Farmwide Pty Ltd v Commonwealth of Australia
[2016] ACTSC 17
•12 February 2016
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Farmwide Pty Ltd v Commonwealth of Australia |
Citation: | [2016] ACTSC 17 |
Hearing Date(s): | 26 November 2015 |
DecisionDate: | 12 February 2016 |
Before: | Burns J |
Decision: | The plaintiff’s application to amend its Statement of Claim is refused and the plaintiff is to pay the defendant’s costs of the application. |
Catchwords: | PRACTICE AND PROCEDURE – Application for Leave to Amend Statement of Claim – breach of deed alleged – plaintiff seeks to rely on previous dealings – no explanation for delay – no evidence amendments are important – plaintiff impecunious –prejudice to defendant – application refused. |
Legislation Cited: | Court Procedures Rules 2006 (ACT) rr 21, 425, 501, 502 Financial Management and Accountability Regulations 1999 (Cth) |
Cases Cited: | Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Balnaves v Armellin [2011] ACTSC 67 Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 |
Parties: | Farmwide Pty Ltd (Applicant) Commonwealth of Australia (Defendant) |
Representation: | Counsel Mr I Davidson, SC (Applicant) Mr C Withers (Defendant) |
| Solicitors Just Dispute Resolution (Applicant) Allens (Defendant) | |
File Number(s): | SC 326 of 2007 |
BURNS J:
These proceedings were commenced by the plaintiff in 2007. They are currently listed for hearing for a period of three weeks commencing on 4 April 2016. The parties are also to participate in mediation in February 2016. By an application dated 5 November 2015 the plaintiff seeks orders:
(a)that it be given leave pursuant to r 501 or, in the alternative, r 502 of the Court Procedures Rules to file an amended Statement of Claim;
(b)that the defendant then be given leave to file and serve a further amended defence within 14 days; and
(c)that the plaintiff then be given leave to file and serve a reply within 28 days.
Annexed to the application was a draft of the proposed amended Statement of Claim. It is fair to say that the proposed amendments are very extensive. The defendant opposes the amendments because, it says, the proposed amended pleadings:
(a)contains allegations which are defective in various respects, embarrassing and which would be liable to be struck out if they had been included in the original pleadings;
(b)would impose upon the defendant the cost of preparing a further defence in circumstances where the plaintiff has no means to pay the defendant’s costs thrown away because of the amendment;
(c)seeks to raise a wholly new contractual case about the interpretation of the deed at issue in the dispute, over 15 years after the relevant events;
(d)pleads new heads of damages, amounting to a claim for some $14 million; and
(e)has not attempted to meet the requirements articulated in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 for demonstrating why leave to amend should be granted.
The plaintiff submitted that the proposed amendments arise out of amendments the defendant made to its defence, or simply provide further particulars of the claim already pleaded.
Relevant legal principles
In Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [102] Gummow, Hayne, Crennan, Kiefel and Bell JJ identified a number of matters as relevant to the exercise of a discretion to allow an amendment to pleadings, including:
(a)the nature and importance of the amendment to the party applying;
(b)the extent of the delay and any cost implications;
(c)any demonstrated prejudice, or prejudice that might be assumed to flow, to the other party if the application is granted;
(d)the point the litigation has reached relative to the trial when the application is made; and
(e)any explanation for the delay in applying for leave to amend.
The importance of the efficient conduct of litigation is reinforced by r 21 (2) (b) of the Court Procedures Rules 2006 (ACT) which requires courts to apply the rules of Court with the objective of achieving the timely disposal of the proceedings at a cost affordable by the respective parties. A party may have a right to institute proceedings, but it also has a duty to prosecute them diligently: Hong v Liew [2014] FCA 40 at [17].
In Balnaves v Armellin [2011] ACTSC 67, Master Harper said at [57]:
Until recent times, the court has generally been disposed to permit amendments to pleadings reasonably freely, subject to orders for costs, including costs thrown away, in reliance, now seen to have been to some extent misconceived, on the decision of the High Court of Australia in Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146, even since the introduction of the Court Procedures Rules in mid-2006. The correct approach to late applications for amendment has now been explained by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, on appeal from this court and dealing with the same rules. Gummow, Hayne, Crennan, Kiefel and Bell JJ in a joint judgment dealt with the power to allow amendment under r 502 and how that fitted in with the objectives of the rules set out in rule 21. Their Honours said at para 92 that the purposes stated in r 21 reflect principles of case management by the courts, now an accepted aspect of the system of civil justice administered by courts in Australia. The principles are directed to tackling the problems of delay and costs in the litigation process. The civil litigation rules are no longer to be considered as directed only to the resolution of the dispute between the parties to the particular proceeding. The achievement of a just but timely and cost-effective resolution of a dispute has an effect on the court and other litigants. Their Honours quoted from the judgment of the English Court of Appeal in Worldwide Corporation Ltd v GTP Ltd [1998] EWCA Civ 1894, delivered by Waller LJ, to the effect that where a party had had a sufficient opportunity to plead his or her case, it might be necessary for the court to make a decision which might produce a sense of injustice in that party, for the sake of doing justice to the opponent and to other litigants. Any suggestion that a party has a right to amend to raise an arguable issue subject to the payment of costs occasioned by the amendment is unfounded. A party has the right to invoke the jurisdiction and the powers of the court to seek the resolution of a dispute, and may have a right to amend without leave depending on the rules of the court, but the question of further amendment is dependent on the court’s discretionary power. Parties should be given a proper opportunity to plead their case, but limits may be placed upon re-pleading when delay and cost are taken into account. An order for costs may not always provide sufficient compensation and therefore achieve a just resolution.
In deciding whether to grant leave to amend, it is also relevant to consider whether the proposed amendments disclose a reasonable cause of action, or whether they have a tendency to cause prejudice, embarrassment or delay in the proceedings. Such pleadings may be struck out pursuant to r 425 and, as Kenny J observed in Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 at [21] a court is not likely to give leave to amend in respect of a pleading that is liable to be struck out, or would have been liable to be struck out had it appeared in the original pleadings: see also Kaye v Woods [2014] ACTSC 84 at [50] – [51]. This fact brings into play principles concerning pleadings generally, and particularly those concerning the striking out of pleadings on the basis that they are embarrassing. In McGuirk v University of New South Wales [2009] NSWSC 1424, Johnson J summarised the relevant principles as follows (at [21] – [35]):
21 The function of pleadings is to state with sufficient clarity the case that must be met by a defendant. In this way, pleadings serve to define the issues for decision and ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her: Banque Commerciale SA En Liquidation v Akhil Holdings Limited (1990) 169 CLR 279 at 286, 296, 302-3. The issues defined in the pleadings provide the basis upon which evidence may be ruled admissible or inadmissible at trial upon the ground of relevance: Dare v Pulham [; [1982] 148 CLR 658 at 664; Banque Commerciale at 296.
22 In Perpetual Trustees Victoria Limited v Dunlop [2009] VSC 331, Forrest J observed at [24] that the rules of pleading are “the servants of the interests of justice”, with those interests demanding that a party have every opportunity to plead out an arguable case against other parties, but that those other parties have, at an early point in the proceedings, the opportunity to be properly appraised of the case against them.
23 Pleadings provide the structure upon which interlocutory processes, such as discovery, are governed and they constitute the record of the matters which the Court has resolved and become relevant if, in any subsequent proceedings, any party claims issue estoppel or res judicata: Australian Competition and Consumer Commission v Fox Symes & Associates Pty Limited [2005] FCA 1071 at [100]-[103].
24 Proper pleading is of fundamental importance in assisting Courts to achieve the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings: s.56 Civil Procedure Act 2005.
25 Where application is made by a party for leave to amend pleadings, the Court should have regard to considerations of case management, cost and delay: Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 at [111]-[112]; [2009] HCA 27; (2009) 83 ALJR 951. Of course, the present application is made by the Plaintiff at an early stage in the proceedings. A hearing is not imminent. Nevertheless, the orderly progress of litigation requires the Court to apply the letter and spirit of the Civil Procedure Act 2005, in accordance with contemporary principles identified in Aon, in determining an application such as this.
26 The need for clarity, precision and openness in the conduct of litigation and the responsibility of parties and their legal representatives therefore flows most clearly from the statutory duty of a party and the duty in civil proceedings to assist the Court to further the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in dispute: Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited & Ors [2008] NSWCA 243 at 161. The need for clarity, precision and openness as part of this co-operation has been emphasised in the context of ambush or surprise: White v Overland [2001] FCA 1333 at [4].
27 For a Statement of Claim to comply with the rules of Court, a party should plead, in a summary form, a statement of the material facts upon which the party relies, but not the evidence by which those facts are to be proved: Rule 14.7 UCPR. In doing so, the pleadings should be as brief as the nature of the case admits: Rule 14.8 UCPR.
28 In Kirby v Sanderson Motors Pty Limited (2001) 54 NSWLR 135, Hodgson JA (Mason P and Handley JA agreeing) said at 142-143 [20]-[21], with respect to the requirement for a pleading to state material facts:
“It might appear that these rules [the Supreme Court Rules] do not require that causes of action be stated in pleadings; the requirement is to have a statement of material facts, and indeed to have only such a statement. However, in my opinion - ‘Material’ means material to the claim, that is, to the cause or causes of action which are relied on. (2) The requirement of a statement of material facts does not exclude the allegation of legal categories, such as duty of care, fiduciary duty, trust and contract. (3) The general requirement to avoid surprise means that material facts must be stated in such a way that the defendant can understand the materiality of the facts, that is, how they are material to a cause of action.
Accordingly, even on the basis of these rules which are common to the District Court and the Supreme Court, I do not take cases such as Konskier as establishing that there is a danger of surprise, which arises particularly where there is lack of precision and clarity in the pleading, it may well be appropriate to require a Plaintiff, either in a statement of claim or in particulars, to explicitly relate the facts it pleads to specific causes of action.”
29 In Gunns Limited v Marr [2005] VSC 251, Bongiorno J observed at [57]:
“Not only must the pleading inform the defendants of the case they must meet now, but it must clearly set out the facts which the plaintiffs must assert to make good their claim with sufficient particularity to enable any eventual trial to be conducted fairly to all parties. Vague allegations on very significant matters may conceal claims which are merely speculative. If this be not the case, the plaintiffs must put their allegations clearly.”
Embarrassing Pleadings
30 A pleading is embarrassing where it is “unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him”: Meckiff v Simpson [1968] VR 62 at 70; Gunns Limited v Marr at [14]-[15].
31 In Shelton v National Roads & Motorists Association Limited [2004] FCA 1393 at [18], Tamberlin J explained the concept of “embarrassment” with respect to pleadings:
“Embarrassment in this context refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense. This is not an exhaustive list of situations in which a pleading may be embarrassing: see Bartlett v Swan Television & Radio Broadcasters Pty Ltd (1995) ATPR 41-434.”
32 A pleading may be embarrassing even though it contains allegations of material facts sufficient to constitute a cause of action, if the material facts alleged are couched in expressions which leave difficulties or doubts about recognising or piecing together what is referred to: Northam v Favelle Favco Holdings Pty Limited (Bryson J, 7 March 1995, BC9504276 at 5-6).
33 Although the pleading of a conclusion may, in some circumstances constitute a material fact, nevertheless, the pleading will be embarrassing if allegations are made at such a level of generality that the defendant does not know in advance the case it has to meet: Charlie Carter Pty Limited v Shop Distributive and Allied Employees Association (1987) 13 FCR 413 at 417-418. In such a case, the appropriate remedy is to strike out the pleading rather than to order the provision of particulars, as it is not the function of particulars to take the place of the necessary averments in a pleading: Trade Practices Commission v David Jones (Australia) Pty Limited (1985) 7 FCR 109 at 112-114.
34 Rule 14.28 UCPR provides that pleadings that involve non-compliance are liable to be struck out as an embarrassment. However, generally the Courts recognise that a wide range of discretionary considerations arise where there is a failure to comply with the technical requirements of the pleading rules: Beach Petroleum NL v Johnson (1991) 105 ALR 456 at 466. In many instances, the appropriate order may be to strike out the offending pleading, but grant leave to amend: Rubenstein v Truth & Sportsman Limited [1960] VR 473 at 476; H 1976 Nominees Pty Limited v Galli (1979) 30 ALR 181 at 186.
35 It is not the function of the Court to draw or settle a party’s pleading. The Court is confined to the function of ensuring that pleadings are within the rules and fulfil the functions for which they exist. Objectionable matter that is so mingled with other matter may lead to the conclusion that the pleading as a whole would tend to embarrass the fair trial of the action ought be struck out: Turner v Bulletin Newspapers Co Pty Limited (1974) 131 CLR 69 at 72, 87-88, 97-98; Gunns Limited v Marr at [57]-[58]; Fleet v Royal Society for the Prevention of Cruelty to Animals NSW and Ors [2005] NSWSC 926 at [55].
Background to the application
I will provide a general background to these proceedings. This background is not intended to be exhaustive. The plaintiff’s claim arises out of a deed that was entered into by the plaintiff and the defendant on 30 June 2000. At paragraph 5 of the Statement of Claim the plaintiff pleads that the deed “provided a regime for the defendant to make certain grant payments to the plaintiff on the terms and conditions set out in the Deed for the FRAN Internet for All Project” (the FRAN project). The FRAN project may, for present purposes be very briefly (if not inadequately) described as a project designed to provide Internet access to rural Australia. I will not set out fully the terms of the deed; it is sufficient to note that the activities to be undertaken by the plaintiff are listed in item 2.4 of the schedule to the deed. The Statement of Claim alleges that the total grant for the FRAN project was not to be more than $20,378,000. For convenience I will refer to this as the grant. The plaintiff alleged that the grant was to be paid, pursuant to the schedule to the deed, in instalments. The defendant was to pay the plaintiff the sum of $200,000 for the preparatory stage of the FRAN project, with the balance of the grant being an amount of not more than $20,178,000. The plaintiff alleged that the deed specified certain circumstances in which the defendant was entitled to terminate the deed or suspend payment of the grant. It is alleged that, at all material times, none of the circumstances entitling the defendant to terminate the deed or suspend the grant applied. It alleged that the defendant breached the terms of the deed on or about 25 May 2001 by indicating that it was not going to continue with the FRAN project after the completion of the preparatory stage. By reason of the defendant’s alleged breach of the deed, the plaintiff claimed to have suffered loss and damage, described as:
(a)loss of the opportunity for the plaintiff to retain from the grant any surplus over the costs to be expended by the plaintiff in implementation of the FRAN project;
(b)loss of the opportunity for the plaintiff to use any asset purchased by the plaintiff from the balance of the grant for profit;
(c)loss of the opportunity for the plaintiff to use its website for profit if the defendant had continued with the balance of the FRAN project;
(d)loss of the opportunity for the plaintiff to derive profit from training activities if the defendant had continued with the balance of the FRAN project; and
(e)loss of the opportunity for the plaintiff to use any intellectual property brought into existence for the purpose of performing the FRAN project for profit.
On 10 August 2015, a Deputy Registrar of the Court granted the defendant leave to file and serve an amended defence. I will not set out comprehensively the amendments made to the defence, but they included an allegation that the deed has been frustrated by Telstra providing to the public a product which met the objectives of the FRAN project. The defendant was also granted leave in this amended defence to withdraw admissions that it had previously made:
(a)that at all material times none of the circumstances specified in clause 15.1 of the deed entitling the defendant to terminate the deed applied, and that the defendant had not, by notice in writing given to the plaintiff, terminated the deed or suspended payment of the grant;
(b)that pursuant to item 4.1 (a) of the schedule to the deed, the defendant was to pay $200,000 of the grant for the preparatory stage of the FRAN project by payments of $180,000 within 28 days of 30 June 2000 and $20,000 within 28 days of its acceptance of the first report specified in item 3.5 of the schedule; and
(c)that by on or about 14 March 2001 the milestones set out in paragraphs (a) to (e) of item 2.5 of the schedule to the deed had been completed.
The plaintiff submits that its proposed amendments are a consequence of the amendments to the defendant’s defence, or simply provide further particulars of the claim already pleaded. It is therefore necessary to consider the nature of the proposed amendments, but before doing so I will set out the relevant legislation.
Relevant Legislation
Rule 501 of the Court Procedures Rules provides:
All necessary amendments of a document must be made for the purpose of –
(a)deciding the real issues in the proceedings; or
(b)correcting any defect or error in the proceedings; or
(c)avoiding multiple proceedings.
Rule 502 of the Court Procedures Rules relevantly provides:
(1)At any stage of a proceeding, the court may give leave for a party to amend, or direct a party to amend, an originating process, anything written on an originating process, a pleading, an application or any other document filed in the court in a proceeding in the way it considers appropriate.
The proposed amendments
Proposed paragraphs 2A to 2G for the first time plead an earlier agreement between the plaintiff and the Department of Housing and Regional Development, referred to as the Online Services Pilot Project (the OSP project). The plaintiff alleges that it entered into a deed with the Department to undertake this project in January 1996, and subsequently published a report of the outcomes of the project in 1999.
Proposed paragraphs 2H to 2K for the first time seek to plead the existence and objectives of another program, the Networking the Nation Program (the NTN). It alleges that a fund called the Internet Access Fund was a fund totalling $36 million over three years as part of the NTN to provide internet access to people in rural or regional areas at a reasonable cost and involving a reasonable bandwidth. In particular it is alleged that the aim of the Internet Access Fund was to ensure that all Australians had untimed local call internet access, or at least the equivalent where traditional dial-up access was not feasible.
Proposed paragraphs 2L to 2N for the first time seek to plead the existence of an earlier deed entered into between the plaintiff and the defendant represented by the Department of Communications and the Arts in or about January 1998. The plaintiff refers to this as the FRAN1 project. The plaintiff pleads the objectives of the FRAN1 project and that between January 1998 and June 2000 it successfully conducted the FRAN1 project.
Proposed paragraphs 2O to 2ZA plead a number of facts concerning the funding application submitted by the plaintiff for the purposes of obtaining funding for the FRAN project, discussions between the representatives of the plaintiff and the defendant concerning the project, the approval of the plaintiff’s funding application, public announcements made by the defendant about the approval of funding and negotiations prior to entering into the deed. The proposed amendments also refer to preparatory activities undertaken by the plaintiff after funding was approved but before the deed was executed. The proposed amendments also seek to raise, for the first time, an allegation that a representative of the defendant on 27 June 2000 represented to the plaintiff that it was a requirement that the deed be executed before the end of the financial year, being 30 June 2000. The plaintiff also seeks to plead that in or about June 2000, the defendant completed all necessary steps to allocate the sum of $20,378,000 from the Internet Access Fund in accordance with the applicable regulations of the Financial Management and Accountability Regulations 1999 (Cth), thereby ensuring that sufficient parliamentary appropriation was available for the purposes of the deed. Of particular significance is proposed clause 2Z, which pleads that on the basis of the relationship between the defendant and the plaintiff established over the course of the OSP project and the FRAN1 project the plaintiff had a reasonable expectation that:
(a)the defendant would be amenable during the course of the performance of the plaintiff’s obligations under the deed to requests from the plaintiff for reasonable modifications to the delivery schedule, the payment schedule and the payment allocations as set out in the table at item 4.4 to the schedule to the deed within the overall time and funding limits of the deed; and
(b)this approach would allow the plaintiff to adapt as required to any innovative outcomes or emerging changes during the grant period to provide the defendant with optimal value for money.
Proposed paragraph 14A pleads a construction of the deed that has not been advanced in the existing pleadings. For the first time, the proposition is advanced, relying upon the contents of the plaintiff’s funding application, the NTN’s “General Guidelines and Selection Criteria Fact Sheet” and the NTN “Draft Fact Sheet for Public Comment” (none of which have previously been pleaded by the plaintiff), that considerations of quality were incorporated into the purpose of the FRAN project as set out in the deed. In particular, the plaintiff says that a minimum bandwidth of 33 kb per second in 2001 and 56 kb per second in 2002 were part of the requirements of the FRAN project. The plaintiff would also allege that minimum standards as to “wait time for service”, “reliability”, “serviceability” and “availability”, as defined in the proposed paragraph 14A, were also incorporated into the requirements of the FRAN project.
In its current pleadings, at paragraph 22, the plaintiff claims that it had, by 9 April 2001, received six tender proposals for the provision of internet services. Proposed paragraphs 22A to 22F raise the content of two “non-conforming responses” to the tender process (which post-dated the execution of the deed), one by Marconi and one by Ericsson, for the provision of wireless based broadband solutions for the FRAN project.
Proposed paragraph 23A and 22B pleads that during 2000 Telstra significantly broadened availability in metropolitan locations of Asymmetric Digital Subscriber Line technology, but that at no time during the grant period did Telstra guarantee a universal download data connection over the in situ telephony network of more than 19,200 bits per second for subscribers in rural and regional Australia. Proposed paragraphs 23C and 23D plead that the plaintiff was advised by Telstra of the availability of local call access to BigPond, Australia wide, via an untimed local call via a new Telstra product called Megapop (the Telstra product), and the subsequent request by the defendant for a report on the FRAN project including a review of the Telstra product. Proposed paragraph 23E provides details of the Telstra product, and proposed paragraph 23F provides details of the BigPond Home Essentials Plan offered by Telstra. Proposed paragraphs 23G and 23H set out views said to have been formed by the plaintiff concerning the cost to the consumer of the Telstra product, and technical considerations concerning it.
Proposed paragraphs 23I and 23J plead the contents of a report prepared in May 2001 by the plaintiff at the request of the defendant concerning the Telstra product. Proposed paragraph 23K pleads a meeting between representatives of the plaintiff and the defendant in which the plaintiff was advised that the FRAN project was not to be further funded, and the defendant suggested that the plaintiff might like to consider a new application to obtain funding by submitting a further funding application. Proposed paragraph 23L pleads an agreement (presumably relied upon as an admission) between the plaintiff and the defendant at this meeting that the Telstra product did not satisfy all elements of the FRAN project, that the plaintiff would submit an alternative funding proposal for the same amount of money as had been allocated to the FRAN project and, if the alternative proposal was approved, the deed would be terminated by consent, but not otherwise.
Proposed paragraph 23M pleads the return of funds which had previously been allocated to the FRAN project by the defendant to the Internet Access Fund, which is said to have been a repudiation of the deed by the defendant. Proposed paragraph 23N pleads that the plaintiff did not accept the repudiation of the deed and that the Telstra product:
(a)did not guarantee connection speeds greater than 19,200 bits per second;
(b)included a distance-based component in the charges levied on internet service providers;
(c)imposed time and data limits on user access;
(d)did not guarantee that connection could be made on demand; and
(e)did not address quality issues.
As such, the pleading alleges, the Telstra product did not meet all the objectives of the FRAN project.
Proposed paragraph 23O pleads that the funding application provided by the plaintiff and accepted by the defendant specified an asymmetric satellite cached server model. It further pleads that by the time of the repudiation of the deed by the defendant alleged in proposed paragraph 23M the plaintiff had formed the view that the Telstra customer access network could not deliver high bandwidth reliably from the server to homes and that terrestrial wireless technology would be the appropriate technology to channel high bandwidth from the server to the home.
Proposed paragraph 23P pleads that at the time of the repudiation alleged in proposed paragraph 23M the plaintiff “had no reason to suggest” that a reduction in the grant amount was warranted, and had formed the view that the cost of some equipment to achieve the project objectives would rise, but that this would be offset by a reduction in the quantity of equipment required.
Proposed paragraph 23Q pleads that, taking into account the changes in the telecommunications environment since the FRAN project was “initially registered” with the defendant in about March 2000, the evolution of Telstra products available, and the innovative solutions suggested to the plaintiff through the tender process by Ericsson and Marconi, the plaintiff formed the view that the infrastructure related objectives of the FRAN project would be best met by the implementation of terrestrial wireless communications based on WiMAX standards.
Proposed paragraph 23R pleads that an initial trial was proposed by Ericsson using specified, and presumably wireless, technology.
Proposed paragraph 23S pleads that at the meeting referred to in proposed paragraph 23K, the defendant directed the plaintiff not to continue with the activities set out in item 2.4 to the schedule to the deed, gave notice to the plaintiff that it did not require the delivery of the Project/Implementation plan and evinced an intention not to provide the plaintiff with a deed of variation as “required” by item 2.1 of the schedule to the deed.
Proposed paragraph 23T pleads that at all material times the plaintiff was ready, willing and able but for the conduct of the defendant to complete the activities set out in item 2.4 to the schedule to the deed, and complete the FRAN project according to its terms. It further pleads that at all material times the plaintiff considered that the outcomes of its activities conducted pursuant to item 2.4 of the schedule to the deed “suggested a reduction in the grant funding amount would not be warranted”.
Proposed paragraph 27A pleads a meeting between representatives of the plaintiff and Senator Alston on or about 19 June 2001 to discuss the scope of any alternative proposal for funding and in particular the possibility of the plaintiff being funded under the NTN specifically to implement emerging wireless technologies.
Proposed paragraph 27B pleads that on or about 6 August 2001 the plaintiff submitted an alternative proposal, as suggested by the defendant. In the alternative proposal the plaintiff sought the same amount as the funds previously allocated to the FRAN project. It pleads that the plaintiff considered that the proposed activities under the alternative proposal were within the scope of the FRAN project but that a separate proposal was required to meet the administrative requirements of the defendant as specified by the defendant at the meeting referred to in proposed paragraph 23K.
Proposed paragraph 27C pleads that on or about 21 August 2001 Senator Alston released a statement to the media entitled “Wireless Internet Trials for Regional Australia” advising that the Australian Broadcasting Authority would be calling for expressions of interest for organisations interested in making use of spectrum space to conduct wireless internet trials. Proposed paragraph 27D pleads that the defendant rejected the plaintiff’s alternative proposal on or about 19 October 2001. Proposed paragraph 27E pleads that a representative of the plaintiff wrote to Senator Alston on or about 6 November 2001 and indicated that as the alternative proposal had been rejected, the plaintiff called on the defendant to honour its original obligations under the deed. Proposed paragraph 27F pleads that on or about 16 November 2001 a representative of the defendant wrote to the plaintiff stating that the FRAN project was at an end. Proposed paragraph 27G pleads that the letter of 16 November 2001 was a further repudiation of the deed by the defendant.
The plaintiff also proposes to amend paragraph 28 of its claim to add a new alternative head of damage, being the loss of the capital value of the assets to be acquired from the expenditure of the grant by the plaintiff to which it would have acquired title pursuant to clause 8.1 of the deed. This claim is quantified at $14,094,000.
Explanation for delay
Mr Robert Ceramidas, a director of the plaintiff company, affirmed an affidavit on 5 November 2015 in support of the application to amend. The relevant portions of the affidavit affirmed by Mr Ceramidas are as follows:
3.The defendant’s proposed amended defence raised for the first time issues that had never been previously brought to the plaintiff’s attention as contentious, either before proceedings were commenced or during the course of the proceedings. Furthermore, some of the issues raised by the defendant in the proposed amended defence had been previously admitted by the defendant and the defendant was now seeking to withdraw those admissions.
4. The significant matters agitated in the proposed amended defence for the first time included:
a. That the plaintiff’s conduct was at fault during the performance of its obligations under the Grant Deed dated 30 June 2000, such that the provisions of clause 15 of the Grand Deed had application;
b.That the obligations of the parties under the Grant Deed had been frustrated;
c. That despite the inclusion of an entire agreement clause in the Grant Deed the defendant was relying on implied terms for the “business efficacy” of what the defendant acknowledges was a standard form government document;
d. That the plaintiff was not capable of performing its obligations under the Grant Deed despite the defendant having previously conducted an extensive assessment process and finding that the plaintiff was capable; [and]
e. That the plaintiff was not capable of developing a profitable business model as an internet service provider in rural Australia despite having previous experience in precisely this context, that experience having been demonstrated by the plaintiff through a project funded by the defendant and fully accepted by the defendant (including the provision of additional funding to what had been originally allocated).
I am satisfied that none of the matters referred to by Mr Ceramidas provide an explanation for the plaintiff’s delay in seeking the present amendments. It may be accepted that prior to the amendments to the defendant’s defence, there had been no suggestion by the defendant that the deed had been frustrated by the offering to the public of new products by Telstra after the deed had been executed. Up to that time, the plaintiff’s claim was, simply put, that the defendant had breached the terms of the deed by failing to provide the funds referred to in the deed for the purpose of the plaintiff carrying out what it says its obligations were under the deed. In making such a claim, the plaintiff was not required to plead that the terms of the deed were to be understood or interpreted by reference to prior dealings between the parties. The original defence filed by the defendant, however, put in issue the proper construction of the deed, to the extent that the defendant pleaded that its obligation to fund activities undertaken by the plaintiff in accordance with the deed was limited to preparatory work, and that if the defendant chose to proceed with the remainder of the FRAN project, a variation to the deed would be required. This defence, which was initially filed in August 2009, squarely raised the proper interpretation of the deed. It also squarely raised the proposition that the defendant had, at the end of the preparatory phase, concluded that the goals of the FRAN project had been met by a “commercial provider” and therefore the plaintiff would not be able to satisfy the defendant that it was appropriate for the FRAN project to proceed to the implementation phase. From a relatively early point in the proceedings, therefore, it is clear that the plaintiff was aware that the interpretation of the deed urged by the defendant was that the defendant was only committed by the deed to funding a preparatory phase and that the defendant was alleging that it was not required by the deed to fund the implementation phase where the objects of the FRAN project had already been met by products offered by a third party. If it was the contention of the defendant, as it now appears to be, that these propositions pleaded by the defendant were based upon an incorrect interpretation of the deed, and that a proper interpretation of the deed imported considerations of quality into the FRAN project, and was dependent upon an understanding of past dealings between the parties, it is inexplicable why the plaintiff did not seek to agitate those issues by way of an application to amend its pleadings, or by filing a reply, shortly after the original defence was filed. It was always an issue on the pleadings, after the defendant had filed its defence, that the objects of the FRAN project which the deed was intended to advance had been met by a product offered by a third party. As such, the August 2015 amendments to the defendant’s defence did not raise a significant new issue, albeit that it raised the legal issue whether the offering of that product by Telstra had frustrated the deed. The factual allegations remained the same. If it had always been the case that the plaintiff was alleging that considerations of quality were to be read into the deed, and that the deed was to be interpreted by reference to past dealings between the parties, the plaintiff could, and should, have pleaded this issue after the defendant filed its original defence.
In its written submissions, the defendant rejected the assertion by Mr Ceramidas in his affidavit that the amended defence alleged that the plaintiff’s conduct was at fault during the performance of its obligations under the deed. The defendant submitted that its allegation in paragraph 12 (c) of the amended defence (which I will not here set out) pleaded that it was entitled to terminate the deed pursuant to clause 15 (c) of the deed, which entitled the defendant to terminate the deed if the Program Delegate was not satisfied that the purposes and activities of the plaintiff remained compatible with the objectives of the FRAN project. The defendant made it clear in its submissions that this pleading did not allege “fault” on the part of the plaintiff, but simply pleaded that the objectives of the FRAN project had been fulfilled and that entitled the defendant to terminate the deed. Whether clause 15 (c) of the deed had the effect alleged by the defendant may need to be resolved at a later time, but to the extent that there may have been any ambiguity in the amended defence on this issue, this statement by the defendant clarifies beyond any doubt that the defendant does not allege failure by the plaintiff to perform its duties or obligations under the deed. Similarly, in its written submissions the defendant eschews any suggestion that the amended defence alleged that the plaintiff was not capable of performing its obligations under the deed.
The new damages claim proposed by the plaintiff clearly does not arise out of the amendments to the defendant’s defence, and it cannot be described as simply providing further particulars to the plaintiff’s already pleaded claim. There is no explanation provided for the failure of the plaintiff to plead this claim at an earlier time.
The implied term case pleaded by the defendant in the amendments to its defence is based upon business efficacy. In essence, the defendant pleads, as an alternative, that a term is to be implied into the deed to the effect that the defendant was not obliged to proceed with the FRAN project where internet access at least equivalent to untimed local call access became available through other means. Whether such a term can or should be so implied must await the hearing of the claim, but the pleading of that defence provides no explanation for the plaintiff’s delay in pleading the proposed amendments to its claim at an earlier time.
I am satisfied that none of the proposed amendments are necessary because of amendments made to the defendant’s defence in August 2015. No other explanation has been proffered for the delay in applying to amend the plaintiff’s claim.
The importance of the amendments
The defendant submitted that no attempt has been made by the plaintiff to explain the importance of the amendments to its case. I agree with that submission. I also agree with its submission that, for the most part, the relevance of the new allegations the plaintiff now wishes to plead is unclear. I have assumed, in these reasons, that the plaintiff wants to plead earlier dealings between itself and the defendant for the purposes of submitting, in some way, that these dealings are relevant to interpreting the deed. There is a suggestion to this effect in the plaintiff’s written submissions. However, no assertion to that effect is made by the plaintiff in the proposed amended pleadings. The plaintiff has not provided any evidence to suggest that the proposed pleadings are important to its case.
Prejudice
The defendant submitted that, if the amendments are allowed, it will suffer the following prejudice:
(a)it will have to attempt to prepare a defence to a pleading which is deficient. As I have already noted, the plaintiff has not attempted, in its amended pleading, to set out the basis of which it suggests that earlier dealings between it and the defendant which it now proposes to plead are relevant to its causes of action. The same, a fortiori, may be said with respect to its proposal to plead dealings between itself and the defendant and others after the deed was executed. The defendant also submitted that there were other significant technical problems with the proposed pleading, including the plaintiff pleading its un-communicated state of mind, pleading multiple, rolled up allegations combining alleged objective facts with allegations about the plaintiff subjective views and the pleading of evidence rather than a material fact. I agree with those submissions. In my opinion, the proposed pleadings would have been liable to be struck out had they originally been pleaded by the plaintiff;
(b)the defendant will be required to undertake significant work for the purposes of preparing a further amended defence, which will involve significant added cost. It will require the defendant to obtain a further expert evidence, particularly if those amendments are allowed in which the plaintiff attempts to plead that conditions of quality are to be imported into the deed, and that the Telstra product did not meet those conditions. The defendant submits that these costs are difficult to quantify but will clearly be substantial. The usual order in such a case is that the amending party pay the costs of the other parties thrown away because of the amendment, and the plaintiff has not sought any different order in its application. It is common ground that the plaintiff company is impecunious, so that there is little prospect of the defendant being able to recover those costs; and
(c)further evidence, both lay and expert, will be required by both parties if the plaintiff is permitted to plead that conditions of quality were to be imported into the deed, and that the Telstra product did not meet those conditions. Both parties have filed and served their evidence and the matter is listed for a three week trial in this Court commencing on 4 April 2016.
I am satisfied that the defendant will suffer prejudice which cannot be adequately compensated by any order for costs if the proposed amendments are allowed. It appears to me inevitable that the hearing date will have to be vacated if the plaintiff is now allowed to allege that considerations of quality are to be imported into the deed, and that the Telstra product did not meet those conditions. Similarly, the proposed new damages claim opens an entirely new area of contest between the parties which would be likely to require expert evidence. The events which give rise to the present proceedings occurred more than 15 years ago and it is inevitable that the memory of witnesses fades over time. Any further significant delay is likely to result in evidence becoming unavailable or becoming less reliable. In addition, the plaintiff does not dispute that it is presently impecunious, so that there is little prospect of any costs order being met by it unless it is successful in these proceedings.
The proposed amended pleadings are embarrassing
For the reasons that I have referred to above, I am satisfied that the proposed amended pleadings are embarrassing. They have no demonstrated relevance to any pleaded cause of action, allege conduct both before and after the execution of the deed, plead evidence rather than material fact, plead the uncommunicated state of mind of the plaintiff and plead rolled up allegations.
Conclusion
The application by the plaintiff to amend its claim will be refused. The significant delay in seeking to raise the matters which it now wishes to raise has not been explained. If the amendments were allowed, the present hearing date would inevitably have to be vacated. I am also satisfied that the defendant would suffer prejudice that could not adequately be compensated by an order for costs if the plaintiff was allowed to make the amendments.
The plaintiff will, of course, be entitled to file a reply to the defendant’s amended defence, if it chooses to do so. It may do so in order to join issue with the defendant in relation to matters raised in the amended defence, but it will not be entitled to attempt to raise the new matters which it wished to raise in the amended Statement of Claim by way of reply.
The application to amend is refused and the plaintiff is to pay the defendant’s costs of the application.
| I certify that the preceding forty-four [44] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Burns. Associate: D. Scuteri Date: 12 February 2016 |