Should leave be granted in the exercise of the Court's discretion?
- Even though the Owners Corporation's amendments are ones that are caught by the language of s 65(2)(b), the Court retains a discretion whether to permit them. That discretion is to be exercised in accordance with ss 58 and 64(2) of the CPA, which in turn requires the Court to have regard to ss 56 and 57 of the CPA: Greenwood v Papademetri [2007] NSWCA 221 at [35].
- Thus, in this application, the Court may have regard to a range of factors including the nature and degree of any prejudice that Loulach Steel would suffer if the amendments were made; the knowledge Loulach Steel had of the proceedings during the limitation period; and other matters such as the facts that resulted in the limitation period having expired and any culpability for the delay in starting the action: Greenwood v Papademetri [2007] NSWCA 221 at [35] and [50].
- Those factors needs to be weighed against the nature and importance of the amendments to the Owners Corporation and whether granting leave would provide for the just determination of the proceedings in a way that facilitates the just, quick and cheap resolution of the real issues in the proceedings: Civil Procedure Act 2005 (NSW), ss 56(1) and 57(1); Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [102].
- Loulach Steel submits that the Court should, in the exercise of its discretion, refuse leave to amend. Its primary opposition is that granting the amendments will cause it real prejudice. It argues that the Owners Corporation's delay in commencing these proceedings until one week prior to the expiry of the seven year limitation period means that it has lost the opportunity to bring potentially valuable cross-claims against the sub-contractors who were responsible for the allegedly defective works.
- Loulach Steel argues that the prejudice arising from the loss of its cross-claim is "obvious and significant" and typically decisive, citing Tekno Ceramics Pty Limited v Milat [2003] NSWCA 254 at [41]; The Owners - SP 67635 v Metlej Developments Pty Limited [2013] NSWSC 1564 at [12]; The Owners - Strata Plan 76841 v Ceerose Pty Ltd [2016] NSWSC 1545, supported on appeal in Owners Corporation Strata Plan 76841 v Ceerose Pty Ltd [2017] NSWCA 140 at [31] and [32].
- As the Owners Corporation's Counsel noted, the cases cited by Loulach Steel did not deal with an amendment application to correct a mistake in the name of a party, as contemplated by s 65(2)(b) of the CPA.
- In Tekno Ceramics, the Court of Appeal overturned a decision by a District Court Judge which granted an employee an extension of time of more than a year in which to bring an action against his employer for damages for personal injury. The employer had lost a viable cross-claim for contribution against a third party, but the prejudice occasioned by that loss had not been taken into account by the District Court Judge. In re-exercising the discretion, the Court of Appeal concluded that the prejudice was obvious and significant and meant it was not just and reasonable to extend the limitation period.
- In this case, unlike in Tekno, the Court is not being asked to extend a limitation period. While the practical effect of an amendment by reason of s 65(2)(b) enables a claim to be brought against Loulach Steel that would otherwise be out of time, the default position is that an amendment to correct a mistake in the name of a party takes effect from the date the proceedings are commenced, unless the Court otherwise orders: Civil Procedure Act 2005 (NSW), s 65(3).
- In Metlej and Ceerose, both building cases, the amendments sought to add additional defects to HBA warranty claims that had been brought in time and in respect of which the builders could no longer bring cross-claims as a result of the subsequent expiry of limitation periods. In both cases, the expert reports which identified the defects the subject of the proposed amendments were served well after the proceedings were commenced and after the critical dates on which the relevant limitation periods had expired. In those circumstances, and having been satisfied that the cross-claims were viable, the Court refused to grant leave to amend as the loss of the cross-claims resulted in prejudice that was significant and obvious.
- The position in this case is, to my mind, different to that faced by the Courts in Metlej and Ceerose. Here, the defects the subject of the claims made in the proceedings were notified to Loulach Developments and, according to Loulach Steel's interpretation of Ms Anne's communications, to Loulach Steel itself, in December 2018 when the three expert reports were provided, well before the proceedings were commenced.
- The evidence also indicates that the Loulach entities understood the nature of the defects in those reports. They responded to each defect and accepted responsibility for some of them. While a fourth expert report is also referred to in the particulars to the list statement, the evidence from Mr Draybi is that the fourth report refers to the defects in the earlier reports and responds to Ms Anne's email dated 19 February 2019, rather than raising new or different defects. In those circumstances, I am also not persuaded by Loulach Steel's submission that the particularisation of the defects by reference to the expert reports causes real difficulty in understanding the case against it or which cross-claims might be relevant. Nor do I accept that the approach to particularisation in the list statement is a basis on which leave to amend should be refused in this case.
- The Owners Corporation submits that, as s 65(2)(b) is a remedial provision that enables proceedings that are out of time to be advanced due to a mistake, it necessarily means that any cross-claims made by a builder who is the correct party that is joined would be out of time. It follows, it submits, that the loss of a cross-claim by Loulach Steel should not be fatal to its application to amend. Put another way, if the loss of a cross-claim were fatal, then the provision would have no work to do.
- To the extent the Owners Corporation suggests that the loss of viable cross-claims is not a relevant consideration, I am not persuaded by that submission. As noted at [36] and [37], the prejudice caused to Loulach Steel by the loss of cross-claims (assuming such prejudice is established) may be taken into account and weighed against the prejudice caused to the Owners Corporation if leave to amend is refused.
- For the loss of cross-claims to amount to prejudice, Loulach Steel must show that it has been deprived of bringing cross-claims which were viable and realistic, rather than fanciful or theoretical: The Owners - SP 67635 v Metlej Developments Pty Limited [2013] NSWSC 1564 at [13]; Creevey v Barrois [2005] NSWCA 264 at [56].
- In support of its submission that it has lost viable cross-claims, Loulach Steel relies on two affidavits from its solicitor, Mr Draybi. In his first affidavit, Mr Draybi summarises what he asserts to be the defects referred to in the expert reports and identifies "potentially liable sub-contractors" under seven general headings which appear to relate to the type of work the sub-contractors were engaged to provide or which materials were to be supplied. Mr Draybi's first affidavit exhibits more than 300 pages of documents relating to the named sub-contractors, such as invoices, payment claims under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA Act), emails relating to payments, installation certificates and other certifications of work done.
- In his second affidavit, Mr Draybi identifies that all but two of the named sub-contractors continue to trade, namely Viewpoint Aluminium Windows & Doors Pty Limited and Vogue Windows Pty Limited who did work or supplied materials in relation to "windows and glazing". As they were deregistered in 2013 and 2014, some years prior to the limitation period expiring, Loulach Steel had no viable or realistic cross-claims against them: The Owners - Strata Plan 76841 v Ceerose Pty Ltd [2016] NSWSC 1545 at [75].
- As to the nature of the cross-claims being asserted, Loulach Steel's Counsel identified that they were cross-claims for breaches of the warranties implied into contracts by s 18B(2) of the HBA. Those contracts would be the sub-contracts between Loulach Steel and its sub-contractors.
- Thus, for Loulach Steel's cross-claims, the seven year period under s 18E of the HBA would run from the date the work was completed under the sub-contact, not from when completion took place under the main residential building works contract between Loulach Steel and the Owners Corporation's predecessor in title, or the notional contract between Loulach Developments as developer and the Owners Corporation: Owners - SP 74602 v Brookfield Australia Investments Limited [2015] NSWSC 1916 at [79]. Those dates may be coterminous but, as the Owners Corporation's Counsel submits, they may not be and will depend on what the sub-contracts provide and the dates of practical completion of the works: Home Building Act 1989 (NSW) ss 3B, 3C and 18B(2).
- Based on the material produced to the Court, it is difficult to assess whether Loulach Steel had viable cross-claims against the other named sub-contractors in respect of the defects claimed in the proceedings and, if they existed, whether they were lost prior to or during the one week period after the date on which the proceedings were commenced. No sub-contracts are in evidence and Loulach Steel has not been explained how each particular sub-contractor named in Mr Draybi's affidavit is responsible for the failure that gives rise to the particular defects as identified by number and description in the three expert reports.
- There are also documents which indicate that the works undertaken by the named sub-contractors were completed more than seven years before the commencement of the proceedings.
- The installation certificates suggest that the works done by Universeal Waterproofing in respect of the internal wet areas were completed by 24 March 2012, with workmanship guaranteed for 10 years, and that the works in respect of the external wet areas were completed by 31 May 2012, with workmanship was guaranteed for seven years.
- The documents relating to "cladding" sub-contractors include emails and final payment claims under the SOPA Act which suggest that any sub-contracted works were completed before 3 June 2012.
- In relation to fire certification, the tax invoices from Innovative Fire Pty Ltd, the certificate of compliance provided by Extreme Fire Solutions and Electrical Services and a tax invoice from Defire (NSW) Pty Limited suggest that fire certification works were completed sometime during the period from 29 March to 30 May 2012.
- The documents relating to the "glass handrails/balustrades", "plumbing" and "concreting" sub-contractors do not provide details of the dates the works were undertaken and the lay evidence does not address that issue.
- There are three other sub-contractors who are asserted to be candidates for cross-claims relevant to the alleged defects, namely HKMA Engineers, a division of TRM Group Pty Limited, who prepared building structural documents and certified the structural elements of the building; Zahinar Architects, a division of TRM Group Pty Limited, who designed the building; and Joseph and Sylvania Chalhoub trading as Batifast Tiling, who carried out tiling work. No attempt is made to identify when the works in respect of those entities were carried out and completed or which particular defect their works relate to and which are said to give rise to potential cross-claims.
- It is not fanciful to suggest that, at one time, Loulach Steel might have had cross-claims against one or other of the sub-contractors referred to in Mr Draybi's affidavit. However, based on the materials before the Court, I am persuaded by the submission advanced by the Owners Corporation that Loulach Steel has not established real prejudice as the asserted cross-claims were likely already lost when the proceedings were commenced.
- Even if I were to accept that Loulach Steel had some cross-claims available to it as at the date the proceedings were commenced, I am not persuaded that it has established real prejudice by demonstrating that it was likely or viable for it to have brought them if it had been named as the builder when the proceedings were commenced and before any relevant limitation period expired. As the Owners Corporation submits, by the time Loulach Developments instructed Mr Draybi on 10 July 2019, the seven year limitation period based on the occupation certificate had expired. During that time, Loulach Developments had also failed to take steps which were available to it to deflect its liability by way of cross-claims against Loulach Steel and its sub-contractors.
- Loulach Steel submits that the relevant delay causing prejudice is not the week or so between 26 June and 5 July 2019 but, for the purposes of s 58 of the CPA, is the period of many years of delay in bringing the proceedings. That delay, it submits, means that Loulach Steel lost its cross-claims in the "chaotic circumstances" that eventuated, which would not have occurred if the Owners Corporation had acted expeditiously and commenced the proceedings earlier.
- The Owners Corporation contends that it is irrelevant to an application under s 65(2)(b) of the CPA that it commenced action only one week prior to the seven year limitation period expiring.
- Section 58(2)(b)(ii) of the CPA permits the Court to take into account the extent to which a party has approached the proceedings with due expedition. That said, it does not seem to me that the Owners Corporation has been as tardy in commencing the proceedings as Loulach Steel contends, or that any delay in doing so has been shown to have led to real prejudice to Loulach Steel.
- The three expert reports that identify the claimed defects were obtained by the Owners Corporation during 2018. The first report raises the possibility of the cladding defect and recommends laboratory testing. The third report outlines the results of that testing and details the nature of the cladding defect, which appears to be a significant defect as it relates to all of the panelling on the building's façade.
- Within a few weeks of receiving the third report, the Owners Corporation instructed Ms Amanatiadis. Part of the delay in commencing proceedings after Ms Amanatiadis received the expert reports can be explained by the enquiries that she made through Council to ascertain the name of the builder and then engaging with Loulach Developments in an effort to have the defects rectified prior to commencing proceedings. In those circumstances, the relevant delay in commencing proceedings is, to my mind, better characterised as a matter a few months, rather than years.
- Loulach Developments took thirteen weeks to serve its list response, which identified the mistake in the name of the builder, and another six and a half weeks to respond to the Owners Corporation's request to consent to an amendment to join Loulach Steel. Even if the Owners Corporation had acted expeditiously and commenced the proceedings earlier, say by early March 2019, based on Loulach Developments' approach to the proceedings, Loulach Steel was likely to have lost cross-claims by the time the mistake was identified. It would also have been in a very similar position to that which it would have been in if correctly named as a defendant when these proceedings were commenced.
- Loulach Steel also submits that, in exercising its discretion, the Court should take into account the existence of "pointers" in other documents and information available to the Owners Corporation's solicitor prior to commencing proceedings that indicated that Loulach Steel was a relevant party. The existence of those pointers suggests, so Loulach Steel submits, that the Owners Corporation's solicitor was not as diligent as she should have been.
- I am not persuaded by Loulach Steel's submission that the references to Loulach Steel in the Council documents and the reference to Loulach Steel on the NSW Fair Trading "Contractor and Tradespersons" licence check database as at 26 February 2020 are of significance in the exercise of the Court's discretion in this case.
- As noted at [11], the documents received by Council and available on its website at the time of Ms Amanatiadis' inquiries named the builder as Loulach Developments. Ms Amanatiadis' understanding that Loulach Developments was the builder was then made clear in her letter to Loulach Developments dated 17 December 2018. Ms Anne's response was open to two interpretations, one of which was that Loulach Developments was the builder, as was accepted at the hearing. Based on Ms Amanatiadis' evidence, I am satisfied that a genuine mistake was made in naming Loulach Developments as the builder. That mistake is part of the foundation for my opinion that the Owners Corporation's application comes within the terms of s 65(2)(b) of the CPA.
- This is a case in which the wrong party that was sued as the builder is a related company of the actual builder. Both the wrong and the right party were on notice that legal action might be taken against the builder and of the nature of the defects that were claimed to exist, well prior to the commencement of the proceedings. The emails from Ms Anne did not make clear that Loulach Steel was the builder, nor did the documents that were available from the Council.
- As a related entity, and based on the communications involving Simon Loulach, I also consider it open to infer that Loulach Steel was on notice of the commencement of the proceedings, the nature of the claims made and the mistake in the name of the builder. While not obliged to do so, at the time the proceedings were commenced, it was open to Loulach Developments and Loulach Steel to correct the obvious mistake and inform the Owners Corporation that Loulach Steel was the builder. For whatever reason, nothing was said until 3 October 2019.
- Having regard to all of these matters, it seems to me that the prejudice to Loulach Steel, to the extent it exists, is not solely of the Owners Corporation's creation or fault, as Loulach Steel contends.
- As to case management, the Owners Corporation has not delayed bringing its application to amend. Granting leave to amend at this time would not be expected to lead to significant delays in the proceedings given the nature of the claims made, the stage the proceedings have reached and the relationship between the defendant and third party respondent.
- Overall, this is a case which, in some respects, is finely balanced. Each party claims they will suffer prejudice if the outcome goes against them.
- Having weighed all the factors and submissions, I have come to the conclusion that the dictates of justice favour the Owners Corporation being granted leave to amend. This is primarily because refusing leave would deny the Owners Corporation of the opportunity to have its defects claim against the builder heard and determined on its merits and it seeks to make the amendments by invoking a remedial provision to correct a mistake in the name of a party.
- I am also not persuaded that Loulach Steel has established that it will suffer real and significant prejudice as a result of the loss of viable cross-claims that it was in a position to bring if it had been named as a party when the proceedings were commenced, or that any such prejudice outweighs the prejudice that would be occasioned to the Owners Corporation if leave to amend was refused. It is also significant, in my view, that the Owners Corporation has not delayed making the application to amend and that Loulach Steel has been on notice of the Owners Corporation's mistake, the nature of the defects and the proceedings during the limitation period.
- Accordingly, I will grant leave to the Owners Corporation to amend its summons and technology and construction list statement on the basis proposed at the hearing, being that Loulach Steel is named as the builder in place of Loulach Developments and joined as a second defendant. In accordance with s 65(3) of the CPA, the amendment is to take effect from the date the proceedings were commenced on 26 June 2019.