Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Citation : WATER CORPORATION -v- CARDNO BSD PTY LTD & ORS [2009] WADC 103

Practice and Procedure - Application for leave to appeal against decision to allow amendment to defence - Amendment to withdraw admission - Relevant principles - Turns on own facts

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 258 ALR 14

Essex Securities Pty Ltd v Lunt [2006] WASC 58

Hutton v Meston [2004] WASCA 178

Sangora Holdings Pty Ltd v Dunstan (Unreported, WASC, Library No 990172, 13 April 1999)

Water Corporation v Cardno BSD Pty Ltd [2009] WADC 103

1 JUDGMENT OF THE COURT: This is an application for leave to appeal against a decision of Sleight DCJ of 17 July 2009, allowing an amendment to the respondent's defence: Water Corporation v Cardno BSD Pty Ltd [2009] WADC 103. On 24 August 2009, it was ordered that the application for leave to appeal be heard with the appeal.

2 On 20 October 2009, we dismissed the application for leave to appeal and the appeal and said we would publish our reasons later. These are our reasons for dismissing the application.

3 In the statement of claim, the appellant alleges that, by a contract dated 27 December 2000, the respondent agreed to provide engineering services when requested by the appellant. The contract is described as 'the BSD contract'. The appellant pleads that, in accordance with the BSD contract, on 19 June 2001 it commissioned the respondent to undertake a design review of a sewerage project and pumping station called 'the Eaton project'.

4 The appellant alleges that, on 17 January 2003, the respondent submitted the final drawings it had prepared for the Eaton project. The respondent's design specified Class 2 concrete pipes of a certain diameter for the overflow tanks of the pumping station. Between May 2003 and July 2003, a contractor constructed the pumping station in accordance with that design. The appellant says that in July 2003 the pipes developed leaks and had to be replaced at a cost of $430,177.75. According to the appellant, at least Class 4 pipes were necessary to ensure that the pump station was fit for its purpose. The appellant claims against the respondent for breach of contract and alternatively negligence.

5 In its defence, filed on 26 March 2008, the respondent (relevantly) admitted that it entered into the BSD contract but denied that it was commissioned to undertake a design review of the Eaton project. The respondent alleged that it was commissioned to provide input to the design of certain aspects of the project, relevantly, the overflow tanks. The respondent admitted that it submitted to the appellant drawings for the overflow tanks but did not admit that it specified in the drawings the Class 2 pipes alleged by the appellant. In response to the allegation that the respondent's design was defective, the respondent denied having breached the BSD contract and said that had the Class 2 pipes it had specified been installed they would have been adequate.

6 The appellant gave discovery on 22 May 2008 but the respondent deferred inspection of the discovered documents pending settlement negotiations between the parties. The respondent gave discovery on 13 June 2008. Further discovery was given by the respondent in January 2009 and by the appellant between February and March 2009. It appears that there are still issues between the parties relating to discovery.

7 On 9 March 2009, the action was listed for a six day trial in the District Court to commence on 4 August 2009.

8 On 19 May 2009, the respondent applied for leave to amend its defence and counterclaim. The effect of the amendment is to deny that the respondent carried out the design work pursuant to the BSD contract and to plead that the work was carried out pursuant to an agreement made on or about 11 October 1999 and extended by a letter dated 29 October 2001 (the 11 October agreement). The significance of the amendment is that the respondent alleges the 11 October agreement incorporated the respondent's standard terms of appointment. Pursuant to cl 14 of those terms, the respondent's liability is limited to an amount of $100,000 and the respondent is discharged from any liability one year after the completion of the contract work. The respondent pleads that, accordingly, the appellant's claim is out of time (the action having been commenced in 2007); alternatively, that if the respondent is liable its liability is limited to $100,000.

9 On 24 June 2009, a deputy registrar of the District Court refused the application for leave to amend the defence.

10 The respondent appealed against that decision and the appeal was heard by the primary judge on 13 July 2009. His Honour delivered his decision on 17 July 2009, allowing the appeal and granting the respondent leave to make the amendment to its defence.

11 In the meantime, on 26 June 2009 the trial dates were vacated and the trial relisted to commence on 23 November 2009. There was no material on this appeal which established the basis upon which the trial dates were vacated. In its written submissions, the appellant contended they were vacated as a result of the respondent's application for leave to amend its defence. In argument, counsel for the respondent contended that that was not the case and that the substantive reason the trial dates were vacated related to an application by the second defendant to the action, the appellant's contract supervisor (ts 18).

12 We should also mention that in June 2008 the appellant settled its claim against the second defendant.

13 His Honour observed that the affidavit evidence on behalf of the respondent did not clearly explain why the respondent had made the admission that the work was carried out under the BSD contract, although he noted that the contractual history between the parties was complex and the significance of which contract applied to the work in question may not have been immediately obvious.

14 The primary judge did not accept the appellant's complaint of delay by the respondent in making the application to amend, concluding that the delay was not exceptional and arose from a decision on the part of the respondent to postpone closer examination of the contractual documents pending efforts to negotiate a settlement of the claim.

15 The primary judge also rejected an argument on behalf of the appellant that the amendments should not be allowed because the appellant may have settled its claim with the second defendant on a different basis had the respondent's proposed amended defence been advanced in the first place. His Honour observed that there was nothing before him which was capable of making out such a contention.

16 The primary judge noted that the action was listed for trial for six days commencing 23 November 2009 and counsel for the parties had informed him that even if the amendments were allowed they were confident the matter could proceed to trial on 23 November 2009.

17 The primary judge concluded it was in the interests of justice that the respondent be given leave to amend its defence. His Honour found that if the amendments were allowed the respondent would have 'a strong arguable case' that the works in question were governed by the 11 October contract. To refuse to allow the amendments would potentially create a gross injustice by allowing the claim to proceed upon a false premise as to the contractual terms between the parties.

18 The appellant relied on three grounds of appeal. They were, in substance:

1. The primary judge erred in allowing the amendment in circumstances where the respondent had not clearly explained on oath the reason that the original admission was made.
2. In exercising his discretion the primary judge failed to apply the principles in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 258 ALR 14.
3. The primary judge erred in finding that the respondent had a strong arguable case that the work in question was performed pursuant to the 11 October contract.

19 The general principles to be applied upon an application to withdraw an admission in a pleading can for present purposes sufficiently be stated as follows:

1. The court has a broad discretion to permit or refuse an amendment which has the effect of withdrawing an admission; the ultimate question must always be what is in the interests of justice in the circumstances of the case.
2. But it is a serious matter to make an admission in a pleading and ordinarily a party should not be permitted to withdraw an admission in a pleading without good cause.
3. In determining whether or not to permit an amendment to withdraw an admission, relevant considerations will generally include:

(a) the circumstances in which the admission was made;

(d) the time for which it has stood on the record; and

(e) any prejudice that is likely to be suffered by the other side that cannot appropriately be compensated by an order for costs.

20 See Sangora Holdings Pty Ltd v Dunstan (Unreported, WASC, Library No 990172, 13 April 1999); Hutton v Meston [2004] WASCA 178; Essex Securities Pty Ltd v Lunt [2006] WASC 58.

21 As with any other application to amend a pleading, where an application is made late in the day and requires that dates set down for trial be vacated, the applicant bears a heavy burden to show why leave should be granted. In such a case the public interest in the timely and efficient resolution of legal proceedings and the effective use of court resources is also a relevant consideration: Aon Risk Services.

22 We respectfully agree with the observation of the primary judge that the explanation offered for the admission of the BSD contract as the contract governing the works in question is not as complete as it should have been. The explanation was contained in two affidavits filed in support of the application, both by solicitors who have acted on behalf of the respondent in the action, one by Mr Schwikkard and the other by Mr Mullins.

23 In his affidavit, Mr Mullins says that during April 2005, after the action was threatened but before proceedings were commenced, he conducted an initial interview of the respondent's witnesses but at that stage there was no issue of substance as to which contract gave rise to the claim. Before the statement of claim was issued Mr Schwikkard assumed conduct of the respondent's defence.

24 In his affidavit, Mr Schwikkard says that, on the basis of instructions he had received up to March 2008 and the documents provided by the respondent, he prepared a defence which he sent to the respondent on 20 March 2008 for comment. The respondent amended the defence in minor ways but did not draw his attention to the fact that the incorrect contract had been pleaded by the appellant. The respondent's defence was filed on 26 March 2008. Mr Schwikkard says that at the time of drafting the defence he was unaware that the relevant contract was the 11 October contract.

25 Mr Mullins reassumed conduct of the matter in approximately March 2009. At that stage the discovered documents comprised some 10 lever arch files. Mr Mullins says in his affidavit that, on 23 March 2009, he had a meeting with one of the witnesses for the respondent (who is now employed by the second defendant in the action) who said that some of the documents in the appellant's discovery had refreshed his memory and that the BSD contract did not apply until July 2002. The applicable contract was the 11 October contract. The respondent gave instructions to amend the defence to plead that the relevant work was carried out pursuant to the 11 October contract.

26 It was submitted on behalf of the appellant that the respondent had made a deliberate and conscious decision to admit the BSD contract and there had been no relevant change of circumstances which might justify the withdrawal of the admission. Counsel argued that the evidence was not sufficient to show any error or mistake or change of circumstances. As the affidavit material did not clearly explain why the respondent approved the draft defence which contained the admission, leave to amend the defence should have been refused.

27 We do not accept that submission. While, as we have said, the respondent's explanation is less complete then it should have been, we consider it sufficiently emerges that the admission was made because of some error or misunderstanding at the time that defence was drafted and settled. There is nothing to suggest that the admission of the BSD contract was a tactical move on behalf of the respondent or that the respondent has simply changed its mind about the manner in which it wishes to put its case. How it came about that what the respondent now says is the wrong contract was admitted in the original defence does not emerge with any great clarity from the affidavits, but we are satisfied that what does emerge is that it came about by reason of error and not for any other reason. In that connection, we would observe that the voluminous documents which were put before us on the appeal clearly justify, with respect, the primary judge's observation that the contractual history between the parties was complex and which contract applied may not have been immediately obvious.

28 While there was some delay in the application to amend being brought, we do not consider that the primary judge erred in concluding that the delay was not such as to warrant the application being refused. It is apparent that the delay is explained, at least in part, by negotiations between the parties directed to a settlement of the action. That will not always be a sufficient reason for an application to amend a pleading being put to one side. Everything must depend upon the circumstances of the case. In the present case, however, we are satisfied that delay does not weigh significantly in the balance.

29 It is a significant factor that there is no evidence that the trial dates which are currently set would be lost if the amendment were allowed. On the hearing of the appeal there was an issue as to whether the trial dates set for August 2009 had been vacated by reason of the application to amend the respondent's defence or for other reasons. There was nothing before this court to indicate the position one way or the other.

30 A good deal of correspondence and other documents were produced on the appeal in support of the appellant's contention that the primary judge erred in finding that the amended defence provided the respondent with a strong arguable case. The appellant argued the primary judge had overstated the strength of the respondent's contention that the relevant contract was the 11 October contract rather than the BSD contract. Counsel for the appellant conceded, however, that the proposition that the relevant contract was the 11 October contract was reasonably arguable. On the material before this court, that concession was properly made.

31 In the circumstances, nothing turns on the finding by the primary judge that the respondent had a strong arguable case. It is sufficient that the case sought to be included in the amended defence is reasonably arguable.

32 It was for those reasons that we concluded leave to appeal should be refused and the appeal dismissed.