Corrine Pty Ltd v Giant Tree Pty Ltd
[2012] VCC 17
•9 February 2012
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST
EXPEDITED CASES DIVISION
Case No. CI-11-03317
| CORRINE PTY LTD | Plaintiff |
| v | |
| GIANT TREE PTY LTD & ORS | Defendants |
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JUDGE: | HIS HONOUR JUDGE ANDERSON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 January 2012 | |
DATE OF JUDGMENT: | 9 February 2012 | |
CASE MAY BE CITED AS: | Corrine Pty Ltd v Giant Tree Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 17 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Application by defendants to file an amended defence and counterclaim – Effect of allowing amendment would be the vacation of the trial date – Adequacy of explanation of delay in making application.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C. King | Australian International Lawyers & Associates |
For the First and Second Defendants | Mr A. Tragardh | SOHO Lawyers Pty Ltd |
| For the Third Defendant | Mr J.A.F. Twigg | DLA Piper Australia |
| For the Fourth Defendant | Ms C. Harris | Norton Rose Australia |
| For the Fifth Defendant | Ms A. Golding | Tress Cox Lawyers |
HIS HONOUR:
1 This matter is listed for trial commencing 27 February 2012. The first and second defendants, by summons filed 23 December 2011, seek leave to file and serve an amended defence and counterclaim. It is likely that if leave were granted for the filing of the amended pleading, the trial would need to be adjourned. Ordinarily, this would mean that the trial would not be re-fixed until early August 2012.
2 By writ dated 12 July 2011, the plaintiff brought proceedings against five defendants arising out of the sale of the business known as “Inzone Café”. The plaintiff was the vendor of the business. The first defendant was the purchaser. The second defendant guaranteed the obligations of the first defendant. The third defendant was the plaintiff’s agent for the sale of the business. The fourth defendant was the individual engaged by the third defendant who was responsible for introducing the first defendant as a purchaser of the business. The fifth defendant is a lawyer, who it was alleged gave negligent advice to the plaintiff concerning an agreement for the issue of shares which was intended to provide security to the plaintiff for payment of the balance of purchase price.
3 The first and second defendants filed a defence on 6 September 2011. The defendants denied that the first defendant was obliged to pay the balance of the purchase price for the business to the plaintiff. Paragraph 61 of the defence reads as follows, “Alternatively, if the first defendant and/or second defendant is liable to the plaintiff as alleged, the first defendant and/or second defendant will then seek to set off so much of its counterclaim as is sufficient to extinguish the plaintiff’s claim”. No counterclaim was filed at that time.
4 The first and second defendants served a draft counterclaim on the plaintiff’s solicitors on 25 October 2011. The defendants’ solicitors noted in correspondence that, “The matters raised in the counterclaim must be included in the subject of the mediation on Thursday 27 October 2011, and if the proceeding is not resolved at mediation, failing your consent, we will make immediate application for leave to file the amended notice of defence and counterclaim”. The defendants to the counterclaim were the plaintiff and Ms Jie Mo, a director of the plaintiff.
5 The counterclaim alleged that representations had been made before the sale of business agreement that the takings of the business “were never less than $13,000 per week and takings over $13,000 would continue”. There was also a trial period, following which the first defendant could cancel the purchase if the gross takings were less than $26,000 for a 14 day period. It is alleged the plaintiff artificially inflated the gross takings during the trial period.
6 The Court was informed that in April 2011 the first and second defendants had become aware of the inflation of the takings during the trial period by employees of the business who had remained employed after the first defendant took over. The delay in filing the counterclaim was said to be as a result of the first and second defendants’ solicitor not being able to obtain first-hand instructions from the employees until later in 2011.
7 No application was made following the failed mediation on 27 October 2011 for the filing of the amended defence and counterclaim. The first and second defendants’ counsel, Mr Tragardh, said that this was because of delays by the defendants’ solicitor obtaining instructions from the employees who had since left the employment of the business, and the absence of critical representatives of the defendants in China during the period from November to January 2012 and the termination of the services of the first and second defendants’ former solicitor, Mr Vassis, and the engagement of new solicitors.
8 A notice of change of solicitor was filed on 14 December 2011. The present application was made on 23 December 2011. The amended defence and counterclaim, in respect of which leave is now sought, seeks to join the third defendant (the agent who was engaged by the plaintiff to find a purchaser for the business) as a defendant to the counterclaim. The counterclaim against that defendant relies upon a document headed “Form 2”, a statement prepared by the accountant of the plaintiff recording that the average weekly takings of the business for the period 1 July 2008 to 30 June 2009 were $5,505.69 and for the period 1 July 2009 to 30 June 2010 were $5,001.75.
9 The Form 2 had been discovered by the third defendant in the proceeding in an affidavit of documents dated 19 October 2011. It is not clear when the first and second defendants first became aware of the document. It may have been at the mediation or shortly thereafter.
10 The attitude of the parties responding to the application by the first and second defendants, was as follows:
a.The plaintiff did not oppose the granting of leave to the first and second defendants to file and serve an amended defence and counterclaim in the form of the draft pleadings, provided the trial date of 27 February 2012 was maintained. The plaintiff submitted that it would be able to meet the allegations raised in the amended pleadings at the trial, including all issues of liability and quantum.
b.The third defendant submitted that, if leave were granted for the amended defence and counterclaim, it would need to issue contribution proceedings against the fourth defendant. It generally did not have any objection to the filing of the amended pleadings subject to being able to seek contribution from the fourth defendant. The third defendant’s counsel, Mr Twigg, suggested that if the first and second defendants were given leave to file the counterclaim that all issues of liability might be determined at the trial commencing 27 February, although issues of quantum could not be considered at that time because of the need for further particulars.
c.The fourth defendant indicated that, if the amended defence and counterclaim were permitted to be filed and the third defendant sought contribution against the fourth defendant in respect of the counterclaim, that the fourth defendant would not be in a position to meet those matters at the trial commencing 27 February.
d.The fifth defendant was unaffected by the proposed counterclaim but wished the hearing fixed for 27 February to proceed.
11 It can be seen from this summary that it would not be possible to satisfy the wishes of each party. Effectively, the only options for the Court are as follows:
a.To grant leave to the first and second defendants to file the amended defence and counterclaim and to re-fix the trial. It is not considered a feasible possibility to proceed with the proposed counterclaim on issues of liability only and to defer issues of quantum. Appeal Courts have regularly commented on the undesirability of splitting issues of liability and quantum as this rarely results in a saving of time and makes it difficult for parties to reach a commercial settlement. If the trial were adjourned, it would be contrary to the wishes of the plaintiff and the third, fourth and fifth defendants.
b.To allow the trial to proceed on 27 February but not permit the first and second defendants to proceed with their proposed counterclaim against the third defendant. This would deny the first and second defendants the opportunity of making a claim which they now wish to make. It would, however, maintain the trial date and allow the first and second defendants to proceed with their proposed counterclaim against the plaintiff and it’s director.
12 Mr Tragardh submitted that it would be unfair to his clients to deny them the opportunity of proceeding with their claim against the third defendant. He said:
a.The basis for the claim only became known to the first and second defendants when the third defendant discovered the Form 2 document showing that the third defendant had knowledge that the asserted $13,000 takings each week was not supported by a document prepared by the vendor’s accountant for the previous two years.
b.Although the first and second defendants’ previous solicitor, Mr Vassis, had become aware of that document in late October 2011, the failure of those defendants to make application for leave to file and serve an amended pleading was explained by the absence overseas of key personnel of those defendants for most or a substantial portion of the period, and by the failure by Mr Vassis to have moved with greater speed, for which his clients should not be penalised.
c.The proceeding was only issued in July 2011.
d.The first and second defendants had foreshadowed the fact of a counterclaim in their initial defence in September, and the general nature of the counterclaim (at least against the plaintiff) in the document delivered shortly before the mediation.
e.The third and fourth defendants had insurers standing behind them.
13 The fact of insurance is an irrelevant consideration and should not have been raised by counsel. The material filed by the first and second defendants in support of the application was sparse and the criticisms of Mr Vassis for failing to move more speedily, were made by counsel from the bar table and ignored the fact that counsel himself had been involved in the proceeding throughout.
14 The relevant matters put by the other parties in opposition to the application were:
a.The trial date would be lost and the matter could not be re-fixed, probably for a further six months.
b. The trial date had been known since it was fixed on 4 August 2011.
c.The first and second defendants had been aware of the basis for their counterclaim against the plaintiff and it’s director since April 2011 and, at the time of filing their defence in September 2011, had foreshadowed that a counterclaim would be delivered contemporaneously. The failure to have done so, or to have sought leave in respect of the counterclaim delivered shortly before the mediation in October 2011, had not been fully explained.
d.The failure to include in the counterclaim claims against the third defendant, when the basis of those claims was said to be a document discovered by the third defendant which came to the attention of the first and second defendants’ solicitors in late October 2011, had not been adequately explained.
15 It is a serious matter to deny a party the opportunity to proceed with claims it may have against another party. It appears that the Form 2 document supports the allegation raised against the third defendant that, through its employee or agent, it made representations about the earnings of the business in circumstances where it held a document prepared by the vendor’s accountants attesting to substantially lesser earnings for the previous two financial years. Although the unexplained period of delay is relatively short, it is possible that, if the first and second defendants had made application for leave to deliver the amended pleadings in November, or even early in December, so that the application might have been heard prior to the Christmas recess, that the necessary interlocutory steps may have been completed in time for the trial to proceed on all issues on 27 February 2011.
16 On balance, however, it is considered that the interests of justice demand that the first and second defendants should be permitted to pursue a counterclaim against the third defendant and the third defendant should be entitled to claim indemnity from the fourth defendant. This would involve the vacation of the present trial date. A combination of factors have made this necessary. It is unfortunate that the first and second defendants’ solicitors did not act sooner. Part of the delay is explained by the absence overseas of relevant persons and the fact that the first and second defendants chose to change solicitors, although the reason for the change is not readily apparent. The application for leave to amend the pleadings was made more than two months before the trial date, however, because of the Christmas recess, the application could not be dealt with at an earlier time.
17 The Court will attempt to re-list the case at the earliest possible date where there is a reasonable prospect of it being heard and in sufficient time for the parties to complete the necessary interlocutory processes as a consequence of the amended pleadings.
18 The material filed in support of the application was inadequate to fully explain the lateness of the application. The first and second defendants will be required, as a condition of leave, to pay the costs of the application of each of the other parties. Although briefs may have been delivered for the trial, I do not consider that an order should be made for the payment of those costs by the first and second defendants at this stage. Rather, the question of any costs of all parties other than the first and second defendants thrown away by reason of the vacation of the trial date, will be reserved.
19 I shall hear the parties further in relation to the re-fixing of the trial date and the necessary interlocutory timetable as a consequence of the amended pleading. There are also further orders which need to be made as a result of other applications, upon which the parties have reached agreement as to the orders the Court should make.
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Certificate
I certify that these 7 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 9 February 2012.
Dated: 9 February 2012
Caroline Dawes
Associate to His Honour Judge Anderson
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