Omega Air Inc v CAE Australia Pty Limited

Supreme Court of NSW|2015-06-12|Before: Ball J

Judgment

By a notice of motion filed on 21 April 2015, the plaintiff, Omega Air Inc, seeks leave to file and serve a Further Amended Commercial List Statement (FACLS) in the form of the document attached to the motion. A number of amendments are not opposed, but a substantial number are. Before describing the nature of the amendments that are opposed, it is necessary to say something concerning the background to the proceedings.

Background

The proceedings arise out of a contract (the Relocation Contract) entered into on 7 October 2011 by which the defendant, CAE Australia Pty Limited, agreed to transport a Boeing 707 full flight simulator owned by Omega from the Richmond Air Base in New South Wales to Las Vegas, Nevada. Omega had bought the simulator from the Commonwealth of Australia in October 2008.
The simulator was dismantled in November and December 2011 and was then shipped to the United States. After some delays, it arrived in Las Vegas in April 2012. It was found at that time to have been damaged substantially by moisture, with the result that its value is said to have declined by approximately USD4,668,000.
The Relocation Contract is contained in three documents: the Price & Delivery Letter, Attachment A - Statement of Works and Attachment B - Terms and Conditions.

The amendments to which objection is taken

The amendments to which objection is taken fall into three categories. First, in paragraphs C5 and C6 of the proposed FACLS Omega pleads that the parties entered into an agreement in late 2008 for CAE to provide maintenance services in respect of the simulator after it was acquired in 2008. Omega does not allege that CAE breached that agreement. Rather, it contends that the paragraphs in question plead factual matters relevant to the interpretation of the Relocation Contract.
Second, Omega seeks to plead that, during the negotiations for the Relocation Contract, CAE made representations that were misleading and deceptive in contravention of s 18 of the Australian Consumer Law (ACL) and that it suffered loss as a consequence. It is not necessary to set out the details of the representations. They fall into two categories. First, it is alleged that CAE made express and implied representations concerning the nature and quality of the services it would provide in connection with the transportation of the simulator. Second, it is alleged that CAE made express and implied representations concerning the insurance it would obtain in connection with the transport of the simulator. In each case, Omega does not say how the representations were misleading or deceptive. Rather, it pleads that the representations concerned future matters and it relies on s 4 of the ACL. Section 4(1) of the ACL provides that a representation with respect to a future matter is taken to be misleading if the person making the representation does not have reasonable grounds for making it. Section 4(2) provides that a person is taken not to have had reasonable grounds for making a representation unless evidence is adduced to the contrary. It will be convenient to refer to these amendments as the "Representation Amendments".
Third, Omega seeks to plead that CAE breached express or implied terms of the Relocation Contract by failing to obtain all risks transit insurance for the simulator on the basis that Omega was the importer on record for the simulator and by failing to obtain "relevant insurance" for the simulator to the value of AUD15,000,000. In the alternative, Omega seeks to plead that, if CAE did obtain insurance of the type it was required to, it breached the terms of the Relocation Contract by failing to provide Omega with information required for Omega to make a claim on the insurance. It will be convenient to refer to these amendments as the "Insurance Amendments".
CAE objects to the amendments seeking to plead the existence and terms of the maintenance contract on the ground that those amendments add nothing to the pleaded case. It objects to the other amendments on three grounds. First, it submits that the amendments are prohibited by cl 4 of the Deed. Second, it submits that the amendments are out of time because the claims they seek to bring are brought outside the one year limitation period set out in cl 20 of the Relocation Contract. Third, it submits that the amendments should not be permitted on case management grounds.

The amendments to paras C5 and C6

In my opinion, Omega should not be permitted to amend its claim to include paras C5 and C6 of the FACLS. The Commercial List Statement is not a statement of claim within the meaning of Uniform Civil Procedure Rule (UCPR) r 14.1 and consequently the rules of pleading set out in UCPR Part 14 do not apply strictly to it. However, List Statements "serve the essential function of pleadings": Resource Equities Ltd (subject to deed of company arrangement) v Garrett [2009] NSWSC 1385 at [204] per McDougall J. Consequently, the rule that a pleading must contain only a summary of the material facts on which the party relies, and not the evidence by which those facts are to be proved (UCPR r 14.7) should apply equally to them. The background facts relevant to the interpretation of the Relocation Contract are not material facts. The pleading of those background facts is only likely to lead to confusion concerning the real issues in dispute. For those reasons, the amendments insofar as they seek to include paras C5 and C6 should not be permitted.

Clause 4 of the Deed

Ms Williams, who appeared for Omega, submitted that it was necessary for the court to determine now whether cl 4 of the Deed prevented Omega from pursuing the claims raised by the Representation Amendments and the Insurance Amendments. It was not possible to allow the amendments on the basis that it was arguable that they were not prevented by cl 4, leaving the issue to be determined at the final hearing. That was because, if the amendments were prohibited by cl 4, it was arguable that the claims they seek to raise could still be pursued in arbitration proceedings. Omega should not be put in the position where it was forced to commence new arbitration proceedings now to protect itself against the possibility that the court will ultimately determine that cl 4 of the Deed prevented the claims based on the amendments from being brought in these proceedings. I accept that submission.
In my opinion, cl 4, and in particular cl 4.1(g), of the Deed do not prevent Omega from bringing the amended claims. Clause 4.1(g) must be read in the context of cl 4 as a whole. Clause 4, and cl 4.3 in particular, plainly contemplate the possibility that one party or the other may seek to amend the Originating Process that it has filed and that the amendment may seek to add a new cause of action. The reference to s 65 of the CPA would be unnecessary if the effect of cls 4.1(f) and (g) were to prevent any amendments or to prevent any amendments that raised a new cause of action.
In my opinion, cl 4.1(g) simply states that the proceedings as they are commenced must be limited to the cause of action pleaded in the Notice of Cross Claim served in the arbitration. The clause does not prevent subsequent amendment in accordance with the relevant rules of court. The purpose of cl 4.1(g) (and cl 4.1(f)) is to prevent either party from obtaining a procedural advantage as a consequence of the termination of the arbitration. If the arbitration had continued and one party or the other wanted to amend its claim then it would be required to obtain a procedural direction from the arbitrator permitting it to do so. Whether a party would be permitted to make the proposed amendment would depend on a number of considerations, including whether the proposed amendment raised a new cause of action that was out of time. Clauses 4.1(g) and (f) are designed to ensure that each party is not in a better position because the other has agreed to the termination of the arbitration and the commencement of the court proceedings. Both parties are required to bring the same claim in the court proceedings. If subsequently they want to amend that claim, they must apply for leave, just as they would have to have applied for leave from the arbitrator if the arbitration had continued.
The point of the previous paragraph is reinforced by cl 4.1(h). It is apparent from that clause that the parties intended to preserve in the court proceedings any limitation defence they had based on cl 20(vii) of the Relocation Contract to the extent that that limitation defence was available before the arbitrator. On the other hand, the parties did not intend any new limitation defence to arise as a result of the termination of the arbitration and the commencement of court proceedings in respect of the causes of action that were the subject of the arbitration. It is for that reason that cl 4.1(h) states that "in determining the date on which that action [ie, an action brought under 4.1(a) or (b)] is brought for the purposes of clause 20(vii) regard may be had to steps taken in the Arbitration preceding the date of filing of the Originating Process". Presumably, the most important steps in the arbitration were the service of the statement of claim and the cross claim. The result is that, in determining the application of the limitation period to the causes of action that were the subject of the arbitration, time ceased to run from the time the relevant claim was made in the arbitration, even though the court proceedings were not commenced until later. That explains why it was critical that the proceedings as originally commenced did not raise causes of action that had not been raised in the arbitration.
Any other interpretation seems to me would have unintended and uncommercial consequences. If the true effect of cl 4 is that the only disputes that can be determined by the court are those that were the subject of the arbitration and no further claims can be brought, there is a real question whether, as Omega submits, cls 4.1(f) and 4.1(g) are unenforceable because they purport to oust the jurisdiction of the court. On the other hand, if the true effect of cl 4 is that no amendment to the court proceedings to raise new causes of action is permissible, leaving it open for other causes of action to be submitted to arbitration in accordance with cl 20 of the Relocation Contract, that would produce the absurd result that part of the parties' dispute was the subject of arbitration proceedings and part was the subject of court proceedings, even though they agreed to terminate the arbitration that was on foot and to resolve their dispute through court proceedings. The parties could not have intended either consequence.

Clause 20(vii) of the Relocation Contract

The parties sought to argue the question whether the claims raised by the FACLS were out of time by reason of cl 20 on a final basis. However, in my opinion, it is neither necessary nor desirable to determine that question on a final basis. The question raises difficult issues concerning the correct construction of cl 20, whether all or some of the Insurance Amendments raised new causes of action and whether the parties can contract out of the six year limitation period provided for in s 236(2) of the ACL in respect of claims for damages for misleading and deceptive conduct in contravention of s 18. Those issues are not appropriate for determination on a final basis on an amendment application. The question is whether the amendments are arguable in the light of cl 20(vii). If they are, and subject to any discretionary considerations, they should be permitted, but on the basis that CAE's defence based on cl 20(vii) is preserved.
In my opinion, it is reasonably arguable that the Insurance Amendments do not raise a new cause of action or if they do, that that cause of action arises out of the same or substantially the same facts as an existing cause of action so that they should be permitted on the basis that they take effect from the date the cross claim was filed in the arbitration.
The Insurance Amendments have two limbs. One is that CAE failed to obtain insurance in accordance with express or implied obligations in the Relocation Contract. The other is that if it did obtain the required insurance it failed to give Omega information which would have permitted it to make a claim on that insurance.
It was alleged in the Notice of Cross Claim served in the arbitration and is alleged in the Amended Commercial List Statement that CAE failed to transport the simulator to Las Vegas in accordance with the Relocation Contract. A particular given of that allegation is that "CAE failed to obtain the contractual transportation insurance for the Simulator". In para 29 of the Notice of Cross Claim, Omega relevantly alleged that "[a]s a result of … CAE failure to abide by the terms of the Contract, Omega has suffered financial loss and damage". It gives as particulars of that loss and damage the diminution in the value of the simulator and lost revenue. That allegation is mirrored in para C72 of the Amended Commercial List Statement (which has been deleted in the proposed FACLS). No doubt, the claim is an abbreviated one. However, the clear allegation is that CAE breached the Relocation Contract by transporting the simulator without obtaining insurance in accordance with the contract. Moreover, it seems to me the claimed loss reasonably relates to that breach, since the implicit allegation is that if the insurance had been obtained, Omega would have been entitled to claim from the insurer the amount that it says it has lost. Consequently, it seems to me to be reasonably arguable that the first limb of the Insurance Amendments pleads precisely the same cause of action as the claim already pleaded.
In addition, it seems to me reasonably arguable that the second limb of the Insurance Amendments arises out of the same facts as the first. What is alleged is that CAE breached the Relocation Contract by failing to take steps to give Omega the benefit of insurance that CAE was contractually obliged to give; and it seems to me that allegation is sufficiently similar to the first to be able to say that they arise out of the same or substantially the same facts so that the amendments should take effect from the date that the original claim was first made.
It is less clear that the Representation Amendments arise out of the same or similar facts as the existing claim. The claim based on those amendments does not depend on a pleaded breach of contract but rather different conduct said to have been engaged in before the Relocation Contract was signed.
However, there are two issues in relation to the Representation Amendments. First, it is reasonably arguable that cl 20, or at least the limitation period contained in cl 20(vii), only applies to contractual claims. That is how the limitation period is expressed. Clause 20(vii) provides for a limitation period of one year "after the breach or alleged breach of the Agreement shall have occurred". Without doing substantial violence to the language or producing uncommercial results, it is not possible to apply that limitation period to a claim for damages for contravention of s 18 of the ACL. As Ms Williams pointed out, if the limitation period is applied literally, it may have the effect that the limitation period expires before the cause of action for a breach of s 18 accrues. Alternatively, it may not apply at all because there is no breach of contract. On the other hand, it is difficult to see how the provision could be applied to claims for contravention of s 18 of the ACL. Mr Williams, who appeared for CAE, suggested that the clause could be read as providing a limitation period of one year after the relevant cause of action had accrued. But that appears to involve a rewriting of the clause.
Second, in my opinion, it is reasonably arguable that the parties cannot contract out of the six year limitation period imposed by s 236(2). There are first instance decisions that have held that a party can: Lane Cove Council v Michael Davies & Associates [2012] NSWSC 727; Firstmac Fiduciary Services Pty Ltd v HSBC Bank of Australia Ltd [2012] NSWSC 1122 (both decided under the equivalent provisions of the Trade Practices Act 1974 (Cth)). And it might be said that those decisions are consistent with others that have held that parties can place contractual limits on the amount recoverable for a contravention of s 18 of the ACL (or its predecessors): see Owners SP 62930 v Kell & Rigby Pty Ltd [2009] NSWSC 1342. On the other hand, it is well accepted that the parties cannot contract out of liability for misleading and deceptive conduct: see, for example, Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546. If the parties can agree to limitations on those rights, it is not easy to see how the line can be drawn between those limitations that are acceptable and those that are not. The issue does not appear to have been considered by the High Court or any intermediate court of appeal. In those circumstances, it remains reasonably arguable that the parties cannot contract out of the six year limitation period.
It follows that it is reasonably arguable that the claims sought to be raised by the amendments to which objection is taken are not barred by cl 20(vii) of the Relocation Contract.

Case management considerations

Omega submits that leave to make the amendments should be refused in accordance with the principles stated by the High Court in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 and ss 56-60 of the CPA. Why that should be so is not apparent. The facts of this case are far removed from those of Aon. The parties have not taken significant steps in the proceedings. Evidence has not been filed. Although directions have been made for the exchange of categories of documents, it does not appear that discovery has been given. The case has not been set down for hearing. Permitting the amendments will not affect the orderly administration of the list. There has been some delay in the conduct of the case, but it is not suggested that CAE will be prejudiced if the amendments are allowed provided it is protected in relation to any limitation defence that it has. For those reasons, I would not refuse the amendments because of case management considerations.

What orders should be made?

As I have said, I think any limitation defence that CAE has should be preserved.
Under s 64 of the CPA, the court may order that any document be amended at any stage of the proceedings. An order may be made even if the effect would be to add a cause of action. However, the amendment only takes effect from the date on which the amendment is made unless s 65 applies: s 64(3). As I have said, under s 65(3) the court may permit an amendment to raise a new cause of action in respect of which the limitation period has expired if the cause of action arises from the same or substantially the same facts as those giving rise to an existing cause of action. In that case, the amendment takes effect from the date on which the proceedings were commenced unless the court orders otherwise.
In the present case, there is a question concerning which if any of the amendments sought to be made by Omega to which objection is taken may be made under s 65; and there is a question whether, to the extent that they are made under s 65, the court should make an order that the amendments take effect other than the date on which the proceedings were commenced. It is not appropriate to resolve those questions in the context of the present application.
In those circumstances, in my opinion, it is appropriate to leave to the trial judge the question from when the amendments should take effect.
That leaves the question of costs. Omega has been substantially successful in its application to amend. However, whether the claim based on those amendments ultimately succeeds is a matter for the trial. In those circumstances, in my opinion, the appropriate order is that the costs of the motion be Omega's costs in the cause.

Orders

The orders of the court are: 1. The plaintiff be granted leave to file and serve the Further Amended Commercial List Statement (FACLS) in the form of the document which is annexure A to the plaintiff's motion filed on 21 April 2015 (the Motion) excluding paragraphs C5 and C6 of that document. 2. The amendments made in the FACLS are to be taken to have effect on the date or dates determined by the trial judge. 3. The plaintiff pay the defendant's costs thrown away by reason of the amendments. 4. The costs of the Motion be the plaintiff's costs in the cause.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 June 2015

Australian Consumer Law Civil Procedure Act 2005(NSW)

Trade Practices Act 1974(Cth)

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