Hamilton v B & P Falcinella P/L - [2014] SASC 96

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master)
HAMILTON & ANOR v B & P FALCINELLA P/L & ANOR
[2014] SASC 96
Judgment of The Honourable Justice Bampton
28 July 2014
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - IN GENERAL AND PRELIMINARY MATTERS
LIMITATION OF ACTIONS - GENERAL MATTERS - AMENDMENT OF ORIGINATING PROCESSES AND PLEADINGS OUTSIDE LIMITATION PERIOD - AMENDMENTS INTRODUCING NEW CAUSE OF ACTION OR PARTICULARISING CAUSE OF ACTION
Appeal from decision of Master permitting amendment of the statement of claim to include a new cause of action after expiry of the limitation period and ordering that the new cause of action is deemed to have been instituted from the date of the application seeking permission to amend – consideration of whether Supreme Court Civil Rules 2006 (SA) have materially changed the powers the Court had available to it regarding amendment as contained in the Supreme Court Rules 1987 (SA) – consideration of the Court’s power to permit amendment utilising the general power to permit amendment under 6R 57 – consideration of the Court’s power to permit amendment pleading new cause of action after expiry of limitation period – consideration of the date to be fixed from which the new cause of action included by way of amendment after expiry of the limitation period is to operate.
HELD: the Supreme Court Civil Rules 2006 (SA) have not materially altered the power available to the Court as contained in the Supreme Court Rules 1987 (SA) to permit amendment to plead a new cause of action after expiry of the limitation period. The Court could not utilise the specific power conferred by 6R 54(6) and (7) to permit the amendment as the new cause of action sought to be introduced by amendment does not arise out of substantially the same facts as the original cause of action – as plaintiffs sought permission to plead the new cause of action coupled with a plea for relief pursuant to s 48 of the Limitation of Actions Act 1936 (SA), the Master was correct to permit the amendment utilising the Court’s general power under 6R 57 – as it was not until 16 December 2013 that the defendants were notified that the plaintiffs’ proposed amendment to plead the statute barred cause of action would be coupled with a claim relief under s 48, the Master’s order varied such that the new cause of action is deemed to have been instituted from 16 December 2013.
Supreme Court Civil Rules 2006 (SA) r 54, r 57; Supreme Court Rules 1987 (SA) r 53; Limitation of Actions Act 1936 (SA) s 48, referred to.
Weldon v Neal (1887) 19 QBD 394; Brook v Flinders University of South Australia (1988) 47 SASR 119; Alstom Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49, considered.

HAMILTON & ANOR v B & P FALCINELLA P/L & ANOR
[2014] SASC 96
Civil: Appeal from a Master

BAMPTON J: The defendants appeal against an order made by a Master granting permission to the plaintiffs to file a second statement of claim pleading a new cause of action after the expiry of the six year limitation period and further ordering that the new cause of action is deemed to have been instituted on 21 October 2013. By cross-appeal the plaintiffs argue that the new cause of action should be deemed to have been instituted from the date of the original proceedings.
Background
The plaintiffs and defendants were members of a partnership (the partnership) which carried on business as grape growers. By its agent that ran the business of the partnership, the partnership entered into a grape grower contract with Simeon Wines Ltd in 2003.
The District Court proceedings
In 2007, the plaintiffs commenced District Court proceedings against Simeon Wines for damages for breach of the grape growing contract. The District Court proceedings were in the nature of a partnership claim. However, the plaintiffs were the only partners who sued Simeon Wines. The plaintiffs joined the agent as second defendant. Their former partners were joined as the third and fourth defendants. The background to the District Court proceedings is explained in the District Court judgment.[1]
[1] Hamilton & Anor v Simeon Wines Ltd & Ors [2011] SADC 195.
As the claim vested in the partners jointly, judgment was entered on 9 March 2012 for the full amount of the partnership loss as assessed plus interest in favour of the plaintiffs, the second, third and fourth defendants against Simeon Wines. On 1 May 2012, Simeon Wines was ordered to pay the plaintiffs’ costs of action on a party/party basis to be agreed or taxed. The plaintiffs were ordered to pay the second, third and fourth defendants’ costs of action on a party/party basis. Simeon Wines were ordered to pay to the plaintiffs 75 per cent of the second, third and fourth defendants’ costs.
Simeon Wines paid the judgment sum to the plaintiffs, the second, third and fourth defendants on 26 June 2012.
The proceedings to recover solicitor/client costs
The plaintiffs commenced proceedings in the Magistrates Court on 6 May 2013 seeking to recover from their former partners (the defendants in this action) 50 per cent of the difference between the party/party costs they recovered in the District Court proceedings and the actual costs of those proceedings.
The Magistrates Court proceedings were transferred to the District Court and then to this Court to deal with issues arising under the Partnership Act 1891 (SA).
By application FDN 3 dated 21 October 2013, the plaintiffs sought permission to file a second statement of claim. The contentious amendment is paragraph [27] which pleads a claim for an account in relation to the partnership which the plaintiffs allege ceased on 1 May 2006 and in relation to financial affairs of the partnership finalised by 30 October 2006. It is not in dispute that the partnership was dissolved by no later than 30 October 2006. The expiry of six years from the termination of the partnership is 30 October 2012.
There is also no dispute that the action of account is out of time. Section 35(b) of the Limitation of Actions Act 1936 (SA) prescribes that actions of account are to be commenced within six years after the accrual of the cause of action. However the plaintiffs did not notify the defendants of their proposed amendment relying upon s 48 of the Limitation of Actions Act until 16 December 2013. On 19 December 2013, the Master gave permission to file a second statement of claim pleading in paragraph [27] the action of account and in paragraph [28] a claim for relief under s 48.
The Court’s power to permit amendment
The Court’s power to give permission to amend is found in 6R 57 and 6R 54. FDN 3 was made pursuant to 6R 54(4)(a). 6R 54(4)(a) empowers the Court to permit a party to amend a document. The Court cannot use this rule to permit a party to amend to include a new cause of action which is statute barred.
As the defendants argue that the Supreme Court Civil Rules 2006 (the 2006 Rules) have materially changed the Supreme Court Rules 1987 (the 1987 Rules) permitting amendment, it is necessary to consider the predecessors to 6R 57 and 6R 54 in the 1987 Rules, namely Rule 53.01 and Rule 53.03.
6R 57 gives the Court a general power to grant permission to amend any document at any stage of proceedings. The wording used in this rule is substantially the same as the wording used in, and confers the same power as, its predecessor, Rule 53.01.
The application of 6R 57 is subject to the common law rule of practice in Weldon v Neal that an amendment should not be allowed which would introduce a new cause of action that is statute barred.[2]
[2] (1887) 19 QBD 394.
6R 54(6) and (7) ameliorate the effect of the rule in Weldon v Neal by giving the Court power to permit an amendment after the expiry of the limitation period to introduce a new cause of action.
Relevantly, 6R 54(7)(a) provides that the Court’s power to grant permission to add a cause of action that is statute barred is qualified in that:
… the Court may only grant permission … if the new cause of action arises out of substantially the same facts as the original cause of action.
(Emphasis added)
Rule 53.03, the predecessor to 6R 54(6) and 54(7), provided that where an application for leave to amend is made after the expiry of the relevant limitation period:
the court may, nevertheless, grant leave, on such terms as it thinks fit:
…
(c)to add or substitute a new cause of action, if the new cause of action arises out of the same, or substantially the same, facts as the original action.
(Emphasis added)
The authority on the application of the 1987 Rules permitting amendment to plead a new cause of action that is statute barred is Brook v Flinders University of South Australia (Brook),[3] where von Doussa J noted that the rule in Weldon v Neal had been displaced to the extent that it is modified by s 48 and to the extent that the amendment was permitted by the Rules of Court to plead an otherwise statute barred new cause of action.[4] His Honour said:
In my opinion, r 53.03 operates as a power to relieve against a time bar which is quite distinct from the power in s 48 …
The scheme of s 48 is to extend time for the institution of proceedings. The scheme of r 53.03 is to relate a new cause of action added to an existing action back to an earlier point of time which is within the limitation period.
[3] (1988) 47 SASR 119.
[4] (1988) 47 SASR 119 at 121.
Von Doussa J discussed the situation where facts underlying the new statute barred cause of action are such that they lead the Court to conclude that the new cause of action arises out of the same or substantially the same facts as the original cause of action. In such circumstances the plaintiff would ordinarily be entitled to an order under Rule 53.03 independently of any other entitlement which may exist by virtue of s 48. There is no need for the plaintiff to rely on s 48 and he or she will no longer need an extension of time as under the “relation back” theory the “existing proceedings, including the new cause of action introduced by amendment, are treated as having been commenced on a date which is within the relevant limitation period”.[5]
[5] (1988) 47 SASR 119 at 123.
Von Doussa J also noted that a plaintiff who obtained an order pursuant to Rule 53.03 would usually obtain an unconditional order to amend. If the plaintiff could not obtain an order to amend under Rule 53.03 then it became necessary to consider the application based on s 48. Pertinently, von Doussa J stated that an application to amend by introducing a new cause of action that is statute barred on the basis of an entitlement to an order under s 48 is not an application dependent on the power contained in Rule 53.03. He considered that such an application should be made under the general power to amend contained in Rule 53.01.[6]
[6] Brook concerned the application of the predecessor to Rule 53.01 which was not materially different to its successor which came into operation 1 January 2003.
The use of the general power in the 1987 Rules to permit an amendment to introduce a new cause of action that is statute barred coupled with a claim for relief under s 48 was discussed in Alstom Ltd v Yokogawa Australia Pty Ltd (No 7).[7] Bleby J referred to the power to permit amendment in Rule 53.01 being subject to the rule in Weldon v Neal and that, “…with the introduction of the power to extend limitation periods under s 48 of the Limitation of Actions Act”, the Court’s general power to amend contained in Rule 53.01 would allow amendments to include new causes of action that are statute barred.
[7] [2012] SASC 49 at [1608].
Von Doussa J observed in Brook that where the application to amend to include a new cause of action is coupled with a claim for relief under s 48, the Court on hearing the application will not determine the claim for relief under s 48 as “that will be determined later at trial after a full investigation of the relevant facts”.[8]
[8] (1988) 47 SASR 119 at 124.
Von Doussa J further observed that on hearing the application, the Court may hear argument as to whether or not there is an arguable case for relief under s 48. If the Court is satisfied that the s 48 claim for relief will fail, the amendment should not be allowed.
The Limitation of Actions Act has been amended since von Doussa J’s comments in Brook. In particular, the addition of s 48(3a) and s 48(3b) raise the previously low threshold to obtaining an extension of time by stipulating:
(3a)A fact is not to be regarded as material to the plaintiff's case for the purposes of subsection (3)(b)(i) unless—
(a)     it forms an essential element of the plaintiff's cause of action; or
(b)     it would have major significance on an assessment of the plaintiff's loss.
(3b) In determining whether it is, in all the circumstances of a case, just to grant an extension of time, the court should have regard to—
(a)     the period of extension sought and, in particular, whether the passage of time has prejudiced a fair trial; and
(b)     the desirability of bringing litigation to an end within a reasonable period and thus promoting a more certain basis for the calculation of insurance premiums; and
(c)     the nature and extent of the plaintiff's loss and the conduct of the parties generally; and
(d)     any other relevant factor.
In my view, the use of different words and in particular the restrictive term “may only” in 6R 54(7)(a) as opposed to the permissive term “may” in Rule 53.03 does not materially change the power conferred by the 2006 Rules from that conferred by Rule 53.03.
Rule 53.03 could only be utilised and 6R 54(7) can only be utilised if the new cause of action arises out of substantially the same facts as the original cause of action. This is because, as reasoned in Brook, under these rules the Court will usually make an unconditional order to amend such that “the new cause of action will be treated as having been commenced on a date which is within the relevant limitation period” and “there will be no need to rely on s 48 as the new cause of action will be treated as having commenced on a date which is within the limitation period”.
If the new cause of action did not “arise out of the same, or substantially the same, facts as the original action”[9] or if the new cause of action does not “[arise] out of substantially the same facts as the original cause of action”,[10] amendment could not be made under the specific power contained in Rule 53.03 and cannot be permitted under 6R 54(7). There is, however, another gateway available to the plaintiff if he or she has an entitlement to relief under s 48. The Court had the power under Rule 53.03, and has the power under 6R 57, to permit the amendment if the application to amend to plead a new cause of action that is statute barred is coupled with a plea for relief under s 48. If there is no plea for relief under s 48, or the plea for relief under s 48 is not arguable, the amendment will be not be permitted.
[9] Rule 53.03.
[10] Rule 54(7).
The Court’s general and specific power to amend as contained in the 1987 Rules has not been materially altered by the 2006 Rules. Accordingly, the reasoning in Brook is applicable to the application of the 2006 Rules permitting amendment. However, when the Court considers an application to amend to introduce a new cause of action which is statute barred coupled with a claim for relief under s 48, regard must be had to the provisions of s 48(3a) and s 48(3b) in determining whether the plaintiff has established an arguable case for relief under s 48.
Appeal
The appeal is by way of rehearing pursuant to 6R 286.
The grounds of appeal are that the Master erred in law in granting permission to amend having found that the amendments sought to add a cause of action that was statute barred and that the amendment did not arise substantially out of the same facts as the original cause of action
The defendants assert that the Master erred in reliance on 6R 57, and that he did not have sufficient regard to 6R 54(7).
The defendants argue in the alternative that the Master erred in not ordering that the cause of action pleaded in paragraphs [27] and [28] of the second statement of claim was instituted on 16 December 2013.
Cross-appeal
By notice of cross-appeal, the plaintiffs assert that the Master was correct to permit the amendment pursuant to 6R 57. However they assert he erred in finding that the amendment did not arise substantially out of the same facts, or facts sufficiently similar to the facts in the original cause of action, such that he should have ordered that the new cause of action is deemed to have been instituted on the date of the issue of the summons in the original proceedings.
Analysis
The amendment
The Master found the original cause of action concerned matters arising out of the District Court proceedings and the recovery of partnership assets. He further found that, apart from the relationship of partnership between the plaintiffs and the defendants, the facts in relation to the claim for account were entirely different to the facts of the original cause of action. The claim for account concerns the dissolution of the partnership not the subject matter of the District Court proceedings.
Further to the Master’s findings, having regard to the matters pleaded in the support of the claim for relief under s 48 in paragraph [28] of the second statement of claim, it is evident that the amendments do not arise out of substantially the same facts as the original cause of action. The Master correctly found the plaintiffs could not be granted permission to amend pursuant to 6R 54(6) and (7) as the new cause of action does not arise out of substantially the same facts as the original cause of action.
The defendants submit that the only rule that can permit an amendment adding a new cause of action that is statute barred is 6R 54. They contend that the 2006 Rules have materially changed the rules permitting amendment considered in Brook and there is such conflict between 6R 54(6) and 6R 57 that the specific provisions of 6R 54(6) should prevail. For the reasons discussed above, I reject these arguments. Once the plaintiffs included the claim for relief under s 48 in their proposed amendments, the Master was entitled to exercise the general power to permit the amendment contained in 6R 57 upon being satisfied the claim for relief under s 48 was arguable.
The defendants also assert that the Master did not refer to s 48(3a) and s 48(3b) when considering whether the plaintiffs had established an arguable case pursuant to s 48(3). The defendants contend that the Court could not reach the conclusion that there was an arguable case for an extension of time when the alleged material fact in paragraph [28.1] of the second statement of claim, namely the payment by Simeon Wines of the District Court judgment sum on 26 June 2012, did not occur within 12 months of the notification of the s 48 amendment on 16 December 2013. Further, the defendants contend that the Master did not consider whether the alleged material fact in paragraph [28.2] of the second statement of claim, namely the agreement between the plaintiffs and Simeon Wines regarding party/party costs, could arguably meet the criteria in s 48(3a) and s 48(3b).
As the material fact pleaded in paragraph [28.1] did not occur within 12 months of 19 July 2013, when the defendants were first told of the intention to amend to claim an account, let alone when they were informed of the proposed reliance on s 48 in December 2013, I am not satisfied this alleged material fact is arguable. The material fact pleaded in paragraph [28.2] is arguable having regard to the matters set out in s 48(3a) and s 48(3b). Once the agreement between the plaintiffs and Simeon Wines regarding party/party costs was reached, it is arguable the solicitor/client costs referrable to the recovery of the partnership asset were known. This may not be sufficient upon full investigation of the relevant facts at trial, however this is not for me to decide. I am satisfied the matters pleaded in paragraph [28.2] are arguable. The matters pleaded in paragraph [28.1] should be left to the trial Judge.
The date from which the amendment is to operate

The Master considered there were three possible dates from which the amendment should take effect. The first being 19 July 2013 when the defendants were notified of the intention to amend to claim an account. The second being the date of the filing of FDN 3 on 21 October 2013. Significantly, FDN 3 merely sought permission to amend the statement of claim pursuant to 6R 54(4)(a) and did not seek permission to amend to include the claim for relief pursuant to s 48. The third date is 16 December 2013 when the defendants were notified that an extension of time would be sought.
The Master noted that in Brook von Doussa J permitted the amendment to have been deemed to be instituted on the date the amendment was first notified to the defendant. The Master determined the amendment and the institution of the new cause of action should take effect from the date of 21 October 2013 (FDN 3).
In the event that the order permitting the amendment is upheld, the defendants contend the date upon which the permitted amendment should take effect is 16 December 2013, the date they were notified of the plaintiffs’ proposed amendment pleading material facts in support of the claim for relief under s 48.
The plaintiffs argue the justice of the case calls for the amendments to date back to the date of the institution of the proceedings because of the substantial similarity between the facts pleaded in the original claim and the facts relied upon in the claim for account because both causes of action:
·are by the same plaintiffs against the same defendants;
·arise out of the same partnership;
·arise out of obtaining judgment in the District Court proceedings;
·arise out of all parties sharing in the benefits of the judgment;
·arise out of them suffering a costs shortfall in the District Court proceedings.
It is contended the date fixed by the Master prevents the plaintiffs from relying on the payment of the judgment sum on 26 June 2012 as a new material fact. As the defendants were first notified of the intention to amend to claim an account on 19 July 2013 and the intention to rely on s 48 on 16 December 2013, an order that the amendment operated from the institution of the original proceedings would be unjust to the defendants. Such an order would be akin to granting unconditional permission to amend pursuant to 6R 54(6) and (7).
The amendment should operate from a date that does justice as nearly as possible by preserving to the defendants the ability to raise the limitation period as a defence.[11] FDN 3 filed 21 October 2013 did not seek permission to plead the claim for account coupled with the claim for relief under s 48. It was not until 16 December 2013 that the plaintiffs gave notice of their intention to seek an extension of time to pursue the claim for account. FDN 3 would have been refused in the absence of reliance on s 48.
[11] Brook v Flinders University of South Australia (1988) 47 SASR 119 at 125.
It follows that the amendment should operate from the date when the defendant was first notified of the proposed amendment including the claim for relief under s 48. That is the third date identified by the Master of 16 December 2013.
Finally, it is obvious that if the amendments are not permitted the plaintiffs could issue separate proceedings, and plead a claim for relief under s 48. The separate proceedings would involve the same parties. It is most likely the new action and the original proceedings would travel together during the interlocutory stages and be tried at the same time or one immediately after the other. This would add to the costs borne by the parties and burden the Court’s interlocutory lists. It is a principle of case flow management that multiplicity of actions should be avoided. It is appropriate in the circumstances to permit the amendment to plead the new cause of action coupled with the claim for relief under s 48 in these proceedings and for the s 48 application to be determined at trial.
The Master correctly permitted the amendment utilising 6R 57. The appeal is allowed only to vary Order 2 of the Master’s orders made 10 February 2014 as follows:
The cause of action pleaded in paragraph 27 of the second statement of claim is deemed to have been instituted on 16 December 2013.