Wardley Australia Ltd & Anor v State of Western Australia

Wardley Australia Ltd and Wardley Australia Securities (the applicants) sought special leave to appeal to the High Court of Australia from a decision of the Full Court of the Federal Court of Australia. The dispute concerned the State of Western Australia's (the respondent) claim against the applicants based on alleged misrepresentations made in October 1987. The State had provided an indemnity to the National Australia Bank in favour of Rothwells, which was conditional on the bank exercising all its rights against Rothwells before pursuing the State. The State commenced proceedings against Wardley based on representations made on 24 October 1987, and later sought to amend its claim to include representations made on 25 October 1987, which would have been outside the three-year limitation period.

The primary legal issues before the High Court were: (1) when the cause of action accrued for the purposes of the limitation period, and (2) whether the court could permit an amendment to introduce a new cause of action that was out of time, notwithstanding the principle established in *Weldon v Neal*. The applicants argued that the cause of action accrued when the indemnity was signed, even though it represented a contingent liability. They also contended that the Federal Court erred in refusing to allow the amendment, suggesting that the court should have been able to avoid the strict application of *Weldon v Neal*.

The Full Court of the Federal Court had held that the mere assumption of an executory and contingent legal obligation, even if likely to be more onerous due to false representations, did not constitute the suffering of loss or damage that was forthwith recoverable under section 82 of the relevant legislation. The court distinguished between potential or likely damage and actual damage that had already been suffered. This reasoning indicated that the cause of action did not accrue at the time the indemnity was signed, but rather when actual loss was incurred. Consequently, the attempt to amend the claim to include representations made on 25 October 1987, which would have been outside the limitation period, was not permitted.