Toomey v Scolaro's Concrete Constructions Pty Ltd [2001] VSC 96 | Case summary

Supreme Court of Victoria|2001-04-04|Before: Eames J

PRACTICE - multiple defendants - application to join new defendant - trial in 35th day - discretion - prejudice - trial management - Rules Supreme Court, Rules 9.02, 9.06, 11.05

(Scolaro's Concrete Constructions Ltd (In Liquidation))

The plaintiff's claim for damages for personal injuries was commenced on 21 June 1997. The plaintiff was very severely injured on 2 March 1996 in a fall from a public stairway or landing in a block of apartments known as Balmoral Apartments in Riversdale Road Hawthorn. The apartments were build on behalf of the owner of the land, Davidson Hughes. It is the plaintiff's case that he fell from a landing on a public stairway in the apartments after being bumped by the eighth defendant, his fall not being prevented - as it should have been - by the balustrade at the landing. The plaintiff contends that the balustrade was designed and constructed at a height which was too low to prevent such an accidental fall, and at a height which was in breach of the Building Code of Australia.

Davidson Hughes was initially joined as third party to the proceedings by the first defendant, Scolaro's Concrete Constructions Pty Ltd (now in liquidation) and it was not joined as a defendant by the plaintiff until 4 November 1999. In its pleading, paragraph 48, the plaintiff alleges that at all material times, Davidson Hughes engaged HCML to act as its agent for the construction of the apartments, and to perform the role of project manager. In its defence to that claim, Davidson Hughes did not admit that allegation of agency but, notwithstanding that fact, the plaintiff did not seek to join HCML as a defendant, nor did any of the defendants seek to join HCML as a third party.

In an affidavit in support of this application, it is disclosed that Davidson Hughes and HCML are both subsidiaries of Hudson Conway Limited and the two subsidiaries each have identical registered offices, principal places of business, directors, company secretary and auditors. It transpires that they also have identical liability insurers.

In his affidavit in support of the application, the plaintiff's solicitor, Mr Michael Glen, deposes that HCML was not joined because it was assumed that Davidson Hughes would be vicariously liable for any negligence or breach of statutory duty on the part of HCML. Now, so it is argued, that position has changed, by virtue of some evidence that was given during the course of the trial, which now raises the possibility, it is feared, that Davidson Hughes might successfully argue that HCML was not acting within the scope of its agency insofar as HCML through its employees acted negligently or in breach of duty towards the plaintiff.

The evidence which is said to give rise to the plaintiff's concern was that of Mr Orazio Scolaro and Mr Fabio Caverzan. Mr Scolaro was the principal of the first defendant. He was called by counsel for the plaintiff on 20 February and completed his evidence on 22 February 2001. Mr Casey QC, senior counsel for the plaintiff, only had the opportunity to confer with Mr Scolaro for the first time on 20 February. Mr Scolaro gave evidence that employees of HCML not only knew that the balustrade over which the plaintiff alleges he fell was too low to comply with the Building Code of Australia 1990, but expressly elected not to rectify the fault. Mr Caverzan gave evidence on 5 March 2001 and agreed that HCML had acted in that way and with that knowledge.

The contention on behalf of the plaintiff is that until that evidence was given, the case against Davidson Hughes related only to its failure through its agent to detect and correct the deficiency in the balustrade. The new evidence disclosed for the first time, so it was submitted, that HCML had a primary liability for its positive knowledge and its deliberate decision not to correct a known fault. At the latest, then, the new information was known on 5 March 2001 when Caverzan apparently confirmed Scolaro's account. Although it was foreshadowed on 23 March, the application to join HCML was not filed until 27 March, and was first brought before me on Friday 30 March.

On 15 March 2001 the insurer HIH was placed under provisional liquidation. I accept that when it was decided on behalf of the plaintiff to apply to join HCML the plaintiff's advisers, although concerned at the possibility, had no confirmation that HIH was the professional indemnity insurer of Davidson Hughes. Nonetheless, that fact is a significant motivation for the present application by the plaintiff, and it is, it appears to me, the sole motivation for the separate application which was made on behalf of the second defendant (and supported by most of the other defendants) to join HCML as a third party, in the event that it is not joined as a defendant to the plaintiff's claim.

The insurance situation of Davidson Hughes and of HCML has been the subject of close scrutiny in the application before me. It is somewhat unusual that that would have been so, but the information was relevant to the applications and it is necessary to examine the matter further to appreciate the thrust of the competing contentions before me.

In his evidence Mr Daniele Agnoletto, a director of both HCML and Davidson Hughes, deposes that the two companies have identical insurance with respect to the plaintiff's claim. I enquired of counsel, and it was not disputed by counsel for HCML, that this means that both companies have the same public liability insurer, namely Royal & Sun Alliance, and both have the same professional indemnity insurer, namely HIH Insurance.

When the third party proceedings were served on Davidson Hughes, the third party claim was referred to Royal & Sun Alliance as public liability insurer for the company. The solicitors Phillips Fox advised Davidson Hughes that they were acting for Royal & Sun Alliance, and thereafter conducted the defence of the proceedings, initially third party proceedings, by taking instructions from Royal & Sun Alliance, and without seeking instructions from Davidson Hughes, save for the purpose of the preparation of the case for their insurer client.

The conduct of the case, in other words, was not in the hands of Davidson Hughes but of Royal & Sun Alliance, as instructors of the solicitors. Mr Agnoletto said that he first became aware that Davidson Hughes had been joined as a defendant to the proceedings in February 2000. Advice to that effect was provided indirectly to Davidson Hughes through a former employee of Hudson Conway. Although Phillips Fox advised Davidson Hughes from time to time of mediation and other activities in the case, no advice was provided to suggest that Davidson Hughes was other than fully indemnified by Royal & Sun Alliance for all claims made in the proceedings. It was not until January 2001, when Mr Agnoletto was contacted by a solicitor representing HIH, that he learnt for the first time that there was a question as to whether the plaintiff's claims should wholly or in part be covered by the professional indemnity insurer, HIH, rather than by Royal & Sun Alliance. He discovered that the company's insurance broker had been advised in April 2000 by Phillips Fox that Royal & Sun Alliance would not cover Davidson Hughes with respect to the claim against it as defendant, which was a claim asserting breaches of duty owed by Davidson Hughes in a professional capacity.

The disclosure of these events led to the firm Blake Dawson Waldron contacting Phillips Fox on behalf of Davidson Hughes and on 6 February 2001 Phillips Fox advised of its intention to withdraw from the proceeding unless Davidson Hughes agreed to meet various terms and conditions, including as to the costs of the proceedings, which terms, Davidson Hughes declined to accept.

The threat by Phillips Fox to withdraw has not been rescinded and the dispute between the firms of solicitors acting for the insurer, on the one hand, and Davidson Hughes, on the other hand, and their respective clients is apparently unresolved.

Mr Watkins of counsel who has appeared to date on behalf of Davidson Hughes has sought to avoid being compromised by this behind the scenes dispute so that he might continue to act as counsel in the case, but a real question now arises as to his precise and continuing role.

In his affidavit in support of joinder, the solicitor for the plaintiff deposed that there would be no prejudice to HCML should it be joined, a proposition which seems to me to have been predicated on the assumption that were I to permit joinder of HCML, the simple expedient might be adopted of Mr Watkins appearing on behalf of both of the Hudson Conway Limited subsidiary companies.

The behind the scenes complications which I have described, and their effect on the position of Phillips Fox and Mr Watkins, were not until the application was brought on behalf of the plaintiff.

Whilst it was contended before me that joint representation of both subsidiaries might prove achievable were I to force the hand of HCML by making the order sought by the plaintiff, it seemed to me that counsel for the plaintiff and counsel for the supporting defendants, recognised that it was the case that separate solicitors, at least, and probably separate counsel, too, would be required, should HCML now be joined as a defendant.

The plaintiff's application is predicated on the fact that without the joinder of HCML, it is exposed, should Davidson Hughes subsequently deny that HCML was its agent and in the event that I accepted the evidence of Scolaro and Caverzan.

At the outset of his submissions on this application, Mr Casey proposed that his client would withdraw his application provided that Davidson Hughes amended its defence so as to expressly admit agency as alleged in paragraph 48. Davidson Hughes, through its counsel and, no doubt, on advice from Royal & Sun Alliance, declined to adopt that course, which raises suspicion that such a defence is contemplated.

If a denial of agency is not intended to be argued as a defence on behalf of Davidson Hughes, then the basis for joinder on which the plaintiff now relies will prove to have been an unnecessary anxiety. It may of course be, that even if the defence is taken, it will be seen to have no substance, having regard to the evidence in the case and the close relationship between the two companies in the project.

If, however, such a defence will be argued, whether successfully or not, then the clear conflict of interest between the two companies would suggest that separate counsel and solicitors would be required to act.

As Mr Riordan, junior counsel for HCML pointed out in the course of his contention that there is such a conflict of interest and a need for separate representation, the need for separate representation might also arise on another basis. There would be a significant prospect, he submitted, that if HCML was joined and the insurer denied liability to indemnify, then Royal & Sun Alliance would be joined by Davidson Hughes and/or HCML as a third party. Even if such proceedings could be severed from this trial, Mr Watkins, would then be placed, he submitted, in the conflict of interest position for that reason also.

Thus, it seems to me, that I should proceed on the basis that it is probable that should I allow the joinder, new counsel and new solicitors would have to be engaged by HCML.

The argument of those favouring joinder was to the effect that should that occur, then the legal representatives of HCML could quickly get on top of the case so that only a short delay, of perhaps a week, might be required to the trial. Counsel for HCML argued that an adjournment of a month would be required.

The plaintiff asserts that the joinder of HCML is necessary to ensure that all relevant parties are before the court, to ensure that all questions are finally determined and, furthermore, because it is just and convenient that the issue concerning HCML also be determined in these proceedings.

In his separate submissions, Mr Gillies QC, senior counsel for the second defendant, submitted that the guiding principle in determining these applications should be the interests of justice. He submitted that it was not inconsistent with principles of justice for him to concede that the defendants' interests in ensuring joinder of HCML was to provide back-up in the event that Davidson Hughes' sole insurer might prove to be HIH.

The defendants' interest is to introduce a party with the means, so it was hoped, to more likely contribute to the satisfaction of any judgment made against all defendants in favour of the plaintiff.

To take the arguments for the plaintiff at their highest, the refusal of Davidson Hughes to agree to admit agency, coupled with the evidence of Scolaro and Caverzan, now introduces a risk not previously considered significant, that the plaintiff may fail as against Davidson Hughes because it might successfully deny agency. The plaintiff would then be unable to recover in these proceedings against HCML unless it had been joined.

There is an issue relevant to the proceedings between the parties, between the plaintiff and HCML, so it is said, which ought, as a matter of justice, to be resolved in these proceedings. It is a secondary consideration, Mr Casey submitted, that the collapse of HIH might make it difficult to satisfy a judgment against Davidson Hughes, but he contended that that was a relevant consideration in any event.

Mr Young QC, senior counsel for HCML, submitted that the plaintiff's application should be refused in the exercise of my discretion on two main bases. First, on account of the unacceptable delay in seeking to join HCML, and second, on account of the prejudice which would be occasioned to HCML, were I to grant the application.

As to delay, it must be unprecedented that joinder of a defendant would be permitted at or about the thirty-fifth day of a trial. The agency question which now motives the plaintiff's application, must have been expressly considered when the proceedings were first issued. At that time, neither Davidson Hughes nor HCML were made defendants. The question must have arisen again when Davidson Hughes was joined as a defendant.

The plaintiff, by its pleading, expressly alleged that HCML was the agent of Davidson Hughes at all relevant times and that allegation was not admitted by Davidson Hughes. Once again, a conscious decision must have been taken not to join HCML despite the fact that agency was not admitted. Whether there was a logic behind that decision or it was a mistake, I do not know.

Mr Casey submitted that until Scolaro gave evidence, it could not have been known that HCML had direct knowledge of the breach of the Code and had chosen to ignore the breach. Scolaro had been a represented party, his solicitor only withdrawing on the first day of the trial when it was announced that the first defendant would take no part in the trial.

The first opportunity to interview Scolaro had arisen only on the morning that he gave evidence, Mr Casey submitted, and the importance and danger to the plaintiff of the agency question, could not have been appreciated before that time.

I accept that the evidence of Scolaro and Caverzan highlighted the possible vulnerability of the plaintiff's case as to this question.

I accept that the evidence of Scolaro and Caverzan is very important to the plaintiff's case against Davidson Hughes. Mr Casey submitted that whilst that is so, it can now not be assumed that the close relationship of the two companies and their respective involvement in the project would render it improbable that any agency defence would succeed.

Whilst the evidence yet to be called by Davidson Hughes might make it less likely that any such defence would be taken, or would succeed, I will assume that it may not, and may even strengthen such a defence.

I therefore think it inevitable that had the allegations of Scolaro and Caverzan been known before trial, application to join HCML would have been made, so as to ensure that an agency defence did not prove effective.

Thus, I accept that there is now a clear basis under both limbs of Rule 9.06(b) for a joinder of HCML as a defendant so that the plaintiff might guard against the possibility of the defence being successfully taken.

The critical question is whether by virtue of delay and prejudice to HCML, I should exercise my discretion so as to refuse the application notwithstanding that I have reached that conclusion.

Given the fact that the agency issue was addressed by the plaintiff and yet, although agency was not admitted, the joinder application was not made until the trial was so advanced, the delay in making the application can only be regarded as being significant.

Indeed, there was significant delay, too, between the time when Scolaro and Caverzan gave their evidence and the time when the announcement of an intention to make the application was first made.

But delay, of itself, cannot be decisive. The rules are not used to punish parties for their inadvertence, but to promote the just and efficient litigation of disputes. However, the delay in this case means that any prejudice to HCML is exacerbated, by virtue of the fact that the trial is at such an advanced stage.

Counsel supporting the application submitted that any prejudice would be minimal because lawyers representing HCML would quickly get to grips with the case against their client. They noted that Blake Dawson Waldron has represented both companies in the defence of proceedings now before VCAT but now adjourned. Those proceedings also relate to the defective balustrade.

It was submitted that although there have been many witnesses called, most of those, with possibly only a couple of exceptions, gave evidence on issues on which HCML would have a common interest with other defendants. Thus, HCML's counsel would probably have been refused the right of cross-examination, in any event, and the cross-examination of the witnesses by other counsel, including by Mr Watkins, was thorough and exhaustive in protecting the interests of HCML. As to those few witnesses whose evidence bore on the question of agency, it was submitted that they were available to be recalled.

Counsel for HCML accepted that prejudice could be met by an adjournment allowing time for counsel and solicitors to examine the evidence and to proof witnesses. An adjournment of a month was suggested. Those supporting the application suggested a week would be sufficient.

Counsel supporting the application asserted that little happened over the 35 days, to date, that should trouble HCML or its advisers, and that any issues otheb than those concerned with the agency question which might concern it, were dealt with in a manner which HCML would find entirely satisfactory, but it is to be kept in mind that those who seek to have HCML joined could not be said to have HCML's best interests uppermost in their collective minds.

I would expect that counsel for HCML would indeed want to check the transcript for themselves, but I also consider that their task would be rendered easier by virtue of the fact that other counsel, including Mr Watkins, could provide useful assistance; such assistance has indeed been offered by counsel for the plaintiff.

It is to be kept in mind, too, that the trial is at a stage where the case for Davidson Hughes is about to commence and most of the proposed witnesses for that party are Hudson Conway employees. Thus, almost as soon as any adjournment concluded, the new counsel would have to be ready to deal with the evidence which would be at the heart of the case involving HCML.

For my part, I consider that a week's adjournment would be inadequate if prejudice was to be removed for HCML, however, given that an adjournment would include the Easter break, the defendant would effectively gain a two week respite before being called on to proceed were the case to be adjourned until after Easter.

To adjourn the trial for this purpose would however, cause a significant dislocation to its progress. The case was set down for trial, initially, to be before a jury, with an estimated duration of six weeks. When the present application was first made before me, the trial was in its 34th day, with the prospect that it will not now be concluded, in my opinion, for at least another four or five weeks. The trial is likely, therefore - even without delay which would accompany a joinder of HCML - to occupy twice the estimated duration, and that occurs at a time when the resources of the Trial Division of the court are stretched to the very limits, with many parties being unable to commence their trial on the due date, due to the lack of a trial judge. In making those comments, I should add that so far as I am able to presently determine, the added duration of the trial relates more to the calling of additional witnesses on behalf of the defendants, than it does to the addition of witnesses to the plaintiff's case, but I also observe that whilst the under-estimate of the duration of the trial is very unfortunate, none of the counsel have conducted their cases in an unreasonable or tardy manner. The estimation of the duration of some cases, especially one where there are ten parties, is simply more difficult than in others.

On the related question of the late amendment of pleadings, the appellate courts have warned against adopting an unreasonable and inflexible approach in declining applications by reference to principles of judicial management. At the same time the appellate courts have not suggested that considerations of the management of trial lists is not a relevant consideration, see Queensland v. J.L. Holdings Pty Ltd [1997] HCA 1; (1996) 189 C.L.R. 146 at 155; Howarth v. Adey [1996] VICSC 4; (1996) 2 V.R. 535 at 542 per Winneke P.

In my opinion, the question of efficient case management is of particular significance where the application, and the potential for continuing dislocation and delay, is concerned not with an amendment of pleadings as between existing parties to an action, but with the introduction of a new party into a long running trial.

This application peculiarly highlights the tensions between the principles of case management, and the desirability, as addressed by Rule 9.06, that all relevant parties and issues should be addressed in the one proceeding - provided that any hardship or any prejudice to any party could be met by an appropriate order as to costs and/or an adjournment. Rule 9.06(b)(ii) poses the question, here, whether it is just and convenient that a question between the plaintiff and the proposed new defendant be determined in the present proceedings. I have no doubt that it would be just to the plaintiff's interests and I consider that injustice to the proposed defendant can be removed, given appropriate time to prepare its case. It is certainly convenient to all the existing parties, with the possible exception of Davidson Hughes, that the agency issue be resolved in this trial. The unrelieved inconvenience is largely that of the court and of other litigants, because if I grant the application this trial will be prolonged to the inconvenience of other parties awaiting trial.

One consideration, going to the convenience of joinder, is the question whether, if HCML is now joined, the evidence given to date would have to be recalled. In Dillon v. Nash [1950] VicLawRp 51; (1950) V.L.R. 293 Sholl J held, obiter, that "in the absence of consent given by the joined defendant, the added defendant could insist that only evidence heard de novo on the issues between the plaintiff and himself should be regarded", by the court. That opinion was expressed as obiter and - so it appears -without the benefit of submissions by counsel. The defendants in the case were unrepresented. Without reaching a conclusion on the point, Harper J cited the decision, without disapproval in Carborundum Realty Pty Ltd v. RAIA Archicentre Pty Ltd unreported 2 June 1992. I would respectfully doubt that either the rules of evidence or the Rules of Court could be interpreted in such a way as to give an effective power of veto to a necessary party who was joined in an action, but I do not consider that I have to decide this question.

If it transpired that an added defendant refused consent and sought the recalling of witnesses unnecessarily, then there might be a costs penalty, even if the court were to accede to the application. I am confident, however, that in the present case, counsel engaged for HCML would be satisfied that the recalling of witnesses would be unnecessary save, if at all, in very few instances. Thus, the massive dislocation which might occur if all witnesses were to be recalled would be avoided.

I have found this application very difficult to resolve. The lateness of the application seems a very compelling reason why the application should be refused, but I can only assume, as the plaintiff does, that the question of agency is indeed a live issue, and has become so or has gained heightened attention, because of the evidence of Scolaro and Caverzan, which evidence the plaintiff could not reasonably have anticipated or obtained before he did. In my opinion, there would be injustice to the plaintiff if in those circumstances he could not have that issue determined as against himself and HCML in this action. Whilst the consequence of the decision I will make will cause dislocation to the court lists and hardship to other litigants, in the end that seems to me to be a problem arising due to the lack of adequate judicial resources available to the court, a matter which cannot be allowed to determine that a just outcome should be denied to a party on that account.

I mention one other argument which was addressed to me. I am doubtful that the changed financial considerations produced by the collapse of HIH should be regarded as a factor which bears upon the interests of justice for the purpose of an application for joinder of a defendant. Mr Gillies and other counsel, urged that it must be so, but I am presently unpersuaded. However, even if it be so, the contention that the capacity of the plaintiff or of the defendants to recover, by way of an award or by contribution, sums which they would otherwise be denied, seems equally to be unproved. From the point of view of the defendants it is the collapse of HIH which motivates the application, but I have uncontradicted evidence that HCML has exactly the same insurance coverage as Davidson Hughes. Mr Gillies submitted that there may well be other funds available to HCML, or other coverage which is not also available to Davidson Hughes, but that is pure speculation.

In the end, I have concluded that notwithstanding the dislocation of the trial, prejudice to HCML would be removed by allowing an appropriate time for preparation of a defence to the action. I do not consider that the preparation of the defence will be as difficult as has been contended by counsel for HCML during this application. Whilst the behind the scenes insurance questions have undoubtedly created problems which will have to be speedily resolved before the trial proceeds, I consider that the interests of HCML will only vary from those pursued by Davidson Hughes (if they vary at all), to a very limited extent, and that experienced counsel would be able to fairly represent the interest of HCML if they are joined. On the other hand, I consider that a significant injustice will be done to the plaintiff if joinder is not permitted. The agency issue is one which should be determined in these proceedings, if it is to be pursued at all as a live issue.

I will therefore grant the application that HCML be joined as the tenth defendant in these proceedings, and I will order that the title of the proceedings be amended to include Hudson Conway Management Limited as tenth defendant. I give leave to the plaintiff to amend the statement of claim to incorporate the amendments set out in the draft sixth amended statement of claim which is in Exhibit "MFSG3" to the affidavit of Michael Francis Suttor Glen sworn 26 March 2001.

It will be necessary to make an order for the delivery of a defence by HCML, and I will hear counsel as to other appropriate orders.

The order joining HCML is made on the basis that the further hearing of this trial will be adjourned until Wednesday 18 April 2001, at which time the trial will resume. In light of the decision I have made as to the joinder of HCML as a defendant, it becomes unnecessary to determine the application made by Mr Gillies for joinder of HCML as third party. And I so rule.

Toomey v Scolaro's Concrete Constructions Pty Ltd

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Judgment (66 paragraphs)

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