Minter Ellison Baker O'Loughlin v Mckay & Ors (No 2) No. DCCIV-96-1083 Judgment No. D3797

[1998] SADC 3987

D3797

MINTER ELLISON BAKER O’LOUGHLIN v McKAY & ORS.

Civil
JUDGE WILSON

REASONS FOR DECISION ON APPLICATION BY DEFENDANTS FOR LEAVE TO AMEND THE MORE EXPLICIT DEFENCE AND COUNTER-CLAIM
DELIVERED ON WEDNESDAY THE 15TH DAY OF APRIL 1998

This is an action in which the plaintiffs, a firm of lawyers, seek to recover from former clients of theirs (conveniently called “the McKay interests”) the balance of their legal costs and fees.  The defendants are defending the claim and, by their counter-claim, allege breach of contract or retainer and seek damages for negligence or professional neglect.

On Wednesday 8th April 1998 (the third day of the trial of this action) application was made on behalf of the defendants for leave to amend their current pleading by substituting for the “More Explicit Defence and Counter-claim” filed on 18th March 1997 a document presently headed “Proposed Amended More Explicit Defence and Counter-claim”.

The new aspects of the proposed pleading are shaded.  Mr Smith, counsel for the plaintiffs, opposed the application for leave to amend.

The recent High Court case of State of Queensland v J L Holdings Pty Limited (1996-1997) 189 CLR 146 is an important decision which establishes that, except in the unlikely event of a statute or rules of court providing that case flow management principles should override the notion of justice, a late amendment of the pleadings should generally be allowed, with a consequential adjournment of the trial (if necessary), to permit a party to litigate a fairly arguable issue, provided that any prejudice to the other parties can be compensated by costs. The J L Holdings case re-established and applied the principles laid down in Cropper v Smith (1884) 26 Ch D 700 and Clough and Rogers v Frog (1974) 48 ALJR 481 which principles had, during the 1980’s and 1990’s (until 1997), often yielded to case flow management principles; but not so in The Duke Group Ltd (In liquidation) v Arthur Young and Anor, an unreported decision of Perry J delivered on 7th February 1988 in Judgment No S2707 (at p. 2).

Although Dawson, Gaudron and McHugh JJ firmly re-asserted, in the J L Holdings case (at p. 154), that “no principle of case management can be allowed to supplant (the ultimate aim of a court, namely the attainment of justice)”, their Honours did acknowledge that “extreme circumstances” might exist “to shut a party out from litigating an issue which (was) fairly arguable”.

Such circumstances might include, so their Honours suggested by reason of their references to Cropper v Smith supra and Clough and Rogers v Frog supra, the situation where there is “fraudulent ... error or mistake”, the situation where there exists an “intention (on the part of the applicant) to overreach”, the situation where “injustice to the other party” will necessarily be “occasioned”, and the situation where there has been “improper concealment of the defence”.

It is not necessary that I set out in these reasons the whole of District Court Rule 2.  Suffice it to say that the words “just” and “justice” are interspersed throughout that Rule.  Notwithstanding the strongly-held views of His Honour Judge Lunn, as expressed in Vordermeier v Alguna P/L & Kenmore Developments Corp. Pty Ltd (No. 1) - unreported decision dated 19th November 1997 in judgment No. D3718, I do not consider that our Rules “circumscribe the criteria for the exercise of the discretion” to grant leave to a party to amend.  With all due respect to my judicial colleague, I do not share His Honour’s view that the J L Holdings case is “only of limited application in the exercise of that discretion”.  Rule 2 does not provide, either directly or by implication, that case flow management principles override the notion of justice.

The general considerations of justice would need to be confined to a much greater extent than is done by Rule 2 before I could, in a case such as this, distinguish the J L Holdings case and not see myself as being bound by what was laid down by the High Court of Australia in that case.

Mr Smith, on behalf of the plaintiffs, opposed the defendants’ application to amend upon the grounds, firstly, that the proposed amendments go beyond merely the supply of further and better particulars of an existing counter-claim;  and, secondly, that, even if they can be characterised as supplying further and better particulars of an existing counter-claim, they are “so far-reaching that they (can be said to have) changed the character of the case”.  I accept that the proposed amendments go beyond merely the supply of further and better particulars and they, to an extent, are far-reaching, but they fall far short of the kind of amendments which, according to the High Court, should be disallowed and which fall into the categories of “fraud”, “intentional overreach” and “improper concealment” and the like.

It is to be noted that the plaintiffs did not submit that the defendants should support their application with sworn evidence.  The circumstances in which the need for the proposed amendment arose were not canvassed in detail.  The reasons for the defendants’ delay were not tested.  And the person  responsible for the proposed change in direction of the defendants’ counter-claim was not identified.  The plaintiffs did not insist that evidentiary material to show that the judicial discretion should be exercised in favour of the defendants be produced.

It is to be noted further that the defendants, through their counsel, purported to justify the amendments only in terms of the need to plead a challenge to the quantum of the plaintiffs’ claim for costs and fees and the need to seek an order that the plaintiffs prepare a bill of costs for taxation;  in terms of the need to make some minor alterations;  and, importantly, in terms of the need to supply further and better particulars of allegations in the counter-claim so as to extend the allegations going to the merits of (and explanations for) the delay allegedly justifying an adjournment of the matter before the Federal Court, in terms of adding further arguments going beyond the issue of quantum, including inter alia the issue of penalty interest, and in terms of the need to supply further and better particulars of the losses allegedly suffered because of the plaintiffs’ alleged breaches of duty.

I am left to determine this application upon limited material and without the benefit of sworn oral evidence.  On the material that is before me and in the exercise of my discretion and applying the principles re-established in the J L Holdings case, I grant leave to the defendants as sought, but I do so on terms favourable to the plaintiffs.  This late amendment of the defendants’ pleadings should, in the circumstances, be allowed in order to permit the defendants to litigate fairly arguable issues.  Any prejudice to the plaintiffs can be compensated by costs.  If, as appears likely, a necessary consequence of the granting of leave is that the trial of this action will need to be adjourned, then I will make an adjournment order accordingly.  The plaintiffs will need to be protected not only for their costs generally but specifically in respect of the costs thrown away.