AON Risk Services Australia Ltd v Australian National University
[2008] ACTCA 13
•25 August 2008
AON RISK SERVICES AUSTRALIA LIMITED v AUSTRALIAN NATIONAL UNIVERSITY [2008] ACTCA 13 (25 August 2008)
CATCHWORDS
PRACTICE AND PROCEDURE – application for leave to appeal from an interlocutory decision of a trial judge regarding practice and procedure – trial judge granted leave to the plaintiff (respondent) to amend its statement of claim by filing a second further amended statement of claim – whether it is necessary for the applicant to establish “exceptional circumstances” – whether there is a question as to the correctness of the order – whether substantial injustice would result if leave is refused – whether the application raises serious questions to be addressed – application for leave to appeal granted.
APPEAL – leave to amend statement of claim – whether trial judge erred in granting leave to amend the statement of claim – where claim enlarged by amendment – r 21 Court Procedure Rules 2006 (ACT) – what principles are appropriate to granting leave – whether r 21 places greater emphasis on case management considerations – paramount consideration is justice between the parties – case management a relevant consideration.
APPEAL – leave to amend statement of claim – delay of plaintiff (respondent) in seeking to amend the statement of claim and in bringing enlarged claim – delay unreasonable – no satisfactory explanation for the delay – what inference(s) may properly be drawn – approach to mistake and to deliberate conduct – whether the amendment will cause substantial injustice not capable of remedy by an order for costs.
APPEAL – whether the trial judge erred in not striking out part of the statement of claim for abuse of process – whether judgment for the respondent against the second defendant was part of the claim – paucity of information before trial judge – trial judge not called upon to consider application to strike out the further amended statement of claim.
COSTS – leave to amend statement of claim – whether the trial judge erred in the award of costs of or resulting from the amendment – whether the applicant should bear the costs of the amendment on an indemnity basis – whether the applicant suffered prejudice – whether the trial judge erred in separating consideration of the application to amend the statement of claim from consideration of costs – indemnity costs awarded.
Court Procedure Rules 2006 (ACT) rr 21, 501, 513, 5311
Civil Procedure Act 2005 (NSW) ss 56, 57, 58, 64
Insurance Contracts Act 1984 (Cth), s 28
Federal Court Rules of Australia 1979 (Cth), O 13 r 2
Rules of the Supreme Court (England) 1883 (UK), O 28
Supreme Court Rules 1970 (NSW)
Limitation Act 1969 (NSW)
Land Act 1962 (Qld)
The State of Queensland & Anor v J L Holdings Pty Ltd (1997) 189 CLR 146
State of New South Wales v Mulcahy [2006] NSWCA 303
Dennis v Australian Broadcasting Corporation [2008] NSWCA 37
Sydney Markets Ltd v Sydney Flower Market Pty Ltd [2001] FCA 662
Oshlack v Richmond River Council (1998) 193 CLR 72
Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246
Licul v Corney (1976) 180 CLR 213
Niemann v Electronic Industries Ltd [1978] VR 431
Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397
Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170
Cropper v Smith (1884) 26 Ch D 700
Clough & Rogers v Frog (1974) 4 ALR 615
Sali v SPC Ltd (1993) 116 ALR 625
House v The King (1936) 55 CLR 499
Walton v Gardiner (1993) 177 CLR 378
James Hardie & Coy Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53
Handley KR, Spencer Bower, Turner and Handley: The Doctrine of Res Judicata (3rd ed, Butterworths, 1996)
Civil Procedure Bill 2005 (NSW), Second Reading Speech
Court Procedure Rules 2006 (ACT), Explanatory Statement
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
No. ACTCA 38 - 2007
No. SC 808 of 2004
Judges: Higgins CJ, Penfold and Lander JJ
Supreme Court of the ACT
Date: 25 August 2008
IN THE SUPREME COURT OF THE )
) No. ACTCA 38 - 2007
AUSTRALIAN CAPITAL TERRITORY ) No. SC 808 of 2004
)
COURT OF APPEAL )
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:AON RISK SERVICES AUSTRALIA LIMITED
Applicant
AND:AUSTRALIAN NATIONAL UNIVERSITY
Respondent
ORDER
Judges: Higgins CJ, Penfold and Lander JJ
Date: 25 August 2008
Place: Canberra
THE COURT ORDERS THAT:
Leave to appeal be granted.
The appeal be allowed to the extent that the order for costs made by the trial judge be replaced with an order that the respondent pay the applicant’s costs of and thrown away by the amendment of the Statement of Claim allowed by the trial judge on an indemnity basis.
The orders made by the trial judge otherwise be confirmed.
The respondent pay the applicant’s costs of and incidental to this appeal.
IN THE SUPREME COURT OF THE )
) No. ACTCA 38 - 2007
AUSTRALIAN CAPITAL TERRITORY ) No. SC 808 of 2004
)
COURT OF APPEAL )
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:AON RISK SERVICES AUSTRALIA LIMITED
Applicant
AND:AUSTRALIAN NATIONAL UNIVERSITY
Respondent
Judges: Higgins CJ, Penfold and Lander JJ
Date: 25 August 2008
Place: Canberra
REASONS FOR JUDGMENT
HIGGINS CJ:
I have read in draft the judgment of Lander J. I am grateful to his Honour for the observations and background set forth.
I agree that the Second Further Amended Statement of Claim (SFASC) enlarges the respondent’s claim for the reasons his Honour advances.
It is, however, clear that the scope of the claim preceding the SFASC, namely, that the applicant had failed to include the buildings listed in the PNI Schedule of buildings and contents, will continue.
The three claims not previously raised allege a failure to obtain building valuations (or at least to advise the respondent with respect thereto), a failure to disclose values and, finally, to seek instructions concerning the deductible that might be imposed if no additional premium was paid.
It was contended that his Honour erred in allowing those amendments and in not ordering costs of and thrown away by the amendments on an indemnity basis.
I agree with Lander J that to justify leave to amend being granted, it is not necessary to show “exceptional circumstances”. It is enough that the amendment will not cause substantial injustice not capable of remedy by an order for costs. It is not generally unjust to hold a party to account for unlawful acts, even if, up to the point of the amendment, that claim had been overlooked.
I say “generally” because considerations of express or implied estoppel may alter the effect of that consideration.
I also agree that the Court Procedures Rules 2006 (ACT) are not inconsistent with The State of Queensland & Anor v J L Holdings Pty Ltd (1997) 189 CLR 146.
I support his Honour’s conclusion that nothing in s 58 of the Civil Procedures Act 2005 (NSW) is inconsistent with that decision. Indeed, s 58(2) expressly draws attention to the “dictates of justice”. I also agree that, whatever may be the view of the Court of Appeal of New South Wales (see State of New South Wales v Mulcahy [2006] NSWCA 303), this Court is bound by and must follow the majority opinion in The State of Queensland & Anor v J L Holdings Pty Ltd (supra).
Case management considerations, including issues of available court resources, are not irrelevant, but, as Lander J noted, the paramount consideration is justice as between the parties.
The trial judge was aware of the alterations to the claim which the SFASC represented. An explanation was put forward that, in effect, the additional claims only became highlighted as potential issues during mediation.
Certainly that explanation was not entirely persuasive, given that the first and second defendants’ defences had already raised the Insurance Contracts Act 1984 (Cth), particularly in relation to the value of the insured assets.
However, whilst I agree with Lander J that the decision to seek to amend was unreasonably delayed and the explanation for that delay was not satisfactory, I do not agree that it should be inferred that the respondent believed that a more frank explanation would have led to a refusal of the application to amend.
Rather, I think it may be inferred that the respondent was conscious that it could not resist an order for costs on an indemnity basis if the only explanation that appeared on the application to amend was, for example, a misplaced hope that, on mediation, the issues would be resolved without the need to engage in the considerable work involved in the preparation of the proposed amendments so that the issue of costs would not arise.
I note that the trial judge did accept that the explanation in fact offered, though truthful so far as it went, was not entirely satisfactory. He considered, however, that the fact that real triable issues of considerable significance were raised weighed in favour of allowing the amendments. Further, it was not contended by the applicant that there had been any representation by the respondent that it would never raise or rely on such allegations.
There is no suggestion, nor is there likely to be, that evidence necessary for the applicant to meet the newly formulated claims will have been lost by the delay. I do not consider that the additional work that may now be required of the applicant cannot be adequately compensated for by an appropriate order for costs.
Nor is the delay now to be suffered by the applicant caused only or even solely by this application to amend.
I, therefore, consider that the application to amend was properly allowed.
However, I agree with Lander J that in that event, and for the reasons he gives, the order for costs of and thrown away by the amendments should have been on an indemnity basis.
I would dismiss the appeal otherwise (but make no order for costs).
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Chief Justice Higgins.
Associate:
Date: 25 August 2008
IN THE SUPREME COURT OF THE )
) No. ACTCA 38 - 2007
AUSTRALIAN CAPITAL TERRITORY ) No. SC 808 of 2004
)
COURT OF APPEAL )
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:AON RISK SERVICES AUSTRALIA LIMITED
Applicant
AND:AUSTRALIAN NATIONAL UNIVERSITY
Respondent
Judges: Higgins CJ, Penfold and Lander JJ
Date: 25 August 2008
Place: Canberra
REASONS FOR JUDGMENT
PENFOLD J:
I, too, have read Lander J’s judgment in draft. I agree with much of his reasoning, but have not reached the same conclusion, for the reasons set out below.
LEAVE TO APPEAL
First, I agree that leave to appeal should be granted, for the reasons set out in paragraph [132] of Lander J’s judgment.
THE APPEAL
Secondly, I agree that the appeal should be upheld, but only to the extent necessary to replace the costs order made by the learned trial judge.
The operation of the ACT Court Procedures Rules
For the purposes of determining the principles applicable to an application to amend a claim at trial in reliance on r 501 of the Court Procedures Rules 2006 (ACT) (CPR), Lander J first examined whether r 21 of the CPR could be read as having modified the principles set out in the High Court decision of State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 (JL Holdings). I agree with his conclusion about the effect of r 21 and the continuing significance of JL Holdings in the ACT, but for different reasons.
Rule 21 of the CPR is set out in Lander J’s judgment, as are ss 56, 57 and 58 of the Civil Procedure Act 2005 (NSW) (the NSW Act). There is no need to repeat them here.
I agree with Lander J’s opinion that r 21 does not go beyond the principles that have been applied by courts since they took on a role in case management, and that would have been recognised by the members of the High Court when they decided JL Holdings. As well, for reasons set out below, I consider that there is nothing in r 21 that would justify an ACT court applying the principles of State of New South Wales v Mulcahy [2006] NSWCA 303 (Mulcahy) in preference to those of JL Holdings in deciding whether to permit the amendment of a statement of claim.
In Mulcahy, the NSW Court of Appeal considered (at [29]) the significance of JL Holdings in the light of ss 56, 57 and 58 of the NSW Act. The Court of Appeal pointed out that the NSW legislation is different from the provisions of the Federal Court Rules considered in J L Holdings at [25]-[28]. J L Holdings related to O 13, r 2, which is in similar terms to s 64 of the NSW Act (which is also set out in Lander J’s judgment). Rule 501 is the ACT equivalent of O 13, r 2 and s 64.
Section 64 of the NSW Act is expressed to be subject to s 58 of that Act (which, in turn, also applied ss 56 and 57 of that Act to cases involving amendments).
The Court of Appeal in Mulcahy treated ss 56, 57 and 58 of the NSW Act as changing the balance to be struck in deciding on an application for amendment of documents:
When regard is paid to all these provisions of the Civil Procedure Act the relative importance of changes in the way the action was conducted at earlier stages on the one hand, and of a party’s wish to put forward some new matter as one of the real questions raised by or otherwise depending on the proceedings on the other hand, is significantly altered. The approach to amendments which the judgments in Queensland v JL Holdings treated as appropriate is significantly altered also. (at [29])
I note that since this case was argued, the NSW Court of Appeal has affirmed the approach taken in Mulcahy, saying “In this State JL Holdings must now be understood as operating subject to the statutory duty imposed on the courts by s 56(2) of the Civil Procedure Act 2005” (Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 (Dennis) at [29]).
If the equivalent ACT provision (r 21 of the CPR) were to the same effect as the NSW provisions, there might be an argument that the Mulcahy and Dennis approach to JL Holdings should be followed in the ACT. Indeed, that argument was put by reference to Mulcahy, and was put on the basis that r 21 in the ACT was to the same effect as the NSW provisions considered in Mulcahy.
However, on careful examination it is clear that not only are the ACT and NSW provisions not in their terms to the same effect, but also that the differences were intended.
The words of the ACT and NSW provisions
NSW subs 64(2) and ACT r 501 are in substantially similar terms, except that subs 64(2) is expressed to be subject to s 58 (which, as mentioned above, also imports ss 56 and 57 into the determination of applications for amendment). Rule 501 is covered by r 21 of the CPR, which is expressed to set out “the purpose of this chapter”—rr 21 and 501 are both in Chapter 2 of the CPR.
NSW s 56 is largely to the same effect as ACT r 21, although insignificant drafting differences can be identified.
For instance, r 21(1) identifies the rule’s purpose as facilitating “the just resolution of the real issues in civil proceedings with minimum delay and expense”, whereas subs 56(1) describes an “overriding purpose” of facilitating “the just, quick and cheap resolution of the real issue in the proceedings”.
Rule 21(2), an instruction to the court, repeats the reference to the “just resolution of the real issues”, and expands on the significance of “minimum delay and expense” by referring to “the timely disposal of the proceedings and all other proceedings in the court, at a cost affordable by the respective parties” (emphasis added). Subsection 56(2) simply refers to the “overriding purpose” that has already been defined in subs 56(1). The reference in r 21(2) to the timely disposal of “all other proceedings in the court” is the only significant point of difference.
Rule 21(3) and subs 56(3) use slightly different words (eg “help” instead of “assist”) to make what is clearly the same point.
Subsection 56(4) has no equivalent in r 21, and while r 21(4) is broader in scope than subs 56(5), its broader scope relates to the court’s powers to impose sanctions in relation to the breaches of the rules more generally or breaches of court orders, and does not seem to be relevant to a comparison of the case management obligations imposed by r 21 and those imposed by the NSW provisions.
Thus, the only aspect in which r 21 relevantly seems to cover more ground than s 56 is the reference in r 21(2) to “all other proceedings in the court”. With that qualification, I consider that r 21 and s 56 are largely equivalent provisions, which in each case advert to considerations of justice, speed and cost (although using different words).
Sections 57 and 58, however, are unlike anything that is found in the ACT provisions.
Those sections, while again referring to considerations of justice (“the just determination of the proceedings” (s 57) and “the dictates of justice” (s 58)), expand the matters to which the court may or must have regard in the course of case management.
Section 57 introduces the concept of “efficiency”, by referring to the “efficient disposal of the business of the court” and the “efficient use of available judicial and administrative resources”. In modern management, “efficiency” encompasses the engineering concept of a comparison between the resources put into a process and the results extracted from the process. The concept of efficiency, together with express references to “the business of the court” and to “judicial and administrative resources”, appears to be used quite deliberately in the NSW legislation to convey a requirement for the courts to take a broader perspective in their role as case managers than they have done in the past. In particular, the courts are to focus on case management for efficiency (that is, extracting more of some kind of results from any given expenditure of judicial and administrative resources) as well as on questions of justice—fortunately, for present purposes, there is no need to pursue the question of what kinds of results are to be extracted or how increased efficiency might be measured.
This requirement of the court was emphasised by the NSW Attorney-General, in his Second Reading Speech for the Bill for the NSW Act, when he said:
The provisions recognise the importance of case management as a tool for increasing the efficiency of the court system and for reducing the cost of litigation. They seek to strike a balance between protecting the interests of justice in an individual case and protecting the interests of justice for other litigants and the courts.
Section 58 provides a further basis for a court, in considering whether to make orders or directions in proceedings, to examine the way in which a case has been run by reference to matters which are clearly not relevant to the underlying strengths or virtues of the matter being litigated (even if they might be relevant to justice between the parties more broadly).
As noted earlier, r 21 does go beyond s 56 of the NSW Act in containing a reference to “the timely disposal … of all other proceedings in the court”. Certainly this draws the court’s attention to the fact that the management of any particular case may affect the timely disposal of other cases, and directs the court to apply the rules with the objective, among other things, of achieving the timely disposal of all other proceedings. It would not, however, be reasonable to suggest that these words are intended to do the same work as is done in NSW by two substantial provisions referring specifically to a variety of considerations relevant to the efficiency of the court in general (s 57) and to the way in which the parties have conducted their case in particular (s 58).
Thus, the NSW provisions, because of the addition of ss 57 and 58, convey an identifiably different message from the message conveyed by the ACT provision, even having regard to the r 21(2) references to the timely disposal of “all other proceedings in the court”.
To some extent I share Lander J’s uncertainty about how the objects set out in paragraphs 57(1)(b) and (c) should be taken account of in “facilitat[ing] the just, quick and cheap resolution of the real issues” in particular proceedings, but that does not detract from my view that the NSW provisions are intended to, and do, convey a different message from that of the ACT provision (r 21).
Legislative history of the ACT and NSW provisions
As well as the fact that the words and scope of the ACT and NSW provisions are on their face different, the history of the two sets of provisions supports the view that the differences are both intentional and purposeful.
The ACT provisions post-date the NSW provisions (although not the Mulcahy decision) – the Bill for the NSW Act was introduced in April 2005, while the ACT rules were made in June 2006. The ACT rules were drafted as part of a major exercise of preparing new consolidated rules for procedures in all ACT courts. The Explanatory Statement for the CPR says that the new Rules “take into account contemporary best practice from across Australia, especially uniform rules adopted recently by Queensland and New South Wales”.
The Explanatory Statement also points out that r 21 has no precedent in the ACT “although it is based on some of the general principles underlying the common law system”. Given the absence of an ACT precedent, and noting the reference in the Explanatory Statement to “contemporary best practice from across Australia”, it can be assumed that the ACT authorities, in preparing the new Rules, looked specifically at precedents for such rules in other jurisdictions, including NSW.
Thus, it can be assumed that r 21 was drafted in full knowledge of the NSW provisions, and a deliberate choice was made not to adopt equivalents of ss 57 and 58.
Although the NSW Court of Appeal that decided Mulcahy did not consider the detail of the NSW provisions concerned, the basis of their decision was the conclusion, as quoted at [29] above that, having regard to those provisions, “[t]he approach to amendments which the judgments in Queensland v JL Holdings treated as appropriate is significantly altered”.
In those circumstances, I consider that there is no basis on which an ACT court could prefer the Mulcahy approach to amendments over the approach determined by the High Court, in JL Holdings, by reference to established principles that are reflected in the current ACT provisions.
The proper approach to the respondent’s “tactics”
In considering my approach to the respondent’s “tactics”, I first respectfully adopt, and repeat, the principles that Lander J has identified at [194] as emerging from the majority opinion in JL Holdings, as follows:
(a) the paramount consideration is justice;
(b)an application should not be refused for the purpose of punishing the party for a mistake nor for that party’s delay;
(c)the principles of case management may be a relevant consideration in a particular case;
(d)case management may not be allowed to prevail to cause an injustice to a party by preventing that party from raising an arguable claim or defence;
(e)if, however, the proposed amendment raises a claim or a defence which is arguable, the proposed amendment should be allowed notwithstanding aspects of case management provided that any prejudice the other party might suffer can be compensated by costs.
The learned trial judge granted leave to amend the further amended statement of claim having regard to evidence given on behalf of the respondent (including oral evidence given by the respondent’s solicitor) about the delays in seeking to amend the pleadings, and what he described (at [43]) as “the important factor that the allegations raise real triable issues between [the respondent] and [the applicant]”. He then proceeded to consider costs separately, and found, first (at [56]) that the applicant was entitled to a costs order (as was conceded by the respondent), but secondly (at [58]), that the applicant had not made out “such a special and unusual feature of the case” as would justify the award of indemnity costs.
Having regard to the JL Holdings principles set out above and to principle (e) in particular, I consider that the learned trial judge fell into error in separating his consideration of the application to amend the further amended statement of claim from his consideration of the appropriate costs order. By doing so, the learned trial judge did not properly apply the JL Holdings test for whether the amendment should be allowed. Once the question of compensating the other party is treated as part of the test for whether an amendment should be permitted, it may become apparent, as I consider it has in this case, that the only proper basis for granting the amendment would include an award of indemnity costs. Only then could it be said for the purpose of principle (e) that, assuming the party seeking to amend has overcome any case management obstacles to the amendment, that party has also overcome the obstacle of ensuring that the other party is not prejudiced.
What are the appropriate orders?
Accordingly, I next need to consider what orders should have been made in this case having regard to the JL Holdings principles set out above.
This is not apparently a case of a party making a mistake in conducting its litigation, such that an amendment should not be refused by way of punishing the party for that mistake (principle (b)). Rather, the inference is open, as Lander J points out, that the respondent deliberately conducted its case in the particular way that has now led it to seek to amend the statement of claim in conjunction with settlements reached with other defendants.
However, principle (b) does not, in the context of the other JL Holdings principles, imply that an application should necessarily be refused in a case where the need for an amendment results from a deliberate tactic used at an earlier stage in the proceeding. At most, the principle implies that punishing a party, by refusing leave to amend, for tactical decisions that may disadvantage other parties, might be appropriate in some cases.
Accordingly, even if the inference is drawn that the respondent’s tactics were deliberate, this does not lead necessarily to the conclusion that the court is obliged to punish the respondent for the deliberate conduct of the litigation in that way (putting aside for the moment the question whether the court is obliged to protect other parties from any prejudice caused by those tactics).
Counsel for the applicant submitted that the respondent’s failure to provide any explanation for its tactics in fact meant that the trial judge’s discretion to allow the amendment was not enlivened, but he was unable to identify any authority for that proposition. Apart from that submission about the significance of the failure to provide an explanation, the applicant did not identify any basis for punishing the respondent. In particular, there was no suggestion that the respondent’s approach, in the sense of what matters were pleaded against which defendants, and when, was aimed at achieving an end that could not otherwise have been achieved legitimately in these proceedings (if, for instance, the initial pleadings had been in the form of the second further amended statement of claim).
Such a suggestion would, I note, be different from the submission made by the applicant in this appeal that the “failure to insure” claim by the respondent should have been struck out as an abuse of process, because of the asserted relationship between the “failure to insure” claim and the contents of the settlements with the first, second and third defendants. I respectfully agree with Lander J’s reasons (at [239]-[255]) for rejecting the abuse of process submission.
In the absence of any particular basis for punishing the respondent, I cannot see a justification for moving from the implication of principle (e) of the JL Holdings principles that tactical decisions may be punished in some cases to the conclusion that a tactical decision should be punished in this case.
Next, I cannot see any particular case management consideration affecting this case that would outweigh principle (a) that “the paramount consideration is justice” and the fact that, as the learned trial judge put it, the amendments sought would “raise real triable issues” between the parties.
Finally, then, it is necessary to consider the prejudice that would be caused to the applicant if the amendments sought by the respondent are allowed to stand, and whether that prejudice can be compensated by costs.
The effect of the respondent’s tactical decisions, if the amendment to the further amended statement of claim is allowed, will certainly go beyond inconveniencing the applicant. As identified in the evidence of Ms Carr, solicitor for the applicant, it will involve the applicant’s solicitors in a substantial amount of new work and probably involve costs for expert witnesses who would not otherwise have been required. On the other hand, no claims were made about witnesses with failing recollections, witnesses who have, or are likely to, become unavailable, or anything else that might result in prejudice that could not be compensated in costs or otherwise. Thus, the identified prejudice—put simply, a large amount of extra work by the applicant’s solicitors and possibly extra witness costs—is prejudice of the kind that could adequately be compensated by an appropriate costs order.
Accordingly, I find that this case falls squarely within principle (d) as drawn from JL Holdings, in that the proposed amendment raises a claim which is arguable, there are no case management considerations that would require leave to amend to be refused, and the other party can be compensated for any prejudice by a costs order.
The costs order originally sought by the applicant was amended in court to include a reference to the costs of the adjournment of the trial. The respondent’s counsel indicated to the court that the respondent understood the trial judge’s order to extend to those costs in any case, and did not object to the amendment.
As I have indicated above, in this case the proper compensation could only be provided by an order for indemnity costs, and in this context I respectfully adopt the remarks of Healy J in Sydney Markets Ltd v Sydney Flower Market Pty Ltd [2001] FCA 662 in which he said at [8]:
Whilst I feel obliged to grant the adjournment application, if there were any prejudice to the respondent, then my attitude would be quite different. I think that anything less than an indemnity costs order would occasion prejudice to the respondent through an occurrence which is no fault of the respondent, and which lies entirely at the door of the applicant.
CONCLUSIONS
I would grant leave to appeal, and allow the appeal to the extent necessary to replace the order for costs made by the trial judge with an order that the respondent pay to the applicant on an indemnity basis the applicant’s costs of and thrown away as a result of the amendment, including costs thrown away that were incurred in the preparation of, or by reason of the adjournment of, the trial.
I certify that the preceding paragraphs numbered [21] to [70] are a true copy of the Reasons for Judgment herein of her Honour, Justice Penfold.
Associate:
Date: 25 August 2008
IN THE SUPREME COURT OF THE )
) No. ACTCA 38 - 2007
AUSTRALIAN CAPITAL TERRITORY ) No. SC 808 of 2004
)
COURT OF APPEAL )
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:AON RISK SERVICES AUSTRALIA LIMITED
Applicant
AND:AUSTRALIAN NATIONAL UNIVERSITY
Respondent
Judges: Higgins CJ, Penfold and Lander JJ
Date: 25 August 2008
Place: Canberra
REASONS FOR JUDGMENT
LANDER J
This is an application for leave to appeal from an order of a judge of this Court made on 12 October 2007 giving leave to the respondent (as plaintiff) to amend its statement of claim by filing a second further amended statement of claim (SFASC).
The application for leave to appeal was accompanied by a draft notice of appeal in which the appellant sought the following orders:
a.Appeal allowed with costs.
b.Set aside the orders of Justice Gray made on 12 October 2007 and in lieu thereof order that:
i.The plaintiff’s application for leave to amend its further amended statement of claim be dismissed with costs.
ii.The further amended statement of claim be dismissed with costs.
c.In the alternative to order (b) above, set aside the orders of Justice Gray made on 12 October 2007 and in lieu therefore (sic) order that:
i.The plaintiff have leave to amend its further amended statement of claim.
ii.The plaintiff pay to the fourth defendant the costs thrown away as a result of the amendment on an indemnity basis.
The application for leave to appeal was also accompanied by an affidavit sworn pursuant to r 5311 of the Court Procedure Rules 2006 (ACT) (CPR) in which the deponent solicitor for the applicant set out the history of the matter.
The application for leave to appeal and the appeal were heard instanter.
The respondent commenced these proceedings on 10 December 2004 against the first, second and third defendants, all of whom are insurers, seeking indemnity against the defendants, pursuant to a contract of insurance, for loss or damage suffered when its buildings at Mount Stromlo were damaged or destroyed as a result of a bushfire on 18 January 2003.
The respondent claimed that it had entered into a contract of insurance with the first, second and third defendants whereby the insurers would insure the interests of the plaintiff against loss, including fire, in the period 31 December 2002 to 31 December 2003.
The respondent claimed that the insurance policies covered buildings and their contents listed in two schedules:
(a) the Australian National University (Schedule C) Property and Business Interruption Period 31 December 2001 to Period 31 December 2002 (referred to herein as Schedule C); and
(b) the Australian National University Properties Not Insured Period 31 December 2001 to Period 31 December 2002 (referred to herein as the PNI Schedule).
The first, second and third defendants each filed a defence admitting that the Schedule C buildings and contents were covered by the relevant contract of insurance but denying that the buildings and contents in the PNI Schedule were insured.
Whilst the first, second and third defendants acknowledged that Schedule C buildings were insured under the relevant contract of insurance, the first and second defendants raised a defence under s 28 of the Insurance Contracts Act 1984 (Cth) claiming that their liability under the policy to the respondent was reduced as a result of a misrepresentation as to the value of the buildings and contents listed in Schedule C.
On 6 June 2005 the respondent joined the applicant as a party to the proceeding and filed an amended statement of claim (ASC). In the ASC the respondent claimed that the applicant, which carries on the business of an insurance broker, had been retained for reward to arrange for the renewal of an expiring cover of insurance for the period 31 December 2002 to 31 December 2003 “in respect of all buildings insured under the expiring cover and their contents (‘the AON retainer’).”
It was pleaded that it was a term of the AON retainer, implied by law, that the applicant would exercise reasonable care, skill and diligence in arranging for renewal of the expiring cover. No other terms of the AON retainer are identified in the pleading. Clearly, therefore, the only relevant term was that claimed to be implied by law.
It was pleaded that in the alternative the applicant owed the respondent a common law duty of care to exercise reasonable care, skill and diligence in arranging for the renewal of the expiring cover.
It was pleaded that the respondent was insured under an insurance cover arranged by the applicant: paragraph 25 of the ASC. However, it was pleaded, in the alternative, that the first, second and third defendants did not admit that the PNI Schedule of buildings were insured under the contract of insurance and that, if as pleaded by the first, second and third defendants, the buildings and contents in the PNI Schedule were not the subject of the contract of insurance, then the applicant was in breach of the AON retainer and in breach of the duty of care in failing to arrange insurance, and in failing to advise the respondent that it had not arranged that insurance. The respondent claimed that the applicant thereby caused the respondent loss and damage.
The claim as against the applicant was limited therefore to a claim that the applicant had failed to arrange to have the contract of insurance issued by the first, second and third defendants cover the buildings and contents in the PNI Schedule. It was no part of the respondent’s claim against the applicant that the applicant had breached any term of the retainer or any duty of care owed to the respondent in respect to any under-valuation of the Schedule C buildings.
On 19 September 2005 the respondent further amended its statement of claim (the FASC) but did not thereby enlarge the claim against the applicant.
On 12 April 2006 an order was made that the matter proceed to trial commencing on 13 November 2006. A period of four weeks was set aside for the trial.
Shortly before trial, the respondent and the defendants embarked upon a mediation and two days after the trial was due to start, the respondent settled with the first, second and third defendants and consent orders were made. The orders made against the first, second and third defendants were in the following terms:
(a) against the first defendant:
1 The proceedings against the first defendant are dismissed;
2All previous Orders as to costs between the plaintiff and the first defendant be vacated;
3Each of the plaintiff and the first defendant pay its own costs of the proceedings between them;
4Leave be granted to the first defendant to file a Defence to the Further Amended Statement of Claim.
(b) against the second defendant:
1Judgement (sic) be entered for the plaintiff against the second defendant in the sum of $750,000;
2All previous Orders as to costs between the plaintiff and the second defendant be vacated;
3No order as to costs between the plaintiff and the second defendant in the proceedings;
4Leave be granted to the second defendant to file an amended Defence;
528 days to pay judgement (sic) sum, interest not to run if judgement (sic) paid within 28 days.
(c) against the third defendant:
1.Notes the agreement between the plaintiff and the third defendant that they have completely settled their dispute in relation to the fire of 18 January 2003 and the claims by the plaintiff against the third defendant and that they ask the court to make the orders and note the matters in the paragraphs below to give effect that agreed settlement.
2.Notes the agreement of the parties as set out in annexure A hereto.
3.Orders:
(a)that judgment be entered in favour of the plaintiff against the third defendant for the amount of $1,250,000; and
(b) that formal entry not take place for 28 days.
4.In the event that the judgment has been satisfied within 28 days:
(a) Directs the judgment not be entered; and in lieu
(b)Orders that the claim of the plaintiff be dismissed as against the third defendant on the basis that the dismissal operates as a bar to the making of any further claim by the plaintiff against the third defendant in respect of or arising out of any matter the subject of the proceedings.
5.Orders that any unsatisfied costs orders or reserved costs orders as between the plaintiff and the third defendant be vacated and makes no other order as to the costs of the proceedings as between the plaintiff and the third defendant.
6.Notes that these short minutes can be disclosed to the other defendants for the purposes of these proceedings only.
7.Notes the agreement between the plaintiff and the third defendant that no step will be taken to enforce the judgment or to claim interest on the judgment if the judgment sum is paid within 28 days of these orders.
8.Notes the further agreement of the plaintiff and the third defendant that these short minutes are to be kept confidential so far as is reasonably practicable.
It is rather curious that the Court would make an order dismissing the proceedings against a defendant or entering judgment for a money sum against a defendant and make a further order permitting that defendant to file a defence, especially when the defendant has already filed a defence. That seems to be the effect of paragraph 4 of the orders made in relation to the first and second defendants.
However, each of the first, second and third defendants filed an amended defence in Court. The first and second defendants filed theirs on 15 November 2006, and the third defendant on 1 November 2006. Those defences addressed the claims made in the FASC.
On the same day, the respondent advised the applicant and the Court that it intended to apply for leave to amend its FASC against the applicant so as to enlarge its claim against the applicant and that the matter would therefore need to be adjourned in order for the respondent to prepare its new case.
The applicant objected to any adjournment of the proceeding but the trial judge adjourned the matter for a short time to enable the respondent to prepare its proposed amended pleadings.
On 22 November 2006 the respondent served the proposed further amended statement of claim on the applicant.
On 27 November 2006 the respondent applied for leave to amend the FASC and for an adjournment. Both applications were opposed by the applicant.
On 12 October 2007 the trial judge made the orders to which I have referred.
The applicant contended that the SFASC significantly enlarged the claim brought by the respondent. There can be no doubt that is so.
In paragraph 7A of the SFASC the respondent pleads that it appointed the applicant as “its insurance broking and advisory services provider” with effect from 1 July 1999 – the services contract, the terms of which included: that the applicant would provide insurance broking and advisory services to the respondent for reward; that the applicant would review the respondent’s existing and proposed policies to ensure that the respondent was familiar with the scope of the insurance and that any additional requirements were met, and, in particular, would address, inter alia, property valuations; that the applicant would prepare a comprehensive underwriting submission for submission to insurers to assist insurers in determining their underwriting criteria and to ensure that all material facts were disclosed to insurers; that the applicant would on the respondent’s instructions arrange for the placement of the respondent’s insurance program with insurers; and that the applicant would have at least fortnightly meetings with the respondent with a set agenda to ensure continuing process of review and analysis of the respondent’s program.
It is pleaded that the applicant expressly warranted that it would exercise skill, care and diligence to a high professional standard in supplying these services and that it would ensure that the services were free from defects and performance, and that it had extensive knowledge of the insurance broking advice needs of higher educational institutions: paragraph 7C of the SFASC.
It is pleaded that in late 1999 the respondent informed the applicant that values of properties and contents disclosed to its Industrial Special Risk insurers had not been updated for several years, and that the applicant advised the respondent that there was a risk of underinsurance of buildings as a consequence of values disclosed to insurers not being updated: paragraphs 7D and 7E of the SFASC.
It is pleaded that the respondent instructed the applicant to arrange for a valuation of the buildings on the respondent’s Acton campus at Mount Stromlo and at Siding Spring: paragraph 7E of the SFASC.
It is pleaded that the respondent engaged International Valuation Consultants Pty Limited, which is said to be a division of the applicant, to carry out valuations of the buildings referred to for insurance purposes to bring values up to date for insurance renewal negotiations. The respondent asserts in the SFASC that valuations were carried out by International Valuation Consultants Pty Ltd and on 11 July 2000 the respondent provided the applicant with a schedule of buildings insured by the first, second and third defendants, which identified building values determined by International Valuation Consultants Pty Limited and requested the applicant to inform it of the premium to be paid on those increased values for the balance of 2000.
It is pleaded that, subsequently, valuations of the respondent’s buildings were provided to the applicant by International Valuation Consultants Pty Limited.
It is claimed that the applicant knew or ought to have known that the values of the contents of buildings insured by the first, second and third defendants had not been valued for insurance purposes and that the true replacement costs of those contents had not been disclosed to those defendants: paragraph 7L of the SFASC.
The respondent has pleaded that it provided to the applicant three schedules in 2001, two of which were the Schedule C and the PNI Schedule. It is claimed that it instructed the respondent to arrange for the calendar year 2002 Industrial Special Risks Insurance cover and the declared values were $1,393,000,000 with a deductible $1,000,000 for each and every loss. It is pleaded that the applicant did not arrange material damage and consequential loss insurance cover over the buildings and contents described in the PNI Schedule for 2003 and arranged insurance on declared values it knew or ought to have known were not true replacement values: paragraph 7R of the SFASC.
It is pleaded in paragraph 7S of the SFASC that the applicant advised the respondent that it had renewed material damage and consequential loss insurance with the first defendant for 2003 in respect of:
‘all tangible property both real and personal of every description (except as excluded) belonging to the insured or for which the insured is responsible or has assumed responsibility prior to the occurrence of any loss or destruction or damage including all such property in which the insured may acquire an insurable interest (provided it is a similar business) during the period of the policy’.
In paragraph 8A of the SFASC it is pleaded that the first, second and third defendants disputed that the contract of insurance comprised the PNI Schedule of buildings and contents. The respondent refers in the SFASC to an exchange of correspondence between the first defendant and the respondent in relation to the values placed upon the buildings and contents. The respondent pleads that the first and second defendants, in their defences, did not admit that there had been any abnormal fluctuation during the currency of the policy in the value of the properties.
The respondent refers to the various defences raised by the first, second and third defendants: paragraphs 18A, 18B and 18C of the SFASC. The respondent pleads the various payments made by the first, second and third defendants pursuant to the respective contracts of insurance. The respondent identified the further payments that the first, second and third defendants agreed to make as a consequence of the mediation on 14 November 2006: paragraphs 21, 22 and 23.
In paragraph 24 the respondent pleads that the settlements agreed between the respondent and the first, second and third defendants were a “reasonable compromise of each of the claims” by the respondent against those defendants.
In paragraph 25 of the SFASC it is pleaded that the respondent was unable to recover any amount from the first, second and third defendants in respect of the damage to and destruction of the PNI Schedule of buildings and contents because the first, second and third defendants denied that it had insured those buildings or the contents of those buildings.
In paragraph 26 the respondent claims that the applicant failed to place material damage and consequential loss insurance over the PNI Schedule of buildings and contents with the first, second and third defendants for 2003
In paragraph 27 it is claimed that the applicant failed to obtain full replacement or reinstatement material damage and consequential loss insurance of the respondent’s buildings and their contents from the first and second defendants in 2003, and instead obtained cover that was liable to be reduced pursuant to s 28 of the Insurance Contracts Act 1984 (Cth).
In paragraph 29 it is pleaded that the applicant breached its duty of care to the respondent in the placement of material damage and consequential loss insurance in 2003 and was negligent. It is further or alternatively claimed that the applicant was in breach of its duty of care to the respondent in the provision of valuations which were inaccurate and which did not represent a true valuation of replacement and reinstatement of value of the buildings.
In paragraph 30 the respondent identified its claim, loss and damage:
30.By reason of the fourth defendant’s breach of the Service Agreement and the fourth defendant’s negligence the plaintiff has suffered loss and damage –
Particulars
(a)the plaintiff’s buildings and contents identified on the PNI List were not insured against material damage and consequential loss at the time of the fire and the plaintiff has consequently not received the sums set out under the heading “Included in the PNI list” in Annexure A hereto from the first second and third defendants;
(b)the plaintiff has been delayed in making a commitment to, commencing or carrying out reinstatement work to the buildings described in paragraph 25 hereof;
(c)the plaintiff has not received payment of the first and second defendant’s proportions of the amounts for buildings and contents under the heading “Not on the PNI List” in Annexure A hereto;
(d)the plaintiff has been delayed in replacing plant machinery and contents;
(e)the delay has given rise to further loss in the form of escalating prices.
In paragraph 35 the respondent further identifies its claims against the applicant:
35. The plaintiff claims against the fourth defendant –
(a)An order that the fourth defendant pay to the plaintiff damages in the sum of $17,016,685 being the amount agreed by the first second and third defendants to be its loss in respect of the damage and destruction of the buildings referred to under the heading “Included on PNI list” on Annexure A hereto and the contents of those buildings which the plaintiff has been unable to recover from the first, second and third defendants;
(b)An order that the fourth defendant pay to the plaintiff damages in the amount the sum of $2,778,372-50, being fifty percent of the amount agreed by the first, second and third defendants to be the cost or reinstatement and replacement any of the buildings and the plant machinery and other contents of those buildings referred to under the heading “Not on PNI List” on Annexure A hereto less the amount of $16,444,017 recovered from the first defendant;
(c)An order that the fourth defendant pay to the plaintiff damages in the amount the sum of $3,568,960, being twenty percent of the amount agreed by the first, second and third defendants to be the cost or reinstatement and replacement any of the buildings and the plant machinery and other contents of those buildings referred to under the heading “Not on PNI List” on Annexure A hereto less the amount of $4,320,960 recovered from the second defendant;
(d)An order that the fourth defendant pay the plaintiff damages arising from the fourth defendant’s breach of the Service Agreement and;
(d)Alternatively an order that the fourth defendant pay damages arising from the fourth defendant’s negligence;
(e)Alternatively an order that the fourth defendant pay the plaintiff damages pursuant to section 12GF ASIC Act.
A number of claims are made in the SFASC against the applicant which were not included in the ASC or the FASC. First, it is claimed that the applicant did not establish by way of valuations the true replacement values for the respondent’s buildings and, in that respect, breached the services contract and the duty of care which was said to be owed to the respondent. Secondly, it is claimed that whilst the applicant knew or should have known that there needed to be disclosure of the true replacement values of both buildings and contents, the applicant knew or ought to have known that the valuations of buildings provided both to the respondent and to the insurers were not the true replacement costs of those buildings and that no valuation of the contents of the respondent’s buildings had been carried out. In that regard it is said also that the applicant breached the services contract or its common law duty of care to the respondent. Thirdly, it is claimed against the applicant that it failed to give proper advice to the respondent in relation to any deductible applicable under the contract of insurance. It is pleaded that the applicant failed to advise the respondent of the effect of a $1,000,000 deductible in the event that loss or damage was suffered by more than one building and that it was necessary to include buildings and contents valued at less than the deductible in any declaration of value to the insurers and/or the consequences of failing to do so. Fourthly, the respondent claims that the applicant failed to insure the buildings on the PNI Schedule, which was the subject matter of the respondent’s claim against the applicant in the ASC and the FASC. However, the claim is not presented in the same way as it was. The plea is that the applicant was instructed by the respondent to insure the buildings in both the Schedule C and the PNI Schedule in the 2002 year. It is claimed that the applicant was aware that the respondent required the same insurance cover in 2003 as it had taken out in 2002.
It is to be remembered that the claim, as originally pleaded in the ASC, was merely that the applicant had failed to effect insurance in respect of the PNI Schedule of buildings and contents.
There are, as the applicant has contended, subsidiary claims which are not important for the purpose of this application and any appeal.
The applicant contends that the SFASC has raised three claims not previously raised: the building valuation claim; the disclosure of values claim; and the deductible advice claim. As already noted, the claim in relation to the failure to effect insurance in relation to the PNI Schedule of buildings and contents is put in a somewhat different way.
The applicant contends that the respondent has “completely abandoned its previous case against [the applicant], and has replaced it with an entirely new (in one instance, inconsistent) case”. The inconsistent case to which the applicant there refers is in relation to failure to effect insurance over the PNI Schedule of buildings and contents. The point that is made by the applicant is that, as originally pleaded, the claim was that the applicant had failed to comply with its instructions from the respondent. As pleaded in the SFASC, the claim is that the applicant had failed to effect insurance in accordance with the respondent’s requirements. Whether it is an inconsistent case or a different case does not really matter.
The point that the applicant rightly makes is that the claim that is raised in the SFASC is a very much enlarged and a very different claim to the claim pleaded in the ASC and the FASC.
The trial judge concluded that the claim in the ASC and the FASC that the applicant had failed to effect insurance cover over the PNI Schedule of buildings and contents was not inconsistent with the plea in the SFASC because the earlier plea was not limited to a failure by the applicant to effect insurance in accordance with instructions. He accepted, however, that the other pleas in the SFASC had not been raised in the ASC and FASC but accepted an explanation from the respondent that the issues were not raised until affidavits had been filed by the first and second defendants shortly before trial and matters raised at discussions during the mediation. He said, however, that he was not entirely satisfied that the plaintiff’s explanations addressed a significant number of the new allegations made. He said the allegations raised “real” triable issues between the applicant and respondent.
He then dealt with an additional objection which had been made by the applicant. The applicant argued before the trial judge and also on this application, that because the second defendant had consented to a judgment being entered against it in favour of the respondent, there was a conclusive determination by the Court that the PNI Schedule of buildings and contents were insured. It was put, for that reason, the respondent could not contend otherwise by a plea in the SFASC. It was put that it would be an abuse of the process to contend otherwise than in accordance with the judgment which had been entered against the second respondent. The trial judge rejected that contention.
Before the trial judge the applicant contended that if an order were to be made as sought by the respondent the applicant ought to have its costs on an indemnity basis. In that regard the applicant relied on Oshlack v Richmond River Council (1998) 193 CLR 72 at 89. The trial judge rejected that contention and said:
58.Although I am not entirely satisfied that the plaintiff has explained some aspects of why it was necessary to make the amendments proposed, I am prepared to accept the major thrust of the plaintiff’s submissions namely that the amendments arose consequential to the discovery and mediation process that occurred just before and at the time of the date set for hearing. That being so, I do not regard that AON has made out such a special and unusual feature of the case that would justify the award of costs on a basis different from that which the Rules contemplate (cf Fairplay Newspaper and Printing Works Pty Ltd v Currico Nominees Pty Ltd [1998] FCA 680 (22 May 1998)).
59.In the present case, there is some explanation why significant amendments needed to be made to the plaintiff’s case. The fact that other amendments are also now sought to be made and that there is no real explanation for the delay in doing so does not, in my view, make this such a special case which justifies an award of indemnity costs.
His Honour determined that costs should be in accordance with r 513 of the CPR, being costs of and resulting from the amendment.
Whilst the trial judge did not make any mention of the costs in relation to the aborted trial, the parties, however, agreed that the effect of the order was to award the applicant the costs thrown away by the amendment including any costs thrown away as a consequence of the adjournment of the hearing. Mr Garling SC, who led for the respondent, conceded as much.
The orders made by his Honour are clearly interlocutory in that they do not finally determine the substantive rights of the parties: Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246; Licul v Corney (1976) 180 CLR 213. It follows that the applicant needs leave to appeal: r 531O of the CPR.
Where a court is called upon to consider the grant of leave to appeal from an interlocutory order, two matters will ordinarily need to be addressed. First, whether the decision complained of is attended with sufficient doubt to warrant its reconsideration by a court of appeal. Secondly, whether a substantial injustice would result if leave were refused on the assumption that the decision is wrong: Niemann v Electronic Industries Ltd [1978] VR 431; Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397.
It was put by the respondent that in conformity with the decision of the High Court in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177, that leave to appeal will be more readily granted where the interlocutory order complained of has determined the substantive rights of the party. It was contended that where the order relates to practice and procedure, the courts will be more reluctant to give leave.
Both those contentions may be accepted. Historically, the courts have been more disposed to grant leave to appeal from an order which determines the substantive rights of a party and more inclined to allow matters of practice and procedure to be determined by the trial or list judge. There are good reasons for that approach. During the course of the litigation, a number of orders might be made which relate to practice and procedure. The parties should only be entitled to seek review of those orders where there is a real question as to their correctness and a substantial injustice will be caused if the orders were not reversed.
The respondent contended, relying upon the contentions to which I have referred, that “the applicant in this case must show that there are exceptional circumstances which justify leave being granted.”
That contention, which is not supported by authority, must be rejected. There is no obligation on a party seeking leave to appeal on a matter of practice and procedure to show that there are exceptional circumstances which justify leave being granted. That would be to impose a different test than in the authorities to which I have referred.
Whilst courts should proceed with the appropriate degree of caution before giving leave in relation to a matter relating to practice and procedure, courts will not require an applicant, who has shown that the order from which appeal is sought to be brought may well be in error and the party might suffer substantial injustice, to further establish that there are exceptional circumstances for the grant of leave.
In this case, in my opinion, the application raises some serious questions which need to be addressed. First, whether the trial judge’s exercise of discretion has miscarried. Secondly, if it were appropriate to allow the respondent to amend its statement of claim whether the order for costs made was appropriate. Thirdly, the scope of the CPR and, in particular, whether the CPR means that courts must have greater regard to case management principles than previously.
Moreover, for the reasons which follow, the applicant has demonstrated that in exercising his discretion, his Honour wrongly categorised the plea which was contained in the FASC as not being limited to a failure to effect the insurance in accordance with instruction and failed to have regard to the extent of the enlargement of the claim brought against the applicant. Moreover, the applicant has established that his Honour failed to have sufficient regard to the respondent’s failure to explain the delay in bringing the enlarged claim. For those reasons, and because the effect of his Honour’s order means that the applicant is facing a significantly more substantial claim, it would be appropriate to grant leave. Leave to appeal should be granted.
From the outset it is necessary to determine the principles which are to be applied to an application by a party to amend their claim at trial, where the effect of the amendment must necessarily be that the trial must be adjourned and the defendant is put to the trouble of repleading its defence, and to the further trouble of having to get up its case to answer a much more substantial claim than it previously faced.
It might be thought that a useful starting point would be by examining the decision of the High Court in State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 and the cases mentioned in that decision.
However, the applicant contended that the Court should start with an examination of r 21 of the CPR, the effect of which, it was submitted, was to modify the previous basis upon which the discretion to grant leave to amend pleadings was exercised. It was contended that r 21 required greater emphasis to be placed on what might be described as case management considerations.
It was further contended that r 21 of the CPR was consistent with the decision of the New South Wales Court of Appeal in State of New South Wales v Mulcahy [2006] NSWCA 303 at [29].
Rule 21 provides:
21(1)The purpose of this chapter, and the other provisions of these rules in their application to civil proceedings, is to facilitate the just resolution of the real issues in civil proceedings with minimum delay and expense.
(2)Accordingly, these rules are to be applied by the courts in civil proceedings with the objective of achieving—
(a)the just resolution of the real issues in the proceedings; and
(b)the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.
(3)The parties to a civil proceeding must help the court to achieve the objectives.
(4)The court may impose appropriate sanctions if a party does not comply with these rules or an order of the court.
The applicant’s contention was that r 21 puts greater emphasis on the case management considerations. It is difficult to discern that change in emphasis in r 21. The purpose of the CPR is clearly articulated in r 21(1) which is to facilitate the just resolution of the real issues with minimum delay and expense. There is nothing new about that proposition. In modern day litigation it has always been the aim of courts to facilitate the just resolution of the real issues with minimum delay and expense.
Subrule (2) requires this Court to apply the rules with the object of achieving the just resolution of the real issues in the proceedings. Again, that has always been the obligation on the court. That is the very purpose for which the court is erected. Subrule (2) also requires the courts to achieve that just resolution by the timely disposal of the particular proceedings and all other proceedings in the court at a cost affordable by (sic) the respective parties.
Before court management was introduced as a concept to the various Australian courts, the parties had the responsibility for the manner in which the litigation proceeded and for setting the pre-trial procedures. It was only when one of the parties applied to the court for an interlocutory order that the court became seized of the matter prior to the trial itself, except, perhaps, if the rules of court required a procedure for a party to apply to set a matter down for trial. Before courts assumed the role of managers of litigation, litigation was conducted wholly in accordance with an adversarial process both before and at trial.
Ever since case management has been a feature of litigation in this country, the courts have seen it as one of their duties to assist the parties to dispose of the proceedings as expeditiously and as inexpensively as possible.
The purpose in r 21(1) and the directions in r 21(2) state the principles of court management of litigation. The purpose of the courts assuming the management of litigation are those contained in r 21(1). The directions in r 21(2) are those directions which all courts would give in an endeavour to achieve the purpose in r 21(1).
There is nothing new, in my opinion, in either of the other subrules. It has always been expected, since the courts assumed the responsibility of case management, that the parties must help the court to achieve the just resolution of the real issues in civil proceedings with minimum delay and expense. Moreover, it has always been understood that if a party does not cooperate or causes another party delay or expense, that party may be subject to the type of sanctions which are predicated in r 21(4).
In my opinion, there is nothing in r 21 which would not have been known to members of the High Court when they decided State of Queensland v J L Holdings Pty Ltd (supra).
It was further contended that r 21 had to be understood in the light of r 501 which provides:
501 All necessary amendments of a document must be made for the purpose of—
(a) deciding the real issues in the proceeding; or
(b) correcting any defect or error in the proceeding; or
(c) avoiding multiple proceedings.
There is nothing, however, novel about r 501. That rule is included in the rules of court of most superior courts. It is presently in the same form in O 13 r 2(2) of the Federal Court of Australia Rules 1979 (Cth) (Federal Court Rules) which was the rule under consideration in State of Queensland v J L Holdings Pty Ltd.
A rule of the same or similar kind has been present in most rules of court since the passing of Judicature Acts in England: see, for example, O 28 of the Rules of the Supreme Court (England) 1883 (UK).
In my opinion, there is nothing in r 21 or r 501 which would compel this Court to start otherwise than by reference to State of Queensland v J L Holdings Pty Ltd. However, as I have said, the applicant contended that both r 21 and the decision of the Court of Appeal in State of New South Wales v Mulcahy (supra) meant that this Court needed to modify “the J L Holdings approach, by making case management as important as the just resolution of the real issues in the proceedings”.
It is difficult to think that anything said by the Court of Appeal in New South Wales in relation to the Civil Procedure Act 2005 (NSW) and the Supreme Court Rules 1970 (NSW) would lead to the result that this Court would not follow a binding decision of the High Court. However, the submission was put.
Sections 56 and 57 of the Civil Procedure Act 2005 (NSW) provides:
56 (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
(2)The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.
(3)A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.
(4)A solicitor or barrister must not, by his or her conduct, cause his or her client to be put in breach of the duty identified in subsection (3).
(5)The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs.
57 (1) For the purpose of furthering the overriding purpose referred to in section 56(1), proceedings in any court are to be managed having regard to the following objects:
(a) the just determination of the proceedings,
(b) the efficient disposal of the business of the court,
(c)the efficient use of available judicial and administrative resources,
(d)the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.
(2)This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1).
Section 56 is in very similar terms to r 21 and incorporates, as I have said, the purpose of court managed litigation and the method by which that purpose ought to be achieved.
Section 57 is facultative in the sense that it is designed to assist in achieving the purpose in s 56(1) and to assist in the making of directions under s 56(2). Section 57 sets out similar directions as are contained in r 21(2).
Section 58 of the Civil Procedure Act 2005 (NSW) provides:
58 (1) In deciding:
(a)whether to make any order or direction for the management of proceedings, including:
(i) any order for the amendment of a document, and
(ii)any order granting an adjournment or stay of proceedings, and
(iii)any other order of a procedural nature, and
(iv)any direction under Division 2, and
(b)the terms in which any such order or direction is to be made,
the court must seek to act in accordance with the dictates of justice.
(2)For the purpose of determining what are the dictates of justice in a particular case, the court:
(a)must have regard to the provisions of sections 56 and 57, and
(b)may have regard to the following matters to the extent to which it considers them relevant:
(i)the degree of difficulty or complexity to which the issues in the proceedings give rise,
(ii)the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities,
(iii)the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties,
(iv)the degree to which the respective parties have fulfilled their duties under section 56(3),
(v)the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings,
(vi)the degree of injustice that would be suffered by the respective parties as a consequence of any order or directions,
(vii)such other matters as the court considers relevant in the circumstances of the case.
Section 58(2) effectively defines the dictates of justice in any particular case when a court is considering an application for relief under s 58(1). Section 58(1) includes an order for the amendment of a document and an order granting an adjournment. The court must have regard to ss 56 and 57. In that regard it must consider the purposes identified in s 56(1) and must seek to give effect to those purposes as mandated in s 56(2). The court must in furthering the purposes in s 56(1) have regard to the objects in s 57. It is difficult in a sense to see how the objects in s 57(1)(b), (c) and (d), insofar as paragraph (d) refers to any other proceedings in the Court, would impact on the just, quick and cheap resolution of the real issues in any particular proceedings before the court. However, that is the statutory injunction which is imposed upon the courts in New South Wales.
In State of New South Wales v Mulcahy, the Court of Appeal in New South Wales was called upon to consider an appeal against an order made by a District Court judge (Judge Quirk) which allowed a plaintiff to amend his statement of claim in proceedings in which the State of New South Wales was the defendant.
The plaintiff had brought proceedings against the State of New South Wales, a number of police officers and the Commissioner of Police on 15 August 2003. He claimed that he had been subject to assault and battery, was falsely arrested and falsely imprisoned, and was subject to malicious prosecution. He also claimed that various employees of the State were guilty of negligence, abuse of process and misfeasance in public office.
The State filed its defence on 7 June 2004 pleading, amongst other things, that the proceedings were barred under the Limitation Act 1969 (NSW). On 19 November 2003 the plaintiff sought to have the limitation period extended but by the time of the hearing before the Court of Appeal that notice of motion had not been heard or determined. On 1 March 2005 the plaintiff filed an amended notice of motion which sought a finding that the running of the limitation period was suspended.
On 25 October 2004 the State applied to strike out some paragraphs of the statement of claim. On 1 December 2004 the plaintiff filed an amended statement of claim limiting his claims to the State and no longer pursuing claims against the other defendants.
On 22 February 2005 the plaintiff filed a second amended statement of claim that further limited his claim to malicious prosecution against the defendant, the State of New South Wales.
On 24 May 2005 the matter was set for hearing to commence on 7 November 2005 over five days.
On 26 August 2005 the plaintiff’s counsel advised that she was no longer able to act for the plaintiff and new counsel was retained. His advice was that the plaintiff ought to revert to the original allegations but only against the State of New South Wales. On 7 October 2005 a third amended statement of claim was filed with the leave of a District Court judge, Judge Quirk. The trial date was vacated.
The State applied for leave to appeal against the leave given by Judge Quirk.
It was contended by the State in support of the leave to appeal application that the amendments which were allowed were futile because the causes of action which were raised were statute barred. It was further contended that Judge Quirk failed to take that matter into account.
The Court of Appeal was of the opinion that the claims for assault and for false imprisonment and misfeasance in public office were all barred by the limitation periods and the time for the bringing of those causes of action could not be extended.
It was argued on the application for leave to appeal that Judge Quirk had wrongly taken into account that the State of New South Wales was aware of the proceedings because it had previously been given notice of those expanded proceedings. That contention was rejected.
It was also contended that the trial judge took into account an irrelevant matter in relation to her not determining the limitation point. That contention was also rejected.
In the course of his reasons, Bryson JA said at [25]-[26]:
High Court authority supports the view that only in extreme circumstances should case management principles shut a party out from litigating an issue which is fairly arguable – see State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 154; and see too 155. However that case was not decided on legislation such as now controls the power of amendment. Consideration of an amendment application should begin with s 64(2) of the Civil Procedure Act 2005 (NSW) which is in these terms:
64. Amendment of documents generally
(1)At any stage of proceedings, the court may order:
(a)that any document in the proceeding be amended, or
(b)that leave be granted to a party to amend any document in the proceedings.
(2)Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings.
These subsections have a strong general similarity to O 13 r 2 of the Federal Court Rules, which were applied in Queensland v J L Holdings. However, other provisions of the Civil Procedure Act require to be considered ...
Justice Bryson then referred to ss 56 to 58 and noted that s 64(2) was subject to s 58. After referring to O 13 r 2 of the Federal Court Rules, Bryson JA said at [29]:
When regard is paid to all these provisions of the Civil Procedure Act, the relative importance of changes in the way the action was conducted at earlier stages on the one hand, and of a party’s wish to put forward some new matter as one of the real questions raised by or otherwise depending on the proceeding on the other hand, is significantly altered. The approach to amendments which the judgments in Queensland v J L Holdings treated as appropriate is significantly altered also. Judge Quirk did not refer to these sections, and the reasons which she stated do not indicate that she gave appropriate consideration, as considerations adverse to allowing the amendment, to the earlier course of proceedings and the various directions in which earlier forms of the Statement of Claim, including significant amendments based on the views of senior counsel, had taken the litigation.
The applicant contends that the trial judge was wrong to find that the applicant had not made out its claim that the respondent had abandoned its former claim and replaced it with a completely new case. In doing so, his Honour rejected the applicant’s contention that the claim in the SFASC, in relation to the effecting of insurance, was that the applicant was under an obligation to insure in accordance with the respondent’s requirements, whereas in the ASC and the FASC the claim was that the applicant had failed to effect insurance in accordance with its instructions.
I agree with the applicant’s contention that the claim in relation to the effecting of insurance in the SFASC is somewhat different to the claim in the ASC and the FASC. As originally pleaded, the breach of contract and the breach of duty were in failing to effect insurance in accordance with the instructions given to the applicant. The claim which is propounded in the SFASC is somewhat wider and suggests that there was an obligation on the applicant to consider what the respondent required for insurance and to effect insurance in accordance with those requirements. It is pleaded, as the applicant contends, that the applicant effected insurance without obtaining the respondent’s instructions.
I do not, however, think it can be said that the respondent abandoned its previous claim. I think it can be said that it has put its previous claim in a different way in that respect.
I do, however, accept the further contentions of the applicant that the other matters raised in the SFASC were not previously raised in the ASC or the FASC. The claim which the respondent propounds in the SFASC is much wider than the claim in the previous documents.
For example, in the SFASC the respondent contends for the first time that the applicant owed a duty to the respondent in relation to the valuations of the properties. That was never part of the respondent’s claim prior to the respondent settling with the first, second and third defendants.
Moreover, it was not part of the respondent’s claim that the applicant had some duty in relation to advising the respondent in relation to any deductible under the policy of insurance.
In my opinion, the claim which is sought to be advanced in the SFASC raises a number of new issues not previously raised and frames the only issue previously raised in a different manner.
The trial judge seems to have accepted that there are claims made in the SFASC which had not previously been made in the ASC and the FASC. He said:
41.AON also says that the plaintiff had not made a case against it in respect of the defences that the first and second defendants have raised under s 28(3) of the Insurance Contracts Act 1984 (Cth) and gives no explanation for the delay in doing so.
42.Whilst conceding that there are allegations in the proposed amendments that have not previously been pleaded, the plaintiff seeks to explain the delay in doing so by reference to receipt of affidavits from Chubb and CGU just before the hearing as well as further discovery relating to the underwriting process. Reference is also made to discussions during mediation which caused the plaintiff’s lawyers to reassess the significance of the defences pleaded by Chubb and CGU in reliance upon s 28(3) of the Insurance Contracts Act 1984 (Cth). In that regard, it was said that AON’s involvement in the declared values of the Schedule C Buildings had consequences which the plaintiff’s lawyers had not appreciated. This further led to consideration of claims by the plaintiff against AON based on the Australian Securities and Investment Commission Act 2001 (Cth) concerning the conduct and representations made by AON.
43.I am prepared to accept those explanations in general although I am not entirely satisfied that the plaintiff’s explanations account for the oversight in not raising a significant number of the new allegations made. However, I do not overlook the important factor that the allegations raise real triable issues between the plaintiff and AON. I am also mindful of the fact that the trial of this matter was set for four weeks and other litigants may be said to have been disadvantaged by the allocated time of the trial not being taken up. On the other hand, it is significant that matters in issue, including the issue of quantum, have been settled as between the plaintiff and the other three defendants.
It is not clear, however, what weight he put on the fact that the SFASC sought to raise these new issues and articulate the previously raised issue in a different form.
The applicant further contends that his Honour was wrong to accept the explanations given by the respondent. Specifically, it was put that the respondent did not offer any explanation as to why it now sought to make its claim in relation to the PNI Schedule in a different way. Nor was there any proper explanation offered for why the remaining claims in the SFASC had not previously been brought. Indeed, it was submitted that there was evidence from the respondent’s solicitor that no explanation was offered and that there was a deliberate decision not to mention any reason why the statement of claim had to be amended. Moreover, it was contended that there was evidence that established that the respondent was aware, long before the date of the application to amend, of the significance of the first and second defendants’ defences under the Insurance Contracts Act 1984 (Cth). It was put that, in fact, there was evidence that the respondent’s solicitor had understood the significance of those defences well before the respondent sought to and obtained an order to join the applicant.
It was therefore contended that because there was no explanation or no proper explanation for the delay, leave should have been refused.
The respondent read an affidavit of Kent Owen, a solicitor employed by the respondent’s solicitors. The applicant read an affidavit of its solicitor, Michelle Carr. Both Mr Owen and Ms Carr were cross-examined on their affidavits.
It was Mr Owen’s evidence that he assumed responsibility for the conduct of these proceedings on 28 February 2006 when a previous employee of the respondent’s solicitors resigned. Mr Owen said he was an experienced litigation solicitor and competent to conduct complex litigation.
He understood when he read the pleadings that the insurers were pleading a defence based on s 28 of the Insurance Contracts Act 1984 (Cth). In that regard, he understood that the insurers were claiming there had been a misrepresentation of the declared values of the relevant properties which was a very important issue in the case. He understood that a relevant element of the insurers’ defence was the assertion made by the insurers that the declared values had been significantly understated.
During Mr Owen’s cross-examination, the applicant tendered letters written by the first defendant to the applicant as early as 2 April 2003 which showed that the first defendant was concerned “at the very substantial increase in value from the declared values provided by the insured in only October last year”. The first defendant wrote that “[t]he provision of accurate declared values is critical, not only to our calculation of the premium under the policy but also more generally to our decision whether or not to accept a particular risk ...”. It asked the applicant to have the respondent provide a detailed explanation as to the reasons “why the current estimate of value for contents so substantially exceeds the declared values.” The letter concludes:
5.Chubb reserves all its rights in relation to these issues, including its rights under the Insurance Contracts Act to reduce its liability to place it in the position it would have been had proper disclosure been given.
On 24 October 2003 the first defendant wrote to the respondent and addressed the question of the valuation of contents. It referred to an explanation which had been given by the applicant on behalf of the insured and concluded:
23.The University knew, or a reasonable person in the University’s position ought to have known, that the declared values were statements relevant to Chubb’s decision whether to accept the risk and, if so, on what terms. The University has quite clearly made misrepresentations as to the value of contents at Mount Stromlo such as to attract the remedies afforded by section 28 of the Insurance Contracts Act.
24.As you probably know, Chubb is entitled to avoid the Policy under subsection 28(2) if the misrepresentation was fraudulent in the relevant sense. If it was not, then its liability is reduced under subsection 28(3) to the amount that would place it in the position in which it would have been if the misrepresentation had not been made. In the circumstances outlined above, Chubb’s liability to the University can be no more than a figure equivalent to US$5 million in respect of the loss sustained at Mount Stromlo. (As to the loss sustained at the Research School of Biological Sciences, Weston Creek, Chubb is separately considering the University’s claim with respect to that site. Following Chubb’s investigation of the facts and circumstances of the claim, Chubb will pay such claims subject to the terms and conditions of the Policy and subject also to any rights Chubb may have to avoid the policy.)
25.It should be noted that the above is based on the material currently available to Chubb and I note in particular that the loss adjuster’s investigations are continuing. Chubb reserves its rights in this regard. Further, Chubb does not intend to exercise any right it may have to avoid the policy without first considering any further explanation you may have to offer in relation to the misrepresentation referred to above.
On 20 January 2004 the first defendant wrote to the Vice Chancellor of the respondent, Professor Ian Chubb and in that letter said:
Chubb wrote to the University’s brokers, Aon, on 3 February 2003 granting indemnity under the policy in respect of the Mt Stromlo loss. The payment by Chubb of an amount that does not equate to the full loss suffered by the University was not attributable to any failure by Chubb to indemnify the University. Rather, it arises from Chubb exercising its rights under section 28(3) of the Insurance Contracts Act to reduce Chubb’s liability to place Chubb in the position of Stromlo. We are particularly concerned that the ANU may have misunderstood Chubb’s position especially in light of the fact that you have been quoted in the media as saying that the dispute between Chubb and the University is about the meaning of “full replacement value” in the policy. Chubb’s argument is not concerned with the meaning of that phrase or the interpretation of the policy more generally, but instead relies upon the remedies available to Chubb under the Insurance Contracts Act arising out of a misrepresentation by the University as to the true value of assets at Mt Stromlo.
It was the applicant’s contention that the respondent knew before it brought its proceedings against the first, second and third defendants that the first defendant was exercising its rights under the Insurance Contracts Act 1984 (Cth) in relation to the understatement of the valuation of the assets, the subject of the contract of insurance.
Mr Owen did not seek to deny that the respondent had that knowledge although, in all fairness to Mr Owen, he did not have responsibility for these proceedings at the time that the letters to which I have referred were written.
In any event, the letters speak for themselves. The letters make it quite clear to the respondent that as at 24 October 2003 the first defendant intended to exercise its rights under s 28 of the Insurance Contracts Act 1984 (Cth).
The critical aspect of Mr Owen’s evidence is his failure to give any explanation for the need to amend the statement of claim. Nowhere does he explain why the further claims which are clearly evidenced in the SFASC were not made earlier.
It was put to him that nowhere in his affidavit did he offer any explanation for the need to amend the statement of claim and asked whether that omission was deliberate or accidental. He answered that it was not accidental. He said, when pressed, a deliberate decision was made not to mention any reason why the statement of claim had to be amended. He said the omission was necessary.
It cannot be thought that the respondent, which was represented by experienced senior counsel and an experienced litigation solicitor, did not know that the respondent ought to give an explanation as to why it was seeking so late in the day to amend the statement of claim and to raise for the first time claims not previously brought against the applicant. It therefore must be inferred that any explanation it gave was likely to lead to the application being unsuccessful.
It can be inferred from Mr Owen’s evidence that prior to the mediation with the first, second and third respondent, the respondent had made a deliberate decision not to bring the claims which are included in the SFASC against the applicant. It had deliberately decided to run a claim against the applicant based solely on the applicant’s failure to arrange insurance over the PNI Schedule of buildings and contents.
Mr Garling SC contended that the inference from Mr Owen’s evidence was that something was said at the mediation which prompted the need to amend the statement of claim but, because of the obligations of confidentiality imposed by the mediation, Mr Owen was not at liberty to reveal what had been said. That was the sense in which Mr Owen used the word “deliberate”.
If that were the reason why Mr Owen did not offer a reason for either the need to amend the statement of claim or the delay in making the application, he could have easily said so in his affidavit and in his evidence. He did not. Moreover, such a statement would be inconsistent with Mr Owen’s knowledge of the matters contained in the first and second defendant’s defences. For those reasons, I reject that contention.
In my opinion, the trial judge was wrong to conclude, as he did, that the respondent’s involvement in the declared value of the Schedule C buildings had consequences which the respondent’s lawyers had not appreciated.
The trial judge should have concluded that because the respondent had deliberately decided not to give any explanation in support of its application to amend and to adjourn the trial, that any explanation would not have supported the making of those orders and, indeed, may have been such that the orders could not be made.
The applicant’s solicitor, Ms Carr, deposed to the consequences for the applicant should the order be made. She said:
14If leave is given to the ANU to amend so as to agitate the issues in the draft further amended statement of claim, in my opinion, having regard to the issues I have considered and the preparation to date it will be necessary for Aon to undertake afresh all of its forensic enquiries to defend the proceedings. Specially, with the assistance of solicitors in my employ it will be necessary to:
●consider the amended pleading for particulars that may be required to better understand the claims against Aon;
●take instructions for the preparation of the defence;
●reconsider the whole question of the parameters of the discovery required of the ANU in respect of these new allegations and form views as to what has an (sic) has not been given to date;
●reconsider the discovery already inspected in light of the new allegations;
●reconsider Aon’s discovery obligations and obtain such instructions as are necessary;
●reconsider the evidence required in respect of the newly propounded claims;
●reconsider subpoenas that may be required to be issued including to some of the same entities as have already been subpoenaed but with regard to these new allegations and not to those that are abandoned;
●revisit the whole question of quantum and the value of the assets in dispute;
●re brief senior and junior counsel and confer as necessary or appropriate in respect of these new claims.
She did not resile from that statement in any way in her cross-examination.
The effect of her evidence, which may be accepted, is that the amendments to the statement of claim would necessitate the applicant revisiting the whole of the proceedings and effectively to have to start again in preparing its defence.
In my opinion, the trial judge failed to give sufficient weight to the following matters. First, that the respondent’s claim in relation to the non-insurance of the PNI Schedule of buildings and contents is materially different in the SFASC. It no longer is a claim that the respondent failed to comply with its instructions to arrange insurance in respect to those buildings and contents. It is a claim that the applicant failed to define the respondent’s requirements for insurance and thereafter failed to cause the PNI Schedule of buildings and contents to be insured. Secondly, the SFASC raises a number of new claims but, most importantly, a claim that the applicant failed to arrange valuations such that the respondent’s buildings and contents were underinsured. Thirdly, that the respondent was aware as early as 2003 that the first defendant at least intended to rely upon the provisions of s 28 of the Insurance Contracts Act 1984 (Cth) because the respondent had understated the value of the buildings and contents, the subject matter of the contract of insurance. Fourthly, that the respondent was aware, after the first and second defendants filed their defences, that those defendants were relying upon a defence under s 28(3) of the Insurance Contracts Act 1984 (Cth) which, in turn, relied upon an allegation that the respondent’s buildings and contents were undervalued. Fifthly, that the respondent refused to give any explanation as to why the respondent had not previously brought the further claims against the applicant when it knew of the first and second defendant’s defence under the Insurance Contracts Act 1984 (Cth). Sixthly, that the application was so late that the trial would have had to have been adjourned even if the application to amend had been unsuccessful. It must be borne in mind that the application to amend was first signalled when the applicant entered judgment against the first, second and third defendants and the application was heard almost two weeks after the trial was due to start. Seventhly, that if the application to amend were allowed the applicant would need to re-examine the whole of its defence by reference to the change in which the respondent put its case against the applicant in relation to the PNI Schedule of buildings and contents and by reference to the further claims raised in the SFASC. Eighthly, unless the applicant was compensated by way of all of its costs thrown away to the date of amendment on an indemnity basis, the applicant would suffer prejudice.
This is not a case where a court should be reluctant to punish a party for the way in which the party conducted its litigation. There is no suggestion of mistake on the part of the respondent in failing to raise its claim in the way in which it wishes to do so in the SFASC and to prosecute its new claims. This is a case where it may be inferred that the respondent deliberately adopted the course that it did and maintained that course up to the time that it settled with the first, second and third defendants.
In my opinion, the trial judge erred in allowing the respondent to amend its statement of claim in those circumstances. The respondent should have been required to conduct its case in accordance with the decision it made some years before and the application refused.
In any event, if it were proper to allow the application, in my opinion, the order for costs was inappropriate. The order for costs did not compensate the applicant for the costs to which it would be put by reason of these late amendments. In those circumstances, the applicant would suffer prejudice.
If the respondent should have been allowed to amend its statement of claim, it ought to have been on terms that the respondent pay the applicant’s costs thrown away including the costs of the adjournment of the trial on an indemnity basis.
The applicant further relied upon a quite separate ground of appeal for contending that the trial judge was wrong to allow the amendment to the SFASC. The applicant contended that “the failure to insure case” should be struck out as an abuse of process. That contention must be rejected. The only application which was before the trial judge was the respondent’s application to amend its statement of claim. There was no application made to the trial judge for any order in relation to striking out any parts of the FASC.
That being the case, the applicant is not entitled to complain about the trial judge’s failure to strike out “the failure insure case” in the FASC as an abuse of process. The applicant, however, contended that the respondent’s application to amend the statement of claim should have been refused on the ground that it was an abuse of process.
The abuse of process was identified in the following way:
a.The failure to insure case (whether in its FASC or SFASC iterations) assumes, as a fundamental premise, that the buildings on the PNI Schedule were not insured.
b.The University alleged, and CGU denied, that the buildings on the PNI Schedule were insured.
c.The University obtained a judgment by consent against CGU.
d.That judgment must be taken to have resolved all matters in dispute on the pleadings between the University and CGU in the University’s favour.
e.That judgment thus determined that the buildings on the PNI Schedule were insured.
f.The University cannot now maintain a case that is inconsistent with that judgment. Because the failure to insure case proceeds on the basis that the buildings on the PNI Schedule were not insured, that case is inconsistent with the judgment, and to maintain it would be an abuse of process.
It can be seen that the applicant relied upon the judgment which was entered against the second defendant only. That judgment was, as is shown in [17] of these reasons, for the respondent against the second defendant in the sum of $750,000.
As I have already said, the second defendant filed an amended defence in this Court on 15 November 2006. In paragraph 18 of that defence the second defendant pleaded:
18.In answer to the allegations contained in paragraph 18 of the Further Amended Statement of Claim the Second Defendant:
(a)says that the Second Defendant’s liability to indemnify the Plaintiff is subject to the rights, obligations and remedies of the Insurance Contracts Act, (Cth) 1984 (“the Act”) and, in particular, the remedy afforded by section 28(3) of the Act and refers to and relies upon the matters pleaded in paragraph 25 below;
(b)further, and in the alternative, says that any such liability to indemnify the Plaintiff is only with respect to buildings listed in the document entitled “The Australian National University (Schedule C) Property and Business Interruption Period 31 December 2001 to Period 31 December 2002” referred to in paragraph 2(d)(ii) above;
(c)refers to and repeats the matters pleaded in paragraphs 19, 20 and 23 below;
(d)does not plead to the allegations insofar as they concern the First and Third Defendants; and
(e)otherwise denies the allegations made therein.
In particular, it can be seen that after entry of judgment the second defendant maintained that its liability to the respondent was limited to the buildings in Schedule C and that, in any event, its liability had to be reduced by reference to s 28(3) of the Insurance Contracts Act 1984 (Cth). Therefore, insofar as it was entitled to file any pleading after a judgment had been entered against it, the second defendant maintained the previously pleaded defences.
However, it did admit, as it previously had, that the respondent was entitled to indemnity under the policy of insurance between the parties in respect to the PNI Schedule of buildings and contents, subject to its defence under s 28(3) of the Insurance Contracts Act 1984 (Cth).
There is no evidence as to how the judgment sum was arrived at or whether any part of the judgment sum was agreed to be in satisfaction of the respondent’s claim in respect of the PNI Schedule of buildings and contents.
However, it was contended by the applicant that, because a judgment had been entered against the second defendant in favour of the respondent, any further claim by the respondent that claimed the policy of insurance did not extend to the PNI Schedule of buildings and contents was an abuse of process. The appellant argued that the Court had jurisdiction to stay any proceeding if the continuance of that proceeding would be oppressive because the proceeding sought to re-litigate a case which had already been disposed of by earlier proceedings: Walton v Gardiner (1993) 177 CLR 378 at 393. It was argued that a superior court also had the power to reject an amendment on the ground that the subject matter of the amendment sought to re-litigate a case which had already been disposed of by earlier proceedings. It was argued that the case had been disposed of by the consent judgment.
It was argued by the applicant that there was no distinction between a judgment given after a contested hearing as opposed to a judgment given at the request and consent of the parties: James Hardie & Coy Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53.
The trial judge said:
51.In respect of the consent judgment that I entered in this matter between the plaintiff and the second defendant, I am just not able to say that a fundamental aspect of the judgment that I entered by consent was a determination that the PNI buildings were insured. That issue is but one of the matters put in issue in the pleadings between these parties. ... It is just not possible, at this stage, to say that the consent judgment against the defendant determined conclusively the issue that the PNI buildings were insured even as between the plaintiff and the second defendant.
52.Further, the fact that judgment was entered dismissing the plaintiff’s claim against Chubb, the first defendant, would seem to me to deny any determination of the issue that the PNI buildings were insured by that defendant. That issue was the subject of an express denial in the pleadings between the plaintiff and Chubb and presumably it could be asserted that the issue of the buildings being insured was determined adversely to the plaintiff in that case.
53.For AON to make good the submission that it makes on this aspect, I think that it must show that the only issue on the pleadings which resulted in an adverse judgment against the plaintiff was the question of whether the PNI buildings were insured. In my view, it has failed to do so.
The difficulty for the applicant on this appeal is that there is no evidence at present that the judgment which was entered in favour of the respondent against the second defendant represented any part of its claim against the second defendant in relation to the PNI Schedule of buildings and contents.
In Spencer Bower, Turner and Handley: The Doctrine of Res Judicata (3rd ed, Butterworths, 1996) at pp 21-22, The Honourable Justice Handley wrote:
38 A judgment or order by consent of the parties may be a res judicata. In such cases the court is discharged from the duty of investigating or further investigating the matters in controversy and does not pronounce a judicial opinion on them; but at the joint request of the parties it gives judicial sanction and coercive authority to what they have agreed and thus converts an agreement which, except by statute, could never operate as a bar into a judicial decision on which a plea of res judicata may be founded. Judgments, orders and awards by consent are as efficacious as those pronounced after a contest, in creating cause of action estoppels and effecting a merger of the causes of action sued on. Although it was suggested that the estoppel in such cases arises by representation, this has not been accepted. The extent to which a consent judgment, order or award may give rise to issue estoppels, however, has not been finally determined. ...
39 Though consent judgments and orders are decisions and their operative parts binding, it may not be clear what questions were concluded. The court will examine the available evidence to ascertain the matters in dispute. Any issue which the parties recognised was the subject of the litigation and was fundamental to the judgment or order will be conclusively determined. Where, however, there are no such materials neither party is estopped from disputing anything but the actual judgment or order. ... (Footnotes omitted)
During the appeal, the applicant recognised that it could put its case no higher than it was a relevant consideration for the trial judge to take into account in the exercise of his discretion that a judgment had been entered against the second defendant.
In my opinion, because of the paucity of the information before the trial judge in relation to the judgment against the second defendant, the trial judge was entitled, as he did, to put out of consideration the judgment entered in favour of the respondent against the second defendant.
As I have said, the trial judge was not called upon to consider any application to strike out the further amended statement of claim. He was asked only to consider whether or not the SFASC should be permitted to be filed. In that regard, although as I have said the claim in respect of the PNI Schedule of buildings and contents was framed in a different way, the respondent continued to maintain that it was entitled to damages against the applicant for failing to cause the PNI Schedule of buildings and contents to be insured.
In my opinion, the trial judge was not wrong to put out of account any consideration in relation to what was said to be the abuse of process argument.
However, for the reasons given earlier, I would allow the appeal. I would set aside the orders made by the trial judge.
In lieu thereof, I would make an order dismissing the respondent’s application to amend its statement of claim.
I certify that the preceding paragraphs numbered [71] to [257] are a true copy of the Reasons for Judgment herein of his Honour, Justice Lander.
Associate:
Date: 25 August 2008
Counsel for the applicant: R Stitt QC with N J Owens
Solicitor for the applicant: Corrs Chambers Westgarth
By their Agents:
Clayton Utz
Counsel for the respondent: P Garling SC with J Oakley
Solicitor for the respondent: Sparke Helmore
Date of hearing: 27, 28 February 2008
Date of judgment: 25 August 2008
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