PPG Development Pty Ltd v Capitanio

Case [2016] SASC 169

SUPREME COURT OF SOUTH AUSTRALIA

(Magistrates Appeals: Civil)

PPG DEVELOPMENT PTY LTD v CAPITANIO

[2016] SASC 169

Judgment of The Honourable Justice Doyle

4 November 2016

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - AMENDMENT

A Magistrate granted the respondent permission to amend her defence. The application was made during the course of trial, and the grant of permission resulted in the trial being adjourned. The appellant appealed on various grounds contending that the Magistrate erred in the exercise of his discretion, including that the Magistrate applied an incorrect principle of law and failed to have regard to relevant prejudice. The appellant also contended that the decision was plainly unjust or unreasonable.

Held per Doyle J, allowing the appeal:

1.       The Magistrate erred in the exercise of his discretion.

2.       The respondent’s application to amend her defence is dismissed.

Magistrates Court (Civil) Rules 2013 (SA) r 80(1), r 3(1), referred to.
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261, discussed.
Channel Seven Adelaide Pty Ltd v Manock [2010] SASCFC 59; Duke Group Ltd v Arthur Young (1991) 55 SASR 24; Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; Tamaya Resources Ltd v Deloitte Touche Tohmatsu (2016) 332 ALR 199; House v The King (1936) 55 CLR 499; Poniatowska v Channel Seven Sydney Pty Ltd [2014] SASC 95, considered.

PPG DEVELOPMENT PTY LTD v CAPITANIO
[2016] SASC 169

Magistrates Appeal

DOYLE J:

  1. On 15 September 2016, a Magistrate granted the respondent (the first defendant, Ms Capitanio) permission to amend her defence.  The application was made during the course of the trial, and the grant of permission resulted in the trial being adjourned.  The appellant (the plaintiff, PPG Development Pty Ltd) appeals against this decision.

    Background

  2. The plaintiff is in the business of property development.  It sought to undertake a development in St Morris, involving the subdivision of properties at 23 Breaker Street (owned by the second and third defendants) and 25 Breaker Street (owned by the first defendant), and the creation of a third allotment (to be located at 25A Third Avenue[1]) across the rear of these properties.  The development contemplated the sale of 23 Breaker Street (as reduced by the subdivision) and 25A Third Avenue, with the defendant continuing to own and reside at 25 Breaker Street. 

    [1]   The property at 25 Breaker Street was a corner allotment, thus resulting in the third allotment at the rear of 23 and 25 Breaker Streets having a frontage on Third Avenue.

  3. On 13 July 2014, the plaintiff entered into a deed with the first defendant to purchase a portion of 25 Breaker Street, being the portion of that property that was to become part of the third allotment, at 25A Third Avenue.  The purchase price was $170,000.  On 16 July 2014, the plaintiff entered into a…

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PPG Development Pty Ltd v Capitanio [2016] SASC 169
Case
[2016] SASC 169
Decision Date

CaseChat Overview and Summary

PPG Development Pty Ltd (the appellant) appeals against a decision of the Magistrate of the Magistrates Court of South Australia, who granted the respondent (the first defendant, Ms Capitanio) permission to amend her defence during the course of the trial, resulting in an adjournment of the trial. The appellant’s claim against the first defendant was that she breached her obligations under a deed executed on 13 July 2014 or repudiated that deed by refusing to provide necessary documentation and otherwise cooperate with the appellant to effect the sale of a portion of 25 Breaker Street and a third allotment, and by failing to demolish a garage located at the rear of her property. The appellant claims that by reason of the first defendant’s breaches or repudiation of the deed, it is entitled to damages in the amount of $64,684.23 for the loss sustained by reason of its inability to conclude the sale of the development by the termination date contemplated in the deed. The first defendant denies any breach or repudiation of the deed, and hence denies the appellant’s entitlement to any damages. The legal issues in this case are whether the Magistrate erred in granting permission to the first defendant to amend her defence, and if so, whether that error was sufficiently significant to warrant the setting aside of the Magistrate’s decision. The court found that the Magistrate erred in his exercise of discretion by failing to have regard to the full range of considerations relevant to the decision, including the importance of the proposed amendment, the merits of the proposed amendment, and the forms of prejudice relevant to the decision. The court held that the error was of sufficient significance to warrant the setting aside of the Magistrate’s decision and the substitution of the decision of this Court. The orders of the court were that the appeal be allowed; the decision of the Magistrate granting permission to the first defendant to amend her defence be set aside; and the matter be remitted to the Magistrates Court to be heard de novo before a different Magistrate.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

On 15 September 2016, a Magistrate granted the respondent (the first defendant, Ms Capitanio) permission to amend her defence. The application was made during the course of the trial, and the grant of permission resulted in the trial being adjourned. The appellant (the plaintiff, PPG Development Pty Ltd) appeals against this decision.Background The plaintiff is in the business of property development. It sought to undertake a development in St Morris, involving the subdivision of properties at 23 Breaker Street (owned by the second and third defendants) and 25 Breaker Street (owned by the first defendant), and the creation of a third allotment (to be located at 25A Third Avenue[1]) across the rear of these properties. The development contemplated the sale of 23 Breaker Street (as reduced by the subdivision) and 25A Third Avenue, with the defendant continuing to own and reside at 25 Breaker Street. [1] The property at 25 Breaker Street was a corner allotment, thus resulting in the third allotment at the rear of 23 and 25 Breaker Streets having a frontage on Third Avenue. On 13 July 2014, the plaintiff entered into a deed with the first defendant to purchase a portion of 25 Breaker Street, being the portion of that property that was to become part of the third allotment, at 25A Third Avenue. The purchase price was $170,000. On 16 July 2014, the plaintiff entered into a deed with the second and third defendant to purchase the entirety of 23 Breaker Street for $530,000. The deeds contemplated a process, to be managed by the plaintiff, leading to the obtaining of the relevant development approval by 1 March 2015, and settlement and completion by 1 April 2015. The defendants took on various obligations to facilitate and assist in completion of the subdivision and sale. In her claim, the plaintiff alleges that the defendants breached their obligations in various ways. The claim against the second and third defendants was resolved prior to the commencement of the trial, and is not relevant for present purposes. So far as the claim against the first defendant is concerned, the plaintiff alleges that the first defendant breached her obligations under the 13 July 2014 deed, or repudiated that deed, by refusing to provide necessary documentation and otherwise cooperate with the plaintiff to effect the sale of 23 Breaker Street and the third allotment, and by failing to demolish a garage located at the rear of her property and adjoining the third allotment. The plaintiff claims that by reason of the first defendant’s breaches or repudiation of the deed, it is entitled to damages in the amount of $64,684.23 for the loss sustained by reason of its inability to conclude the sale of the development by the termination date contemplated in the deed. The first defendant denies any breach or repudiation of the deed, and hence denies the plaintiff’s entitlement to any damages.The trial The trial of the plaintiff’s claim was initially listed for hearing on 20 June 2016. It was then rescheduled to occur over two days, 9 and 10 August 2016.

Evidence

Evidence Before The Court

Finally, I note that the Magistrate cited the reasons of Parker J in Poniatowska v Channel Seven Sydney Pty Ltd[23] in support of his application of the approach of Perry J in Duke Group Ltd v Arthur Young. While Parker J did refer to Duke Group Ltd v Arthur Young in considering the applications to amend with which he was concerned, a reading of Parker J’s reasons as a whole makes it plain that his Honour had regard to the broader considerations, and forms of prejudice, set out in Aon Risk Services. His Honour took into account these considerations in refusing permission to make various of the proposed amendments. It follows that the reasons of Parker J in Poniatowska v Channel Seven Sydney Pty Ltd are of no assistance to the first defendant on this appeal.[23] Poniatowska v Channel Seven Sydney Pty Ltd [2014] SASC 95.Ground 3: form of the application to amend and the evidence relied upon The plaintiff complains that the Magistrate erred in granting permission to amend in circumstances where the terms of the amendment had not been articulated, the application was made orally and without forewarning, and no explanation was proffered for the delay. Nothing turns on the fact that the application itself was made orally. While interlocutory applications should ordinarily be made in writing, it is common place – particularly during the course of a trial – that circumstances justify an application being made orally. Of more significance in this case was the fact that the application was made without the terms of the amendment being articulated, and without warning. Despite the apparently late timing of the decision and instructions to apply to amend in this case, the first defendant ought to have proffered a version of the amendment so as to enable its nature and consequences to be considered with more precision. It will often be difficult to assess the extent to which an amendment gives rise to new factual issues (and the consequences in terms of delay and disruption likely to be associated with those new issues) without seeing the precise form and detail of the proposed amendments. Likewise, it will also often be difficult to assess the arguability or tenability of the proposed amendment without this detail and precision. Further, the first defendant’s counsel or solicitor ought to have given the plaintiff’s counsel or solicitor some warning of the intention to apply to amend so as to give them the opportunity to consider their response and take instructions. Even if the prospect of an application to amend only arose a day or so before the resumption of the trial, and even if a final decision was awaiting formal instructions, there does not appear to be any good reason why the plaintiff’s advisors could not have been informed of the general effect of what was intended so that they could consider their client’s position. Giving the timing of the application, it was incumbent upon the first defendant’s advisors to do what they could to provide at least some notice to the plaintiff’s advisors. In this context, it is regrettable that the first defendant’s solicitor did not take the opportunity that arose when he was telephoned by the plaintiff’s solicitor before court on the morning the application was made to inform him at least that it was likely that the application would be made, and the general effect of the proposed amendment.

Decision

Reasons for decision

However, again, despite the first defendant’s departure from the preferable approach to late amendment applications, I do not consider that the Magistrate was in error by reason merely of his decision to entertain and determine the application in the absence of affidavit evidence from the first defendant. While the absence of such evidence made it difficult to be confident as to the precise circumstances of, and explanation for, the application to amend, and in particular whether any consideration had previously been given to the issue by Mr Whatson, it was nevertheless open to the Magistrate to accept Mr Manetta’s statement that his retainer a few days ahead of the resumed trial explained the fact and timing of the amendment. Ground 4: decision plainly unjust or unreasonable The Magistrate’s reasons are very brief. Indeed, other than mentioning the timing of the application, referring in general terms to the principles he applied in exercising his discretion, and then apparently concluding that there was no prejudice beyond that which might be addressed by an order for costs, his reasons do not provide any insight into the matters that he considered relevant in the exercise of his discretion. The plaintiff does not challenge the adequacy of the Magistrate’s reasons. While it would have been preferable if the Magistrate had at least listed the more significant matters he took into account, it is appropriate to bear in mind that the Magistrate delivered his reasons after only a very short adjournment to consider the submissions made on the application. It was desirable that the Magistrate determine the application in the expeditious manner he did. To have reserved his decision for any significant period of time would itself have prejudiced the orderly progress of the trial. Whilst the brevity of the Magistrate’s reasons is understandable in the circumstances, it nevertheless makes the task of this Court difficult. The only practical way for this Court to determine whether the discretion miscarried in the sense that the outcome was plainly unjust or unreasonable is to undertake a consideration of the matters the Magistrate ought to have taken into account and then consider whether, in light of those matters, the Magistrate’s decision to grant permission to amend was plainly unjust or unreasonable. The nature and importance of the proposed amendment. The proposed amendment was of importance to the first defendant in that if made out it would establish a defence to the plaintiff’s claim. While largely an allegation of law, and overlapping to some extent with the existing joinder of issue (albeit not express in the pleadings) as to whether or not stamp duty was payable, nevertheless the proposed amendment did raise a fresh factual issue as to the existence of a purpose of avoiding or evading stamp duty, and hence the state of mind or motivation of the parties to the deed. The merits of the proposed amendment. There will often be limits to the ability and appropriateness of the court giving detailed consideration to the merits of a proposed amendment. If the court is satisfied that the amendment is not arguable or tenable, this will weigh heavily against an exercise of the discretion to permit the amendment to be made. Here, there was no submission to the Magistrate that the proposed amendment was untenable. While a submission to this effect was made on appeal, I do not consider it appropriate to take that into account in determining whether the Magistrate erred. In any event, while I have some reservations about the merits of the proposed amendment, bearing in mind the limits of the court’s ability to form a detailed view as to the merits on an application such as the present, I am not satisfied that the proposed amendment is unarguable or untenable. I regard the merits of the proposed amendment as a neutral consideration.

Ratio Decidendi

Legal Principle Established

For completeness, I observe that there is nothing in the Magistrates Court (Civil) Rules 2013 (SA) relevant in this case that would warrant any departure from the principles set out in Aon Risk Services. While r 80(1) confers upon the Court a broad discretion to permit a party to amend their pleadings at any stage before final judgment, this is subject to r 3(1). This rule provides that in interpreting and applying the rules, the Court “must in all things promote the expeditious, economical and just conduct and resolution of an action or proceeding”.Consideration of the appeal As the present appeal involves a challenge to a discretionary decision of the Magistrate, it involves an application of the principles in House v The King.[20] It is thus not sufficient that I form the view that I would have exercised the discretion differently. Identification of error in this context requires a conclusion that the Magistrate erred as a matter of principle, failed to have regard to a relevant consideration, had regard to an irrelevant consideration, made a material error of fact, or otherwise arrived at a decision or outcome that was plainly unjust or unreasonable. This last category of error does not necessarily require an ability to identify the reason for the error; it is enough that the decision or outcome was one that no reasonable Magistrate could properly have reached.[20] House v The King (1936) 55 CLR 499 at 504-505. In a case such as the present, where the discretion in question related to a matter of practice and procedure, it is particularly important that the appellate courts observe the principles of appellate restraint in House v The King. The orderly conduct of litigation depends upon appellate courts respecting the broad discretions generally conferred upon the courts below in relation to matters of practice and procedure. That said, once error has been identified in accordance with the principles of House v The King, it is the duty of the court to intervene. In my view, for the reasons that follow, the appellant in this case has established errors of the type required by the principles in House v The King. Essentially those errors reflect the matters set out in grounds of appeal 1, 2 and 4, as distilled by me earlier in these reasons. While ground of appeal 3 highlights some matters involving departures by the first defendant from the desirable approach to late amendment applications, I am not satisfied that they involved any error on the part of the Magistrate.Grounds 1 and 2: error of principle and failure to have regard to relevant prejudice While the Magistrate made reference to the decisions of the High Court in Aon Risk Services and the Full Court of the Supreme Court in Channel Seven Adelaide Pty Ltd v Manock, his reliance upon the passage extracted from the reasons of Perry J in Duke Group Limited v Arthur Young reveals an error of principle. The approach articulated by Perry J is akin to the approach subsequently articulated by the High Court in Queensland v JL Holdings Pty Ltd. It involves an approach that affords parties something tantamount to a right to amend on condition that they pay the costs thrown away by reason of the amendments. It involves an approach that tends to overlook the fact that amendments often occasion prejudice both to the parties (and to the administration of justice more generally) in the form of disruption and delay that cannot be adequately compensated for by an order for costs. It thus involves an approach that is inconsistent with the High Court’s confirmation of the existence and significance of these forms of prejudice in Aon Risk Services.