Court of Appeal (ACT)|2012-08-31

Arrow International Australia Limited (ARBN 081 136 352) v Group Konstrukt Pty Ltd (ACN 111 141 336) [2012] ACTCA 37 (31 August 2012)

ARROW INTERNATIONAL AUSTRALIA LIMITED (ARBN 081 136 352) v GROUP KONSTRUKT PTY LTD (ACN 111 141 336)

[2012] ACTCA 37 (31 August 2012)

Court Procedures Rules 2006 (ACT), rr 21, 425, 1452

LexisNexis Butterworths, Civil Procedure: Victoria vol 1 (at service 259)

LexisNexis Butterworths, Ritchie's Uniform Civil Procedure NSW vol 2 (at service 39)

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175

Arnold v National Westminster Bank PLC [1991] 2 AC 93

Bienstein v Bienstein [2003] HCA 7; (2003) 195 ALR 225

Border Auto Wreckers (Wadonga) Pty Ltd v Strathdee [1996] VSC 55; [1997] 2 VR 49

Camberfield Pty Ltd v Klapinis [2004] VSCA 104

Canberra Data Centres Pty Ltd v Vibe Constructions (ACT) Pty Ltd (2010) 4 ACTLR 114 Capital Property Projects (ACT) Pty Ltd v Planning and Land Authority (ACT) (2008) 2 ACTLR 44

Caroli v Hurst (1883) 31 WR 301

Carr v Finance Corporation of Australia Ltd [1981] HCA 20; (1981) 147 CLR 246

Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1986) 164 CLR 502

Cox Bros (Aust) Ltd v Cox [1934] HCA 16; (1934) 50 CLR 314

Cropper v Smith (1884) 20 Ch D 200

Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 655; (1991) 33 FCR 397

Edwards v Santos Ltd [2010] FCAFC 64; (2010) 185 FCR 280

Ex parte Bucknell [1936] HCA 67; (1936) 56 CLR 221

Florida Investments Pty Ltd v Milstern (Holdings) Pty Ltd [1972] WAR 148

Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22; (2002) 209 CLR 478

Group Konstrukt Pty Ltd v Arrow International Ltd [2011] ACTSC 14

Group Konstrukt Pty Ltd v Arrow International Australia Ltd [2012] ACTSC 14

Hall v Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423

Hession v Century 21 South Pacific Ltd (in liq) (1992) 28 NSWLR 120

Hope v RCA Photophone of Australia Pty Ltd [1937] HCA 90; (1937) 59 CLR 348

Hunt v Allied Bakeries Ltd [1956] 3 All ER 513

Hunt v Knabe (No 2) (1992) 8 WAR 96

Kowalski v NMAL Staff Superannuation Fund Pty Ltd [2009] FCAFC 117; (2009) 178 FCR 401

Liangis Investments Pty Ltd v Daplyn Pty Ltd (1994) 117 FLR 28

Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508

Little v Victoria [1998] 4 VR 596

Mackellar v Hornsey (1901) 49 WR 301

Mango Boulevard Pty Ltd v Spencer [2010] QCA 207

McMahon v John Fairfax Publication Pty Ltd [2010] NSWCA 308

National Companies and Securities Commission v Monsoon Nominees Pty Ltd (No 3) (1990) 3 ACSR 491

Port of Melbourne Authority v Anshun Pty Ltd (1980) 147 CLR 35

Prelea v Westpac Banking Corporation [1992] NSWCA 189

Racovalis v Rescom Mortgages Pty Ltd (2010) 28 VR 250

Re An Application by Chief Commissioner of Police (Vic) [2005] HCA 18; (2005) 79 ALJR 881

Salter Rex & Co v Ghosh [1971] 2 QB 597

Sanofi v Parke Davis Pty Ltd (No 1) [1982] HCA 9; (1982) 149 CLR 147

Schiffer v Pattison [2005] FCA 494; (2005) 143 FCR 328

Tampion v Anderson [1973] VicRp 82; (1973) 3 ALR 414

Tildesley v Harper (1878) 10 Ch D 393

Wills v Australian Broadcasting Corporation [2009] FCAFC 6; (2009) 173 FCR 284

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Court of Appeal of the Australian Capital Territory

IN THE SUPREME COURT OF THE ) No. ACTCA 1 - 2012

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: ARROW INTERNATIONAL AUSTRALIA LIMITED (ARBN 081 136 352)

1. The applicant is an appellant and has a right to appeal against the orders of the Honourable Justice Burns made on 31 January 2012.

2. So far as may be necessary to grant leave to appeal from that part of his Honour's order that struck out the applicant's defence, leave is granted.

3. The costs of the application be reserved to the Court hearing the appeal.

IN THE SUPREME COURT OF THE ) No. ACTCA 1 - 2012

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: ARROW INTERNATIONAL AUSTRALIA LIMITED (ARBN 081 136 352)

1. The parties to this application made a contract with each other on 16 May 2007 in respect of works to be undertaken at a project called "Chisholm Village Shopping Centre" in Chisholm, ACT.

2. Under the contract, the respondent, Group Konstrukt Pty Ltd (Group Konstrukt), agreed to carry out certain works as a sub-contractor to the applicant, Arrow International Australia Ltd (Arrow), who was, it appears, the head contractor for the project.

3. On 9 May 2008, Group Konstrukt commenced proceedings against Arrow in the Supreme Court claiming $248,621.94 plus interest for debt being amounts said to be due under the contract for works claimed to have been completed by it on the project. It is not necessary to specify the details of the Statement of Claim more precisely.

4. Arrow filed a Defence and Counterclaim on 12 August 2008, serving it within time. Group Konstrukt served a Reply and Defence to the Counterclaim and later sought to strike out the Defence and Counterclaim.

5. Further proceedings in relation to Arrow's pleadings were heard by the Court from time to time until, on 4 February 2011, Master Harper identified deficiencies in the pleadings of Arrow and ordered that a further draft be delivered by 4 April 2011.

6. Group Konstrukt appealed against the decision of the learned Master to a single judge, which it had power to do under s 9(2)(a) of the Supreme Court Act 1933 (ACT), as the learned Master's order was clearly interlocutory. On 31 January 2012, Burns J upheld the appeal and ordered that the orders of the learned Master be set aside, that Arrow's defence be struck out, that judgment be entered for Group Konstrukt in the sum of $248,621.99 and that Arrow's counterclaim be heard separately: Group Konstrukt Pty Ltd v Arrow International Australia Ltd [2012] ACTSC 14.

7. Arrow wishes to appeal against that decision. It maintains that the decision is a final decision and that leave is not required, but, if it is an interlocutory decision for which leave is required, seeks that leave be granted to appeal.

8. Section 37E(4) of the Supreme Court Act requires that leave be given before an appeal from an interlocutory order of the Supreme Court may be appealed to this Court. Thus, if the order of Burns J is a final order, no leave is required; if it is not a final order, but an interlocutory order, then leave is required.

9. The question of whether an order is final or interlocutory is a notoriously difficult one and, while some general principles have been enunciated by the courts, they do not admit of easy application.

10. Indeed, in Tampion v Anderson [1973] VicRp 82; (1973) 3 ALR 414 at 416, the Judicial Committee of the Privy Council said:

At the hearing on the petitions, their Lordships had the advantage of a very full citation of authority, both Australian and English, on the question whether a given judgment is of a final or an interlocutory character. It is clear that, in general, and certainly in the present cases, the Australian courts have accepted as authoritative the English decisions on this topic.

It was submitted, and their Lordships would be inclined to agree, that the authorities are not in an altogether satisfactory state. there is a continuing controversy whether the broad test of finality in a judgment depends on the effect of the order made, as decided in Bozson v Altrincham UDC [1903] 1 KB 547, per Lord Alverstone CJ at 548, or on the application being of such a character that whatever order had been made thereon must finally have disposed of the matter in dispute - Salaman v Warner [1891] 1 QB 734. but the difficulty seems to arise out of attempts to frame a definition of 'final' (or of 'interlocutory') which will enable a judgment to be recognized for what it is by appealing to some formula universally applicable in any contingency in which the classification falls to be made. It may be for that reason that in Re Page; Hill v Fladgate [1910] 1 Ch 489 Cozens-Hardy MR said, at 491: 'I have no intention of attempting the task of defining exhaustively or accurately the meaning of an interlocutory order. I leave that to others.'

Again, in Salter Rex & Co v Ghosh [1971] 2 QB 597 at 601; [1971] 2 All ER 865 at 866, Lord Denning MR said: 'This question of "final" or "interlocutory" is so uncertain that the only thing for practitioners to do is to look up the practice books and see what has been decided on the point. Most orders have now been the subject of decision.' This advice, even if it be distressing to the scientific lawyer, may nevertheless be the most helpful in any actual case.

11. The controversy to which their Lordships referred - as to whether it was the judgment or order that had to be final or interlocutory, or whether it was the application on which the judgment or order was made that had to be final or interlocutory - has long ago been resolved in Australia as it is the former, namely, the nature of the judgment or order not of the application, that has to be final or interlocutory, as was held in Ex parte Bucknell [1936] HCA 67; (1936) 56 CLR 221 at 225. This view has been confirmed by later decisions of the Court such as Licul v Corney [1976] HCA 6; (1976) 180 CLR 213 at 225.

12. The test, then, of what is a final judgment or order or an interlocutory one, propounded by the High Court, is easy to state. In Hall v Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423, at 443, Windeyer J referred to the test

that seems to be most satisfactory, and the one that accords most nearly with what has been said on the subject in this Court, is it seems to me to look at the consequences of the order itself and so ask does it finally determine the rights of the parties in a principal cause pending between them.

13. To the same effect was what Taylor J, with whom Owen J agreed, said at 440-1.

14. This approach has been followed since: Licul v Corney; Port of Melbourne Authority v Anshun Pty Ltd (1980) 147 CLR 35 at 38; Sanofi v Parke Davis Pty Ltd (No 1) [1982] HCA 9; (1982) 149 CLR 147 at 152; Bienstein v Bienstein [2003] HCA 7; (2003) 195 ALR 225 at 230; [25]; Re Luck [2003] HCA 70; (2003) 78 ALJR 177 at 178; [4]; Re an Application by Chief Commissioner of Police (Vic) [2005] HCA 18; (2005) 79 ALJR 881 at 885-6; [28]. In Carr v Finance Corporation of Australia Ltd [1981] HCA 20; (1981) 147 CLR 246 at 248, Gibbs CJ noted that the test had to have regard to the legal rather than the practical effect of the judgment or order.

15. That test, however, is never easy to apply except in the clearest of cases. There is the approach suggested by Lord Denning MR in Salter Rex & Co v Ghosh [1971] 2 QB 597 at 601, approved of by their Lordships in Tampion v Anderson (see above at [10]). See also Border Auto Wreckers (Wodonga) Pty Ltd v Strathdee [1996] VSC 55; [1997] 2 VR 49 at 52. Even this approach is not always easy when the point has not been directly decided.

16. LexisNexis Butterworths, Civil Procedure: Victoria vol 1 (at service 259) at [64.01.445]-[64.01.450], provides over nearly five pages various instances of final or interlocutory orders, as there is in LexisNexis Butterworths, Ritchie's Uniform Civil Procedure NSW vol 2 (at service 39) [SCA s 101.80]-[SCA s 101.82], nearly two pages of similar instances, but reading through them show some decisions which seem inconsistent or, at least, not easy to reconcile.

17. None, as perhaps one would expect, deals with precisely this situation and so a court applying the approved test must argue from analogy; it is here that different decisions, pointing in different directions, can make the decision very difficult.

18. Thus, an order striking out a Statement of Claim as not disclosing a cause of action is interlocutory, according to cases such as Hunt v Allied Bakeries Ltd [1956] 3 All ER 513, and Little v Victoria [1998] 4 VR 596, but if the order provides that the proceedings be dismissed, the order is final: Florida Investments Pty Ltd v Milstern (Holdings) Pty Ltd [1972] WAR 148.

19. The former approach was affirmed by Rares J, with whom Emmett J agreed (North J not deciding), in Wills v Australian Broadcasting Corporation [2009] FCAFC 6; (2009) 173 FCR 284. His Honour summarised the relevant authorities (at 289-90; [24]-[29]) before concluding (at 290; [30]) that "an order ... determining that a claim or defence has no reasonable prospects of success is interlocutory". In deciding whether leave was required, however, his Honour held that the summary dismissal complained of in the case was interlocutory as the applicant "still had on foot unresolved pleaded claims against other respondents".

20. Again, an order for summary dismissal of a proceeding on the ground that the party had no reasonable prospects of successfully prosecuting the proceedings was held to be an interlocutory order in Kowalski v NMAL Staff Superannuation Fund Pty Ltd [2009] FCAFC 117; (2009) 178 FCR 401. In the federal jurisdiction, this approach was confirmed by the insertion of s 24(1D)(b) to the Federal Court Act 1976 (Cth), which provides that "a decision granting or refusing summary judgment [where a party has no reasonable prospects of success]" is an interlocutory judgment for the purpose of requiring leave to appeal. See further: Federal Court Act ss 24(1A)-(1C), 31A; Edwards v Santos Ltd [2010] FCAFC 64; (2010) 185 FCR 280 at 281; [2].

21. An order giving a party leave to enter judgment is also interlocutory, as held by the High Court in Cox Bros (Aust) Ltd v Cox [1934] HCA 16; (1934) 50 CLR 314.

22. On the other hand, the following orders have relevantly been held to be final:

• an order granting a plaintiff's application for summary judgment: Hunt v Knabe (No 2) (1992) 8 WAR 96, though a different decision was reached by Weinberg J in Schiffer v Pattison [2005] FCA 494; (2005) 143 FCR 328. His Honour, however, did not refer to the earlier Western Australian case;

• an order dismissing a proceeding against one of several defendants on the ground that no claim for substantive relief was made against it: National Companies and Securities Commission v Monsoon Nominees Pty Ltd (No 3) (1990) 3 ACSR 491 at 494;

• an order dismissing proceedings in an application by a defendant for summary judgment where the defendant had a good defence on the merits: Camberfield Pty Ltd v Klapinis [2004] VSCA 104.

23. Despite the plethora of decisions considered in those practice books which point to this order being a final order, none is precisely in point. There are, however, some authorities which are of assistance. In Hope v RCA Photophone of Australia Pty Ltd [1937] HCA 90; (1937) 59 CLR 348, the plaintiff sued for the charges for hire of certain sound reproducing equipment to the defendant and for goods sold and delivered by the plaintiff at the defendant's request.

24. The defendant cross-claimed that, by an agreement, the plaintiff was to hire to the defendant certain new equipment, but failed to do so and only provided equipment that was not new and, therefore, the defendant had been put to expense.

25. The plaintiff demurred to the cross-claim and the Full Court of the Supreme Court of New South Wales gave judgment for the plaintiff on the demurrer and the defendant did not plead and judgment was given against him.

26. The defendant appealed. The plaintiff applied to have the appeal struck out as incompetent on the ground that it was not a final judgment.

27. Although Latham CJ expressed some doubts, all the other members of the Court found that the judgment was a final judgment. In particular, Dixon J (at 352), held that the cross-action was

an independent cause of action upon which there may be an independent recovery, and, in my opinion, the judgment in demurrer was a final conclusion which of itself determined the rights of the parties and concluded the cross-action.

29. In Prelea v Westpac Banking Corporation [1992] NSWCA 189, an appeal was lodged concerning a judgment which only resolved part of the action. The bank sued Mr Prelea and his wife claiming moneys owed by them as guarantors of what appears to be their company.

30. Both Mr and Mrs Prelea filed defences and, later, cross-claims, with their company, against the bank under the Trade Practices Act 1974 (Cth), and the Contracts Review Act 1980 (NSW).

31. The bank applied to strike out the defences and cross-claims as disclosing no grounds of defence or cross-claim. The trial judge struck out all the paragraphs in the defence, save for one relating solely to Mrs Prelea, and various paragraphs of the cross-claim. His Honour also gave the bank leave to enter judgment against Mr Prelea, none of whose defences survived. The defence of Mrs Prelea was stood over for trial as was the cross-claim by the company.

32. For reasons not presently relevant, it appeared, and the bank agreed, that his Honour should not have struck out all the claims made by Mr Prelea. The bank suggested that the matter be relisted before his Honour for the orders to be reconsidered but Mr Prelea instead appealed against them. Mrs Prelea and the company, instead, sought leave to appeal against the interlocutory orders affecting their claims.

33. Finally, the bank entered judgment against Mr Prelea. The Court held, relying on Cox Bros (Aust) Ltd v Cox, that, prior to judgment, Mr Prelea's appeal was incompetent as leave was required. This is consistent with authority in this Court: Liangis Investments Pty Ltd v Daplyn Pty Ltd (1994) 117 FLR 28 at 30.

34. Sometime after the bank entered judgment, however, Mr Prelea appealed again.

It was thus an appeal against a final judgment and not against the orders of [the trial judge] given earlier which had simply given leave to the bank to enter judgment against Mr Prelea in accordance with the rules of court.

...

[T]he second notice of appeal ... was filed after judgment was entered pursuant to the leave granted by [the trial judge]. It suffers from no such defect as affected the first notice of appeal.

36. On the basis of those authorities, it seems to me that I can find that the fact that a counter-claim remains on foot after judgment is entered in the principal claim does not deprive that judgment of its character as a final judgment. I can also find that when judgment is entered against a defendant whose defence has been struck out as disclosing no grounds of defence any judgment thereafter entered is a final judgment.

37. Thus, the first question, as to whether the fact that the counter-claim is to be heard separately, thereby continuing to raise issues between the parties, means that the order entering judgment is final or interlocutory, can now be answered confidently that the judgment is final. Thus, no leave is required on this count.

38. The problem, however, is whether the striking out of the Defence was on the basis that it disclosed no defence to the cause of action or for other reasons.

39. The order of his Honour was as follows (at [26]):

A just resolution of the appellant's claim requires that the respondent's defence be struck out and that judgment be entered for the appellant in the sum of $248,621.99 together with interest on that amount. The respondent's counterclaim should be severed.

40. There is no indication of the source of his Honour's power to make this order. It could have been struck out under r 425 of the Court Procedures Rules 2006 (ACT), but that would have required his Honour to have found that the pleading:

(a) discloses no reasonable cause of action or defence appropriate to the nature of the proceedings; or

(b) may tend to prejudice, embarrass or delay the fair trial of the proceeding; or

41. These all, however, require an analysis of the terms of the pleading and whether the terms of the pleading in the defence are describable in any of these terms. While there was an analysis in the reasons, they did not reach to the standard of this rule, save, perhaps for (b), though there was no reference to that.

42. In the reasons his Honour delivered, there a chronology which shows that orders were made by the learned Master on a number of occasions that showed the pleading was unsatisfactory.

43. On only one occasion, however, was there a judgment delivered by the learned Master, to which my attention was drawn. In that judgment, Group Konstrukt Pty Ltd v Arrow International Ltd [2011] ACTSC 14 the learned Master did analyse the pleadings in some detail, showing how the defence failed to comply with the rules of pleading. In his judgment (at [11]-[13]), Burns J quoted extensively from the judgment of the learned Master and adopted his analysis.

44. The rules of pleading, though sometimes disparaged, are an important part of the case management of litigation: Canberra Data Centres Pty Ltd v Vibe Constructions (ACT) Pty Ltd (2010) 4 ACTLR 114 at 121-2; [27]-[30]. While arid technicalities and arguments about them are to be avoided, it is very important that, as the learned Master said (at [19]), "[t]he defence should enable the plaintiff, and the trial judge, to know what is really in issue between the parties."

45. In the appeal, the learned Appeal Judge did, it seems to me, consider the analysis of the learned Master, which his Honour adopted, as the basis of his jurisdiction to act as he did though his Honour did not state so, but without an express reference to r 425.

46. The alternative rule under which the learned Appeal Judge may have acted was suggested to be r 1452; this requires the defaulting party to have defaulted in failing to comply with an order to take a step in a proceeding in the court.

47. Although the learned Appeal Judge did not identify such a default expressly, there was, however, at least one possible default as follows. On 20 October 2010, the learned Master heard the third strikeout application brought by Group Konstrukt. His Honour made orders that Arrow serve and provide the Master's associate with a draft further amended defence and counterclaim in a time described in the judgment of the learned Master as "within 21 days, i.e. by 10 October 2010". That clearly must have been in error; while 21 days is strictly 9 November 2010, it makes the likely date 10 November 2010.

48. In any event, the draft was not provided until 19 November 2010. It was this failure that led to the hearing which resulted in the judgment from which the appeal was taken to the Supreme Court. That would, of course, amount to a non-compliance for which an order under r 1452 could be made.

49. I note that in Mango Boulevard Pty Ltd v Spencer [2010] QCA 207 at [112], Fraser JA, with whom White JA agreed, held that a judgment entered under r 374 of the Uniform Civil Procedure Rules 1999 (Qld), the equivalent of r 1452, is a final judgment. That seems to me is reinforced by the terms of r 1452(7). This sub-rule provides that, other than where the well-known principle applies, that ex parte decisions are able to be reviewed without appeal at the request of the absent party (McNamara v Cameron [1890] VicLawRp 22; (1890) 16 VLR 108 at 110), an order under the rule can only be reviewed on appeal, as with any other final order.

50. My view is further strengthened by the decision of the Court of Appeal of New South Wales in Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508. In that case, the respondent had, when refused an adjournment, withdrawn from a trial in the County Court of Victoria in which it had filed a defence and counter-claim to the claim by the appellant. Judgment was entered for the appellant on its claim and the counter-claim dismissed. Some years later the respondent sought to sue the appellant in the Supreme Court of New South Wales for the claim the subject of its counterclaim.

51. It contended that, as there had been no hearing on the merits, the decision of the County Court dismissing its claim was not final and did not found a plea of res judicata. The Court of Appeal held otherwise, Clarke JA, with whom Samuels JA agreed, said (at 526-7):

I take it that these authorities establish that if a plaintiff withdraws from the trial and an order is made in its absence dismissing its claim then that order will, unless set aside or successfully appealed from, ground a later plea of res judicata in the event that a later attempt is made to litigate the same case. The position is no different than that which arises under a default judgment: Spencer-Bower (at 158).

52. I do not consider that the distinctions made in cases such as Racovalis v Rescom Mortgages Pty Ltd (2010) 28 VR 250 and Mango Boulevard Pty Ltd v Spencer undermine this conclusion so far as it is applicable to this case.

53. As a result, my clear view is that the applicant is, in fact, an appellant and needs no leave to appeal but may appeal as of right against the judgment.

54. It may be, however, that what the applicant really seeks to do in the order it challenges is to appeal against the order striking out the defence insofar as it is a separate order, for it is not clear as to the basis on which it might challenge the entry of judgment, there being at that time no defence standing in the way of judgment: Mackellar v Hornsey (1901) 49 WR 301. The judgment is then entered on the implied admissions, not "actual admissions of fact", through the absence of a defence: Caroli v Hurst (1883) 31 WR 839 at 840. The analysis of the order made in Cox Bros (Aust) Ltd v Cox may suggest that in such a case leave is required.

55. Of course, as was held in Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22; (2002) 209 CLR 478 at 483-4; [6]-[7] on a final appeal, interlocutory orders can be challenged if they affect the result:

The proposition that any interlocutory order can be challenged in an appeal against the final judgment in the matter is often stated in unqualified terms [see, e.g. Nolan v Clifford [1904] HCA 15; (1904) 1 CLR 429 at 431: 'all points ... are open.'] The better view, however, is reflected in the formulation adopted in Spencer Bower, Turner and Handley [The Doctrine of Res Judicata, 3rd ed (1996) pp 79-80, par 170] where it is said that 'on an appeal from the final order an appellate court can correct any interlocutory order which affected the final result' (emphasis added).

It is necessary to make the qualification, 'which affected the final result', at least to reflect the well-established principle that a new trial is not ordered where an error of law, fact, misdirection or other wrong has not resulted in any miscarriage of justice. That principle, well established in the common law [Conway v The Queen (2002) 209 CLR 203], is applied to appeals to the Court of Appeal of New South Wales.

56. Thus, Arrow could, it seems to me, challenge the order striking out the defence in its challenge against the judgment entered by order of the learned Appeal Judge.

57. As the issue of interlocutory and final order is so fraught, however, it is desirable to deal with the question of whether leave should be granted so far as it may be necessary. It would not promote efficient litigation were that question to be left to arise on the appeal.

58. The principles on which a court will grant leave to appeal have been dealt with by the courts. The principles, which I set out in Capital Property Projects (ACT) Pty Ltd and Anor v Planning and Land Authority (ACT) (2008) 2 ACTLR 44, may be summarised as follows:

(a) leave will be granted sparingly to avoid delaying and fragmenting the hearing of cases;

(b) a Court will be particularly hesitant to grant leave where the decision is one in respect of practice and procedure or is made in the exercise of a discretion;

(c) decisions which, though interlocutory, determine substantive rights will more readily be the subject of the grant of leave;

(d) the party seeking leave bears the onus of satisfying the court of the necessary criteria to justify the grant of leave;

(e) the court will ordinarily grant leave where the decision is wrong and prejudice will be suffered by the appellant;

(f) leave may also be granted where the decision is attended with sufficient doubt to warrant its reconsideration or, to put it another way, where the decision is 'attended with difficulty and [its] correctness is open to dispute' (Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 655; (1991) 33 FCR 397 at 400) and, if it is wrong, significant consequences will be suffered by the applicants; and

(g) it may be a factor favouring the grant of leave that:

(i) the decision involves a matter of public importance; or

(ii) the decision may affect the fairness of the trial, a consideration under s 21 of the Human Rights Act 2004 (ACT), though this can also weigh against the decision if the appeal results in unfair delay or fragmentation of the trial.

It may be that these principles should be applied more liberally in the light of s 21 of the Human Rights Act 2004 (ACT) which expresses the right to a fair trial since an error in the interlocutory decision may have the effect of derogating from the fairness of the trial.

The Human Rights Act has, perhaps, little work to do in this case as all parties are corporations and not individuals: s 6 of the Human Rights Act.

60. In this case, it is necessary to set out some of the events leading to the decision that Arrow seeks to challenge.

61. Group Konstrukt commenced the proceedings in the Supreme Court on 9 May 2008 and served Arrow on 19 May 2008. No defence having been filed, Group Konstrukt sought default judgment which was entered on 19 June 2008.

62. On 11 August 2008, the Registrar set aside default judgment with the usual orders that Arrow pay the costs of Group Konstrukt of doing so. On 15 August 2008, Arrow filed and served its Defence and Counter-Claim.

63. On 27 August 2008, Group Konstrukt delivered a request for further and better particulars of the Defence and Counter-Claim. Nearly four months later on 15 December 2008, on an application by Group Konstrukt, the Registrar ordered Arrow to provide the particulars sought by 22 December 2008 and for Group Konstrukt to prepare and file a Scott Schedule by 23 March 2009.

64. Arrow provided the further and better particulars on 24 December 2008. Arrow provided the Scott Schedule with its entries completed on 19 March 2009. On 28 May 2009, Arrow wrote to Group Konstrukt asking it to complete the Scott Schedule.

65. On 9 June 2009, Group Konstrukt wrote to Arrow complaining of the inadequacy of the particulars provided nearly six months earlier and of the Scott Schedule, provided nearly three months earlier.

66. There was further correspondence about these issues and on 26 June 2009 Arrow provided further particulars. On the same day, Group Konstrukt wrote to Arrow complaining of claimed inadequacies of the particulars provided.

67. On 31 July 2009, on an application by Group Konstrukt to strike out the Defence and Counter-Claim or, alternatively, provide proper particulars of the pleading, the Deputy Registrar ordered that Group Konstrukt provide a letter identifying the particulars it sought by 14 August 2009 and that Arrow provide the answers by 6 September 2009. Group Konstrukt provided its letter on 10 August 2009 (also inviting Arrow to amend its defence and counter-claim) and Arrow its reply on 11 September 2009.

68. On 14 September 2009, the Deputy Registrar directed Arrow to file and serve its application to amend its defence and counter-claim by 5 October 2009. On 15 October 2009, Arrow sent a proposed amended defence and counter-claim to Group Konstrukt, seeking its consent to filing.

69. Presumably in the absence of such consent, the Deputy Registrar on 19 October 2009 extended the time for making an application for leave to amend to 23 October 2009 and directed Group Konstrukt to file and serve any application to strike out the defence and counter-claim on or before 23 October 2009.

70. On 27 October 2009, Group Konstrukt filed its application to strike out the defence and counter-claim and, on 5 November 2009, Arrow filed its application for leave to amend its Defence and Counter-Claim.

71. These applications came before the Master on 13 November 2009 and were, by consent, adjourned to 4 December 2009 and further adjourned to 11 December 2009 when they were not reached and given a special fixture on 29 January 2010. On that date the Master gave Arrow leave to file and serve an Amended Defence and Counter-Claim by 26 February 2010. An unsealed copy of an Amended Defence and Counter-Claim was served on Group Konstrukt on 4 March 2010 and a sealed copy served on 24 March 2010.

72. On 29 March 2010, the Deputy Registrar directed Group Konstrukt to request any further and better particulars of the Amended Defence and Counter-Claim by 9 April 2010 and Arrow to provide any requested particulars by 7 May 2010.

73. Those particulars were requested by Group Konstrukt on 4 May 2010; they were 134 pages in length.

74. On 20 May 2010, Arrow sought three months within which to supply the requested particulars and the directions were adjourned to 12 July 2010.

75. There were some discussions about security for costs which I do not need to address. Arrow then provided some of the particulars requested on 9 July 2010. On 26 July 2010, Group Konstrukt complained about the failure to supply the particulars and on 9 August 2010 made a further application to strike out the Amended Defence and Counter-Claim and also for security for costs.

76. That application came before the Master on 20 October 2010 when his Honour ordered that Arrow give security for costs and that it deliver a draft Further Amended Defence and Counter-Claim by 10 November 2010 to his Honour's associate and adjourned the application to 24 November 2010.

77. On 19 November 2010, Arrow provided a proposed Further Amended Defence and Counter-Claim. The Master heard the application on 24 November 2010 and reserved his decision.

78. On 4 February 2011, his Honour delivered his decision permitting Arrow to file a draft Further Amended Defence and Counter-Claim in conformity with his Honour's reasons, which, for the first time, judicially analysed and identified the relevant deficiencies in the Defence and Counter-Claim. Clearly, his Honour was intending to provide specific case management of the proceedings, as seems required.

79. On 11 February 2011, Group Konstrukt appealed from the order of the Master. That appeal was heard on 7 October 2011 and on 23 January 2012, Burns J upheld the appeal and made orders as noted above (at [6]).

80. On appeal, his Honour set out the history of the proceedings, broadly as I have done. He noted that the learned Master had analysed the pleadings, identified the deficiencies of the Defence and Counter-Claim and adopted that analysis. His Honour noted further that the Master had referred to the decision of the High Court in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 (Aon) and also McMahon v John Fairfax Publication Pty Ltd [2010] NSWCA 308 and that the learned Master determined to allow Arrow "one more opportunity to get its pleadings in order."

81. His Honour then addressed a number of the statements of the members of the Court in Aon, noting that Arrow had had since 11 August 2008 to file a proper defence and counter-claim and had not done so. His Honour also referred (at [25]) to what he said was "of more importance ... the failure [of Arrow] to comply with the rules of the court, and directions given by the court". It is by no means clear to me to which rules his Honour was referring. Certainly it had failed to comply with time limits imposed by the Court, but so had Group Konstrukt, though, it has to be said, not so consistently as had Arrow.

82. His Honour then identified what he said was the error he found in the Master's decision as follows (at [26]):

In my view, the stage has been reached where costs orders are no longer a panacea for that prejudice. The learned Master fell into error by not properly applying r 21 to those provisions of the Court Procedures Rules which he considered or applied in the course of his decision of 4 February 2011. A just resolution of the appellant's claim requires that the respondent's defence be struck out and that judgment be entered for the appellant in the sum of $248,621.99 together with interest on that amount. The respondent's counterclaim should be severed.

83. With the greatest respect to his Honour, it seems to me that this is not an error of principle of the kind that House v The King [1936] HCA 40; (1936) 55 CLR 499 requires before an appellate court will interfere with a discretionary decision. I note, too, that this was a matter of practice and procedure where judicial restraint is expected on appeal: Hession v Century 21 South Pacific Ltd (in liq) (1992) 28 NSWLR 120, at 122.

84. His Honour clearly had a different view from the Master about whether the time had come for the court to exercise a discretion not to permit a further amendment. Whether that time had come, however, was a matter for the discretion of the primary judicial officer.

85. The learned Master was clearly aware of the issues: his reference to Aon makes that plain. Reference to passages in Aon do make it clear that the exercise of the discretion to allow amendments is not as open-ended as had formerly been thought. See the comments on cases such as Cropper v Smith (1884) 20 Ch D 200 and Tildesley v Harper (1878) 10 Ch D 393 in Aon at 187-9; [18]-[23] per French CJ, 205-9; [73]-[83] per Gummow, Hayne, Crennan, Kiefel and Bell JJ.

86. Nevertheless, their Honours made it clear that delay is not the only consideration that needs to be taken into account.

87. As French CJ said in Aon (at 192; [30]), which puts a more nuanced approach to the issue,

It might be thought a truism that 'case management principles' should not supplant the objective of doing justice between the parties according to law. Accepting that proposition, JL Holdings cannot be taken as authority for the view that waste of public resources and undue delay, with the concomitant strain and uncertainty imposed on litigants, should not be taken into account in the exercise of interlocutory discretion of the kind conferred by r 502. Also to be considered is the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification, whether they be for adjournment, for amendments giving rise to adjournment, or for vacation of fixed trial dates resulting in the resetting of interlocutory processes.

88. The latter references show, too, some important context of the decision itself.

89. Further, the plurality said (at 214-5; [102]-[103]):

The objectives stated in r 21 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. Whilst r 21 assumes some ill-effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail. It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. there may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment.

The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in J L Holdings [(1997) [1997] HCA 1; 189 CLR 146 at 152]. Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case.

90. That the learned Master did not set out such detailed references to passages such as those in the judgment his Honour published is not an error. It ought not to be thought that every interlocutory decision has to be explained extensively not only with detailed reference to authority but also an extensive analysis of their terms. The learned Master was well aware of the decision in Aon and its import. He clearly was aware that the point was coming rapidly when further indulgence to Arrow should not be granted, though his discretionary decision was that it had not yet arrived. The claim was an important one for Arrow, as noted to be an important factor by the Court in Aon,. The Master was drawing the process to a close. It appears to be, I note, the first and only occasion when there had been an express judicial statement of the precise inadequacies of the pleadings and a judicial explanation of them.

91. Group Konstrukt, however, answered this point by submitting that the disadvantage to Arrow could be overcome by permitting Arrow to plead all the matters of defence in its Counter-Claim. It offered not to plead res judicata or issue estoppel in answer to any of the claims that Arrow would wish to make in pursuing its Counter-Claim so far as any of those claims were dealt with by the judgment. It offered to give an undertaking to this effect.

92. The difficulty with that, however, is that those claims that Arrow would raise by way of defence have now merged in the judgment. As the High Court said in Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at 532 "the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence". That a party declines or fails to raise the defence cannot revive that which has merged. See Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1986) 164 CLR 502; Arnold v National Westminster Bank PLC [1991] 2 AC 93. So far as its defence sets off the claims by Group Konstrukt, those matters claimed by Arrow would, it seems, merge in the judgment.

93. In my view, Arrow is likely to suffer real prejudice from the entry of judgment. It has a reasonably arguable case that his Honour erred in setting aside the decision of the Master and in striking out the defence and entering judgment on it.

94. So far as it is necessary, I will grant leave for Arrow to appeal from the judgment of the Supreme Court given on 31 January 2012.

I certify that the preceding ninety-four (94) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Federal Court Act 1976(Cth)

Civil Procedure Rules 1999

Procedures Rules 2006

Arrow International Australia Limited (ARBN 081 136 352) v Group Konstrukt Pty Ltd

At a glance

Court

Decision date

Source

Judgment (188 paragraphs)

Arrow International Australia Limited (ARBN 081 136 352) v Group Konstrukt Pty Ltd (ACN 111 141 336) [2012] ACTCA 37 (31 August 2012)

Parties

Legislation Cited (8)

Cases Cited (31)