A M Stevens Pty Ltd v Australian Red Cross Society & Anor

REASONS FOR JUDGMENT 1 The Notice of Motion in this proceeding is one in which the Applicant, AM Stevens Pty Ltd ("AMS") seeks leave to amend its Application and Statement of Claim. The Application was filed in September 1998 and alleges (a) contraventions of both s 52 of the Trade Practices Act 1974 (Cth) and s 12 of the Fair Trading Act 1992 (ACT) in respect of conduct said to have been engaged in in December of 1993 and (b) breaches of contracts for the sale and purchase of property entered into on or about 17 October 1994. The burden of the Notice of Motion is said by the Applicant to be to expunge unnecessary material and to sharpen the focus of its claim. It is seen otherwise by the Respondents, the Australian Red Cross Society and Prank Nominees Pty Ltd ("NPC"), the First and Second Respondents respectively. 2 The circumstances giving rise to the Application, insofar as presently relevant, arose out of negotiations for the acquisition of units from which to conduct a general medical practice in a building to be constructed and leased by the Red Cross as stage two of a development undertaken by the Red Cross. The representations in the original Statement of Claim were (as supplemented by further and better particulars) said to have been made at a meeting on or about 15 December 1993 at an office in Deakin by a Mr Johnson and a Mr Wellsmore on behalf of the Second Respondent which was in turn acting as agent for the Red Cross in the development of the stage two project. The representations as set out in para 6 of the Statement of Claim are that: "In December 1993 NCP, and Red Cross by its agent NCP, represented to AMS: (a) that Stage 2 would be a prestige medical building; (b) that Stage 2 would be built the same as Red Cross House Stage 1; (c) that an inspection of Red Cross House Stage 1 would disclose that which would be supplied in Stage 2; (d) that Stage 2 was a medical building which would cost more than a commercial building to build; (e) that Stage 2 would be a high quality building; (f) that NCP knew what commercial property values were in Canberra and that prices were not lower than $3,200 per square metre for purchase of comparable premises; (g) that Stage 2 was being constructed as a service to the Red Cross; and (h) that NCP was not making excessive profits. Particulars The representations were oral and were made by Mr Wellsmore of NCP in a conversation with Dr Stevens on or about 15 December 1993." 3 What I would note of these representations is that in further and better particulars supplied on 12 August 1999 it is said that Messrs Johnson and Wellsmore used language similar in terms to what was said in paras (a)-(h). It does seem to be the case that while some of these paragraphs (and I note paras (b) and (c)) seem to be making a link between stage one and stage two for comparability purposes, paras (a) and (e) suggest more general attributes of the building not dependent on a comparison directly between stage one and stage two. I will return to this matter below. 4 Further claims were made under both the Trade Practices Act and the Fair Trading Act. One was based on representations contained in a letter from Mr Wellsmore to Dr Stevens, the principal of the Applicant, dated 20 December 1993 in which it is claimed (inter alia) that "the type of construction and facilities in stage two would be the same quality as in Red Cross House stage one". Distinctly there was a claim of misleading conduct arising from non-disclosure. This is pleaded in paras 8 and 9 of the Statement of Claim, it being alleged that the Respondents were aware that AMS intended to use any units it might acquire in stage two for the purpose of conducting a general medical practice; that it encouraged AMS to acquire units; but that it did not disclose that stage two was not suitable for the purpose of conducting a general medical practice. 5 All of the representations made are claimed to have been falsified in the event (s 51A of the TP Act has been pleaded). The principal grounds of falsification, whether in respect of representations relating to a comparison between stage one and stage two of the Red Cross development or in respect of representations that stage two when completed would be a prestige medical building or a high quality building or would be suitable for the purpose of conducting a general medical practice, were particularised in the same way. These are set out in paras (i)-(iv) of para 14(a) of the pleading: "(i) Red Cross House Stage 1 is constructed as a "class A" building; Stage 2 is "Class B". (ii) Whereas Stage 1 has a floor load rating of 500kg/sq m, Stage 2 has a rating of only 400kg/sq m and is, accordingly, unable to accommodate compactus record storage. (iii) The walls of Stage 2 are 10mm gyprock with no Hebel bricks, whereas Stage 1 is 13mm gyprock with Hebel brick and accordingly sound proofing in Stage 2 is inadequate for the intended use of the Units for medical diagnostic purposes. (iv) The building was constructed with numerous defects, including those to be listed in the schedule of defects referred to in the particulars to paragraph 16 below." 6 The amendment proposed is one which seeks first to substitute a new Applicant, AM Stevens Nominees Pty Ltd for AM Stevens Pty Ltd, the proposed Applicant being a company that was incorporated on 11 August 1994. That apart, the substantial amendments relate to the claims in paras 6, 7 and 14 of the proposed Amended Statement of Claim. The new para 6 refers to representations being made by Mr Johnson and Mr Wellsmore to Dr Stevens: "(a) that Stage 2 would be designed and built in such a way as to be suitable for AMS's purpose of conducting a medical practice in that part of Stage 2 to be acquired by it; (b) that Stage 2 would be a high quality prestige medical building; (c) that Stage 2 would be a quality property as was Stage 1. Particulars 1. Oral representations were made at meetings and during conversations between Allan Johnson and Dr Stevens in mid to late 1993 when Allan Johnson said words to the effect of paragraph 6(a), (b) and (c) above. 2. Oral representations were made at a meeting between Allan Johnson, Michael Wellsmore and Dr Stevens at Roland House, 10 Thesiger Crt, Deakin on 15 December 1993 when Allan Johnson or Michael Wellsmore or each of them said words to the effect of paragraphs 6(b) and (c) above." 7 Of these I would note immediately that the representation contained in para (a) is alleged to have occurred at a time other than 15 December 1993 (see particular 1). Furthermore it puts in the form of a positive representation what was previously merely an aspect of the claim for misleading conduct arising from non-disclosure contained in paras 8 and 9 of the original Statement of Claim. While proposed amendments are foreshadowed for paras 8 and 9, the non-disclosure case remains substantially the same albeit that the proposed new Applicant is injected into it as a party whose conduct or intentions were known to or else encouraged by the Respondents. 8 Para 7 of the original Statement of Claim is to be amended by the abandonment of two grounds leaving only a variant on that to which I have already referred. 9 Para 14 which deals with the falsity of the representations would now deal only with three matters. These are that: "Contrary to the representations: (a) Stage 2 was not designed or built in such a way as to be suitable for AMS's purpose of conducting a medical practice in Units 4 and 6. Particulars See Schedule 'A'. (b) Stage 2 is not a high quality prestige medical building. Particulars See Schedule 'B'. (c) Stage 2 is not a quality property as Stage 1 is. Particulars See Schedule 'C'." 10 Before turning to the question of the grant of leave to make all or any of these amendments, I would note that there is a very real issue in the proceeding as to whether at least the Trade Practices Act claims are statute barred. In para 18 of its Defence, the Respondent raises the statute of limitations against both the Trade Practices Act and the Fair Trading Act claims although it appears to be accepted that the limitation period in question would only run against the former of these statutes. 11 The Respondents oppose the grant of leave to amend both the Application and the pleading. I should interpolate that the amendment to the Application is merely to vary the name of the Applicant in the proceedings. 12 The power of the court to amend the Application and Statement of Claim arises under Order 13 of the Federal Court Rules. Order 13 rule 2 subrules (1), (3), (4) and (7) provide: "(1) Subject to the following provisions of this rule, the Court may, at any stage of any proceeding, on application by any party or of its own motion, order that any document in the proceeding be amended, or that any party have leave to amend any document in the proceeding, in either case in such manner as the Court thinks fit. … (3) Where an application to the Court for leave to make the amendment mentioned in subrules (4), (5), (6) or (7) is made after any relevant period of limitation current at the date of commencement of the proceeding has expired, the Court may, nevertheless, grant such leave in the circumstances mentioned in that subrule if it thinks it is just to do so. (4) Where there has been a mistake in the name or identity of a party, an amendment to correct the name of the party may be made notwithstanding that the effect of the amendment is to substitute another person as a party. … (7) An amendment may be made notwithstanding that the effect of the amendment will be to add or substitute a new claim for relief or another foundation in law for a claim for relief if the new claim for relief or foundation in law for that claim arises out of the same facts or substantially the same facts as those already pleaded to support existing claims for relief by the party applying for leave to make the amendment." 13 It is the Respondents' contention that the proposed amendments to the Statement of Claim add foundations in law for the Applicant's claim for relief that do not arise "out of the same facts or substantially the same facts as those already pleaded to support existing claims for relief". It is claimed in relation to para 6(a) of the proposed new pleading, that it alleges a positive new representation made at a point different in time from any of the previous representations, ie sometime in mid to late December but not on 15 December 1993. This claim it is said does not arise out of the same or substantially the same facts as those already pleaded. 14 Secondly it is said in relation to paras 6(b) and (c) that, particularly when viewed through the particulars supplied in relation to the original claim and when contrasted with those proposed in relation to the new paras 6(b) and (c), they raise claims of a different character to the present ones in that their concern would be not merely with a comparison between stage one and stage two of the Red Cross development but also with what I might call general questions of aesthetics. The manner in which the Applicant proposes to plead falsity is relied upon simply to demonstrate the character of this change. 15 In the event that the Respondents are incorrect in their submission in relation to Order 13 rule 2(7), they contend additionally, that it would not be just to grant leave to amend under Order 13 rule 2(3). The basis of this submission relates to the tortured history of this matter - it has dragged on for now three years - with inconsistent claims having been made by the Applicant. This latter point is exemplified in a variety of ways most notably in the proposed para 6(a) which introduces a positive representation as to use of the units to be built whereas previously that matter was simply the subject of a non-disclosure claim. The Respondents go on to point out that there have been fourteen directions hearings; that the proposed amendment has gone through quite a number of iterations responding to comments made by it; that considerable costs have been incurred to date and have been wasted; the process for extracting further and better particulars has been protracted; and that in the circumstances it would not be just for leave to be given. 16 The Applicant's case in contrast is that to the extent that a new cause of action or alternatively a new foundation for the relief sought is being advanced, it does arise out of the same or substantially the same facts. The only instance in which the applicant says something new is being sought is in relation to the proposed para 6(a) representation that stage two would be suitable for AMS's purpose of conducting a medical practice in it. Notwithstanding that the representation was made at a point anterior to that of any representation previously pleaded and that it transforms what was previously pleaded by way of non-disclosure into a positive representation, the Applicant claims it does, nonetheless, arise substantially out of the same facts in that there was a period of encounter and discussion between Dr Stevens and representatives acting on behalf of the Respondents prior to the 15 December representations. Those prior dealings would in any event be relevant to the non-disclosure claim so that any representation made in them which was itself used to ground a contravention of s 52 could itself be said properly to arise out of substantially the same facts as those pleaded to support existing claims. Otherwise, it is said that save for the substitution of a new applicant the amendments merely streamline and clarify claims already made. 17 Dealing with the proposed amendments to para 6 separately, I am satisfied that the proposed para 6(a) does fall within O 13 r 2(7). While the original para 6 referred only to representations made on 15 December 1993 and not to an earlier period in 1993 (as the proposed amendment alleges), and while the alleged representation itself is not only different in character from those pleaded in the original para 6 but also pleads by way of positive representation what previously was subsumed only in the non-disclosure claim, the proposed para 6(a) can nonetheless properly be said to "arise out of substantially the same facts as those pleaded to support existing claims". This conclusion would not be so readily arrived at had not the applicant pleaded the non-disclosure claim in paras 8 and 9 of the Statement of Claim which, in further and better particulars, it related to meetings and conversations between Mr Johnson and Dr Stevens prior to 15 December 1993. The proposed para 6(a) would appear to relate to what transpired at those meetings. 18 In relation to the proposed paras (b) and (c) of paragraph 6, while the original Statement of Claim can be criticised on the grounds both of obscurity and of its capacity to mislead a reader, the proposed paragraphs are in my view clearly related to the same matters that were the subject of further and better particulars to the original para 6(b) and (c). Furthermore I do not consider that they actually advance claims that were not inherent in what had been claimed in the original Statement of Claim, albeit claimed in a somewhat oracular fashion. There is no doubt that the prosecution of those claims will pose some very real questions for the Applicant in making out their claim. But I am not concerned at this stage with the strength of the claim advanced but rather with whether an amendment should be allowed. As that proposed does not alter in a significant way what previously inhered in para 6 (though the particulars have been varied to a considerable degree), I am satisfied that leave to amend so as to insert para 6(b) and (c) should be granted. 19 The claims made by the Respondent objecting to the proposed amendments to para 7 stand in my view in the same state as the objections to para 6(b) and (c). The representation now sought to be pleaded is one made in the same letter that was particularised for the purposes of the old para 7. That amendment in my view should be allowed. A series of consequential amendments have arisen both to enlarge the non-disclosure claims and to advance a claim that representations previously made should be qualified or withdrawn. These in some degree are related to the addition of a new Applicant. Consistent with the provisions of Order 13 rule 2 subrules 4 and (7), it seems to me these amendments are properly advanced. 20 As to whether it is just to allow the amendments, I should say by way of preface that one can only have considerable sympathy for the situation in which the respondents have found themselves in this proceeding. The history of this matter does no credit to the litigation system itself. The court has on a number of occasions sought to give focus and direction to this matter without any considerable success. I have had regard to the matters to which the respondents have made reference: the history of the matter; the significant change in the nature of the representations relied upon (particularly that embodied in para 6(a)); the number of directions hearings; the amount of cost that has already been incurred; and the tortured path of the proceedings to date. Nonetheless, I do not consider that it would in all the circumstances be unjust to give the leave sought. Notwithstanding both the significant passage of time since the representations relied upon are said to have occurred and the movement in the date thereof at least in relation to the para 6(a) representation, the general period and persons to be examined have long been known. I do not consider any significant new prejudice would be suffered by the Respondents in having to accommodate these new matters in this proceeding. The issues relating to the tortured path taken to the present, and the costs incurred thereby (as also in allowing the amendment) are in my view proper subjects for consideration in relation to costs. They are not sufficient to justify refusing the leave sought. Consistent with the approach to the making of amendments taken by the High Court in Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 it does seem to me to be the case that the justice of the matter requires that the Applicant be allowed to put arguable claims against the Respondents arising out of the circumstances of its acquisition of units in stage two of the Red Cross development. I do not comment in any way on the likelihood of success of those claims. But I do consider it would not be a proper exercise of discretion to lock the Applicant out of making those claims through refusing leave to amend at this stage. 21 Accordingly I will give the applicant leave to amend the Application and the Statement of Claim in the manners proposed. 22 There is one final matter to which I should make reference. The Respondents have sought to have the matter transferred to the Supreme Court of the ACT under the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). It clearly is the case that the jurisdiction of this Court was properly invoked in respect of the Trade Practices Act claim whether or not that claim proves to be unsuccessful in the event. I am not satisfied that there are any considerations relating to the interests of justice or for that matter of appropriateness as would justify the transfer sought. 23 I will invite submission on the question of costs of the Notice of Motion. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.