North East Equity Pty Ltd v Proud Nominees Pty Ltd

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 When I delivered my reasons in North East Equity Pty Ltd v Proud Nominees Pty Ltd (No 2) [2008] FCA 1189 I asked the parties to consider them and address the question of final orders which ought be made flowing from them. There are now outstanding these two questions. First, whether I should allow an amendment to the statement of claim so as to permit a further allegation of negligence to be added that Proud Machinery and Mr Proud negligently procured and installed a flume elevator system that was not fit for its purpose of transferring carrots from the brush washers to the diameter sizers. Secondly, how costs should be awarded.

The Flume Elevators Amendment 2 North East Equity's opening outline of submissions for trial specifically asserted, as one of the five substantial alleged problems with the new line, that the flume elevators between the brush washers and diameter sizers were too steep and problematic. The submission continued by observing that, at a meeting on 18 November 2003, Mr Proud had agreed to fix the issue of the flume elevators but, in the result, did not do so. During the course of the trial there was a substantial issue as to whether an agreement was made at the meeting on 18 November 2003 and thereafter performed. I found that an essential element in the agreement reached at that meeting was that the flume elevator system was defective and in need of replacement. 3 As I observed in North East Equity (No 2) [2008] FCA 1189 at [380], North East Equity had not appeared to make any separate claim for damages based on deficiencies in, and disruption caused by, the flume elevators. North East Equity now accepts that that accurately described its pleaded position. Today it has sought to make an amendment to its pleadings so as to bring them into line with what it said was the case run at trial. 4 In Water Board v Moustakas (1988) 180 CLR 491 at 497-498, Mason CJ, Wilson, Brennan and Dawson JJ discussed the principles for granting an amendment of pleadings or particulars so as to bring them into line with the case that had actually been run at the trial. They said that ordinarily the pleadings would be of assistance in determining whether a point had been raised at the trial and that no narrow or technical view should be taken. They also said that the particulars may not be decisive if the evidence had been allowed to travel beyond them, but that when that happened and fresh issues were raised, the particulars should be amended to reflect the actual conduct of the proceedings. A failure timeously to apply to amend is not necessarily fatal either at trial or on appeal. Their Honours adopted what had been said by Stephen, Mason and Jacobs JJ in Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437 at 446; 50 ALJR 666 at 668 that there the pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence. In Moustakas 180 CLR at 497, their Honours went on to say: "The failure to apply for the amendment in that case was held not to be fatal. But in Maloney v Commissioner for Railways (NSW) ((1978) 52 ALJR 291, at p 294; 18 ALR 147, at pp 151-152), Jacobs J, with whom the other members of the Court agreed, pointed out that the conclusion in Leotta was reached only upon the presupposition that the new issue or new way of particularizing the existing issue had emerged at the trial and had been litigated. It is necessary to look to the actual conduct of the proceedings to see whether a point was or was not taken at trial, especially where a particular is equivocal." 5 The guiding principle in allowing an amendment to pleadings is, of course, elucidated in Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 at 154-155. There Dawson, Gaudron and McHugh JJ held that where the proposed amendment raised a fairly arguable claim or defence it ought be allowed so long as any prejudice to the other party could be cured by an order for costs. 6 Here, the trial took 14 days and involved a considerable degree of evidence. One issue which arose on the cross claim by Proud Machinery and Mr Proud concerned what had been agreed at the meeting of 18 November 2003. The basis of that pleading was that, first, those present at the meeting had agreed that the new line had achieved the production capacity of packed tonnes required by North East Equity, and secondly, four particular services should be supplied to it by Proud Nominees (being the fitting of invertors to conveyor belts, remedying the cause of two Gillenkirch packing stations tripping out, the provision of operating manuals for the Gillenkirch machinery and the installation of two new pumps in the flume elevators). 7 However, I found that a different arrangement had been made. That included a recognition that ultimately the problems with the flume elevators had to be fixed. Although initially it had been proposed that the solution would be achieved by installing the new pumps (which was done), in the end that did not successfully resolve the problem. This led to the need to design substitute equipment. As I found in North East Equity (No 2) [2008] FCA 1189 at [373] those present at the meeting of 18 November, including Proud Machinery and Mr Proud, recognised that the flume elevators were not operating to the standard which they ought to have achieved. That problem was never remedied. 8 However, what North East Equity now seeks to do is to add a new plea that Proud Machinery and Mr Proud breached their previously pleaded duty of care by procuring and installing a flume elevator system that was not fit for its purpose of transferring carrots from the brush washes to the diameter sizers. I found that the flume elevators were not so fit. 9 But, the question which arises is whether North East Equity should be allowed to rely on a new plea that Proud Machinery and Mr Proud would exercise reasonable care and skill in the performance of their services, including the selection of goods or working materials, that were reasonably fit for the purposes for which North East Equity had (here by implication) indicated they were required: North East Equity (No 2) [2008] FCA 1189 at [367]. 10 In my opinion, the circumstances in which this issue was litigated at the trial did not address the question of Proud Machinery or Mr Proud exercising reasonable care and skill in the performance of that service. That failure was not the subject of a specific plea. While it is true that there was a complaint about the way in which the flume elevators operated, the expert evidence did not deal with any particular impact on the operation of the new line as a whole or specifically caused by their deficiency. And, the question of whether Proud Machinery and Mr Proud were negligent in 2002 when selecting or supplying the particular flume elevator equipment was not the subject of any specific plea litigated at the trial and was not itself the subject of specific attention. Rather, the trial proceeded on the basis that it was accepted that, as installed, the flume elevators were not satisfactory, although some attempts were made, with some success, to remedy the performance of the cleats on them. And it was accepted at the meeting of 18 November 2003 and thereafter, that they needed to be remedied and never were. However, none of this bore on the issue as to what, if anything, Proud Machinery and Mr Proud did, or failed to do, at the time at which that equipment was selected or supplied in 2002 and early 2003. 11 I am of opinion that if I were to allow this amendment at this stage, I would need to give Proud Machinery and Mr Proud the opportunity to re‑open. I appreciate that Mr Proud gave general evidence that he relied on Bruynooghe, as the supplier of equipment, and that he may well have simply repeated such evidence were he recalled. But it seems to me that this particular issue (of the circumstances in which the equipment came to be selected, or supplied, in the defective form it actually was) was not the subject of exploration at the trial. 12 North East Equity argued that because I found, on the basis of a clear concession to that effect, that the equipment did not perform to the standard it ought to have, this is a case of res ipsa loquitur. But, in my opinion, that submission should be rejected. There could be a number of explanations as to why the equipment chosen, or supplied, did not perform to the particular standard it ought to have. I am not satisfied that it is so obvious that it goes without saying, that the negligence of Proud Machinery or Mr Proud in selecting or supplying the flume elevators was the cause of there being the actual defects in that equipment identified and accepted as present at the 18 November 2003 meeting. 13 Proud Machinery and Mr Proud also argued that I should reject the application to amend, on the basis that they would have given serious consideration to joining Bruynooghe as a party to the proceedings. I accept that Proud Machinery and Mr Proud may well have wanted to explore, in evidence from lay witnesses and experts, the circumstances in which it could be said that they were negligent in selecting or supplying the equipment in 2002 and 2003, and how that negligence led to the flume elevators being defective. However, I cannot accept that they would have joined or further considered joining Bruynooghe as a party to these proceedings, had this particular claim been raised. By the time of the trial (and before) it was plain that a real issue had been raised in the proceedings concerning the responsibility of Bruynooghe in supplying many of the components of the line overall. That included the allegations that length graders were defective and that there were problems with the chilling tank system. Given that North East Equity's claims in relation to these matters involved many millions of dollars, as pleaded or particularised, I cannot accept that what would have tipped the scales in any decision to join Bruynooghe by Proud Machinery and Mr Proud would have been this new claim about the cost of replacement of the flume elevators, worth only about €51,000. I am not satisfied that, had I allowed the amendment, there would have been any prejudice to Proud Machinery or Mr Proud by reason of the loss of a possible opportunity for them to consider once again the joinder of Bruynoogh. 14 North East Equity argued that this particular amendment should be viewed as a stand alone claim for recovery of the €51,000 and $10,000 I found as damages for disruption, rather than as any component of a claim based on its claim of a "no transaction" method of assessment of its damages. Again, it seems to me that if the claim had been put that way, it would have been one, on the findings I have made at least, that should have been brought in the Federal Magistrates Court. It would have occupied much less time and resources than were devoted to the claim to recover several million dollars. 15 However, for the reasons I have given, I am not satisfied that I should allow this amendment to be made. In my opinion it raises a new issue which could have been addressed in evidence called at the trial. And if I were to allow it to be raised now, it has the potential, substantially, to add to the costs of the litigation in a way that could not be remedied by an order for costs, having regard to the size of the sum involved and what has already been spent to date. 16 For these reasons I reject the application to amend. If I were wrong in that decision, I have given my assessment of the damages that would have been suffered.