Garden Estate Hackham Pty Ltd v Angas Securities Ltd - [2018] SASCFC 140

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Permission to Appeal in Private)
GARDEN ESTATE HACKHAM PTY LTD & ORS v ANGAS SECURITIES LTD & ORS
[2018] SASCFC 140
Judgment of The Full Court
(The Honourable Chief Justice Kourakis, The Honourable Justice Vanstone and The Honourable Justice Kelly)
21 December 2018
LIMITATION OF ACTIONS - CONTRACTS, TORTS AND PERSONAL ACTIONS - APPLICATION OF THE STATUTES TO PARTICULAR CAUSES OF ACTION
LIMITATION OF ACTIONS - CONTRACTS, TORTS AND PERSONAL ACTIONS - WHEN TIME BEGINS TO RUN - PARTICULAR CAUSES OF ACTION
Application for permission to appeal against a ruling of a Judge of this Court in refusing to permit the applicants to add a time barred claim for economic duress to an existing action in contract pursuant to rule 54(7)(a) of the Supreme Court Civil Rules 2006 (SA).
Held, per Curiam, refusing permission to appeal:
1. The underlying rationale for allowing an amendment pursuant to rule 54(7)(a), even though it is time barred, must be that it is an integral part of the controversy delineated by the statement of claim, or at least closely connected to it.
2. The considerations as posed in the proposed amended statement of claim played no part in the relatively straightforward claims already in existence.
Supreme Court Civil Rules 2006 (SA) rule 54(7)(a); Retirement Villages Act 2016 (SA); Australian Consumer Law (Cth); Corporations Act 2001 (Cth); Australian Securities and Investments Commission Act 2001 (Cth), referred to.

GARDEN ESTATE HACKHAM PTY LTD & ORS v ANGAS SECURITIES LTD & ORS
[2018] SASCFC 140
Civil: Application for Permission to Appeal

THE COURT: This is an application for permission to appeal against an order of a Judge of this Court refusing to permit the applicants (to whom I will refer as the plaintiffs) to add a time-barred claim for economic duress to an existing action in contract pursuant to the Supreme Court Civil Rules 2006 (SA) (SCR) r 54(7)(a).
It is convenient to first summarise the statement of claim filed on 21 September 2016 (the SOC) to which the plaintiffs sought to add their economic duress claim. The plaintiffs pleaded by way of background that Garden Estate Hackham Pty Ltd (GEH) signed a sale and purchase agreement to purchase a retirement village at Hackham (the Hackham Village) on 11 November 2009 for a purchase price of $4 million. The purchase was funded by a loan from the respondent, Angas Securities Ltd (Angas), of $2.6 million and another from Ravenswood Pty Ltd (Ravenswood) of $1 million. The plaintiffs also pleaded that on 21 December 2009 Garden Estate Christies Pty Ltd (GEC) purchased a retirement village at Christies Beach (the Christies Beach Village) for a price of $3.5 million, which was financed by way of loan from Angas of $2.1 million secured by mortgage and a second loan from Angas of $1 million.
Under a heading ‘The basis of the causes of actions’ the SOC recited discussions between the principal of GEH and GEC, Mr Michalakas, and representatives of Angas. Those discussions concerned the endorsement of the Hackham and Christies retirement villages pursuant to the Retirement Villages Act 2016 (SA) and the Deferred Management Fees which GEH and GEC would thereby be entitled to charge in operating them (the DFM Model). The plaintiffs pleaded that in January 2010, by agreement partly in writing and partly oral between GEC, GEH and Angas, it was agreed that the loans to be made by Angas would be repaid (the loan principal and interest) from the sales of units in the Hackham and Christies Beach villages on the DMF model. The agreement was to the effect that the units would be sold pursuant to residents’ contracts, as that term is defined in the Retirement Villages Act.
The plaintiffs pleaded that Michalakas accepted the loan offers from Angas for and on behalf of GEH and GEC on the basis of an agreement reached in those discussions. The SOC recited that on a number of occasions before 21 September 2010 Angas indicated through its officers and agents that it would produce the certificates of title to allow the endorsements under the Retirement Villages Act to be registered on the certificates of title of the land on which the Hackham and Christies Beach villages were located. The plaintiffs claimed that by email on 21 September 2010 Angas, in breach of the agreement, refused to produce the certificates of title. The plaintiffs also made claims against Angas of misleading and deceptive, and unconscionable, conduct under the Australian Consumer Law, the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth). The plaintiffs also claimed that Angus had wrongfully appointed a receiver and manager.
The plaintiffs’ claimed that by reason of those matters GEH and GEC were unable to discharge the loan obligations to Angas. As a result, GEH and GEC entered into an alternative subdivision development of the properties, which was not profitable.
They sought by way of remedies (inter alia):
_·damages;
_·declarations that Angas held the village properties on trust for GEH and GEC respectively;
_·the discharge of the mortgages;
_·an order that Angas account for repayments made on the loan;
_·equitable compensation;
_·damages for the loss of opportunity to subdivide and redevelop the villages pursuant to the Retirement Villages Act; and
_·a tracing of the proceeds of sale of the units.
SCR r 54 relevantly provides:
54—Amendment
(1)A party may amend a document filed by the party.
(4)An amendment may be made—
(a)with the Court's permission; or
(b)with the consent of all other parties; or
(c)as authorised by subrule (5).
(5)A party is authorised to amend without the consent of the other parties or the Court's permission if—
(a)the amendment is made within the period allowed for disclosure of documents or a further 14 calendar days from the end of that period; and
(b)the party has not exercised the right to amend under this subrule on an earlier occasion.
(6)However, an amendment cannot be made without the Court's permission or the consent of the other parties if the effect of the amendment is—
(a)to withdraw an admission; or
(b)to add or substitute a cause of action that is statute barred; or
(c)to introduce a defendant against whom a fresh action would be statute barred.
(7)The Court's power to grant permission for amendment under subrule (6) is subject to the following qualifications—
(a)the Court may only grant permission for the addition or substitution of a cause of action that is statute barred if the new cause of action arises out of substantially the same facts as the original cause of action;
(8) For the avoidance of doubt, nothing in this rule prevents the Court permitting an amendment to add a cause of action that is statute barred or introduce a defendant against whom a fresh action would be statute barred on the basis that that the amendment not relate back to the commencement of the action and the addition or introduction be subject to the subsequent granting of an extension of time under section 48 of the Limitations of Actions Act 1936 or other statutory power.
Note— See Brook v Flinders University of South Australia (1988) 47 SASR 119.
The Judge refused permission to amend the proposed SOC for the following reasons:
Economic duress
[42][GEC] pleads by paragraphs 43.1 and 44 of the proposed statement of claim that on 29 March 2010 [GEC] and Angas entered into a contract (the Contract of Sale) for the sale of a 30 per cent interest in the Christies property for $1 million with a deposit of the full purchase price payable on execution of the contract.
[43][GEC] pleads by paragraphs 43.2 and 45 that on 29 March 2010 [GEC] and Angas entered into a deed (the Option Deed) for the grant to each party of the option, exercisable by 29 March 2011 and for a fee of $1.6 million, to terminate the sale contract, in which event [GEC] was to repay to Angas the deposit of $1 million together with an additional amount of $600,000 and otherwise Angas was to discharge its mortgage over the Christies property.
[44][GEC] pleads by paragraphs 60 to 63 that on 31 March 2011, after the term of the Option Deed had expired, Angas purported to exercise the option but this was too late and Angas was obliged to discharge its mortgage over the Christies property.
[45][GEC] pleads by paragraphs 64 and 65 that on about 31 March 2011 Angas demanded that [GEC] execute a deed of forbearance agreeing not to enforce the relevant clause of the Option Deed and that [GEC] pay $1.6 million to Angas under the remaining clauses of the Option Deed, failing which Angas would commence foreclosure action against [GEC] and Hackham Co.
[46][GEC] pleads by paragraph 66 that on 22 June 2011, under economic duress induced by Angas’ threat to commence foreclosure action, [GEC] executed a Deed of Forbearance dated 29 March 2011 (the Deed of Forbearance)[1] and an agreement dated 22 June 2011 and paid $1.6 million to Angas sourced from a new borrowing from Angas of $2 million (the new loan agreement).
Time limitation
[47]It is common ground that the cause of action for economic duress accrued on 22 June 2011 and that pursuant to section 35(c) of the Act a proceeding for economic duress was required to be commenced by 22 June 2017. It is also common ground that a claim for economic duress or in respect of the Deed of Forbearance or the 22 June 2011 agreement was not notified to Angas until not before 20 April 2018.
[50][GEC] concedes that prima facie an amendment to introduce the new cause of action of economic duress is precluded by rule 54(6)(b) unless the exception in rule 54(7)(a) applies.
[51]The test prescribed by rule 54(7)(a) is whether the new cause of action “arises out of substantially the same facts as the original cause of action”. The original causes of action pleaded by [GEC] in the original statement of claim were confined to breach of contract and unconscionable and misleading conduct as summarised above. There was no plea of any of the facts summarised at [42] to [46] above (other than the bare fact that Angas provided $1 million by way of loan which was used by [GEC] to settle on the purchase of the Christies property). In these circumstances, it is clear that the new cause of action does not arise out of substantially the same facts as the original causes of action.
[52][GEC] contends that, because the matters sought to be pleaded as summarised at [42] to [46] above are essential steps in the chronological history of the accumulation of the debt and in proving the pleaded invalidity of the appointment of the receivers and managers, the new cause of action arises out of substantially the same facts as the original causes of action. This is not the test for the application of rule 54(7)(a). Rule 54(7)(a) has no application to the proposed plea of economic duress.
(Footnotes in original)
[1] Paragraph 66 appears to plead that the Deed of Forbearance was not executed until 22 June 2011 even though it was dated 29 March 2011.
On the application for permission to appeal against the Judge’s ruling, the plaintiffs submit:
5.The applicants contend that the correct interpretation of the rule is to empower the Court to permit the joinder of a new cause of action if that cause of action arises out of substantially the same facts as the existing causes of action. That will be a question of degree in each case.
See: Menegazzo v Pricewaterhousecoopers (A firm) & Ors [2016] QSC 94 at [50]; Camilleri v The Trust Company (Nominees) Pty Ltd [2015] FCA 1138 at [11]; Bryant (Liquidator) v LV Dohnt & Co Pty Ltd, in the Matter of Gunns Limited (In Liq) (Receivers and Managers Appointed) [2018] FCA 238 at [71].
6.It does not require the facts for the new cause of action to be pleaded already. If it did, it would have been a simple matter to say so, for example, by tying the new plea to “the pleaded material facts of the original causes of action”.
7.The original causes of action were breach of contract, misleading or deceptive conduct contrary to the ASIC Act 2001 (Cth) and the Australian Consumer Law, unconscionable conduct pursuant to those same statutes, dishonest conduct under the Corporations Act 2001 (Cth), and for the wrongful appointment of the second and third defendants as receivers and managers because:
7.1.    the value of the debt of the first plaintiff had been wrongfully inflated (by accrual of interest and penalties and the failure to properly credit repayments); and
7.2.    the plaintiffs had been denied the opportunity to realise the potential of their investment in their properties because of the failure by the first defendant (Angas) to produce Certificates of Title for endorsement as “Retirement Villages”.
As was evident from the original Statement of Claim, and was accepted by Blue J, the interests of the plaintiffs were inextricably interlinked. Accordingly, the debt position of the plaintiffs was interdependent.
8.Accordingly, the original causes of action relied on the facts of and incidental to the agreement to loan the plaintiffs funds, the application of those funds and the alleged debt that Angas relied upon to appoint the second and third defendants as receivers and managers of the plaintiffs.
9.The question is whether “the overlap is so great that the new cause of action can fairly by said to arise out of substantially the same facts as the old cause of action”.
Brook v Flinders University (1988) 47 SASR 119 at 131; State of New South Wales v Radford [2010] NSWCA 276; (2010) 79 NSWLR 327 at [69] quoting Cross LJ in Brickfield Properties Ltd v Newton [1971] 1 WLR 862 at 880.
10.As a pleading, the original Statement of Claim was deficient (in fact and law) and it was struck-out. It failed to properly plead the case for the plaintiffs. The process by which the plaintiffs’ case has been re-pleaded has taken many months. In the premises, it is unsurprising that the original Statement of Claim did not plead all the facts event to make good the alleged causes of action. It would be even more surprising if it pleaded the precise facts of the proposed new cause of action.
11.The relevant question should be answered as a matter of general impression, rather than requiring precise similarity of factual circumstances. To the extent that his Honour did the latter, with respect, he was in error.
Ibrahimi & Ors v Commonwealth of Australia (No 9) [2017] NSWSC1051, at [462]; New South Wales v Radford (2010) 29 NSWLR 327; [2010] NSWCA 279, at [72]; Weston v Publishing and Broadcasting Ltd (2011) 83 ACSR 206, at [592]; Welsh Development Agency v Redpath Dorman Long Ltd [1994] 4 All ER 10 at [1994] 1 WLR 1409.
12.As Thomas JA expressed the practical application of the test, in Draney v Barry, the question is whether the additional facts arise out of substantially the same story as that which would have been told to support the original cause of action: Draney v Barry [2002] 1 Qd R 145 at [57].
See also Thomas v State of Queensland [2001] QCA 336 at [19]; Menegazzo v Pricewaterhousecoopers (A Firm) & Ors [2016] QSC 94 at [48] and Camilleri v The Trust Company (Nominees) Ltd [2015] FCA 1138, at [10] per Middleton J.
13.If the underlying objective of the rule was to preserve the rigor of the Rule in Weldon v Neal, then a fact-for-fact comparison would be warranted. However, the intent of the rule is to relieve against the harshness of that Rule. In the premises, a broader, remedial approach is to be taken to its interpretation. This approach is supported by the approach taken to the application of like procedural rules in other jurisdictions, namely:
13.1. in New South Wales – Civil Procedure Act 2005 (NSW) s 65(2)(c);
13.2. in Queensland – Uniform Civil Procedure Rules 1999 r 376(4);
13.3. in the ACT – Courts Procedures Rules 2006 r 503;
13.4   federally – Federal Court Rules 2011 r 8.21(1)(g)(i).
Expressions such as, and tests such as, ‘substantially the same facts’ and ‘substantially the same story’ are convenient abstractions of the task presented by rule 54(7). The description of the test in that way will often, it can be accepted, lead to an impressionistic approach.
However, it must be remembered that the effect of sub-rule (7) is to obviate the need to seek an extension of time which is regulated by statute. The underlying rationale for allowing an amendment pursuant to sub-rule (7), even though it is time barred, must be that it is an integral part of the controversy delineated by the SOC, or at least closely connected to it. However, in this case, the proposed duress claim is quite collateral. The execution of the Deed of Forbearance was a sequela of the conduct on which the plaintiffs based their claims in the SOC, but formed part of the controversy submitted for adjudication. It is collateral to it. Even though it contains a narrative history of the dealings between the parties, the SOC did not mention the facts now sought to be pleaded. Importantly, the claim of economic duress necessarily involves a consideration of the relative financial position of Angas on the one hand and GEC and GEH on the other. Moreover, it would require a consideration of the relative justification of Angas for seeking the arrangement, and of the reasons for GEC entering into it. It would require a consideration of the interests which Angas sought to protect. These considerations, which are fundamental to the claim, played no part in the relatively straightforward claims of breach of contract, misrepresentation and unconscionable conduct.
There is insufficient reason to doubt the decision of the Judge. We would refuse permission to appeal.