Downie & Community Information & Referral Service ACT Incorporated v Jantom Company Pty Limited and Ex-Government Furniture Pty Limited [2010] ACTSC 110

3. The first plaintiff was injured in the course of her employment by the second plaintiff on 11 October 2002, when an office chair manufactured by the first defendant and sold to the second plaintiff by the second defendant collapsed under her.

4. I am assuming for the purpose of the application that the plaintiff will succeed in establishing that the collapse happened because of a manufacturing defect. The first defendant supplied the chair to the second defendant in kit form. It was assembled by the second defendant, but there is no suggestion that the second defendant did so negligently, or that there was any causal connection between the assembly process carried out by staff of the second defendant and the collapse.

5. The workers' compensation insurer of the second plaintiff redeemed the plaintiff's claim and seeks to recover, in the name of its insured, the total amount it has paid out.

6. The action was commenced on 30 September 2005. In the statement of claim filed then, the first plaintiff's claim was pleaded in negligence against the first defendant only. The applicable paragraph of the statement of claim was:

1.5 The first defendant was negligent in the manufacture and supply for sale of the chair.

a) Manufacturing and supplying a chair with inadequate support in that the spokes that supported the chair were prone to snap;

7. The second plaintiff's claim against the first defendant contained three counts: A count under section 74B and section 74D of the Trade Practices Act 1974 (Commonwealth); a claim in negligence, pleaded in almost the same wording as the first plaintiff's claim; a claim for indemnity pursuant to section 183(1)(d) of the Workers Compensation Act 1951 (ACT); and a claim for breach of contract, specifically of an implied term that the chair was of merchantable quality.

8. Initially a mistake was made about the name and Australian Company Number of the first defendant. In error, a completely unrelated company with a similar name was sued. The mistake came to light after this company was served, and was put right by an amendment to the originating application and statement of claim in August 2006. The substance of the statement of claim was not changed at that time.

9. Thereafter the action proceeded in conventional fashion. The interlocutory steps included discovery and interrogatories. In October 2009 a certificate of readiness was filed, signed by the solicitors for each of the parties. The solicitors certified that the action was ready for trial and that the hearing would take four to five days. On 2 December 2009 the Deputy Registrar fixed the action for hearing as a special fixture with a five-day estimate, to commence on 6 September 2010. The Deputy Registrar also set the matter down for directions before me on 1 July 2010, but that direction does not seem to have been carried into effect. If it had been, it may be that some of the difficulties that emerged on the first day of the hearing would have come to light and could have been dealt with earlier.

10. On the date fixed for the hearing to commence, 6 September 2010, I was informed that the first defendant company had been deregistered on 29 February 2008. It is apparent that the solicitors then on the record for the first defendant were unaware of this. I infer that their instructions came from the company's insurer. There was a change of solicitors on behalf of the first defendant in February 2009, and I draw the same inference in relation to the new solicitors. The plaintiff made a separate application on 7 September 2010 for an order that the Australian Securities and Investments Commission reinstate the registration of the company. That application is part heard and will return to my list on 8 October 2010.

11. On 18 December 2009 the solicitors for the second defendant issued a subpoena addressed to the first defendant seeking production of documents. The subpoena was returnable on 15 January 2010. There is no record on the court file of what occurred if anything on that date. I infer that no documents were produced. I have no information about when an attempt was made to serve the subpoena. There is in evidence before me a file note of a telephone conversation between Ms Meller of Dibbs Barker, solicitors for the second defendant, and Ms Calvert of Sparke Helmore, solicitors for the plaintiffs. The note is of a conversation on 1 June 2010. The note reads as follows:

- She tried issuing subpoena to Jantom but informed by Civic and Commercial that company deregistered

12. It is apparent that the solicitors for the plaintiff were on notice from that date that it was asserted that the first defendant had been deregistered. A company search then would have confirmed the position. By then the hearing date had already been fixed six months earlier, but the hearing was still three months away.

13. To complete the picture, I should add that I was also informed on the first day of the hearing that the second defendant company had been wound up by court order on 27 August 2010. Upon being assured by counsel for the second defendant that his instructions came not from the company itself but from its insurers, I granted leave pursuant to section 471B of the Corporations Act 2001 (Commonwealth) for the plaintiff to proceed with the action.

14. With that background, counsel for the plaintiff applied on 7 September 2010 for leave to amend the statement of claim. In relation to the first plaintiff, the application was in essence for leave to make a claim, for the first time, against the second defendant in negligence. The proposed amendment initially was to add an assertion that the second defendant had "manufactured" the chair and had been negligent in its manufacture and supply for sale. The basis for the assertion was that in section 74A of the Trade Practices Act 1974 (Commonwealth), the word "manufactured" is defined for the purposes of division 2A of part V of the act to include "grown, extracted, produced, processed and assembled". The second defendant had assembled the chair from the kit provided by the first defendant, and could be taken to have manufactured it for the purposes of the division. Division 2A deals with actions against manufacturers and importers of goods within part V, which contains the consumer protection provisions of the Act.

15. In the course of argument, counsel conceded that the definition was limited to claims brought under the Act, and could not extend to actions for damages for negligence under the general law. He expected to be in a position to call evidence of an admission by a employee of the second defendant made to the manager of the second plaintiff soon after the first plaintiff's injury, that there had been similar failures with chairs of the same make and model on earlier occasions. This would be evidence that the second defendant had knowledge that the chairs were prone to collapse. On further probing, counsel told me that the witness to whom the admission was made was Mr Elgar Starkis, now working in England, and that the employee of the second defendant was Mr Lockie Thomas.

16. I have in evidence a copy of a statement made by Mr Starkis on 9 December 2002 within two months of the plaintiff's injury. Mr Starkis came on the scene shortly after the first plaintiff's fall, and examined the broken chair. Mr Starkis said in the statement:

Subsequently I spoke to the supplier of the chair and informed him of the incident. The supplier provided a new replacement of a different brand chair as a goodwill gesture. He vaguely indicated that there may have been other incidents involving the same type of chair. He also supplied me with the contact details of the manufacturer.

17. The last sentence of the words quoted from the statement is verified by a fax from Mr Thomas to Mr Starkis, on the letterhead of the second defendant, dated 24 October 2002 and providing the name, address, telephone, fax and email details of the first defendant.

18. I proceed on the footing that the statement made within two months of the incident is likely to have been reasonably accurate, and to represent Mr Starkis' best recollection at the time. It can hardly be expected that he will now, eight years later, have any more accurate or detailed recollection of what Mr Thomas said to him about "other incidents involving the same type of chair". I take the statement as likely to represent the high point of the evidence available to the plaintiffs about the second defendant's knowledge about any propensity of chairs of the same make and model to collapse.

19. There is no suggestion that Mr Thomas made a written statement soon after the conversation. Any such statement would have been disclosed on discovery. I am satisfied that there would be significant prejudice to the second defendant, or in practical terms its insurer, if the plaintiff were permitted to plead a new cause of action based on the conversation between Mr Starkis and Mr Thomas, eight years after the conversation and five years after proceedings were commenced. The observations made by McHugh J in Brisbane South Regional Health Authority v Taylor (1996) 186CLR 541 at 551, in the context for an application for extension of a limitation period, are nevertheless apposite:

The enactment of time limitations has been driven by the general perception that "where there is delay the whole quality of justice deteriorates". Sometimes the deterioration in quality is palpable, as in the case where a crucial witness is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable even by the parties. Prejudice may exist without the parties or anybody else realising that it exists. As the United States Supreme Court pointed out in Barker v Wingo, "what has been forgotten can rarely be shown". So, it must often happen that important, perhaps decisive, evidence has disappeared without anybody know "knowing" that it ever existed. Similarly, it must often happen that time will diminish the significance of a known fact or circumstance because its relationship to the cause of action is no longer as apparent as it was when the cause of action arose. A verdict may appear well based on the evidence given in the proceedings, but, if the tribunal of fact had all the evidence concerning the matter, an opposite result may have ensued. The longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose.

20. This passage has less application to a case like the present, where the action was commenced in time and the parties have known about it for some years, but it does seem to me relevant to an amendment which would raise for the first time a claim by one party against another, where there had previously been no issue of any kind between them.

21. Counsel for the plaintiffs submitted that the first plaintiff ought to be allowed to amend so as to argue that the assembly of the chair in kit form by staff of the second defendant amounted to manufacturing under the general law and not merely within the Trade Practices Act definition.

22. The plaintiffs have not sought leave to amend so as to raise a Trade Practices statutory cause of action against the second defendant.

23. For a number of reasons it seems to me that the proposed amendment should not be permitted. In the first place, the application is made much too late: on the second day of the week set aside for the hearing of the action, some ten months after the solicitors for the plaintiffs certified that the action was ready for trial and nine months after a hearing date was fixed. This aspect of the application for leave to amend seems to have been considered by those advising the first plaintiff only after they became aware that the first defendant's policy of insurance might not respond to the claim. For reasons explained in detail in each of the judgments in Aon Risk Services Australia Limited v Australian National University (2009) 83ALJR 951; [2009] HCA 27, the application to amend should be viewed from the perspective that it was made very late in the day and to grant it would give too little weight to case management considerations.

24. Secondly, the first plaintiff's claim following such an amendment would have poor prospects of success. There is no suggestion that there is any evidence available to the plaintiffs of any shortcomings in the second defendant's assembly of the chair kit. Nor is there any suggestion of any evidence that there was anything about the appearance of the chair kit, when unpacked or when being assembled, that should have put staff of the second defendant on notice that it might have a defect. The only evidence which might assist the first plaintiff in establishing negligence on the part of the second defendant is the flimsy sentence in Mr Starkis' statement, that the supplier (presumably Mr Thomas) "vaguely indicated that there may have been other incidents involving the same type of chair". It is hardly surprising that those advising the plaintiffs, having seen Mr Starkis' statement, did not come to the view earlier that it was capable of forming the basis of a claim by the first plaintiff in negligence against the second defendant.

25. The third and perhaps the most cogent reason for refusing this part of the amendment is that to permit it would cause serious prejudice to the second defendant. If Mr Thomas had been provided with Mr Starkis' statement soon after it was made and asked to respond to it, he might have been expected to remember the conversation in some detail and could have given his own version of it. To expect him to do so eight years after the event is unreasonable.

26. Accordingly the leave sought by the first plaintiff to amend so as to plead a cause of action against the second defendant will be refused.

27. The second plaintiff's claim against the second defendant is presently only in contract. The other claims made by the second plaintiff, for damages for negligence, damages pursuant to division 2A of part V of the Trade Practices Act and the claim for indemnity under the Workers Compensation Act are all brought against the first defendant only. The second plaintiff now seeks to mount causes of action against the second defendant in negligence and under the Trade Practices Act.

28. The claim in negligence as I understand it would be based on the "admission" said to have been made by Mr Thomas to Mr Starkis. The Trade Practices Act count would be based on the fact that the second defendant "manufactured" the chair by assembling the kit.

29. For the same reasons that I have refused leave to the first plaintiff to bring a claim in negligence against the second defendant, leave for the second plaintiff to do so should be refused. The major consideration is the difficulty the second defendant would have in meeting evidence from Mr Starkis about his conversation with Mr Thomas eight years ago. Having said that, even if I were to accept that the conversation included a statement along the lines of the sentence in Mr Starkis' statement, it would provide a flimsy basis indeed for a finding of negligence.

30. In relation to the Trade Practices Act count, a further difficulty which has occurred to me during the preparation of these reasons, not raised by counsel during submissions, is that section 74A(2)(a) is in the following terms:

a) a reference to goods shall, unless the contrary intention appears, be read as a reference to goods of a kind ordinarily acquired for personal, domestic or household use or consumption.

31. The "goods" in question in the present action is an office chair purchased from a retailer of office equipment by a business. Whilst I take judicial notice that one might find a chair of this kind in a study or home office in residential premises, there is a strong argument that it is not an item of a kind ordinarily acquired for personal, domestic or household use or consumption.

32. The policy behind the provision is reasonably clear. The consumer protection provisions of the Trade Practices Act are intended to provide a source of compensation for consumers in a personal, domestic or household environment. Those who suffer loss by reason of defective goods in a commercial, business or government environment have other sources of compensation available to them.

33. The second plaintiff already has available to it, and has pleaded, a cause of action for breach of contract against the second defendant. The second plaintiff should not be permitted at this stage of the proceedings to amend so as to raise additional causes of action against the second defendant.

34. The application for leave to amend the statement of claim will accordingly be refused.

I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.