Harkford Pty Ltd v Coventry Square Construction Pty Ltd [No 2]

[2013] WADC 148

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION:   HARKFORD PTY LTD -v- COVENTRY SQUARE CONSTRUCTION PTY LTD [No 2] [2013] WADC 148

CORAM:   DAVIS DCJ

HEARD:   5 AUGUST 2013

DELIVERED          :   19 SEPTEMBER 2013

FILE NO/S:   CIV 3769 of 2011

BETWEEN:   HARKFORD PTY LTD

Plaintiff

AND

COVENTRY SQUARE CONSTRUCTION PTY LTD
Defendant

BRUCE WILLIAM DUCKHAM
Additional Party

Catchwords:

Practice and procedure - Application for costs following successful appeal - Application by plaintiff for indemnity costs of strike-out application to be paid by the defendant's former solicitor - Further application by plaintiff to strike out parts of defendant's amended counterclaim - Whether defendant should be given further opportunities to re-plead - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 O 66 r 5

Result:

Plaintiff's application for indemnity costs to be paid defendant's former solicitor refused
Parts of defendant's amended counterclaim struck-out with leave to re-amend

Representation:

Counsel:

Plaintiff:     Mr W Vogt

Defendant:     Mr G J Douglas

Additional Party           :     Mr W J Chesnutt

Solicitors:

Plaintiff:     Vogt Graham Lawyers

Defendant:     Hotchkin Hanly

Additional Party           :     Muries Lawyers

Case(s) referred to in judgment(s):

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175

Briggs v Curtis Quick & Associates [1999] WASCA 139

Coe v Commonwealth (1979) 24 ALR 118,; 53 ALJR 403

Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95

Flower & Hart v White Industries (Qld) Pty Ltd (1999) 87 FCR 134; (2009) 163 ALR 744

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125

Harkford Pty Ltd v Coventry Square Construction Pty Ltd [2013] WADC 62

Lai v Tiao (No 2) [2009] WASC 22

Neilson v City of Swan [2006] WASCA 94

Quancorp Pty Ltd v MacDonald [1999] WASCA 101

Re Malley SM; ex parte Gardner [2001] WASCA 83

Ridehalgh v Horsefield [1994] 3 All ER 848

Rodwell v Hutchinson [2010] WASCA 197

Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118

Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S)

Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (No 2) (1997) 18 WAR 190

White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169

White Industries Australia Ltd v Federal Commissioner of Taxation (2007) 160 FLR 298

1. DAVIS DCJ:  In this action the plaintiff claims monies owed for painting carried out at the Coventry Square Markets in Morley, Western Australia.  The plaintiff contracted to carry out painting works pursuant to a written sub-contract agreement made 24 February 2011 with the defendant (the contract).  The defendant was the principal contractor for construction work at the markets.

2. The defendant has defended the action, claiming, inter alia, that the plaintiff breached the contract by suspending the painting works and terminating the contract without proper cause.  By way of counterclaim the defendant claims that the plaintiff's termination of the contract contributed to a delay in completion of the head contract for the construction work at the markets, causing the defendant to suffer loss and expense.

3. In April this year I heard an appeal by the plaintiff from a decision of a deputy registrar dismissing the plaintiff's application to strike out certain paragraphs of the counterclaim relating to the defendant's claimed loss and damage.  On 3 May 2013 I made orders striking out parts of the counterclaim, but giving the opportunity to the defendant to amend its pleading: Harkford Pty Ltd v Coventry Square Construction Pty Ltd [2013] WADC 62 (Harkford v Coventry Square Construction). 

4. There is an outstanding issue in relation to one aspect of costs arising from the appeal.  While the plaintiff sought, and I made, an order that the defendant pay the plaintiff's costs of the appeal on the usual party/party costs basis, the plaintiff sought an order that the defendant's former solicitor pay the plaintiff's costs of the application heard before the deputy registrar on an indemnity basis, to be taxed and paid forthwith.  I determined that argument should not take place in the absence of the former solicitor: Harkford v Coventry Square Construction [78] ‑ [79]; Rules of the Supreme Court 1971 O 66 r 5(2).

5. As the plaintiff wished to pursue the indemnity costs order, the matter was referred for further directions so that notice could be given to the former solicitor and brought back for hearing before me. 

6. The defendant filed an amended defence and counterclaim on 16 May 2013.  On 31 May 2013 the plaintiff brought an application by chamber summons seeking orders striking out pars 28 ‑ 30 and the prayer for relief in the amended counterclaim on the grounds that these paragraphs, which relate to the loss and damage claimed by the defendant, will prejudice, embarrass or delay the fair trial of the action.

7. Both the plaintiff's application for indemnity costs and to strike out those parts of the amended counterclaim were listed for a special appointment hearing before me.

Plaintiff's application for indemnity costs against defendant's former solicitor

1. An indemnity costs order departs from the usual orders made on the disposition of an interlocutory application, where costs are usually awarded on a party/party basis.  It is well established that an indemnity costs order will only be made in exceptional circumstances: Rodwell v Hutchinson [2010] WASCA 197 [29]; Re Malley SM; ex parte Gardner [2001] WASCA 83.

2. The principles applicable to the making of an indemnity costs order were set out in Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S) [10] (Pullin JA and Kenneth Martin J):

   1.A superior court, in its inherent jurisdiction, may make an indemnity costs order (see also Supreme Court Act 1935 s 37, and Legal Profession Act 2008 s 280).

   2.An indemnity costs order departs from the usual costs disposition order, whereby costs are awarded on a party/party basis: EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59.

   3.The court’s discretion as to the making of an indemnity costs order is a discretion that must be exercised judicially. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 at 400 Woodward J said:

   'Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases, where "there is some special or unusual feature in the case to justify the court exercising its discretion in that way'. (emphasis added)

   4.To obtain an indemnity costs order, it is not the case that the successful party needs to show a collateral purpose, or establish some species of fraud against the unsuccessful party. In J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 303 French J by reference to the observations of Woodward J in Fountain Selected Meats, said:

   'It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.'

   5.Furthermore, in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Unreported, FCA, 3 May 1991) (referred to by Ipp J in Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190 at 191) French J observed:

   'The categories in which the discretion may be exercised are not closed.'

   6.Competing principles need to be balanced in assessing the making of a potential award of indemnity costs. In Quancorp Pty Ltd v MacDonald [1999] WASCA 101 [7], Wheeler J observed:

   'On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as "hopeless" so as to justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as "hopeless" is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full.'

   7.An indemnity costs order may be appropriate in situations which are shown to involve some element of improper, or at least unreasonable, conduct by a party or the party’s legal advisers: see Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 (Sheppard J), referred to by Pullin J in Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S) ; (2003) 28 WAR 95 [9].

   8.A properly crafted special costs order may obviate the need for an indemnity costs order, where components of cost scale items are allowed above the applicable scale ceiling: see Flotilla [20] ‑ [24].

   9.An indemnity costs order may not be appropriate if the claimed costs would be likely to be recovered under the standard order for party and party costs, or under a special order raising or removing a scale ceiling allowance: Flotilla [11]. In Unioil (No 2) (193), Ipp J observed:

   'However, counsel for the plaintiffs was unable to identify any costs so incurred that would not be covered by an order for party and party costs. An order for indemnity costs on this ground is therefore not warranted.'

   10.Nonetheless, an indemnity costs order will constitute an appropriate sanction marking the disapproval of improper or unreasonable conduct: see Brookvista Pty Ltd v Meloni [2009] WASCA 180 [32], Flotilla [25]. In Flotilla Pullin J said [26]:

   'A solicitor should not, in my view, resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party.'

3. Order 66 r 5 of the Rules of the Supreme Court 1971 provides that the court may order any practitioner to pay costs personally if it considers the practitioner to be responsible for costs incurred by a party as a result of 'any improper, unreasonable, or negligent act or omission'. 

4. There are few cases which deal with the meaning of the terms 'improper' and 'unreasonable'.  However, this was discussed in Lai v Tiao (No 2) [2009] WASC 22 [35] applying the meaning to the terms given in Ridehalgh v Horsefield [1994] 3 All ER 848, 861 - 862:

   'Improper' means what it has been understood to mean in this context for at least half a century. The adjective covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice or other serious professional penalty … But it is not in our judgment limited to that. Conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion can fairly be stigmatised as such whether or not it violates the letter of a professional code.

   'Unreasonable' also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the events to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner’s judgment, but it is not unreasonable.

5. There is also discussion of what is 'misconduct' set out in Kendall C & Curthoys J, Civil Procedure Western Australia [66.1.16D], [66.5.9] and [66.5.10].  There is a requirement of a legal practitioner to act honestly and with candour and to confine the case to identified issues which are genuinely in dispute.  The creation of false issues for tactical reasons is a ground for making a special costs order and appropriate costs orders may also be made when there is discourteous and non-cooperative behaviour leading to delays, inconvenience and needless costs: Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (No 2) (1997) 18 WAR 190, 193 - 194.

6. As set out in Ridehalgh v Horsefield (866) and also Civil Procedure Western Australia [66.5.7], the court only has jurisdiction to make an order for payment of costs by the practitioner where the improper, unreasonable or negligent conduct complained of has caused a waste of costs.

7. In support of its application for both indemnity costs and that those costs be paid by the defendant's former solicitor, the plaintiff has relied on the following matters.

8. The first is the history of this action, which I set out in Harkford v Coventry Square Construction [16] ‑ [37]. Counsel for the plaintiff submitted that there was a failure by the defendant to provide adequate details about its counterclaim and associated delays by the defendant in providing proper discovery. The plaintiff's requests for particulars of the counterclaim dated back to 3 July 2012. It was submitted that the defendant's former solicitor's conduct in responding to those requests demonstrated that the counterclaim was pleaded without the solicitor taking all reasonable and practical steps to ensure the defence was confined to issues that were genuinely in dispute. It was also submitted that the counterclaim had been brought merely to delay the plaintiff's action.

9. The second matter relied upon is a letter dated 21 December 2012 written by the defendant's former solicitor explaining the basis of the counterclaim.  In that letter the solicitor stated that the plaintiff's breach of contract delayed the defendant's completion of its contract with the owner of the markets, the owner of the markets alleges that it suffered loss of rental and loss of tenants by the consequent delay in opening for business, and the owner of the markets had 'lodged a claim' against the defendant for its alleged losses arising from the delay.  Later, in January 2013, in an affidavit in opposition to the strike‑out application sworn on behalf of the defendant by Michael Brooksby Holtham on 25 January 2013, he deposed that the owners were awaiting quantification of losses and 'they will be issuing proceedings against the defendant when that quantification is determined'.

10. Counsel for the plaintiff submitted that there is a major discrepancy between what was stated in the defendant's solicitor's letter of 21 December 2012 and what was subsequently disclosed when the affidavit of Mr Holtham was filed. Counsel for the plaintiff argued that the use of the words 'lodged a claim' in the 21 December letter necessarily indicated that proceedings had been commenced by the owners of the markets against the defendant. In support of this contention, counsel for the plaintiff referred to r 95 of the Magistrates Court (Civil Proceedings) Rules 2005 which defines the word 'lodge' as follows:

    95.'Lodge' meaning of

    In order to lodge a document with the court a person must lodge it in accordance with this part at the court registry referred to in rule 96 together with any fee required under the Magistrates Court (Fees) Regulations 2005. 

11. Accordingly it was submitted that there was no basis for the defendant's former solicitor's statement in the 21 December letter, and that the use of the words 'has lodged a claim' was an attempt to convince the plaintiff that it was not appropriate to apply to strike out the counterclaim. 

12. Finally, the plaintiff's counsel relied on observations made by Deputy Registrar Hewitt at the hearing of other applications brought by the plaintiff, in particular at the hearing of the plaintiff's application for specific discovery on 12 December 2012.  The deputy registrar said:

    I don't have any doubt that you're stonewalling.  And I have very little doubt that your counterclaim is entirely intended to just slow things up. 

13. From all of the above, counsel for the plaintiff submitted that it is reasonable to infer that the defendant had pursued its counterclaim simply to delay the plaintiff's action, the defendant had persisted in what should, upon proper consideration, be seen to be a hopeless counterclaim and there had been some element of improper or at least unreasonable conduct by the defendant's former solicitor.

14. I do accept that the plaintiff and its solicitors must have been considerably frustrated by the actions (or non-action) of the defendant and its former solicitor during 2012.  However, appropriate costs orders have already been made in each of the applications brought by the plaintiff in order to progress its action, apart from the last hearing before Deputy Registrar Hewitt on 12 December 2012, relating to discovery, where the costs order made was that the costs be reserved.

15. The costs order which I am asked to make relates to the strike‑out application by the plaintiff which was brought after that hearing on 12 December 2012.  The strike‑out application was brought two weeks after that hearing, after the correspondence of 21 December 2012, without any delay, and the application progressed fairly quickly. 

16. There is, in my view, no special or unusual feature in the strike‑out application which would entitle the plaintiff to an indemnity costs order.  The application was not unusually difficult or complex and counsel for the plaintiff has not identified any wasted costs or any cost incurred that would not be covered by an order for party/party costs.  Following Swansdaleand Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [20] ‑ [24] and [26], an order for indemnity costs would not be warranted.

17. As discussed in Swansdale and Quancorp Pty Ltd v MacDonald [1999] WASCA 101 [7], it is recognised that the court should not too readily categorise a case as hopeless. In determining the strike‑out application, I was required to proceed on the basis that the facts alleged in the counterclaim were true: Neilson v City of Swan [2006] WASCA 94 [18]. As I found in my decision in Harkford v Coventry Square Construction [63] ‑ [64] this was not a situation where the counterclaim was struck out because it disclosed no reasonable cause of action or was so clearly untenable that it could not possibly succeed.  On the basis of the pleadings as they stood, I formed the view that the defendant does have an arguable case that it suffered loss and damage recoverable at law. The ground upon which I struck out the pleading was that it would embarrass and delay the fair trial of the action because there was ambiguity in the way the claim for loss and damage was pleaded and an inadequacy in the material facts upon which the claim for loss and damage had been made.  Accepting the facts as alleged, it could not be said the defendant's counterclaim is 'hopeless', or that properly advised, it should have known that its counterclaim has no chance of success.

18. As to whether the defendant's former solicitor engaged in improper or unreasonable conduct in relation to the letter written on 21 December 2012, I do not consider a statement that the owner of the markets had 'lodged' a claim against the defendant to necessarily mean, in the context of that letter, that proceedings had been commenced by the owner. The letter went on to state, among other things, that 'the owner has told the defendants' that lost rent was $750,000, which indicates that the defendant had not yet received formal notification of the details of the claim. Nor do I consider that the word 'lodge' should be given the limited meaning, as the plaintiff's counsel has urged me to do, pursuant to r 95 of the Magistrates Court (Civil Proceedings) Rules.  The dictionary meaning of 'lodge' includes (Shorter Oxford English Dictionary, 6^th ed):

    d.Vest or represent as residing in a specified person or thing; place (power etc) with or in the hands of a person, or body.

    e.Deposit in court or with an official a formal statement of (a complaint, objection, etc); bring forward, allege (an objection etc). 

1. In my view, another interpretation of the expression to 'lodge' a claim would include bringing forward or making a claim, and not necessarily the commencement of court proceedings.  For example, in the area of insurance the expression 'lodge a claim' is often used to describe the making of a claim by an insured against an insurer.

2. In any event, if the statement in the former solicitor's letter of 21 December 2012 meant or was intended to convey the meaning that the owner of the markets had in fact commenced proceedings, that statement did not affect, nor could it have affected, the plaintiff's decision to bring the strike‑out application.  The pleadings relating to loss and damage were deficient on their face.  Whether or not the owner of the markets had in fact commenced proceedings against the defendants did not affect the outcome of the plaintiff's strike‑out application.

3. The cases where there has been a finding of improper or unreasonable conduct on the part of a solicitor, such as Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (No 2) (1997) 18 WAR 190 and White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169; Flower & Hart v White Industries (Qld) Pty Ltd (1999) 87 FCR 134; (2009) 163 ALR 744, involved a finding made after trial, when all the facts and circumstances and the merits of the defence were known. I do not consider that there is sufficient basis to make a finding that, in respect of the strike‑out application brought in December 2012 and heard before the deputy registrar, the defendant's former solicitor intentionally sought to mislead the plaintiff or created false issues, for tactical reasons, to delay the bringing of the strike‑out application.

4. In this regard it is relevant that before the hearing of the strike‑out application the defendant produced, annexed to the affidavit of Mr Holtham sworn 25 January 2013, a letter from the owner of the markets dated 14 February 2012 which set out a claim for delays in completion of the contract for the markets: Harkford v Coventry Square Construction [60]. There has been no suggestion that the bona fides of that letter should be doubted.

5. In all the circumstances, I am not satisfied that an indemnity costs order should be made, or that any costs order (whether indemnity or party/party costs) should be made against the defendant's former solicitor in relation to the costs of the strike‑out application initially heard before the deputy registrar.

6. The appropriate order is the usual order that the defendant pay the plaintiff's costs of the application on a party/party basis.

Plaintiff's further application to strike out the amended counterclaim

1. In my reasons in Harkford v Coventry Square Construction [71] ‑ [73] I found that it was incumbent upon the defendant to provide, as part of its pleading, all the necessary material facts and appropriate particulars so as to clearly identify the case for damages which it seeks to put at trial.  I discussed the material facts and particulars of damage that should be pleaded by the defendant in order for the plaintiff to know what case it had to meet.

2. The pleading of the loss and damage in the amended counterclaim in my view is still defective, in that the plaintiff still does not know what case it has to meet.

3. In the newly pleaded par 27 it is stated that 'pursuant to the head contract and variations thereto' the defendant was required to give practical completion of the works by 26 October 2011.  Details of the variations to the contract have not been provided.  The plaintiff needs to know what the variations to the contract were and when the date of practical completion was fixed. 

4. In par 28, in relation to the delay in the completion of the head contract, it is pleaded that practical completion of the head contract was given 51 days late and 50 days of that delay was caused by the conduct of the plaintiff.  No particulars are given as to how the 50 days is calculated and arrived at.

5. Further, the delay attributable to the plaintiff as pleaded in par 28 is inconsistent with the defendant's answers to the plaintiff's amended request for further and better particulars of its defence dated 6 August 2012, where the delay attributed to the plaintiff was pleaded to be 21 days.  In addition, it had previously been stated by the defendant that another contributing cause for delay of the head contract was the completion of works in the carpark and, in fact, the defendant has commenced separate proceedings against the carpark contractor (see Harkford v Coventry Square Construction [60], [61] and [73](b)). The present pleading in par 28 as to the extent of the delay should not be allowed to stand in light of the inconsistency with the defendant's previous particulars of the delay attributable to the plaintiff: Briggs v Curtis Quick & Associates [1999] WASCA 139 [28].

6. It is then pleaded, in par 29, that the plaintiff's conduct kept the defendant mobilised on site for that 50 days and caused the defendant to incur extra costs and expenses.  No particulars of the costs and expenses are set out and there is a general pleading that these will be the subject of expert evidence. 

7. This is a new claim that the defendant itself had incurred additional site costs and expenses by reason of the plaintiff's alleged delay of 50 days.  As I explained in Harkford v Coventry Square Construction [73](c) proper notice must be given of all heads of damage and, to the extent that a head of damage is capable of calculation, the calculations must also be provided. In par 29 there is a complete absence of any particulars of heads of damage.

8. It has been submitted that the particulars are properly the subject of expert evidence by way of a critical path analysis, however, it is clear that the defendant has not prepared any critical path analysis.  I was advised by counsel for the defendant that no expert has yet been retained, even though the counterclaim was first pleaded over a year ago.

9. Finally it is claimed, in par 30, that the owner of the markets has claimed losses caused by the late opening of the markets.  The defendant has still not identified the basis upon which it is or may be liable to the owner of the markets.  The defendant has failed to plead the relevant terms of the head contract.  For example, is the defendant's liability under the head contract pursuant to a liquidated damages clause or some other clause of the head contract, or on some other basis? As was suggested at the latest hearing before me, the defendant is attempting in its counterclaim to set up a contingent or prospective liability, however, that has not been properly pleaded.

10. In my view the plaintiff is no wiser, and the counterclaim is no further advanced, then when the original paragraphs of the counterclaim dealing with loss and damage were struck out by me on 3 May 2013.

11. The amended counterclaim remains defective and pars 27 ‑ 30 must be struck out.

12. At the hearing of this application I suggested to the parties that they consider whether the counterclaim could be severed from the action so that the plaintiff's action can proceed without further delay.  The parties agreed to confer and advise me after the hearing whether some agreement as to that could be reached.  No agreement could be reached.  That is understandable given that the counterclaim is really bound up with the issues in the plaintiff's claim.

13. I then requested the parties to provide me with further written submissions on whether, and if so on what terms, the defendant should be granted further leave to amend the counterclaim should it be struck out.  I have received and had regard to further written submissions from each of the parties on this issue.

14. The plaintiff has urged me not to give further leave to amend, particularly given the delay in the action and the fact that the defendant should have, but has not, obtained expert evidence.  The submission has been made that if the defendant is allowed further time to try and formulate a pleading which complies with the rules of pleading, it is more than likely that the defendant will not do so and further injustice will be visited upon the plaintiff.

15. Having considered the matter carefully, including case flow management principles and the principles set out in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175, I have decided that notwithstanding the difficulties for the plaintiff, in the exercise of my discretion I should give the defendant a further opportunity to amend, for the following reasons.

16. First, as I found in my decision in Harkford v Coventry Square Construction and set out in [24] above, this was not a situation where the counterclaim was struck out because it disclosed no reasonable cause of action or was frivolous or vexatious.  Accepting the facts as alleged and also taking into account the other information before me, in particular the letter of demand from the owner of the markets dated 14 February 2012, it could not be said that the counterclaim is 'hopeless' or there is no basis for the claimed loss and damage.

17. Secondly, although there has been delay in the action, there has been no entry for trial or trial dates allocated.  There is therefore no risk to trial dates or matters affecting the public interest in the sense of allocation of the resources of the court, nor is this a situation where, if leave is granted, this would cause confidence in the court system to be undermined: Aon Risk Services Australia Ltd v Australian National University [5], [24], [27] and [35] (French CJ), [111], [113] and [114] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).

18. Thirdly, I must be cautious not to do an injustice by summary dismissal of the defendant's counterclaim, thus depriving it of the opportunity to have its case determined at trial: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, 129 ‑ 130; Aon Risk Services Australia Ltd v Australian National University [98], [102]; see also Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 [24] (French CJ and Gummow J), [55] (Hayne, Crennan, Kiefel and Bell JJ). As was stated by Lindgren J in White Industries Australia Ltd v Federal Commissioner of Taxation (2007) 160 FLR 298 [47] relating to Federal Court rules dealing with deficient pleadings and the power to strike them out, (reproduced with approval by French CJ and Gummow J in Spencer v The Commonwealth [23]):

    [E]vidence may disclose that a person has or may have a 'reasonable cause of action', or 'reasonable prospects of success', yet the person's pleading does not disclose this.  In such a case O 11, r 16 empowers the court to strike out the pleading but … s 31A(2) would not empower the court to give judgment for the respondent against the applicant.  A failure after ample opportunity to plead a cause of action may suggest that none exists and therefore that the applicant has no reasonable prospects of success, but the existence of a reasonable cause of action and the pleading of a reasonable cause of action remain distinct concepts. (Italics my emphasis)

19. Fourthly, if I was to strike out the counterclaim without giving leave to amend, it would be open to the defendant to commence new proceedings against the plaintiff.  The counterclaim by the defendant is not yet time barred.

20. Finally, if there is a possibility that a defect in a pleading may be made good, the Court should allow the party to re‑plead unless the proceedings themselves are vexatious : Coe v Commonwealth (1979) 24 ALR 118, 132; 53 ALJR 403, 409.

21. I should record that given the deficiencies in the amended counterclaim in the pleading of loss and damage and the failure of the defendant to obtain any expert evidence, it might be said that the defendant is, in the deputy registrar's words, 'stonewalling'.  However, in my view, the point has not yet been reached where the Court is able to conclude that because the defendant has failed to properly plead its loss and damage, its counterclaim has no merit and it should be summarily dismissed.  I am of the opinion that at this stage it is necessary to give the defendant a final opportunity to amend in order to avoid a possible injustice.

22. In my view, the plaintiff's concerns about the delay in this action can be overcome by the strict timetabling of amendments to the pleading, the preparation of a Scott schedule or critical path analysis and the exchange of expert evidence.

23. If the defendant is still unable to formulate an adequate pleading after being given this further opportunity, or does not comply with the timetable for the provision of the Scott schedule or the expert evidence, I would anticipate that an appropriate order dismissing the defendant's counterclaim may be made. 

24. I will hear from the parties as to the terms of the orders which should be made, including appropriate costs orders.