McCrohon v Leodaritsis

What happened

In McCrohon v Leodaritsis [2020] NSWSC 1537, Ward CJ in Eq dealt with a procedural application, not a final hearing of the dispute over the sale of a Mosman property. The plaintiffs, Peter Edward McCrohon and Karin Elizabeth Bergseng, had commenced proceedings by statement of claim on 22 January 2020. They sought a declaration that they had validly terminated a property sale contract and an order that the first defendant pay the balance of a deposit. A defence and statement of cross-claim had been filed by the first defendant.

The plaintiffs then sought leave to amend their statement of claim and join the first defendant's father, Petros Vasilios Leodaritsis, also known as Peter, as a second defendant. Their proposed pleading alleged that the second respondent had represented that he would be the purchaser and would fund the purchase price. The plaintiffs proposed claims under ss 18, 20 and 30(1)(b) of the Australian Consumer Law, which is sch 2 to the Competition and Consumer Act 2010 (Cth). They also sought to allege that the first respondent was knowingly concerned in the second respondent's alleged contraventions and to advance a subrogation claim based on the first respondent's rights of indemnity against the second respondent. These were pleaded allegations, not findings that the conduct occurred or breached the law.

The application was made by notice of motion filed on 7 September 2020. The second respondent was an undischarged bankrupt. His counsel asked for an adjournment, referring to his hip replacement surgery. The Court declined to stand over the application, reasoning that delay would not be consistent with the just, quick and cheap resolution of the real issues in dispute under s 56 of the Civil Procedure Act 2005 (NSW). The Court also observed that he was not yet a party and that ordinarily a non-party would not have a right to appear to argue against being joined.

The Court granted leave. It directed the plaintiffs to file and serve the amended statement of claim within seven days, noted that the second respondent would become the second defendant when that pleading was filed, and ordered the plaintiffs to pay the first defendant's costs thrown away by the amendment. This was a decision about whether the proposed pleading could be added at that stage. It did not determine the merits of the property dispute, the alleged Australian Consumer Law contraventions, or the proposed claims between the defendants.

Why the court decided this way

The Court approached the application under s 64 of the Civil Procedure Act. It noted that, subject to s 58, necessary amendments are to be made before the real questions in proceedings are determined. The Court said that the discretion had to be exercised with regard to the Act's overriding purpose and the dictates of justice. It identified four broad considerations: whether the application was made for a proper purpose, whether the amendments were proper in substance and form, whether they would cause undue prejudice, and whether they were consistent with the dictates of justice.

The Court referred to Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27, specifically its discussion at [14] and [71]. The judgment does not reproduce the relevant passages from Aon or independently set out a comprehensive account of that decision. Its express use of the case is as authority for considering the matters relevant to amendment applications.

On the proposed pleading, the Court found no suggestion that the claims were futile, unviable or untenable. It also identified no issue that the pleading was deficient in form or substance. That is a procedural assessment of the material before the Court. It is not a determination that the pleaded representations were made, that the statutory provisions were contravened, or that the plaintiffs would ultimately establish their claims.

Delay was another relevant matter. The Court was satisfied that the plaintiffs had given a satisfactory explanation for the circumstances in which the amendment application had been brought. The first defendant's opposition related to delay and the costs that would be occasioned if he had to defend the amended pleading. The Court considered that the prejudice to him did not extend beyond costs. The order for costs thrown away addressed that identified consequence, while allowing the proposed claims to be heard as part of the proceedings.

The bankruptcy issue did not prevent the Court from granting leave on the application before it. The Court recorded that the second respondent's sequestration date was 11 July 2019 and that the events in issue occurred after that date. It also recorded the applicants' position that they did not need leave to commence proceedings against him, and that the trustee in bankruptcy had taken no issue with that proposition. The Court did not provide a general ruling on proceedings against bankrupts. It expressly left open any future application under s 60 of the Bankruptcy Act 1966 (Cth) for a stay.

Before and after state of the law

This judgment is a short procedural ruling applying statutory provisions and amendment principles to one motion. It does not announce a broad change in the law. Before the decision, the plaintiffs had a claim against the first defendant, and the proposed second defendant was not a party. After the decision, the plaintiffs had leave to file and serve a pleading that would join him as the second defendant, subject to the direction that filing and service occur within seven days.

The judgment's account of the governing framework is that s 64 of the Civil Procedure Act, subject to s 58, concerns making necessary amendments before determining the real questions in the proceedings. The Court also connected that discretion with s 56's just, quick and cheap resolution purpose and the dictates of justice. It identified the four broad factors set out above. The decision shows how those considerations were applied where the Court found the proposed claims were not shown to be untenable, delay had been satisfactorily explained, and the existing defendant's identified prejudice could be met by costs.

The ruling does not define the scope of ss 18, 20 or 30(1)(b) of the Australian Consumer Law. Those provisions appear because they were the proposed legal bases for allegations in the amended pleading. Nor does the ruling determine the meaning or operation of s 60 of the Bankruptcy Act in this dispute. The only point decided about that issue was procedural: no stay application was before the Court, and any such application was reserved for another day.

Accordingly, the before-and-after distinction is principally about the state of the pleadings and parties. The proposed claims were not determined on their merits. The first defendant retained the benefit of the costs order for expense caused by the amendment. The second respondent's joinder did not decide whether the proceedings would later be stayed or what the result of the underlying dispute should be.

Key passages with plain-English translation

The judgment says s 64 requires necessary amendments to be made before the real questions in the proceedings are determined, subject to s 58. In plain English, the Court treated amendment as a way to ensure the case could address the issues that needed to be resolved, while still considering the statutory limits and the impact on the parties.

The Court listed four considerations: proper purpose, proper substance and form, no undue prejudice, and consistency with the dictates of justice. In plain English, permission to amend was not treated as automatic. The Court considered why the change was sought, whether the proposed pleading was suitable, what disadvantage it would cause others, and whether permitting it accorded with justice in the circumstances.

The Court stated that there was “no suggestion” the proposed amendments were futile, unviable or untenable. In plain English, the material before the Court did not establish a sufficient basis to reject the proposed claims as incapable of proceeding. That observation did not amount to a final endorsement of the claims or a finding that the allegations were true.

The Court was “satisfied there has been a satisfactory explanation” for the delay. In plain English, the explanation put forward for the timing of the application was accepted for the purpose of deciding this motion. The judgment does not set out the full chronology or identify every element of that explanation, so it should not be read as a general ruling about what amount of delay is acceptable in other cases.

On prejudice, the Court said it did not appear that the first defendant would suffer prejudice beyond the issue of costs. It then ordered costs thrown away. In plain English, the Court considered the financial impact of having to deal with the amended case could be addressed through the costs order, rather than by refusing the amendment.

Finally, the Court said that a possible application under s 60 of the Bankruptcy Act “is for another day”. In plain English, the ruling did not settle whether a stay should be granted or whether the second respondent's bankruptcy affected the continuation of the proceedings. That question would require an application and decision in the future, if pursued.

What fact patterns trigger this precedent

The decision is most directly relevant to procedural applications seeking leave to amend pleadings and join a party where a case is already underway. Its usefulness is strongest where the court is asked to consider the proposed amendment's purpose and content, delay, practical prejudice to existing parties, and the relationship between amendment and the efficient determination of the real issues.

The particular features in this case were an explanation for delay that the Court accepted, proposed claims that were not shown to be futile or untenable, no identified pleading defect, and prejudice to the existing defendant that the Court assessed as limited to costs. The first defendant's concern about the expense of responding to an amended claim was expressly addressed by the costs thrown away order. These features explain the ruling, but they do not establish that the same result must follow whenever those features are present.

The judgment also concerns an attempted joinder where the proposed defendant appeared through counsel before being formally joined. It records that the second respondent sought an adjournment due to surgery, and the Court considered the effect of an adjournment on the statutory purpose of resolving the real issues justly, quickly and cheaply. That procedural context may be relevant where a court is asked to delay an amendment hearing, but the decision does not set out a general rule about adjournment requests based on medical circumstances.

The bankruptcy feature is narrower. The proposed second defendant was an undischarged bankrupt, the sequestration date was 11 July 2019, and the events in issue were after that date. The trustee did not take issue with the applicants' position that leave was not required to commence proceedings. The Court nevertheless reserved any question about a stay under s 60. The case therefore does not decide the outcome where the alleged events pre-date sequestration, where a trustee disputes the position, or where an actual stay application is before the court.

How later courts have treated it

The judgment text provided contains no later decisions discussing McCrohon v Leodaritsis. It therefore does not establish whether later courts have followed, distinguished, applied or otherwise treated this decision. No later case citations or subsequent history are supplied in the judgment material.

Within its own reasoning, the Court cited Aon Risk Services Australia Ltd v Australian National University at [14] and [71] as authority relevant to the factors governing amendment applications. The decision does not state that Aon was overruled, distinguished or disapproved. It invokes the cited discussion and then sets out the four broad considerations used for the application before it.

For research purposes, the decision's significance should be kept at the level supported by its short reasons: it is an example of the application of the statutory amendment discretion to a proposed joinder, with an award of costs thrown away addressing the prejudice identified. The supplied material is insufficient to describe its standing in later case law or to claim that it has become a leading authority.

Still-open questions

The most explicit unresolved issue is the possible application of s 60 of the Bankruptcy Act. The Court recorded that counsel had raised the possibility of a stay, but no application was before it. The decision therefore does not reveal what arguments might be made about the provision, what evidence would be relevant, or how a court would resolve such an application on these facts.

The merits of the proposed Australian Consumer Law claims were also left open. The Court did not decide whether the alleged representation was made, whether it was misleading or otherwise contravened the pleaded provisions, or whether the plaintiffs relied on it. It did not determine whether the first respondent was knowingly concerned in any contravention. Those remained allegations in the amended pleading.

The property-contract dispute itself remained unresolved. The judgment does not determine whether the plaintiffs validly terminated the contract, the amount of any balance of deposit payable, or the parties' rights concerning the property. It also does not determine the factual basis or legal effect of the proposed resulting-trust and indemnity allegations.

Finally, the short reasons do not give a full account of the explanation for delay or reproduce the amended statement of claim. That limits the ability to assess the precise pleaded case or compare the timing and procedural circumstances with other applications. The Court's conclusion was tied to the material and submissions before it on 23 October 2020.

This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have a qualified Australian lawyer check it.