PORT PIRIE CITY & DIST COUNCIL v LEENDERS & PTNRS No. SCCIV-99-839 [2001] SASC 208

PORT PIRIE CITY AND DISTRICTS COUNCIL V LEENDERS & PARTNERS PTY LTD

LANDER J. This is a defendant's appeal from orders made by a Master on 26 April. I will refer to the orders a little later in these reasons.

The plaintiff commenced these proceedings against the defendant on 13 July 1999. The plaintiff's claim is for contribution or indemnity pursuant to the Wrongs Act 1936 (SA).

The plaintiff had previously been sued by Letnim Pty Ltd (Letnim).

Letnim claimed in those earlier proceedings that the plaintiff had been guilty of negligence and in breach of a duty of care it owed to Letnim in relation to the design of footings for a shopping centre at Port Pirie.

Letnim claimed damages of $2,086,034. The plaintiff filed an offer to consent to judgment in those proceedings in the sum of $350,000 which sum was accepted by Letnim.

The plaintiff claimed against the defendant in these proceedings that the plaintiff itself had been negligent in respect of the design of the footing and had acted reasonably in settling the Letnim proceedings. It claimed contribution against the defendant claiming that the defendant had been also guilty of negligence in the exercise of its statutory duty in issuing a building permit, and that it acted in breach of the duty of care it owed to Letnim.

On 11 August 1999 the defendant filed an appearance and on 20 January 2000 a defence. It denied any liability to the plaintiff. The defendant filed its list of documents on 1 March 2000 and the plaintiff its list on 2 March 2000.

On 9 June 2000 the defendant applied to adjourn the pre-trial conference set for 13 June 2000 because it intended to seek leave to join a third party to these proceedings. An affidavit filed in support of the adjournment application shows that the defendant first informed the Court that it intended to seek to join a third party on 2 March 2000. Indeed the Master's fiat shows that the defendant was advised at that time that "an application for leave should be made expeditiously". On 13 June the pre trial conference was adjourned to 8 August with a direction that the defendant make its application for leave by no later than 4 July. On 4 July 2000 the defendant sought, and on 27 July 2000, obtained leave to join Mr Kenneth Short and Mr Rocco Katnich as third parties.

On 31 July 2000 the defendant filed a Statement of Claim directed to the third parties and on 14 August 2000 filed a third party notice. I am not sure how the defendant could file a Statement of Claim before the third party proceedings were instituted, but nothing turns on that.

It was claimed in the third party proceedings that Mr Short was employed by the defendant as a building surveyor to provide building surveying services to the Council and to advise on construction applications. It was further claimed that Mr Katnich was at the relevant time an employee of Mr Short.

The defendant further claimed that in June 1979 it received a report written by Mr Katnich as the employee of Mr Short advising that the footing calculations had been checked and recommending that the defendant approve the construction of the shopping centre. It is claimed that the third parties were in breach of duties owed both to the plaintiff and the defendant. It further claimed that the third parties were in breach of contract between the defendant and the thereof parties.

On 8 August the second pre trial conference was cancelled.

On 2 November 2000 the defendant sought an order for substituted service. In the affidavit accompanying the application the defendant's solicitor deposed that process servers had been instructed on 14 August 2000 to serve Mr Katnich with the third party notice.

The defendant's solicitors had been advised on 24 August 2000 that Mr Katnich could not be served because he was "currently sailing a yacht around the world and his present whereabouts were unknown but that he was due to return to Adelaide in mid September".

An attempt was made again on 26 September 2000 to serve Mr Katnich. The process server was advised that Mr Katnich was in Adelaide and a message was left for him to contact the process server.

On 2 November 2000 an order for substituted service was made.

On 23 November 2000 the third parties filed an appearance. On 14 December 2000 a Master gave leave to join Short and Katnich. The defendant filed an amended third party Statement of Claim on 9 January 2000.

The amended Statement of Claim is directed to a third party "Short and Katnich". It is clear that the amended Statement of Claim names a different entity to the entity joined on the original third party notice and referred to in the original Statement of Claim.

It is claimed in paragraph 3 of the amended Statement of Claim that Short and Katnich was a firm of building surveyors of which the principles were Mr Kenneth Short and Mr Rocco Katnich.

On 10 January 2001 an amended third party notice was filed directed to Short and Katnich. Again the originating proceedings were issued after the Statement of Claim was filed and served.

On 18 January 2001 Short and Katnich appeared. The appearance conforms with r 36.04 in that the partners have appeared in their own names.

The defence, which was filed on 2 March 2001, admits all of the factual matters alleged in the Statement of Claim but does not plead to the claims of negligence and breach of contract. Of course if r 46A applies the third parties were not obliged to deny any of those allegations. The defendant will have to prove negligence and breach of contract. But the third parties' defence raises no positive case. It is difficult to understand how the third parties could present a case on the pleading as it presently stands. Moreover the defence does not address the defendant's application for an extension of time within which to institute the third party proceedings.

On 26 April 2001 the Master made the following orders:

"1 I dispense with the need for a certificate of readiness in respect of the action between the pltf and deft.

2 I direct the action between the pltf and the deft proceed to trial (5 days).

3 I direct that by the Listing Conference date the pltf file copy documents in respect of the action between the pltf and the deft.

4 I extend the time within which the third parties shall file and serve a list of documents for 21 days from today's date.

Since the Master made this order the matter has been listed for trial on 19 November 2001.

This appeal is against paragraph 2 of the Master's order that the action between the plaintiff and the defendant proceed to trial independently of the defendant's claim against the third party. The defendant claims that a trial of the plaintiff's claim independent of its claim against the third parties would prejudice the defendant.

The plaintiff indicated that it neither supported nor opposed the appeal. Its only interest was to assume that the matter was not adjourned and the trial of its action was heard on 19 November. The plaintiff's attitude cannot be criticised. Its trial has been delayed now by some 12 months.

The third parties' solicitor attended on the appeal. The solicitors are in a difficult position. Originally they were instructed to act by the third parties' insurers, HIH Insurance. Those instructions were terminated when a provisional liquidator was appointed to HIH Insurance on 15 March 2001.

However, even during the period of their retainer by HIH Insurance the third parties' solicitor had considerable difficulties in obtaining instructions from the third parties.

Mr Short is deceased. I am not sure when he died. That is not clear from the evidence on the file. Mr Katnich is on a yacht somewhere off the coast of Malayasia. He can only be contacted by e-mail. Apparently he comes ashore from time to time and dials up the internet for any e-mails for him. It is apparent, so his solicitors assert in letters to the other parties, that Mr Katnich has no understanding of his predicament.

The third parties' solicitors have not been able to obtain instructions from Mr Katnich. That explains, it was submitted, the form of the third parties defence.

There is no doubt that the pleadings between the defendant and the third parties need amendment. The Statement of Claim must recognise Mr Short's death. The defence, if instructions are received, will have to be amended not only to respond the amendments to the Statement of Claim but also, if it is Mr Katnich's instructions, to plead a defence.

Rule 37.05 of the Supreme Court Rules 1987 (SA) provides:

"37.05 Unless the Court otherwise directs either at or before the trial where a third party is defending any part of the proceedings:

(a) The third party proceedings will be tried together with the trial of the plaintiff's action;

(b) The third party is to be at liberty at such trial to cross-examine the witnesses of the other parties to the extent permitted by the trial Judge;

(c) The third party is to be at liberty to adduce evidence at that trial on the issues as between the plaintiff and the defendant and between the defendant and the third party;

(d) The third party issues are to be determined at such trial;

(e) The third party is to be bound by the result of the trial between the plaintiff and the defendant."

Paragraph 2 of the Master's order means that the third party proceedings will be heard independently of the action between the plaintiff and the defendant. That will mean that the defendant will be put to the cost of two trials. In that regard the defendant will suffer prejudice.

It is the general rule, as r 37.05 provides, that third party proceedings are heard at the same time as the proceedings between the plaintiff and the defendant. Indeed that is the very purpose of third party proceedings.

There are good reasons for that. First, a trial which involves all parties simultaneously is the most cost effective way of deciding competing rights. Secondly, all parties obtain a decision at the same time. There is no hiatus when one party is subject to a judgment but cannot prosecute a claim for contribution or indemnity. The plaintiff in this very case is an example of a party prejudiced by a claim proceeding without all parties, who might be called upon to contribute, being present. Thirdly, it avoids the possibility of conflicting findings and conflicting verdicts. It is inimical to the administration of justice for the Court to be called upon to consider the same factual circumstances twice. One court may be presented with different material to another or reach different views on the credibility or reliability of witnesses with the result that different findings of fact are made, and different and inconsistent verdicts reached.

The purpose of third party proceedings is to bring all interested parties before the court at the same times and to decide all of the common and disparate issues simultaneously, thus binding all parties.

However, all general rules are subject to exceptions. It will not always be possible to hear the third party proceedings at the same time as the proceedings between the plaintiff and defendant.

It was put by the appellant's counsel, Mr Greenwell, that there could not be a separation of the trial of the plaintiff's proceedings against the defendant and the third party proceedings unless there were exceptional circumstances. He relied upon Godfrey v Nominal Defendant; Burgess (1964) NSWR 214 and AMP Fire and General Insurance Ltd v Dixon [1982] VicRp 83; [1982] VR 833 at 836. He argued that the third parties had not established exceptional circumstances and therefore the Master's decision was wrong.

The expression "exceptional circumstances" is derived from a decision in Standen v G H Varley Pty Ltd & Williams (1956), SR (NSW) 346 at 347. In that case it was held:

"... it is only in exceptional circumstances that the power should be exercised, since it is obvious that as a matter both of convenience and justice it is most desirable that the same tribunal should, at one and the same time, determine the rights and liabilities of all the parties concerned. Indeed it was for that very reason that the third party procedure was introduced ..."

That case was apparently followed in Godfrey v Nominal Defendant; Burgess (1964) NSWR 214 at 216 although in that case the Full Court of the Supreme Court said:

"However, there may be, in particular cases, countervailing consideration sufficiently compelling to outweigh the advantages of third party procedure to which Scrutten LJ referred."

In the second case relied upon the court was concerned with circumstances where a party was seeking to have the third party proceedings heard in advance of the proceedings between the plaintiff and the defendant. The Full Court of the Supreme Court of Victoria determined that an order from a Master directing the trial of third party proceedings before the primary proceedings ought to be set aside. In lieu thereof the court ordered that there be separate trials of the issues between the defendants and a third party but that such trial take place after the trial of the issues between the plaintiffs and the defendants.

I think it is right to say, as Mr Greenwell argued, that in that case the court determined that it would only be in exceptional circumstances that third party proceedings would be heard in advance of the primary proceedings. That, however, is not the point in issue in this case.

In my opinion, it is not useful to impose tests upon parties in matters of procedure which are not provided for in the Rules themselves. It is not useful to require a party to establish exceptional circumstances before an order for the separate trial of third party proceedings is made.

Generally, for the reasons I have given, third party proceedings will be held at the same time as the primary proceedings. However, there will be some cases where it is inappropriate for the third party proceedings to be heard at the same time as the primary proceedings. It is not possible to say that those circumstances will always have to be exceptional. Those circumstances will give rise to separate trials when it is in the interests of justice so to do.

In my opinion, the test in all matters of procedure is whether the procedure provided for in the rule is appropriate for the particular matter then before the court. Usually the procedure provided for in the rules will be appropriate for all matters. There will, however, be times when the procedure provided for in the rules is not appropriate. That is because the procedure, if enforced rigorously, will give rise to an injustice. The rules are not to be applied so as to create an injustice. The purpose of the rules is to provide a procedure whereby parties can obtain justice: Jackamurra v Krakauer (1998) 72 ALJR 819 at 825. They cannot be used as an instrument of oppression.

The sole test, on an application of this kind, in my opinion, is whether it would be just in the circumstances before the court to order separate trials.

In considering whether such an order should be made the Court will exercise a discretion which requires a consideration of each party's position.

In this case the Master did not give reasons for the order. That is no criticism of the Master. It is clear from a reading of the file why it is that he made this order. It can be assumed that he believed the proceedings between the defendant and the third party were not likely to be ready for trial for a further period of time and in those circumstances, he believed that the plaintiff should be allowed to proceed to trial.

Since making his decision an affidavit has been filed by Ms Croser, a solicitor employed by the appellant's solicitors, who has exhibited a letter from the solicitors acting for the third parties.

"We refer to your letter of 17 May 2001 regarding your outstanding account for photocopying. As you will be aware, we were instructed by HIH Insurance to act for the partnership of Short & Katnich in respect of this claim and we requested copy documents from you on HIH's instructions. On 15 March 2001 a provisional liquidator was appointed to HIH. Our instructions were terminated immediately and no subsequent accounts have been met by HIH.

The situation has been made more difficult by the communication difficulties we are having with Mr Katnich who is on an indefinite vacation overseas and lives aboard his yacht. Our communications with him have been, at best, sporadic. Mr Short is deceased. To date we are yet to receive instructions to act direct for Mr Katnich. In the event that we are so instructed, we will refer your account to him.

We request your forbearance given the unusual circumstances outlined above.

Please contact the writer if you wish to discuss the matter."

I think it is likely that there will be considerable delay in the third party proceedings. Mr Short is apparently dead. The other third party, Mr Katnich, apparently has not given instructions for some time. The third party proceedings will have to be regularised.

In my opinion it is not possible to have the trial of the primary proceedings and the third party proceedings at the same time without disadvantaging both the plaintiff and the third parties. The plaintiff will be disadvantaged because it is likely that its trial will have to be postponed. The second third party is likely to be disadvantaged because he will not have had an opportunity of properly instructing his solicitors and putting his pleadings in order.

If there is to be a trial of the proceedings between the plaintiff and the defendant separate to the trial of the third party proceedings, then there is a possibility that the defendant will be disadvantaged. The defendant might suffer any of the disadvantages which I have referred to earlier as being the reasons underpinning the rationale for the general rule that the primary and third party proceedings are heard at the same time.

In the end result it is a matter of weighing all of the parties' interests.

The Master has done that. He has concluded that, in the circumstances, it would be appropriate to separate the two trials.

It seems to me, it cannot be said that the Master's order is in error. I think it was within the exercise of his discretion to require the defendant to meet the plaintiff's claim in advance of the defendant's claim for indemnity from the third party.

I cannot say that he is wrong. Indeed, I think, on balance his judgment is correct.