Cordon Investments Pty Limited v Lesdor Properties Pty Limited

Cordon Investments Pty Limited v Lesdor Properties Pty Limited - [2009] NSWSC 1370 - NSWSC 2009 case summary — Zoe

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iv. that of Mr Semken made on 25 November 09 2 The motion is opposed 3 In October 2009 the defendant brought a similar application before the court which was refused on the basis that the defendant had offered no reasonable excuse as to why the further evidence was not brought forward prior to the expiry of Justice McDougal's guillotine order in December 2008. Procedural history 4 These proceedings were commenced on 12 April 2006 by way of summons together with a notice of motion seeking interlocutory relief. There have been countless defaults by both sides in complying with orders for discovery and the service of evidence. 5 The substantive proceedings concern a dispute between parties to a joint venture deed for the purposes of developing land at Kingsway, Miranda entered in September 2002. The plaintiff was the builder and the defendant the owner of the land. An occupation certificate for the development was issued by Sutherland Shire Council on 1 December 2005. The defendant refused to execute the strata plans in respect of the property to allow sales of the residential units to complete. 6 The plaintiff's initial motion sought an order that the defendant execute specific strata plans in respect of the property. The parties relied on substantial evidence in support of that application, including expert evidence as to defective works and the scope of rectification work required to address same. 7 Justice Barrett dismissed the plaintiff's interlocutory application on 5 May 2006. His Honour found that he could not grant the interlocutory orders sought on the basis of the evidence before him. His Honour believed that there was no obligation on the defendant to execute the strata plans until actual completion, including rectification of minor defects and omissions, had been completed. 8 The plaintiff then attended to rectification works and served evidence in support of its contention that all defective works had been attended to in October 2006. 9 On 3 November 2006, the parties entered into an Interim Management Agreement and Interim Settlement Orders (IMA) to allow the Strata Plan to be registered and the residual residential units to be sold. 10 Between June 2007 and February 2008, the parties were engaged in the discovery process. 11 In February 2008, orders were made for the plaintiff to complete service of its further evidence in this matter. By 13 June 2008, the plaintiff had completed service of its primary lay and expert evidence. The evidence addressed all alleged defective work raised by the defendant as well as evidence as to the value of the building works. 12 As a result of the defendant's continued failure to comply with the IMA, on 3 October 2008, the Court appointed a receiver over the residual lots to give effect to same. The order appointing a receiver was stayed pending an appeal to the Court of Appeal. 13 The defendant was in substantial default of the Court timetable in serving its evidence in reply in the substantive proceedings. On 17 October 2008, Justice McDougall made orders including the following:

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iii. The matter is listed for further directions on 19 December 2008. 14 By 19 December 2008, no reply evidence had been served by the defendant. The matter was listed before Justice Bergin who adjourned the matter to February 2009, leaving it for the defendant to seek leave on the next occasion to rely on any evidence served by that date. 15 By the end of February 2009, the defendant finally served evidence in reply from a building consultant as to the costs of the building works and alleged defects. Evidence was also called from two members of the defendant, Paul Semken and Les Semken. 16 On 27 February 2009, with the consent of the plaintiff, Justice Bergin gave leave for the defendant to rely on that evidence. That evidence was limited to alleged defective works in the existing commercial building, the new commercial building, the common areas and residential units 20, 21 and 25 of the property. 17 On 1 April 2009, by consent the orders appointing a receiver were set-aside in the Court of Appeal and further consent orders were made giving effect to the IMA. 18 The plaintiff completed service of all evidence in reply in the substantive proceedings by the end of June 2009. In doing so, it served a report from a tiler in relation to allegations of drummy tiles raised by Mr Goddard in those parts of the building then the subject of the dispute. 19 Prior to 24 July 2009, the plaintiff served a proposed Further Amended Cross Claim on the defendant. The proposed amendments were to ensure that issues the subject of the completed evidence were reflected in the pleadings. 20 On 24 July 2009, the Court granted leave by consent for the plaintiff to file and serve the Further Amended Statement of Claim. The defendant was to serve any proposed amended cross claim by 14 September 2009. It failed to do so. 21 On 18 September 2009, the defendant informed the Court that it intended on serving a proposed further amended cross claim and additional evidence in this matter. The plaintiff objected and the Court ordered that the defendant serve (but not be permitted to rely) on any further evidence by 15 October 2009 and that issues of leave to rely on that evidence and any proposed amended pleadings to be debated on the next occasion. 22 On 9 October 2009, the parties attended a mediation before Mr Morling QC. It was unsuccessful. 23 On 15 October 2009, the defendant served the following further evidence:

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vi. In September 2008, Lesdor's counsel informed the Court that Lesdor "has taken its position not to go ahead with the IMA and dispose of the remaining units for the very reason that in the current state of the market it sees a real problem and at the end of the day if it did sell those units, there would be this deficit, there is no money in it for the plaintiff and the defendant is left with a deficit". Cordon denies this to correct as the value of the remaining residual lots well exceeds the outstanding balance on the loan facility. Other matters 37 The plaintiff contends that it is the defendant's case to establish in its evidence all defective and incomplete work justifying its position that the works had not reached completion, including alleged defects in the residual lots. Cordon was entitled to assume that following the service of its evidence in February 2009, all relevant allegations of defective work had been identified. 38 Lesdor has served expert evidence as to the valuations of the residual units. Cordon was entitled to assume those valuations allowed for any allegations of defective work. 39 Given the relevance of any alleged defects in the residual lots to the proceedings, no credible explanation has been offered as to why Lesdor failed to serve evidence in relation to alleged defects in the residual lots prior to October 2009. 40 Mr Solari suggests that the evidence is now only necessary because Mr Randall opines that before the residual lots can be sold, all defective work should be rectified and as such, "Lesdor has now to be left in possession of the Residual Units". It has never been the objective intention of the parties that Lesdor was or is entitled to retain the residual lots. Cordon has offered to purchase the residual lots at the value Mr Randall opined that they were to be put to the market after any alleged defective work has been rectified. That offer has been refused by Lesdor. In those circumstances, Cordon rejects any suggestion that Lesdor would be entitled to damages being the cost of rectification work of the residual lots. 41 In addition to further evidence concerning defects in the residual lots, Lesdor also seeks to rely on a structural engineer to comment on various aspects of alleged defective work in the commercial buildings. Goddard's report in February 2009 stated that there was a need to obtain an opinion from a structural engineer on certain matters. Lesdor elected neither to obtain such evidence nor to seek further time to rely on such evidence after December 2008. No explanation has been given to justify the delay in obtaining this further evidence. The principles underpinning the exercise of the discretion to permit a party to rely upon late affidavit evidence/reports 42 Although the recent decision of the High Court of Australia in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 dealt with matters concerning the discretion to allow amendments to pleadings, the same decision sets the touchstone appropriate to the principled exercise of the discretion to allow or disallow the mobilising of late affidavit materials/reports.. Essentially the Court is dealing with case management and fairness.

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vi. At 98, the majority observed as follows: Of course, a just resolution of proceedings remains the paramount purpose of r 21; but what is a "just resolution" is to be understood in light of the purposes and objectives stated. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account. The Rule's reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs. vii. At 99-101, the majority observed as follows: In the past it has more readily been assumed that an order for the costs occasioned by the amendment would overcome injustice to the amending party's opponent. In Cropper v Smith Bowen LJ described an order for costs as a panacea that heals all. …The modern view is that even an order for indemnity costs may not always undo the prejudice a party suffers by late amendment. … The views expressed by Lord Griffiths in Ketteman v Hansel Properties Ltd , that justice cannot always be measured in money and that a judge is entitled to weigh in the balance the strain the litigation imposes upon litigants , are also now generally accepted. In Bomanite Pty Ltd v Slatex Corp Aust French J said of Bowen LJ's statements in Cropper v Smith : "... That may well have been so at one time, but it is no longer true today ... Non-compensable inconvenience and stress on individuals are significant elements of modern litigation. Costs recoverable even on an indemnity basis will not compensate for time lost and duplication incurred where litigation is delayed or corrective orders necessary."

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viii. At 102-103, majority observed as follows : 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 . 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. 44 As have already observed these observations may be readily applied to applications such as that is presently before this Court. Decision 45 Insofar as Mr Hale SC relied upon the plaintiff's amended statement of claim filed in August 2009, where claim to restitution had been raised, the circumstances were that the restitutionary claim was made by consent. Further that application was made to bring the evidence into line with the pleadings as it was part of the plaintiff's case to show the costs to actually carry out the works in the event that the joint venture agreement be terminated-apropos the quantum meruit claim based on the cost of construction. 46 Litigation is not a game. None of the explanations of Mr Solari are of substance. The principled exercise of the Court's discretion is to disallow the leave sought. Costs 47 The Court makes the following orders:

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