BHP Billiton Olympic Dam Corporation Pty Ltd v Bluestone Apartments Pty Ltd (No 2) - [2013] SASC 133

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
BHP BILLITON OLYMPIC DAM CORPORATION PTY LTD v BLUESTONE APARTMENTS PTY LTD (NO 2)
[2013] SASC 133
Judgment of The Honourable Justice Anderson
23 August 2013
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - AMENDMENT
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS - DEFENCES AND COUNTERCLAIM
APPLICATION FOR DETERMINATION OF A PRELIMINARY ISSUE
The plaintiff in this matter seeks specific performance of the defendant's obligations under a Project Deed entered into between the parties. Under the deed, the defendant agreed to undertake the design and development of residences and other infrastructure in accordance with the Deed. The plaintiff alleges the defendant failed to adhere to certain timelines, eventually giving a termination notice under the Deed due to the alleged breaches. The defendant disputes the plaintiff's entitlement to specific performance and denies most of the allegations.
The defendant seeks to amend the second defence and counterclaim. The defendant seeks to abandon its claim of mistake and no longer seeks rectification. The defendant seeks to add the claim of misleading and deceptive conduct against the plaintiff as an alternative cause of action. The plaintiff opposes the application on the principle of case flow management. Secondly it opposes the application as a settlement deed has been enforced between the parties relating to the matters alleged by the defendant.
Held: Application to amend the pleadings is allowed in part. The amendment is not to include reference to matters settled by the deed between the parties as to the authority of Mr Walters. Amendment is allowed in the other respects pleaded.
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, applied.
Quad Consulting Pty Ltd v David R Bleakley & Associates Pty Ltd (1990) 98 ALR 659; Williams v Commonwealth Bank of Australia [1999] NSWCA 345; Pihiga Pty Ltd v Roche (2011) 278 ALR 209; Tapoohi v Leewenberg [2003] VSC 410; Lamb v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458; Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25, discussed.

BHP BILLITON OLYMPIC DAM CORPORATION PTY LTD v BLUESTONE APARTMENTS PTY LTD (NO 2)
[2013] SASC 133
Civil
ANDERSON J.
Introduction

In this matter the defendant has applied for leave to amend its second defence and counterclaim. It has provided a draft of the proposed defence and counterclaim together with an affidavit of Mr Gdanski, a director of the defendant, sworn on 30 July 2013.
I have set out brief details of the action in my earlier decision in BHP Billiton Olympic Dam Corporation Pty Ltd v Bluestone Apartments Pty Ltd [2013] SASC 64.
This matter has taken some time to reach this stage of the proceedings. The defendant initially raised the possibility of amending its defence approximately 12 months ago but gave no details. The plaintiff at that stage was attempting to have the matter listed for trial. On 9 April 2013 I made an order that any potential amendments to the defence were to be provided to the plaintiff within three weeks. That was not done.
I then made orders on 23 July 2013 that the defendant file any application for amendment of its defence and counterclaim within seven days. The application for amendment was lodged on 31 July.
At the time I dealt with the question of privilege in the earlier judgment referred to, the plaintiff was seeking specific performance of the defendant’s obligations under the Project Deed. The defendant pleaded in its defence that the documentation arose as a result of a mutual mistake or in the alternative a unilateral mistake and as a result it sought rectification of the document.
The defendant in its defence pleaded both express and implied terms of the contract which it relied upon. It pleaded that the plaintiff was not entitled to terminate the deed as it had purported to do.
The defendant now seeks to abandon its claim of mistake and no longer seeks rectification. It seeks to add an alternative cause of action and alleges misleading and deceptive conduct against the plaintiff. It maintains the same defences to the breach of contract alleged by the plaintiff but seeks to add the claim of misleading and deceptive conduct as an alternative cause of action.
Arguments on application
Mr Doyle SC for the plaintiff opposed the application on two broad grounds. First that the application offended against the principles stated in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, and second that as a matter of substance the amendment should not be allowed.
Mr Doyle pointed to a settlement deed entered into between the parties arising from a dispute as to the authority of a Mr Walters, a servant or agent of the plaintiff. The plaintiff had alleged that Mr Walters was not authorised to enter into the particular transaction. The defendant said that he was so authorised. When the dispute arose negotiations occurred between the parties, an agreement was reached and the question of Mr Walters’ authority was finalised by the terms of an agreement recorded in a deed. Mr Doyle submits that this area of a previous dispute cannot now be raised in the proposed new pleading relating to misleading and deceptive conduct.
The plea in question is contained in paragraph 60 of the proposed defence as follows:
On 7 September 2010, the plaintiff wrote a letter dated 7 September 2010 to the defendant, in which it:
(a)falsely represented to the defendant that Paul Walters did not have the requisite internal authority to execute the transaction documents on behalf of the plaintiff.
The other broad head of the pleading alleging misleading and deceptive conduct in the proposed new defence and counterclaim is that the plaintiff impliedly represented to the defendant that it intended to proceed with the development of the retained lands site and lease back the dwellings constructed on the retained lands site whereas in truth it had no intention of doing so.
Mr Clarke for the defendant relied on the general principles governing the amendment of pleadings. He referred to those principles in his written outline. There is no dispute as to those principles.
In relation to the particular reason for the lateness of this amendment Mr Clarke refers to and relies on an affidavit from Mr Gdanski. This affidavit states:
After making initial attempts in February and March 2013 to arrange a meeting, in around early May 2013 I met with a former employee of the plaintiff with whom I had dealt as part of the negotiation of the Project Deed and the settlement of the previous dispute with the plaintiff. The information and evidence given to me by the former employee caused me to reconsider a claim under the Australian consumer law.
Mr Gdanski continues:
With this new evidence and as advised by my Victorian counsel, Mr Marcus Clarke, I instructed Mr Clarke to draft an amended pleading to incorporate a claim under Australian consumer law.
In his submissions Mr Clarke acknowledges the “case flow management” principles which generally apply but argues that this is not the same case as Aon. In Aon an application to amend was made on the third day of a four-week trial. It was to add a substantial new claim. The proceedings had been on foot for two years.
He submits that the overriding principle is the interest of justice and that the defendant in the present circumstances should not be precluded from proceeding with its amendment unless there is a prejudice which is incurable. He submitted that it is still four months to the indicative trial date. He acknowledges that his client is liable for costs thrown away for the abandonment of part of the existing defence and for the work entailed in substituting a new cause of action. With this acknowledgment he argues that there is no other prejudice to the plaintiff.
The deed
Mr Doyle argued that, although the question of costs provides a partial answer to compensate his client for prejudice, the amendment should not be allowed because of the fact that the deed was entered into at arm’s length and a concluded agreement was reached. That agreement specifically related to the question of Mr Walers’ authority and that the parties by entering into the agreement have foreclosed any further argument on that topic. He points to the mutual releases entered into between the parties in relation to the subject matter of the dispute as to Mr Walters’ authority. Mr Doyle submits that the representation alleged in the proposed amendment covers the same subject matter of the settled dispute in respect of which the mutual releases have been exchanged.
Mr Clarke argued that the deed of settlement was entered into as a result of the misleading conduct which is alleged. In support of his contention he referred to four decisions. Each of these decisions involved statements made at a mediation at which settlements were reached. He referred to Quad Consulting Pty Ltd v David R Bleakley & Associates Pty Ltd (1990) 98 ALR 659, Williams v Commonwealth Bank of Australia [1999] NSWCA 345, Pihiga Pty Ltd v Roche (2011) 278 ALR 209 and Tapoohi v Leewenberg [2003] VSC 410.
I do not intend to refer in detail to each of those decisions. There is a clear distinction between a settlement reached at a mediation and one negotiated between the parties at arm’s length. The mediator plays a significant role in achieving a settlement and not just the parties. Of necessity a mediation involves the parties reaching a compromise position with the assistance of the mediator. A deed such as the one entered into in this matter where for commercial purposes the parties have agreed and mutually released each other from anything further to do with the dispute is quite different.
Both the decisions of Quad and Pihiga involve attempts by a party to a successful mediation seeking protection by way of “without prejudice” privilege. A concluded contract with mutual releases is quite a different situation.
The court in Williams refers to two statements which in my view are pertinent to this case. In Lamb v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458, Gleeson CJ said at 475:
Where parties are dealing at arm’s length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice.
Burchett J in Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 26 said:
I do not think it has ever been suggested that s 52 strikes at the traditional secretiveness and obliquity of the bargaining process. Traditional bargaining may be hard, without being in the statutory sense misleading or deceptive. No-one expects all the cards to be on a table. But the bargaining process is not therefore to be seen as a licence to deceive.
In this matter a settlement has been negotiated between the parties. The parties here have settled the dispute as to whether the document was entered into by Mr Walters with or without authority. The parties have released each other from any liability relating to that dispute. Courts generally should be reluctant and have in the past been reluctant to interfere with settlement processes which have been undertaken by the parties and in which the parties agree to mutually release each other from any further obligations arising from the dispute. That is the case here.
In relation to the reason for the lateness of the amendment the evidence relating to this is scant. The affidavit from Mr Gdanski does not specify that it was Mr Walters that he spoke to but this information was provided to me from the bar table. The affidavit does not give any detail by way of particulars which would be required should this amendment be allowed.
Were it not for the execution of the deed, I would have required the defendant to file more explicit particulars as to their discovery of the new information before ruling on it. However, as I have reached a firm view relating to the deed it is not necessary to go into that detail.
In relation to the general matter of delay and the questions raised in the Aon decision I take into account that the indicative date for the trial is still some months away in December and that there is still plenty of time for the pleadings to be finalised. If I did allow the amendment in relation to the plea concerning Mr Walters’ lack of authority I accept Mr Doyle’s submission that the amendment will require a large amount of activity to be directed towards questions involving further and better discovery at some considerable expense both in money and time. That is an additional ground for refusing that part of the proposed amendment. It would place an unfair burden on the plaintiff in its preparation for trial.
Conclusion
In my view the Aon question should be generally answered in favour of the defendant. There is still plenty of time to amend the pleadings, give further discovery and generally prepare the matter for trial. Any prejudice is capable of being cured by an award of costs thrown away and Mr Clarke acknowledges and accepts that such costs must be borne by his client. The exception to this relates to the proposed amendment which seeks to argue the question of Mr Walters’ authority.
I am not prepared to allow the amendment on the basis proposed. I am not prepared to allow any amendment which includes a reference to the lack of authority of Mr Walters. In my view that matter has been concluded by a deed and the parties have exchanged mutual releases. It would be contrary to all principles of justice to allow those matters to be revisited.
I will allow the amendment in the other respects pleaded. That is subject to the comment that the matter pleaded in paragraph 64 relating to the article in the Australian Financial Review should not form part of the pleadings. I consider that it is an inappropriate pleading as it is pleading evidence.
I will hear the parties as to the necessary orders to be made as a consequence of my decision in this matter. That will include the question of costs on this application. I also wish to hear the parties on a final trial date.