Lake Macquarie City Council v SCE Resources Pty Ltd trading as Steelstone

[2020] NSWSC 279

Supreme Court

New South Wales

Medium Neutral Citation:

Lake Macquarie City Council v SCE Resources Pty Ltd trading as Steelstone [2020] NSWSC 279

Hearing dates:

13 March 2020

Decision date:

23 March 2020

Jurisdiction:

Equity - Technology and Construction List

Before:

Ball J

Decision:

(1)   The plaintiff be granted leave to file and serve an amended list statement in the form annexed to its motion filed on 17 February 2020 and marked “A”.

 

(2)   Reserve to the trial judge the question of when the amendments are to take effect.

 

(3)   The plaintiff pay the defendant’s costs thrown away by reason of the amendment.

 (4)   The defendant pay the plaintiff’s costs of the motion filed on 17 February 2020.

Catchwords:

PROCEDURE – Application to amend List Statement – Where substantial delay in seeking amendment – Where no real explanation for the delay – Whether no prejudice arises from delay – Question whether limitation period for cause of action with damages as essential component has expired – Question whether claim as sought to be made satisfies Civil Procedure Act 2005, s 65(2)(c) – Question whether Court should otherwise order under s 65(3) – Questions not to be decided on an interlocutory basis.

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Cases Cited:

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Cyril Smith & Associates Pty Ltd v The Owners-Strata Plan No 64970 [2011] NSWCA 181
Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514

Category:

Procedural and other rulings

Parties:

Lake Macquarie City Council (Plaintiff)
SCE Resources Pty Ltd trading as Steelstone (Defendant)

Representation:

Counsel:
L Shipway (Plaintiff)
D Williams SC with S Walsh (Defendant)

  Solicitors:
Moray & Agnew (Plaintiff)
Thompson Cooper Lawyers (Defendant)

File Number(s):

2018/77899

Judgment

1. By a notice of motion filed on 17 February 2020, the plaintiff, Lake Macquarie City Council (the Council), seeks leave to amend its list statement in a number of significant respects. Leave is opposed by the defendant, SCE Resources Pty Ltd, trading as Steelstone (SCE).

2. The proceeding concerns a claim by the Council against SCE in relation to the supply by it to the Council of a road base material product known as “Steelstone Mix 3” (Mix 3) which was used by the Council in the construction of roads. The material is said to be unsuitable for that purpose because it expands over time when wet.

3. The proceeding was originally commenced on 9 March 2018 in the District Court as a subrogated claim in the Council’s name by its insurer. That insurer had settled a claim against the Council by a landowner, Mr O’Neill, who had made a claim in respect of damages to his property resulting from the lateral expansion of the adjacent road which had been constructed using Mix 3.

4. On 15 March 2019, Hammerschlag J ordered that the District Court proceeding be transferred to this Court together with another proceeding commenced on 29 September 2017 in the District Court against the Council by a second landowner claiming damages resulting from damage to his property.

5. On 26 April 2019, I gave leave to the Council to amend its claim (the Amended Claim). As amended, the claim pleads that:

1. SCE supplied Mix 3 to the Council pursuant to two contracts, one entered into on 29 July 2009 (Contract T818) and the other entered into on 19 April 2011 (Contract T874);

2. Pursuant to the contracts the Council from time to time ordered Mix 3 from SCE that was used in a number of roadworks including those identified in Annexure A to the List Statement;

3. The Plaintiff had settled a claim made by Mr O’Neill. In addition, a number of other property owners have made claims against the Council, which have not been settled, for alleged damage to their properties resulting from the expansion of adjacent roads;

4. As a result, the Council has suffered or will suffer damage estimated to total $26.5 million in rectifying damage to 33 Council roads or sections of road and compensating an additional 15 landowners for the loss they claimed to have suffered;

5. In supplying Mix 3, SCE breached its contracts with the Council and a duty of care owed to the Council.

6. At the time of giving leave, I reserved to the trial judge the question when the amendments were to take effect.

7. By its motion, the Council seeks to amend its claim further (the Further Amended Claim):

1. To add claims in respect of Mix 3 supplied under contracts T818 and T874 in respect of 34 additional sections of road;

2. To add claims in respect of a number of sections of road constructed using Mix 3 supplied under contracts dated 12 June 2007 (contract T729) and 15 April 2008 (contract T768);

3. To add claims in respect of two sections of road allegedly damaged by the expansion of adjacent roads that were constructed using Mix 3;

4. To delete claims in respect of two property owners but to add claims in respect of an additional four property owners;

5. To add claims in negligence in respect of roads constructed by others, such as developers, which were transferred to or owned by the Council;

6. To add a claim that SCE engaged in misleading and deceptive conduct which caused the Council to acquire Mix 3 and to give its approval to the design and construction of roads by others using Mix 3;

7. To add various particulars, including particulars of the facts from which a duty of care is said to arise.

8. The Council is not yet able to quantify the Further Amended Claim, but if the amendments are permitted it appears it would be in excess of $100 million.

9. The proceeding has not yet been set down for hearing. The Council has served its evidence including expert evidence in support of its Amended Claim. If the further amendments are allowed, it will need to serve additional evidence to deal with the additional sections of road the subject of the Further Amended Claim. The defendants have not served their evidence but have done substantial work to meet the Amended Claim. There has been correspondence between the parties in relation to discovery, but categories for discovery have not been agreed.

10. SCE objects to the amendments on two broad grounds.

11. First, it says that the amendments substantially broaden the case at a late stage in the proceeding where there has been no real explanation for the delay. It submits that applying the case management principles set out in the Civil Procedure Act 2005 (NSW) (CPA), ss 56-60 and those stated by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [102]-[103] the amendments should not be permitted.

12. Second, SCE says that the claims sought to be advanced by the amendments are out of time.

13. In a sense there has been a very substantial delay by the Council in bringing the proceeding. It appears that the Council formed the view in February 2013 that the likely cause of damage to a number of roads was Mix 3, and it suspended use of that material in the construction of roads on 21 February 2013. Over time, it became aware of problems with other roads which it attributed to Mix 3. Despite that, it appears that it was not until sometime in 2018 that the Council engaged its own solicitors to advise it in relation to the uninsured losses it claims to have suffered and it was following their engagement that the Council applied for the proceeding to be transferred to this Court. It is not clear why the Amended Claim was limited to 33 sections of road. The Council did serve a drafted further amended List Statement in December 2019 in accordance with directions given by the Court by consent on 11 October 2019 which was intended to bring its claim into line with the evidence it had served up until that time. SCE objected to that version of the claim. It appears that the Council did not finally identify all the sections of road which it claims to be defective because of the use of Mix 3 until it started reviewing its records to identify documents that fell within the proposed discovery categories, which led to the application to file the Further Amended Claim.

14. Although the history of the matter provides the context in which any delay must be assessed, what is relevant is the delay in seeking to amend the proceedings and the reasons for that delay, not the delay in commencing the proceeding. It was open to the Council to commence proceedings at any time, subject to the application of any relevant limitation period.

15. In the present case, the explanation for the delay in seeking to amend could hardly be described as compelling. It appears that no one at the Council or at its solicitors properly turned their mind to identifying all the sections of road said to be defective or to identifying all the causes of action that may be available to the Council in respect of the loss that it claims it has suffered. I accept that that is a reason that counts against allowing the amendments.

16. On the other hand, SCE cannot point to any particular prejudice it will suffer if the amendments are allowed, leaving aside the limitation point, to which I return below. Generally, the Court will presume that at least some prejudice arises from delay: see Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 556 per McHugh J. But in the present case most of the delay arose before the proceeding was commenced; and it is not clear that the delay from when the proceeding was commenced or when the Amended Claim was filed will contribute substantially to any prejudice SCE might suffer. The claim largely turns on objective facts concerning the contractual relationship between the parties, which itself depends on written documents, the characteristics of Mix 3 and the current state of the sections of road the subject of the Further Amended Claim. The Council seeks to add a claim based on misleading and deceptive conduct. But all of the relevant representations are said to have been made in documents.

17. SCE may need to do substantial additional work to meet the claim. In particular, it appears that one basis on which it will seek to defend the claim is that the roads were not properly constructed, which will require an expert to inspect each relevant section of road so as to be able to express an opinion on that question. But that is work that would have had to have been done whenever the claim was made. It is not clear that if the Further Amended Claim is permitted, that will result in substantial work being wasted. The case has not been set down for hearing and there will be no significant implications from a case management point of view if the amendments are allowed, particularly in the current circumstances brought about by the COVID 19 virus. For those reasons, in my opinion, the delay itself is not a reason for refusing the amendments.

18. As to SCE’s second point, s 65 of the CPA provides:

Amendment of originating process after expiry of limitation period

(1)   This section applies to any proceedings commenced before the expiration of any relevant limitation period for the commencement of the proceedings.

(2)   At any time after the expiration of the relevant limitation period, the plaintiff in any such proceedings may, with the leave of the court under section 64 (1) (b), amend the originating process so as:

(a)   to enable the plaintiff to maintain the proceedings in a capacity in which he or she has, since the proceedings were commenced, become entitled to bring and maintain the proceedings, or

(b)   to correct a mistake in the name of a party to the proceedings, whether or not the effect of the amendment is to substitute a new party, being a mistake that, in the court’s opinion, is neither misleading nor such as to cause reasonable doubt as to the identity of the person intended to be made a party, or

(c)    to add or substitute a new cause of action, together with a claim for relief on the new cause of action, being a new cause of action that, in the court’s opinion, arises from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process.

(3)   Unless the court otherwise orders, an amendment made under this section is taken to have had effect as from the date on which the proceedings were commenced.

(4)   This section does not limit the powers of the court under section 64.

(5) This section has effect despite anything to the contrary in the Limitation Act 1969.

(6)   In this section, originating process, in relation to any proceedings, includes any pleading subsequently filed in the proceedings.

19. The application of this section raises three questions. The first is whether the limitation period in respect of any of the claims that the Council seeks to add has expired. The second is whether, if it has, the claims that are sought to be made satisfy the requirements set out in s 65(2)(c). The third is whether the Court should order otherwise under s 65(3).

20. SCE’s submission is to the effect that the Court should determine now that (1) the new claims that the Council seeks to add raise new causes of action and that the limitation periods in respect of those causes of action have expired; and (2) the new claims either do not meet the requirements of s 65(2)(c) or, if they do, the Court should nonetheless exercise its discretion under s 65(3) and order that the amendments take effect from the time that they were made.

21. In my opinion, it is not appropriate to determine either of those questions on an interlocutory basis.

22. The question of when the limitation period expires in relation to causes of action which have damage as an essential ingredient is not straightforward, since it depends on when the loss in respect of which the claim is made first occurred or, in the case of latent defects in building work, when the physical manifestation of the damage and its cause is known or ought to be known: see Cyril Smith & Associates Pty Ltd v The Owners-Strata Plan No 64970 [2011] NSWCA 181 at [17]. It is only in the clearest of cases that that question should be decided in interlocutory proceedings: Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514 at 533 per Mason CJ, Dawson, Gaudron and McHugh JJ. The issue is not so clear in this case that it should be determined on an application for leave to amend.

23. Similarly, the question whether the claims sought to be added by the Further Amended Claim arise “from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process” and the question whether the Court should nonetheless exercise its discretion under s 65(3) are questions that can only be answered once all the facts relating to the claim are known.

24. SCE submits that the Court should determine the two questions identified in para [19] above now because it may result in very substantial savings in costs. There are, however, three answers to that point. First, that would only be the case if the issues were resolved in SCE’s favour. Second, although I accept that the amendments will add substantially to the costs, I do not accept that the additional costs will be as great as SCE suggests. The complaint made by the Council is a systemic one and any response to it is also likely to be systemic. The issues that are likely to involve the greatest costs are whether Mix 3 had properties which made it unsuitable for use in the construction of roads and whether the Council and others adopted construction techniques which caused or contributed to the problems. That is not likely to require a detailed testing or examination of each road. And, in any event, the work involved is not likely to be any greater in scope and scale than it is in many building cases. Third, in my opinion, the considerations of cost cannot outweigh the other matters I have pointed to, particularly having regard to the quantum of the claim.

25. It follows that the orders of the Court are:

1. The plaintiff be granted leave to file and serve an amended list statement in the form annexed to its motion filed on 17 February 2020 and marked “A”.

2. Reserve to the trial judge the question of when the amendments are to take effect.

3. The plaintiff pay the defendant’s costs thrown away by reason of the amendment.

4. The defendant pay the plaintiff’s costs of the motion filed on 17 February 2020.

26. The matter is listed for directions on 3 April 2020.

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Decision last updated: 23 March 2020