Procedure - Supreme Court procedure - Tasmania - Practice under Rules of Court - Amendments - Defence of third parties - After judgment for plaintiffs against defendants - Defences not relied upon by defendants.

Judgment Number: [2002] TASSC 87

RODNEY FRANK HOWARD, PAMELA MARGARET OLIVE HOWARD

v JASON LEN WATLING, LEN WATLING; MICHAEL JOHN GRIGGS,

1 The third parties have applied for leave to file and serve an amended defence. That application is opposed by the defendants. The circumstances are unusual.

2 These proceedings arise out of the assignment of a lease of a butcher's shop. The plaintiffs were apparently the landlords. The defendants were the original tenants. They assigned their lease to the third parties by deed. In 1995 the plaintiffs sued the defendants on the lease for rent, rates, land tax and interest, alleging that no payments had been made as from 27 June 1994. The defendants issued a third party notice, seeking an indemnity from the third parties. Pleadings were exchanged in the third party proceedings. By a defence dated 11 December 1996, the third parties joined issue as to every allegation made by the defendants in their statement of claim. That defence went no further. No positive assertions were made in it. Thereafter, nothing significant appears to have happened until March 2000, when the plaintiffs applied for summary judgment against the defendants. On 1 May 2000, Slicer J heard that application and gave judgment for the plaintiffs against the defendants for $25,400.65, together with interest thereon at the rate of $8.96 per day from 14 September 1995, plus costs. On 6 February 2002, the defendants applied for judgment to be entered for them against the third parties for the same sum, plus interest at the same daily rate, and costs. That application appears to have prompted the third parties' application to amend their defence of 11 December 1996.

3 In their proposed amended defence, the third parties are seeking to plead a number of matters relevant to the condition of the premises, and the legal consequences thereof. Their proposed defences can be summarised as follows. The cool room was inadequately constructed. The results were rusting and the escape of wood shavings and sawdust from the cool room walls. Further, there were cracks to the floor of the cool room, and its floor was heavily pitted. All these things are said to have constituted structural defects. The landlords were required by a covenant in the lease "to forthwith attend to repair and make good at its own cost any structural defects discovered in the building". It is said that the lease also contained an implied term, necessary to give it business efficacy, that the premises would be fit for use as a butcher's shop and would comply with "statutory acts [sic] and regulations". It is said that the landlords breached such terms by not repairing the structural defects, failing to keep the premises fit for use as a butcher's shop, and allowing them to be "unsanitary and hygienic [sic]" in contravention of the Meat Hygiene Act 1985, s25. It is said that the landlords' breaches amounted to a repudiation of the lease, which the third parties accepted by vacating the premises. It is said that the defendant Len Watling told the third party Michael Griggs in May 1994 that he agreed with the third parties' action in leaving the premises if remedial work was not undertaken, and that it follows that the defendants are estopped from claiming an indemnity pursuant to the deed of assignment.

4 When a litigant seeks leave to amend a pleading, such leave is ordinarily given so long as that can be done without injustice to the opposing party: Cropper v Smith (1884) 26 Ch D 700 at 710; Shannon v Lee Chun [1912] HCA 52; (1912) 15 CLR 257 at 261; Clough v Frog (1974) 48 ALJR 481; Commonwealth v Verwayen (1990) 170 CLR 394 at 456, 464, 485. Counsel for the defendants submitted that the proposed amendments would result in injustice because, as a result of summary judgment having been entered for the plaintiffs on 1 May 2000, it is now too late for the defendants to adopt the new defences that the third parties are seeking to introduce and to rely upon them as defences to the plaintiffs' claims. The third parties contend that they kept the defendants adequately informed as to the matters that they now wish to plead, and that therefore no injustice would result from the proposed amendments being allowed.

5 The third parties took over the butchery in or about May 1992. One of the third parties, Michael Griggs, swore two affidavits in support of the present application, and was cross-examined on them. According to him, he received repeated visits from a Council health inspector who threatened to have the shop closed if various matters were not attended to. These matters included the pitting of the floor, which made it difficult to clean, and rusting near the bottom of the cool room walls, which resulted in material from inside the walls falling out onto the floor. (He did not mention cracks to the floor.) He says he repeatedly asked the landlords to fix the walls and the flooring, without success; that he eventually told the landlords he would leave if the work was not done within eight weeks; that the work was not done within eight weeks; and that he then told the landlords he was leaving, and left. He said in his affidavit that he kept the defendant Len Watling informed of the landlords' failure to do the work that he wanted done; that he told Len Watling that he intended to leave the premises if the landlords did not do the work; and that Len Watling told him he agreed with that action.

6 There was some communication between the solicitors for the defendants and the third parties as to the availability or otherwise of any defence based upon the condition of the premises. The third party notice was issued on 5 October 1995. An appearance was entered for the third parties on 7 November 1995. On 19 December 1995, the defendants' then solicitors wrote to the third parties' solicitors in the following terms:

"As we have discussed, it is our view that, without prejudice, the Howards will succeed against our Clients and we will succeed against yours. There seems to be no advantage accruing to anybody as the matter currently stands. We note that you were looking into the question of a breach of a covenant of the Lease. Are you any further advanced in this matter? If there is nothing in this proposal, then may we suggest that it would be in everyone's interests if we consented to a Judgment on the part of the Howards and that you consented to a Judgment against us [sic]. We look forward to your advice at your earliest convenience."

Some ten months later, on 21 October 1996, the two solicitors discussed this matter. The defendants' solicitor made a note that the only argument the third parties had was as to fit and proper premises, but that there was "no stuff in writing" as to that. The defendants' solicitors delivered a statement of claim on 28 October 1996. The third parties' solicitors responded by delivering their defence of 11 December 1996, in which nothing was pleaded as to the condition of the premises.

7 When the plaintiffs' summary judgment application was listed on 1 May 2000, the defendants' solicitors took the view that no defence was available to them, advised a representative of the defendants accordingly, obtained instructions to consent to summary judgment, and so consented. The third parties and their solicitors were not advised of that summary judgment application until well after judgment had been entered. I infer that the defendants' solicitors took the view that, if a defence as to the condition of the premises had had any possible merit, it would have been pleaded by the third parties' solicitors in December 1996. The third parties must have known all that there was to know about the condition of the premises as at the time they moved out. Unlike the defendants, they were in a position to provide precise instructions upon which advice could be given as to whether the landlords had breached any covenant requiring the repair of structural defects. I have no evidence as to the terms of the lease relating to repairs and maintenance, save that the third parties are seeking to plead that it contained a covenant as to structural defects in the terms I have referred to. I infer that it did not contain any other covenants upon which a defence relating to the condition of the premises could be based. If the information Mr Griggs says he gave Mr Len Watling was in fact given, and if it was passed on to the defendants' solicitors, I think they would have been entitled to regard as far-fetched both the notion that the defects affecting the cool room walls and floor were structural, and the notion that the landlords' failure to undertake the repair of such defects, even if structural, amounted to a breach of a term that was so fundamental that the failure amounted to a repudiation of the lease. The evidence suggests that some new floor tiles and some replastering of the wall would have been sufficient for the butchery to continue in business. Having regard to all these matters I infer that, on 1 May 2000, the defendants and their solicitors could reasonably have assumed, and did reasonably assume, that the third parties could not raise a defence based upon the condition of the premises that had any merit.

8 Prior to that date, if the third parties had sought an amendment to plead any such defence, the defendants could have applied to amend their defence accordingly, and such amendments would probably have been allowed in accordance with the authorities I have referred to above. Now that judgment has been entered for the plaintiffs against the defendants, it is too late for them to adopt any such defence. As a result, I think it would be incurably unjust to allow the third parties to plead any new defences which the defendants could have adopted if judgment had not already been entered against them.

9 The proposed estoppel defence is in a different category. It is not a defence which the defendants could have adopted as a defence to the plaintiffs' claim. However, I have decided not to allow the proposed amendments, insofar as they set out the proposed estoppel defence, because an estoppel defence so pleaded could not possibly succeed. The third parties are seeking to plead that the defendants "represented" their consent to the third parties treating the assignment and the lease as repudiated; that, in reliance upon that representation, the third parties vacated the premises and stopped paying rent; and that the defendants are therefore estopped from relying upon "the indemnity contained in the assignment". However the proposed pleading falls short of asserting that the defendants expressly or impliedly intimated that they would not rely on their right of indemnity conferred by the deed of assignment, or that they led the third parties to believe that they would not rely on that right. Without those matters having been pleaded, an estoppel defence based on an allegation that the defendants consented to the third parties vacating the premises could not succeed. The third parties therefore should not be permitted to amend so as to add a plea of estoppel in the form presently proposed.

10 For these reasons I have decided to dismiss the third parties' interlocutory application.