Bacon v Vicsail PTY LTD

Supreme Court of NSW|2024-08-22

Solicitors: DCB Law (Plaintiff) Agar Cahalan Maritime (First Defendant) File Number(s): 2023/00100412

JUDGMENT

This judgment concerns an application by the plaintiff for leave to join a United States corporation known as Farr Yacht Design Limited ('Farr') as a third defendant to these proceedings. The plaintiff also requests leave to amend his statement of claim and transfer the matter to the Admiralty list.
The plaintiff is John Bacon ('Bacon'). The first defendant is Vicsail Pty Limited ('Vicsail'), the second defendant is Bret Perry ('Perry'), the third defendant Farr is sought to be joined in the proceedings. The plaintiff is represented by J.M Ireland KC of counsel. The first defendant is represented by C.L.W Street of counsel. The third defendant is represented by K. Lewis. The second defendant did not oppose the orders sought. The plaintiff and the second defendant have agreed to costs of this motion between themselves.
By way of notice of motion filed 5 July 2024 the plaintiff relevantly seeks, 1. Leave to join a United States (Delaware) corporation, namely Farr Yacht Design Limited as third defendant in these proceedings. 2. Leave to amend its statement of claim.

As to Farr joining as third defendant in these proceedings.

There is no opposition from Vicsail nor Perry to the making of the order in [1] of this notice of motion. However, this court must be satisfied that there is jurisdiction to enable such an order to be made.

Background

In September 2020 Bacon ordered from Vicsail an ocean-going racing yacht. The yacht was the first of its type and it was designed by Farr, which is an established yacht designer located in Delaware in the United States of America. The design work was carried out by Farr overseas.
Vicsail made arrangements to obtain and pay for the major component parts for the yacht, that were to be manufactured overseas. The yacht was then to be assembled and commissioned here in Australia. That work was carried out in Sydney, New South Wales between about April and June 2022.
The second defendant, Perry, worked on the assembly and commissioning of the yacht here in Australia, including the attachment of the keel to the hull of the yacht as it was prepared for a first ocean voyage on 1 July 2022.
In the early hours of 2 July 2022, the plaintiff's yacht capsized off the east coast of Australia, eventually washing up near Wollongong. Its two crew members were eventually rescued by the Australian Navy. The yacht was a total loss.

The claims made by the Defendants as to proportionate liability.

Bacon pleads claims of breach of contract and negligence against Vicsail. By its defence filed on 21 July 2023 at [32-35] Vicsail now alleges that Farr was a concurrent tortfeasor under part IV of the Civil Liability Act 2002 (NSW) ('CLA') and seeks a finding of proportionate liability.
The claims by the existing defendants under part IV of the CLA bring the issue of whether Farr has a liability to the plaintiff for negligent design of the yacht.

The plaintiff's submissions

The plaintiff submitted that Farr can be served out of the jurisdiction in the State of Delaware in the United States of America without leave of the Court by virtue of UCPR 11.4 and subparagraphs (a) (h) and (j) of schedule 6 of the rules.

Relevant Statutory Provisions

Rule 11.4 of the Uniform Civil Procedure Rules 2005 (NSW) ('UCPR') reads: 11.4 Cases for service of originating process (1) Originating process may be served outside of Australia without leave in the circumstances referred to in Schedule 6. (2) This rule extends to originating process to be served outside Australia in accordance with the Hague Convention. [my emphasis]
Schedule 6 of the UCPR provides: An originating process may be served outside of Australia without leave in the following cases - (a) when the claim is founded on a tortious act or omission - (i) which was done or which occurred wholly or partly in Australia, or (ii) in respect of which the damage was sustained wholly or partly in Australia, … (h) when any person outside of Australia is - (i) a necessary or proper party to a proceeding properly brought against another person served or to be served (whether within Australia or outside Australia) under any other provision of these rules, or (ii) a defendant to a claim for contribution or indemnity in respect of a liability enforceable by a proceeding in the court, … (j) when the claim arises under an Australian enactment and - (i) any act or omission to which the claim relates was done or occurred in Australia, or (ii) any loss or damage to which the claim relates was sustained in Australia, or (iii) the enactment applies expressly or by implication to an act or omission that was done or occurred outside Australia in the circumstances alleged, or (iv) the enactment expressly or by implication confers jurisdiction on the court over persons outside Australia (in which case any requirements of the enactment relating to service must be complied with), …

Resolution

Rule 11.4 permits the originating process to be served without leave. Leave can be granted that Farr be ordered to join the proceedings as they are a company that is incorporated outside of Australia and in the State of Delaware in the United States of America. The United States is a signatory to the Hague Convention.
It is my view that Farr is a proper party to these proceedings for the loss or damage to the yacht which was sustained in Australian waters. Farr's role was to carry out the design work. The acts or omissions occurred in Australia and the loss and damage was sustained in Australia. This is enough to ground jurisdiction under the legislation, but Farr is entitled to challenge jurisdiction once it is served the ASC. For these reasons, I make the order that the plaintiff is permitted to serve Farr outside Australia in the state of Delaware in the United States of America.

The first defendant's objection to plaintiff filing the proposed amended statement of claim ('PASC')

Vicsail opposes the amendments made against it.
Section 64 of the Civil Procedure Act 2005 provides, 64 Amendment of documents generally (cf SCR Part 20, rules 1 and 4; DCR Part 17, rules 1 and 4) (1) At any stage of proceedings, the court may order - (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings.
Part 19 of the Uniform Civil Procedure Rules ('UCPR') relevantly 2005 states, Part 19 Amendment 19.1 Amending a statement of claim (cf SCR Part 15, rule 12, Part 20, rules 2 and 2A; DCR Part 17, rules 2 and 2A; LCR Part 16, rule 2) (1) A plaintiff may, without leave, amend a statement of claim once within 28 days after the date on which it was filed, but, unless the court otherwise orders, may not amend it after a date has been fixed for trial. (2) If a plaintiff amends his or her statement of claim under subrule (1) after the defendant has filed a defence, the defendant may amend his or her defence at any time within 14 days after service of the amended statement of claim. (3) A plaintiff's right to make an amendment under subrule (1) is not affected by any amendment the plaintiff has made under rule 7.22. 19.2 … (4) If a person is added as a party under this rule, the date of commencement of the proceedings in relation to that person is taken to be the date on which the amended document is filed. … 19.4 Disallowance of amendment (cf SCR Part 20, rule 3; DCR Part 17, rule 3; LCR Part 16, rule 3) (1) If a party amends a pleading, as referred to in rule 19.1(1) or (2), the court may, by order, disallow the amendment. (2) Unless the court orders otherwise, notice of motion for such an order must be filed within 14 days after the date on which the amended document was served on the applicant. (3) If, on the hearing of an application for an order under this rule, the court is satisfied that, had an application for leave to make the amendment been made, it would not have granted leave to make the whole or some part of the amendment, the court must disallow the amendment or that part, as the case may be. 19.5 Mode of amendment generally (cf SCR Part 20, rules 7 and 8; DCR Part 17, rules 7 and 8; LCR Part 16, rules 7 and 8) (1) Subject to any directions referred to in rule 19.6, amendments to a filed document must be made by filing a fresh document that has been amended in accordance with these rules or pursuant to an order of the court. (2) The amendments must be indicated as follows - (a) the omission of existing matter must be indicated in such manner (such as striking through the matter, with or without underlining) as does not affect the legibility of the matter being omitted, and (b) the insertion of new matter must be indicated in such manner (such as the use of underlining, bolding or italics) as distinguishes it from existing matter (including existing matter to be omitted). (3) A document amended under this rule must be marked with the following particulars - (a) the date of the amendment, (b) if the amendment is made pursuant to an order of the court, the date of the order, (c) if the amendment is made otherwise than pursuant to an order of the court, a reference to the provision of these rules that authorises the amendment, (d) the manner in which the omission and insertion of matter have been indicated in the amended document. (4) An amended document must retain the existing paragraph numbering, with any additional paragraphs that are inserted after an existing paragraph bearing the number of that paragraph together with the letters "A", "B" and so on, as in these rules. 19.6 Court may give directions as to mode of amendment (cf SCR Part 20, rule 6; DCR Part 17, rule 6; LCR Part 16, rule 6) If the court orders, or grants leave for, the amendment of a filed document, the court may give such directions as it thinks fit concerning - (a) the mode of amendment, and (b) the mode of service of the amended document or of notice of the amendment, and (c) the time within which the amended document or notice of amendment is to be filed and served.

The proposed amendments to the statement of claim PASC

Bacon seeks to make the following amendments in the PASC against Vicsail. It seeks to add a claim in negligence, relying on the same factual pleading in contract in the statement of claim. The plaintiff also seeks to add a claim for damages for contravention of s 18 of the Australian Consumer Law ('ACL'). Section 18 of the ACL reads, 18 Misleading or deceptive conduct (1) A person must not, in trade or commerce engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in Part 3 - 1 (which is about unfair practices) limits by implication subsection (1).
The elements needed to satisfy s 18 of the ACL include, 1. Conduct. The conduct must involve some form of representation whether through, words, action or silence. Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 2. Misleading and deceptive. The conduct must be misleading or deceptive or likely to mislead or deceive. Intent is not a necessary factor for breach. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 3. Trade or commerce. The conduct must be deemed to have occurred within the scope of trade or commerce. The conduct must be within the context of business and commercial activities. Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 4. Causation. The conduct must have caused or materially contributed to the loss suffered. It is not a requirement that the conduct is the sole reason for the loss suffered. I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109, 128 [57] 5. Loss. It is necessary for the plaintiff to satisfy the Court that the misleading or deceptive conduct led to the making of a decision or consequential conduct by the plaintiff or person who suffered damage. Commissioner for Fair Trading v Jonval Builders Pty Ltd [2019] NSWSC 1893, [20].
The plaintiff has pleaded that, at the request of Vicsail in 2020 Farr prepared the FarrX2 Design. In or about 2020, Farr issued to Vicsail a series of documents as follows: 1. A proposed design layout, design No. 857, drawing No. 1402; 2. A stage 2 Preliminary Performance Prediction - Design #857; 3. A standard specification - updated edition dated 27 July 2020 ('updated specification'); 4. Designer Comments for the Farr X2 Vessel No. #857.
In preparing the Farr X2 Design for the Vessel, Farr was under a duty of care to persons including Mr Bacon: 1. To ensure that the system adopted by Farr in the design for the attachment of the keel to the hull of the Vessel was adequate to avoid the keel separating from the hull when the Vessel was sailing; 2. To ensure that the specification issued by Fan to those involved in the construction and the supply of the Vessel to its purchaser identified fully and accurately the components required for the appropriate and adequate attachment of the keel to the hull of the Vessel: 3. To ensure that the specification issued by Farr to those involved in the construction and the supply of the Vessel identified a torsion, to be applied to the bolts attaching the keel to the hull of the Vessel, which was sufficient to avoid the loosening of the bolts when the Vessel was sailing and the consequent separation of the keel from the hull.
On 1 February 2021 Vicsail, Farr and Perry issued Bacon with an updated specification for the vessel.
In the updated specification for the Vessel each of Vicsail, Farr and Perry represented to Bacon: 1. That the hull design, engineering and workmanship for the Vessel throughout would be consistent with the construction of a light hull, without compromising strength or stiffness and would be in accordance with ISO standard requirements; and 2. That the keel and bulb for the Vessel was designed and would be built above current ISO Standard requirements.
[33] In breach of the implied terms of the Agreement pleaded in paragraph 1, above, Vicsail failed to take necessary steps to: 1. Ensure that the engineering system used for securing the keel to the hull of the Vessel was adequate for that purpose; 2. Ensure that work carried out to secure the keel to the hull of the Vessel was carried out in a proper and workmanlike matter; or 3. Supervise the work undertaken by Mr Perry in respect of the construction, assembly and commissioning of the Vessel, so as to ensure that the keel fitted to the Vessel was safely and adequately secured to the hull.
Paragraphs [35] to [36] pleaded that further to or in the alternative to the allegations of breach of contract pleaded in [33].
[35] In undertaking to supply the yacht to Bacon and in engaging and authorising Perry to carry out the work identified in paragraphs [22] and [25] above, Vicsail owed a duty of care to Bacon to: 1. Ensure that the engineering system used for securing the keel to the hull of the Vessel was adequate for that purpose; 2. Ensure that work carried out to secure the keel to the hull of the Vessel was carried out in a proper and workmanlike matter; and 3. Supervise the work undertaken by Perry in respect of the construction, assembly and commissioning of the yacht so as to ensure that the keel fitted to the Vessel was safely and adequately secured to the hull.
[36] In the circumstances pleaded, the duty of care pleaded in the preceding [35] was a non-delegable duty and Vicsail became vicariously liable to Bacon for negligence on the part of Perry as pleaded in [37] below.
In carrying out the work and supervision which he undertook in relation to the construction and commissioning of the Vessel referred to in paragraph above and the inspection referred to in [25] above, Perry negligently: 1. Failed to ensure that the keel was attached securely to the hull of the yacht; 2. Failed to adopt an engineering system which safely secured the keel to the hull of the yacht; 3. Failed to adopt the torque recommended by Farr when tightening the bolts which attached the keel to the hull of the yacht; 4. Failed to ensure that the bolts used to secure the keel to the hull of the yacht were tightened to an appropriate torque to create an adequate and secure attachment between hull and keel. Failed to adequately inspect the yacht on 9 June 2022 at Royal Prince Alfred Yacht Club prior to its ocean voyage to check and ensure that the keel was adequately secured to the hull of the yacht; 5. Failed to take account of the observable cracking of the paintwork at the point of attachment between the keel and the hull of the yacht when he inspected the yacht on 29 June 2022; 6. Failed to advise Bacon or the crew of the yacht of the observable 7. cracking of the paintwork and the consequent risk of separation of the keel from the hull when the yacht was sailing; 8. Failed to take adequate steps on 29 June 2022 following his inspection to ensure that the attachment of the keel to the hull of the yacht safe and adequate; 9. Failed to meet the requirements of the applicable and current ISO standards; and 10. Failed on 29 June 2022 to carry out the inspection procedure prescribed by: 1. Appendix C to the Australian Sailing Special Regulations or 2. ISO Standard 12215-5 (2019)

The defence

At [6] and [7] of the defence filed 21 July 2023, Vicsail admits that, 1. Bacon paid Vicsail a sum of US$15,000.
In relation to paragraph [7] Vicsail admits that: 1. It entered into a written contract with Bacon on about 21 August 2020 which was signed by the parties; with the particulars 1. contract for the sale of new vessel, terms and conditions; 2. says that the agreement was the subject of a written Addendum on or about 15 September 2020 signed by the parties; with further particulars 1. Farr X2 Contract No X2001 Appendix; 2. understands that the reference to the Agreement is intended to refer to the written contract and addendum particularised above; and 3. otherwise denies [7].
Bacon sought the expert report of Mr David Lyons ('the Lyons report'). That report was dated 29 February 2024 and was served on Vicsail on 1 March 2024. A copy is exhibited to Mr Balog's affidavit of 5 July 2024. The Lyons report expresses the opinion that Farr's design of the yacht may well have contributed to the failure of the keel, its separation from the hull and the consequent capsize of the yacht on its initial ocean voyage on 2 July 2022. The Lyons report also supports the view that Perry's inspection of the yacht on 29 June 2022, just prior to its ocean voyage on 1 July 2022, ought to have revealed the defect(s) of the yacht.

Vicsail's objections to ASC

Vicsail objected to the filling of the amended statement of claim ('ASC') on the basis set out in its solicitor's letter dated 9 February 2024 (Ex 1). It relevantly states, "Amendments to Relief Claimed We are instructed that our client Vicsail opposes all the proposed amendments with respect to it. Further: (a) The amendment to the pleadings to raise new and different causes of action against Vicsail as well as additional relief was not foreshadowed to us or the Court when the Plaintiff's obtained orders in December 2023. In that regard: i. By December 2023, the plaintiff was massively out of time to serve its evidence in chief which was due on 27 October 2023, an issue which was the subject of multiple communications from our office to your office over an extended period which went unanswered until 4 December 2023. Your client remains in default of those orders (which have not been vacated or extended). ii. in correspondence with the Court in December 2023 the Plaintiff's solicitor stated: Balog Solicitor for the Plaintiff We ask that the listing be maintained so that we can appear before the Court and seek appropriate orders to vacate directions 5c and 5d made by the Court on 7 August 2023 and seek directions for the filling and service of a proposed Notice of Motion seeking leave to join Far Yacht Design Limited as a third defendant. The writer will file an affidavit this morning in support of the directions sought. May it please the Court [Online Court 12 December 2023]; iii. Paragraph [3] of the Affidavit of David Balog sworn 12 December 2023 stated that: The pleadings in the matter are closed as between the Plaintiff and the First and Second Defendants. iv. In paragraph [7], the Plaintiff's solicitor relevantly stated that: The Plaintiff and his legal advisers have undertaken substantial work investigating the matter... v. In paragraph [9], the Plaintiffs solicitor relevantly stated that: The preparation of the Plaintiff's lay evidence is well advanced but not yet complete vi. In paragraph [10], the solicitor relevantly stated that: I have retained an expert witness David Lyons on the issue of liability who is currently preparing a report ... he still has further research and investigation to carry out both in Australia and overseas and that he expects to have is report available for service by the end of January 2024. vii. In paragraph [11], the solicitor relevantly stated that: As a result of the work carried out and facts which have recently come to light in the preparation of the plaintiffs case for trial, I have formed the view that the Plaintiff should make an application ... seeking leave to join a Third Defendant, namely Farr Yacht Design Ltd ... the designer of the vessel. viii. In paragraph [12], the solicitor relevantly stated that: Counsel has been briefed to further advise and to settle a Notice of Motion and supporting evidence together with a draft Amended Statement of Claim to set out and provide the Court and the existing Defendants with the terms of the amendment proposed. ix. In paragraph [13], the Plaintiffs solicitor stated: In those circumstances, I respectfully request that the Court vacate the directions numbered 5c and 5d made by the Court on 7 August 2023 for the filing of evidence by the parties and at this stage give directions for the filing and service of the Plaintiff's proposed Motion seeking leave of the Court to join Farr as Third Defendant in the proceedings and for consequential orders." (b) At no point in that Affidavit did the solicitor identify any possibility that there would be a proposed amendment to the case against Vicsail (or Perry), notwithstanding the "substantial work" said to have been undertaken, the briefing of experts and counsel, facts which had recently come to light "in the preparation of the Plaintiff's case for trial", etc. Rather, the solicitor clearly excluded the notion of any amendment to the claim against Vicsail by making express reference to the fact that pleadings between the plaintiff and Vicsail had closed in paragraph [3]. … (d) In your email dated 18 January 2024 serving the proposed Amended Statement of Claim, you made no mention of any amendments to the pleading against Vicsail. Instead, you stated that "In accordance with order one, we enclose by way of service an amended statement of claim seeking to join a third party." That was coy. On any view, the proposed Amended Statement of Claim attached to your email cannot be fairly described as a document within the scope of order 1 insofar as it seeks to raise new causes against Vicsail and Perry and expand the relief sought against them. (e) The only correspondence that we have received from your office in relation to the proposed amendments against Vicsail is your email dated 18 January referred to above. That correspondence is insufficient and unpersuasive as to the question of whether your client should be permitted to amend its claim against Vicsail. (f) Your client still has not served any evidence, including expert evidence estimated by you to be available by the end of December 2023 (lay) and January 2024 (expert) (see above) and is still in default of the orders in that regard. (g) Vicsail does not accept that the proposed amendments are properly or adequately pleaded."
In oral submissions, counsel for Vicsail specified that the amendments to the PASC were not properly pleaded. I accept the proposed negligence claim in the PASC does not plead s 5B to 5D of the CLA nor does it properly plead the claim in relation to contravention of s 18 of the ACL.
It was also submitted that Vicsail is not liable for Perry's negligence as Perry was not an agent of Vicsail. Agency is pleaded in the PASC. Whether or not Perry was an agent of Vicsail is a matter for trial.
Vicsail conceded that to grant leave to file an ASC avoids multiplying proceedings, "Now it is a factor, I don't say it is a decisive factor, obviously your Honour has to balance the interests of justice and just, quick and cheap objectives and the avoidance of multiplicity of proceedings. I accept that there is a level at which if your Honour were to reject these amendments, it would be open to my friend to commence a fresh action and that would cause a multiplicity, so I accept that is a fairly powerful factor in favour of granting amendments". (T25 [10])

Resolution

It is my view that while there was some small delay in obtaining its expert report, the interests of justice favour the granting of leave to the plaintiff to file the PASC that incorporates proper pleadings of negligence and the contravention of s 18 of the ACL. There are several deficiencies in the current PASC. Duty of care, breach of duty and causation under the CLA as well as the cause of action under s 18 of the ACL are not properly pleaded. Bacon needs to make these additional pleadings to the PASC.
Amendments should be granted to allow s 56 (1) of the Civil Procedure Act 2005 (NSW) which states, 56 Overriding purpose (cf SCR Part 1, rule 3) (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
Vicsail does not allege any prejudice in these circumstances. Justice demands that Bacon should be granted leave to file the PASC, provided it properly pleads negligence under the CLA and misleading and deceptive conduct under s 18 of the ACL.

Transfer to the Admiralty

Vicsail sought that the proceedings be transferred to the admiralty division of this Court. In the end, counsel for the plaintiff neither consented to nor opposed the transfer to the Admiralty division. These proceedings involve knowledge of yacht construction and the reasons as to why the yacht capsized. Hence, it is my view that it is appropriate for these proceedings to be transferred to the Admiralty list.
I make that order; the matter is to be listed for a directions hearing in the Admiralty list on 3 October 2024

Costs

Costs are discretionary. Costs normally follow the event. While the plaintiff has been granted an indulgence to file his PASC, the first defendant failed in his opposition to the filling of the PASC. In these circumstances, it is my view that the appropriate order for costs is that as between the plaintiff and the first defendant, the costs of the motion dated 12 July 2024 be costs in the cause.

THE COURT ORDERS THAT: 1. The plaintiff file his amended statement of claim and serve the same on the first and second defendants by 26 September 2024. 2. The first and second defendants file and serve their amended defences to the Amended Statement of Claim by 10 October 2024. 3. The proceedings be listed for further directions before the Judge in the Admiralty List on 17 October 2024 4. The plaintiff is to serve a copy of this judgment together with the amended statement of claim on the third defendant. 5. Costs of the plaintiff's notice of motion dated 12 July 2024 be plaintiffs or the first defendant's costs in the motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 September 2024

At a glance

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Judgment (17 paragraphs)

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