B & P Falcinella Pty Ltd v Hamilton

[2015] SASCFC 5

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court: Permission to Appeal)

B & P FALCINELLA PTY LTD AND ANOR v HAMILTON AND ANOR

[2015] SASCFC 5

Judgment of The Full Court

(The Honourable Chief Justice Kourakis, The Honourable Justice Blue and The Honourable Justice Parker)

22 January 2015

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - AMENDMENT

LIMITATION OF ACTIONS - GENERAL MATTERS - AMENDMENT OF ORIGINATING PROCESSES AND PLEADINGS OUTSIDE LIMITATION PERIOD - AMENDMENTS INTRODUCING NEW CAUSE OF ACTION OR PARTICULARISING CAUSE OF ACTION

Application for permission to appeal to the Full Court from a judgment of a single Judge dismissing an appeal against an order by a Master for amendment of a statement of claim with prospective effect to introduce an application for an extension of time to add an additional cause of action.

The plaintiffs (respondents) were granted leave to amend their statement of claim to introduce with prospective effect an additional cause of action which was statute barred and to seek an extension of time in respect of the additional cause of action.  The defendants (appellants) appealed to a single Judge against the grant of leave to amend.  The appeal was dismissed except insofar as the date from which the amendment was to take effect was modified.

Whether under rule 57 of the Supreme Court Civil Rules 2006 the Court has power to order an amendment on a prospective basis to introduce a claim for an extension of time to add an additional cause of action that would otherwise be statute barred.

Held (the Court):

Permission to appeal refused.  Rule 57 gives the Court a general power to order the amendment of a statement of claim upon conditions the Court considers appropriate, including the condition that the amendment only operate prospectively.  This power is not conditioned upon a new or added cause of action arising out of substantially the same facts as the original cause of action.  Rule 54(6) of the Supreme Court Civil Rules 2006 does not operate to limit the power conferred by rule 57 (at [17]-[18]).

Limitations of Actions Act 1936 SA s 48; Supreme Court Civil Rules 2006 (SA) r 54, r 54(6)(b), r 54(7)(a), r 57; Supreme Court Civil Rules 1987 (SA) r 53.03(c), r 53.01(1), referred to.
Brook v Flinders University of South Australia (1988) 47 SASR 119, discussed.
Agtrack (NT) Pty Ltd v Hatfield (2003) 7 VR 63; Air Link Pty Ltd v Paterson (No 2) (2003) 58 NSWLR 388; Perpetual Executors and Trustees Assoc of Australia Ltd v FCT (1948) 77 CLR 1; Weldon v Neal (1887) 19 QBD 394, considered.

B & P FALCINELLA PTY LTD AND ANOR v HAMILTON AND ANOR
[2015] SASCFC 5

Full Court:      Kourakis CJ, Blue and Parker JJ

THE COURT:  

1. This is an application for permission to appeal to the Full Court from a judgment of a single Judge dismissing an appeal against an order by a Master for amendment of a statement of claim with prospective effect to introduce an application for an extension of time to add an additional cause of action.

   Background

2. The plaintiffs (the Hamiltons) and the defendants (Falcinella and Marschall) were partners in the Golden Heights Partnership.  The partnership was dissolved on 1 May 2006[1] and winding up of its affairs was completed by 30 October 2006. 

   [1]    When the Hamiltons sold their interest in the business to third parties.

3. In September 2007, the Hamiltons instituted an action in the District Court against Simeon Wines Limited for damages for breach of contract for sale by the partnership to Simeon Wines of grapes from the 2006 vintage year (the Simeon action).  Because the Hamiltons relied upon a joint cause of action vested in all four partners, Falcinella and Marschall were necessary parties and were joined as co-defendants.[2]  The Hamiltons succeeded in the Simeon action and in May 2012 judgment was entered in favour of the Hamiltons, Falcinella and Marschall against Simeon Wines for $103,850 together with the Hamiltons’ costs of action on a party/party basis.[3]

   [2]    District Court Civil Rules 2006 (SA) rules 73 and 74.  The Hamiltons also joined Golden Heights Estate Pty Ltd, the nominee and manager of the partnership, but that company can be ignored for present purposes.

   [3]    Costs orders were also made in favour of Falcinella and Marschall as against Simeon Wines (75 per cent) and the Hamiltons (25 per cent), but those costs orders can be ignored for present purposes.

4. In May 2013, the Hamiltons instituted this action against Falcinella and Marschall for payment of a 50 per cent share of their unrecovered legal costs incurred in prosecuting the Simeon action.[4]  The pleaded causes of action were indemnity under the Partnership Act 1891 (SA)[5] or an equitable lien or trust over the proceeds of the Simeon action.

   [4]    The action was instituted in the Magistrates Court but subsequently transferred to the District Court and then to the Supreme Court.

   [5]    Partnership Act 1891 (SA) s 24(1)(b) or s 39.

5. On 21 October 2013, the Hamiltons applied to amend their statement of claim to introduce an additional cause of action for taking or re-opening the partnership accounts.  On 16 December 2013, they applied to amend their statement of claim to introduce an application for an extension of time in which to bring the action insofar as it would include the additional cause of action.[6]

   [6]    Limitations of Actions Action 1936 (SA) s 48.

6. On the hearing of the amendment application, Falcinella and Marschall argued that the Court had no power to permit the amendment under rule 54 of the Supreme Court Civil Rules 2006 (SA) (the Rules) because the new cause of action did not arise out of substantially the same facts as the original causes of action within the meaning of rule 54(7)(a) and the Court had no power to permit the amendment under rule 57 because rule 54 covers the field of the Court’s power to permit an amendment to add a cause of action that is statute barred.  A Master upheld the first argument but rejected the second, ordering that the amendment take effect from 21 October 2013.

7. On the appeal to the Judge, the Judge upheld the Master’s decision on both issues, but varied the order so that the amendment took effect from 16 December 2013.

8. The sole issue raised on the application for permission to appeal to the Full Court is whether the Court has power under rule 57 to order an amendment on a prospective basis to introduce a claim for an extension of time to add an additional cause of action that would otherwise be statute barred.

   Analysis

9. In 1887, the English Court of Appeal considered the exercise of the power to permit an amendment after expiration of the statutory limitation period.  Order 27 rule 1 of the Rules of Court at the time[7] provided that:

   The Court or a Judge may, at any stage of the proceedings, allow either party to alter his statement of claim or defence or reply … and all such amendments shall be made as may be necessary for the purpose of determining the real questions or question in controversy between the parties.

   [7]    The Schedule to the Supreme Court of Judicature Act Amendment Act 1875.

10. It was then, and remains, clearly established that, unless the Court otherwise specifically orders, an amendment to a statement of claim relates back to the date of institution of the action.[8] In 1887, there was no general power, such as is now found in section 48 of the Limitation of Actions Act 1936 (SA), to extend time to institute an action.

    [8]    Agtrack (NT) Pty Ltd v Hatfield [2003] VSCA 6; (2003) 7 VR 63 at [33]-[44] per Ormiston JA (Chernou JA and O’Bryan AJA agreeing) (reversed on other grounds by the High Court); Air Link Pty Ltd v Paterson (No 2) (2003) 58 NSWLR 388 at [46] and [54]-[59] per Mason P (Beazley JA agreeing).

11. In Weldon v Neal,[9] Lord Esher MR (Lindley and Lopes LJJ agreeing) said:

    We must act on the settled rule of practice, which is that amendments are not admissible when they prejudice the rights of the opposite party as existing at the date of such amendments.  If an amendment were allowed setting up a cause of action, which, if the writ were issued in respect thereof as at the date of the amendment, would be barred by the statute of limitations, it would be allowing the plaintiff to take advantage of her former writ to defeat the statute and take away an existing right from the defendant, proceeding which, as a general rule, would be, in my opinion, improper and unjust.  Under very peculiar circumstances the Court might perhaps have power to allow such an amendment, but certainly as a general rule it will not do so.[10]

    [9] (1887) 19 QBD 394.

    [10] (1887) 19 QBD 394 at 395.

12. On the one hand, there are cases in which a plaintiff is permitted to amend a statement of claim after expiration of the limitation period without making a major or radical change to the case originally pleaded.  On the other hand, there are cases in which a plaintiff is not permitted to amend after expiration of the limitation period to introduce what is in substance a new or additional case.  Numerous cases since Weldon v Neal have explored the criteria by which a court decides on which side of the line an application to amend falls.

13. Rule 54(7)(a) clarifies or modifies the criteria that have been adopted following Weldon v Neal to determine whether permission to amend should be granted.  The rule stipulates that the criterion is to be whether the new cause of action arises out of substantially the same facts as the original cause(s) of action.  Subrules 54(6)(b) and (7)(a) are directed to the power of the Court to grant permission for an amendment that has retrospective effect, ie relates back to the date of institution of the action, and which is treated as not prejudicing the rights of the defendant because the new cause of action only arises out of substantially the same facts as the original cause of action.

14. By contrast, rule 57 gives to the Court a general power to order the amendment of a statement of claim (or any other document) and empowers the Court to order that the amendment be made on conditions.  Rule 57 empowers the Court to order an amendment on condition that it only operate prospectively so as not to prejudice the defendant.  This power is not conditioned upon a new or added cause of action arising out of substantially the same facts as the original cause of action.  When a plaintiff applies to amend a statement of claim to introduce an additional cause of action and an application for an extension of time in which to institute the action insofar as it includes the additional cause of action, rule 57 on its face empowers the Court to order the amendment on the condition that it only take effect prospectively. 

15. Falcinella and Marschall accept that, but for the existence of subrules 54(6) and (7), rule 57(1) would empower the Court to order an amendment to introduce an additional cause of action and an application for an extension of time with prospective effect.  However, they contend that subrules 54(6) and (7) operate to limit the power otherwise conferred by rule 57.  They contend that rule 54 constitutes a specific provision whereas rule 57 constitutes a general provision and, when there is a conflict between general and specific provisions, the specific provision prevails.[11]  The rule of interpretation upon which their submission is founded is not a fixed rule but only one possible strand of reasoning which has greater or lesser weight depending on the wording, structure and purpose of the provisions in question.  In the present case, that maxim has no weight because subrules 54(6) and (7) relevantly address an amendment that has retrospective effect whereas rule 57 addresses amendments that may have prospective effect which give rise to quite different considerations.

    [11]   Perpetual Executors and Trustees Assoc of Australia Ltd v FCT (1948) 77 CLR 1 at 29 per Dixon J.

16. Falcinella and Marschall accept that under the Supreme Court Civil Rules 1987 (SA) (the Former Rules) the Court had power to order an amendment with prospective effect to introduce an additional cause of action that did not arise out of substantially the same facts as the original cause of action when the plaintiff was seeking an extension of time in respect of the additional cause of action.  Rule 53.03(c) of the Former Rules provided:

    Where an application for leave to amend is made after any relevant period of limitation has expired, the Court may, nevertheless, grant leave, on such terms as it thinks fit:

    …

    (c)     to add or substitute a new cause of action, if the new cause of action arises out of    the same, or substantially the same, facts as the original cause of action.

    and Rule 53.01(1) relevantly provided:

    A party may amend any document, other than an order … with the leave of the Court.

17. In Brook v Flinders University of South Australia,[12] von Doussa J held that rule 53.01(1) empowered the Court to grant leave to amend a statement of claim to introduce a new cause of action and seek an extension of time in respect thereof notwithstanding that it did not arise out of the same, or substantially the same, facts as the original cause of action within the meaning of rule 53.03(c).  Falcinella and Marschall contend that, because rule 54(7)(a) of the Rules is worded differently to rule 53.03(c) of the Former Rules, it should be construed as precluding recourse to rule 57 of the Rules notwithstanding that recourse to rule 53.01(1) of the Former Rules was not precluded.  That contention should be rejected.  The change in wording from 53.03(c) of the Former Rules to the wording of rule 54(7)(a), of the Rules is a change in drafting style and not of substance.  It was clear under rule 53.03(c) of the Former Rules that the power conferred thereby could only be exercised if the condition was satisfied: otherwise there would have been no point in imposing the condition.  Rule 54(7)(a) of the Rules merely makes explicit that which was implicit under the Former Rules.  

    [12] (1988) 47 SASR 119.

18. As a matter of principle, there is no reason to read down or confine the power conferred by rule 57 in the manner suggested by Falcinella and Marschall.  Exercise of the power conferred by rule 57 in the manner exercised by the Master and upheld by the Judge causes no prejudice to a defendant.  As the Judge observed, there is nothing to prevent a plaintiff instituting a new action pleading the new cause of action and seeking an extension of time in which to do so.  In that event, it is likely that the two actions would be heard together and in substance the defendant would be in no better position than if the statement of claim in the original action had been amended with prospective effect.  In a case such as the present, it is preferable that the controversy between the parties be the subject of one action rather than a multiplicity of actions.

    Conclusion

19. The decision of the Judge is plainly correct.  Permission to appeal is refused.