Fabfloor (Vic) Pty Ltd v BNY Trust Company of Australia Limited
[2016] VSC 99
•16 March 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST
S CI 2012 07202
| FABFLOOR (VIC) PTY LTD (TRADING AS EVENT FLOOR) & ORS | Plaintiffs |
| v | |
| BNY TRUST COMPANY OF AUSTRALIA LIMITED & ORS | Defendants |
S CI 2013 00175
| DANFOSS (AUSTRALIA) PTY LTD & ANOR | Plaintiffs |
| v | |
| BNY TRUST COMPANY OF AUSTRALIA LIMITED & ORS | Defendants |
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JUDGE: | JOHN DIXON J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 February 2016 |
DATE OF JUDGMENT: | 16 March 2016 |
CASE MAY BE CITED AS: | Fabfloor (Vic) Pty Ltd & Ors v BNY Trust Company of Australia Limited & Ors |
MEDIUM NEUTRAL CITATION: | [2016] VSC 99 |
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PRACTICE AND PROCEDURE – Joinder of parties – Amendment of defence – Application by defendant invoking proportionate liability under Part IVAA of the Wrongs Act 1958 as a defence to add alleged concurrent wrongdoers as defendants – Whether evidence necessary to establish arguable case to permit joinder and amendment – Part IVAA, s 24AL, Wrongs Act 1958 (Vic) – Rule 9.06(b) Supreme Court (General Civil Procedure) Rules 2015.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs in S CI 2012 07202 | M G Roberts QC | Gilchrist Connell |
| For the Plaintiffs in S CI 2013 00175 | G G McArthur QC | Lander & Rogers |
| For the Second Defendant in each proceeding | R C Macaw QC with C E Shaw | Norton Gledhill |
HIS HONOUR:
Introduction
By a Notice of Appeal dated 16 October 2015, the second defendant in both proceedings appealed orders made by an associate judge on 5 October 2015 refusing leave to join five additional parties as defendants and file an amended defence.
For the reasons that follow, I will allow the appeal.
Background
These two separate, but related, proceedings concern a fire at a warehouse in Dandenong South on 17 January 2007. The plaintiffs in proceeding 2012/07202 (the Fabfloor proceeding) owned goods stored in the warehouse and were registered as proprietors of land nearby to the warehouse that was damaged by the fire. The plaintiffs in proceeding 2013/00175 (the Danfoss proceeding) owned goods stored in the warehouse.
The second defendant, DTM, occupied the warehouse as lessee carrying on a transportation and storage business. In each proceeding, the plaintiffs claim that DTM owed them a duty of care. Amongst an array of alleged breaches of this duty, the plaintiffs allege that DTM failed to install or maintain an automatic fire detection and alarm system appropriate to the risk posed by its storage of hazardous materials and/or failed to ensure that the automatic sprinkler system and automatic fire detection and alarm systems were connected to the fire brigade.
The plaintiffs make claims against a number of other defendants, including the current owner of the warehouse, a company providing security monitoring services of alarm systems installed at the warehouse, a company providing external security patrols and checks at the warehouse and a company carrying on the business of assessing, designing and installing fire, smoke detection and security alarm systems for commercial premises.
By its defence, DTM alleges that the plaintiffs’ claims against it are apportionable claims to which Part IVAA of the Wrongs Act 1958 (Vic) applies and that other parties, including but not limited to, the existing defendants are concurrent wrongdoers. DTM contends that any judgment against it should be limited as provided for in s 24AI of the Wrongs Act.
DTM sought leave from the primary judge to add a further five defendants for the purposes of reducing its proportionate responsibility for the plaintiffs’ loss, being:
(a) Mr Howard Owen, a building surveyor, who issued an occupancy permit for the warehouse (the proposed sixth defendant);
(b) Mr John Neate, an inspector of firefighting equipment, who inspected the firefighting equipment at the warehouse (the proposed seventh defendant);
(c) Lettieri Constructions Pty Ltd, the original owner/builder of the warehouse (the proposed eighth defendant);
(d) Mr Phillip Marks, a fire safety practitioner who issued a certificate of acceptance for an automatic smoke detection and alarm system for the warehouse (the proposed ninth defendant); and
(e) Mr Peter Larkin, a fire security, sales and maintenance consultant, who serviced the firefighting equipment and fire detection system installed at the warehouse (the proposed tenth defendant).
DTM alleged that each proposed added defendant owed a duty of care to the plaintiffs, which he or it breached, causing the loss and damage claimed by the plaintiffs in the proceedings.
In respect of the proposed sixth, seventh, and ninth defendants, the plaintiffs alleged a counterfactual that had each proposed defendant not breached the alleged duty of care, deficiencies in compliance with obligations such as those arising under an occupancy permit, Australian Standards, or the Building Code of Australia would have been reported to the eighth defendant. Had the deficiency been reported, the eighth defendant would have rectified it, and had the required connections to the Fire Brigade and detection and alarm systems been installed, the fire would have been extinguished before it spread to the plaintiffs goods and property.
In respect of the proposed eighth defendant, DTM alleged that it constructed the warehouse to plans and specifications agreed with DTM, which included the installation of an automatic fire detection and alarm system in accordance with AS 1670. Although DTM denies that the warehouse was not constructed in accordance with the plans and specifications approved by the building surveyor, if that be the fact, the proposed eighth defendant breached its duty of care to the plaintiffs. That breach permitted the fire to spread to the plaintiffs’ goods when it would not otherwise have done so and caused any loss and damage suffered by the plaintiffs.
The proposed tenth defendant was engaged directly by DTM to regularly service the firefighting equipment and fire detection system installed at the warehouse. DTM alleged that he owed a duty of care to the plaintiffs which he breached by failing to note the absence of an automatic fire detection and alarm system that complied with applicable standards at the warehouse and/or that the fire detection system was not fully functional. Had those facts been reported to DTM, a compliant fire detection system would have been installed and/or repaired and maintained in a fully functional condition. The proposed tenth defendant’s breach of duty permitted the fire to spread to the plaintiffs goods when it would not otherwise have done so and caused any loss and damage claimed in the proceedings.
The plaintiffs stated in argument that the form of the pleading of the defence of proportionate liability was not in issue on the appeal. It was not contended that the proposed pleading failed to disclose an arguable defence. The question on the appeal was limited to the proposition that the application required evidence to demonstrate that there was substance to the defence to be raised by the amendment in the case of each further proposed defendant.
Identical considerations applied in each proceeding. DTM applied for leave to file and serve an amended defence and to join the proposed defendants, as concurrent wrongdoers, as parties to each proceeding pursuant to s 24AL(1) of the Wrongs Act. DTM also sought some other amendments that were unopposed, and allowed by the primary judge. The plaintiffs in each proceeding opposed the joinder of the proposed added defendants.
Decision of the Associate Judge
The primary judge by order made on 5 October 2015, dismissed the joinder and amendment applications. In his reasons,[1] the primary judge held that an applicant must lead some evidence showing that there is substance to the claims proposed to be raised so as to provide a foundation for the allegations of negligence. Put another way, the applicant must show by evidence that the claims are not hopeless, and that joinder of additional defendants is warranted.[2]
[1][2015] VSC 434.
[2]Ibid 20 [49], 23 [59].
The primary judge held that in respect of two of the proposed defendants the evidence was insufficient and in respect of three of them, no evidence was led.[3] Accordingly, leave was refused.
[3]Ibid 20-21 [51].
Issues on appeal
DTM contended that the primary judge erred in holding that where a defendant applied to join additional defendants on the basis that they are concurrent wrongdoers under Part IVAA of the Wrongs Act 1958 (Vic), so as to limit its liability to the plaintiffs, the applicant is positively required to lead some evidence showing that there is substance to the claims proposed to be raised and that the claims are not hopeless.
DTM contended that the primary judge ought to have concluded that on an application for joinder pursuant to s 24AL(1) of the Act, it is sufficient for a defendant to establish that the proposed pleadings contain facts or allegations which, if established at trial, could arguably establish the alleged defence and that if the Court is so satisfied, joinder should be allowed.
Finally, DTM contended that the primary judge erred in not finding that the proposed further amended defence made allegations of fact, which, if established at trial, could establish that its liability to the plaintiffs should be limited to a proportion of the plaintiffs’ loss or damage having regard to the comparative responsibility of the proposed sixth, seventh, eighth, ninth and tenth defendants respectively for that loss or damage, if those parties were added to the proceeding.
The issue to be decided enlivens three basic propositions, which, when properly understood, demonstrate the proper disposition of the appeal.
(a) Under s 24AI of the Act, when the court is determining what proportion of the plaintiff’s loss or damage it considers to be just having regard to the extent of the defendant’s responsibility for it, the court must not have regard to the comparative responsibility of any person who is not a party to the proceeding, subject to limited, presently inapplicable, exceptions. Under s 24AL of the Act, the court may give leave for concurrent wrongdoers in relation to an apportionable claim to be joined as defendants in a proceeding in relation to that claim. That section, rather than Order 9 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), is the source of the court’s power to join additional parties to the proceeding on the present application.
(b) By the Rules, all pleadings must be signed. Pursuant to s 42 of the Civil Procedure Act2010, a legal practitioner must certify that on the factual and legal material available each allegation of fact in a pleading has a proper basis. A party is not usually required prior to trial to verify a cause of action or defence by evidence.
(c) A consequence of this approach to substantiation of allegations is that on interlocutory applications, when the viability of the claim or response is challenged, the traditional pleading rule - that the court assumes for the purposes of the application that the pleading party can establish at trial the allegations that it makes - is applied. The powers to amend a pleading and join additional parties are discretionary. Evidence may be required to provide the basis for an exercise of discretion to grant leave to amend a pleading or join a party but it is usually not required to substantiate the pleaded allegations.
Relevant provisions of the Statute
Section 24AF of the Wrongs Act defines an ‘apportionable claim’ as ‘a claim to which this part applies,’ which includes ‘a claim for economic loss or damage to property in an action for damages (whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care’. The plaintiffs’ claims in the proceedings are apportionable claims.
Section 24AH of the Wrongs Act provides as follows:
24AH Who is a concurrent wrongdoer?
(1)A concurrent wrongdoer, in relation to a claim, is a person who is one of two or more persons whose acts or omissions caused, independently of each other or jointly, the loss or damage which is the subject of the claim.
Section 24AI of the Wrongs Act provides as follows:
24AI Proportionate liability for apportionable claim
…
(3)In apportioning responsibility between defendants in the proceeding the Court must not have regard to the comparative responsibility of any person who is not a party to the proceeding unless the person is not a party to the proceeding because the person is dead or, if the person is a corporation, the corporation has been wound up.
Section 24AL of the Wrongs Act provides as follows:
24AL Joining non-party concurrent wrongdoer in the action
(1)Subject to sub-section (2), the court may give leave for any one or more persons who are concurrent wrongdoers in relation to an apportionable claim to be joined as defendants in a proceeding in relation to that claim.
Plaintiffs’ contentions
The plaintiffs challenged the notion that the application could be determined without evidence that demonstrated an arguable basis for joinder of each proposed defendant. They submitted that the conventional pleading test could not be applied. The fact that DTM had filed inadequate, or in three cases no, evidence that demonstrated in some way that there was a proper basis for DTM’s allegations lay at the heart of the plaintiffs’ opposition to the applications. Accepting that commonly a party opposing a pleading amendment waived the requirement of evidence verifying the allegations made by the amendment, the plaintiffs argued that in this case they had not done so. Having taken the point, the onus lay with DTM to identify, by evidence, an arguable basis for joinder. They submitted that it was incumbent on DTM to do more than make ‘mere assertions’ as to the role that proposed defendants may have played in the circumstances of the matter.
The plaintiffs submitted that the primary judge’s analysis of principle[4] on the central issue in dispute upon this appeal was correct and the plaintiffs invited the court to accept that reasoning. The primary judge reasoned as follows:[5]
[4]Relying on Main Road Property Group Pty Ltd & Ors v Pelligra & Sons Pty Ltd & Ors [2010] VSC 5, Wimmera-Mallee Rural Water Authority v FCH Consulting Pty Ltd [2000] VSC 102, Woods v De Gabriele & Ors [2007] VSC 177 and Latteria Holdings Pty Ltd v Corcoran Parker Pty Ltd & Anor (2014) 224 FCR 519.
[5][2015] VSC 434, 17-20 [42]-[50].
(a) The authorities establish that it is plainly necessary for an applicant to show an arguable case for amendments being sought to a pleading.
(b) An application to join a party is not a true pleading application to be evaluated by the application of the conventional pleading test and some material must be adduced to demonstrate that joinder is just and convenient.
(c) A defendant may join further parties as defendants over the opposition of the plaintiff and need not itself make any claim against that joined defendant.
(d) There is a potential for abuse if a defendant introduces a large number of co-defendants so as to make the trial unmanageable.
(e) The power to order joinder arises under r 9.06 of the Supreme Court (General Civil Procedure) Rules 2005, and the cases have set out a number of propositions relevant to the exercise of the discretion under that rule. In particular, it must be just and convenient that the new question be determined in the same proceeding as the existing question.
The plaintiffs contended that there was no authority, where the point of whether some evidence was required to support joinder had been debated, that stands for the proposition that evidence substantiating the proposed pleading is not required. The cases cited by DTM concerned arguments going to the adequacy of a pleading of a defence of proportionate liability, and not a requirement for evidence in support of the application.[6] The plaintiffs contended that in none of those decisions was the point taken as to the sufficiency of the evidence in support of the existence of a proper basis for the defence, nor did any court say that no evidence was required upon an application to join a defendant under s 24AL of the Act.
[6]Atkins v Interprac Financial Planning Pty Ltd & Anor (No. 2) [2008] VSC 99, [12]; Suncorp Metway Ltd v Panagiotidis [2009] VSC 126, 9 [43], [44] and 10 [49]; Main Road Property Group Pty Ltd v Pelligra & Sons Pty Ltd & Ors [2010] VSC 5, 5 [14]; Coastal Seafarms Holdings Pty Ltd v Port of Portland Pty Ltd [2010] VSC 167, [9]; Braham and Anor v ACN 101 482 580 Pty Ltd [2014] VSC 171, 18 [64] and 19 [68]; Utility Services Corporation Ltd v SPI Electricity Pty Ltd & Ors (2012) 35 VR 628.
Responding to DTM’s contention that the scope and degree of evidence required was not identified and the approach of the primary judge created uncertainty, the plaintiffs contended that varying evidentiary requirements for the purposes of interlocutory applications are common. For example, leave to amend may be granted on an application for summary judgment under r 22.05 where evidence shows a question that ought be tried or an arguable response to a claim.
The plaintiffs submitted that it was correct in principle, and consistent with purpose, to require an evidentiary basis for the breach allegation before joining additional defendants. It would bring the law into disrepute if persons could be added as parties for proportionate liability purposes, carrying with it the prospect that a reported proceeding might have a detrimental effect upon their personal or business reputations, when there was no evidentiary basis for them to be joined.
Having noted the basis of the primary judge’s reasoning and the arguments advanced in support of the order made, I will say a little more about the three basic propositions I have identified.
Power to add a party
There are two sources for the court’s power to add a party to a proceeding in the present context. The primary source of the court’s power is found in s 24AL of the Act. Reading Part IVAA in context, s 24AL complements the restriction, set out in s 24AI(3), on the court’s discretion to apportion responsibility.[7] Section 24AL confers a broad and unfettered discretion that, of course, must be exercised judicially. What is relevant for present purposes is to identify the differences between the power to join a concurrent wrongdoer as a defendant under s 24AL and the broad power found in r 9.06(b) to add a party to a proceeding, for it was the latter power under which the primary judge refused the application.
[7]This policy approach of requiring concurrent wrongdoers to be parties to the proceeding for the assessment of comparative responsibility is peculiar to Victoria. Proportionate liability legislation federally and in other states is not uniform, and particular care must be exercised when referring to cases in other jurisdictions in this respect.
Rule 9.06 is in these terms:
At any stage of a proceeding the Court may order that –
…
(b) any one of the following persons be added as a party, namely –
(i)a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or
(ii)a person between whom and any party to the proceeding there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between parties to the proceeding.
With respect, I do not agree with the primary judge’s suggestion that there is no rule of court dealing specifically with the joinder of a party as a defendant, by an existing defendant, for the purpose of limiting the liability of that existing defendant. In argument on the appeal, the plaintiffs also directed attention to sub-rule (b)(ii). Having concluded that the rule was his source of power, the judge identified, and applied, a number of propositions established by the authorities relevant to that sub-rule. Once committed to that analysis, the judge focused on the particular language of the rule that required a question ‘which it is just and convenient to determine’ between the added party and the applicant together with the existing questions raised in the proceeding. I will return to this issue. This conclusion was influential in the reasoning that evidence was necessary to show that there is substance in the proposed amendment.
With respect, I do not agree with the judge that sub-rule (b)(ii) applied. That rule has no application in the present circumstances because the question identified by the proposed amendment, while arising out of, or relating to, or connected with, claims in the proceeding does not exist between the applicant for joinder and the party to be added, as the rule requires. The question that exists is between the plaintiffs and the existing second defendant, DTM and it is the question that is defined by s 24AI(i) of the Act. Once the proper question is identified, plainly sub-rule (b)(i) applies.
The persons that DTM seeks to join as defendants to the proceeding are persons whose presence is necessary to ensure that all questions before the court are effectually and completely determined and adjudicated upon. That such persons must necessarily be parties to the proceeding follows from the limitation in s 24AI(3) of the Act on the court’s power to apportion responsibility between defendants in the proceeding. Because of that limitation on the court’s power, a defendant’s proportionate liability defence cannot be effectually and completely determined and adjudicated upon if some of the parties that it alleges are concurrent wrongdoers are not parties to the proceeding.[8] This is a different question to whether it is just and convenient to determine the proposed issues identified by the amendment with the existing issues in the proceeding.
[8]Unless an exception applied, for example were they deceased or wound up.
In Boral Resources (Vic) Pty Ltd v Robak Engineering and Construction Pty Ltd,[9] Chernov JA[10] referred without apparent disapproval to the Privy Council’s analysis of the object of sub-rule (b)(i) in Pegang Mining Co Ltd v Choong Sam (No.1).[11]
Lord Diplock, speaking for the Privy Council, recognised, at 602, that a principal object of the rule was to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity to be heard. His Lordship said that one way of expressing the test to be applied in determining if a person should be added as defendant under sub-para. (i), was to ask:
Will the [other person's] rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?
This test appears to have found favour with the Full Court of the Federal Court of Australia in News Ltd v Australian Rugby Football League Ltd in the context of the relevant Federal Court rule which is equivalent to the rule in sub-para. (i) (there being no Federal Court rule which corresponds to the rule in sub-para. (ii)).
[9][1999] 2 VR 507, 525 [66] (citations omitted).
[10]Tadgell and Batt JJA agreeing.
[11](1969) 2 PCC 593.
Chernov JA’s analysis was directed to rejecting the proposition that the mere fact that the plaintiff did not wish to proceed against the proposed defendant could be prima facie determinative of the application. But as Lord Diplock himself stated, the question he posed was but one way of expressing the test. It is an expression of the test that strays significantly from the plain text of the rule. It is now well established that courts ought to use the language adopted in stating the rule understood by reference to context and purpose, rather than some interpretive restatement of the text.[12] Accepting that a principal object of the rule was to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment, by proceeding to adjudicate upon the matter in dispute in the action in the absence of persons who were not then parties to the proceeding, the text of the rule does not limit that consideration to whether the proposed added party has a right to be heard, or to whether the proposed added party’s rights will be affected.
[12]Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355, 381-382 [69]-[71]; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, 47-48 [51]; Independent Commission Against Corruption v Cunneen and Ors (2015) 318 ALR 391, 487-489 [57], [62].
The allegations raising a defence of proportionate liability are directed at the plaintiffs, who plainly have the opportunity to be heard. The rights that will be affected are those of DTM. The purpose of Part IVAA must not be forgotten. Part VIAA effected a substantive change in the liability of a defendant, who is one of at least two concurrent wrongdoers, to a plaintiff in respect of an apportionable claim. For those claims to which it applies, the concept of solidiary liability has been abolished and it may be necessary for a plaintiff to take proceedings against every concurrent wrongdoer, in respect of each apportionable claim on which the plaintiff sues, in order to recover the whole of its loss and damage. If the plaintiff chooses not to proceed against an added party, there may be no reason for the added party to be heard, because the issue is joined only between the plaintiff and the existing defendant. In the circumstances, Lord Diplock’s formulation of the test is no longer apposite. A just determination of the issue put in dispute in this proceeding by the pleading amendments is not to be achieved by giving an added party a right to be heard in respect of an issue between the existing parties.[13] By permitting an existing defendant to satisfy a procedural limitation that would otherwise constrain the complete and effective adjudication of its defence, the court can permit a just determination of the issue raised by the amendments.
[13]Whether the added party should have the right to be heard is a separate question, particularly when the plaintiff does not add that party to its claim and seek relief from it.
The effect of the statutory limitation in s 24AI(3) on the court’s deliberations when assessing responsibility for the plaintiff’s loss would mean, in the absence of the additional concurrent wrongdoers, that the just determination of the civil proceeding was compromised. The defence of proportionate liability was an existing issue in this proceeding that could only be effectually and completely determined for the defendant that pleaded it by the joinder of all relevant concurrent wrongdoers. Further, under the Civil Procedure Act, the interpretation or exercise by the court of its procedural powers in a manner that seeks to give effect to the overarching purpose under s 7 of the Act is a primary objective for the court in discharging its obligation to further that overarching purpose.[14]
[14]See ss 7, 8, and 9(1)(a) of the Act.
Whether the court acts under s 24AL or r 9.06(b)(i), the application is approached in the same way. Assuming that the parties opposing the application raised no considerations that might persuade a court in its discretion to refuse the application such as prejudice, the relevant questions for the primary court were, first, whether the plaintiffs’ claims against DTM were apportionable claims, which is assessed by analysis of the plaintiffs’ statement of claim, and, second, whether the allegations to be introduced by the amendment, if proved at trial, could establish that each of the proposed defendants was a concurrent wrongdoer in relation to those claims. For the reasons I will presently explain, both questions are assessed by reference to the traditional pleading test.
It is a nonsense to suggest that to determine the first issue the plaintiffs’ statement of claim should not be analysed by reference to the traditional pleading test and that the second defendant ought to put on evidence. Equally, it is a nonsense to suggest that a different approach should apply to determine the second issue.
Where, as here, a party seeks both a pleading amendment and joinder of the relevant concurrent wrongdoers as parties, once the court is satisfied that the amendments plead a defence that has a real prospect of success, joinder of the additional parties should follow as a matter of course. As Croft J observed in Main Road Property Group Pty Ltd & Ors v Pelligra & Sons Pty Ltd & Ors:[15]
Although the amendments and joinder are in some respects separate matters they are, in the present context, intimately related and it would not be appropriate to give leave for one and not the other.
[15][2010] VSC 5, 7 [19]
What evidence is required on a s 24AL application
It is not now and never has been the law of this state that, absent special circumstances,[16] a party must by evidence verify in advance a claim to be pleaded in a proceeding. The long-standing principle is that a party, or more usually, a party’s legal representatives must certify that there is a proper basis for the allegations made in the pleading. Rule 13.01(3) provides that a pleading must be signed, either by counsel who settled it, or by the party’s solicitor. This requirement has a long pedigree and its purpose was explained by James LJ in Great Australian Gold Mining Co v Martin[17] when he observed that counsel’s signature is a matter -
…to which the court was in the habit of paying - as it ought to pay and always will be warranted in paying hereafter, as it has done heretofore - the greatest possible respect. It was to that extent a voucher that the case was not a mere fiction.
The editors of Bullen & Leake[18] note that the signature of counsel reflects his responsibility for the formulation of the case of a party, which requires the exercise of great care, skill and art to present with clarity, precision and effectiveness.
[16]Such as where an amendment that necessarily implies that there was no proper basis for the pleading prior to its amendment is sought late in a proceeding resulting in a significant recasting of the issues in dispute.
[17](1877) 5 Ch D 1, 10.
[18]Bullen & Leake & Jacobs, Precedents of Pleadings, 12th Ed, Sweet & Maxwell, 27.
The Civil Procedure Act2010 aims to change litigation culture in this State.[19] Counsel’s signature no longer carries the respect that was afforded to it in 1877. Relevantly, the Act has changed the process of certification of the proper basis for allegations contained in a pleading in two significant ways. First, by s 18, a person to whom the overarching obligations apply, which includes both the pleading party and its legal representatives, has a paramount duty to the court[20] not to make any claim or make a response to any claim in a civil proceeding that, relevantly, does not have a proper basis, on the factual and legal material available to the person at the time of making the claim or responding to the claim as the case requires. Secondly, s 42 of the Act requires, relevantly, that a legal practitioner acting for a party to a proceeding who files any subsequent substantive document in a civil proceeding which adds or substitutes a party or makes, adds or substitutes a substantive defence or substantive matter by way of response or reply must file a proper basis certification that complies with the section.[21]
[19]See s 1(1)(a) of the Act.
[20]Section 16 of the Act.
[21]See, generally, Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) [2014] VSC 400.
The policy response implemented by the Civil Procedure Act seeks to strengthen the process of legal practitioner certification of the existence of a proper basis for allegations made in a pleading well beyond respect for counsel’s signature. An alternative policy response of requiring a party to verify allegations by affidavit or demonstrate that the allegations contained in its pleading are supported by evidence was not adopted. Such procedures have been tried, or adopted, in other jurisdictions.
In assessing the adequacy of a pleading, the unchanged approach remains that a court assumes, because the proper basis for the allegations has been certified, that the party advancing the pleading can establish its allegations at trial. This conventional pleading test is well-established. Of course, the presumption may be rebutted. As Dawson J said in The Commonwealth v Verwayen:[22]
In granting leave to amend, a court is concerned with the raising of issues and not with their merits. Of course, an amendment which is futile because it is obviously bad in law will not be allowed.
[22](1990) 170 CLR 394, 456.
Where there is a question whether claims made in a pleading have any real prospect of success, the proper interlocutory response is an application for summary judgment pursuant to ss 61 or 62 of the Civil Procedure Act and r 22.03 of the Rules. Alternatively, a party may apply in an appropriate case under r 23.01 for judgment in, or a stay of, the proceeding generally or in relation to any claim or, under r 23.02, to strike out a pleading. Primarily, an application for leave to amend (and any consequent addition of parties) will likely be opposed where the claim or response to a claim has no real prospect of success, is defective in form, or is otherwise scandalous, frivolous, or vexatious, may prejudice, embarrass or delay the fair trial of the proceeding, or is otherwise an abuse of process.
Applications for summary judgment or for summary stay or dismissal either require[23] or may be supported by[24] evidence on affidavit. It is well-established that an application under r 23.02 is determined by analysis of the pleading and the application is not supported by an affidavit or other extrinsic evidence, although the court may examine documents referred to in the pleadings.[25] The opposing party may demonstrate that granting leave to amend would be futile because the opposing party would have a good application under either r 22.03 or r 23.01. Evidence may be admitted in opposition to an application for leave to amend a pleading when such an objection is taken. Applications of this sort may cast an onus upon the party seeking leave to amend to adduce responsive evidence. But no such application was made in these proceedings.
[23]Rule 22.04.
[24]Rule 23.04.
[25]LexisNexis Butterworths, Civil Procedure Victoria, vol 1 [I23.02.5] and the cases there cited.
The conventional pleading test is not to be confused with the requirement that a party seeking to persuade the court to exercise a discretion is usually required to adduce evidence in order that the court has a proper basis to exercise its discretion judicially, particularly where the opposing party points to countervailing considerations relevant to that discretion.[26] Thus, where the party opposing an amendment and/or joinder of an additional party claims to be prejudiced, for example by reason of delay, the applicant should adduce evidence to satisfactorily explain its delay. There may be circumstances when the grounds of opposition advanced by the opposing party will require the moving party to provide some evidence about the merits of the amendment or joinder. Further, the dictates of modern case management procedures may develop particular practices, especially in specialist case lists, that require substantiation of a claim or response beyond proper basis certification.
[26]AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, in particular 181-182 [4]–[6], 189 [24], 192 [30] (French CJ), 212-213 [94]–[98], 217-218 [111]–114] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).
That said, nothing is evident, neither in the material before the court nor from submissions, to require evidence in every case about the merits of the claims to be alleged against the added defendants to be placed before the court on an application for joinder of a concurrent wrongdoer as a defendant pursuant to s 24AL of the Act. The plaintiffs in this case did not suggest prejudice or that the amendments would be futile or an abuse of process. There was no issue of form and it was not submitted that on the basis of the traditional pleading test DTM’s defence had no real prospect of success. There was no impediment to the judicial exercise of the discretion under the section to permit joinder.
An application for joinder under r 9.06 may raise different considerations to an application under s 24AL. Evidence is not necessarily required on an application to join a defendant under r 9.06(b). In 1985, Williams’ Supreme Court Practice, in relation to the practice under the Order 16, Rule 11, noted:
Where the facts relied upon as showing the grounds for the application (for joinder) appear on the face of the pleadings or proceedings, no affidavit is necessary.
That is so in this case. As I have explained, it is not the case that the applicant must establish that it is just and convenient that the new question raised by the amendment be considered in the same proceeding with the existing question. Where that is a relevant question, the necessary facts may not always appear on the face of the pleadings.[27] Commonly in proportionate liability cases, plaintiffs cling to the outdated notion that is apt in cases of solidiary liability, that a plaintiff is entitled to identify the defendants to its proceeding and to frame the claims against them to be adjudicated by the court. In the present case, the plaintiffs appear to have led the primary judge to that error. Thus, the primary judge concluded that in the absence of adequate evidence showing that there was substance in the claims proposed to be raised and that such claims were not hopeless, it was not just and convenient to permit the amendment and the joinder of additional parties.
[27]For example Carborundum Realty Pty Ltd v RAIA Archicentre Pty Ltd (Unreported, Supreme Court of Victoria, Harper J, 2 June 1992).
The plaintiffs’ noble concerns of prospective prejudice to multiple potential concurrent wrongdoers brought into a proceeding unnecessarily or without proper basis are misplaced. The Civil Procedure Act provisions requiring proper basis certification and acknowledgement of overarching obligations appropriately deal with the risks posed by a party seeking joinder without basis. As I will later note, Chernov JA in Boral Resources, rejected the notion that the prospect that the plaintiffs’ proceedings may become unmanageable through joinder of many parties was relevant to the discretion to join additional parties.[28]
[28]See paragraph [61] below.
For these reasons the primary judge fell into error in concluding that an amendment to a defence alleging proportionate liability against additional concurrent wrongdoers who are to be joined as defendants to the proceeding requires some evidence demonstrating that there is substance to the claims proposed to be raised and that such claims are not hopeless. Although that conclusion is sufficient to dispose of the appeal, I will say something more about the authorities relied on by the plaintiffs in submissions, which are consistent with the principles that I have expressed.
Prior cases
The plaintiffs relied on the following cases as supporting the proposition that at the very least some evidence should be required before a party could be joined in this proceeding: Boral Resources Pty Ltd v Robak Engineering and Construction Pty Ltd;[29] Wimmera-Mallee Rural Water Authority v FCH Consulting Pty Ltd;[30] Woods v De Gabriele;[31] Godfrey Spowers (Victoria) Pty Ltd v Lincolne Scott Australia Pty Ltd;[32] Main Road Property Group Pty Ltd v Pelligra & Sons Pty Ltd & Ors;[33] Utility Services Corporation Ltd v SPI Electricity Pty Ltd;[34] and Latteria Holdings Pty Ltd v Corcoran Parker Pty Ltd.[35]
[29][1999] 2 VR 507.
[30][2000] VSC 102.
[31][2007] VSC 177.
[32](2008) 21 VR 84.
[33][2010] VSC 5.
[34](2012) 35 VR 628.
[35](2014) 224 FCR 519.
Boral Resources (Vic) Pty Ltd v Robak Engineering & Constructions Pty Ltd and Wimmera-Mallee Rural Water Authority v FCH Consulting Pty Ltd (the latter applying the decision in Boral) can be distinguished from the present application on several grounds. First, each case dealt with the proportionate liability regime established under the Building Act 1993 (Vic) and not Part IVAA of the Wrongs Act. There were material differences between the statutory regimes, particularly in respect of joinder of concurrent wrongdoers as parties. Where s 24AL of the Wrongs Act empowers the court to join concurrent wrongdoers, the Building Act contained no such provision and joinder under the Building Act regime was pursuant to r 9.06. Secondly, the application in Boral Resources was to join a third party as an additional defendant, which presupposes a question existing between the proposed defendant and the existing defendant, which draws in the operation of r 9.06(b)(ii). Thirdly, the present application is founded on s 24AL and r 9.06(1)(a), unlike the applications in those cases. The plaintiffs correctly characterised s 131 of the Building Act as, in effect, the forerunner to Part IVAA the Wrongs Act, with both regimes directed at attaining the same or similar results. For the reasons I have given, that generic observation does not support the plaintiffs’ submission that there was ‘no logical difference’ between an application under r 9.06(b)(ii) and s 24AL of the Wrongs Act. In Boral Resources, the primary judge had held that it would not be just and convenient to require the plaintiff to proceed against defendants that he did not wish to sue. The court held that consideration not to be prima facie determinative of the application.
Boral had been sued by the plaintiff for having substandard concrete for building work and applied to join the Third Party concrete subcontractor (Foster Hall) as a defendant. Boral did not apply to amend its defence that alleged:
34. Further, if Boral has any liability (which is expressly denied):
.....
34.5.Foster Hall Pty Ltd, the concrete applicator to the Formal swimming pool, was responsible for all or part of the loss and damage claimed in this proceeding.
Particulars were then given. Similar allegations were made in the third party notice against Foster Hall.
The primary judge appeared to accept the plaintiffs’ submission that Boral Resources made it clear that there must be some basis, often no more than information and belief, for the claims said to underlie an application for joinder. It was said that this exercise of establishing the requisite basis may involve little more than evidence of the role and responsibility of the proposed defendant in the matter or project the subject of a plaintiff’s claim so as to provide a foundation for the allegation of negligence, with inferences being relied on to complete the elements of a duty of care.[36]
[36][2015] VSC 434, [49].
However, the state of the evidence was not the issue before the court in Boral Resources. Firstly, to the extent that the Court of Appeal required evidence in the Boral Resources case, that evidence was required to address the jurisdictional requirements: that is, whether there may exist a question which it is just and convenient to determine.[37]
[37][1999] 2 VR 507, 510 [7] (Tadgell JA), at 511 [13] (Batt JA) and at 527-528 [76] (Chernov JA).
Secondly, it was not said in Boral Resources that evidence would always be required to satisfy the requirements of joinder. Tadgell JA referred to the need ‘to be satisfied that there is substance to [the defendant’s] contention that “there may exist a question” such as is contemplated by the rule’.[38] His reference in that context to Spelling Goldberg Productions Inc v BPC Publishing Ltd[39] indicates that part, at least, of the focus of those remarks was on the temporal existence of such a question. In that case, the trial judge had held that it did not constitute an infringement of the copyright in a cinematograph film to reproduce individual frames in the defendant’s magazines and posters. The plaintiff appealed. Another film company sought to intervene. It was held that the possibility that the defendant might in future do the same to it, was not enough to show that a question may exist. Tadgell JA does not in terms suggest that evidence would be required to show that there is substance to the contention that “there may exist a question”. There is no reason to think that the temporal connection required could not be sufficiently shown in the proposed pleading.
[38]Ibid, 510 [7].
[39][1981] RPC 280.
Batt JA considered the strength or weakness of the case against Foster Hall in the context of the requirement that the joinder should be ‘just’ as well as convenient. That is the context in which he said:[40]
… that when addition is under consideration it is sufficient on this matter that there should be shown a case that is not hopeless. Frequently that is done by hearsay evidence. Here the affidavit material was quite sufficient.
Batt JA did not suggest that such evidence would always be required.
[40]Ibid, 511 [13].
Chernov JA said about the practical difficulties that might arise from the joinder of multiple defendants at the instance of an existing defendant:[41]
In my view, however, the court has always been faced with difficulties of this nature and worse, but so far, has successfully managed to deal with them. It is used to dealing with proceedings which involve numerous parties, including third and fourth parties. In many ways, the conduct of a building action with a number of defendants who are added by the original defendant, would be no different from the conduct of a proceedings where the same persons are third and fourth parties. The court will not doubt be vigilant to ensure that the applicant has made out on proper material, a basis for its contention that the person sought to be added is at least in part responsible for the damages claimed by the plaintiff. But this and other like requirements would have to be worked out by the court in order to accommodate the requirements of particular cases. It will not, however, be a novel experience for the court.
[41]Ibid 527-528 [76].
Nothing in this passage, nor the judgment as a whole, confined the concept of ‘proper material’ to evidence on affidavit. The mere fact that there was evidence on affidavit in that case did not establish that the Court of Appeal ’confirmed’ a requirement for evidence as necessary in every case, and the traditional pleading test as not sufficient, on an application to join additional parties. In fact such ‘evidence’ as was filed in the Boral Resources proceeding was ultimately of minimal, if any, probative value.[42]
[42]The evidence was contained in the affidavit of Mark John Attard sworn 31 March 1998, but there was no attempt to verify the particulars to [34.5] of the defence or the corresponding particulars to [9] of the third party notice.
The plaintiffs also submitted that the decision in Wimmera-Mallee supported their proposition. That case also concerned an application to add a third party as a defendant for the purposes of ss 131 and 132 of the Building Act. Byrne J identified the test to be that the defendant must demonstrate on proper material that there exists a viable cause of action in the plaintiff against the proposed added defendant. The question as to whether a cause of action was viable required the application of the conventional pleading test. Accordingly, Byrne J held that he should treat the cause of action as viable unless he was satisfied that it was clearly hopeless and his reasons demonstrate that he undertook a detailed analysis of the pleadings. His Honour’s approach is perfectly consistent with the principles that I have set out, bearing in mind that what has to be demonstrated by the proposed defence has changed with the introduction of Part IVAA.[43] Significantly, Byrne J identified deficiencies in the pleaded allegations. The proposed amended third-party statement of claim did not plead or particularise material facts that supported the existence of the alleged duty of care or that demonstrated that the plaintiff’s loss was caused by any breach of such duty.
[43]The material facts that must be pleaded to establish a viable proportionate liability defence were discussed by the Court of Appeal in Utility Services Corporation Ltd v SPI Electricity Pty Ltd & Ors (2012) 35 VR 628, 635 [24].
Byrne J continued:
Since the application is not a true pleading application, but an application to join a party, the applicant must adduce material, including, if need be, hearsay in accordance with Rule 43.03(2), sufficient to satisfy the court of these matters as well as to matters which may be relevant to the exercise of the discretion of the court.
The application was refused because the proposed pleading failed the conventional pleading test. As the judge in charge of the Building Cases List, as it then was, Byrne J made general observations about the procedures for joinder applications. The plaintiffs pressed the fourth of those observations, which stated:
The application for joinder should, in the ordinary course, be supported by an affidavit showing that there exists a question between the defendant and the proposed defendant. The applicant should place before the court a proposed statement of claim for delivery to the proposed defendant to enable the court, the proposed defendant, and any other interested party to see precisely how the case is to be put.
For the reasons already stated, that observation about procedure is not of great utility on an application under s 24AL of the Act.[44]
[44]See also TNT Australia Pty Ltd v CMW Design & Construction Pty Ltd & Ors [2003] VSC 338.
Woods v De Gabriele[45] concerned claims arising out of an investment made by the plaintiff on the advice of De Gabriele. Two other defendants, being De Gabriele’s employer or principal, applied to join another company SPM, then in liquidation, which was also alleged to have been De Gabriele’s employer or principal at the relevant time. The application was to join SPM for proportionate liability purposes. The applicant defendants relied on an affidavit stating that during the relevant period De Gabriele was employed as a financial planner by the proposed defendant. The plaintiff produced some evidence to the contrary. Hollingworth J, after referring to the evidence on the application, concluded:[46]
No doubt the precise nature of the relationship between de Gabriele and SPM will need to be examined at trial, on all the evidence. If the defendants are unable to satisfy the trial judge that the relevant employment or agency relationship existed at the relevant times, that may well have significant costs consequences for them. But for the purposes of these applications, it cannot be said (as the plaintiff asserts) that there is no evidentiary basis for allowing Chimaera and Pyxus to plead that De Gabriele was employed by, or an agent of, SPM.
[45][2007] VSC 177.
[46]Ibid, [23].
The plaintiffs submitted that whether De Gabriele was employed by SPM was said to be an essential element in the claim that SPM was a concurrent wrongdoer, and the effect of this passage was that Hollingworth J was requiring evidence in support of the allegation to be made against SPM for the purpose of the amendment and joinder applications. I do not accept this submission. The plaintiff put in issue whether the allegation about De Gabriele’s employment could be established at trial and it was in that context that her Honour disposed of the evidentiary dispute. Read as a whole, her Honour’s reasons apply the traditional pleading test.[47] Further, her Honour identified that the need for joinder of the additional defendant arose because of s 24AI(3) and the court’s power to give leave for such joinder was found in s 24AL.
[47]Ibid, [46]-[61].
In Atkins v Interprac Financial Planning Pty Ltd (No 2),[48] Hargrave J concluded that joinder should be determined by application of the traditional pleading test, stating:
Having reconsidered the matter, I am now of the view that the proposed pleadings by the defendants against PIR do not raise a case which is so hopeless that it does not admit of argument. Issues such as whether a duty of care is owed, the class of persons to whom a duty of care is owed and whether an arguably misleading statement was the cause of loss to persons relying upon it are all questions to be resolved on the basis of the evidence presented at trial. On an application such as this, the defendants need only establish that the proposed pleadings contain factual allegations which, if established at trial, could arguably found one or more of the causes of action alleged. If the Court is satisfied that such an arguable case has been put forward, joinder should be allowed.
[48][2008] VSC 99, [12].
In Godfrey Spowers (Victoria) Pty Ltd v Lincolne Scott Australia Pty Ltd,[49] Ashley JA stated that a defendant seeking joinder under s 24AL is only required to put forward an arguable pleading that the party is a concurrent wrongdoer. Ashley JA (with Nettle and Neave JJA agreeing) said:
It was contended by counsel for the engineer that s 24AL(1) stood against a conclusion that a concurrent wrongdoer was only identifiable once a court had made findings. But I am not persuaded that this is so. Use of the present tense of the verb “to be” should be regarded, on a consideration of the tenor of Pt IVAA, as being anticipatory; or in a practical sense, as requiring only that a defendant:
… put forward a pleading which raises an arguable case that the party is a concurrent wrongdoer … that … the defendant need only plead a case which is “not hopeless”.[50]
[49](2008) 21 VR 84, 106 [112].
[50]Ashley JA then referenced Woods v De Gabriele [2007] VSC 177, [9] and Atkins v Interprac Financial Planning Pty Ltd [2007] VSC 445, [10].
In Main Road Property Group Pty Ltd v Pelligra & Sons Pty Ltd,[51] Croft J noted that it was plainly necessary for the applicants to establish an arguable case for the amendments they sought. Although Croft J referred to and considered evidence supporting the pleaded allegations,[52] he granted leave for the amendments by applying the traditional pleadings test.[53]
[51][2010] VSC 5, 6-7 [16]-[17].
[52]Ibid, 6-7 [16]. It can be seen that Croft J’s comments at [13] were in the context where evidence was put forward of relevant facts. Reference was made to the decision of Hargrave J in Atkins v Interprac Financial Planning Pty Ltd [2008] VSC 99.
[53]Ibid 11-13 [26]-[30].
Utility Services Corporation Ltd v SPI Electricity Pty Ltd & Others[54] similarly does not assist the plaintiffs. The plaintiff’s contention that evidence was required in support of the amendments was rejected by J Forrest J at first instance when put to him in that case,[55] and was not pursued on appeal.
[54](2012) 35 VR 628.
[55]Matthews v SPI Electricity Pty Ltd (Ruling No 6) [2012] VSC 70, [43]-[44].
In Latteria Holdings Pty Ltd v Corcoran Parker Pty Ltd & Anor,[56] Mortimer J refused an application to join additional defendants under s 24AL of the Wrongs Act for three reasons. First, that section was inapplicable by operation of either s 79 or s 80 of the Judiciary Act1903 (Cth). It is an express aspect of the federal scheme for proportionate liability that other concurrent wrongdoers need not be a party to a proceeding in which a court apportions responsibility for the plaintiff’s loss. Secondly, there was no admissible evidence about the conduct of the party to be added and, in a point of difference from this case, the applicant made no allegations against him that would permit a conclusion that he was a concurrent wrongdoer.[57] Thirdly, joinder was not appropriate pursuant to r 9.05 of the Federal Court Rules 2011 on discretionary grounds. Given the significantly different issues raised by this case, I am not assisted by it.
[56](2014) 224 FCR 519.
[57]Ibid 532, [57].
Conclusion
The claim by the plaintiffs in each proceeding against DTM is plainly a claim for economic loss or damage to property in an action arising from an alleged failure to take reasonable care and may, for present purposes, be accepted to be an ‘apportionable claim’ within the meaning of s 24AL of the Wrongs Act. If DTM establishes its proposed pleaded case, each of the proposed added defendants is a concurrent wrongdoer in relation to the plaintiffs’ claim because he or it is a person who is one of two or more persons whose acts or omissions caused, independently of each other or jointly, the loss or damage which is the subject of the claim within the meaning of s 24AH of the Wrongs Act. Given that the plaintiffs’ claims are for damage to property and not pure economic loss, it is not necessary to plead the usual indicia of a duty of care in cases of pure economic loss such as vulnerability, power or control.[58] As I have noted, the plaintiffs did not submit that the proposed amendments failed the traditional pleading test.
[58]See, for example, Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 and Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185.
The primary judge erred in holding that where a defendant applies to add other persons on the basis that they are concurrent wrongdoers with the defendant under Part IVAA of the Wrongs Act so as to limit their liability to the plaintiffs, there is a positive requirement to lead some evidence showing that there is substance to the claims proposed to be raised and that the claims are not hopeless. There is no such requirement.
It is sufficient for a defendant to establish that the proposed pleadings contain facts or allegations which, if established at trial, could arguably found one or more of the causes of action alleged and that if the Court is satisfied such an arguable case has been put forward, joinder should be allowed.
The appeal is allowed. The decision of the primary judge will be set aside. I will make the following orders.
(a) The appeal is allowed and paragraphs 1 and 2 of the order of the Honourable Associate Justice Derham made 5 October 2015 are set aside.
(b) Leave is granted to the second defendant in each proceeding to file and serve a further amended defence substantially in the form of the proposed further amended defence exhibited to the affidavit of Miranda Ellen Bordignon affirmed 15 December 2014.
(c) Leave is granted to the second defendant to join Howard Craig Owen, John Henry Neate, Lettieri Constructions Pty Ltd, Philip John Marks, and Peter J Larkin to each proceeding as sixth, seventh, eighth, ninth and tenth defendants respectively and the title of each proceeding shall be amended accordingly.
I will hear from counsel as to the precise form of orders, further directions, and in respect of costs.
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