim is pleaded in par 14 to par 18 of the Amended Defence in the following manner:
14.Further or in the alternative the Plaintiff owed the Defendant a duty of care to exercise due care, skill, diligence and expedition in the provision of its services to the Defendant.
15.In or about July 2006, Darrell Crouch on behalf of the Defendant:
(a)requested the Plaintiff to provide a plumbing quote for the construction of 35 residential apartments at 52 Wickham Street, East Perth for Challenge Mirage Pty Ltd ('Challenge');
(b)advised Ray Beal on behalf of the Plaintiff that Challenge was controlled by Chinese investors who were members of the Group.
16.Between January and April 2008, Darrell Crouch on behalf of the Defendant verbally advised Ray Beal of complaints by the owner and developer, by correspondence dated 29 January 2008, 30 January 2008 (date received), 4 February 2008, 8 April 2008 and 24 April 2008, regarding the lack of diligence and expedition of the Plaintiff.
17.Negligently and in breach of the duty of care pleaded in paragraph 14 the Defendant failed to carry out the plumbing work with reasonable diligence and expedition.
PARTICULARS
The Defendant repeats the particulars to paragraph 10.
18.The Defendant:
(a)repeats paragraph 11 and 12;
(b)repeats paragraph 15 and 16;
(c)by reason of the Plaintiff's breach of duty pleaded in paragraph 17 has suffered loss and damage.
PARTICULARS
(i)The Defendant repeats the particulars to paragraph 13(b) and (c).
(ii)Loss of opportunity to be engaged as builder of 35 residential apartments at 52 Wickham Street, East Perth for Challenge, notwithstanding that the Defendant's tender was the lowest tender received by Challenge, resulting in a loss of margin in the sum of $605,000.00.
Paragraph 14, par 15 and par 17 are identical to par 14, par 14A and par 15 of the 16 September 2010 Minute. Paragraph 16 is new. Paragraph 18 is similar to par 16 of the 16 September 2010 Minute in that both refer back to par 11 and par 12. Paragraph 18, particularly (ii), is similar to par 13(v) of the 16 September Minute.
Including the relevant portions of par 11, the amendments made to address the plaintiff's objections include:
(a)to make the references to the Group consistent, including to delete references to 'investor' members of the Group;
(b)in par 11 (ii) to include a reference to a specific development;
(c)to delete par 11(c) of the 16 September, this being a reference to members of the Group keeping each other informed;
(d)to delete par 11(d) of the 16 September Minute, being a plea that the members of the Group were active property developers; and
(e)in par 15(a), refer to a 'plumbing' quote.
However, a key part of the 21 September submissions has not been addressed as follows (page 3):
There is no plea of material facts as to the individuals who stand behind Challenge or their association or connection with the people who stand behind D & M Australia, let alone that this caused Challenge to refuse to enter into a contract with the Defendant (which but for these matters Challenge would otherwise have entered into with the Defendant).
This deficiency remains. The references to the 'Group' in par 11(b) and par 11(c) are so vague as to be embarrassing. In order for the plaintiff to know the case it has to meet, the pleading would need to set out, at the very minimum, the names of each member of the Group, or at least those members relevant for the purposes of the claim.
The particulars do not support the entirety of the pleaded facts. The particulars do not support the plea in par 11(c) relating to loss of reputation and business opportunities. There are no particulars as to the request in par 15(a) and the advice in par 15(b); for example, was it express or implicit from the actual words used. There are no particulars of the conversations in par 16.
There is then no plea as to how information about the contract with D & M Australia came into the possession of the controlling minds of Challenge. There is no plea as to what relevant knowledge was in the minds of those controlling Challenge. There is no plea to the effect that, but for the knowledge of the issues in relation to the contract with D & M Australia, the defendant would have been engaged by Challenge. There is no detail as to what is meant by the 'loss of opportunity' in par 18(ii).
In the absence of these pleas and particulars, the pleading does not disclose a reasonable cause of action, let alone one pleaded in such a manner that the plaintiff is able to respond to it. In my view, par 11 and par 14 to par 18 ought to be struck out as disclosing no reasonable cause of action or at the very least as not disclosing the defendant's case in a form that would give the plaintiff a fair opportunity to meet it.

Amended defence - Misleading conduct claim

The misleading conduct claim is set out in par 19 to par 23 in the following terms:
19.Further or in the alternative the Plaintiff prior to the making of the Subcontract represented to the Defendant alternatively gave the Defendant the impression that the Plaintiff:
(a)had the capacity and ability to carry out the plumbing work with reasonable skill and care and reasonable diligence and expedition ('the First Representation');
(b)the Plaintiff would carry out the plumbing work with reasonable skill and care and with reasonable diligence and expedition ('the Second Representation');
PARTICULARS
The Representations are implicit in the Plaintiff entering into the Subcontract with the Defendant.
20.In reliance on the Representations or each of them the Defendant entered into the Subcontract.
21.The Representations and each of them was false in that:
(a)the Plaintiff did not have the capacity or ability to carry out the plumbing work with reasonable skill and care and/or with reasonable diligence and expedition;
(b)the Plaintiff did not carry out the plumbing work with reasonable skill and care and with reasonable diligence and expedition.
22.By reason of the matters pleaded in paragraphs 19, 20 and 21 the Plaintiff engaged in conduct that was misleading or deceptive or alternatively likely to mislead or deceive contrary to s 52 of the Trade Practices Act 1974 ('the Act') and insofar as the Representations relate to future matters the Defendant seeks to rely on s 51A of the Act.
23.By reason of the matters pleaded in paragraphs 20 and 21 the Defendant has suffered loss and damage.
PARTICULARS
(a)The Defendant repeats paragraphs 11 and 12.
(b)The Defendant repeats the particulars to paragraph 13(b) and (c).
(c)The Defendant repeats paragraph 15.
(d)The Defendant repeats paragraph 18(c).
The defendant has conceded that the words in par 19 'alternatively gave the Defendant the impression that the Plaintiff' are vague and should be deleted.
The representations in par 19 have been redrafted from those in the par 19 of the 16 September 2010 Minute. They remove language objected to as being vague and replace it with language capable of being applied with sufficient precision to be responded to. However, it is not sufficient to particularise these allegations by stating that they were 'implicit' in the plaintiff entering into the subcontract with the defendant. Just as particulars of the basis of the implied contractual terms are provided in par 8, so there needs to be particulars of the facts giving rise to the implication. As already noted, where the amendment is made late in the life of the action, the amendment ought to be fully particularised: Fletcher [30].
Further, no particulars are given for the plea in par 21. This was an issue raised in the 21 September submissions in relation to former par 19 (page 6). The defendant must particularise the basis of the falsity and misleading nature of the representations. In relation to par 19(a), it is not clear whether this representation is present or future. If present, the defendant must establish that at the date of the representation being made, the plaintiff did not then have the capacity to carry out the plumbing work in accordance with the representation. If future, the defendant must establish that the plaintiff had no reasonable grounds for making it at the time it was made. In either case, it is not sufficient to rely on the subsequent breaches as they occurred after the time at which the representation was made. The pleading attempts to turn a representation said to be misleading at a point in time into a continuing promise of a contractual nature.

Moreover, and again as set out in the 21 September submissions, the allegations of falsity do not match the pleaded representations. The representation in par 19(b) of the Amended Defence is as to future conduct. In order for the representation to be actionable, the defendant must establish that it was misleading at the time it was made. The position remains even if Australian Consumer Law s 4(2) (formerly Trade Practices Act 1974 (Cth) s 51A) is relied upon. The defendant must establish that the plaintiff did not have a reasonable basis for making the representation at the time it was made. The fact that the plaintiff did not subsequently carry out the plumbing work with reasonable skill and diligence and expedition, does not establish that the representation in par 19(b) was misleading when it was made.
In my view, par 19 to par 23 ought to be struck out as not disclosing any reasonable cause of action, or at the very least, not disclosing a cause of action which is pleaded and particularised with sufficient detail and clarity for the plaintiff to know the case it has to meet.

Summary of abuse of process and pleadings issues

I am satisfied that in the Amended Defence the defendant has made a genuine attempt to address the concerns in the 21 September submissions. It follows that I am not persuaded that there has been an abuse of process.
However, in my view, the defendant has still failed to address the concerns in the 21 September submissions adequately. For the reasons set out above, I would strike out the negligence claim (par 11 and par 14 to par 18) and the misleading conduct claim (par 19 to par 23) as disclosing no reasonable cause of action. I would not strike out par 13(b) and par 13(c), thus allowing the claim for losses on the head contract to proceed to trial. I would allow par 12 as it goes to this claim.
The remaining issue is whether the defendant ought to have leave to file and serve a further amended pleading. The other side to this issue is whether some limit ought to be placed on the ability of the defendant to make any further application for leave to amend.

Case management and discretion

As noted above, because there has been a listing conference in this action, the window of opportunity to amend in RSC O 21 r 3 and 2005 DCR r 48A has now closed. There remains, however, the discretion to allow further amendments in RSC O 21 r 5. It provides that 'the Court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as may be just and in such manner (if any) as the Court may direct'. In order to consider whether to grant the defendant a further opportunity to amend, it is instructive to consider the principles governing amendments to pleadings, in particular late amendments.
What may be described as the traditional approach to the exercise of discretion in relation to pleadings amendments is summarised by Newnes AJA in May v Thomas [2008] WASCA 215 in the following terms ([33] - [34]):
The relevant principles to be applied on an application to amend a pleading are well-known. In general, a party should be permitted to amend their pleading so that the court may decide all matters in issue between the parties, unless the amendment would cause an injustice to the other party which could not be adequately remedied, for instance by an order for costs: Cropper v Smith (1884) 26 Ch D 700, 710; Shannon v Lee Chun (1912) 15 CLR 257, 260 - 261; Clough v Frog (1974) 4 ALR 615, 618; The State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146, 154. The party seeking the amendment bears the burden of persuading the court that the amendment will not cause irremediable prejudice to the other party: Hancock Shipping Co Ltd v Kawasaki Heavy Industries Ltd [1992] 1 WLR 1025, 1030; McKenzie v Commonwealth of Australia [2001] VSC 361 [22] - [23]; Burk v Commonwealth of Australia (No 3)[2004] VSC 210. However, the party opposing the amendment ordinarily bears the evidential onus of adducing evidence in relation to the prejudice, at least where the proof of that prejudice lies in the hands of that party; the non-existence of prejudice is difficult to prove, so that in practice in the latter circumstances an evidential burden is borne by the party resisting the amendment: Hancock Shipping Co Ltd (1030).
But it is not sufficient for a party to rely on prejudice which results from an unreasonable act or omission on the part of that party: Steward v North Metropolitan Tramways Co (1886) 16 QBD 556, 559 - 560; Wilson v Grimwade [1995] 2 VR 628, 632.
This approach must now be refined in the light of the decision of the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. In Aon all members of the court held that in exercising the general discretion to allow amendments to pleadings in Court Procedure Rules 2006 (ACT) (ACT Rules) r 502, the court is to seek the objectives of case management set out in ACT Rules r 21 ([36], [89], [133] - [134], [157]). ACT Rules r 502 is similar in effect to RSC O 21 r 5. The objectives of case management set out in ACT Rules r 21 are substantially the same as those set out in RSC O 1 r 4A and r 4B. RSC O 1 r 4B is in the following terms:
4B.System of case flow management
(1)Actions, causes and matters in the Court will, to the extent that the resources of the Court permit, be managed and supervised in accordance with a system of positive case flow management with the objects of —
(a)promoting the just determination of litigation; and
(b)disposing efficiently of the business of the Court; and
(c)maximising the efficient use of available judicial and administrative resources; and
(d)facilitating the timely disposal of business; and
(e)ensuring the procedure applicable, and the costs of the procedure to the parties and the State, are proportionate to the value, importance and complexity of the subject matter in dispute; and
(f)that the procedure applicable, and the costs of the procedure to the parties, are proportionate to the financial position of each party.
(2)These Rules are to be construed and applied and the processes and procedures of the Court conducted so as best to ensure the attainment of the objects referred to in paragraph (1).
Order 1 r 4B(1)(e) and r 4B(1)(f) were added by amendments taking effect in mid 2010. By parity of reasoning, in exercising the discretion in RSC O 21 r 5, I should seek the attainment of the objectives in RSC O 1 r 4A and r 4B.
The majority in Aon made the following comments on ACT Rules r 21 which are relevant to the interpretation of RSC O 1 r 4A and r 4B ([98], [102]):
Of course, a just resolution of proceedings remains the paramount purpose of r 21; but what is a 'just resolution' is to be understood in light of the purposes and objectives stated. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account. The Rule's reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs.
…
The objectives stated in r 21 do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. While r 21 assumes some ill-effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail. It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment.
The overarching issue in the exercise of the discretion to grant leave to amend is to balance the competing risks of injustice in the context of maintaining public confidence in the administration of justice as a whole. Four factors emerge from the decided cases:
(a)the reasons for delay in making the application;
(b)the prejudice to the defendant if leave is not granted;
(c)the prejudice to the plaintiff if leave is granted; and
(d)the impact on the public interest if leave is granted.
See generally: Aon; State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; Fletcher [25] – [30], Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290; Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No5) (1997) 18 WAR 334, 345; Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323.
In the present case, the issue of delay is relevant to the action as a whole. The events the subject of the action occurred in 2006 and 2007. Assuming a trial later this year, there will have been a four year gap since the events in question occurred.
The prejudice to defendant if no further amendment is allowed is that it will not be able to litigate its claim that because of the breaches in relation to the 90 Scarborough Beach Road contract with D & M Australia, it lost the opportunity to enter into another contract and make a profit of some $605,000. The decision in Aon makes it clear that they key question is whether the defendant has had a sufficient opportunity to raise and plead this claim. The claim for loss of reputation and loss of profits on other contracts is in the 14 January 2010 version of the defence and counterclaim. It was the subject of the initial decision in April 2010 that led to the appeal. As noted, the 16 September Minute was the eighth version of this pleading over a five month period. The Amended Defence is the ninth attempt over what is now a 14 month period.
The prejudice to the plaintiff is that its claim is being delayed while these pleadings issues are resolved. To an extent its costs have been attended to given the indemnity costs order made by Judge Birmingham QC. However, there is still the inevitable ongoing costs of managing the claim.
The impact of delay on the parties to litigation was the subject of comment in Aon. It is now generally accepted that 'justice cannot always be measured in money and that a judge is entitled to weigh in the balance the strain the litigation imposes upon litigants': Aon [100]. It is not just personal litigants who feel this stress; corporations and those who work in them are also subject to the pressures of litigation: Aon [100]. In the words of Justice Heydon, commercial litigation has significant claims to expedition (Aon [137]):
… Those claims rest on the idea that a failure to resolve commercial disputes speedily is injurious to commerce, and hence injurious to the public interest… Commercial life depends on the timely and just payment of money. Prosperity depends on the velocity of its circulation. Those who claim to be entitled to money should know, as soon as possible, whether they will be paid. Those against whom the entitlement is asserted should know, as soon as possible, whether they will have to pay. In each case that is because it is important that both the claimants and those resisting claims are able to order their affairs. How they order their affairs affects how their creditors, their debtors, their suppliers, their customers, their employees, and, in the case of companies, their actual and potential shareholders, order their affairs. The courts are thus an important aspect of the institutional framework of commerce. The efficiency or inefficiency of the courts has a bearing on the health or sickness of commerce.
The fourth factor is the public interest in the proper and efficient administration of justice. In Aon the court affirmed that the public interest in the administration of justice, reflected in provisions such as ACT r 21 (and RSC O 1 r 4A and r 4B) is an important consideration in the exercise of judicial discretion. In the words of the Chief Justice ([24], [30], also [93], [133]):
… Undue delay can undermine confidence in the rule of law. To that extent its avoidance, based upon a proper regard for the interests of the parties, transcends those interests. Another factor which relates to the interests of the parties but transcends them is the waste of public resources and the inefficiency occasioned by the need to revisit interlocutory processes, vacate trial dates, or adjourn trials either because of non‑compliance with court timetables or, as in this case, because of a late and deliberate tactical change by one party in the direction of its conduct of the litigation. These are matters which, even under the Australian versions of the Judicature Act system, unaffected by the sequelae of the civil procedure reforms of 1998 in the United Kingdom, are to be regarded as both relevant and mandatory considerations in the exercise of the discretion conferred by rules such as r 502.
…
It might be thought a truism that 'case management principles' should not supplant the objective of doing justice between the parties according to law. Accepting that proposition, JL Holdings cannot be taken as authority for the view that waste of public resources and undue delay, with the concomitant strain and uncertainty imposed on litigants, should not be taken into account in the exercise of interlocutory discretions of the kind conferred by r 502. Also to be considered is the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification, whether they be for adjournment, for amendments giving rise to adjournment, or for vacation of fixed trial dates resulting in the resetting of interlocutory processes.
The same concern was expressed by the Full Court of the Supreme Court in Christmas Island Resort (No 5) (345):
Access to justice is a critical factor in the functioning of a fair society. Court resources, both in terms of time and facilities are scarce and shrinking. This makes even more important for a court to ensure that public resources are applied in the best and most efficient means possible. The way in which parties to a dispute seek access to the public resources that the courts represent must be closely monitored….It is a question of balancing the private interests of the parties against the broader public interest considerations involved in the administration of justice.
Similar comments are also made in Christmas Island Resort (No 5) (345), Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [No 2] [2009] WASC 301 [80], Wiltrading (316) and Tony Sadler (333 – 334).
A particular dimension of the public interest that is relevant for present purposes is proportionality. As noted, in mid 2010, RSC O 1 r 4A was amended to strengthen the weight to be given to proportionality in the management of cases. The comments made by Judge Birmingham QC about the attempts made by the defendant to amend the defence, reflected in an indemnity costs order, as well as my own review of the action, lead me to the view that issue of proportionality ought to be a paramount consideration in the exercise of the discretion I am required to exercise.

Determination and orders

In balancing the risks of injustice, the issues of proportionality, finality, delay and the 'the need to revisit interlocutory processes' (Aon [24]), lead me to the view that I should make an order limiting the ability of the defendant to make yet another application for leave to amend its pleading. As the High Court stated in Aon: 'Limits may be placed upon re-pleading, when delay and cost are taken into account': ([98], [102]). Further, it 'cannot be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs': Aon [98]. I am satisfied that the defendant has had adequate, indeed ample, opportunity to amend its defence to plead the loss of reputation claim or the loss of other contracts claim.
The power to make case management orders is a wide one. 2005 DCR r 24(1) provides that a 'case management direction is any procedural direction that in the court's opinion it is just to make in a case to facilitate the case being conducted and concluded efficiently, economically and expeditiously'. In my view orders along the following lines ought to be made in order to ensure that the case is conducted and concluded efficiently, economically and expeditiously:
(a)par 11 and par 14 to par 23 of the Amended Defence, Set off and Counterclaim dated 25 February 2011 be struck out;
(b)by 29 April 2011 the defendant file and serve an Amended Defence, Set off and Counterclaim reflecting the order in par (a);
(c)by 29 April 2011 the defendant file and serve particulars of its loss and damage complying with 2005 DCR r 45C;
(d)the defendant not make any further applications for leave to amend its defence, set off and counterclaim, save for an amendment designed to more completely plead or particularise the existing defences and causes of action in the pleading in par (b) above;
(e)by 13 May 2011 the plaintiff file any reply and a defence to the counterclaim;
(f)by 20 May 2011 each party file and serve a certificate complying with 2005 DCR rule 43(3a);
(g)the parties have leave to adduce expert evidence at the trial of the action;
(h)by 6 May 2011, the plaintiff:
(1)serve on each other party a copy of the report of any expert witness, the substance of which the party intends to rely on at the trial; or
(2)disclose in writing to each other party the substance of any expert evidence that the party intends to adduce at the trial;
(i)by 20 May 2011, the defendant:
(1) serve on each other party a copy of the report of any expert witness, the substance of which the party intends to rely on at the trial; or
(2) disclose in writing to each other party the substance of any expert evidence that the party intends to adduce at the trial;
(j)by 27 May 2010 each party file and serve an index of the reports of any expert witness that the party intends to tender as evidence at trial in accordance with 2005 DCR r 45E;
(k)the action be listed for a listing conference on 13 June 2011 at 10.00 am;
(l)in the event of default by any party for 5 working days in complying with any paragraph of this order, the party in default shall within a further 2 working days either:
(1)file and serve a consent order adjusting the timetable set out in this order; or
(2)request the court to list the action for a directions hearing;
(m)there be liberty to either party to request the court to list the action for a further directions hearing;

I will hear from counsel as to the precise terms of these orders, including timing, as well as costs.