Omar Property Pty Ltd v Amcor Flexibles (Port Melbourne) Pty Ltd (No 3)
[2020] VSC 17
•5 February 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERICAL LIST
S ECI 2019 00109
| OMAR PROPERTY PTY LTD (ACN 602 739 668) | Plaintiffs |
| (and others according to the Schedule attached) | |
| v | |
| AMCOR FLEXIBLES (PORT MELBOURNE) PTY LTD (ACN 004 284 673) | Defendant |
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JUDGE: | GARDE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 31 January 2020 |
DATE OF JUDGMENT: | 5 February 2020 |
CASE MAY BE CITED AS: | Omar Property Pty Ltd & Ors v Amcor Flexibles (Port Melbourne) Pty Ltd (No 3) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 17 |
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PRACTICE AND PROCEDURE – Pending trial – Defendant’s application to join third parties – Whether trial should be deferred – Relevant considerations – Civil Procedure Act 2010 (Vic) s 7(1); Supreme Court (General Civil Procedure) Rules 2015 rr 11.01(c), 11.12(b) – AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr R Chaile | Maddocks |
| For the Defendant | Mr L Hawas with Mr C Lum | Baker McKenzie |
| For the proposed Third Parties | Mr R Harris | Harricks Lawyers |
HIS HONOUR:
Introduction
In July 2016, the first plaintiff sold the land at 187 and 195-201 Williamstown Road, Port Melbourne (‘premises’) to the second and third plaintiffs. The land was subject to a five year lease in favour of a corporate predecessor of the defendant (‘Amcor’). The lease was subject to covenants which, in summary, provided that:
(a)the lessee would not make structural alterations or additions to the premises without first obtaining the lessor’s consent (which must not be unreasonably withheld) (cl 5.2);
(b)the lessee would observe the provisions of statutes (cl 5.4); and
(c)the lessee would not cut, injure or deface any part of the premises (cl 5.6).
The lease also contained successive options for renewal for five years and two years by notice in writing. The lessee was not entitled to exercise an option to renew if there was an unremedied breach of the lease of which the lessee had been given written notice.
Over the period from April to October 2017, Amcor installed a large industrial printing press within the premises. To do so, it performed works to the premises which are detailed in the evidence, including works to the floor and the roof. Amcor did not obtain a building permit under the Building Act 1993 (Vic), and did not seek the plaintiffs’ consent for the works.
On or about 4 July 2018, the plaintiffs served a default notice under the lease. Amcor denied that it was in breach of the covenants and contended that it did not need a building permit for the works. It also sought retrospective consent for the works. Later in 2018, Amcor sought to exercise the option to renew.
The principal dispute in this proceeding is whether Amcor was entitled to renew the lease. This involves a determination as to whether it required a building permit for the works, and whether breaches of the covenants occurred and were unremedied when it sought to renew the lease. It also involves the question of whether consent for the works can and should be given retrospectively.
The plaintiffs principally seek declarations that the proposed renewal is invalid and of no effect, as well as an order for possession of the premises. Amcor seeks declarations that it was entitled to renew the lease and has done so.
The dispute is a classic landlord and tenant dispute. The relevant facts as to the works performed are not in dispute. The legal significance of the facts, and the issue of whether there were unremedied breaches of the covenants when Amcor sought to renew the lease are strongly disputed. There is also a dispute as to whether the plaintiffs can, or should retrospectively give consent for what was done.
Procedural history
The proceeding was issued in January 2019, and came on for directions before Croft J on 18 March 2019. The plaintiffs sought an early hearing of the proceeding.
The application was successful. After hearing from the parties and giving directions, Croft J listed the proceeding for a five day hearing commencing on 10 July 2019. Following correspondence between the Court and the parties about the possibility of an earlier trial date, the trial date was confirmed.
In April and May 2019, the parties filed their witness statements. The witness statements filed by Amcor included the witness statement of John Crow, who was the principal of the building company which performed the works. In his witness statement, Mr Crow says that his company, A.J.R. Crow Pty Ltd (ACN 006 582 430), provided Amcor with a quotation for the floor works, and later for works to the roof. Before the floor works commenced, Mr Crow considered whether a building permit was required. He came to the view that no building permit was necessary for these works, obtaining a like opinion from a building surveyor.
As to the roof works, Mr Crow says that he considered that no building permit was required because, in his view, the roof works did not affect the structure of the building.
In his affidavit of 11 December 2019, Peter Michael Lucarelli, a partner of Amcor’s solicitors, deposes that in April 2019 Amcor considered the possibility of bringing a third party claim against Mr Crow and A.J.R. Crow Pty Ltd (‘Crow parties’). He said that Amcor decided not to do so. However, following the receipt of a second report from the plaintiffs’ expert dated 18 November 2019, Amcor decided to seek to join the Crow parties as third parties to the proceeding. It first advised the plaintiffs’ solicitors of this decision on 11 December 2019.
In the meantime, much had been done in the proceeding:
(a)on 17 May 2019, the plaintiffs brought an application by way of summons for orders seeking particular discovery and concerning the redaction of documents produced on discovery. On 3 July 2019, Mukhtar AsJ published a ruling which resolved this issue;[1]
(b)on 6 June 2019, Amcor issued a summons seeking orders for further and better discovery. On 16 September 2019, Mukhtar AsJ upheld the plaintiffs’ objection to the production of documents and dismissed Amcor’s summons;[2] and
(c)on 19 June 2019, Amcor issued a summons seeking to set aside a subpoena filed by the plaintiffs to a third person. On 7 August 2019, Mukhtar AsJ dismissed that summons.
[1]Omar Property Pty Ltd & Ors v Amcor Flexibles (Port Melbourne) Pty Ltd [2019] VSC 446, [8].
[2]Omar Property Pty Ltd & Ors v Amcor Flexibles (Port Melbourne) Pty Ltd [2019] VSC 627.
On 27 June 2019, Croft J vacated the trial date.
Following Croft J’s retirement, the proceeding was listed before me on 20 September 2019 for directions. Final directions were given and the proceeding was fixed for trial on 17 February 2020 on an estimate of eight days. At this hearing, Amcor confirmed that the parties had filed their witness statements or affidavits and that the evidence was essentially complete, subject to proper objections. The trial date was determined having regard to the availability of counsel and witnesses.
On 28 November 2019, the plaintiffs issued a summons seeking leave to file and serve a supplementary expert report of Patrick Irwin returnable on 12 December 2019.
On 11 December 2019, Amcor issued a summons seeking to file and serve an expert report of Richard Drew and to vacate the trial date.
The two summons were heard by me on 12 December 2019.
On that date, the plaintiffs urged that the trial proceed on the listed date. Amcor foreshadowed a third party proceeding. I made orders for the filing of the two expert reports but declined to vacate the trial date.
On 19 December 2019, Amcor issued a further summons seeking leave to file a third party notice and to vacate the trial date. On the following day, I gave directions as to the filing and service of affidavits and submissions, and directed that the summons be returnable on Friday 31 January 2020.
On the return of the summons, the parties appeared by counsel. Counsel also appeared by leave for the Crow parties.
Parties’ submissions
The plaintiffs submitted that:
(a)no adequate explanation has been given as to why the application to join third parties was not made earlier;
(b)Amcor had positively considered joining the Crow parties in April 2019, but elected not to do so;
(c)Amcor had obtained a witness statement from Mr Crow which was filed on 31 May 2019;
(d)Amcor’s decision to change its position and seek to join the Crow parties was made shortly before the trial date;
(e)continuing delay in the trial of the proceeding was to Amcor’s benefit, as it was able to continue in occupation of the premises; and
(f)Amcor’s continuing occupation of the premises diminished or prejudiced the plaintiffs’ commercial interests. Over one year has already passed since the commencement of the proceeding.
Amcor submitted:
(a) the application was brought under r 11.01(c) of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’) on the basis that it raised questions relating to the original subject matter of the proceeding that should be determined not only as between the plaintiffs and Amcor, but also as between Amcor and the Crow parties;
(b) there was a common question to be determined as between the plaintiffs’ claim against Amcor and the proposed claim against the Crow parties, namely whether a building permit was required for the building works the subject of the default notice given in July 2018; and
(c) while Amcor had previously decided not to join the Crow parties, after receipt of the plaintiffs’ second expert report, Amcor determined to bring a third party claim against the Crow parties.
As to the considerations relevant to the exercise of the Court’s discretion, Amcor submitted:
(a)it was an object of the third party procedure established by ord 11 of the Rules that common questions arising between a plaintiff and a defendant be determined at the same time as between a defendant and a third party;
(b)this avoided the need to try the same question twice and the potential for prejudice to a defendant in the event of inconsistent findings;
(c)the potential for prejudice was great, given that the success of the plaintiffs’ claim under cl 5.4 would require Amcor to vacate the premises at significant expense;
(d)the interests of justice favoured a short adjournment of the trial to afford the Crow parties the opportunity of prosecuting their defence fully;
(e)the plaintiffs’ material overstated the prejudice that they would suffer; and
(f)the grant of leave to file the proposed third party notice and the adjournment of the trial best protected the interests of Amcor and the Crow parties while minimising any prejudice to the plaintiffs.
The Crow parties opposed the application to join them as third parties, and submitted:
(a)Mr Crow had provided a witness statement stating that he was of the view that a building permit was not required, after consultation with a building surveyor;
(b)consideration might need to be given as to whether the building surveyor was to be joined as a party;
(c)joinder of the Crow parties might prove futile because any finding that the Court made as to the need for a building permit necessarily required the Court to reach a finding that Amcor was in breach of other covenants of the lease;
(d)Amcor had conceded that the works involved structural alterations;
(e)the damage caused to Amcor was not quantified;
(f)it was likely, if the Crow parties were joined as third parties, that they would wish to participate in the trial, make submissions and cross-examine expert witnesses. Full participation in the trial may potentially require the Crow parties to obtain their own expert evidence;
(g)the allegations of negligence against Mr Crow were in the form of a claim for economic loss but were without necessary allegations as to the basis of the duty of care, and as to Amcor’s reliance on Mr Crow, who was not a party to the building contract;
(h)the Crow parties would be seeking proper particularisation of the allegations of negligence; and
(i)third party proceedings would make the case significantly wider and bigger than it currently is.
The Court’s discretion
The Court has a discretion under the Civil Procedure Act 2010 (Vic) (‘CPA’) and the Rules as to what should be done in the circumstances.
The overarching purpose of the CPA is ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’.[3] The Court must seek to give effect to this overarching purpose in the exercise of any of its powers.[4] The Court has very extensive powers to further the overarching purpose.[5]
[3]CPA s 7(1).
[4]Ibid s 8(1).
[5]Ibid s 9.
The Court and the parties also have overarching obligations to act promptly, minimise delay, narrow the issues in dispute, and to ensure that the costs incurred are reasonable and proportionate to the issues in dispute.[6]
[6]Ibid ss 23–25.
In addition to the statutory provisions, the Court is assisted by the principles outlined by the High Court in AON Risk Services Australia Ltd v Australian National University.[7] In the case of an application to award pleadings, the Court is required to take into account the nature and importance of what is sought to be done, the extent of delay, the costs associated with it and the prejudice which might reasonably be assumed to follow. The High Court noted that much may depend upon the point the litigation has reached relative to the trial when the application is made.[8]
[7](2009) 239 CLR 175 (Gummow, Hayne, Crennan, Kiefel and Bell JJ).
[8]Ibid 214–5 [102].
In the present case, the fundamental issue to be determined by the Court is whether Amcor is entitled to remain in possession of the premises. Resolution of the principal question has important consequences. All parties agree that this issue requires expeditious resolution by the Court, and that the determination of this issue should occur in a timeframe consistent with its importance.
There is little dispute as to the facts of the proceeding. It is accepted that the works were constructed by the Crow parties at Amcor’s request. The works performed are still in place and have been inspected by the experts retained by the plaintiffs and by Amcor. The Court can conduct a view to better understand what has been done.
Apart from the alleged breach of cl 5.4, the plaintiffs rely on alleged breaches of cls 5.2 and 5.6 of the lease. The third parties are not liable (or at least have no obvious liability) for these claims.
I do not accept Amcor’s submission that a postponement of the trial to a date when the proposed third party proceeding would be ready for trial would involve only a short delay. It is plain from the submissions of the Crow parties that:
(a)there is a dispute as to whether the third party claims have been properly pleaded and particularised;
(b)the Crow parties may desire to obtain an expert witness who will need to inspect the works and provide an expert report;
(c)consideration will need to be given as to whether subcontractors should be joined as fourth parties and to any claim for proportionate liability under Pt IVAA of the Wrongs Act 1958 (Vic);
(e)discovery will need to occur between Amcor and the third parties; and
(f)the loss and damage suffered by Amcor will not be known until some time after Amcor vacates the premises (if in fact this transpires).
It is also plain that the proposed third party proceeding involves much wider questions of fact than whether a building permit was needed for the works. They include the nature and form of instructions given by Amcor to the Crow parties, the terms of the agreements made between them, the conversations between the personnel involved, and the issue of whether Mr Crow was negligent, even if he formed an incorrect view about whether a building permit was needed for the works. I accept that it would be unfair to the third parties for the third party claim to be tried on 17 February 2020.
A further problem relates to the fixing of the proceeding for trial. Difficulties were experienced in fixing the present trial date. Those difficulties included the availability of senior counsel and expert witnesses, as well as the trial commitments of the Court.
If the present trial date is vacated, and if the questions raised in the third party notice are to be tried at the same time as the trial of the proceeding, it is unrealistic to expect that the delay would be less than 12 months. Such delay would cause significant prejudice and disadvantage to the plaintiffs.
While it is the usual practice, and for good reason, that common questions arising in a proceeding and a third party claim be heard and determined at the same time, there are circumstances where the interests of justice may dictate that the third party claim be heard at a later time, even if there is some risk of a different resolution of the common question between the two proceedings. In the present case, the risk is low, and can be further reduced.
Previous decision
I am assisted by the decision of Ormiston J in Consolidated Exploration Ltd v Ord Minnett Ltd.[9] In that case, the fixing of a proceeding for trial was resisted by the defendant on the basis of a third party proceeding, which had only recently been issued. None of the newly joined third parties were ready for trial. The third party claim depended entirely on the plaintiff’s success in the claim against the defendant and the defendant sought to be indemnified against any damages the plaintiff may recover. Ormiston J considered that the plaintiff could not be blamed for the defendant’s delay in bringing the third party proceeding, and that whatever difficulties the defendant faced, it should have joined the third parties earlier.[10]
[9][1993] VSC 181.
[10]Ibid 3.
Ormiston J did not think it appropriate to delay the trial to allow the third party proceeding to catch up. While noting the desirability of achieving the concurrent trial of all claims if that were practicable, the plaintiff’s trial would be delayed for an unnecessarily long period. Moreover, his Honour considered that, given that the matter was in the Commercial List, the Court should not be hesitant to dispose of severable claims.[11] Ormiston J concluded that justice would be better served by the setting down for trial of the plaintiff’s claim against the defendant, rather than see the trial deferred to the following year.[12]
[11]Ibid 4.
[12]Ibid 5.
Decision
In the present case, I am satisfied that justice is best served if the trial date is not vacated. The proceeding has been set down for trial for months. The parties are ready to proceed. The dispute as to possession of the premises is the principal issue to be determined. The claims made by the plaintiffs involve substantially wider issues than the common questions involved in the third party proceeding. Likewise, the third party proceeding involves different issues, and possibly additional parties who are not presently parties to the proceeding. The third party claim will arise only if Amcor is unsuccessful in the proceeding, and then only on the cl 5.4 claim.
The plaintiffs have said that they did not oppose the grant of leave to bring a third party claim, or the participation of the third parties at the trial provided that the trial is not delayed.
I am satisfied that the risk of inconsistent results is much reduced, although not entirely removed, by:
(a)the fact that the trial is before a judge sitting alone, and not a jury;
(b)the confined nature of the common question viz whether the building regulations provide an exemption from the requirement for a building permit;[13]
(c)the fact that Mr Crow long ago provided a witness statement and will be giving evidence at the trial;
(d)the absence of factual disputes as to the common questions with the result that the issue is one of the legal significance of common facts rather than the determination of competing primary facts; and
(e)the availability of the Crow parties to participate in the trial so that in the unlikely event that a point concerning the common question is overlooked by counsel for Amcor, they will have the ability to draw the point to the Court’s attention.
[13]Building Interim Regulations 2017 (Vic) sch 8 item 4.
To the extent that there may be any risk of inconsistency between the proceeding and the third party proceeding despite the steps I have outlined, this is the result of making the application for leave to bring the third party proceeding about three months after the proceeding was set down for trial. It is not the plaintiffs’ fault that Amcor had a change of heart about the need to join third parties.
Proposed orders
If a third party files an appearance, r 11.12(b) of the Rules provides that unless the Court otherwise orders:
(i) the third party may attend and take part at the trial of the proceeding;
(ii)at the trial the questions between the defendant and the third party shall be tried concurrently with the questions between the plaintiff and the defendant; and
(iii) the third party shall be bound by the result of the trial.
Doing the best that I can in the interests of justice, I will make an order to the effect that:
(a)Amcor have leave to issue the proposed third party proceeding;
(b)the trial date of 17 February 2020 is confirmed;
(c)the Crow parties have leave to attend and take part in the trial of the proceeding;
(d)further directions will be given for the conduct of the third party proceeding after the trial if that is necessary;
(e)the questions between the defendant and the third party will not be tried on 17 February 2020 but at a later date; and
(f)the Crow parties are not bound by the result of this trial.
It is also convenient to exclude the assessment of damages from the scope of the trial. This will remove one area of disputation, and have some effect in reducing the length of the trial.
Conclusion
Subject to hearing from the parties as to the form of orders, the trial will proceed, with the third party claim to be tried at a later time should this prove to be necessary.
SCHEDULE OF PARTIES
| OMAR PROPERTY PTY LTD (ACN 602 739 668) | First Plaintiff (First Defendant by counterclaim) |
| MB WILLIAMSTOWN ROAD PTY LTD (ACN 612 177 723) AS TRUSTEE FOR THE MB WILLIAMSTOWN ROAD TRUST | Second Plaintiff (Second Defendant by counterclaim) |
| JG WILLIAMSTOWN ROAD PTY LTD (ACN 612 179 352) AS TRUSTEE FOR THE JG WILLIAMSTOWN ROAD TRUST | Third Plaintiff (Third Defendant by counterclaim) |
| ID WILLIAMSTOWN ROAD PTY LTD (ACN 612 184 675) | Fourth Plaintiff (Fourth Defendant by counterclaim) |
| AMCOR FLEXIBLES (PORT MELBOURNE) PTY LTD (ACN 004 284 673) | Defendant (Plaintiff by counterclaim) |
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