Hyatt v BHP Biliton IRON-ORE Pty Ltd - [2010] WADC 131

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: HYATT -v- BHP BILITON IRON-ORE PTY LTD & ANOR [2010] WADC 131

CORAM: DAVIS DCJ

HEARD: 2 SEPTEMBER 2010

DELIVERED : 3 SEPTEMBER 2010

FILE NO/S: CIV 34 of 2009

BETWEEN: MICHAEL JOHN HYATT
Plaintiff
AND
BHP BILITON IRON-ORE PTY LTD
Defendant
ALLIANCE AUSTRALIA INSURANCE LTD
Third Party

Catchwords:

Practice and procedure - Late application to amend reply - Whether proposed amendment to reply introduces a new cause of action - Whether amendment should be allowed - Late application for leave to adduce expert evidence

Legislation:

Insurance Contracts Act 1984 (Cth), s 37
Trade Practices Act 1974 (Cth), s 52, s 53, s 87

Result:

Application for leave to amend reply dismissed
Application for leave to adduce expert evidence allowed

Representation:

Counsel:

Plaintiff:     Mr D V Brand
Defendant:     Ms B A Mangan
Third Party                   :     Dr J T Schoombee

Solicitors:

Plaintiff:     Bradley Bayly Legal
Defendant:     WHL Legal Pty Ltd
Third Party                   :     SRB Legal

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

ABB Service Pty Ltd v Hetherington [2001] WASCA 235
Aon Risk Services Australia Ltd v Australian National University (2009) 258 ALR 14
Bank of America Australia Ltd v Ceda Jon International Pty Ltd (1988) 17 NSWLR 290
Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215
Girando v Padbury (1919) 22 WALR 7
Gumana v Northern Territory of Australia (2005) 218 ALR 292
Johnson Tiles Pty Ltd v Esso Australia Ltd (2001) ATPR 41-794
Ritz Hotel Ltd v Charles of the Ritz Ltd (No 7) (1987) 14 NSWLR 204
SH Lock (Australia) Ltd v Kennedy (1988) 12 NSWLR 482
Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323
University of Western Australia v Gray (No 17) [2007] FCA 924
Weal v Bottom (1966) 40 ALJR 436
Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290

DAVIS DCJ: Yesterday, 2 September 2010, I heard two applications, one to amend pleadings and the other for leave to adduce expert evidence, brought by the defendant in this action, BHP Billiton Iron‑ore Pty Ltd. These applications are urgent, as this action is listed for trial to commence on 13 September 2010, less than two weeks away.

Background to these applications

The action involves a claim for damages made by the plaintiff, Mr Hyatt, following injuries he suffered on 16 January 2006 in the course of his employment when working on a mine‑site known as Area C Mine‑site at Newman, Western Australia.
Mr Hyatt was employed as a serviceman for Capena Contracting Pty Ltd, formerly known as Henry Walter Eltin Constructing Pty Ltd, however Mr Hyatt did not sue his employer, Capena. Mr Hyatt sued the defendant, BHP Billiton, the owner and occupier of the mine‑site, as Mr Hyatt's "deemed" or "principal" employer.
BHP Billiton commenced third party proceedings against Capena, however, these were not pursued after Capena went into administration. BHP Billiton also commenced third party proceedings against Allianz Australia Insurance Limited, Capena's insurer. BHP Billiton claimed that it was entitled to indemnity for Mr Hyatt's claim pursuant to a Principal's Indemnity Extension in the workers' compensation and employer's liability insurance policy taken out by Capena with Allianz.
There is an issue in the third party proceedings between BHP Billiton and Allianz as to whether the Principal's Indemnity Extension in Capena's insurance policy with Allianz extends to cover BHP Billiton for any liability it may have at common law for Mr Hyatt's injuries and consequential damages. Allianz says that the policy does not so extend. In its defence to the statement of claim in the third party proceedings, filed 23 February 2010, Allianz has pleaded that if the policy does so extend, Allianz's liability to indemnify BHP Billiton is limited to whatever damages Mr Hyatt could have obtained had he sued his employer, Capena. In respect of a claim by Mr Hyatt against Capena there are limitations and restrictions on the awarding of damages against an employer set out in Pt IV Div 2 of the Workers' Compensation and Injury Management Act 1981. Allianz relies on the terms and conditions set out in the Principal's Indemnity Extension in the policy which include the following:
1.The principal (BHP Billiton) shall comply with and be subject to the terms, conditions, limitations and exclusions of the policy as though the principal were the insured;
2.The limit of liability of the insurer (Allianz) to the principal shall not exceed any aggregate of that sum which is the total liability that the employer (Capena) would have paid to the worker (Mr Hyatt) directly or indirectly had the worker only sued the employer and had the principal not been a party to the action or any subsequent or related action (cl 2, which the parties have referred to as "the limit of liability" clause); and
3.The limit of liability shall not be increased irrespective of the order or manner in which proceedings are brought nor as a consequence of whatever causes of action exist.
Allianz's position as pleaded is that had Mr Hyatt sued only Capena the provisions of the Workers' Compensation and Injury Management Act, in particular s 93K, would have the effect that Capena would not have been liable for any damages to Mr Hyatt. Accordingly the relevant limit of liability for the purpose of the Principal's Indemnity Extension is nil.
On 23 April 2010 BHP Billiton filed a reply to Allianz's defence in which BHP specifically pleaded that the restrictions in awarding damages pursuant to the Workers' Compensation and Injury Management Act could not be relied on by Allianz to avoid liability to BHP Billiton as principal under Capena's policy. It was pleaded that the terms of the policy relied on by Allianz were not of the kind usually included in contracts of insurance of this type and BHP Billiton was not informed of those terms. Consequently because of the operation of s 37 of the Insurance Contracts Act 1984 (Cth) Allianz is unable to rely on the terms to avoid liability to indemnify BHP Billiton.
On 11 August 2010 BHP Billiton brought an application for leave to amend its reply to Allianz's defence in the third party proceedings. That application was originally listed to be heard on 23 August 2010 and was adjourned to a special appointment hearing. Also listed for hearing at the same time was an application dated 27 August 2010 brought by BHP Billiton for leave to adduce expert evidence.
The trial dates in this matter were allocated at a listing conference held immediately after an adjourned pre‑trial conference which took place on 15 March 2010. Only the third party proceedings between BHP Billiton and Allianz will now be proceeding to trial on 13 September 2010, however, as at the hearing of these applications I was informed that BHP Billiton had reached a settlement with Mr Hyatt.

Application to amend the reply

I will deal first with BHP Billiton's application for leave to amend its reply. There are amendments proposed to reflect the fact that third party proceedings against Capena are no longer pursued and the only third party proceedings are those brought by BHP Billiton against Allianz. The substantive amendments proposed to the reply are to add three new paragraphs raising a contravention by Allianz of s 52 and s 53 of the Trade Practices Act 1974 (Cth). In par 5.5 it is claimed that Allianz has engaged in conduct that was misleading or deceptive or likely to mislead or deceive. It is pleaded that Allianz "misrepresented to Capena or to the defendant", in effect, that the policy extended to indemnify the defendant for liability arising out of injury to persons employed by Capena, including liability by statute and at common law. That same matter is pleaded in a par 5.6 as a false representation made by Allianz "to Capena or to the defendant". Paragraph 6 pleads that by operation of s 52 and s 53 of the Trade Practices Act, Allianz may not rely on the alleged terms of the Principal's Indemnity Extension in the Capena policy.
When considering whether it is just to grant leave to amend, the starting point is that the Court will not grant leave to a party to make an amendment in a form which would be struck out or which is embarrassing or does not disclose a reasonable cause of action. Even if the proposed amended pleading does disclose a reasonable cause of action, where the application for leave to amend is brought at a late stage in the proceedings, particularly just before trial, whether to grant leave to amend is discretionary, and considered taking into account and balancing a number competing factors. These are:
1.the reasons for delay in making the application;
2.the prejudice to the applicant if leave is not granted;
3.the prejudice to the other party or parties if leave is granted; and
4.the impact on the public interest if leave is granted.
See Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290; Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323.
Allianz opposes BHP Billiton's application for leave to amend on a number of grounds. First, it is submitted that the proposed amendment raises a new cause or causes of action which cannot be introduced in a reply. Secondly it is submitted that the pleading is flawed, vague and embarrassing. Finally, issues of the lateness of the application and prejudice to Allianz have been raised.
I agree with Allianz's submission that proposed amendments pleading the Trade Practices Act claims cannot be introduced in the reply. It is well established that a reply may not raise any new cause of action: see Seaman, "Civil Procedure Western Australia" at [20.5.1]; see also University of Western Australia v Gray (No 17) [2007] FCA 924 per French J at [20] and [42]. If a new cause of action is to be raised, the proper course is to amend the statement of claim.
There are circumstances when it would not be proper to plead a matter in a statement of claim because to do so would be to anticipate the defence: Girando v Padbury (1919) 22 WALR 7 at 8. For example, it is not possible to raise in a statement of claim that the plaintiff has complied with limitation periods or the Statute of Frauds. If those matters are raised in the defence, the plaintiff's compliance ought to be pleaded in the reply. It is also permissible to raise in the reply new matters such as estoppel, in order to answer matters raised in the defence.
In my view a claim brought pursuant to s 52 or s 53 of the Trade Practices Act is not in the same category as the examples I have just given. Such a claim based on any conduct on the part of Allianz is a matter which ought properly be pleaded in the third party statement of claim.
It was argued before me by counsel for BHP Billiton that the claims pursuant to s 52 and 53 of the Trade Practices Act were intended to be raised as a shield, not a sword. As conduct which is not permitted under the Trade Practices Act has been engaged in by Allianz, then by virtue of the Trade Practices Act, Allianz cannot rely on that conduct. This pleading in the reply was, as I understood counsel's submission, akin to a defence of illegality. There are, in my view, two difficulties with this. First, a contravention of s 52 or s 53 of the Trade Practices Act does not give rise to any issue of illegality: Bank of America Australia Ltd v Ceda Jon International Pty Ltd (1988) 17 NSWLR 290; SH Lock (Australia) Ltd v Kennedy (1988) 12 NSWLR 482 at 494. Secondly, damages is an element of a claim for misleading or deceptive conduct or false representation pursuant to the Trade Practices Act: see Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222. Relief other than damages can only be ordered if the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by the conduct engaged in by another person in contravention of the Trade Practices Act: see s 87 of the Trade Practices Act.
There are other difficulties with the proposed pleading of the claims pursuant to s 52 or s 53 of the Trade Practices Act.
To claim for misleading or deceptive conduct under s 52 of the Trade Practices Act the original indorsement on the writ (or in this case, the third party notice) must contain details of the alleged representation and sufficient information to link the defendant to the representation said to have been made, what is said to be the subject matter of the representation, the manner (writing, oral or implied) in which the representation is said to have been made, the plaintiff’s receipt of or reliance on or knowledge of the representation, and the damage arising from the representation: see ABB Service Pty Ltd v Hetherington [2001] WASCA 235 per McLure J at [13] to [17].
The statement of claim must begin by identifying the conduct, whether it is by act or omission, and the facts relied upon to give it the character of misleading or deceptive conduct. Conduct is misleading or deceptive if it induces or is capable of inducing error. No conduct can mislead or deceive unless the representee labours under some erroneous assumption; in other words, the representee must be led into error: see Johnson Tiles Pty Ltd v Esso Australia Ltd (2001) ATPR 41-794 per French J at [61] to [67] and in particular at [63].
Further, as I have already noted, damages must be pleaded. It is not sufficient simply to allege loss and damage as a result of the alleged contravention of the Trade Practices Act. It is necessary to plead material facts to identify a causal connection between the impugned conduct and such loss as is said to have been suffered: see Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (supra) at 222.
In the proposed amendments to the reply, it is not pleaded how the misrepresentation in par 5.5 or the false representation in par 5.6 was made, whether it was something said or left unsaid – and if it was something said, whether that was done in writing or some other way and the substance of what was said. It is not pleaded when the misrepresentation or false representation was made. BHP Billiton's receipt of or knowledge of the misrepresentation or false representation has not been pleaded in either of the par 5.5 or par 5.6. So far as reliance is concerned, it is pleaded only that "Capena or the defendant" relied on the misrepresentation or false representation. There are no details as to how BHP Billiton so relied, or to put it as expressed in Johnson Tiles Pty Ltd v Esso Australia (supra) how BHP Billiton was led into error. In fact it is pleaded that "the defendant will provide further particulars of how the [misrepresentation or false representation] was made to Capena or the defendant and how reliance was placed on the false representation upon discovery of the third party's relevant underwriting files". Finally, there is no pleading of the damage suffered.
In my view, the proposed Trade Practices Act claims are impermissibly contained in a reply, and in any event they are in a form which ought to be struck out because, as presently pleaded they disclose no reasonable cause of action, are vague and embarrassing. Allianz, on the basis of these proposed pleadings, would be unable to know what case under the Trade Practices Act it had to meet at trial.
I turn now to the discretionary factors relevant to the consideration of whether leave to amend ought to be granted. On the affidavit material there is in my view no adequate explanation as to the delay in bringing the application for leave to amend the reply, particularly as BHP Billiton was aware well before filing of the reply in April 2010 of the stance which Allianz was taking with respect to the construction of the Principal's Indemnity Extension. There is evidence, in the form of a letter dated 3 November 2009 from its solicitors to Allianz's solicitors, that BHP Billiton was aware of Allianz's reliance on the terms of the Principal's Indemnity Extension in order to deny indemnity to BHP Billiton. There is no explanation as to why the possibility of a claim under the Trade Practices Act was not addressed at that stage, or later addressed at the stage of the filing of the reply in April 2010. It was submitted by counsel for BHP Billiton that delays in discovery of documents from Allianz can go some way in explaining the delay, however, BHP Billiton gave notice to Allianz of its proposed claim by a letter dated 24 June 2010 from BHP Billiton's solicitors to Allianz's solicitors. There is evidence that on 2 July 2010 BHP Billiton filed an amended third party notice to include a claim pursuant to the Trade Practices Act. That was filed without leave, and therefore does not stand as the third party notice (and the information in that third party notice is insufficient in any event: see ABB Service Pty Ltd v Hetherington (supra) at [12]). However, it does indicate that BHP Billiton had instructed its solicitors in relation to a claim under the Trade Practices Act, at that time. There is in my view no adequate explanation of the delay after 24 June 2010 in bringing this application.
Even if the proposed pleading was in an acceptable form, I am not satisfied that I should grant leave because of the very late stage at which this application is made and the absence of an adequate explanation as to the delay in making the application.
While the ultimate aim of the court is the attainment of justice, I must bear in mind what McLure JA said in Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (supra) at [93] that a late grant of leave to amend is not invariably in the interests of justice of the case. Justice McLure was critical of the common practice of applying for late amendments of pleadings and stressed the importance of filing an affidavit in support of such an application explaining the delay in raising the proposed amendment.
I also need to bear in mind the recent principles relating to applications to amend and adjourn set out by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 258 ALR 14. Allianz is entitled to a just resolution of the issues in this action with minimum delay. The proper exercise of my discretion also involves my taking into account inefficiencies in the use of the court as a publicly funded resource arising from the vacation or adjournment of trials as well as the need to maintain public confidence in the judicial system. If an amendment is allowed to introduce a new cause of action, this in my view is likely to necessitate an adjournment of the trial.
For these reasons I dismiss the application by BHP Billiton to amend its reply. I will hear from the parties on the issue of costs.

Leave to adduce expert evidence

In support of the application for leave to adduce expert evidence, an affidavit has been sworn by Nicole Lara Levy on 26 August 2010. The expert opinion which BHP Billiton seeks to adduce at trial relates to the opinion of an insurance broker as to, whether having regard to industry standards and practice, the limit of liability clause in the Principal's Indemnity Extension is unusual for the purpose of s 37 of the Insurance Contracts Act. The broker's opinion might also be obtained as to the meaning of terms in the limit of liability clause, as used in the insurance industry.
I discussed with counsel at the hearing whether, in relation to the first issue in particular, evidence of industry standards and practice is in fact opinion evidence for which leave is required pursuant to Supreme Court Rules 1971 O 36A. The insurance broker will to some extent be giving evidence of insurance industry practice or the trade, custom and usage of the terms of the Principal's Indemnity Extension relied upon by Allianz. Although that is often referred to as "expert" evidence, because it will be given by someone with experience, it will be evidence of a fact within the witness' experience or observation and may not require the expression of an opinion: see Weal v Bottom (1966) 40 ALJR 436 at 438-439; Ritz Hotel Ltd v Charles of the Ritz Ltd (No 7) (1987) 14 NSWLR 204; Gumana v Northern Territory of Australia (2005) 218 ALR 292 at [155] to [160]. Nonetheless both Counsel considered that some of the matters to be addressed by the broker may require the expression of an opinion, as to which Allianz ought to be provided notice before the trial.

I therefore proceed on the basis that the evidence from the insurance broker proposed to be called by BHP Billiton will, to some extent, contain opinion evidence and for this purpose leave will be required.
There has been, once again, no adequate explanation for the delay in making this application. The first approach made to the insurance broker was not made until 2 August 2010. Some reliance has been placed on the request from Allianz for discovery of its underwriting file and the fact that this underwriting file, at the time of the swearing of the affidavit in support of this application, had not yet been produced. I have difficulty in accepting that the ability of BHP Billiton to obtain evidence relating to whether the limit of liability clause is unusual was dependent on obtaining discovery of Allianz's underwriting file. The affidavit states, however, that the insurance broker can provide an opinion, on the available documents, on or before 3 September 2010. I was advised by counsel at the hearing yesterday that the Allianz underwriting file has now been produced and the insurance broker should be able to provide the opinion on all aspects by 3 September 2010.
The application for leave to adduce this expert evidence is opposed by Allianz. An affidavit of Brian Ullinger sworn 27 August 2010 sets out that the solicitors for BHP Billiton first notified Allianz's solicitors of the intention to adduce expert evidence by way of a letter dated 23 August 2010. It is stated that Allianz has, at this stage, had insufficient time to consider that expert evidence and obtain its own expert opinion. There are no details in this affidavit regarding whether attempts have been made to obtain an expert who may be prepared to address those issues after 3 September 2010 or any other evidence which shows that Allianz would be prejudiced if the expert evidence proposed by BHP Billiton was permitted to be led at the trial.
Notwithstanding the delay and the inadequate explanation for the delay in bringing this particular application, I need bear in mind that both parties have been aware for some time of BHP Billiton's argument that the terms in the Principal's Indemnity Extension relied on by Allianz are said to be unusual. Allianz has, in my view, had adequate time to investigate this issue and has known that it will need to address this at trial. The submission was put to me that it is BHP Billiton who bears the onus of proving that the terms are unusual. That is so, but I do not accept that this means that Allianz was relieved of the obligation to address this issue in the course of its preparation for trial (and the affidavit of Mr Ullinger does not suggest that this issue has not been addressed). There is nothing to suggest that appropriate evidence could not obtained and led by Allianz at the trial listed to commence on 13 September 2010.
In my view the justice of the case does require that, notwithstanding the lateness of the application brought by BHP Billiton, it ought to be allowed to adduce this evidence from an insurance broker. This is an important matter from BHP Billiton's point of view and it ought not be deprived of the right to lead its proposed evidence. Unlike the application for the amendment of the reply, Allianz is in a position that it does know about this issue and what it has to meet at trial. In my view, on the materials before me, there is no reason why the granting of the application will prejudice Allianz or cause an adjournment of the trial. I will therefore allow this application.
I will hear the parties as to the orders which I should make, as well as the issue of costs.