David John White v Eurocycle Pty Ltd (Respondent), Peter v Stevens Importers Pty Ltd and Seimm Societa Esercizio Industrie Moto Meccaniche Trading as Moto Guzzi (Appellant) and NZI Insurance Australia Limited No...

[1995] SASC 5109

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA KING CJ(2) DUGGAN(1) AND NYLAND(3) JJ

CWDS
Practice - Appellant joined as third party by respondent, one of the defendants in an action bought by the plaintiff for personal injuries suffered in motor cycle accident - respondent sold the motor cycle to the plaintiff - plaintiff alleging faulty design of motor cycle - held that proposed amendment to respondent's statement of claim raised new cause of action - rule in Weldon v Neal (1887) 19 QBD 394 discussed. Patterson v Richards (1963) VR 179; Harris v Raggatt (1965) VR 779 at 785; Brook v Flinders University of South Australia
(1988) 47 SASR 119 at 130 referred to.

Whether amendment to pleadings can be made pursuant to SCR 53.03(c) in case of an action under Trade Practices Act (Commonwealth) s74H after limitation period for bringing such an action has expired. Held that the limitation provisions are procedural in nature and that SCR 53.03(c) permitted amendment. McKain v R.W. Miller and Co (SA) Pty Ltd (1991) 174 CLR 1 at 19; Maxwell v Murphy (1957) 96 CLR 261; State of Western Australia v Wardley Australia Ltd
(1991) 102 ALR 213 and Australia and New Zealand Banking Group Ltd v Larcos
(1987) 13 NSWLR 286 discussed. Held that it was appropriate to permit amendment in the present case.

HRNG ADELAIDE, 4-5 May 1995 #DATE 8:6:1995 #ADD 4:9:1995

Counsel for appellant:     Mr I Robertson

Solicitors for appellant:    Piper Alderman

Counsel for respondent:     Ms R Layton QC with her
   Mr J Costello

Solicitors for respondent: Stratford and Co

ORDER
Appeal allowed.

JUDGE1 DUGGAN J The appellant is a third party in an action brought by the plaintiff for damages for personal injuries suffered in an accident which occurred on 20th May, 1987. The plaintiff fell from a motor cycle while travelling along a country road. The respondent, one of the defendants, sold the motor cycle to the plaintiff. The other defendant was the importer of the motor cycle. The appellant manufactured it in Italy.

2. The plaintiff's claim against the respondent is for damages for negligence, breach of statutory warranties and conditions provided for in the Sale of Goods Act and breach of statutory conditions arising from the Trade Practices Act. It is pleaded in the statement of claim that the respondent sold the motor cycle when it knew or ought to have known of design deficiencies which resulted in instability.

3. The plaintiff's summons was issued on 16th March, 1990. The third party notice was taken out on 19th January, 1993. Then on 20th September, 1993 the respondent filed a more explicit statement of claim in the third party action. In the prayer for relief the respondent claimed to be entitled to an indemnity from the appellant against the plaintiff's claim and judgment for any amount that may be found due from the respondent to the plaintiff "both pursuant to sections 25 and 26 of the Wrongs Act and section 82 of the Trade Practices Act". Section 82 of the Trade Practices Act permits a person suffering loss or damage in contravention of a provision of Part IV or V of the Act to recover the amount of the loss or damage.

4. The appellant applied to have the reference in the third party pleadings to s82 of the Trade Practices Act struck out and the application came on for hearing before an acting master. At the hearing the respondent applied to amend its more explicit statement of claim so as to include claims to be entitled to an indemnity and to recover loss and damage pursuant to various sections of the Trade Practices Act.

5. The claim which is the subject of the present appeal is based upon s74H of the Act which renders a manufacturer of goods liable to indemnify the seller of the goods in respect of any liability of the seller to the consumer which arises in the circumstances defined in the section. However s74J(1) of the Act provides that an action under a provision of this Division of the Act "may be commenced at any time within 3 years after the day on which the cause of action accrued". The section goes on to provide in sub-section (2)(b) when the cause of action shall be deemed to have accrued in the case of an action under s74H. It is common ground that the date on which the cause of action accrued in the present case is 16th March, 1990, the day on which the plaintiff commenced his action against the respondent. Accordingly the three year limitation period expired on 16th March 1993, after the third party notice was issued but before the more explicit statement of claim was filed.

6. The acting master concluded that the proposed amendment to the third party statement of claim which pleaded a claim based on s74H should be disallowed on the ground that it raised a new cause of action which had not been identified in the third party notice and could not now be pleaded by reason of the expiry of the three year period. The respondent appealed against that decision to a single judge of this court who allowed the appeal after reaching the conclusion that no new cause of action under s74H was raised in the proposed amendments, but rather that they amounted to a particularising of such a claim already before the court in the third party notice. An alternative argument was advanced that, if the action under s74H had not been raised in the third party notice, the amendment could have been allowed pursuant to SCR 53.03(c) which gives the court a discretion to add a new cause of action if it arises out of the same or substantially same facts as the original cause of action and despite the fact that the application for leave to amend is made after any relevant period of limitation has expired. The learned judge found it unnecessary to resort to this power, but expressed the view that it could have been relied upon in the present case if he had reached a different view on the first issue.

7. At the hearing before this court the appellant argued that the limitation period prevented a new cause of action based on s74H of the Act from being raised after the limitation period had expired and that such a cause of action had not been pleaded in the third party notice. It was further argued that SCR 53.03(c) did not apply to a claim which was out of time under the provisions of the Trade Practices Act.

8. I deal first with the submission that the pleading gives rise to a new cause of action and that to permit an amendment would be contrary to the rule in Weldon v Neal (1887) 19 QBD 394.

9. Before examining the wording of the third party notice it is appropriate to have regard to the nature of the cause of action provided for in s74H. The section states:
    "Where:
    (a) a person (in this section referred to as the "seller")
    is under a liability to another person (in this section
    referred to as the "consumer") in respect of loss or damage
    suffered by the consumer as a result of a breach of a
    condition or warranty implied by a provision of Division 2
    in a contract for the supply of goods (whether or not the
    goods are of a kind ordinarily acquired for personal,
    domestic or household use or consumption) by the seller to
    the consumer; and
    (b) a third person (in this section referred to as the
    "manufacturer"):
     (i) is liable to compensate the consumer in respect of the
     same loss or damage by reason of a provision of this
     Division; or
     (ii) in a case where the goods referred to in
     paragraph (a) are not of a kind ordinarily acquired for
     personal, domestic or household use or consumption -
     would, if the provisions of sections 74B, 74C, 74D and 74E
     applied in relation to those goods, be liable to
     compensate the consumer in respect of the same loss or
     damage by reason of any of those provisions;
    the manufacturer is liable to indemnify the seller in
    respect of the liability of the seller to the consumer and
    the seller may, in respect of the manufacturer's liability
    to indemnify the seller, institute an action against the
    manufacturer in a court of competent jurisdiction for such
    legal or equitable relief as the seller could have obtained
    if the liability of the manufacturer to indemnify the seller
    had arisen under a contract of indemnity made between the
    manufacturer and the seller."

10. It will be seen that the section gives the seller of goods a right of indemnity as against the manufacturer of the goods which is enforceable as though it were a right arising out of a contract of indemnity between the manufacturer and the seller. The conditions precedent to the right arising are set out in paras (a) and (b). In the present case the relevant conditions are that the seller is liable under a contract with the buyer for loss or damage arising out of a breach of warranty implied by the Act under Division 2 and the manufacturer is liable to compensate the consumer under sections 74B and 74D of the Act. The section thus provides for a statutory indemnity.

11. The third party notice was expressed in the following terms:
    "The first named Defendant claims against you to be
    indemnified against the Plaintiff's claim and costs of the
    action or contribution in respect of any verdict given
    against it on the grounds that your negligence and/or breach
    of duty of care and/or breach of the contract between you
    and the second named Defendant for the sale and supply to
    the second named Defendant of the said motor cycle referred
    to in the Amended Statement of Claim of the Plaintiff herein
    being a Moto Guzzi Le Mans 1000 Frame No. VV12060, Engine
    No. WO11917 and/or breach of statutory warranty caused or
    contributed to the alleged circumstances under which the
    plaintiff's claim arises."

12. Most of the cases in which the rule of practice in Weldon v Neal has arisen have involved the raising of significant new allegations of fact or amendments which are opposed on the basis that there has been a change in the legal categorisation of the claim. (See the cases cited in Susan Campbell, Amendments and Limitations: The Rule in Weldon v Neal, (1980) 54 ALJ 643). Various expressions have been used in attempts to explain the class of amendments prohibited by the rule. In Patterson v Richards (1963) VR 179 Sholl J stated that it was a matter of determining whether what was pleaded was something essentially different from that which had been pleaded earlier. He said (p188):
    "It is not a matter of forbidding the setting up of anything
    which amounts to a new fact or facts - for in Collins' Case,
(1947) KB 598; (1947) 1 All ER 633, and Wilkins' Case,
(1958) NZLR 958, and a good many others, that was allowed.
    It is a matter, as it seems to me, of forbidding the setting
    up of such new 'ultimate' or 'pleading' facts - whether with
    or without a new or different allegation of legal
    consequences, or a new or different legal characterization -
    as to involve in real substance 'a new departure, a new head
    of claim, a new cause of action'."

13. Subsequently, in Harris v Raggatt (1965) VR 779 at 785, Sholl J said:
    "The real question is whether there is or is not a
    sufficient relation between what has been alleged within the
    period of limitations and what is sought to be alleged after
    it has expired, for the latter to be regarded as merely a
    reasonable and relevant extension of the former, and not as
    quite 'new matter of controversy', as Jordan CJ, called it
in Horton v Jones (No. 2) (1939), 39 SR (NSW) 305, at
    p.315."

14. In Brook v Flinders University of South Australia (1988) 47 SASR 119 at 130 von Doussa J said:
    "There will be a complete change in the cause of action if
    the statement of claim seeks to 'embark on any quite
    different set of ideas or on quite a different allegation of
    fact': Graff Brothers Estates Ltd v Rimrose Brooke Joint
Sewerage Board (1953) 2 QB 318 at 328."

15. Miss Layton QC, for the respondent, argued that the effect of the third party notice was to raise a cause of action properly described as an action for indemnity or, alternatively, a claim for indemnity to be interpreted in a broad sense in a manner similar to a claim for damages. What follows in the notice, so it was argued, are grounds of indemnity which are not descriptive of causes of action in their own right. This, it was said, led to the conclusion that the amendment relating to s74H did no more than further particularise a general claim of indemnity.

16. I am unable to accept that view of the third party notice. The pleader followed the wording of the third party precedent in Form 10 of the Rules which is based upon SCR 37.01. The word "indemnified" has a broad meaning: a right to indemnity may arise from express contract, by statute, or by implication from some principle of law. In most cases, it will be necessary to link the right with one or other of these categories in order to adequately identify the cause of action. Indeed, this was the course adopted by the pleader in the present case. It is claimed in the third party notice that an indemnity or right to contribution arises from the negligence and/or breach of duty of care of the appellant; breach of contract between the appellant and the importer of the goods and breach of statutory warranty. But the mere use of the word "indemnified" as part of the description of these causes of action does not justify a subsequent amendment claiming a right of indemnity howsoever arising.

17. The alternative argument that the claims made in the third party notice for indemnity by reason of breach of contract and breach of statutory warranty are apt to describe the subsequent claim made under s74H must also be rejected. The contract referred to in the notice is between the appellant (manufacturer) and the second defendant (the importer) whereas the relief permitted under s74H is that which the respondent could have obtained if there had been a contract of indemnity between the appellant as manufacturer and the respondent as seller. And although breach of a statutory warranty is referred to in s74H, it is in relation to a breach by the seller of the goods such as to incur liability to the consumer (a precondition of liability under the section) and has nothing to do with any breach of statutory warranty by the appellant as manufacturer.

18. In my view, therefore, the proposed amendment gives rise to a new cause of action and the rule of practice in Weldon v Neal requires the refusal of the application to amend unless it is to be allowed by an exercise of the discretion provided for in SCR 53.03(c).

19. The appellant argued that the power to allow an amendment under SCR
53.03(c) could not be applied to an action under s74H which had been brought out of time. Insofar as it is relevant SCR 53.03 provides as follows:
    "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."

20. The time for commencing an action based on s74H is provided for in s74J which states:
    "(1) Subject to this section, an action under a provision of
    this Division may be commenced at any time within 3 years
    after the day on which the cause of action accrued.

(2) For the purposes of this section, a cause of action
    shall be deemed to have accrued:
    ...
    (b) in the case of an action under section 74H, on:
     (i) the day, or the first day, as the case may be, on
     which the seller referred to in that section made a
     payment in respect of, or otherwise discharged in whole or
     in part, the liability of that seller to the consumer
     referred to in that section; or
     (ii) the day on which a proceeding was instituted by that
     consumer against the seller in respect of that liability
     or, if more than one such proceedings was instituted, the
     day on which the first such proceeding was instituted;
    whichever was the earlier."

21. Mr Robertson, for the appellant, argued that the time limit is an essential element of the claim and the failure to bring the action within the statutory limitation period cannot be cured by amendment under SCR 53.03(c). Miss Layton argued that the limitation period related only to the remedy for enforcement and that the expiry of the period prior to action brought did not extinguish the substantive right given by s74H.

22. As Mason CJ pointed out in McKain v R.W. Miller and Co (S.A.) Pty Ltd
(1991) 174 CLR 1 at 19, the distinction between the denial of the remedy, a procedural matter, and the subsistence of the right, an issue which goes to substance, has been criticised, but the need to distinguish the two in circumstances such as the present is clearly established. (ibid at 40). It is necessary, therefore, to construe the limitation provision in each case.

23. There is little assistance to be obtained by way of general guidelines. In Australian Iron and Steel Ltd v Hoogland (1962) 108 CLR 471 at p488 Windeyer J thought that there might be some significance for present purposes in the distinction "between Statutes of Limitation, properly so called, which operate to prevent the enforcement of rights of action independently existing, and limitation provisions annexed by a statute to a right newly created by it". He said that in the latter case the limitation did not bar an existing cause of action but imposed a condition which was of the essence of a new right. (See also The Commonwealth v Verwayen (1990) 170 CLR 394 at 497). However Windeyer J went on to say:
    "Even when a time limit is imposed by the statute that
    creates a new cause of action or right, it may be so
    expressed that it is regarded as having a purely procedural
    character, as a condition of the remedy rather than an
    element in the right; and in such cases it can, it seems, be
    waived, either expressly or in some cases by estoppel." (108
    CLR at 488)

24. In my view, the imposition by s74J of a time limit on actions commenced under s74H falls into the procedural category. The limitation periods for various types of action are grouped in a section of the Act separate from those which allow the rights of action. The actions are based on a variety of different circumstances which might arise between manufacturers, sellers, consumers and importers. Section 74J appears under the heading "Time for commencing actions". The language of the limitation provisions is typical of that used in the usual statute of limitations of a general character.

25. Counsel for the appellant relied upon the case of Maxwell v Murphy (1957) 96 CLR 261 which dealt with legislation based on Lord Campbell's Act. Section 5 of the Compensation to Relatives Act, 1897 - 1946 (NSW) provided the cause of action for relatives of a deceased person and stated that every such action shall be commenced within twelve months after the death of the deceased. By the time the action in the particular case was brought on the time limit had been extended to six years.

26. The High Court held that, as the action had not been brought within the twelve month period, the right of action had been lost and could not be revived by the amendment. The court emphasised the fact that the action was given expressly by the statute and that the section which created it contained two important requirements relating to its enforcement. The requirements were expressed as follows:
    "Not more than one action shall lie for and in respect of
    the same subject-matter of complaint, and every such action
    shall be commenced within twelve months after the death of
    such deceased person".

27. It was pointed out that in the original Act the requirement that the action be commenced within twelve months was preceded by the words "Provided always". It was held by the High Court that, on a proper construction of the provisions, the requirement to commence the action within the statutory period was an ingredient in the cause of action and thus a matter of substance. The fact that the time limit was linked with the stipulation that there would be only one cause of action was considered an important consideration. In their joint judgment Kitto and Taylor JJ said (at 292):

    "A proviso added two more limitations: 'that no more than
    one action shall lie for and in respect of the same subject
    matter of complaint; and that every such action shall be
    commenced within twelve calendar months after the death of
    such deceased person'. That the first limb of this proviso
    went to the substance of the new right to damages is clear,
    for its effect was to exclude from the right any persons for
    whose benefit the liability to an action was imposed who
    might not be parties for whom and for whose benefit the
    action was in fact brought. It meant that 'the persons who
    stand out stand out for ever': Avery v London and North
Eastern Railway Co (1938) AC 606, at pp. 613, 618, 619. The
    second limb carried the process of limiting the right a step
    further, for it meant that the liability was confined to
    being sued, not only in a single action, but in an action
    commenced within twelve months after the death. This second
    limb could hardly have worn less resemblance to a mere
    limitation of the time for enforcing a cause of action to
    which it was extraneous. It appeared in the Acts as one of
    the provisions by which the area of the new liability was
    being plotted - as an essential qualification indeed, of the
    new action that was being provided for.

The proviso has always remained as a proviso in England. In
    New South Wales the Act was re-enacted in 1897, and the
    words 'Provided always' and 'calendar' were then omitted.
    But the nature of the provision remains indubitably the
    same."

28. The decision can be distinguished from the present case for the reasons which I have already given. It is also of relevance to note the importance which was given to the fact that the relevant provisions of the Compensation to Relatives Act were expressed in terms of a remedy and a bar had been placed on the remedy as such. (96 CLR at 268). However s74H creates the right of action, namely, the right to indemnity and then confers the remedy by way of an action in a court of competent jurisdiction. In my view s74J is addressed to the remedy and not the right of indemnity.

29. The classification of s74J(2)(b) as procedural in nature finds further support from the joint judgment of the Full Federal Court in State of Western Australia v Wardley Australia Ltd (1991) 102 ALR 213. The court considered the effect of the limitation provision in s82 of the Trade Practices Act which states:
    "(1) A person who suffers loss or damage by conduct of
    another person that was done in contravention of a provision
    of Part IV or V may recover the amount of the loss or damage
    by action against that other person or against any person
    involved in the contravention.

(2) An action under subsection (1) may be commenced at any
    time within 3 years after the date on which the cause of
    action accrued."

30. Their Honours said (226):
    "In a general sense, the effect of s 82(2) may be described
    as the prescription of a time limitation: Sent v Jet Corp of
Australia Pty Ltd (1986) 160 CLR 540 at 542; 66 ALR 73. But
    there is a distinction between the operation of a statute of
    limitation, properly so called, which prevents the
    enforcement of rights of action independently existing, and
    a time limitation imposing a condition which is the essence
of a new right: R v McNeil (1922) 31 CLR 76 at 96, 100-1.
    It is for a defendant to plead a statute of limitation
    against an independent right, but when a limitation is
    annexed by a particular statute to the right which it
    creates it is for the plaintiff to allege that the action
    was brought within time: cf Elna Australia Pty Ltd v
    International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR
410 at 415; 75 ALR 271. If the jurisdiction of a court to
    entertain proceedings is conditioned in this way on
    commencement of proceedings within a specified time, the
    defendant cannot by a purported waiver confer jurisdiction
of the court; Commonwealth v Verwayen (1990) 170 CLR 394 at
425; 95 ALR 321, per Brennan J.

However, it is necessary when dealing with s 82 to bear in
    mind its double operation, to which we have referred above,
    as dealing with right and remedy. In our view, in stating
    that an action under sub-s (1) may be commenced at any time
    within the three year time limit specified in s 82(2), that
    latter provision is to be regarded as having a procedural
    character. That is to say, s 82(2) is a condition of the
    remedy rather than an element in the right and a
    prerequisite to jurisdiction which cannot be waived. It
    follows that it is for a defendant to assert non-compliance,
    rather than for a plaintiff to assert compliance with s
    82(2) as an element of the cause of action."

31. Once it is accepted that the limitation provisions in s74J(2)(b) are procedural in character and do not go to the substance of the right of action under s74H there is no reason, in my view, why an amendment under SCR 53.03(c) should not be allowed in an appropriate case. The Supreme Court applies its ordinary rules of evidence and procedure when exercising federal jurisdiction unless there is some specific provision to the contrary. Nor can I accept the argument that there is inconsistency between the limitation period in the Trade Practices Act and the Supreme Court Rules. This argument is answered by the reasoning of Rogers J in Australia and New Zealand Banking Group Ltd v Larcos (1987) 13 NSWLR 286. The defendant to proceedings for possession of land which were commenced in the Supreme Court of New South Wales filed a cross-claim alleging fraudulent misrepresentation in relation to the transaction. Subsequently he sought to amend the cross-claim so as to plead misleading and deceptive conduct, the statutory claim permitted under s52 of the Trade Practices Act. The new cause of action was out of time because of the provisions of s82 which I have set out above. Rogers J allowed the amendment under the New South Wales equivalent of SCR 53.03(c). His Honour held that there was no inconsistency between the Commonwealth legislation and the State Rules of Court to the extent that they might be applied to actions under the Commonwealth legislation. The rule permitted an exercise of discretion to grant an amendment. The effect of the amendment would be to backdate the commencement of proceedings under the Act so that the action could be said to have been commenced "at any time within 3 years after the date on which the cause of action accrued." (s82(2))

32. As for the exercise of the discretion, the appellant could not demonstrate any prejudice if leave to amend were granted. Mr Robertson pointed out that the appellant's right to claim that the new cause of action should be defeated by reason of the limitation period would be lost, but that is so in the usual case where an amendment of this nature is permitted. The plaintiff's statement of claim pleaded causes of action under the Trade Practices Act and, in the circumstances, it would not have occasioned surprise that the respondent would also wish to rely on its rights under the same Act.

33. In my view the new cause of action arises out of substantially the same facts as the original cause of action and in all the circumstances the discretion given by SCR 53.03(c) should be exercised in favour of the respondent. I would allow the appeal for the limited purpose of varying the order of the judge appealed from by directing that there be leave pursuant to SCR 53.03(c) to amend the more explicit statement of claim of the first defendant against the third party so as to add the cause of action based on s74H of the Trade Practice Act, this amendment to take effect from 19th January, 1993.

JUDGE2 KING CJ I agree with the order proposed by Duggan J for the reasons which he gives.

2. I would add that the discretion under SCR 53.03(c) should be exercised in favour of allowing the amendment because the amendment will permit the court to do full justice in the case by considering all legal rights and remedies to which the respondent may be entitled against the Third Party and because counsel for the Third Party has been unable to point to any prejudice which the Third Party would suffer in consequence of the later raising of the new cause of action.

JUDGE3 NYLAND J I have had the advantage of reading the draft reasons for decision of Duggan J. I am also of the view that the proposed amendment which pleads a claim based on s74H of the Trade Practices Act raises a new cause of action but for the reasons expressed by Duggan J that the discretion given by SCR
53.03(c) should be exercised in favour of the respondent, I would allow the appeal. I agree with the order proposed by Duggan J.