Appellant v Respondent

1 The respondent brought proceedings in the Benalla Magistrates' Court seeking $34,600.35 for the hire of a trailer between October 2011 and June 2012, and other ancillary amounts. On the face of the pleading, the claim filed 3 December 2018 was out of time and statute-barred. The defence, as originally filed, omitted to raise this defence.

2 At the hearing of the claim, the learned Magistrate refused the application by the appellant to amend his Defence. This appeal is brought pursuant to s 109 of the Magistrates' Court Act 1989 (Vic) against the decision of the Magistrate made on 4 June 2019 to refuse the application to amend the Defence which would have enabled the appellant to raise a statute of limitations defence in his pleading.

3 Order 36.01 of the Magistrates' Court General Civil Procedure Rules 2020 provides a general power to grant leave to amend pleadings for the purpose of determining the real question in controversy between the parties to any proceeding, correcting any defect or error or avoiding multiplicity of proceedings. That power may be exercised at any stage of the proceeding.

4 The respondent had been provided with a copy of the proposed amended defence a few days prior to the hearing. The proposed amended defence sought to amend the defence in several respects, including by raising the limitation of actions defence. However, only the limitation of actions amendment was the key change pursued, the other substantive changes were not pressed before his Honour.

5 In oral submissions before the learned Magistrate, the respondent conceded that the amendment did not raise any new questions of fact that he would not be able to deal with on the day of the hearing and an adjournment of the hearing was unnecessary. The complaint by the respondent before his Honour as to prejudice was that if notice of the statute-barred defence had been given earlier than on, or near the day of the hearing the respondent might have behaved differently and this opportunity was now lost to him.[1] No other prejudice occasioned by the amendment was identified by the respondent.

6 The learned Magistrate refused the amendment on the basis that it was too late in the proceeding. In refusing the application he said:[2]

Well, my view is that this is too late in the hour for an amended defence to be put through. This matter has been on the books at least since 20 December when the original defence was filed so I can only deduce that lawyers were consulted in and around then, if not earlier, once the complaint was filed. The matter has been to mediation. I don't believe it's appropriate to come into court at a contested hearing and ask to turn things on its head in relation to filing an amended defence and I will refuse that application.

7 The appellant argued that his Honour erred in refusing the amendment, failing to exercise his discretion judicially by failing to balance the countervailing considerations in accordance with the authorities. The appellant submitted that his Honour took into account extraneous matters, namely that the application was brought late, and that he did not consider relevant matters, namely the importance of the amendment.

8 In particular, it was argued that his Honour did not take into account whether the amendment facilitated the identification of the real issues between the parties or have regard to the importance of the amendment.

9 Secondly, the appellant argued that his Honour took into account an extraneous and irrelevant matter, namely that the defendant had brought the application too late in the proceeding.

10 Thirdly, the appellant argued that the decision was plainly unjust and unreasonable. The amendment was of considerable significance and was a complete defence to the claim. Rather, it was submitted, that there were no countervailing reasons to refuse leave. There would have been no delay, no need to vacate the hearing date, no waste of court time and the matter was capable of being run and determined on the day. It was submitted that there was no prejudice to the respondent or unfair cost consequences.

11 A further ground raised was that by refusing to allow the amendment and proceeding to hear the matter, the learned Magistrate did not allow the appellant to present his case, amounting to a denial of procedural fairness and error of law. This ground was not pursued at the hearing.

12 The respondent argued that the learned Magistrate was correct in the exercise of his discretion to refuse the amended pleading as the application came too late in the proceeding. Proper case management, wasted costs and effects of delay to the court were relevant factors and the learned Magistrate 's decision was correct. Reliance was placed on the High Court's decision in Aon Risk Services Australia v Australian National University[3] and the implications of that decision for late pleading amendment applications.

13 It was argued that the learned Magistrate identified correctly that the application for amendment was a substantial amendment late in the proceedings and that the public interest considerations of court resources and case management are matters that the presiding judicial officer was required to, and did properly take into account. It was submitted that it could not be said that the learned Magistrate was plainly wrong.

Leave to amend is discretionary- principles on appeal

14 Granting leave to amend a pleading is discretionary. The principles for reviewing an exercise of discretion on appeal are conveniently stated in House v The King:[4]

It is not enough that the judges composing the appellate court considered that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

15 To successfully overturn the learned Magistrate's decision to refuse the pleading amendment the appellant needs to identify a material error by his Honour in the exercise of that discretion. As the decision of the learned Magistrate was one which concerned a matter of practice and procedure, the Court is required to exercise particular circumspection in reviewing such a decision. There is a strong presumption in favour of correctness of the decision. Ordinarily, in order to set aside such a decision, the appellate Court must be satisfied that not only was there a material error in the exercise of discretion but additionally the appellant will suffer substantial injustice if the decision is permitted to stand.[5]

16 There was no issue between the parties that the principles set out above in House apply.[6]

Relevant principles - exercise of power to amend

17 The relevant principles in the exercise of the power to amend have been canvassed in a number of cases and can be summarised as follows:[7]

(a) there are limits placed on re-pleading;

(b) the court must consider whether the proposed amendment facilitates the identification of the real issues in dispute and the just resolution of the proceeding;

(c) the nature and importance of the proposed amendments must be considered;

(d) this must be weighed against case management considerations such as cost, delay and potential for unfair prejudice;

(e) an amendment which is futile because it is bad at law will not be allowed; and

(f) whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought.

18 The Court of Appeal has recently revisited the principles relative to the determination of an appeal such as is before this Court.[8] Referring to Aon Risk Services[9] the Court highlighted that in determining such an application, amongst other matters, a court is required to take into account principles of proper case management, where there has been substantial delay and waste pertaining to the application. In particular, it cited the following extract from Aon Risk Services (per Gummow, Hayne, Crennan, Kiefel and Bell JJ):[10]

An application for leave to amend a 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. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in JL Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.

A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.

In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings.

19 The Court of Appeal also referred to the reasoning in the joint judgement of Kyrou and McLeish JJA in Northern Health v Kuipers[11] which expressed the applicable principles as follows:

The principles pertaining to an application to amend a pleading were explained in Aon Risk Services Australia Ltd v Australian National University. As set out in the reasons of Forrest J in Ultra Thoroughbred Racing Pty Ltd v Those Certain Underwriters at Lloyd's, London, the factors that the High Court in Aon considered as relevant to an application to amend a pleading include:

(a) whether there will be a substantial delay caused by the amendment;

(b) the extent of any wasted costs;

(c) whether there is an irreparable element of unfair prejudice caused by the amendment;

(d) concerns of case management arising from the stage in the proceeding when the amendment is sought;

(e) whether the grant of the amendment will lessen public confidence in the judicial system; and

(f) whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought.

Did the learned Magistrate err in the exercise of his discretion?

20 From the transcript of the hearing the only reason clearly articulated by his Honour for refusing the amendment was that in his opinion it came too late in the proceeding. At best one can infer that his Honour was referring to concerns of case management arising from the stage in the proceeding when the amendment is sought.

21 There were a number of amendments initially proposed by the appellant before his Honour. However only an amendment in respect of clarification to paragraph 13 of the Defence and the limitations defence were pressed before him and the submissions made before me focused on the limitation defence only.

22 His Honour has not drawn any distinction between the various amendments that were sought but, in any event, the only substantive amendment was the limitation defence.

23 It is well established that the significance of an amendment is a relevant and important consideration. The learned Magistrate did not consider this issue. Not only is it a relevant consideration; not turning his mind to the significance of the defence, which was on its face a complete defence, amounts to a material error. Not only is it a material error, it is one it is one which would lead to serious injustice to the appellant. On this issue alone I am of the view that the appeal should be allowed.

24 There are other well established considerations relevant to his Honour's exercise of discretion, including the timely and proper administration of justice and prejudice to the parties.

25 The case management and the waste of court resources considerations were emphasised by the respondent. It was submitted that in a busy court such as the Magistrates' Court it was appropriate in considering the timely, just and efficient disposition of matters for the lateness of an amendment as occurred in this matter to have greater weight.

26 It could equally be argued that in the superior courts where cases are more actively case managed a late request for an amendment to pleadings could properly be given greater emphasis than in the summary jurisdictions, given the potentially high costs involved for parties to such a proceeding.

27 In this regard, it is insightful to consider the facts that were before the Court in Aon Risk Services as compared to those that were before his Honour. That is not to say that the law does not require consideration to be given to case management principles and efficient use of court resources. This is clearly so given the High Court's decision in Aon Risk Services.

28 In Aon Risk Services, the amendments were so substantial and extensive that they effectively amounted to a new proceeding requiring Aon 'in effect, to defend again, as from the beginning'.[12] The resultant adjournment had the effect of an abandonment of a four week trial on the third day.[13] Additionally, the new claims were not previously agitated apparently because of a deliberate tactical decision not to do so.[14]

29 In the proceedings here, the particular amendments which might have occasioned an adjournment because they raised new facts or proofs, were abandoned. Only the amendment which was a clarification, and the amendment to raise the statute of limitations defence were pursued. The implications of these amendments, particularly the new limitation defence, were conceded by the respondent both at the trial, and again before me,[15] as capable of being dealt with on the day and did not necessitate an adjournment. There was just no prejudice identified of any materiality not to allow the defence to be amended. The only identification of prejudice was the suggestion that the course of the litigation may have been different if the defence had been raised earlier. When considered against the significance of what on its face is a complete defence to the action, this is a material error in the reasoning and approach of the learned Magistrate. A contrary view would unfairly penalise the appellant.

30 I agree with the submission made on behalf of the appellant that case management did not arise as a substantive factor in the exercise of discretion when the material before the learned Magistrate is properly analysed. The parties were in agreeance that, even with the amendment, the matter could run and be determined on the day. There would be no delay or wasted cost in this respect by the proposed limitation defence amendment. The application to amend was brought on the day of the hearing but notice had been provided to the respondent a few days prior. In terms of cost and timeliness in the context of a relatively small claim, bringing the formal application to amend on the day of the hearing was justified. The separate bringing of an application by way of a summons on an earlier date would be an added step in the litigation and inevitably attract additional cost for the parties.

31 Whether there has been an explanation for the late request for amendment to the pleadings is also a relevant consideration. In this matter, the explanation given was that 'it was an oversight'.[16] In the context of all of the matters relevant in the exercise of his Honour's discretion, this explanation for the late request, whilst unfortunate and no doubt frustrating, appears here to have no real consequence by way of prejudice to the respondent in the Aon Risk Services sense.

32 This is not a situation like the apparently deliberate tactic in Aon Risk Services. Here, there is no evidence that the late amendment was other than an oversight. An honest admission of oversight or inadvertence was accepted by Nichols J in KSG Investments Pty Ltd v Openmarkets Online Trading Pty Ltd[17] and was not fatal to the application to amend in that matter. I consider the scenario here as a similar circumstance. There is no doubt that the reason for a late amendment can be highly relevant but only insofar as it has consequences. I do not agree that the absence of a reason more than an honest admission of oversight is automatically fatal. This is particularly so where the appellant would suffer substantial injustice if he were deprived of a complete defence to the claim.

33 The lateness of an amendment can be a significant consideration if the consequences of the lateness of such an amendment has real prejudice. In this case, the only potential prejudice to the plaintiff would appear to be that the opportunity to consider or reconsider its position at an earlier time had been taken away from it and consequently time and cost involved in preparation of the matter for hearing may well have been wasted. In my view, this was not a consideration of itself sufficient to refuse the amendment as this aspect could well have been cured by an award of costs.

34 It is recognised that an application for leave to amend a pleading should not be approached on the basis of the party being entitled to raise an arguable claim subject to payment of costs by way of compensation. It is necessary for all relevant matters to be considered. Where there is substantial delay and wasted costs the concerns of case management will carry importance on application for leave to amend.[18] However, here the only prejudice to the plaintiff identified was the lost opportunity to review its position.

35 The limitation defence, if made out would be a complete defence to the action and it would be unfair to the defendant to have what on its face is a valid defence, and a complete defence open to it.

36 As Croft J said in ACN 074971109 & Anor v The National Mutual Life Association of Australasia Ltd:[19]

The authorities are clear that pleadings are not an end in themselves and are, rather, a means of ensuring that real issues of controversy are raised for determination in a way that is procedurally fair, both to a plaintiff and a defendant. This allows claims and defences to be clearly articulated, granting parties an opportunity to present their case properly prepared, on clear notice of allegations and defences raised in the proceedings. On this basis, the authority is clearly established that, absent extraordinary circumstances, leave to amend will be granted.

37 In applying the principles relevant to the exercise of discretion on appeal and the principles which have been established in respect of the operation of Order 36.01 as identified above, I am satisfied that the learned Magistrate erred in the proper exercise of his discretion pursuant to Order 36.01.

38 The refusal of the amendment did not allow the defendant to rely upon a defence which was of significance and if made out a complete defence to the claim. To refuse such an amendment given its importance and significance and lack of unfair prejudice to the plaintiff undermines the just resolution of the proceeding.

39 It is not apparent from the transcript of the proceedings before his Honour that he has turned his mind to the significance of the amendments sought and the potential implication for the outcome.

40 The factors relevant to the exercise of discretion to amend are well established. The task of the learned Magistrate was to consider them and balance them in the interests of justice. The late application inevitably would incur some prejudice to the respondent. Considerations of confidence in the administration of justice and rule of law, costs and delay all must come into the balance together with the significance of the amendment sought.

41 On examination of the reasons given by his Honour and the circumstances which were before him I must conclude that he erred in failing to take into account the significance of the limitation defence amendment sought, the lack of real prejudice to the respondent and the relative inconsequential impact on court resources.

42 I will allow the appeal. The matter will be remitted to a differently constituted Magistrates' Court to be reheard in accordance with law.

[1] Transcript of Proceedings, Gordon McLaughlin v Colin Daldy, (Magistrates' Court of Victoria, J13129959, Magistrate Mithen, 4 June 2019) 6 (Mr Cahill).

[3] (2009) 239 CLR 174 ('Aon Risk Services').

[4] (1936) 55 CLR 499 [504] - [505].

[5] Billington v Sussan Corporation Australia Pty Ltd [2020] VSCA 12 [24] ('Billington') citing Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 176-7.

[6] Gordon McLaughlin, 'Respondent's Outline of Submissions', Submission in Colin Daldy v Gordon McLaughlin, S ECI 2019 02974, 28 January 2020, [3].

[7] Aon Risk Services (n 3), summarised by Vickery J in Namberry Craft Pty Ltd v Watson [2011] VSC 136 [38]; Cargill Australia Limited v Viterra Malt Pty Ltd (No 18) [2018] VSC 772 [31] - [34]; ABL Nominees Pty Ltd v MacKenzie (No 2) [2014] VSC 529 [17]-[22]; Billington (n 5) [24] - [26] citing Northern Health v Kuipers [2015] VSCA 172 [28]; Ultra Thoroughbred Racing Pty Ltd v Those Certain Underwriters at Lloyds, London & Ors (2011) VSC 370 [4] - [13].

[10] Aon Risk Services (n 3) [111] - [113].

[11] [2015] VSCA 172 [28].

[12] Aon Risk Services (n 3) [104].

[15] Transcript of Proceedings, Colin Daldy v Gordon McLaughlin, (Supreme Court of Victoria, S ECI 2019 02974, Justice Quigley, 26 November 2020) 18 (Mr Cahill).

[16] Transcript of Proceedings, Gordon McLaughlin v Colin Daldy, (Magistrates' Court of Victoria, J13129959, Magistrate Mithen, 4 June 2019) 2 (Mr Bevan).

[17] [2020] VSC 186 at [31], [42].

[18] Aon Risk Services Australia (n 3) [113] - [115]; Gordon McLaughlin, 'Respondent's Outline of Submissions'(n 6) [4].

[19] [2010] VSC 186 [28].