Bechini v IUS Pty Ltd (in liquidation)

[2016] NSWSC 696

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Bechini v IUS Pty Ltd (in liquidation) [2016] NSWSC 696

Hearing dates:

10 May 2016, 13 May 2016 and written submissions thereafter

Decision date:

01 June 2016

Before:

Adamson J

Decision:

(1) Grant leave to the plaintiffs to file and serve a further amended statement of claim in the form served by the plaintiff on 13 May 2016.

 

(2) Reserve to the trial judge, pursuant to s 65(3) Civil Procedure Act 2005 (NSW), the question of the date on which the amendments made in the further amended statement of claim take effect.

 

(3) Dismiss the notice of motion filed by the third defendant on 5 August 2015.

 

(4) The plaintiffs pay the second and third defendant’s costs thrown away by the filing of the further amended statement of claim, which costs include the costs thrown away by the service of the earlier versions of the proposed amended statement of claim on 14 and 15 December 2015, 12 and 13 May 2016.

 

(5) Order the plaintiffs to pay the second and third defendants’ costs of the motion.

 (6) Stand the matter over for further directions before the Registrar on 15 June 2016.

Catchwords:

PRACTICE AND PROCEDURE – third defendant’s notice of motion to strike out plaintiffs’ statement of claim – notice of motion resolved by agreement between parties that further draft pleading could stand

  COSTS – general rule that pleading party pay costs associated with amending its pleading – plaintiffs to pay costs of the motion

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 65(3)
Insurance Contracts Act 1984 (Cth), s 54
Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 6
Uniform Civil Procedure Rules 2005 (NSW), r 42.6

Category:

Procedural and other rulings

Parties:

Julian Bechini and Michelle Bechini (Plaintiffs)
IUS Pty Ltd (in liquidation) (First Defendant)
WFI Insurance Limited (Second Defendant)
M & R Insurance Brokers Pty Ltd (Third Defendant)

Representation:

Counsel:
CJM Palmer (Plaintiff)
G Covington (Solicitor)(Second Defendant)
D Lloyd (Third Defendant)

  Solicitors:
HBA Legal (Plaintiffs)
Moray & Agnew Lawyers (Second Defendant)
Lander & Rogers (Third Defendant)

File Number(s):

2013/14677

Judgment

Introduction

1. On 16 January 2013 Julian and Michelle Bechini (the plaintiffs) commenced these proceedings by filing a statement of claim against IUS Pty Ltd (the first defendant, or the Architect) for damages for breach of contract or negligence arising from the alleged failure to advise the plaintiffs about an amendment to the applicable planning instrument which had the effect of prohibiting the development which the plaintiffs proposed.

2. In August 2013 an order was made that the Architect be wound up. As a consequence the plaintiffs applied for and, on 23 March 2015, were granted leave pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) to join WFI Insurance Ltd (the second defendant, or the Insurer) as well as M & R Insurance Brokers Pty Ltd (the third defendant, or the Broker). An amended statement of claim was filed on 27 March 2015.

3. On 5 August 2015 a notice of motion was filed on behalf of the Broker which sought orders that the proceedings against the Broker be dismissed, or, alternatively, that certain paragraphs of the amended statement of claim be struck out.

4. At the hearing of the Broker’s notice of motion before Hall J on 27 November 2015, directions were made which required the plaintiffs to file a statement setting out, in further detail, the allegations relied on and the particulars thereof which the plaintiffs made against the Broker. The particulars required included: the representations that were alleged to have been made by the Broker; to whom they were made; and the nature of any loss and damage occasioned by the failure to fulfil the representations. The notice of motion was stood over for further hearing before Hall J on 16 December 2015.

5. On 16 December 2015 the plaintiffs provided a draft further amended statement of claim to the defendants. The Broker maintained that the proceedings against it ought be struck out. Further directions were made by Hall J as to the filing and service of submissions.

6. The motion was listed for hearing before me as duty judge on 10 May 2016. The hearing of the motion proceeded. However, during the luncheon adjournment, there were discussions between Mr Lloyd, who appeared for the Broker, and Mr Palmer, who appeared for the plaintiffs, as a result of which it was agreed that the plaintiffs would serve a further draft statement of claim and the Broker would indicate whether it pressed its motion for strike-out after considering the further draft. I stood the matter over to 13 May 2016 before me.

7. I was notified that the Broker did not press its notice of motion in light of the further draft statement of claim. Accordingly the only issue that remained for determination was the costs of the notice of motion filed on 5 August 2015.

The nature of the plaintiff’s claim against the defendants

8. In substance, the plaintiffs’ case against the Insurer is that it is liable for the negligence and breach of contract of the Architect. The Insurer has declined indemnity. The Broker is sued on the basis of representations it is alleged to have made to the Architect as to the coverage of the insurance provided by the Insurer. The plaintiffs allege that, if the Insurer is not liable for the Architect’s liability to them because of a gap in the policy, they will have suffered loss as a result of the Architect’s reliance on representations made by the Broker (but for which the Architect would, it is alleged, have obtained insurance with better cover, which would have covered the Architect’s liability to the plaintiffs).

The orders for which the parties contend

9. The parties contended for different substantive orders, and different orders for costs. The orders contended for and the submissions in support have been provided in writing. I note that the submissions on costs are lengthy and I do not propose to restate them, except in very summary terms.

The third defendant’s proposed orders and submissions

10. Mr Lloyd contended for the following orders:

1. Grant leave to the plaintiffs to file and serve a further amended statement of claim in the form served by the plaintiff on 13 May 2016.

2. Pursuant to s 65(3) of the Civil Procedure Act 2005 (NSW), reserve to the trial judge the question of the date on which the amendments made in the further amended statement of claim take effect.

3. The motion filed by the third defendant on 5 August is dismissed.

4. The plaintiffs pay the third defendant’s costs thrown away by the filing of the further amended statement of claim, which costs include the costs thrown away by the service of the earlier versions of the proposed amended statement of claim on 14 and 15 December 2015, 12 and 13 May 2016.

5. The plaintiffs to pay the third defendant’s costs of the motion dated 5 August 2015 until 14 March 2016 on the ordinary basis and thereafter on the indemnity basis;

6. The costs orders be assessable forthwith.

11. Mr Lloyd submitted that the Broker had been vindicated in bringing the notice of motion and ought be rewarded by an order for costs in its favour. He noted the revisions to the pleading that had been occasioned by the hearing before Hall J on 27 November 2015; the further pleading and statement of particulars dated 14 December 2015; and the most recent revisions (which included a reference to s 54 of the Insurance Contracts Act 1984 (Cth)). He adverted to the following circumstances:

1. the Broker had consistently pressed for any further iteration of the pleading before the hearing of the motion so that the Broker could consider its position, but none was provided;

2. the motion was heard on 10 May 2016 as a result of which the plaintiffs accepted the need to replead; and

3. the draft provided on 13 May 2016 contained a new case on causation and also included s 54 of the Insurance Contracts Act.

12. Mr Lloyd relied on his instructing solicitor’s letter dated 14 March 2016 to the plaintiffs requesting an amended pleading in support of the third defendant’s application for costs on an indemnity basis. He contended that the plantiffs’ conduct in failing to provide an amended pleading earlier (notwithstanding specific requests) was unreasonable and that the costs order should provide that costs be payable forthwith.

The plaintiffs’ proposed orders and submissions

13. The plaintiffs sought the following orders:

1. Grant leave to the plaintiffs to file a further amended statement of claim in the form served by them on 13 May 2016.

2. Dismiss the third defendant’s notice of motion filed on 5 August 2015.

3. The costs of the third defendant’s notice of motion be costs in the cause.

14. The plaintiffs did not oppose the order sought by the Broker that the date at which the amendments are to take effect is to be reserved to the trial judge.

15. The plaintiffs contended that there is a general principle that, where parties resolve matters, including interlocutory matters, without the need for them to be heard, it is undesirable that a court be required to determine the outcome of what has become a hypothetical dispute, merely in order to make a costs order. Mr Palmer, who appeared for the plaintiffs, contended that the plaintiffs had saved the court’s time in a busy duty list and that the provision of a further draft pleading had ultimately led to the substantive issues in the motion being resolved by agreement. He also submitted that it was not necessary for the second defendant to be represented at the hearing of the notice of motion as it was not a party to the motion and was not affected by the orders sought. He submitted that, in those circumstances, no order for costs ought be made in favour of the second defendant.

16. Mr Palmer also submitted that, as the third defendant had not filed a defence, it has not incurred any costs thrown away by the proposed amendment, other than the costs of the notice of motion. He contended that, for this reason, the appropriate costs order was that the costs of the motion be the costs in the cause.

17. Mr Palmer contended that s 54 of the Insurance Contracts Act was not required to be pleaded since it applied by operation of law and that the new pleading is substantially the same as previous iterations. He submitted that no new case on causation was made in the new draft pleading. Mr Palmer argued that the plaintiffs’ ultimate response to the notice of motion was pragmatic, in light of the pressures on the court list, and ought not be construed as a capitulation by the plaintiffs, or a vindication of the third defendant’s position. He contended that there was no warrant for costs to be ordered on an indemnity basis.

The second defendant’s proposed orders and submissions

18. The second defendant agrees to the orders proposed by the third defendant as to the disposition of the notice of motion. The second defendant seeks the following costs orders:

1. The plaintiffs pay the second defendants’ costs thrown away by the filing of the further amended statement of claim, which costs include the costs thrown away by the service of the earlier versions of the proposed amended statement of claim on 14 and 15 December 2015 and 12 and 13 May 2015.

2. The plaintiffs pay the second defendant’s costs of the motion dated 5 August 2015 on the ordinary basis until 14 December 2015 and on an indemnity basis from 15 December 2015, or alternatively, the second defendant‘s costs of the motion dated 5 August 2015 be the second defendant’s costs in the cause.

19. The second defendant contended that the costs on the motion were occasioned because of the plaintiffs’ failure to properly plead their causation case against the third defendant, and, by association, the second defendant. It argued that the causation case ultimately pleaded by the plaintiffs was substantially different from their original case on causation.

20. On 15 December 2015 the second defendant sought the agreement of the other parties that the costs of the motion be costs in the cause to avoid the need for further appearances. This offer was not accepted.

21. The second defendant contended that it was required to be present at the hearing of the motion since there was always a prospect that the plaintiffs’ claim would be amended in response to the third defendant’s notice of motion, in respect of which the second defendant had a right to be heard. In support of this submission, the second defendant relied on the affidavit of Grant Covington (a solicitor employed by the solicitors on the record for the second defendant) affirmed 20 May 2016. Mr Covington deposed as to his belief that it was likely that the submissions made by the plaintiffs at the hearing before Hall J on 27 November 2015 would illuminate the plaintiffs’ case against the second defendant. He also deposed as to his belief that the most likely outcome of the third defendant’s notice of motion was that the plaintiffs would be granted leave to serve a further draft pleading.

22. The second defendant adopted the submissions of the third defendant in relation to indemnity costs and contended that the plaintiffs’ refusal of its offer (that the costs of the motion be the costs in the cause) was unreasonable.

Consideration

23. A detailed adjudication of the matters raised in the parties’ submissions would require the hypothetical determination of the third defendant’s notice of motion. It would be quite inconsistent with the just, quick and cheap determination of issues in the proceedings, not to mention the interests of justice, for this hypothetical determination to be made. Accordingly, the assessment of where the merits of the application lie is necessarily considerably less detailed than would be required for any final determination of the substantive issues, other than costs.

24. The net result of the third defendant’s notice of motion is that the pleading is a more refined document in which the plaintiffs’ case is more specifically and comprehensively pleaded than hitherto. This process has been to the benefit of the plaintiffs (since they have a better pleading); to the benefit of the other parties (since they are in a better position to appreciate the respective cases they have to meet) and to the benefit of the Court, since the pleadings define and confine the issues for determination and therefore set the parameters of the proceedings. The true significance and effect of the amendments (and whether they are such as to affect the result) is not something that can, or ought, be adjudged at this stage of the proceedings.

25. The questions are: who should pay for the improved pleading; on what basis should the costs of the improved pleading be paid; and when should they be paid (either forthwith, or at the conclusion of the proceedings).

26. Generally speaking, the pleading party is required to pay the costs associated with an amendment to its pleading. Uniform Civil Procedure Rules 2005 (NSW), r 42.6 is an instance of this general rule of practice. It requires a party who amends a pleading without leave to pay the costs occasioned by the amendment after the conclusion of the proceedings. Other factors are relevant, including that where matters at issue are resolved by agreement, it can be undesirable to visit a costs order (particularly one on an indemnity basis, or that costs be payable forthwith) on the party which has withdrawn its opposition, lest such an approach engender, or reward, intransigence.

27. I consider, in light of the evidence and the submissions, that the fairest approach to the costs of the motion is to require the plaintiffs to pay them, but on the ordinary basis and only at the conclusion of the proceedings. The principal reason for this is that the efforts of the third defendant (in pressing its motion and engaging in a protracted procedure for improving the pleading) have produced a better pleading, which, although to the advantage of all parties and to the Court, is principally for the benefit of the plaintiffs.

28. I accept the second defendant’s submissions that, although it was not strictly involved in the contest the subject of the third defendant’s notice of motion, it was nonetheless an interested party. There was a forensic imperative that it monitor the progress of the notice of motion and that it be represented at the hearing of the notice of motion, in case (as eventually occurred) a further amendment was proposed. The plaintiffs and the third defendant have an interest in the plaintiffs succeeding against the second defendant, since if the second defendant, as Insurer, is liable, the claim against the third defendant, as Broker, falls away. Because of the close association between the claims of the plaintiffs against the Insurer and the Broker, I do not consider that the second defendant ought be deprived of its costs associated with the third defendant’s notice of motion.

29. Although, in hindsight, it would have been both reasonable and desirable for the plaintiffs to agree to the costs order proposed by the second defendant in December 2015, and reasonable and desirable for the plaintiffs to prepare an amended pleading earlier, I do not regard the plaintiffs’ conduct in doing neither to be so unreasonable as to warrant departure from the usual principle that costs ought be paid on the ordinary basis. It may be that the submissions made by Mr Lloyd on 10 May 2016 at the hearing of the notice of motion were ultimately what persuaded the legal representatives of the plaintiff not only that the pleading ought be amended, but also in what respects such amendments ought be made.

30. Although, for the reasons given above, it would be undesirable to determine the motion as if it had not been resolved, it is reasonable to propose that (as Mr Covington apprehended) the most likely outcome was that the claim against the third defendant would not have been struck out but that the plaintiffs would have been given leave to serve a further draft amended pleading because of deficiencies in the existing pleading against the third defendant. In that event, there would have been much to be said in favour of the proposition that the plaintiffs ought pay the costs of the motion. The plaintiffs’ acceptance of that course, without the dispute having to be determined, was reasonable and to be encouraged. However, for the reasons given above, the plaintiffs ought pay the costs of their improved pleading, which could have been wholly avoided (by all parties) had the pleading originally filed been in the same terms as the further draft.

31. I am not persuaded that it would be appropriate to order the plaintiffs to pay the defendants’ costs forthwith despite the fact that the proceedings are, by reason of the dispute regarding the plaintiffs’ pleading, still at an early stage.

Orders

32. I make the following orders:

1. Grant leave to the plaintiffs to file and serve a further amended statement of claim in the form served by the plaintiff on 13 May 2016.

2. Reserve to the trial judge, pursuant to s 65(3) Civil Procedure Act 2005 (NSW), the question of the date on which the amendments made in the further amended statement of claim take effect.

3. Dismiss the notice of motion filed by the third defendant on 5 August 2015.

4. The plaintiffs pay the second and third defendant’s costs thrown away by the filing of the further amended statement of claim, which costs include the costs thrown away by the service of the earlier versions of the proposed amended statement of claim on 14 and 15 December 2015, 12 and 13 May 2016.

5. Order the plaintiffs to pay the second and third defendants’ costs of the motion.

6. Stand the matter over for further directions before the Registrar on 15 June 2016.

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Amendments

01 June 2016 - Paragraph 6 line 1 date changed from 18 May to 10 May

Decision last updated: 01 June 2016