Officine Meccaniche Toschi Sp A v Cosco Holdings Pty Ltd

No judgment structure available for this case.

IN THE COURT OF APPEAL

[1992] QCA 051

SUPREME COURT OF QUEENSLAND

No. 1425 of 1990

BETWEEN:

OFFICINE MECCANICHE TOSCHI Sp.A.

(Plaintiff)

AND:

(Defendant)

BY ORIGINAL ACTION

AND BETWEEN:

(Appellant/Plaintiff)

AND:

OFFICINE MECCANICHE TOSCHI Sp.A.

(Respondent/Defendant)

BY COUNTERCLAIM

JUDGMENT - THE COURT

Delivered the Second day of April 1992

This is an appeal from a judge's refusal to allow an amendment in a commercial cause. The action is one in which the respondent sued on dishonoured bills of exchange and for moneys owing under an agreement and for other moneys due in respect of a machine it manufactured and sold to the appellant in 1984. The defence set up that the machine was defective and also pleaded a compromise between the parties.

A Scott Schedule was delivered and the court referred the

technical issues in the case to an expert, Mr. David Paul.
During the hearing of the reference, the appellant advised
that it wished substantially to amend its claim and it is
the court's rejection of an application to amend which is
complained of in this appeal.

The main contention put forward on behalf of the appellant by Mr. Hugh Fraser was based on the admitted fact that if the amendments were allowed and the hearing of the reference resumed to deal with them, the trial of the issues left in the case would not be delayed. At a recent callover, commercial causes were set down up to September 1992 and it seems clear that the amended claim, if allowed, would be likely to be dealt with by the referee before the trial. Therefore, says Mr. Fraser, there is no prejudice to the respondent which cannot be compensated for by costs.

It is necessary to explain the history of the
matter in more detail. The appellant agreed to buy the
machine in question, a tissue paper mill plant, in 1984;
six years ago, in March 1986, it began operation. The
purchase price was to be paid in part by bills of exchange
drawn on the appellant, maturing on various dates up to 31
January 1990. By a subsequent agreement, the date for
payment of two of the bills was deferred and a bill due on
31 January 1988 was to be paid by seven equal weekly
payments beginning on 28 February 1988; the appellant did
not pay a number of the bills due. On 7 September 1990, the
respondent issued a Supreme Court writ claiming payment of
overdue bills and other sums said to be due in relation to
the machine. The defence, delivered on 28 September 1990,
set up a warranty that the machine would be capable of
operating continuously 24 hours a day for extended periods
without shutdown, which warranty was alleged to have been
broken. The defence also said that by agreement made in
January 1986, the respondent acknowledged its liability for
repairs and modifications to the machine and lost production
totalling about $2.7 M, which sum was to be taken into
account when the appellant purchased a further paper
machine. The defence also alleged, in effect, that
arrangements were made for deferred payment of the sums due
from the bills. After further pleadings, the matter was
placed on the commercial causes "A" list and the appellant
delivered a Scott Schedule on 21 March 1991. On 25 March
1991, the respondent's solicitors wrote to the appellant's
solicitors asking for a number of particulars of the Scott
Schedule, which included a claim for loss of profit; they
specifically asked whether certain costs claimed related to
downtime of the machine or whether the machine at times was
running at less than full efficiency and were told, among
other things, that each item in the Schedule for loss of
profit related to "actual down time of the machine". That
is, at that stage the loss of profit claim was said to flow
from periods when the machine was totally stopped. On 9
May, and again on 16 May 1991, an amended Scott Schedule was
delivered. On 27 June, an order was made for reference of
the technical matters to arbitration and on 15 July further
amendments to the Scott Schedule were delivered.

The agreed date for the hearing of the reference was 1 August 1991, but it was put off because of the unavailability of counsel. The hearing before the referee began on 7 October 1991, when there were further amendments to the Scott Schedule. On 12 October 1991, the referee refused the appellant leave to amend Item 3 of the Schedule, in a respect further mentioned below. On 13 October, the hearing of the reference was adjourned, the appellant having closed its case, subject to one witness returning to give evidence about a specific matter; the hearing was to resume on 1 December.

On that day, 1 December 1991, the appellant's solicitors told the respondent's solicitors that they wished to make the amendments now in question. The appellant applied to de Jersey J. on 4 December when, except as to certain amendments not in issue, the application to amend was refused with costs; hence this appeal. On 21 February 1992, the referee delivered his report on the issues referred to him. There remained, and still remains, the necessity of a trial to determine the issues, so far as they have not been resolved by the referee's report.

There are three amendments sought. It is unnecessary to set them out at length, but some details are necessary.

Item 3

This is a claim in respect of certain gearboxes which were alleged to be defective. The report says they were indeed defective and allows substantial amounts of down time and costs in relation to them. The appellant desires to add to the claim which went before the referee the amounts set out in certain invoices not included in the original claim. There is no explanation advanced as to why they were not included; the additional amount sought to be claimed is $28,652.

Item 10

This relates to a steam circuit which was alleged and was found by the referee to be defective. The additional amount sought to be claimed is $472,500 for loss of profit.

Item 23

This claim relates to what is called a press roll which was alleged, and found by the referee, to be deficient in design. In its original formulation, Item 23 included no claim for down time or money. Its function was to form part of the basis for the appellant's claim that the machine could not operate continuously. The proposed amendment includes an allegation that the defect mentioned in Item 23 reduced production by 10 per cent and required the appellant to incur repair costs. The claim sought to be made for loss of profit is $2,169,600 and the claim for repair costs $483,900.

The total amount sought to be added by way of amendment to the claim is over $3 M. To put this in context, the total amount of costs allowed in favour of the appellant in the report is about $135,000.

There is evidence, although of a rather scanty kind, bearing upon the reason why these important amendments proposed to be made to Items 10 and 23 came so late, at a time when the appellant's case before the referee was, in substance, complete and nearly six years after the machine began operation. An affidavit filed for the appellant says that on 13 August 1991 it retained an expert to prepare a report on its claims in the Scott Schedule, but he shortly afterwards resigned. A replacement was retained on 9 September 1991 - one Dennis Fetherston. The appellant's evidence is to the effect that Fetherston reviewed the appellant's production records during the adjournment of the reference referred to above, from 13 October to 1 December 1991. He told the appellant that it had suffered losses not then claimed, in excess of $ 2 M. The appellant did not tell its solicitors what Fetherston said until 28 November 1991 and they acted promptly, telling their opponents about the matter on 1 December. During that conversation, the appellant's solicitors said that the claim related to decreased efficiency in production over particular periods of time, which were largely in the first year of operation of the machine; that is, the events principally in question occurred five years ago or more. We were given to understand that this explanation of the amendments covered Items 10 and 23. As has been mentioned, no excuse was advanced for the failure to raise the additional Item 3 claim until a late stage and it appears to need no further consideration.

In his reasons for judgment, the learned primary judge discussed the arguments advanced before him and went on:

Mr. Fraser made a number of specific criticisms of these reasons, namely that the judge exercised his discretion on the basis of the following erroneous assertions: that the amendment would dislocate the determination of the claim, that a representative of the respondent who had come from Italy for the hearing before the referee probably would have to return, that the respondent's plea of "enough is enough" was justified and that there was no apparent reason why the new claims could not have been prepared long ago.

As to the question of dislocation, the judge's view appears to be defensible. The amendment was sought at a time when the hearing of the reference was drawing to a close. Allowing the amendment would, as a matter of probability, have necessitated much further preparation, a reopening of the appellant's case and a further substantial hearing; all that remains true.

We see no reason to disagree with the judge's view on the second point, that a representative from Italy probably would have to return, although that is not a matter of great consequence.

Nothing needs to be said about the plea "enough is enough", except that the Schedule had been amended a number of times.

That there was no apparent reason why the claim
could not have been prepared long ago appears to be evident.
So far as the evidence shows, the appellant did not attempt
to engage an expert until August 1991, well after the Scott
Schedule had been delivered and amended, and indeed nearly
two months after it had been agreed that the matter should
be referred. It was or should have been evident at that
stage that care and expedition were necessary to ensure that
the appellant's claims were properly formulated. The
documents which, according to the appellant's case, were
examined by Fetherston before he advised that additional

claims should be made were, it may safely be assumed,

available at all material times.

In substance, the case is one in which a party, having formulated its claim, led its evidence and got a decision, decides that it wishes to have the whole matter reopened so as to advance new claims much greater in size than those dealt with in the decision.

This is an unusual course, but it is accepted that the primary judge could have allowed the amendment. If it were now allowed, it is common ground that the final resolution of the case would be unlikely to be held up; the trial cannot take place before September, due to unavailability of judge time. On the face of it, one might be inclined to agree that the only problem is one of wasted costs.

But there are other disadvantages in allowance of a substantial amendment at such a late stage. It is desirable to encourage comprehensive preparation of matters which are going to trial, as well as early detection of any gaps in the issues as formulated for trial. If the impression is created that substantial late amendments will be allowed as of course, the incentive to get cases in proper order for hearing may be diminished. In this case, claims were made for lost time, at an early stage; the bulk of what is sought to be added is essentially a different sort of claim for lost time, not brought to light by any recent eventuality, but prompted by further thought about the contents of the appellant's records, years old. After the matter had come to a hearing in 1991 before the referee, the Schedule having been amended several times, the respondent was surely entitled to proceed on the assumption that the appellant had determined what sorts of claims it wished to pursue under the contract made in 1984. The court should not ignore the harm which can be done by disappointing such expectations: cp. The Commonwealth v. Verwayen (1990) 170 C.L.R. 394 at 461-462.

The proposed amendments contain little by way of detail, as formulated; one might have expected that, desiring the court to add the very large sums proposed to be inserted in Items 10 and 23, the appellant might have assiduously set out as much detail as it could, as to the basis of the new claims and the way in which they were calculated. But even at the hearing before us, it appeared that little or no information of that sort was available.

Mr. Hampson Q.C., who led Mr. Richard Douglas for the respondent, stressed that the decision made by de Jersey J. was a discretionary one of a procedural kind; he relied upon authorities for the view that such decisions will not lightly be interfered with. While that is true, some procedural decisions - and this may well be one - can have an impact upon substantive rights; upholding the primary judge's decision may, in the result, prevent the appellant from ever pursuing these claims. The limitation period has not expired, but a separate proceeding, now instituted, may be defeated by a plea of estoppel of the kind dealt with in Port of Melbourne Authority v. Anshun Proprietary Limited (1981) 147 C.L.R. 589.

In the end, no sufficient ground appears to warrant reversing the judge's decision. None of the specific criticisms made of his Honour's reasons appears to have any real substance. It is far from being a case in which one could say that the result is so plainly wrong that his Honour's view of the facts or application of the law must have been erroneous in some respect. Nor would one be justified in interfering on the ground that it is now clear that the ultimate disposition of the matter would be unlikely to be held up by allowance of the amendment; the judge did not assume the contrary. While there were substantial reasons in favour of allowing the Items 10 and 23 amendments, much could be said against that course. It was a matter for the judge to weigh the various considerations as well as he could, and his Honour did so in a way which appears to us not to be erroneous.

The judge's exercise of discretion has not been shown to be wrong and the appeal must be dismissed with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

No. 1425 of 1990

BETWEEN:

OFFICINE MECCANICHE TOSCHI Sp.A.

(Plaintiff)

AND:

(Defendant)

BY ORIGINAL ACTION

AND BETWEEN:

(Appellant/Plaintiff)

AND:

OFFICINE MECCANICHE TOSCHI Sp.A.

(Respondent/Defendant)

BY COUNTERCLAIM

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

No. 1425 of 1990

Before the Court of Appeal
Mr. Justice Pincus
Mr. Justice McPherson

Mr. Justice Shepherdson

BETWEEN:

OFFICINE MECCANICHE TOSCHI Sp.A.

(Plaintiff)

AND:

(Defendant)

BY ORIGINAL ACTION

AND BETWEEN:

(Appellant/Plaintiff)

AND:

OFFICINE MECCANICHE TOSCHI Sp.A.

(Respondent/Defendant)

BY COUNTERCLAIM

JUDGMENT - THE COURT

Delivered the Second day of April 1992

MINUTE OF ORDER: The appeal is dismissed with costs.

CATCHWORDS: PRACTICE - COMMERCIAL CAUSES - Appellant sought amendment to claim following hearing of reference - whether discretion to disallow amendment correctly exercised - whether impact on substantive rights relevant.

Counsel:	H. Fraser, for the Appellant C. Hampson Q.C., with him, R.J. Douglas, for the Respondent
Solicitors:	Messrs Morris Fletcher & Cross for the Appellant Messrs Carther Newell for the Respondent
Hearing Date(s):	9 March 1992

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Officine Meccaniche Toschi Sp A v Cosco Holdings Pty Ltd [1992] QCA 51

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[1992] QCA 51

2/04/1992