Nathan v Dunn

Catchwords: CIVIL PROCEDURE – amendments to plead statute barred cause of action – consideration of operation of ss 64 and 65 Civil Procedure Act 2005

Legislation Cited: Civil Procedure Act 2005 (NSW) ss 64, 65
Design and Building Practitioners Act 2020 (NSW) s 37
Home Building Act 1989 (NSW) s 18B
Uniform Civil Procedure Rules 2005 (NSW) r 6.28

Cases Cited: Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541; [1996] HCA 25
Commonwealth v Winston (2024) 116 NSWLR 111; [2024] NSWCA 277
Greater Lithgow City Council v Wolfenden [2007] NSWCA 180
McGee v Yeomans [1977] 1 NSWLR 273
Salmon v Albarran [2023] NSWSC 1238

Category: Procedural rulings

Parties: Sonia Louise Nathan (First Plaintiff)
Lionel Tangaroa Nathan (Second Plaintiff)
Christopher Samuel Dunn (First Defendant)
R A Gates Pty Ltd (Second Defendant)
Reliant Building Pty Ltd trading as Reliant Pest and Building (Third Defendant)

Representation: Counsel:
C Curry (solicitor) (Plaintiffs)
S Keizer (First Defendant)
Solicitors:
The Law Office of Conrad Curry (Plaintiffs)
Newcastle Legal and Conveyancing (First Defendant)

File Number(s): 2024/00182334

Publication restriction: Nil

JUDGMENT

Background

1. By Statement of Claim filed 16 May 2024, the plaintiffs commenced proceedings against three defendants, seeking damages in respect of certain defective building and construction works (the Works) allegedly carried out at a property in Elermore Vale, NSW (the Property).

2. On the plaintiffs’ case, the first and second defendants purchased the Property as tenants in common on or about 6 February 2018 and carried out the Works between 16 March 2018 and 24 August 2018.

3. It is alleged the first and second defendants advertised the Property for sale from 18 May 2024 and following an offer made by the plaintiffs on 16 July 2018, contracts were exchanged on 25 July 2018, with the sale being completed on 24 August 2018.

4. The plaintiffs allege they retained the third defendant to provide a pre-purchase pest and building report in relation to the Property, which they obtained on 16 July 2018.

5. Following settlement of the purchase, the plaintiffs say they became aware of various defects with the Property. As a result, in these proceedings the plaintiffs sued the first and second defendants pursuant to the Home Building Act 1989 (NSW) (HBA), alleging breaches of the statutory warranties provided under s 18B of the Act. They also sued the third defendant in negligence and breach of contract for alleged failures to exercise reasonable skill and care in the provision of the pest and building report.

6. The second defendant, which has taken no active part in the proceedings, has been deregistered. Orders were recently made for the proceedings to be discontinued against it.

7. The plaintiffs have also recently settled their claims against the third defendant.

8. Accordingly, the first defendant is the only remaining defendant in the proceedings.

The Application Before the Court

9. The matter comes before me on the plaintiffs’ Notice of Motion seeking orders for the filing of an Amended Statement of Claim.

10. There are a number of proposed amendments to the Statement of Claim which refine the material facts and more clearly articulate the basis of the claims made under the HBA. Those amendments are not controversial.

11. However, in paragraphs 22-25 of the proposed Amended Statement of Claim, the plaintiffs plead, for the first time, a claim pursuant to the Design and Building Practitioners Act 2020 (NSW) (the Design Act). In those paragraphs, the plaintiffs rely upon s 37(1) of the Design Act to invoke a duty upon the first defendant to exercise reasonable care to avoid economic loss being suffered by the plaintiffs and enumerate various precautions it is alleged the first defendant failed to take. In the proposed cause of action under the Design Act, the plaintiffs bring an additional or alternative claim for loss and damage suffered as a result of the defects which ground the claims made under the HBA.

12. The first defendant opposes the leave sought. In doing so the first defendant does not contest the submission made on behalf of the plaintiffs that the amendments relate to the same facts and circumstances as those giving rise to the existing cause of action under the HBA.

13. It is common ground that the claim the plaintiffs now seek to bring under the Design Act is statute barred. The plaintiffs argue it was not statute barred at the time proceedings were commenced in 2024. However, the first defendant does not accept that to be the case, and if leave is granted to amend, will plead a limitation defence. The question of whether or not the Design Act claim was out of time when proceedings were commenced is a question of fact for determination by the trial judge.

The Relevant Statutory Provisions

14. At the heart of the issues which divide the parties are ss 64 and 65 of the Civil Procedure Act 2005 (NSW) (CPA). They provide as follows:

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.

(3) An order under this section may be made even if the amendment would have the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings but, in that case, the date of commencement of the proceedings, in relation to that cause of action, is, subject to section 65, taken to be the date on which the amendment is made.

(4) If there has been a mistake in the name of a party, this section applies to the person intended to be made a party as if he or she were a party.

(5) This section does not apply to the amendment of a judgment, order or certificate.

65 Amendment of originating process after expiry of limitation period (cf SCR Part 20, rule 4; DCR Part 17, rule 4)

(1) This section applies to any proceedings commenced before the expiration of any relevant limitation period for the commencement of the proceedings.

(2) At any time after the expiration of the relevant limitation period, the plaintiff in any such proceedings may, with the leave of the court under section 64 (1) (b), amend the originating process so as—

(a) to enable the plaintiff to maintain the proceedings in a capacity in which he or she has, since the proceedings were commenced, become entitled to bring and maintain the proceedings, or

(b) to correct a mistake in the name of a party to the proceedings, whether or not the effect of the amendment is to substitute a new party, being a mistake that, in the court’s opinion, is neither misleading nor such as to cause reasonable doubt as to the identity of the person intended to be made a party, or

(c) to add or substitute a new cause of action, together with a claim for relief on the new cause of action, being a new cause of action that, in the court’s opinion, arises from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process.

(3) Unless the court otherwise orders, an amendment made under this section is taken to have had effect as from the date on which the proceedings were commenced.

(4) This section does not limit the powers of the court under section 64.

(5) This section has effect despite anything to the contrary in the Limitation Act 1969.

(6) In this section, originating process, in relation to any proceedings, includes any pleading subsequently filed in the proceedings.

The Position of the Parties

15. The first defendant contends s 65 is the starting point in the Court’s consideration of this application. The first defendant argues the claims made by the plaintiffs in the original Statement of Claim were out of time under the HBA because, as pleaded, they must be taken to relate to defects which were not “major defects” within the meaning of the HBA. As such, those claims were subject to a two-year limitation period under the HBA, putting them well out of time when proceedings were commenced. [1]

16. That submission is grounded in a pleading point. Basically, the first defendant argues that if the plaintiffs assert there is a major defect, that must be positively pleaded as a material fact and is not simply a matter for particulars. The first defendant says that as the Statement of Claim, both in the original and proposed amended form, does not plead major defects, it must necessarily be the case that the defects were other than major defects.

17. The plaintiffs argue that as the question of whether defects were major or not goes to the applicable limitation period under the HBA, it is not necessary to pre-emptively plead to those limitation provisions. The plaintiffs contend they have pleaded the material facts and the statutory basis for the remedies they seek. Further detail, they say, is a matter for particulars. The plaintiffs’ submissions make it clear they propose to assert at least some of the defects alleged are major defects.

18. This is not the occasion for a determination of the first defendant’s pleading point.

19. To the extent that, contrary to the first defendant’s position on the pleadings, the claims made under the HBA involved major defects, the first defendant argues the determination of whether they were brought in time or not depends upon a factual question centred on whether the proceedings were commenced within six-years from the date when the relevant Works were completed. If completed before 16 May 2018 (ie more than six years prior to the commencement of the original proceedings), then the first defendant contends the original proceedings were out of time in respect of all potential claims under the HBA.

20. The first defendant says it is for the plaintiffs, as the applicants on this Motion, to establish whether and to what extent the claims in the original Statement of Claim were in time.

21. The first defendant contends this engages s 65 of the CPA. It is argued that sub-s(1) which “applies to any proceedings commenced before the expiration of any relevant limitation period for the commencement of the proceedings” presupposes that the original proceedings were commenced within the relevant limitation period. The first defendant asserts that any amendment to add a new cause of action under s 65(2)(c) must relate to facts and circumstances associated with causes of action which were in time when the original proceedings were commenced. The first defendant argues that to interpret “relevant limitation period” in s 65(1) as relating to the cause of action the subject of the proposed amendment, is contrary to the work done by s 65(3), which serves to overcome what is said to be the general rule that amendments operate from the date of amendment. The first defendant cites s 64(3) CPA and Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 6.28 in support of that so called general rule.

22. The plaintiffs argue s 65(1), when it speaks of “relevant limitation period”, ought not be so constrained and is referring to the limitation period applicable to the new cause of action the subject of the application to amend.

23. The parties were unable to point to any authority determining this issue. The first defendant did draw my attention to the decision of Nixon J in Salmon v Albarran [2023] NSWSC 1238 at [482]-[485]. While his Honour adverted to the question with which I am now concerned, he was not required to decide the point as the application to amend was ultimately determined on discretionary grounds under s 64 of the CPA.

24. The plaintiffs argue s 65 does not prescribe a code for amendment and that irrespective of the view taken as to its operation, the Court has, and in this case should exercise, the discretion to allow amendment under s 64.

25. The first defendant concedes s 64 provides the Court with a general discretion on the question of amendment.

26. As was observed in Greater Lithgow City Council v Wolfenden [2007] NSWCA 180, with roots stretching back to McGee v Yeomans [1977] 1 NSWLR 273, s 65 CPA does not exclude the power to grant leave under s 64 to add a cause of action which is out of time. So much is clear from the terms of s 65(4) CPA.

27. The breadth of s 64 was recently discussed by Leeming JA in Commonwealth of Australia v Winston (2024) 116 NSWLR 111; [2024] NSWCA 277.

28. In the end result, in line with the first defendant’s concession, it is clear that the Court retains a discretion where the interests of justice so require to allow an amendment pursuant so s 64, notwithstanding the addition of a cause of action which is statute barred.

Disposition

29. Like Nixon J in Albarran, it is unnecessary for me to decide the parameters of s 65 as I have come to the conclusion that it is appropriate in the exercise of my discretion under s 64, that the plaintiffs have leave to amend the Statement of Claim as requested.

30. However, before explaining that conclusion, it is appropriate at this point to make the observation that I do not agree with the first defendant’s submission that an amendment to add a new cause of action is generally taken to operate from the date of amendment.

31. Rather, as Leeming JA in Winston at [57] observed:

“Ordinarily, ‘an amendment, duly made, takes effect, not from the date when the amendment is made, but from the date of the original document which it amends’: Baldry v Jackson [1976] 2 NSWLR 415 at 419; Air Link Pty Ltd v Paterson (No 2) (2003) 58 NSWLR 388; [2003] NSWCA 251 at [47]-[50].”

32. As noted, the first defendant called s 64(3) of the CPA in aid of its submission that amendments operate from the date they are made. However, I do not think s 64(3) assists the first defendant. Unlike the present case, s 64(3) deals with an amendment in cases involving the addition or substitution of a cause of action arising after the commencement of proceedings. As I see it, s 64(3) operates to displace the normal rule in those cases as it would be anomalous to consider a cause of action to have been pleaded before the cause of action arose.

33. Similarly, UCPR r 6.28, also relied upon by the first defendant in support of its position, is a rule dealing with the date upon which a party is taken to have been joined to proceedings. Again, it would be anomalous for an amendment joining a new party to the proceedings to have retrospective effect. Rule 6.2 can thus also be seen as standing outside the general rule that amendments operate from the date of the original pleading.

34. Returning then to my conclusion that the plaintiffs ought have leave to amend pursuant to s 64 CPA. The discretionary factors which have influenced that conclusion are:

35. The amendment concerns the same facts, matters and circumstances which ground the original claim under the HBA.

36. The plaintiffs have explained the delay in pursuing the claim under the Design Act which, in short, was not adverted to until counsel was retained in early 2025.

37. Following an unsuccessful mediation in February 2025, the plaintiffs’ solicitors acted promptly to draft, give notice of, and seek consent to, the Amended Statement of Claim.

38. The plaintiffs are not complicit in the failure of their legal representatives to include the Design Act claim in the original Statement of Claim.

39. The plaintiffs have served an expert report of Mr Stanton detailing the defects alleged and do not propose serving additional expert evidence, save for a supplementary report from Mr Stanton.

40. The first defendant is yet to serve expert evidence.

41. The proposed amendment involves the addition of a potentially significant cause of action for the relief the plaintiffs seek.

42. The Court’s ultimate goal is to do justice between the parties having regard to the true merits of the claim and the Defence.

43. Mr Keizer, who appears for the first defendant, whilst appropriately acknowledging there are discretionary factors in support of the application for leave to amend, raised what he submitted was a significant factor weighing against the grant of leave, namely the prejudice faced by the defendant in having to deal with a cause of action now out of time.

44. Mr Keizer argues that, as is well recognised in the authorities, there is a presumptive prejudice which falls upon a party in having to meet stale claims. Memories fade, documents may be lost or incomplete, and generally the effluxion of time undermines a party’s ability to defend itself.

45. As reflected in the reasoning of McHugh J in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 553; [1996] HCA 25 (and the many cases which have adopted his Honour’s reasoning since), presumptive prejudice is a significant matter to be weighed in an application to proceed out of time.

46. Mr Keizer does not however point to any actual prejudice falling upon the first defendant, who was the builder, and thus presumably has first-hand knowledge of the Works. It is significant that the first defendant has had to meet the same factual allegations in the original Statement of Claim, and in his Defence has directly engaged with and traversed those allegations.

47. The impact of presumptive prejudice should not be underestimated. However, balancing the competing factors in the present case leads me to the conclusion that it is appropriate in the exercise of my discretion under s 64 CPA that the plaintiffs have the leave they seek to amend the Statement of Claim.

Costs

40. It is appropriate, in the circumstances, that the plaintiffs pay any costs thrown away by the first defendant consequent upon the amendment of the Statement of Claim. Otherwise, as the plaintiffs have succeeded in the contest, I consider it appropriate they have their costs of the application.

Orders

41. Accordingly, I make the following orders:

42. Pursuant to s 64 of the Civil Procedure Act 2005 (NSW), the plaintiffs have leave to file an Amended Statement of Claim in the form of the document marked MFI 2 on this application, with additional amendment as necessary to delete the claims against the second and third defendants.

43. The plaintiffs are to pay the first defendant’s costs thrown away by reason of the amendment of the Statement of Claim.

44. The first defendant is to pay the plaintiffs’ costs of this application.

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Endnote

Even allowing for the facility to extend that limitation period under the HBA.