Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd

The Supreme Court of New South Wales, Court of Appeal, considered an application for leave to appeal against a refusal to grant leave to amend pleadings. The applicant, Illawarra Hotel Company Pty Ltd, had filed a cross-claim seeking damages for delays to works on hotel premises. The applicant leased these premises to third parties and had initially claimed loss of rent by reference to these leases. The proposed amendment sought to add an alternative claim for loss of profits.

The central legal issues before the Court of Appeal were whether the proposed amendment to the pleadings lacked a sufficient factual foundation and whether the claim for loss of profits was legally available to the applicant, notwithstanding the existence of the leases to third parties. Essentially, the court had to determine if the applicant could pursue a claim for loss of profits as an alternative to its claim for loss of rent, and if the evidence supported such a claim.

McColl JA and Macfarlan JA, in their respective judgments, found that the proposed amendment lacked the necessary factual foundation to support a claim for loss of profits. Their Honours reasoned that the applicant's contractual relationship was with its tenants, and the loss flowing from the delay was demonstrably the loss of rent under those leases. The court held that a claim for loss of profits was not open to the applicant in these circumstances, as it would require a different factual basis and a different legal analysis than that which underpinned the existing claim for loss of rent. The application for leave to appeal was therefore dismissed with costs.