In Base Investments v Hammer (Ruling No 1)
[2022] VCC 164
•23 February 2022
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BANKING AND FINANCE LIST
Case No. CI-20-03113
| In Base Investments Pty Ltd & Anor | Plaintiffs |
| v | |
| Sharon Hammer Investments Pty Ltd & Anor | Defendants |
| And | |
| Keith William Blackney | Third party |
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JUDICIAL REGISTRAR: | Muller | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14 February 2022 | |
DATE OF RULING: | 23 February 2022 | |
CASE MAY BE CITED AS: | In Base Investments v Hammer (Ruling No 1) | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 164 | |
RULING
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | S Hibble | DSA Law |
| For the Defendants | M Bearman | Hall & Wilcox |
| For the Third Party | K Moorhouse Perks |
THE JUDICIAL REGISTRAR:
Summary
1I have determined to grant the adjournment of the trial sought by the defendants and allow the defendants leave to amend their pleadings. My reasons for doing so follow below.
2If necessary, I will also order that this proceeding be heard and determined together with proceeding CI-21-03857 although if there is way to streamline the matters then the parties are encouraged to do so.
3I direct that the parties confer and provide minutes of consent orders for the further conduct of the proceedings and in respect of costs. If consent is not achievable, then parties are to file and serve proposed orders and submissions of no more than 5 A4 pages by Monday 7 March 2020.
Reasons
4On about 14 July 2020, In Base Investments Pty Ltd and Drosten Pty Ltd issued proceedings against Sharon Hammer Investments Pty Ltd (SHI) and Sharon Lee Hammer claiming repayment of moneys and possession of a property in the name of SHI pursuant to a loan agreement dated 10 September 2015 between the plaintiffs as lenders, SHI as borrower and Hammer as guarantor.
5At the time of issue, the monetary claim was said to be $299,095.02 with interest continuing pursuant to the loan agreement and indemnity costs pursuant to the loan agreement. Alternatively, the plaintiffs claimed restitution in the sum of $166,000, interest pursuant to statute and costs on a standard basis.
6A defence was filed on 8 September 2020. It was prepared by the second defendant but clearly intended to be a defence for both defendants. However, because SHI had not appointed a lawyer to act on its behalf, the registry rejected an attempt to file a defence for it.
7On 15 September 2020, standard timetabling orders were made, including setting the matter down for trial on 16 June 2021 on an estimate of 2 sitting days. The following day, further orders were made on the Court’s own motion extending time for the first defendant to file and serve a defence and providing that any application by the first defendant for leave to be represented otherwise than by a solicitor must be made by 21 September 2020.
8However, the latter part of the order was surpassed when on 24 September 2020, Hall & Wilcox commenced acting for both the first and second defendants.
9On 5 February 2021, Hall & Wilcox filed a third party notice on behalf of second defendant directed to Keith William Blackney. Blackney filed a defence to the third party claim on 15 March 2021.
10On 27 May 2021, the Court made orders based on proposed minutes of consent order including vacating the trial and refixing it for trial on 2 March 2022.
11The plaintiffs apparently made discovery in around April 2021, although that is not clear from an examination of the Court file. The third party made discovery by about 31 May 2021.
12A mediation was held on 19 April 2021. It was unsuccessful. The defendants’ lawyers say that various internal matters then caused some delay between the conclusion of the mediation and around the start of August 2021 when counsel were retained. I note that Hall & Wilcox are acting pro bono for the defendants. They did not submit or suggest that this meant they were to be held to any lesser standard, but I do accept that it means things such as securing counsel may take longer than if a client was retaining lawyers on the usual fee-paying basis.
13At this point, a series of events transpired. The defendants’ lawyers become concerned that, as the sixth anniversary of the loan would occur on 10 September 2021, any claims based on pre-contractual conduct could become statute barred on or before that date. On the advice of counsel, a writ supported by an indorsement of claim was prepared and on 9 September 2021 filed in a new proceeding, CI-21-03857. The plaintiffs and the third party in this proceeding, are named defendants in the new proceeding. The writ and indorsement of claim was not, and has not, been served. In addition to not serving, the defendants did not inform either the plaintiff or the third party that they had issued the new proceeding. No satisfactory explanation was given for not so doing, even though the defendants’ solicitors foreshadowed to the plaintiffs’ solicitors in correspondence on 16 November 2021 that they may seek leave of the Court to amend the pleadings in this proceeding.
14The defendants’ solicitor, Graydon Dowd, said that after the new proceeding was filed, counsel were instructed to draw and settle a statement of claim in the new proceeding to state full and in proper form the allegations raised by the Indorsement of claim and which might later be relied upon in lieu of a counterclaim, an amended third party claim and other third party claims in this proceeding, as well as fully identifying and pleading matters pertaining to an amended defence.[1]
[1] Dowd affidavit dated 11 February 2022 at [31]
15The defendants also submitted that it was necessary for them to obtain the probate file for Hammer’s late father, George Hammer. It was not clear to me why the probate file was necessary, but it was ultimately obtained on 21 November 2021. I accept that the Covid-19 restrictions which were in force for a significant period of the time between late July and mid-November contributed to the delay in obtaining the probate file.
16I also accept that further delays were caused by counsel availability, health issues arising from the Covid-19 pandemic and people taking leave during the summer period. I also accept that it was a difficult pleading to draw.
17Ultimately, a statement of claim in the new proceeding was completed on 8 February 2022 along with a proposed amended defence.[2] It was not until 9 February 2022 that the defendants informed the plaintiffs and the third party of their intention to file a summons seeking that the trial be adjourned and 11 February 2022 that the writ and indorsement of claim was provided in the new proceeding.
[2] Dowd [32]-[40]
18A statement of claim has now been filed in the new proceeding. It pleads detailed allegations against the third party and the plaintiffs that if upheld at trial would provide a complete defence to the plaintiffs’ claim. However, it also raises questions about Hammer’s standing to bring the claim and whether she is accountable to other beneficiaries in respect of matters arising from her father’s will. Those matters strike me as mostly to be resolved on the defendants’ (in this proceeding) side of the fence.
19On 11 February 2022, I permitted the defendants to file and serve their summons to be made returnable on 14 February 2022 at what was the listed time for the pre-trial directions hearing. The summons filed seeks a number of orders but they can be distilled to this: Should the trial be adjourned and the defendants permitted to file and serve an amended defence and counterclaim in this proceeding?
20The plaintiffs and the third party oppose this course and say the matter should proceed to trial on the current pleadings. Despite the short notice, affidavits were filed on behalf of the plaintiffs and the defendants and submissions provided by the third party and the parties informed me at the commencement of the hearing that they were ready to proceed. At the end of the hearing, I gave leave for the parties to provide further written submissions addressing the cases relied upon the by the plaintiffs and to put on evidence of the value of the properties over which the plaintiffs claim a mortgage. Both the defendants and the third party provided further submissions and the third party provided a Land Use Victoria Valuation report stating the site value, capital improved value and net annual value of one of the properties. The Land Use Victoria Valuation is of no use in this matter as it does not give any indication of the likely market value of the property over which the plaintiffs have a mortgage.
21At the hearing before me, counsel for the plaintiffs submitted that the orders sought by the defendants should not be allowed because:
(a) the defendants were radically out of time for their amending pleadings;
(b) the defendants had not provided a proper explanation for their delay;
(c) the statement of claim in the new proceeding is defective and raises further difficulties for the defendants, including that they may not be the proper parties to seek relief in the new proceeding;
(d) to allow the adjournment and repleading would cause prejudice to the plaintiffs who, if successful will be entitled to recover a debt that was due 25 September 2016;
(e) it is a “smack in the face of the Court” for the defendants not to have informed the Court in September 2021 of what they were proposing, or considering;
(f) the matter should not be delayed because there is a matter reserved in the High Court that might have an impact on the law applicable to this matter (and further that it had not been developed in submissions by the defendants what our how the High Court’s judgment might affect this matter). I accept this submission and I have not factored it when weighing the competing considerations.
22In the alternative, counsel for the plaintiffs submitted that if the trial was adjourned and leave was granted there should be a costs order in favour of the plaintiffs that was taxable forthwith. I was not taken to authority in support of this submission which is to say there was no authority guiding me on why I should displace the usual order made pursuant to r 63A.20.1. I am also mindful of the difficulty at this juncture of determining what costs are in fact thrown away if an adjournment is granted and leave given to file amended pleadings.
23In support of these submissions, counsel for the plaintiffs relied on:
(a) Keegan v Auscool Airconditioning & Mechanical Services Pty Ltd (Ruling No 1) [2020] VSC 61, in particular paragraphs 10, 12 and 15; and
(b) Limin James Chen & Anor v Kevin McNamara & Son Pty Ltd & Anor [2013] VSC 539 at paragraph 76.
24Keegan at [12] merely sets out the objects in section 9(1) of the Civil Procedure Act 2010 to which I must have regard. At [15], Richards J sets out the considerations identified by the Court of Appeal in Northern Health v Kuiper [2015] VSCA 172 at [28] as being relevant to this kind of application.
25I have regard to each of these matters. I also have regard to what the High Court stated in AON Risk Services Australia Pty Ltd v Australian National University (2009) 239 CLR 175 that an application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. All matters relevant to the exercise of the power to permit an amendment should be weighed. In seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.[3]
[3] AON at [111]-[113]
26In AON, the High Court held that:
… a just resolution of proceedings remains the paramount purpose of r.21 [of the Court Procedure Rules 2006 ACT[4]); but what is a ‘just resolution’ is to be understood in the light of the purposes and objectives stated. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and costs are taken into account.[5]
[4] r.21 is stated in similar terms to s 7 of the Civil Procedure Act
[5] AON [98]
27The Court of Appeal stated it this way:
… the primary question still remains: what do the interests of justice dictate? AON reminds courts that ‘the prism through which these interests are viewed is wider than just that of the moving party.[6]
[6] Northern Health at [33]
28Chen was a case where the plaintiffs were seeking leave to appeal one or more questions of law arising under an award made pursuant to s 38 of the Commercial Arbitration Act 1984 (Vic). The paragraph relied on by the plaintiffs at [76] stands for the proposition that the obligations under the Civil Procedure Act must be taken seriously by litigants and their lawyers. In that case, Croft J found, on the balance of probabilities, that the plaintiffs had breached their overarching obligations as set out in s 25 of the Civil Procedure Act. Ultimately, in that case, Croft J also held that the delay was excessive in all the circumstances and that the prejudice suffered by the other party if an extension of time was granted would be real and not easily ameliorated.[7]
[7] Chen at [85]
29While superficially Chen has many similarities with the present situation, I accept the defendants’ submission that the issuing of the new proceeding was done in circumstances to preserve rights that may have been lost and that they had turned their minds to their obligations under the Civil Procedure Act. However, that does not mean that they should be free from sanction. The defendants (by which I specifically mean its lawyers) should have informed the Court and other parties of the course they were undertaking and kept them abreast of the difficulties they were encountering and the progress they were making. It is professionally discourteous. It is also, frankly, difficult to comprehend. It means that, yet again, the Court finds itself in the position of having to deal with matters that have become urgent solely because lawyers have not adequately communicated with others. In the present case it also means that the defendants’ ability to defend the matter on the basis they wish hangs in the balance. I will return to this below.
30Ultimately though, the requirement is to apply the provisions of the Civil Procedure Act and the considerations identified in AON and Northern Health to the facts of this case. As is shown by Keegan at [17], different circumstances may produce different outcomes.
31I turn to each of the considerations raised in AON and Northern Health and I deal with the plaintiffs and third party’s submissions in addressing those considerations. In doing so, I not that the competing factors mean this application is very finally balanced and contains tension between the case-management principles and prejudice to the plaintiffs and third party and ensuring that the defendants have the opportunity to put forward the defence to the claim that they wish to run at trial.
Will there be a substantial delay caused by the amendment?
32There is no doubt that granting an adjournment and allowing the amendments will result in the trial being adjourned. That would result in a likely trial date towards the end of 2022. The question is though, is that a substantial delay? Looking at a counterfactual where the defendants had informed the Court and the parties in early September 2021 of the course they were proposing and the difficulties they were facing then the trial might have been adjourned at that time until May or June of 2022. However, given the matters deposed to by Dowd, particularly that the proposed amended pleadings were not ready until early February 2022, it appears unlikely that the parties would have been ready for trial by then, even allowing for a timetable that required the parties to move more quickly. Speed and efficiency are viewed in the sense of minimum delay and expense, not as an unyielding race to a trial date. As I find below, I accept the defendants’ explanation for the delay (but not their silence).
33Therefore, the likely delay is an adjournment is granted now is a difference of four to five months when compared to an application made in September 2021.
34Looking at the whole of matter, I am not satisfied, in the overall context of the case, that there will be substantial delay caused if the amendments are allowed.
What is the extent of any wasted costs?
35It was not submitted that there would be extensive wasted costs other than some of the costs of preparing for trial. A distinction must be drawn between those costs properly said to be thrown away and those costs which will be incurred if the amendments are allowed. Costs in the latter category are yet to be incurred and will only be incurred if the amendments are allowed. Whilst the plaintiffs’ case, in particular, at the moment appears relatively straightforward, the fact that they may now incur extra costs because they have to rise above a more challenging defence does not amount to wasted costs. Of course, if the amendments are allowed, the plaintiffs and the third party should have their costs thrown away.
Is there is an irreparable element of unfair prejudice caused by the amendment?
36The plaintiffs pointed to the fact that they have been out of their money since late 2016 and will remain so for longer if the trial is adjourned. It was not submitted that this was irreparable unfair prejudice and they did not adduce any evidence suggestive of irreparable hardship if they remained out of their money for a further period of time. Where the plaintiffs are compensated by payment of interest if they are successful on their claim at a rate higher than provided for by statute upon entering judgment, and where they have the benefit of having the debt secured against real property, and in the absence of any evidence of the market value of the Albanvale Property (which might have shown for example that the value of the loan might soon be greater than the value of the security), I do not find that there is irreparable unfair prejudice to the plaintiffs if the amendments are allowed.
37I also have regard to the third party’s written submission. Nothing in them points to irreparable unfair prejudice if the amendments are allowed.
38Against that, if the amendments are not allowed the defendants will lose the opportunity to run what might amount to a complete defence to the claim in circumstances where presently they have a very thin defence. A loss will result in the forfeiture of the second defendant’s residential home, and possibly financial loss to other beneficiaries of the second defendant’s father’s estate. I accept the defendants’ submission that such a loss will be irreparable.
What concerns of case management arise from the stage in the proceeding when the amendment is sought?
39The defendants’ failure to comply with the timetabling orders of the Court and in particular their lawyer’s failure to inform either the Court or the other parties of what they were doing is deeply troubling. Orders of the Court are made with the expectation that they will be complied with. Routinely in this Court, parties are given liberty to apply to have orders varied where the circumstances and interests of justice require. It cannot be said strongly enough that parties, and in particular, lawyers, should not simply remain silent when they know they will not be able to comply with orders and they must raise an inability to comply with orders at the earliest possible time.
40However, the adjourning of the trial at this date will mean that a judge is available to hear another matter. It is different to the situation where a trial is adjourned on the first day as was the case in Traffic Technique Pty Ltd v Burgmann [2020] VSCA 319. Indeed, one of the purposes of the pre-trial directions hearings is to make sure that parties are ready to proceed on the scheduled trial date and to adjourn matters if they are not so that judicial resources are allocated to the matters that are ready to proceed and to minimise the prospects of adjournment applications being made once a judge has been allocated to conduct the trial.
Will the grant of the amendment will lessen public confidence in the judicial system?
41Addressing this consideration highlights a significant tension. Allowing a party to conduct itself in a manner that might be seen to minimise the significance and importance of complying with Court orders carries the real risk of lessening public confidence in the judicial system. However, not allowing a party to run a defence to a claim, particularly a defence that raises serious allegations also carries the real risk of lessening public confidence in the judicial system.
42Much of the fault here lies with the defendants’ lawyers. It may be that this amounts to a breach by the lawyers of their obligations under the Civil Procedure Act. It may be that the lawyers should be responsible for costs thrown away. The parties will have leave to return to this matter at the conclusion of the trial.
43On balance, I conclude that properly informed, the reasonable public expectation would be in favour of allowing the defendants to put their defence at trial and that to not allow this would cause the greater lessening of public confidence in the judicial system.
Has a satisfactory explanation has been given for seeking the amendment at the stage when it is sought?
44The defendants have given an explanation for the delay and I accept this explanation is adequate. However, they did not give an explanation for their silence. That is unsatisfactory. It may result in a subsequent application being made against the lawyers at the conclusion of this proceeding for the payments of costs or compensation under the Civil Procedure Act. I will leave that for another day.
Conclusion
45As I noted above, determining this application required consideration of a number of factors and the balancing of competing interests and the weighing of factors that are inherently in tension. Ultimately, I have concluded that while very finely balanced, the interests of justice dictate that the adjournment should be granted and the defendants given leave to amend.
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