Stephen Floyd Bailey and 1 Ors v Redebi Pty Limited trading as PR Design Co and 1 Ors

[1999] NSWSC 823

CITATION:	Stephen Floyd Bailey & 1 Ors v Redebi Pty Limited trading as PR Design Co & 1 Ors [1999] NSWSC 823
CURRENT JURISDICTION:	Common Law Division - Construction List
FILE NUMBER(S):	55022/98
HEARING DATE(S):	12/08/99
JUDGMENT DATE:	12 August 1999
PARTIES :	Stephen Floyd Bailey (First Plaintiff) Bailey's Diesel Services Pty Limited (ACN 003 170 769) (Second Plaintiff) Redebi Pty Limited trading as PR Design Co (ACN 002 557 842) (First Defendant) Sherson & Associates Pty Limited (ACN 001 022 993) (Second Defendant)
JUDGMENT OF:	Santow J

COUNSEL :	I D Faulkner (Plaintiffs) R Hunt (Second Defendant)
SOLICITORS:	Henry Davis York (Plaintiffs) Corrs Chambers Westgarth (Second Defendant)
CATCHWORDS:	PRACTICE and PROCEDURE — Leave refused to amend defence to add limitation defence — Limitation defence overlooked until close of oral addresses — Governing principles — Courts too lenient? — Prejudice to other party not adequately compensable by indemnity for costs — Relevance of public interest and interests of other litigants — Woolf Rules.
ACTS CITED:	Supreme Court Rules Pt 20 r1(2)
CASES CITED:	A H and R N Grundy v J B Lewis and others (Cooper J, Federal Court, 21 September 1998, unreported) Commissioner of Taxation v Brambles Holdings Pty Limited (1991) 28 FCR 451 Ketterman v Hansel Properties Ltd [1987] AC 189 Mehta v Commonwealth Bank of Australia (Rogers CJ Comm D SCNSW, 7 May and 27 June 1990, unreported) Sali v SPC (1993) 116 ALR 625 State of Queensland v JL Holdings (1997) 189 CLR 146; (1997) 141 ALR 353 Technical Team Products v Noble Dunn (1990) 20 NSWLR 221
DECISION:	Leave to amend defence refused.

REVISED — 13 August, 1999
IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
CONSTRUCTION LIST

SANTOW J

No. 55022/98
STEPHEN FLOYD BAILEY
First Plaintiff
BAILEY’S DIESEL SERVICES PTY LIMITED (ACN 003 170 769)
Second Plaintiff
REDEBI PTY LIMITED trading as PR DESIGN CO (ACN 002 557 842)
First Defendant
SHERSON & ASSOCIATES PTY LIMITED (ACN 001 022 993)
Second Defendant
JUDGMENT — ex tempore

12 August 1999

INTRODUCTION

1    The issue before me is one that has increasingly pressed upon courts in recent times. It is how the interests of justice should be balanced between the parties, when one party belatedly seeks an indulgence. Is there room in our overcrowded courts for consideration of the interests of other litigants and the public interest? Are individual justice and court efficiency necessarily in conflict? Here belatedly one party seeks the indulgence of amending its defence, proffering an amount for the resultant costs; the other party contends that this could not adequately compensate it for the prejudice it would suffer were the indulgence granted. The indulgence sought by the Second Defendant is leave to amend its defence by pleading the limitation period. It seeks to do so over a month after close of evidence and at the end of oral addresses. It proffers all costs that the Plaintiffs would suffer by reason of such leave being granted. 2    It is important at the outset to identify whether prejudice would thereby be suffered and, if so, its extent and whether adequately compensable by cost indemnity. The cases, including most recently the High Court in State of Queensland v JL Holdings (1997) 189 CLR 146; (1997) 141 ALR 353 provide some guidance. But they provide no mechanical algorithm such as, that where the availability of costs are an adequate recompense it automatically follows that the indulgence should be granted, important though that factor be. 3    What of the interests of other litigants waiting for their cases to come on — the public interest in the efficiency of the courts, jeopardised by too ready a willingness to grant such indulgences, causing cases to escalate in time and cost? JL Holdings in the High Court did not overrule the earlier decision in Sali v SPC (1993) 116 ALR 625 at 629. There the High Court said that the trial judge:

“is entitled to consider claims by litigants in other cases awaiting hearing … as well as the interests of the parties … What might be perceived as an injustice to a party when considered only in the context of an action between parties may not be so when considered in a context which includes the claims of other litigants and the public interest in achieving the most efficient use of court resources.”

4    This is not to be understood as an automatic elevation of court efficiency over individual justice to the parties. Rather it is a factor to be taken into account with other relevant considerations as they bear upon the interests of justice overall. As Sir Anthony Mason said, in a recent paper on “the Future of Adversarial Justice” given on 7 August 1999 to the Australian Institute of Judicial Administration:

“There is no inconsistency between the two decisions. The criticism of JL Holdings seeks to elevate case management values to an absolute. No system with pretensions to doing justice could allow that to occur. The departure contemplated in JL Holdings is predicated on the availability of costs as an adequate recompense, though it is now accepted, and properly so, that courts have been too ready to conclude that procedural failures can be made good by an order for costs.
It may be that JL Holdings has been misinterpreted by some judges as an authority for excessive leniency. If so, appellate courts should ensure that the correct approach is adopted as a counter to the tendency already mentioned. There is no need for legislative intervention and it is by no means clear what the appropriate legislative intervention would be.”
APPLICATION OF PRINCIPLES TO PRESENT APPLICATION

5    When comparing the facts of JL Holdings to those presently before me there are some important differences. In JL Holdings, the primary judge refused leave to the defendants to amend their defence on one ground (though allowing leave on other grounds) after earlier amendments and interlocutory hearings. The reason given was to avoid vacation of the date for hearing, estimated to take four months. Although the defence was fairly arguable, the judge in a case managed jurisdiction considered that maintaining the date for hearing was a more pressing consideration — mistakenly as the High Court held. The party in breach of a timetable stipulation in a case managed jurisdiction was thus entitled by the High Court to pursue a fairly arguable point, having raised it not at the last minute, as here, but six months before the date of the trial; any prejudice to the other side could be cured by an order for costs. This was because the parties were not small individuals for whom the stress of prolonged litigation could be expected to loom large. One was the State of Queensland and the other a large developer. The High Court considered that the principles of case management were not an end in themselves. They were to be subordinated to permitting a party properly to present its case by granting it the necessary indulgence to do so, where costs adequately compensated the other party for any prejudice. If one were to take into account the interests of litigants in other cases awaiting hearing, their position was not in truth prejudiced to any material extent. This was because there would have been ample time to fill the vacated hearing dates in the ensuing six months. 6    What has here essentially occurred is that an engineer defendant was sued in tort for negligent design concurrently with an architect defendant. Only the architect invoked the limitation period. The engineer defendant now seeks, at the close of oral submissions following detailed written submissions and well after the close of evidence, to plead the same limitation defence thus prolonging the trial and adding to costs. The Plaintiffs constitute an individual and his small incorporated business bringing action with the apparent concurrence and backing of an insurance company. The Plaintiffs will suffer prejudice if the indulgence is granted, though the Second Defendant contends that the proffered costs will adequately compensate. 7    I am satisfied that much of that prejudice may be met by an order for costs but certainly not all. The residual prejudice is significant. It can fairly be assumed to include the strain of further prolongation of litigation. If the leave to amend were allowed, the Plaintiffs would need then to have the opportunity to present full argument (and evidence) relating to the Plaintiffs’ pre-trial attitude to settlement of these proceedings, affected as the Plaintiffs assert by the absence of a limitation defence from the engineer. The Rules inhibit an elaboration of that assertion at this point. But the potential prejudice does not stop there. The Plaintiffs’ counsel has conducted the case throughout on the assumption that the defence for the engineers was to be conducted on merit, and that limitation periods were not invoked, whether for commercial reasons or because the engineer was confident on the issue of liability, or both. The Plaintiffs’ counsel, while fairly acknowledging the difficulty of dealing with these matters with the vision of hindsight, asserts that the way he conducted his clients’ case including cross-examination was materially influenced by those considerations. I have no reason to doubt that. While the Defendant Engineer invites the Plaintiffs now to conduct such further cross-examination or submit such further evidence as would correct the Plaintiffs’ position to what it should have been had the defence been pleaded at the outset, the Plaintiffs decline to do so. The Plaintiffs say that correction is now impossible. It would itself be prejudicial and in ways that an indemnity for the extra costs could not compensate. I have no basis for doubting the Plaintiffs in that conclusion. 8    All that is quite apart from the material consideration of concern for court efficiency in further extending the time this case has already taken compared to what it should have taken with timely pleading. There is also the consequential impact that has on the interests of other litigants with cases awaiting hearing. 9    Courts have acknowledged that in the past judges have been too ready to conclude that procedural failures can be made good by an order for costs; see Ketterman v Hansel Properties Ltd [1987] AC 189 at 220:

“But justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes, and the legitimate expectation that the trial will determine the issues one way or the other. Furthermore to allow an amendment before a trial begins is quite different from allowing it at the end of the trial to give an apparently unsuccessful defendant an opportunity to renew the fight on an entirely different defence.
Another factor that a judge must weigh in the balance is the pressure on the courts caused by the great increase in litigation and the consequent necessity that, in the interests of the whole community, legal business should be conducted efficiently. We can no longer afford to show the same indulgence towards the negligent conduct of litigation as was perhaps possible in a more leisured age. There will be cases in which justice will be better served by allowing the consequences of the negligence of the lawyers to fall upon their own heads rather than by allowing an amendment at a very late stage of the proceedings.”

10    This observation was preceded by Lord Griffiths’ critical observations about invoking a defence of limitations so late in the day. This was not to indicate that to do so was automatically precluded. Rather it was to place proper emphasis on how rarely a court should exercise such a discretion favourably. Thus at 219 he said:

“… I have never in my experience at the Bar or on the Bench heard of an application to amend to plead a limitation defence during the course of the final speeches. Such an application would, in my view, inevitably have been rejected as far too late. … A defendant does not invariably wish to rely on a defence of limitation and may prefer to contest the issue on the merits. If, therefore, no plea of limitation is raised in the defence the plaintiff is entitled to assume that the defendant does not wish to rely upon a time bar … If both parties on this assumption prepare their cases to contest the factual and legal issues arising in the dispute and they are litigated to the point of judgment, the issues will by this time have been fully investigated and a plea of limitation no longer serves its purpose as a procedural bar .
If a defendant decides not to plead a limitation defence and to fight the case on the merits he should not be permitted to fall back upon a plea of limitation as a second line of defence at the end of the trial when it is apparent that he is likely to lose on the merits. Equally, in my view, if a defence of limitation is not pleaded because the defendant’s lawyers have overlooked the defence the defendant should ordinarily expect to bear the consequences of that carelessness and look to his lawyers for compensation if he is so minded.” [emphasis supplied]

11    Lord Woolf in his interim United Kingdom report on “Access to Justice” of June 1995 refers to that past practice of over-ready indulgence in the following paragraph, presaging the tougher attitude that is likely to be exhibited by English courts following the introduction of the Woolf Rules for civil procedure.

“Where it does become apparent (often at a late stage and sometimes at trial itself) that facts have not been adequately pleaded, the courts are reluctant to penalise parties substantively (for example, by preventing them from pleading and arguing a particular point) for what tend to be seen still as technical faults. The belief dies hard that procedural failures can be made good, so far as the other party is concerned, by an appropriate award of costs. In fact, such awards are rarely adequate to compensate parties for delay or added inconvenience and, coming as they do after the event, have little effect on behaviour.”

12    In Australia we have not yet explicitly invoked as an overriding principle the Woolf requirement of proportionality quoted below from the Civil Procedure Rules of 1999:

“THE OVERRIDING OBJECTIVE
1.1 (1) These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly.
(2) Dealing with a case justly includes, so far as is practicable —
(a) ensuring that the parties are on an equal footing;
(b) saving expense;
(c) dealing with the case in ways which are proportionate —
(i) to the amount of money involved;
(ii) to the importance of the case;
(iii) to the complexity of the issues; and
(iv) to the financial position of each party;
(d) ensuring that it is dealt with expeditiously and fairly; and
(e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases.”

13    Nonetheless that objective finds some parallel in the approach that courts should take when weighing matters bearing upon their discretion to grant indulgences. Indeed it is already to be discerned in a number of recent cases; for example A H and R N Grundy v J B Lewis and others (Cooper J, Federal Court, 21 September 1998, unreported) The present case is between parties who are not major corporations or governments. It has already taken, for proper reason, a considerable number of days. Its hearing should not be prolonged merely because one party with experienced legal advisers through inadvertence fails to plead a defence in timely fashion, more especially a limitation defence. Such an approach is not punitive. It is based on the interests of justice firstly as between the two parties and then the public interest overall in ensuring that the courts with their limited resources are efficient and fairly available for all litigants. The primacy of justice between the parties does not preclude consideration of the public interest where the former does not decisively favour granting the indulgence. 14    This case has been transferred from a specialised jurisdiction of the now merged Commercial Division. Legal practitioners in it know and understand that requirements are heightened for conduct of litigation efficiently and expeditiously; see for example Cole J in Technical Team Products v Noble Dunn (1990) 20 NSWLR 221 at 229; Rogers CJ Comm D refusing a late limitations amendment in Mehta v Commonwealth Bank of Australia (Rogers CJ Comm D SCNSW, 7 May and 27 June 1990, unreported); Sheppard J in Commissioner of Taxation v Brambles Holdings Pty Limited (1991) 28 FCR 451 at 455. Practice Note 100 provides a regime for directions to ensure the “just, quick and cheap disposal of proceedings”. Such principles have not been tempered by the High Court decision in JL Holdings in circumstances such as these. 15 It remains for me to consider a matter raised by counsel for the Engineer as to the circumstances in which raising the defence was overlooked (T, 9July 99 at 33(30-36)). 16 The Defendant Engineer contends that guided by Pt 20 r1(2) of Supreme Court Rules I should grant the indulgence sought, as a necessary amendment justified because the evidence prompting it emerged for the first time during the cross-examination of Mr Bailey, the First Plaintiff, on 11 May 1999. This evidence was as to the time at which Mr Bailey first became aware of the defects of the building from his seeing a report dated 9 May 1992; see T, 41, 42 and 51 where counsel for the Architect (the First Defendant) cross-examines Mr Bailey on that question. 17    But even accepting that this was when that evidence first emerged, this is not an application made at the conclusion of Mr Bailey’s evidence around 11 May 1999 but even more belatedly on 9 July 1999, two months after. Furthermore, the Engineer had at the outset of the case on discovery, the very report with its date of 9 May 1992 outside the limitation period which was the subject of the cross-examination. That should have been enough to alert the engineer with his experienced legal advisers to the possibility of a limitation defence, especially as the architect had pleaded it from the outset; further cross-examination would simply have tested the tenability of that defence. That report as the Engineer must have known had been furnished to the solicitor for the Plaintiffs in relation to proceedings then on foot against the builder. It should have been readily appreciated that such a report would therefore have been known about by the solicitor who could be expected to pass on its contents to Mr Bailey, though the precise time this occurred is properly a matter of evidence. The Plaintiff would require actual knowledge of the report to be in a position to act upon it and it was to this that the cross-examination was directed. It is therefore not a case where, through any lack of candour on Mr Bailey’s part, the Engineer can find justification for failing to plead the limitation defence in timely fashion and more especially some months after 11 May 1999. At 11 May 1999 the Plaintiffs’ position may indeed have been different, in terms of the forensic choices open, compared to the much later date (9 July 1999), well after evidence had closed, when leave to amend was only then first sought.

Summing up

18    By way of general observation, in weighing up the overall interests of justice in the present circumstances, it can fairly be said that even indemnity cost orders proffered to the Plaintiffs for any extra costs arising from the late amendment if granted, could not adequately compensate for the prejudice that the Plaintiffs would suffer if the indulgence were granted. To that factor is to be added the lateness with which the matter has been raised. Then there are considerations of court efficiency and the interests of other litigants waiting for their cases to be heard. Those interests would not ordinarily outweigh the legitimate claims of justice by a party seeking an indulgence. But where such claims are not decisively in favour of the party seeking the indulgence, then such public interest factors may certainly be taken into account against the party seeking the indulgence and may be decisive in the other direction. Nor is there necessarily any incompatibility between the public interest and the interests of justice between the parties. That is illustrated by the delay factor. Where there is lengthy delay by the party seeking the indulgence, that is a factor which goes both to the claims of justice between the parties and to the broader public interest. It points against granting the indulgence sought, its relative impact depending on the circumstances.

ORDERS AND COSTS

19    I refuse the application by the Second Defendant to amend and order that the Second Defendant pay the Plaintiffs costs on the application to amend.

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Last Modified: 08/13/1999