Caterpillar Financial Ltd v West
[2005] VSC 238
•1 July 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 6197 of 2001
| CATERPILLAR FINANCIAL LTD | Plaintiff |
| v | |
| WEST AND OTHERS | Defendants |
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JUDGE: | SMITH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10, 15, 22 and 23 June 2005 | |
DATE OF JUDGMENT: | 1 July 2005 | |
CASE MAY BE CITED AS: | Caterpillar Financial Ltd v West and Others | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 238 | |
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Practice and procedure – application to amend reply and defence to counterclaim – prejudice to defendants from delay – failure by applicant to explain delay – responsibility for delay.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J.S. Graham | Mallesons Stephen Jaques |
| For the Defendants | Mr R.B.C. Wilson | Tolhurst Druce & Emmerson |
HIS HONOUR:
The Application
Caterpillar Financial Australia Limited (Caterpillar) has applied for leave to amend its reply and defence to counterclaim in proceedings brought by it against Anthony Phillip West, Jeanette Heather West and Trent Phillip West (the Wests)
Background to the Application
Caterpillar commenced its proceedings by writ. In its statement of claim, filed on 6 June 2001, Caterpillar sought to recover money allegedly payable under a loan agreement and chattel mortgage dated 30 April 1999 secured over agricultural equipment, namely, a tractor and a grader. The total claimed was $227,789.44 with interest continuing. In the alternative, Caterpillar sought delivery of the equipment to enable it to exercise its power of sale and payment of the balance remaining after exercise of that power of sale.
The writ was served on the Wests on 3 August 2001. On 28 August 2001 Caterpillar entered a default judgement in the amount of $227,789.44 together with interest of $3798.30 and costs of $2400. Caterpillar seized the tractor and sold it on 25 September 2001.
By letter dated 11 December 2001, Caterpillar through its solicitors advised the Wests that the equipment had been sold realising sale proceeds of $77,000. It attached a statement of costs and proceeds and the balance outstanding and demanded that the Wests forward to it by 2 January 2002 payment of $179,255.14 or a proposal for terms of payment. If neither was received, it stated that it would proceed to enforce the judgement against them.
By letter dated 29 January 2002 the solicitor for the Wests replied to this letter, stating that it appeared that Caterpillar had ignored the interests of the Wests in the sale and that in doing so it had acted in breach of its duty to the mortgagor. The letter asked that evidence be supplied of the steps taken by Caterpillar to exercise reasonable care to protect the interests of the mortgagor and that if Caterpillar failed to demonstrate within 14 days that reasonable steps had been taken to obtain a proper price for the tractor, it would be necessary for the Wests to commence legal action against Caterpillar for breach of duty of care.
Caterpillar did not respond. Neither side took any action for two years. On 24 February 2004 Caterpillar by its solicitors wrote to the Wests demanding payment of the default judgement. The Wests conferred with their solicitor who practised in New South Wales. He advised that he could not act in the matter in Victoria. They then contacted solicitors in Victoria. After consultation, the solicitors prepared for them an application to set aside the default judgement. On 7 April 2004, a summons was issued to set aside the judgement. On 31 May 2004, an order was made by consent setting aside the default judgement. On the same day, the Wests filed a defence and counterclaim.
By their defence and counterclaim, the Wests sought to rely by way of defence on a number of allegations pleaded in their counterclaim arising out of earlier hire purchase agreements with Caterpillar relating to the same equipment. They alleged that the hire purchase agreements and the loan agreement and chattel mortgage were lawfully terminated by them on about 9 January 2001 for breach of condition or repudiation by Caterpillar or pursuant to section 6 (1) and (2) of the Hire Purchase Act 1959 (the Act). The conditions alleged to be implied under the Hire Purchase Act and relied upon by the Wests were that the goods were of merchantable quality and that they were reasonably fit for the purposes made known by the Wests to Caterpillar through its servants and agents, including Gough and Gilmour Holdings Proprietary Limited (Gough and Gilmour). The Wests also alleged that the agreements were lawfully rescinded for misrepresentation by Caterpillar. The Wests relied upon two categories of misrepresentation.
· On about 31 July 1997 concerning the quality and suitability of the tractor (the first representations) made by Gough and Gilmour “as dealer for and acting on behalf of Caterpillar”; and
· On or about 3 April 1998, that the plaintiff would do everything possible to rectify the problems with the tractor (the second representation) by Caterpillar.
The Wests also alleged the making by Caterpillar of false representations on 15 and 16 March 1999 (the third representations) concerning the rescheduling of the hire purchase agreement, and, in particular, payments. They alleged that these representations caused them, on 30 April 1999, to execute by mistake documents that were in fact a loan agreement and chattel mortgage. They alleged that they were, therefore, void for mistake. In addition, they have sought declarations that:
· under s.13(4) of the Act, the rights of Caterpillar under all agreements had ceased and determined; and
· any liability should be reduced pursuant to s.3 (4) of that Act by the amount of term charges.
They have also sought an order under s.24 of the Act re-opening the transaction, setting aside the agreements and giving judgment in favour of them.
The Wests also alleged that Caterpillar’s failure to perform its obligations under the hire purchase agreements had resulted in loss and damage and in no liability on the part of the Wests to make further payment to Caterpillar under the loan agreement and chattel mortgage or otherwise. The Wests also alleged recoverable losses resulting from the above representations. They allege negligent misstatements and false and misleading conduct in contravention of section 52 Trade Practices Act 1974, section in 11 Fair Trading Act 1985 and section 9 Fair Trading Act 1999. They alleged that on and after 24 February 2000 they lawfully refused to pay any further amounts to Caterpillar until Caterpillar either fixed or replaced the equipment. The Wests also allege that after that date Caterpillar unlawfully registered a default credit listing against the Wests and that this resulted in further loss and damage.
The Wests also alleged losses flowing from action taken by Caterpillar on 25 October 2000 to repossess the tractor which prevented a sale by the Wests of the tractor for $210,000. They also alleged that Caterpillar, on 19 January 2001 and 10 August 2001, unlawfully entered the Wests' property and seized the tractor (and on the first occasion, the grader) and caused damage to its other equipment and unlawfully or in breach of duty sold the tractor on 25 September 2001 for $77,000 when its market value was $160,000. They alleged that the sale was in breach of duty and was unlawful under the Hire Purchase Act. They also alleged that Caterpillar lost its rights under the Hire Purchase Act because it failed to serve a notice under section 13 (3) of that Act.
On 14 July 2004, Caterpillar filed a reply and defence to counterclaim. In that document it admitted, subject to production and reference at trial, the full terms and effect of the hire purchase agreements referred to by the Wests and the fact that the Hire Purchase Act 1959 (Vic) applied. It did not admit that the hire purchase agreements did not comply with that Act and also alleged that the agreements were fully performed on about 30 April 1999. As to paragraph 26 which alleged that Gough and Gilmour was at all relevant times its servant and agent, it admitted that for the purposes of the negotiations leading to the making of the hire purchase agreements, Gough and Gilmour was its “dealer” within the meaning of the Act but otherwise denied the allegations. It also denied all allegations relating to the first representations and pleaded that, if it did make them, it had reasonable grounds for making them. As to the alleged faults in the functioning of the tractor, it alleged that they resulted from the Wests’ failing to follow the instructions of Gough and Gilmour and using it contrary to clause 4(2) of the hire purchase agreements and generally misusing it by using it for sinking dams and heavy earthmoving and operating on and driving it wrongly. In relation to the second alleged representations Caterpillar denied all allegations and did not admit the allegations relating to the problems subsequently experienced with the tractor. As to the third representation, it admitted that the first defendant requested a rescheduling of payments but denied the representations alleged and further alleged that if it did make the representations it had reasonable grounds for doing so. It also denied any mistake or that it knew or ought reasonably to have known of the mistake. It relied upon the terms of the chattel mortgage. It also alleged that if there were any subsequent problems they were the fault of the Wests in the use of the tractor. It denied any breaches, any false representations and any false or misleading conduct. It denied the allegation that the Wests lawfully refused to pay any further monies after 24 February 2000. It asserted its entitlement to register a default credit listing against the Wests and denied the allegations based on the listing
As to the Wests' allegation as to loss on sale, Caterpillar alleged that the Wests had no right to sell the tractor under the chattel mortgage but admits that the Wests did not at any time sell the tractor. It denied unlawfully preventing the sale and denied the losses alleged. It denied that the Wests lawfully terminated the agreements or that the chattel mortgage was void for mistake. It admitted the seizures but alleged that they were lawful and denied any breach or fault in respect of the sale.
Notwithstanding the complexities raised in the pleadings, the dispute at that point was one between Caterpillar and the Wests with Gough and Gilmour's position as the negotiating dealer of Caterpillar under the Hire Purchase Act not in dispute and the operation of that Act in relation to the hire purchase agreements not in dispute. I am satisfied that at that stage, the Wests were entitled to proceed on the basis that Caterpillar was not disputing the operation of the Act in relation to the hire purchase agreements and was not disputing that Gough and Gilmour was its dealer in the course of the negotiations of those agreements. I am also satisfied that there was no reason for them to make any claims against Gough and Gilmour in respect of those issues raised by them which involved representations made by Gough and Gilmour or the receipt of information as to the purpose for which the equipment was required
By a request dated 9 August 2004, Caterpillar sought particulars of the defence and counterclaim. The Wests responded on about 10 September 2004. Caterpillar's solicitors sought further particulars on 11 October 2004. Further particulars were provided on 22 October 2004. On the same day, Caterpillar's solicitors sought particulars of loss and damage stating
“as we have previously advised, the absence of particulars of loss and damage is inhibiting Act client's ability to perform interlocutory steps and otherwise prepare this matter for trial. In this regard, all our client's rights are reserved.”
The Wests supplied particulars of loss and damage on 10 December 2004. By letter dated 21 January 2005, Caterpillar's solicitors sought further particulars and these were provided by the Wests on about 23 February 2005.
Apparently, during this period Caterpillar's solicitors conducted investigations within the Caterpillar organisation and that of others as to the circumstances the subject of the defence and counterclaim. This resulted in the preparation of a third party notice and statement of claim joining Gough and Gilmour and a proposal to amend Caterpillar's defence to the counterclaim of the Wests. Leave to file and serve an amended reply and defence to counterclaim was sought by summons dated 18 April 2005. It is this summons that is the subject of this proceeding.
The Proposed Amendments to the Reply and Defence to Counterclaim
Caterpillars seeks leave to amend their reply and defence to counterclaim to do the following:
1. Amend paragraphs 22, 23 and 25 to raise the following issues;
·whether (as alleged in paragraph 22 of the defence and counterclaim) the "goods" were sold pursuant to each hire purchase agreement? (paragraph 22),
·whether (as alleged in paragraph 23 of the defence and counterclaim), for each hire purchase agreement, it was subject to the Hire Purchase Act and so subject at all times (paragraph 23),
·whether there were terms of each hire purchase agreement implied as a condition by section 5 (2)-(3) Hire Purchase Act as alleged in paragraph 25 (b)-(c) of the defence and counterclaim.
2. Amend to add paragraphs 82-85 to raise the issues whether, if Caterpillar is liable as alleged by the Wests,
·the Wests were contributorily negligent (paragraphs 82, 83),
·the Wests failed to mitigate their loss (paragraph 84),
·Caterpillar's liability should be apportioned pursuant to section 87CD Trade Practices Act and/or Parts IVAA Wrongs Act (paragraph 85)
3. Amend to add paragraph 86 to raise the issue of whether, if the hire purchase agreements continued in force and were subject to the Hire Purchase Act as alleged, the terms of those agreements and the provisions of the Act had the consequences listed which it was alleged, inter alia, resulted in no liability or reduced liability on the part of Caterpillar in respect of the condition or suitability of the tractor
4.Amend to add paragraph 87 to plead that each of the causes of action raised in the counterclaim was statute barred or barred by analogy to the Limitations of Actions Act or by the Wests' own laches.
Scope and effect of the amendments -- submissions of the Wests
The Wests argue that the amendments, if allowed, would result in
·the withdrawal of admissions that had been made that the Hire Purchase Act applied and that the contractual terms of merchantable quality and fitness for purpose under the Hire Purchase Act were terms of the hire purchase agreements between the parties;
·a new defence of contributory negligence which would rely upon the particulars previously relied upon in denying causation (paragraph 56) , namely, a failure to maintain and a failure to maintain a service agreement and relationship with a qualified repairer. As pleaded, the proposed amendment encompassed Gough and Gilmour involving an allegation that they were negligent and not properly qualified;
·new defences of failure to mitigate and apportionment, related factually to the reliance of the Wests on Gough and Gilmour;
·new contractual defences expressly barred by the Hire Purchase Act if it applied;
·the raising of limitation of actions defences.
Counsel for the Wests has submitted that the amendments significantly change Caterpillar's case. By way of example, he referred to the withdrawal of the admission that the Hire Purchase Act applied arguing that that affected not only the question of the contractual terms, previously admitted to be implied, but also whether
·other contractual terms could be relied upon;
·Caterpillar could be held liable for the conduct of its dealer Gough and Gilmour; and
·the Wests could rely on the provisions in the Act placed there for the express protection of hirers.
Some of the provisions were relied upon as the basis for terminating or setting aside agreements including the chattel mortgage and final loan agreement. Counsel further submitted that Caterpillar was now arguing that the Wests should not have relied on Gough and Gilmour. Counsel also drew attention to the application to allow Caterpillar to rely upon limitation of actions defences for the first time.
It was put for the Wests that until now they had not needed to sue Gough and Gilmour. If leave is given to Caterpillar they will need to do so but any claims against Gough and Gilmour will be subject to limitation of actions defences.
Submissions made for Caterpillar
Counsel for Caterpillar has submitted that the fundamental principle to be applied is that an application to amend should "ordinarily be allowed provided that any injustice arising to the other party from so doing can be compensated by the imposition of terms"[1]
[1]Howarth v Adey [1996] 2 V.R. 535 at 542.
As to prejudice, Caterpillar submit that the Wests have failed to establish that to allow the amendments would cause them incurable prejudice. Counsel advanced three reasons.[2]
·There was insufficient evidence to support the conclusion that the Wests had relied upon the original pleading.
·If there was reliance, it was not reasonable having regard to the change of position and causes of action which the defendant now say they have against Gough and Gilmour.
·It the reliance was reasonable, the defendant failed to establish that any incurable prejudice would flow from the amendments.
[2]Reliance was placed on Wilson v Grimwade [1995] 2VR 628, Dagi v BHP Co. Ltd Byrne J, 15 March 1995, unreported, BC 9503240.
As to evidence of reliance upon the original pleading, counsel for Caterpillar submitted that it must be shown that the Wests had directed their minds to the question of the absence of the matters now sought to be pleaded and relied on the absence of those matters in not bringing claims against Gough and Gilmour. Counsel submitted that counsel for the Wests had been unable to put the case on this issue that high. As to evidence, Counsel submitted that the only evidence was contained in affidavit of Peter Weller sworn 8 June 2005 but that it says nothing as to the actual consideration at the time of the original pleading of whether to join Gough and Gilmour. Counsel also referred to evidence in an affidavit sworn by Mr West on 7 April 2004 explaining the delay up to that date.[3]. Counsel submitted, however, that this was the only evidence as to why there was no action against Gough and Gilmour
[3]Pages 29 and 31, paragraphs 71 and 72.
If there was reliance, Counsel for Caterpillar submitted that any such reliance was not reasonable. Counsel argued that in determining whether the decision not to join Gough and Gilmour was reasonable it is relevant to consider what change of position has now occurred which it is said requires the joinder. Counsel submitted that the critical paragraph is paragraph 26 of the defence and counterclaim. Counsel submitted that the only effect of the amendments is to qualify the admission of dealership. Counsel submitted that Caterpillars had never admitted that Gough and Gilmour were the agents for all purposes of Caterpillar. A further issue that is raised turns on the effect of amendments to Victorian law which had the effect that the Hire Purchase Act only applied to agreements in force as at 1 April 1998. Caterpillar wishes to argue that the first agreement was replaced by the later agreement and was no longer in operation in 1998. Counsel submitted that the proposed change would oblige the Wests to prove that the Hire Purchase Act conditions applied and that in the original reply and defence to counterclaim, it had denied and not admitted any allegations of liability whatever the basis. Counsel submitted, therefore, that the change was not a significant one. In support of this proposition, it also relied upon the authority of Antonio v Robson & Esanda[4] for the proposition that the statutory agency conferred upon dealers by the Hire Purchase Act did not have the effect of making them agents, for the purposes of the Trade Practices Act. Similarly, it was put that the Hire Purchase Act provisions rendering the dealer Caterpillar’s agent would not be available to assist the Wests in establishing agency in support of the claims based on negligent misstatement. Counsel submitted that, therefore, the changes of pleadings relating to the Hire Purchase Act did not in fact involve a significant change and, if in the original pleading, would not have prompted the Wests to join Gough and Gilmour.
[4](1984) 53 ALR 221, 222.
Finally, for Caterpillar, it was submitted that the Wests could not demonstrate any incurable prejudice. Counsel submitted that what was at issue was whether the Wests were in any worse position when they received the proposed amendments on 19 April 2005 than they would have been if they had received a reply and defence to counterclaim in that form on 14 July 2004 when the original document was received. Counsel submitted that in fact the claims now said to be barred by the various limitation of actions provisions would have been barred as at 14 July 2004. In support of this argument, Counsel referred to the claims that had been included in the writ issued by the Wests against Gough and Gilmour on 6 May 2005 to protect themselves from the consequences of further delay.
Referring to the cause of action based upon representations of Gough and Gilmour allegedly made in July 1997, counsel submitted that the claim based upon the provisions of the Trade Practices Act would, on any view, have been statute barred as at 14 July 2004. Counsel submitted that the cause of action accrued when the first loss was suffered. Referring to the further and better particulars of loss and damage supplied by the Wests, counsel said that the first item of damage referred to was an instalment of $45,000 paid under the first Hire Purchase Agreement on 31 October 1997.[5] Council then referred to the particulars of problems and repairs to the tractor and to the allegation that on 27th of December 1997 one of the tracks rolled off the tractor.[6] Finally counsel referred to the particulars of loss flowing from the second representation made on 3 April 1998 which recorded damages in the form of cost of repairs incurred in January 1998, 3 March 1998 and 30 April 1998.
[5]DCM 3, 91.
[6]Ibid 41.
Counsel submitted that the causes of action available against Gough and Gilmour relying upon representations allegedly made, whether in negligence or under the Trade Practices Act or Fair Trading Act, accrued prior to July 1998 and, therefore, the raising of the defence of limitation of actions in 2005 did not give rise to any prejudice because the prejudice had already been suffered.
In relation to causes of action against Gough and Gilmour for breach of duty of care in contract and tort in the servicing and repairing of the tractor, Counsel submitted that any cause of action based on breach of contract accrued with the first breach and to the extent that the Wests relied upon a cause of action in negligence, accrued with the first lost suffered. Again it was submitted that the causes of action had accrued prior to July of 1998.[7]
[7]Writ against Gough and Gilmour, exhibit P.G.W. 6, p.16 and 19.
Counsel submitted that the Wests cannot demonstrate that there were any causes of action which could have been pleaded against Gough and Gilmour that were not statute barred by 14 July 2004. Counsel submitted that in these circumstances the Wests cannot demonstrate any prejudice flowing from seeking to raise the matters stated in the proposed amended pleading in 2005.
To meet the alleged prejudice should the amendment raising contributory negligence be permitted, particularly contributory negligence relying upon the use of Gough and Gilmour by the Wests, Caterpillar has foreshadowed a further amendment to the proposed amendments which would exclude the allegations based on the Wests’ use of Gough and Gilmour or any suggestion of failures on their part as a consideration in determining contributory negligence. Counsel for the Wests has argued, however, that this does not assist the Wests so far as the defences of mitigation and apportionment are concerned. The amendment would, however, modify the defence of mitigation because the proposed pleading refers back to the particulars of contributory negligence. The same cannot be said about the defence of apportionment. It relies on the particulars of causation contained in paragraph 56 of the proposed amended pleading and would not exclude the allegations based on the Wests’ use of Gough and Gilmour. It would also require amendment, but counsel for Caterpillar did not foreshadow such amendment.
Counsel submitted that applying the appropriate principles, the only prejudice that the Wests could point to would be costs, in particular, cost possibly thrown away and they could be dealt with by appropriate costs orders.
Further Submissions of Counsel for the Wests
Counsel for the Wests, in further addressing the issue of prejudice, submitted that it was clear that, during the critical period of 14 July 2004 to 19 April 2005, there were causes of actions that existed and were not statute barred if pursued during that period. Counsel referred, for example, to the claims for loss and damage flowing from reliance upon representations to which Gough and Gilmour had been a party. Counsel submitted that the continued use of the equipment on the basis of assurances including that of the second representation concerning the repair of the tractor demonstrated continued reliance on both the initial representation as well as the second representation during the relevant period.[8] Counsel also referred to the evidence in the affidavit of Mr West of 7 April 2004[9] from which counsel submitted it was clear that the Wests had continued to rely upon Gough and Gilmour until early 2000 when they expressly made it clear that they no longer had any faith in them. Counsel submitted that reliance is an element of the causes of action based on the representations and new causes of action arose every time something went wrong with the equipment and the Wests chose, relying on the representations, to continue to comply with the agreements and use the equipment. Counsel pointed, for example, to the damages claim in respect of the second representation in the form of lost income which concerned three jobs which could have been carried out in and between August 1998 and February1999.[10] While this argument is available in respect of causes of action against Gough and Gilmour in negligent misrepresentation, the situation is less clear in respect of claims sought to be made under the Trade Practices Act or the Fair Trading Act depending upon whether a six-year or three-year limitation period applies.
[8]Relying upon Jobbins v Capel Court Corporation Ltd (1998) 91 ALR 314.
[9]Particularly pp.16 to 17
[10]Exhibit DCM3, at 75; note also two other jobs, pp.76 and 77.
Counsel also referred to authority supporting the proposition that,
"… where the disadvantageous character of a transaction cannot be ascertained at the outset, a loss is not sustained until the plaintiff or applicant ascertained, or has the means available to ascertained, that he or she has been prejudiced by entry into the transaction. Potential loss is not enough."[11]
Counsel submitted that there were claims of this description that would have become statute barred by and in between the critical dates.
[11]Karedis Enterprises Pty Ltd v Antoniou (1995) ATPR 41-427, at 40, 818, (per Sackville J.) citing Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514, 527.
Counsel submitted that similar issues arise in respect of the claims the Wests could have brought against Gough and Gilmour in respect of their service and repair of the equipment pursuant to a service contract that they had with Gough and Gilmour. Counsel submitted that on each occasion when there was a service or repair that later was found to be unsatisfactory, there was a separate breach and therefore a separate cause of action. The relevant particulars include a number of occasions where repairs were incurred during the critical period in 1998 and 1999.
They seek to justify the decision not to join Gough and Gilmour when the original defence and counterclaim was filed on the basis that there was nothing to be gained by bringing an action against the dealer while they had available to them a more direct cause of action against Caterpillar which sold them both the tractor and the scraper and it was responsible for the conduct of its dealer under the Hire Purchase Act[12].
[12]Rely upon Sugerman J, Joint Coal Board v Adelaide Steamship Co Ltd (1969) NSWR 143, 144.
Analysis - applicable principles
The principles to be applied on an application to amend pleadings were discussed by the Court of Appeal in Wilson v Grimwade[13]. In that case, the defendants sought leave to file and serve an amended defence which included a plea relying on the Limitation of Actions Act. Tadgell JA confirmed the following principles as applying in that situation:
“First, that in general a defendant should be permitted to amend the defence so that the Court may decide all issues between the parties provided that the amendment may be effected without injustice to the plaintiff; ….. Secondly that, in order to resist an amendment in accordance with the first principle, plaintiff must point to prejudice caused by conduct of the defendant in first filing a defence without relying on the statute of limitations and later seeking to file a defence which relied upon the statute. Thirdly that, in order that the defendant should be disentitled from amending, it is not sufficient if the prejudice relied upon by the plaintiff results from an unreasonable act or omission on the plaintiff's own part;…."[14]
[13][1995] 2 VR 628.
[14]Ibid, at 632
His Honour also commented, after referring to the history of the case,
“But the judge was not invited to exercise his discretion in that case merely upon those facts. His Honour was required to consider whether it was a fair thing that the appellants should be permitted to change their ‘front’ by pleading the statute three and a quarter years later upon application made on 9 March 1994. There was no evidence at all to indicate a reason, or to allow a reason to be properly inferred, why the appellant waited until 9 March 1994 to apply for leave to amend the defence.”[15]
[15]Ibid at 633
His Honour also accepted that where there was no plea of limitation of actions raised in the defence, the plaintiff was entitled to assume that the defendant did not wish to rely upon the time bar.[16]
[16]Ibid at 633, citing Ketteman v. Hansel Properties Ltd [1987] AC 189 at 219.
Callaway JA described the ultimate question as being
“… whether, notwithstanding the respondent's solicitors' own assessment and maintenance of the decision [not to join another party], the appellants' conduct is, as between the parties and as a matter of common sense and experience, properly to be seen as making the appellants responsible for the prejudice that the amendment would cause.”[17]
[17]Ibid at 635.
Analysis – prejudice
In assessing the alleged prejudice to the Wests of not being put on notice as at 14 July 2004 of these proposed defences, the putative proceedings against Gough and Gilmour which it is said would have been brought are those which could have been brought between 14 July 2004 and 19 April 2005 but would now be statute barred.
The first issue to consider is the question whether the failure to plead the matters now sought to be pleaded is causally connected to the prejudice the Wests now claim. It is correct as counsel for Caterpillar submitted that the Wests cannot demonstrate that a conscious decision was made not to bring proceedings against Gough and Gilmour because Caterpillar had not included the matters now sought to be pleaded in the reply and defence to counterclaim. In my view, however, that is not the end of the matter. I am satisfied that if the original pleading had included the matters now sought to be included, the Wests would have taken steps to bring claims against Gough and Gilmour. They were placing heavy reliance on the remedies given by the Hire Purchase Act against Caterpillar. The proposed new defence to counterclaim directly challenged the application of that legislation. Further, there is no reason to think that they would have reacted any differently in 2004 than they did in April of this year when they caused a writ to be issued against Gough and Gilmour to protect themselves in the event that Caterpillar was given leave to amend its pleadings. I note also that on 28 April 2004, three days before filing their defence and counter-claim in the present proceedings, the Wests commenced proceedings by Writ against Caterpillar. This indicates that as at April 2004 the Wests had directed their minds to the limitation of action issues at the time of filing their defence and counter-claim.
As to prejudice, I am satisfied that a number of claims against Gough and Gilmour were not statute barred in the period from 14 July 2004 to 18 April 2005 but would now be statute barred. I refer to the examples mentioned by counsel for the Wests and similar ones that can be identified in the Wests' particulars. Prejudice is made out. I am also satisfied that the conduct of the Wests in not taking action against Gough and Gilmour in July 2004 was reasonable in view of the fact that Caterpillar had admitted the application of the Hire Purchase Act, the dealership position of Gough and Gilmour and had not raised any defence that claims were statute barred. As to the latter, the Wests were entitled to assume that Caterpillar did not intend to raise such defences.
These matters are sufficient, in my view, to warrant the exercise of my discretion by not allowing the amendment of the pleading sought by Caterpillar.
It is also relevant, however, to consider the reasons for the delay in pleading the matters now sought to be pleaded and the responsibilities for those delays.
As to the delay that had occurred between the filing of the first reply and defence to counterclaim and the service of the proposed amended reply and defence to counterclaim, counsel for Caterpillar referred to the second affidavit of the plaintiff's solicitor Mr Morgan sworn on 28 April 2005 where he deposed that they had been investigating the matter since receiving the original counterclaim and faced considerable difficulties in analysing the claims. It was said that both tasks had been adversely affected by the passage of time and the way the claims had been pleaded.
The explanations given, however, do not explain why the defences that the claims were statute barred were not raised in the original pleading. It is understandable that other issues now sought to be raised required some investigation and consideration but Caterpillar would have known enough for its legal advisers to give advice as to whether to plead that claims were statute barred. In my view no satisfactory explanation has been given as to why defences that claims were statute barred were not pleaded in the original pleading.
The explanations advanced also rely upon the delays that occurred between the obtaining of the default judgement and the application to set it aside. In that context, it is relevant to consider the reasons for and responsibilities for that delay. There is another aspect to that delay which may also be relevant although it was not something that the parties themselves sought to address in any detail. That other aspect is that it may be said that a major reason for the Wests finding themselves at a disadvantage if Caterpillar is allowed to re-plead the reply and defence to counterclaim is the loss of time from the entry of the default judgement in 2001 to the setting aside of that judgement in 2004. For both reasons, it is relevant to consider the cause of this delay and where the responsibility for it lies in determining whether to exercise the discretion to allow the amendment.
Counsel for Caterpillar submitted that the Wests received notice of the default judgement a few days after it was entered and then did nothing and did not foreshadow a counterclaim until 2004. Counsel also submitted that activity by Caterpillar was not vital because it seized and sold the tractor on 25 September 2001. Counsel submitted that the Wests evidence was that they did nothing because they were impecunious. Caterpillar, however, has not filed any material explaining its failure to enforce the judgment for two years.
The Wests refer to and rely on the letter, referred to above, written by their then solicitor on 29 January 2002 to the solicitors acting for Caterpillar following the sale of the tractor. It alleged that Caterpillar had acted in breach of its duties as mortgagee and stated that, if Caterpillar failed to demonstrate that it had taken reasonable steps to secure a proper price, it would be necessary for the Wests to commence legal action against Caterpillar. It should be noted that the judgement in default of appearance was entered on 28 August 2001. Mr West has deposed to discussing with his legal advisers in early 2002 the possibility of suing Gough and Gilmour about the defective tractor and the loss of income. He deposes that at no time were they advised by their solicitor that they had the grounds, or should apply, to set aside the default judgement. He also deposes to having difficulty considering suing Gough and Gilmour because they did not owe them money. He also deposes to his solicitors advising him that because of Caterpillar's breach of duty concerning the sale, the default judgment would “just go away”. He said that his solicitor told him not to worry about it saying that “they know they have done wrong”. He also said that in February 2002 their then solicitor obtained advice from counsel about potential legal claims against Gough and Gilmour and Caterpillar in connection with the tractor but to his knowledge did not give any advice about the possibility of setting aside the default judgement. He deposes to investigations that were carried out in the ensuing months of that year. He also deposes to consistent advice from his solicitor that they would not hear again from Caterpillar because he had scared Caterpillar and that they should not act until Caterpillar came after them. Much attention also seems to have been focused upon the problems they had with other creditors such as Case Credit and Pivot. Mr West deposes that on 2 July 2002 he met with his solicitor in respect of the matter with Caterpillar and the problems with Case Credit who were trying to bankrupt them. He deposes that he could see no sense in suing Gough and Gilmour because they did not owe them any money. As to Caterpillar, he deposes that because it had taken no further action against them, nothing further was done because his solicitor considered that he had scared them and the matter would just go away. According to Mr West nothing was heard from Caterpillar until a letter was received dated 24th February 2004 from their solicitors demanding satisfaction of the amount owing under the default judgement together with further costs incurred in selling the tractor. His solicitor then informed him that he could not act for him in Victorian and Mr West then engage Victorian solicitors. On 30 March 2004 he received advice for the first time about the need to apply to set aside the default judgment.
Plainly, both parties were in a position to take action during the two year period of inactivity. Each must therefore accept some responsibility. I have come to the conclusion, however, that the primary responsibility rested with Caterpillar. The solicitor for the Wests had challenged Caterpillar to justify the price received from the sale of the equipment. Caterpillar could have taken up the challenge or ignored it and proceeded to execute its judgment. Instead it was silent and did nothing. Caterpillar's conduct was plainly open to the interpretation that it was not going to pursue the matter any further and it was reasonable for the Wests to take that view. One can well understand persons in the position of the Wests, as a matter of common sense and experience, taking that view and that view gathering strength the longer Caterpillar did nothing. The alternative for them would have been to take proceedings to set aside the judgment and run the risk of reviving a major and potentially very costly problem that appeared to have gone away.
Conclusion
I am satisfied that the probable prejudice to the Wests flowing from the proposed amendments is such that leave should not be given to the plaintiff to make the proposed amendments to its reply and defence to counterclaim. There are other issues that support that result. I refer to the failure of Caterpillar to file any evidence explaining its lack of action to enforce the judgment for two years and its failure to plead the limitations of actions defence in 2004. I refer also to the conclusion that the plaintiff was primarily responsible for the two year delay which has contributed significantly to the creation of the situation in which it can now raise the defence that the Wests' claims are statute barred and claims by the Wests against Gough and Gilmour can be met by a limitation of actions defence. The application of the plaintiff for leave to amend its reply and defence to counterclaim should be dismissed.
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