Kingscape Holding Pty Ltd v J & P Metals Pty Ltd
[2010] WADC 11
•5 FEBRUARY 2010
| JURISDICTION | : | DISTRICT COURT OF WESTERN AUSTRALIA IN CHAMBERS |
| LOCATION | : PERTH | ||
| CITATION |
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| CORAM |
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| HEARD |
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| DELIVERED |
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| FILE NO/S |
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| BETWEEN |
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AND
J & P METALS PTY LTD (ACN 009 298 248)
Second Plaintiff
SPEEDWORK PTY LTD (ACN 070 004 223)
First Defendant
ALAN FERRIS DESMOND
Second Defendant
JOHN EDWARD GANDOSSI
Third Party
Catchwords:
Pleadings - Leave to amend - Construction claim - Latent defects
[2010] WADC 11
Legislation:
Nil
Result:
Application refused
Representation:
Counsel:
| First Plaintiff | : | Mr C Thorpe |
| Second Plaintiff | : | Mr C Thorpe |
| First Defendant | : | Mr S R Sirett |
| Second Defendant | : | Mr S R Sirett |
| Third Party | : | Mr S R Sirett |
Solicitors:
| First Plaintiff | : | Slee Anderson & Pidgeon |
| Second Plaintiff | : | Slee Anderson & Pidgeon |
| First Defendant | : | Downings Legal |
| Second Defendant | : | Downings Legal |
| Third Party | : | Downings Legal |
Case(s) referred to in judgment(s):
Aon Risk Services Australia Ltd v Australian National University (2009) 258
ALR 14
Barclay Mowlem Construction Ltd Dampier Port Authority & Anor (2006) 33
WAR 82
Bryan v Maloney (1995) 182 CLR 609
Central Trust Co v Rafuse (1986) 31 DLR (4th) 481
Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No5) (1997)
18 WAR 334
Frank Jasper Pty Ltd & Anor v Deloitte Touche Tohmatsu (A Firm) [2006]
WASC 24
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112
CLR 125
Hawkins v Clayton (1998) 164 CLR 539
Hooker Corporation v Commonwealth (1986) 65 ACTR 32
[2010] WADC 11
Impex Transport Aktieselskabet v AG Thomas Holdings Ltd (T/A John Gibb
and Sons) [1982] 1 All ER 897
Kimberley Downs Pty Ltd v Western Australia, unreported; SCt of WA; Library
No 6414; 25 August 1986
May v Thomas [2008] WASCA 215
McDonald East Ltd v McGregor (1936) 56 CLR 50
Neilson & Anor v City of Swan [2006] WASCA 94
Permanent Mortgages Pty Ltd v Vandenbergh [2009] WASCA 156
Pollard v Endale Pty Ltd [2009] WASCA 189
Sinclair v James [1894] 3 Ch 554
Southern Wine Corporation Pty Ltd (In Liq) v Frankland River Olive Co Ltd &
Anor [2005] WASCA 236
State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146
Stone James (a firm) v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233
Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515
[2010] WADC 11
PRINCIPAL REGISTRAR GETHING
PRINCIPAL REGISTRAR GETHING: By application filed 26 October 2009 the defendants have sought leave to further amend their defence and counterclaim. The amendments are set out in a minute of amended defence and proposed further amended counterclaim filed 26 October 2009 ("Minute").
2 The plaintiffs' claim against the defendants is for unpaid invoices in
the amount of approximately $100,000 arising out of a contract between the first plaintiff and the first defendant for the fabrication and erection of two grandstands at the Bunbury City and Regional Raceway. The grandstands were built between December 1997 and March 1998. The action was commenced by writ filed 10 December 2003. By the time the writ was filed, nearly six years had elapsed since the relevant contracts were entered into and the grandstands constructed.
3 The defendants filed a defence and counterclaim on 11 February 2005. So far as is relevant for present purposes, the defence pleaded an implied term of the "First Agreement" – defined in the statement of claim as being between the first plaintiff and first defendant – that the second plaintiff would "carry out the construction of the works in a good and workman like manner using proper and sufficient materials". The defendants go on to plead that the second plaintiff constructed the grandstand in breach of this implied term and that the defendants have suffered loss and damage.
4 The plaintiff filed a reply and defence to counterclaim on
28 March 2007. Aside from general denials, the only specific point raised in the reply and defence to counterclaim was an allegation that in or about March 1998 the second defendant verbally instructed Peter Tolmachoff of the first plaintiff to "switch from two-pack paint to enamel paint and to cut the undercoat and to only apply top coat due to the need to have the work completed for an up coming event at the Bunbury City Regional Raceway". Significantly, the reply and defence to counterclaim at this stage did not raise any limitation to defence.
5 The defence and counterclaim was subsequently amended by consent
order signed on 1 December 2008. The amendments, so far as are relevant, clarified the pleading in respect of the agreements for the construction of the grandstands and the defects in the construction of the grandstands, and also the basis of the claim for damages.
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PRINCIPAL REGISTRAR GETHING
6 In support of their application for leave to amend, the defendants
filed an affidavit of one Ms Charunee Horwood, a solicitor employed by the defendants' solicitors. The affidavit was affirmed on 10 November 2009. In her affidavit, Ms Horwood states that the "Amended Defence and Counterclaim was filed after a lengthy period of conferral between the parties which started in or about December 2004".
7 In their defence to the Amended Defence and Counterclaim, the
plaintiffs assert that the claim for damages for breach of contract is statute barred. The basis for this plea is that the first plaintiff completed the grandstands on or by 27 February 1998 and the defendants filed their counterclaim for damages on 11 February 2005.
Ms Horwood further states in her affidavit (par 10):
"At no time prior to Plaintiffs' Reply to Amended Counterclaim did the Plaintiffs raise their limitation defence or state that they believe that the claim was brought solely in contract."
Amendments sought
9 The amendments sought in the Minute add a claim for breach of duty
of care in relation to the construction of the grandstand. It appears that the defendant seeks to use this alternative cause of action to get around the limitation defence as they further plead that the relevant breaches were first detected by the defendants on or about 1 February 1999 when rust had then become detectable upon close inspection (Minute, proposed par 18).
10 The relevant limitation period in respect of a cause of action raised in
a counterclaim is calculated from the date of service of the counterclaim: McDonald East Ltd v McGregor (1936) 56 CLR 50 at 55; Impex Transport Aktieselskabet v AG Thomas Holdings Ltd (T/A John Gibb and Sons) [1982] 1 All ER 897 at 905. The position at common law has changed by virtue of Limitation Act (2005) s 81, but that legislation did not come into effect until 15 November 2005. As noted, the defendants filed the counterclaim for damages on 11 February 2005, and presumably served it shortly thereafter.
11 The plaintiff has not taken the point that the proposed cause of action
in negligence is outside the scope of the relevant facts set out in the defence and counterclaim. The application proceeded on the basis that, at least on this ground the amendment was permissible pursuant to Rules of the Supreme Court 1971 ("RSC") O 21 r 5(1), (5).
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12 Two issues arise for determination. The first is whether or not the
amendment are permissible on the usual rules of pleadings. The second, is whether, as a matter of discretion, the court ought to allow the amendments to be made.
General principles relating to amendments
13 The starting point when considering an application for leave to
amend is that the Court will not grant leave to a party to make an amendment which does not disclose a reasonable cause of action: Sinclair v James [1894] 3 Ch 554 at 557. Neither will the court grant leave to make an amendment which could be struck out as defective on any of the grounds set out in RSC O 20 r 19(1)(b) to (d): Hooker Corporation v Commonwealth (1986) 65 ACTR 32 at 38.
14 The principles relating to pleadings challenges are conveniently
summarised by Master Newnes (as his Honour then was) in Frank Jasper Pty Ltd & Anor v Deloitte Touche Tohmatsu (A Firm) [2006] WASC 24 at [11] – [13], in the following terms:
"In determining the adequacy of a pleading it is fundamental that a party is entitled to a statement of the opponent's case sufficiently clear to allow the party a fair opportunity to meet it: Gould & Birbeck & Bacon v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 at 517; Dare v Pulham (1982) 148 CLR 658 at 664. A pleading may therefore by struck out where it is vague, ambiguous or pleaded at too great a level of generality so as to leave the other party in doubt as to how to respond to the pleading: Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405 at 413; Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 per Mason CJ and Gaudron J. The application of those principles, and the rules as to pleading contained on O 20 of the Rules of the Supreme 1971, in any particular case invariably involves matters of judgment and degree. The approach to be taken to objections to pleadings, or proposed pleadings, must be directed to the attainment of the objectives set out in O 1 r 4B. Such an approach requires a degree of flexibility that may not always be consistent with the practices of earlier times. In that connection, in my respectful view, the comments of Lockhart J in Australian Competition & Consumer Commission v Golden West Pty Ltd & Geraldton Telecasters Pty Ltd [1997] FCA 792 are apposite. His Honour said:
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'It is important that I say something about motions to strike out statements of claim in the conduct of modern litigation. Today, courts are playing an increasingly active role in case management. Motions to strike out pleadings are matters of practice and procedure. In its role of case management, courts devise various procedures to overcome deficiencies in pleadings other than by simply ordering that the offending paragraphs be struck out. Sometimes it is appropriate to strike them out, sometimes not. On some occasions it is better for the court to direct the applicant, whose statement of claim is under challenge, to furnish particulars or to file and serve affidavits to show that there really are facts which can be proved and which, if proved, would support the general statements made in the statement of claim. This was the course which I took in Trade Practices Commission v Australian Iron and Steel Pty Ltd (1990) 22 FCR 305, a practice which other judges adopt from time to time. This is not, of course, intended to be a substitute for a defective pleading in every case because, as is well known, pleadings must assert basic or constitutive facts, not the evidence by which they are to be proved. But case management is a sensible and flexible thing. It must not be unduly circumscribed.'
The question of whether a pleading is so defective that it should be struck out is not, therefore, to be answered by any mechanical application of the rules of pleadings. It is generally to be answered by whether or not the pleading serves the fundamental objective of pleadings and whether any significant deficiencies in it can adequately be overcome by the provisions of particulars or by some other means. While it is necessary that a pleading set out with reasonable clarity and detail the case that the other party must meet, the focus must be on whether the pleadings is sufficient for the fair and proper disposition of the case, not whether it complies meticulously with the rules of pleading."
15 Where the pleading is sought to be struck out on the basis that it
discloses no reasonable cause of action, great care must be exercised to ensure that a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130. It is
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PRINCIPAL REGISTRAR GETHING
only in cases in which it can be seen from the outset that, however the facts be found, there is no basis for the legal conclusion contended for by the plaintiff that the pleading should be struck out: Kimberley Downs Pty Ltd v Western Australia, unreported; SCt of WA; Library No 6414; 25 August 1986; Neilson & Anor v City of Swan [2006] WASCA 94 at [18].
16 As a general rule, when considering whether a pleading discloses a
reasonable cause of action, all the facts alleged in the statement of claim must be accepted as true: Kimberley Downs (supra); Neilson (supra) at [18]. No evidence is admissible on an application of this kind: RSC O 20 r 19(2); Southern Wine Corporation Pty Ltd (In Liq) v Frankland River Olive Co Ltd & Anor [2005] WASCA 236, at [51].
17 In applying these principles, it is important that I note the comments
of his Honour the Chief Justice on the function of pleadings and the approach which the Court should take to the resolution of interlocutory disputes. In Barclay Mowlem Construction Ltd Dampier Port Authority & Anor (2006) 33 WAR 82, his Honour states at p 84:
"In my view, it follows that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and apprising the parties of the case that has to be met, the court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment. Most pleadings in complex cases, and this is a complex case, can be criticised from the perspective of technical pleading rules that evolved in a very different case management environment. In my view, the advent of contemporary case management techniques and the pre-trial directions, to which I have referred, should result in the court adopting an approach to pleading disputes to the effect that only where the criticisms of a pleading significantly impact upon the proper preparation of the case and its presentation at trial should those criticisms be seriously entertained."
[2010] WADC 11
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Maintainable cause of action
In proposed par 16 of the Minute the defendants plead that:
"… the First Plaintiff, further or alternatively the Second Plaintiff, owed the Defendants a duty to ensure that the Grandstands were constructed, fabricated and erected:
(a) in accordance with the structural details and drawing provided by the First Defendant dated October 1996 and November 1997, respectively. (b) in accordance with the Australian Standards at the time. (b) in proper and workman like manner with proper and sufficient materials and having regard to the location of the Grandstands."
19 As I have already noted, the defendants go on to plead that the
breaches were first detected by the defendants on or about 19 February 1999 when rust became detectable upon close inspection. The case is thus one for a latent defect.
20 The issue of liability in tort for latent defects in a building and
construction context was considered by the High Court in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515. In that case, an engineering company designed the foundations of a warehouse and office complex. Some years after the building was completed the property was sold. The contract of sale did not include a warranty that the building was free from defect and there was no assignment by the vendor of any rights that the vendor might have had against others in respect of such defects. After the purchaser had taken possession, it became apparent that the building was suffering substantial structural distress. It was agreed between the parties that the distress was due to settlement of the foundations of building, or material below the foundations, or both.
21 The purchaser sued the engineering company and one of its
employees who acted as the project manager in respect of the design and construction of the building for negligence. The High Court held that neither the engineering company nor the employee owed a duty of care to the purchaser to avoid damage in the nature of the economic loss the purchaser alleged it had incurred.
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22 The High Court confirmed that the damage for which the purchaser
sought a remedy was the economic loss it suffered as a result of buying a building which was defective. The majority held that this is a claim for pure economic loss at [19] – [20]. The same conclusion would apply to the present case. The defendants do not allege that the plaintiffs damaged the grandstand. Rather, the defendants allege that as a result of the failure to exercise care by the plaintiffs, there was a latent defect in the way in which the grandstand was constructed. At a subsequent time, namely around February 1999, this latent defect became apparent. The damages claimed are the repair costs for the defect or, alternatively, the diminution in the value of the grandstand as a result of the defect.
23 The majority, Gleeson CJ, Gummow, Hayne and Hayden JJ,
confirmed that "damages for pure economic loss are not recoverable if all that is shown is that the defendant's negligence was a cause of the loss and the loss was reasonably foreseeable" at [21]. Their Honours commented that once it is recognised that forseeability of negligently caused economic loss is a necessary but not sufficient condition for recovery of such loss, the critical question becomes: What more must be shown? (par 34). The answer, to majority, the vulnerability of the plaintiff at
[23] – [24]:
"23. Since Caltex Oil, and most notably in Perre v Apand Pty
Ltd the vulnerability of the plaintiff has emerged as an
important requirement in cases where a duty of care to
avoid economic loss has been held to have been owed.
'Vulnerability', in this context, is not to be understood as
meaning only that the plaintiff was likely to suffer
damage if reasonable care was not taken. Rather,
'vulnerability' is to be understood as a reference to the
plaintiff's inability to protect itself from the consequences
of the defendant's want of reasonable care, either entirely
or at least in a way which would cast the consequences of
loss on the defendant. So in Perre, the plaintiff's could
do nothing to protect themselves from the economic
consequences to them of the defendant's negligence in
sowing a crop which cause the quarantining of the
plaintiffs' land. In Hill v An Erp, the intended beneficiary
depended entirely upon the solicitor performing the
client's retainer properly and the beneficiary could do
nothing to ensure that this was done. But in Esanda
Finance Corporation Ltd v Peat Marwick Hungerfords,
the financier could itself have made inquiries about the
[2010] WADC 11
PRINCIPAL REGISTRAR GETHING
financial position of the company to which it was to lend money, rather than depend upon the auditor's certification of the accounts of the company.
24. In other cases of pure economic loss (Bryan v Maloney is an example) reference has been made to notions of assumption of responsibility and known reliance. The negligent misstatement cases like Mutual Live & Citizens' Assurance Co Ltd v Evatt and Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] can be seen as cases in which a central plank in the plaintiff's allegation that the defendant owed it a duty of care is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided. And it may be, as Professor Stapleton has suggested, that these cases, too, can be explained by reference to notions of vulnerability. (The reference in Caltex Oil to economic loss being 'inherently likely' can also be seen as consistent with the importance of notions of vulnerability.) It is not necessary in this case, however, to attempt to identify or articulate the breath of any general proposition about the importance of vulnerability. This case can be decided without doing so."
Their Honours were not able to discern the relevant element of vulnerability in the case stated before them at [31]:
"31. Neither the facts alleged in the statement of claim nor those set out in the Case Stated show that the appellant was, in any relevant sense vulnerable to the economic consequences of any negligence of the respondents in their design of the foundations for the building. Those facts do not show that the appellant could not have protected itself against the economic loss it alleges it has suffered. It is agreed that no warranty of freedom from defect was included in the contract by which the appellant bought the land, and that there was no assignment to the appellant of any rights which the vendor may have had against third parties in respect of any claim for defects in the building. Those facts describe what did happen. They say nothing about what could have been done to cast on the respondents the burden of the economic consequences of any negligence by the respondent. The
[2010] WADC 11
PRINCIPAL REGISTRAR GETHING
appellant's pleading and the facts set out in the Case Stated are silent about whether the appellant could have sought and obtained the benefit of terms of what kind in the contract."
25 The context between the parties in the present case is the contractual
relationship between them. The existence of a contractual relationship between parties does not preclude the existence of common law duties to act with reasonable care: Hawkins v Clayton (1998) 164 CLR 539 at 574 – 576. At the same time, "[a] claim can not be said to be in tort if it depends for the nature and scope of the asserted duty of care on the manner in which an obligation or duty has been expressly and specifically defined by a contract": Central Trust Co v Rafuse (1986) 31 DLR (4th)
481 at 521 – 522 cited with approval in Bryan v Maloney (1995)
182 CLR 609 at 620 - 621.26 In the present case, all that has been pleaded is, in effect, negligence,
being a duty of care and breach of that duty, and loss. Significantly, no element of vulnerability or other factor suggesting that economic loss is recoverable in tort has been pleaded. On this basis, the claim in negligence in proposed par 16 to par 19 of the Minute ought not be allowed on the basis it does not disclose a reasonable cause of action.
27 The question which then arises is whether the defendants ought to
have leave to re-plead the claim in negligence, specifically to incorporate a plea of the material facts from which the court could make a finding that the requisite element of vulnerability was present.
In supplementary submissions filed by the defendants the defendants deal with this issue as follows:
"The Defendants were in a position of 'vulnerability' in the works carried out on the Grandstand. The allegations of negligence in this case relate to the preparation of the steel Grandstands and the painting of the same. The defective preparation and painting of the Grandstands masked the existence of any negligent preparation work and could not be ascertained by reasonable inspection. The existence of such vulnerability is a basis for the imposition of liability in tort for economic loss."
29 However, the problem with this plea is that, by definition, each and
every case for a latent defect in a building or construction will be one in which defect is not immediately apparent upon reasonable inspection.
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That is why the defect is referred to as "latent". On the facts being considered by the High Court Woolcock, the defect was in the foundations of the building. Necessarily, the existence of the building itself masked the existence of any negligence in the preparation of the site. In my view, if the defendants' submission which I have quoted above was converted into material facts, that would still not disclose a reasonable cause of action.
30 In the present case, from my review of the materials before me it
appears that both the plaintiffs and defendants may be described as small to medium enterprise operators. The plaintiff's operated a metal fabrication construction business. The defendants operated a speedway business. There is nothing in the materials before me to indicate that the relationship between the plaintiffs and the defendants was characterised by any assumption of responsibility by the plaintiffs and of reliance by the defendants.
31 Significantly, in distinction to both the factual scenarios in Woolcock and Bryan, the plaintiff and the defendant are in a direct contractual relationship. It was open for the defendants to have protected themselves against the type of economic loss they allege they have suffered by including in the contract some form of warranty. Indeed, the defendants allege that the contract contains an implied term in the exact same scope as the duty alleged to have been owed in negligence.
32 I can see no basis consistent with the decision in Woolcock on which a court could find the existence of a duty of care between the plaintiff and the defendant. That being so, I do not consider that the pleading is capable of disclosing a reasonable cause of action.
Discretion – legal framework
33 Even if I were of the view that the defendants ought to be given the
opportunity to re-plead their counterclaim in order to see if they can disclose a reasonable cause of action, I would have been minded to refuse the application on discretionary grounds.
The discretion to allow amendments is set out in RSC O 21 r 5. It provides that "the Court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as may be just and in such manner (if any) as the Court may direct".
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35 What may be described as the traditional approach to the exercise of
discretion in relation to pleadings amendments is summarised by Newnes AJA in May v Thomas [2008] WASCA 215 in the following terms at
[33] – [34): "The relevant principles to be applied on an application to amend a pleading are well-known. In general, a party should be permitted to amend their pleading so that the court may decide all matters in issue between the parties, unless the amendment would cause an injustice to the other party which could not be adequately remedied, for instance by an order for costs: Cropper v Smith (1884) 26 Ch D 700, 710; Shannon v Lee Chun (1912) 15 CLR 257, 260 - 261; Clough v Frog (1974) 4 ALR 615, 618; The State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146, 154. The party seeking the amendment bears the burden of persuading the court that the amendment will not cause irremediable prejudice to the other party: Hancock Shipping Co Ltd v Kawasaki Heavy Industries Ltd [1992] 1 WLR 1025, 1030; McKenzie v Commonwealth of Australia [2001] VSC 361 [22] - [23]; Burk v Commonwealth of Australia (No 3) [2004] VSC 210. However, the party opposing the amendment ordinarily bears the evidential onus of adducing evidence in relation to the prejudice, at least where the proof of that prejudice lies in the hands of that party; the non-existence of prejudice is difficult to prove, so that in practice in the latter circumstances an evidential burden is borne by the party resisting the amendment: Hancock Shipping Co Ltd (1030). But it is not sufficient for a party to rely on prejudice which results from an unreasonable act or omission on the part of that party: Steward v North Metropolitan Tramways Co (1886) 16 QBD 556, 559 - 560; Wilson v Grimwade [1995] 2 VR 628, 632."
36 A significant issue in determining the present applications is the
extent to which this approach must now be refined in the light of the recent decision of the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 258 ALR 14. In Aon (supra) all members of the Court held that in exercising the general discretion to allow amendments to pleadings in Court Procedure Rules 2006 (ACT) ("ACT Rules") r 502, the Court is to seek the objectives of case management set out in ACT Rules r 21 at [36], [89], [133] – [134] and [157]. ACT Rules r 502 is similar in effect to RSC O 21 r 5. The objectives of case management set out in ACT Rules r 21 are substantially the same as those set out in RSC O 1 r 4A and 4B.
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By parity of reasoning, in exercising the discretion in RSC O 21 r 5, I should seek the attainment of the objectives in RSC O 1 r 4A and 4B.
38 The majority in Aon made the following comments on ACT Rules r 21 which are relevant to the interpretation of RSC O 1 r 4A and 4B at [98] and [102]:
"Of course, a just resolution of proceedings remains the paramount purpose of r 21; but what is a 'just resolution' is to be understood in 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 cost are taken into account. The Rule's reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs.
…
The objectives stated in r 21 do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. While r 21 assumes some ill-effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail. It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the
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exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment."
39 The majority placed emphasis on whether the party seeking the
amendment has had a sufficient opportunity to identify the issues they
seek to agitate (at [112] – emphasis in original):"A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, 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."
40 The overarching issue in the exercise of the discretion to grant leave
to amend is to balance the competing risks of injustice in the context of
maintaining public confidence in the legal system as a whole.
Four factors emerge from the decided cases:
(a) the reasons for delay in making the application; (b) the prejudice to the plaintiff if leave is not granted; (c) the prejudice to the defendant if leave is granted; and (d) the impact on the public interest if leave is granted. See generally: Aon, State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146; Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290; Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No5) (1997) 18 WAR 334, at 345; Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323. Each of these factors is considered in detail below.
Discretion – reasons for delay
42 This first, and perhaps most critical, factor is the reason why the
party has not sought the relevant order in the past. To quote the majority
in Aon at [103] – footnotes omitted, also [98]:"[103] The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in JL Holdings. Generally speaking, where a discretion is sought to be exercised in favour of one party, and
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to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case."
43 The importance of an explanation for the delay has also been
emphasised by the Supreme Court: see generally Pollard v Endale Pty Ltd [2009] WASCA 189 at [43]; Wiltrading at [91] – [94] (supra); Tony Sadler (supra) at p 336.
44 Where there is a recent catalyst for the application, the Court is more
likely to grant leave, there having been no prior opportunity to raise the issue. This seems to have been a significant factor in the grant of leave in J L Holdings (supra) (at 154) and a significant factor against the grant of leave in Aon at [51] – [54], [106] and [131]. In the words of Justice Heydon in Aon at [131]: "There was nothing to indicate that whatever was seen as relevant had not been available earlier if diligence had been employed".
45 Ms Horwood's affidavit deals in general terms with the reasons for
delays in this action. She deposes that the initial amended defence and counterclaim, which was filed on 1 December 2008, was filed after a lengthy period of conferral between the parties which started in or about December 2004. She further deposes that at "no time prior to the Plaintiffs' reply to Amended Counterclaim did the Plaintiffs raise the limitation defence or state that they believe the claim was brought solely in contract", at [10]. Ms Horwood then goes on to depose that between March 2009 and June 2009 Downings Legal considered whether a limitation defence should best be responded to by way of reply, or by further amendment to the counterclaim to clarify the negligence claim.
46 It is unclear to me what the reference in Ms Horwood's affidavit to
clarifying any negligence claim means. In my review of the pleadings, at no time prior to the Minute and the present application have the defendants sought to raise a claim in negligence.
47 This is not a case where there is a recent external catalyst for the
application. It appears that the catalyst for the application was the plea by
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the plaintiff, in its reply, of a limitation defence. It has not been suggest to me that the facts giving rise to the limitation defence were recently discovered by the defendant. The date of completion of the contract and date of commencement of the action were patently facts within the knowledge of the defendant.
48 There is no evidence before me that the plaintiffs made any
representation to the defendants that they would not raise a limitation
defence in response to any amended defence and counterclaim.49 This is a case in which a party has made "a late and deliberate
tactical change the direction of its conduct of the litigation", as was the case in Aon at [24]. The absence of a cogent reason for the delay in making the current application is a strong factor against the grant of leave.
Discretion – prejudice to the defendant
50 The second factor is the prejudice to the party seeking the
amendment if the amendment is not granted: see generally: Wiltrading (supra) at [79]–[86] and [102]. This may require a detailed analysis of the specific grounds of prejudice: Wiltrading at [79] – [86].
51 In looking at the prejudice to the parties, the Court will examine the
nature and importance of the amendment to the parties: Aon at [102]. Where the proposed amendments do not extend in any material way the factual ambit of the action, that will be a factor weighing in favour of the grant of leave: Permanent Mortgages Pty Ltd v Vandenbergh [2009] WASCA 156 at [21]. It will also weigh in favour of the amendment if it will enable the "litigation to be fought out on the true facts": Stone James (a firm) v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233 at 241. In JL Holdings weight was given to the fact that the point sought to be raised by the amended pleading could not be avoided at trial as it was apparent on the face of certain documents: at p 154 , also Aon at [28].
52 The prejudice to the defendants if the amendments are not allowed is
that they run the risk of not being able to have the court rule on the question of whether or not the grandstands were constructed in a defective manner. This risk would arise if the contract claim is struck out on limitation grounds. Indeed, the purpose of introducing the claim in tort seems clearly to have been in response to the risk that the contract claim will be struck out on a limitation grounds.
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Prejudice to the plaintiff
The general principles relating to prejudice set out about are applicable to the party opposing the amendments
The plaintiffs have not identified any specific prejudice they will suffer if the amendments sought are allowed.
55 It was common ground between both parties that the addition of the
cause of action in negligence will not add significantly to the facts that need to be brought before the court at the trial of the action. This is because the issue of the relevant facts surrounding the construction of the grandstand, the alleged deficiencies in the way in which the grandstand was prepared and painted and the loss suffered will need to be dealt with on the contract claim. The plaintiff has not, at this stage, sought to strike out the defendants' claim on the limitation ground, consistently with decision such as Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 at 533. This issue will be determined at trial.
Discretion – public interest considerations
56 The fourth factor is the public interest in the proper and efficient
administration of justice. In Aon the Court affirmed that the public interest in the administration of justice, reflected in provisions such as ACT Rule 21 (and RSC O 1 r 4A and r 4B) is an important consideration in the exercise of judicial discretions. In the words of the Chief Justice at
[24] and [30], also [93] and [133]: "… Undue delay can undermine confidence in the rule of law. To that extent its avoidance, based upon a proper regard for the interests of the parties, transcends those interests. Another factor which relates to the interests of the parties but transcends them is the waste of public resources and the inefficiency occasioned by the need to revisit interlocutory processes, vacate trial dates, or adjourn trials either because of non-compliance with court timetables or, as in this case, because of a late and deliberate tactical change by one party in the direction of its conduct of the litigation. These are matters which, even under the Australian versions of the Judicature Act system, unaffected by the sequelae of the civil procedure reforms of 1998 in the United Kingdom, are to be regarded as both relevant and mandatory considerations in the exercise of the discretion conferred by rules such as r 502.
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…
It might be thought a truism that 'case management principles' should not supplant the objective of doing justice between the parties according to law. Accepting that proposition, JL Holdings cannot be taken as authority for the view that waste of public resources and undue delay, with the concomitant strain and uncertainty imposed on litigants, should not be taken into account in the exercise of interlocutory discretions of the kind conferred by r 502. Also to be considered is the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification, whether they be for adjournment, for amendments giving rise to adjournment, or for vacation of fixed trial dates resulting in the resetting of interlocutory processes."
57 Similar comments are also made in Christmas Island Resort (No5) (supra) at p 345; Pollard at [24], Attorney-General of Botswana (supra) at [80], Wiltrading at [94] and Tony Sadler at p 333 – p 334.
58 The issue of impact on the public interest falls into sharpest focus
when the proposed exercise of discretion would imperil trial dates. This is a very significant factor, as if the allocated trial dates are vacated, it usually means that the trial dates are not able to be allocated to another party awaiting trial dates. This was a significant point of distinction between the facts in JL Holdings at p 154 – where there was six months to trial – and Aon – where the amendment was sought three days into the four week trial. However, this action has not been allocated trial dates.
Discretion – application
59 In applying the discretion in RSC O 21 r 5, I am required to give
effect to the general principles laid down in Aon and the other authorities which I have cited, in particular to set the balance between the private interests of the parties and the broader public interest considerations involved in the administration of justice.
60 The critical factor here seems to be the maintenance of confidence in
the courts and the administration of justice. At some point in time, the court needs to rule a line on what amendments can be made to pleadings. "[I]t … cannot be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs" Aon at [98]. Added to this is the fact that the
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defendants have offered no cogent reason for the delay in making the
application.61 In the circumstances of the present case, the factors which I have set
out above add weight to the conclusion that the defendant ought not be
given a further opportunity to amend their defence and counterclaim.
The application for leave to amend is dismissed.
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