Aon Risk Services Australia Ltd v Australian National University

EX TEMPORE Judgment 1His Honour: By statement of claim filed on 10 November 2010, the plaintiff sues the defendants for damages for professional negligence. The claim relates to losses suffered by the plaintiff on the sale of residential property at Blakehurst, New South Wales, which fell through. The property has been subsequently re-sold at a loss. 2The first defendant is the plaintiff's estate agent acting in relation to the sale, and the second defendant is the legal practice acting on the conveyance. 3The first defendant applies to amend the defence it filed on 27 July 2011. The amended defence is annexure A to the affidavit of Rebecca Jaye Mulae sworn on 10 September 2012. The defence bears a court seal, having been filed without the required leave on 24 August 2012. 4In substance, the amendment proposed raises the application of Part 4 of the Civil Liability Act 2002 (NSW) relating to proportionate liability. In summary, the allegation of the existence of an apportionable claim under Part 4 is an argument that the relevant losses were caused by a breach of the former s 42 Fair Trading Act 1987 (NSW) by the purchaser of the property and his agent. 5The management of this case is very well advanced indeed. A mediation was convened late last year, affidavit evidence has long since been exchanged, and when the matter was before the Court for directions on 8 August 2012, before notice was given of this application, it was fixed for hearing on 10 and 11 December 2012. 6It is obvious to me, if to no-one else, that if I allow the amendment, these hearing dates are very likely to be aborted; the plaintiff will need to substantially re-group, further evidence will need to be exchanged and the adjourned hearing will be longer and more complex than previously contemplated. 7The first defendant says that the substance of this new ground has been in the mix already, inasmuch as the second defendant, by paragraph 22 of its defence filed on 21 June 2011, raises the failure of the plaintiff to sue the errant purchaser and his agent as a failure to mitigate his loss. I interpolate that it was not said in the second defendant's defence that the plaintiff's rights against those persons was an apportionable claim. 8By way of explanation for the delay in raising the allegations, the first defendant relies on a number of affidavits of Ms Mulae. Ms Mulae is a senior associate at the firm of Lander & Rogers who act on behalf of the first defendant. She has the daily carriage of the matter. In her affidavit of 4 October 2012, Ms Mulae makes it clear by what she says, and by the annexure to that affidavit of portions of her letters of advice to her insurer client, that the question of whether the conduct of the purchaser and his agent gave rise to an apportionable claim had been in her mind from the outset, but for reasons she explains in her various letters, she had formed the view that the evidence then available to her from time to time was not sufficient to enable her to discharge her professional obligations in relation to bringing proceedings only if the claim is arguable. 9In a letter of 14 September 2011, annexure C to that affidavit, Ms Mulae informed her client that she had access to the second defendant's file by way of discovery, and she set out her understanding of the conduct of the failed conveyance by that firm in some detail. 10After the solicitors advised the plaintiff to rescind the contract for the purchaser's breach, the second defendant obtained advice from counsel on behalf of the plaintiff, who advised that legally the plaintiff could bring proceedings against the purchaser for breach of contract. 11The central dispute in the present case, as between the plaintiff as vendor and the purchasers, related to the failure of the purchaser to produce the original of a deposit bond by which means the contract contemplated the plaintiff's obligations in respect of the deposit would be secured. I will not go further into the facts but suffice it to say that counsel advised the second defendant on behalf of the plaintiff that the purchaser and his agent had arguably made misrepresentations in relation to the deposit bond, which misrepresentations were material. 12Counsel did not advise the solicitors that the conduct arguably involved a breach of s 42 Fair Trading Act, but as Mr McLure of counsel, who appears for the first defendant before me, argued, it was only a small step from the advice of counsel in relation to the matters he addressed to realise the same factual basis may underpin a claim under s 42. In any event, having reviewed that material, Ms Mulae remained of the opinion that the evidence was insufficient to justify the bringing of an application to amend the defence to allege an apportionable claim under Part 4. 13I should interpolate that it is regrettable that proactive steps were not taken at that time to attempt to obtain evidence which might have justified the bringing of the present application then, given the significance of the issue. I mean no criticism of Ms Mulae in this regard but that does, in my judgment, somewhat weaken the explanation offered. 14Affidavit evidence was exchanged between the parties and an affidavit of the solicitor handling the matter on behalf of the second defendant, Mr Lawrence Picone, sworn on 21 June 2012 was served. That affidavit was tendered before me as exhibit A. Mr McLure referred me to certain passages in the affidavit, including paragraphs 15 to 43, 60 to 63 and 67 to 81. That affidavit was received by Ms Mulae after a brief had been delivered to counsel, I infer Mr McLure, to advise generally in relation to the matter. Upon receipt, the affidavit was forwarded to counsel for inclusion in his brief. 15Having considered that matter, Ms Mulae's evidence is that counsel advised that there was sufficient evidence to justify amending the defence to raise the apportionable claim. Unfortunately, although it was the intention of the solicitors to act upon that advice forthwith, the defence, although engrossed, was not filed at that time and the error was not picked up by the solicitors, including Mr Jonathan Hunt, the partner responsible for the file, until after the directions hearing I have referred to. 16I might add that the solicitors acknowledge their error in filing the defence without leave. Given the plaintiff's resistance to this application, I have no doubt that had consent been sought as a necessary precursor to an application for leave, or to dispense with the necessity for leave, that consent would have been refused. However, had that emerged in a timely way, the matter in all probability would not have been set down for hearing in December when it came before the Court on 8 August 2012, nor until that dispute was resolved. 17Mr McLure asks me to infer that it was the receipt of Mr Picone's affidavit which tipped the balance. Although the argument was put in Mr McLure's customary thorough and persuasive way, in my judgment it is not the better view, in view of the absence of direct evidence. I am rather more attracted to the argument of Mr Sharpe of counsel, who appeared for the plaintiff, that although it might be said that Mr Picone's affidavit rather joined the dots that were apparent from an inspection of the solicitors' file, there were already, if I may put it this way, plenty of dots pointing in a pretty obvious direction. 18It seems to me that the better inference on the available material is that learned counsel formed a different view from his solicitors, acknowledging he did have the benefit of all of the evidence at the time he advised, and therefore advised the solicitors that the material was sufficient to justify raising the allegation. 19It seems to me that the explanation for raising the matter now consists of the following matters: First, that Ms Mulae always had this point firmly in mind but took a conservative view of the evidence available. I am not critical in putting it that way. Secondly, that the view of counsel, with the benefit of additional material, was probably more robust. Thirdly, whilst it is regrettable that counsel's advice was not acted upon as soon as it was received, as I have said, it was the intention of the solicitors to do so. 20I observe that even in the best organised offices, and in the case of the most efficient solicitors, sometimes things go wrong, and I accept that Mr Hunt has already apologised to the plaintiff, and indeed to the Court, for authorising the defence to be filed without first obtaining leave. That apology for that breach of the rules should be accepted. 21I am satisfied, therefore, that the explanation given for the delay in taking the point has been full, although it is not completely satisfactory, given that perhaps more proactive steps could have been taken earlier, and given the complexity of this developing area of the law, it may have been advisable for counsel to have been consulted before June of 2012. 22However, I am satisfied in general terms that the explanation is sufficiently satisfactory, even bearing in mind the efficiency provisions of the Civil Procedure Act 2005 to which I will return soon. 23The next point which I consider relevant is the question of whether the point raised is sufficiently arguable to justify the grant of leave. 24Initially I was attracted to the proposition that the case seemed to be covered by the decision of the Court of Appeal in Mitchell Morgan Nominees Pty Ltd and Anor v Vella and Ors [2011] NSWCA 390. In argument, Mr McLure persuaded me that notwithstanding that decision, the claim is sufficiently arguable for present purposes by reference to the decisions of Kayteal Pty Ltd v Dignan [2011] NSWSC 197 per Brereton J, and Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367. Mr McLure reminded me that it is not for me to determine the matter definitively at this preliminary stage. It is only if I was convinced that the point was hopeless that I would form the view that it would be futile to permit the amendment. I am not convinced the point is hopeless and in this regard, I note that the High Court of Australia granted special leave to appeal from the decision in Mitchell Nominees on 7 September 2012. 25One cannot make a decision in a matter like this without having regard to the efficiency provisions contained in ss. 56-60 of the Civil Procedure Act. 26Moreover, it is inevitable that one must acknowledge the decision of the High Court of Australia in relation to such matters in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. I will not quote at length from that decision but I remind myself that at [98], a plurality of five justices said the following: Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account. [The efficiency provisions] reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs. At [111], their Honours said: An application for leave to amend the pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. 27The High Court's decision in Aon was considered in the light of the Federal Court Rules by the Full Court of the Federal Court of Australia in Cement Australia Pty Ltd and Ors v Australian Competition and Consumer Commission (2010) 187 FCR 261. In an unanimous judgment, Keane CJ, Gilmour and Logan JJ said, at [67] to [69]: Importantly, to adapt the joint judgment in Aon Risk...to reflect the relevant statutory provision in the present case, the objectives in s 37M of the Federal Court Act do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. There is nothing in Aon Risk or ss 37M and 37N of the Federal Court Act which would suggest that the consideration that it is desirable that the case be decided on its merits, so as to preserve public confidence in the administration of justice, is a consideration irrelevant to the exercise of this discretion. It should be borne in mind that the extent to which the granting of an amendment which will lead to an adjournment of a trial may have the adverse effect upon the orderly administration of justice envisaged by the High Court in Aon Risk is a question in relation to which a trial judge of the Federal Court enjoyed a peculiar advantage. That last reference is a reference to the docket system of listing in the Federal Court, a system not applied in this Court. 28However, it seems to me that the proposed amendment is of such a nature and importance to the party applying as the interests of justice, having regard to the overriding purpose and the other efficiency provisions I have referred to, require in this case a favourable exercise of the discretion to grant leave. 29It might be observed that Part 4 of the Civil Liability Act 2002 in relation to claims of this type introduces radical changes to the law. To my mind, the central feature of those changes is the introduction of a system of true apportionment of liability. The purpose, it seems to me, is that wrongdoers to whom the provisions apply ought only to be required to bear what I will call their fair share of liability for the losses. Doubtless such an approach leads to advantages of economic efficiency, amongst other matters. Part of the purpose of the provisions is that Parliament saw it as contrary to the public interest that professional advisors should bear the full losses suffered by their clients when the real wrongdoer might walk away scot-free. This purpose, of course, must yield to the language actually used by Parliament, but in my judgment, these considerations of legislative purpose add weight to the first defendant's arguments as to the importance of the point they seek to raise in this case. 30Having said that, I have not overlooked the significance of s 35A Civil Liability Act 2002. It seems to me that that provision places an obligation upon a defendant to raise the matter at an early time to enable the plaintiff, if I may put it this way, to appropriately adjust his case. Moreover, the power vested in the Court to make orders for indemnity costs by s 35A provide, it might be said, a stick to encourage defendants to comply promptly with their legal obligations arising under the statute. 31When the matter was argued before me, Mr Sharpe, who strenuously opposed the application, I add, appropriately so, was unable to outline for me the true costs thrown away by this proposed late amendment or say whether an adjournment would be necessary. As I have said, I am pessimistic about the latter question. 32I have borne in mind the consideration that costs and an adjournment are not always a salve to the prejudice suffered by a plaintiff in situations like the present. However on balance in the present case I am of the view that a wasted costs order for an adjournment if sought and the operation of s.100 Civil Procedure Act 2005 is an adequate cure for the plaintiff's undoubted prejudice suffered as a result of the late amendment. 33In that regard, it seems to me that I should, in my orders, reserve liberty to the plaintiff to apply, if he considers it appropriate, for a costs order in respect of any of the costs incurred to date that have been wasted by the failure to raise this point at an earlier time. Likewise, I will allow the plaintiff some time for reflection upon the question of whether the hearing dates can be maintained. 34There was some debate before me about costs. Mr McLure argued that as the plaintiff had resisted this amendment strenuously, and from the outset, the defendant had no choice but to come to court to seek relief. There is force in that argument, but it seems to me that the case is an appropriate one for the application of the so-called indulgence rule, given that although the first defendant has been successful, the need to make this amendment at a late stage made it, in my judgment, reasonable for the plaintiff to seek to resist it to maintain his hearing dates in December. Accordingly, I will make an order that the first defendant pay the plaintiff's costs of the application when I pronounce my orders. 35My orders are: (1)The first defendant have leave to amend its defence in accordance with the amended defence filed on 24 August 2012 nunc pro tunc; (2)The first defendant pay the plaintiff's costs of this application on the ordinary basis; (3)The plaintiff to have liberty to apply in respect of costs already incurred wasted by the late application for amendment; (4)I stand the proceedings over for directions before the Registrar on 19 October 2012 for the parties to inform the Court whether the hearing dates can be maintained.