The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd

Facts

1. To effect the work required under the first and second contracts, the contractor engaged with a number of subcontractors, including Ausrise Aluminium Pty Ltd (Ausrise), which saw aluminium composite panels (ACPs) installed at the casino.
2. The plaintiffs and contractor entered into the third contract in December 2015, in the form of a deed. The contractor entered into a further subcontract with Ausrise.
3. In April 2020, these proceedings were commenced in respect of the first contract, where the ACPs are said to have been non-compliant. In September 2020, the plaintiffs amended their claim to also seek damages in respect of the second contract. On 10 June 2021, the contractor filed cross-claims against five entities, including Ausrise. In October 2021, Ausrise filed a response which inter alia pleaded that the claim against it was statute-barred as the cause of action accrued more than six years before the commencement of the proceedings on 10 June 2021, being the date that the cross-claim was filed.
4. In late 2021, a consultant identified further ACPs at the casino. In March 2022, the plaintiffs notified the contractor that additional ACPs had been found, which had been installed under the third contract. Further, the plaintiffs intended to collect samples and test the ACPs as soon as access was available and, if the ACPs were non-compliant, to add an additional claim in these proceedings. There was no response.
5. On 14 July 2022, the plaintiffs' solicitor informed the contractor's solicitor that further ACPs had been identified and tested. There was no response. A further letter in like terms was sent on 25 July 2022. There was no response.
6. On 26 September 2022, the plaintiffs' solicitor provided the contractor's solicitor with proposed amended pleadings. However, the plaintiffs' solicitor advised that they would need to amend the document further once the plaintiffs heard from the Department of Planning, Industry and Environment as to the works which would need to be effected. The plaintiffs' solicitor proposed to recirculate the amended pleadings once that information was to hand so that the contractor would only need to consider the proposed amended pleading once. There was no response.
7. On 4 November 2022, the plaintiffs' solicitor provided the contractor's solicitor with a copy of the consultant's report on the further ACPs. On 1 December 2022, the Department issued an order, which I understand required works to be effected to the casino to deal with the problem concerning the additional ACPs. On 23 December 2022, the plaintiffs' solicitor circulated amended pleadings, which took the Department's order into account. There was no response. The offices of the defendant's solicitor had closed for Christmas. The contractor's solicitor did not return to the office until the end of January 2023.
8. On 2 February 2023, the plaintiffs' solicitor sent a follow-up letter. There was no response. On 6 February 2022, the plaintiffs filed a motion seeking to amend its pleadings. In support, the plaintiffs' solicitor, Marie-Louise Scarf, swore an affidavit attaching the correspondence to which I have referred.
9. Whilst the evidence of quantum is yet to be filed, it is thought that the quantum sought in respect of the first and second contracts is significantly greater than that sought in respect of the third contract. The cost of rectification under the first and second contracts is thought to be several million dollars, whilst the cost of rectification under the third contract is more like hundreds of thousands of dollars.
10. The contractor's solicitor, Jonathan Newby, deposed that his client would suffer prejudice in the event that the pleadings were amended as sought. Under the building contract, the contractor had agreed to exclude the operation of the proportionate liability regime in Part 4 of the Civil Liability Act 2002 (NSW). Consequently, the contractor had sought to 'pass through' any liability it may have to the plaintiffs by cross-claims. Ausrise was the only cross-defendant against whom the contractor would wish to cross-claim in respect of the additional matter now sought to be raised. Any cross-claim against Ausrise in respect of the third contract would likely be time-barred.

Submissions

1. The plaintiffs accepted that the contractor's inability to sue Ausrise by cross-claim was a significant factor that weighed in the Court's determination as to whether to grant leave to amend. However, that inability was not dispositive. Ausrise had already pleaded that the claims under the first and second contracts were time-barred. This may be referable to the fact that the contracts between the contractor and its subcontractors were not by deed, such that a shorter limitation period applied. The contractor's choice in this regard should not be visited upon the plaintiffs, where their claim against the contractor was within time.
2. The plaintiffs submitted further that it was open to the contractor to move the Court to back-date any consequential amendment of the cross-claim to 10 June 2022 under section 65(2) of the Civil Procedure Act 2005 (NSW). The contractor accepted that, if such an order was made by the Court, its additional claim against Ausrise would not be time-barred.

Consideration

1. As Sackar J observed in Owners - SP 67635 v Metlej Developments Pty Ltd [2013] NSWSC 1564 at [12]: The prejudice occasioned by the deprivation from a defendant of a means to deflect liability to a third party by reason of a delay by the plaintiff in including a particular claim in its pleadings against the defendants, is a factor particularly relevant to the exercise of my discretion in the present application.
2. It is also a critical factor to be considered on this application. Here, of course, there is no suggestion that the delay in adding this potential claim is the plaintiffs' fault per se as the alleged defect appears to be latent. There is no suggestion that the plaintiffs have been dilatory in identifying the problems with the building.
3. The prejudice which the defendant may suffer is the prospect that it cannot cross-claim against Ausrise. It is safe to proceed on the assumption that Ausrise will contend that the additional claim is time-barred and oppose any back-dating of an amended cross-claim to 10 June 2021.
4. What is not known is how the Court may deal with such an application by the contractor. I was invited by the contractor to defer determination of this motion until such time as it could be heard together with a motion brought by the contractor to amend its cross-claim against Ausrise and have the amended cross-claim backdated to 10 June 2021. I decline to make such an order. There is enough information to exercise the Court's discretion in respect of the amendment application now. Doing so will also make the next judge's task in deciding any future application easier.
5. In addition to the prejudice which the defendant contractor may suffer, I take into account that the plaintiffs' proposed additional claim against the contractor is, without argument, within time.
6. Second and relatedly, If I refuse leave to amend on the basis of the contractor's inability to recover from its subcontractor, it is open to the plaintiffs to commence separate proceedings, presumably in the District Court, seeking the same damages as are sought to be added to these proceedings. The contractor would have to defend the District Court proceedings notwithstanding that it may not be entitled to seek to recover any loss from its subcontractor. It would be undesirable to have a multiplicity of proceedings between the parties in respect of the same issues of fact and law.
7. Third, the plaintiffs' claim is not suggested to be unmeritorious.
8. Fourth, the contract between the contractor and Ausrise includes an indemnity provision: clause 14.3. Even if the contractor is unable to recover any damages from Ausrise by cross-claim in these proceedings, it may enforce the contractual indemnity. There is a carve-out in the indemnity clause that provides that the indemnity does not apply "to the extent" that the damages are caused by "the negligence of the Contractor or the Principal." The contractor submitted that this carve-out may have the effect of nullifying the indemnity. While that is possible, the carve-out does not provide that the indemnity is nugatory in circumstances where there has been any negligence by the Contractor or the Principal. The carve-out is limited "to the extent" that such damages are caused by the negligence of the Contractor or the Principal. Unless the damages are entirely attributable to the Contractor or Principal's negligence, the indemnity clause will likely provide some recompense for the contractor.
9. Having regard to these considerations, in particular, the potential prejudice to the contractor if it is not able to recover any additional damages from its subcontractor, I consider it is appropriate in all the circumstances to grant the plaintiffs leave to amend.

Costs

1. As to the costs of the motion, the plaintiffs accept that they need to pay the contractor's costs thrown away as a result of the amendments, but press for their costs of the motion, given the late narrowing of issues and the fact that they had put the contractor on notice of their wish to amend for some time. The contractor submits that the plaintiffs are seeking an indulgence.
2. The plaintiffs did notify the contractor at an early time of their wish to amend their pleadings and, even before that correspondence, kept the contractor informed of the discovery of further ACPs and the fact that it would likely be added to these proceedings. The plaintiffs do not appear to have had the courtesy of any response to several pieces of correspondence.
3. Whilst the plaintiffs have been granted an indulgence today, the costs of the motion may have been avoided if the contractor had engaged in the subject matter of this motion earlier, or at all. For these reasons, I order the contractor to pay the plaintiffs' costs of the motion. I make orders 1, 2 and 3 in the plaintiff's motion filed on 6 February 2023.

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: 30 March 2023