//
[2020] VSCA 319
General information, not legal advice.
Court of Appeal (Vic)
2020-12-10
Mr J, Tate JA, Sifris JA
Original judgment source is linked above.
Traffic Technique Pty Ltd v Burgmann (County Court of Victoria, Judge Macnamara, 25 February 2020)
PRACTICE AND PROCEDURE - Application for leave to appeal from interlocutory decision - Application to amend defence on first day of trial - Whether judge erred in allowing amendment and vacating trial date - Whether judge failed to give proper consideration to case management principles - Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, , , discussed - Leave to appeal refused.
Did the judge err in granting leave to amend the defence?
1 Traffic Technique Pty Ltd ('Traffic') seeks leave to appeal against an interlocutory ruling made in the exercise of a discretionary power on a matter of practice and procedure in the County Court, namely, the granting of leave to amend a defence, the vacation of a trial date, and an adjournment for further directions.
2 Traffic, which provides traffic management services, brought a proceeding in the County Court against a former employee, Lloyd Burgmann ('Burgmann'), alleging breach of fiduciary duties as a result of Burgmann soliciting work from Traffic's clients and appropriating Traffic's intellectual property, as well as a breach of an equitable duty of confidence in using Traffic's proprietary traffic management information. Traffic also sues Burgmann's company, LJ & LJ Pty Ltd (trading as 'A Plus Traffic Management') ('A Plus'), alleging knowing assistance and knowing receipt in respect of the breaches of fiduciary duty. Burgmann and A Plus are the respondents to the application for leave to appeal.
3 On the morning of the first day of a four-day trial, Burgmann and A Plus sought leave to adjourn the hearing to enable Burgmann and A Plus to amend their defence to plead the defences of laches and acquiescence and prepare an expert report. The applications were opposed. The trial judge gave a ruling on 25 February 2020 granting leave to amend and vacating the trial date ('the Ruling').[1] Traffic now seeks leave to appeal from that ruling.
4 For the reasons set out below, we would refuse leave to appeal.
5 Traffic commenced proceedings by writ and statement of claim filed on 30 April 2019 in the Commercial Division General List of the County Court. It pleaded that Traffic was founded in 2012 by Mr Allen Bethune, who is its director. Traffic is engaged in providing traffic management services in and in the vicinity of Gippsland for organisations such as Baw Baw Shire Council, Downer EDI and Select Solutions Group. The services provided include 'work zone traffic management to the construction industry, which involves erecting, displaying, placing, removing and controlling traffic control devices and monitoring and managing traffic flows for various projects'.
6 Traffic alleges that Burgmann was its employee between 7 May 2013 and 'at least' 15 July 2016 and had responsibility for managing Traffic's existing operations and pursuing new business opportunities. It says that A Plus was incorporated on 20 May 2016, that Burgmann is its director and that it too provides traffic management services in and in the vicinity of Gippsland. Traffic alleges that its business declined substantially following Burgmann's establishment of A Plus in May 2016 and his resignation from Traffic.
7 Traffic claims that Burgmann owed it a fiduciary duty to avoid conflicts of interest or duty, as well as a fiduciary duty not to use his position to effect an advantage for himself or third parties, and an equitable duty of confidence in relation to Traffic's confidential information. Notwithstanding these duties, Traffic alleges that from at least mid-2016, Burgmann began to solicit work from Traffic's clients on his own account and sought and obtained references from Baw Baw Shire Council, Downer EDI and Select Solutions Group on 24 June 2016, 28 June 2016 and 12 July 2016 respectively. Traffic alleges that in April 2016 Burgmann copied its intellectual property, comprising all traffic management plans prepared by Traffic between 2014 and 2016, and used that information to prepare a VicRoads prequalification scheme audit report on behalf of A Plus, which was required to enable A Plus to provide traffic management services. Burgmann then submitted that audit report on behalf of A Plus to RMF Consulting for assessment and obtained approval on 19 July 2016.
8 As a result of these actions, Traffic alleges Burgmann breached his duty to Traffic to avoid conflicts of interest, and further or in the alternative, breached his duty not to use his fiduciary position to effect an advantage for himself or third parties, and breached his duty of confidence. Traffic also alleges that, given Burgmann was the director of A Plus at the relevant times, A Plus was aware that Burgmann was Traffic's employee and it was aware, was wilfully blind, wilfully or recklessly failed to make enquiries as an honest and reasonable company would make, or had knowledge of the circumstances that would indicate to a reasonable company, that the diversion of the business opportunities and intellectual property constituted a breach, or breaches, of Burgmann's fiduciary duties to Traffic. Traffic alleges that A Plus therefore assisted in that fraudulent and dishonest design and knowingly received benefits by reason of Burgmann's breaches of fiduciary duties. Traffic seeks equitable compensation, or alternatively an account of profits from Burgmann and A Plus.
9 The defence filed by Burgmann and A Plus contains a number of bare denials.[2] They admit that while Burgmann was an employee of Traffic, he was engaged on a casual basis from about 23 August 2013 to 25 May 2014, and on a full-time basis between 26 May 2014 and 24 June 2016. They do not admit the duties pleaded by Traffic and deny that Burgmann solicited work from Traffic's clients. They admit that Burgmann sought and obtained references from Baw Baw Shire Council, Downer EDI and Select Solutions Group, but do not admit that any of those entities were Traffic's major clients and they repeat that Burgmann ceased his employment with Traffic on 24 June 2016. They deny that Burgmann copied Traffic's intellectual property or used it to prepare a VicRoads prequalification scheme audit report on behalf of A Plus. They further deny diverting Traffic's work or appropriating its intellectual property, asserting that they have never undertaken any work for Baw Baw Shire Council or for Select Solutions Group. They deny any breaches of duty, or that A Plus knowingly received benefits from, or assisted in, breaches of duties.
10 Further, Burgmann and A Plus allege that the issues raised by Traffic in its statement of claim were the subject of complaint made by Burgmann against Traffic to the Fair Work Ombudsman and that complaint was resolved by way of a settlement agreement ('the settlement agreement') on the basis of Burgmann and Traffic 'releasing and discharging each other and their directors, employees, assignees or successors from any liability past, present or future from all claims, suits, demands, actions or proceedings arising out of or in connection with [Burgmann's] employment with [Traffic]' ('the release').
11 Traffic filed a reply[3] in which it admits that it entered into Terms of Settlement with Burgmann, dated 5 September 2016, but pleads that 'it would be unconscientious for the Defendants to rely on the general words of the Settlement in respect of the present claims due to the nature of the Settlement and the circumstances surrounding its entry into the Settlement'. In the particulars, Traffic says that the settlement agreement was entered into to dispose of a complaint made by Burgmann for allegedly unpaid wages owed to him by Traffic.
12 On 27 June 2019, a Judicial Registrar of the County Court set the matter down for hearing on 25 February 2020, and gave directions, including an order that all expert reports as to damages and liability be filed and served by 25 September 2019. The pleadings closed on 18 August 2019 under r 14.08 of the County Court Civil Procedure Rules 2018.[4] While Traffic filed an expert report on 30 September 2019, Burgmann and A Plus did not file any expert reports within the stipulated time, or at all. In the week leading up to the trial date, the parties agreed on the contents of the Court Book, a chronology and a summary of key issues, as well as a trial running sheet.
13 The trial was to commence on 25 February 2020, a Tuesday. On the Friday before (21 February) an email was sent to Traffic's solicitors from Burgmann and A Plus indicating that an adjournment would be sought. On the Monday, 24 February 2020, the solicitors for Burgmann and A Plus informed the Court that counsel would apply for an adjournment of the trial.
14 On the morning of the first day of the hearing, counsel for Burgmann and A Plus, Mr Tierney, applied to adjourn the trial and to file an amended defence. He did not seek to rely on any affidavit material in support of the applications, but he did proffer an explanation for the delay in what the judge termed 'candid concessions' about his clients' conduct in the preparation for trial. He relied upon three grounds for his applications, which he acknowledged were all attributable to the fault of his clients: (1) the absence of any expert report in response to the one filed by Traffic; (2) the need to plead an adequate defence; and (3) the fact that he had only been briefed late on Friday, when the trial was fixed to start the following Tuesday. He put these submissions in the following terms:
First, the defendants have not put on any expert evidence in response to the expert report filed by the plaintiff ... Second, the defence is not adequately pleaded and, third, ... I received instructions to act on a proper basis on Friday afternoon. The inadequate preparation is a problem entirely of the defendants' own making. There's no way to sugar coat that fact. The blame lies completely with us. Nonetheless, Your Honour, in my submission, the interests of justice warrant the adjournment of this trial.
15 The proposed amendments to the defence, handed to the judge and to counsel for Traffic that morning, sought to add the following paragraphs [28]-[31]:
28. Mr Allen Bethune [[5]] was at all material times:
(a) responsible for the day-to-day management, direction and control of the Plaintiff's operations;
(b) a person who authorised decisions regarding the Plaintiff's employment practices;
(c) by reason of the above, a person whose conduct was engaged in by the Plaintiff, when it was engaged in on behalf of the Plaintiff and was within the scope of his actual or apparent authority; and
(d) by reason of the above, a person whose state of mind was the state of mind of the Plaintiff for conduct engaged in within the scope of his actual or apparent authority.
(a) the allegations pleaded in paragraph 9 of the Statement of Claim; and
(b) the allegations pleaded in paragraphs 11 and 12 of the Statement of Claim.
Particulars
Such knowledge is to be inferred from the letter written by the Plaintiff's solicitor to Mr Burgmann, Ms Lynda Burgmann and Mr Hayden Ward dated 4 August 2016. The letter is in the Court Book at page 156.
30. By reason of:
(a) the Plaintiff's actual knowledge of the material facts said to sustain the First Defendant's breach of duties (which is denied);
(b) the Settlement Agreement described in paragraph 27 of this Defence;
(c) the delay between 4 August 2016 and 30 April 2019 in the Plaintiff seeking to enforce its rights;
any grant of equitable relief would impose unfair prejudice on the Defendants.
31. By reason of paragraph 30:
(a) the Plaintiff acquiesced to the Defendants' conduct as described in Sections B, C.1 and C.2 of the Statement of Claim; and
(b) the Defendants rely on the defence of laches to any claim of equitable relief made by the Plaintiff.
16 By [29] of the proposed amended defence Burgmann and A Plus alleged that Traffic knew that Burgmann sought and obtained references from Baw Baw Shire Council, Downer EDI and Select Solutions Group; that Burgmann had used Traffic's intellectual property to prepare a VicRoads prequalification scheme audit report on behalf of A Plus; and that Burgmann had submitted that prequalification scheme audit report to RMF Consulting for assessment and approval.[6] The period referred to in [30(c)] of the proposed amended defence is the period between the letter from Traffic's solicitor on 4 August 2016, alleged to reveal the relevant knowledge, and the date on which the writ and statement of claim were filed.
17 Mr Tierney explained that his instructing solicitor had made preliminary enquiries with Mr Paul Fielden, the accountant for A Plus, who had indicated that he could provide an expert report addressing the issue of Traffic's alleged loss. However, given that Mr Tierney could not state with certainty what conclusions Mr Fielden would reach, he could not assure the judge that the evidence would point to a materially different conclusion to that reached by Traffic's expert.
18 In relation to the proposed amendments, Mr Tierney submitted that the positive defences of laches and acquiescence went considerably beyond the bare denials in the original defence. In respect of the settlement agreement, he said that Traffic had prior knowledge of the settlement agreement discussions, the terms of the settlement agreement were relevant and there was a significant passage of time since the settlement agreement was entered into.
19 As mentioned, the applications were opposed. Counsel for Traffic, Mr Dinelli (with Mr Walter), informed the judge that the first indication his client had that Burgmann and A Plus might seek to call any expert evidence was on the previous Friday. Although he had not yet seen the content of any expert statement, he anticipated an issue about the independence of the new expert. He relied on the observations of Dodds-Streeton J in Ananda Marga Pracaraka Samgha Ltd v Tomar [No 4] ('Ananda Marga')[7] in which her Honour noted that a lack (or perceived lack) of independence does not render an expert witness incompetent, but it may go to the weight to be given to such evidence. She said:
In my opinion, relevant authority establishes that while (as reflected by the Federal Court Practice Note and like curial protocols) objectivity and independence are sought of expert witnesses, such qualities are not preconditions of competence, even in the case of expert witnesses. The sanction for failure to fulfil the obligations imposed by relevant authority and curial protocols is not the exclusion of the expert's evidence, but rather, the significant risk that it will fail to persuade.[8]
20 Mr Dinelli also pointed to case management principles that he submitted ought to weigh heavily in the judge's exercise of his discretion. He relied on the provision in the Practice Note governing vacation of trial dates in the Commercial Division, which provides:
Applications to vacate trial dates must be made at the earliest opportunity. Only in exceptional cases should this be within 30 days of the trial. ...[9]
21 He adopted remarks the judge had made about the difficulties posed by last minute vacation of trial dates for the management of cases in the list, and the impact on court resources and other litigants waiting for a trial date. The judge had observed, in exchange with counsel, that:
[I]f the dates were just allowed to be lost it creates gaps in the list and we have the unhappy circumstance of people who are waiting and waiting and then there are judges who aren't properly employed and the whole system is brought into disrepute. ... if this matter goes off there might be other useful business for me to do or there might not be. If the expectation is I start something else on Monday and there's a seven-day trial that I could usefully do, given that a seven-day trial creates a problem for the five-day one, hypothetically, I'm starting on Monday. So this listing process is difficult and problematic and having cases drop out at the last minute just makes it, well, worse and worse. ... then there's the wider thought that it's an inefficient use of scarce resources if gaps appear in the court's list willy-nilly because adjournments are too readily granted.
22 Mr Dinelli submitted that the Practice Note reflects the important public policy factors outlined in Aon Risk Services Australia Ltd v Australian National University ('Aon').[10] He pointed to the remarks of French CJ about the need, when exercising the discretion whether to allow an amendment and an adjournment, to consider not only whether any prejudice to the opposing party could be compensated for by costs, but other matters such as, whatever costs are awarded, the irreparable prejudice arising from delay, the efficient use of publicly funded court time, and the need to maintain public confidence in the judicial system. In Aon French CJ observed:
In the proper exercise of the primary judge's discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system. Given its nature, the circumstances in which it was sought, and the lack of a satisfactory explanation for seeking it, the amendment to ANU's statement of claim should not have been allowed. The discretion of the primary judge miscarried.[11]
23 Mr Dinelli also sought to rely on remarks of Heydon J in Aon regarding the desirability of expedition in dealing with commercial litigation and the role of the courts in ensuring the health of commerce by determining claims for money as soon as possible:
The litigation thus commenced was commercial litigation. While in general it is now seen as desirable that most types of litigation be dealt with expeditiously, it is commonly seen as especially desirable for commercial litigation. ... commercial litigation does have significant claims to expedition. Those claims rest on the idea that a failure to resolve commercial disputes speedily is injurious to commerce, and hence injurious to the public interest. As Rogers J stated in Collins v Mead:
For example, if banks are unable to collect overdue loans from borrowers speedily, if small traders cannot recover moneys owed to them speedily the commercial life of the [c]ommunity is detrimentally [a]ffected. The consequences of delay in the hearing of a commercial dispute ... will impact not just on the two or three persons or companies who are the immediate parties, but may have an effect on the creditors of the business, on employees, and perhaps on other traders unrelated to the immediate dispute.
Commercial life depends on the timely and just payment of money. Prosperity depends on the velocity of its circulation. Those who claim to be entitled to money should know, as soon as possible, whether they will be paid. Those against whom the entitlement is asserted should know, as soon as possible, whether they will have to pay. In each case that is because it is important that both the claimants and those resisting claims are able to order their affairs. How they order their affairs affects how their creditors, their debtors, their suppliers, their customers, their employees, and, in the case of companies, their actual and potential shareholders, order their affairs. The courts are thus an important aspect of the institutional framework of commerce. The efficiency or inefficiency of the courts has a bearing on the health or sickness of commerce.[12]
24 In exchange with counsel, the judge observed that the sentiments expressed by Heydon J could apply to the present case, but also to other commercial litigants waiting to be heard:
[T]hose sentiments or observations could be regarded as applying to the present dispute but, more pertinently, they apply to other disputes which are pending in the court and if this place in the queue is, in effect, thrown up what it requires is that another place in the queue be established later on and that will put others further back.
25 Mr Dinelli then took the judge to the following remarks of Heydon J:
The presentation and adjudication of the case in the courts below do cause it to merit a place in the precedent books. The reasons for placing it there turn on the numerous examples it affords of how litigation should not be conducted or dealt with. The proceedings reveal a strange alliance. A party which has a duty to assist the court in achieving certain objectives fails to do so. A court which has a duty to achieve those objectives does not achieve them. The torpid languor of one hand washes the drowsy procrastination of the other. Are these phenomena indications of something chronic in the modern state of litigation? Or are they merely acute and atypical breakdowns in an otherwise functional system? Are they signs of a trend, or do they reveal only an anomaly? One hopes for one set of answers. One fears that, in reality, there must be another.[13]
26 Applying the Aon approach to the present case, Mr Dinelli submitted that insufficient explanation had been given for why Burgmann and A Plus had raised the new matters 'at the eleventh hour' and had not taken advantage of the timetable, made by consent, for filing expert evidence and reviewing the defence. He urged the judge to find that the explanation given by Mr Tierney was not satisfactory, especially as no sworn evidence had been provided to explain the poor preparation. Any question of lack of funding would be speculative given there was no relevant evidence.
27 Turning to the proposed amendment, Mr Dinelli submitted that his clients would be unfairly and irreparably prejudiced if the new pleas of laches and acquiescence were allowed. Traffic had decided to bring a purely equitable claim in the County Court, rather than a claim on the basis of breach of director's duties under the Corporations Act 2001 (Cth) which would have required it to issue proceedings in another court, the Supreme Court or the Federal Court. However, it was now faced, at the last minute, with the equitable defence of laches - a defence that Mr Dinelli argued could not have been relied upon had Traffic brought a breach of director's duties claim - with the result that Traffic would need to consider re-pleading its claim and seek to transfer the proceeding to the appropriate jurisdiction.
28 In relation to the defence of acquiescence, Mr Dinelli submitted that the amendment sought to expand the nature of the defendants' reliance on the release to say it was a complete bar to Traffic's claim. As noted, Traffic had pleaded in its reply that it would be unconscientious for the defendants to rely on the release because of its nature and the circumstances surrounding its entry as part of a settlement of claims by Burgmann for alleged non-payment of wages. Mr Dinelli submitted that the release was not intended to cover claims such as those in the present proceeding for breaches of fiduciary duties.[14] He pointed to Grant v John Grant & Sons Pty Ltd[15] in which Dixon CJ, Fullagar, Kitto and Taylor JJ said that the general words of a release cannot be relied upon to escape obligations falling outside the 'true purpose' of the transaction. Their Honours observed:
[I]t will be seen that equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor.[16]
29 Mr Dinelli submitted that Mr Bethune would give evidence about the circumstances surrounding the settlement agreement which would show that the release was intended to be limited in scope. While Traffic's solicitors had expressed some concern about Burgmann's conduct in correspondence before the settlement, that was not the subject matter of the dispute before the Fair Work Ombudsman. Mr Dinelli also noted that A Plus was not a party to the settlement agreement.
30 In response, Mr Tierney clarified before the judge that the adjournment was sought on the sole basis that it would be in the interests of justice for Burgmann and A Plus to be allowed to put their case properly. He referred to the letter of 4 August 2016, mentioned in the particulars to [29] of the proposed amended defence,[17] from Traffic's solicitors to Burgmann and Mrs Burgmann which he submitted showed that Traffic was in full contemplation of making a claim for a breach of equitable duties against Burgmann and that the settlement agreement, including the release, would have to be understood in this context. He acknowledged that the settlement agreement did not bind A Plus. He emphasised that the quantum of the settlement agreement was zero and that this, 'viewed in the context of the surrounding circumstances [indicated that Burgmann] was, in fact, agreeing for both parties to move on'. This would be relevant to determining how widely to construe the terms of the release. With respect to the unfair prejudice to Traffic that was alleged to arise from its choice of claim and jurisdiction, he submitted that it had been a strategic decision by Traffic to sue in the County Court for breach of fiduciary duties and breach of the equitable obligation of confidence and that the prospect of an equitable defence being raised must have been in Traffic's contemplation, particularly a fairly straightforward defence such as laches.
31 Before the judge there was no reliance placed on the overarching obligations in ss 7 and 9 of the Civil Procedure Act 2010.
32 The judge then immediately delivered the Ruling as an oral decision. He recorded that Burgmann and A Plus had sought an adjournment of the trial, in part to amend the defence to raise defences of laches and acquiescence and to allow expert accounting evidence to be filed by an employee or officer of A Plus, and that the applications were opposed. He referred to the submissions made on behalf of Traffic, citing Ananda Marga,[18] that an adjournment would be a grave matter as the proposed new evidence may not be afforded much weight given the witness's connection with Burgmann and A Plus and noting the concession made by Mr Tierney that he could not say whether the new evidence would be significantly different from Traffic's expert evidence. In relation to the adjournment, the judge accepted that Mr Tierney had made 'candid concessions' and acknowledged that the situation had arisen because of his clients' failure to prepare properly:
Turning then to the issue of adjournment generally. Mr Tierney made candid concessions. He said he had been retained in the matter as recently as last Friday, today being Tuesday, and the deficiencies in the pleadings and in the evidence on which the defendant[s] sought to rely were evident to him, thereby, leading to the present application. He could offer no mitigation, if you will, in the implication that this situation has arisen because of the failure to prepare the case properly on behalf of the defendants.[19]
33 The judge referred to the directions made by consent for the filing of pleadings and expert evidence, and concluded that the blame and responsibility for the failure to prepare properly 'lies with the defendants and the defendants alone'.[20] He noted that counsel for Traffic 'took me to the well-known and oft cited decision of the High Court of Australia in Aon'.[21] After referring to the remarks of French CJ in Aon set out above,[22] he noted that counsel for Traffic said that those strictures were applicable in the current case. He noted the submission that no satisfactory explanation had been given, that Traffic would suffer irreparable prejudice not compensable by costs, and that other litigants would also be prejudiced as a result of the disruption should the adjournment be granted.
34 He further noted that counsel for Traffic had taken him 'to the parting shots fired by Heydon J in his concurrence with the other members of the Court in the outcome in Aon'.[23] He noted the submission that were he to grant the adjournment application, he 'would be falling into the very pattern of conduct denounced by his Honour in that passage'.[24] In relation to the amendment application, he said that Traffic's submission was that if the proposed amendments to the defence were permitted, the strategic response would be for Traffic to reformulate its claim to add a claim based on breaches of directors' duties under the Corporations Act, with the consequence that Traffic might well have to consider an application to transfer the proceedings to the Supreme Court. Traffic had submitted that it would be 'intolerable ... to allow such a thing to happen, not just at the door of the court but with counsel commencing on the first day of trial'.[25]
35 The judge observed that Aon brought about a change in approach from that taken in Queensland v JL Holdings Pty Ltd ('JL Holdings'),[26] where 'adjournment applications seemed to be almost irresistible' and 'the objective of the justice system was to adjudicate matters upon their substantive merits and considerations of proper order and procedural efficiency must bend to that higher objective'.[27] With Aon the emphasis shifted to an approach which gave full and proper weight to the prejudicial effect not only on the other parties, but more broadly on other litigants, and to the efficient operation of the court system. However, he did not accept that the application of Aon resulted in the pendulum swinging to the other extreme, where an adjournment application must always be rejected. He said:
In Aon Risk Management the High Court rebalanced the range of considerations which bear on adjournment applications so that matters urged by Mr Dinelli and Mr Walter now are to be given their full and proper weight and not, if you will, shoved to the side in the interests of the pursuit [of] some abstract principle of justice based on substantive considerations only and to the exclusion of what one might regard as procedural justice.
The rebalancing, however, does not, I think, have the consequence that whilst adjournment applications almost invariably succeeded when the JL Holdings case was the authority they must now, invariably, fail. I did not take Chief Justice French's analysis, as already quoted, as carrying with it the consequence that since an adjournment necessarily entailed a measure of irreparable prejudice to the party resisting it that the adjournment application must, for that reason, always be rejected.[28]
36 In the present case, the judge described the matter as 'very finely balanced indeed'.[29] He noted that the new expert evidence had the potential to be 'a non-event'. In relation to the proposed amendments, the judge weighed up where the interests of justice lay in assessing, on the one hand, allowing the defendants to rely on defences they would otherwise be entitled to, and, on the other hand, Traffic being driven to another jurisdiction and losing its trial date. On balance, he concluded the interests of justice lay with allowing Burgmann and A Plus to rely on the new defences. He said:
The issue of the proposed amendments is even more perplexing. If there is a good equitable defence or defences why, one asks, is it not in the interests of justice that these defendants be entitled to rely upon them. To put it another way, would it not be a great injustice to force them to trial in circumstances where these defences might be availing but are simply ruled out of consideration.
On the other hand, of course, the injustice of potentially driving the plaintiff from the seat of justice to an entirely different one, not perhaps having to start from scratch but, no doubt, having to take a big step back in the queue, is obvious enough. All in all, these applications are most perplexing. In my view, however, the thought that good equitable defences should be ruled out and not considered at all as part of the adjudication is contrary to the interests of justice.
That means that the proposed amendments should be allowed. No doubt, there are likely to be costs consequences but the interests of justice, in my view, dictate that the proposed amendment be allowed. Fiat justitia, ruat caelum. Once one concludes that the amendments ought to be allowed the points made by the plaintiff indicate that it would be unjust to force the plaintiff on in this venue with the pleadings amended as proposed.[30]
37 The consequence of this decision was that the trial date had to be vacated. The judge said:
The consequence of that seems to be, subject to anything further that might be said on behalf of the plaintiff, that this particular appointment for trial must go off. If it must go off for that reason then the adjournment must occur and an opportunity will be presented for Mr Fielden's evidence to be put on.[31]
38 The judge made the following orders on 27 February 2020, after the parties provided a form of order:
1. The trial scheduled for 25-28 February 2020 is vacated.
39 Traffic now seeks leave to appeal against paragraphs 1 and 2 of the orders made on 27 February 2020 on the following grounds:
Ground 1
The learned trial judge erred in ordering that the four-day trial of the proceeding be adjourned, in circumstances where:
(a) no evidence was led in support of the adjournment application, so as to explain the basis of the application;
(b) the application was made on the first morning of trial on 25 February 2020;
(c) the proceeding had been set down for trial approximately eight months prior to the trial on 27 June 2019;
(d) pleadings had closed approximately six months prior to the trial on 18 August 2019 (being 30 days after service of the applicant's reply on 18 July 2019); and
(e) the plaintiff had filed expert evidence, and complied with the orders for preparation of the trial.
Ground 2
The learned trial judge erred in granting the respondents leave to file and serve an amended defence, in circumstances where:
(a) no evidence was led in support of the amendment application, so as to explain the basis of the application;
(b) pleadings had closed approximately six months prior to the trial on 18 August 2019 (being 30 days after service of the applicant's reply on 18 July 2019); and
(c) no application for leave to file and serve an amended defence was made prior to the first morning of the trial on 25 February 2020.
40 Counsel for Traffic conceded before this Court that the two grounds are inter-related and the adjournment was an inevitable consequence of the judge's grant of leave to amend the defence which required that Traffic be given time to respond rather than being forced on to commence the trial on the scheduled date while confronting an amended defence. On this basis, the grounds of appeal can be conveniently analysed as a single issue, namely, whether the judge erred in granting leave to amend the defence.
Did the judge err in granting leave to amend the defence?
41 Traffic concedes that an appellate court is generally reluctant to intervene in an interlocutory decision made by a trial judge; it is well known that 'appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure' and generally do so only where 'the decision appealed from ... work[s] a substantial injustice to one of the parties'.[32] It nevertheless submits that the error in this case is of that kind. The injustice consists in placing Traffic in a position, at a very late stage, of being required to consider transferring its case to another court. This is likely to lead to very substantial delay and the need to obtain a fresh trial date.
42 Traffic emphasises that no evidence was led in support of the applications (including no evidence as to the reason for the lack of adequate preparation) with the applications being made on the morning of the first day of a trial that had been set down some eight months earlier, where pleadings had closed, and Traffic had filed an expert report in accordance with directions and complied with pre-trial preparation orders. It submits that the judge's discretion miscarried because, in that context, his decision was inconsistent with principles of case management as outline in Aon and in the Civil Procedure Act.
43 Traffic submits that although the judge referred to Aon, he did not properly appreciate or apply the principles set out in that case. It submits that the judge's reference to the maxim 'Fiat justitia, ruat caelum' ('Let justice be done, though the heavens fall') demonstrates that the judge was guided by outdated principles and applied an approach which overlooked or set to nil the principles in Aon and in a number of decisions of this Court, as well as the policy considerations underpinning the Civil Procedure Act, which he failed to consider at all. His approach was said to be one of regarding Burgmann and A Plus as entitled to raise the new defences irrespective of the substantial inconvenience to Traffic or the impact on other litigants waiting to be heard.[33] Traffic submits that the judge's reliance on the principle expressed by the Latin maxim vitiates any earlier observations he may have made about case management.[34]
44 Traffic emphasises the approach to case management expressed in Aon, not only in the extracts of the judgments of French CJ and Heydon J relied on before the judge but also on the following remarks of the plurality:
A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.[35]
Of course, a just resolution of proceedings remains the paramount purpose of r 21;[[36]] but what is a 'just resolution' is to be understood in light of the purposes and objectives stated. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account.[37]
46 Traffic also relies on the summary of factors applicable to amendment applications set out by this Court in Northern Health v Kuipers ('Kuipers').[38] Kyrou and McLeish JJA identified those factors as follows:
[T]he factors that the High Court in Aon considered as relevant to an application to amend a pleading include:
(a) whether there will be a substantial delay caused by the amendment;
(b) the extent of any wasted costs;
(c) whether there is an irreparable element of unfair prejudice caused by the amendment;
(d) concerns of case management arising from the stage in the proceeding when the amendment is sought;
(e) whether the grant of the amendment will lessen public confidence in the judicial system; and
(f) whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought.[39]
47 Traffic further relies on the observations made in Billington v Sussan Corporation Australia Pty Ltd ('Billington')[40] in which this Court dismissed an appeal from a refusal by a County Court judge to grant leave to a plaintiff to file and serve an amended statement of claim. This Court observed that the application to amend in those circumstances was unacceptable and contrary to proper case management:
The application for leave to amend was made at a very late stage in the proceeding, on the eve of the date on which the case was fixed for trial. The applicant did not proffer any satisfactory explanation for the delay in making the application. The applicant, or his solicitors, did not provide any such explanation by way of affidavit. From the Bar table, counsel on behalf of the applicant explained that due to the change in counsel, a different view had been formed as to the appropriate cause of action to be advanced on behalf of the applicant. That explanation was by no means an adequate excuse for the delay. The cause of action, based in battery, is not particularly uncommon. It is a well-known and well understood tort, and it could have been appropriately pleaded from an early stage, if those acting on behalf of the applicant had considered that it was worth relying on it. The purpose of pleadings is to define the issues that are to be agitated in the proceeding, and to be determined by the court. In the circumstances of this case, it was unacceptable, from the point of view of proper case management, that those acting on behalf of the applicant should, without any adequate explanation, seek to alter the whole basis upon which the trial was to proceed, at such a very late stage.[41]
48 In oral submissions, Mr Dinelli acknowledged that while it is Traffic that raises in its reply the allegation that it would be unconscientious for Burgmann and A Plus to rely on the release, the amendment seeks a significant expansion of the enquiry into the nature of the release, the circumstances in which it was executed and, importantly, by [30(c)] of the amended defence,[42] the facts after the settlement. He acknowledged that while there was overlap, these were new defences being put six months after the pleadings had closed and by that stage it was simply too late, consistently with proper case management, for leave to amend to be granted. Had those equitable defences been raised earlier, Traffic could have considered its position then. There was no suggestion that the defences were being advanced because new material had come to light; it was conceded that Burgmann and A Plus had failed to prepare properly and they should bear the consequences of that. As Aon makes clear, the interests of justice extend beyond the interests of the parties and encompasses the effect on other litigants and the administration of justice generally.
49 With respect to identifying an error in the exercise of discretion, on the basis of House v The King,[43] Traffic submits that the judge made a decision that was unreasonable or plainly unjust with the result that the judge's discretion miscarried. It also submits that the judge failed to take into account case management principles and the public interest in the efficient use of court resources.
50 In response, Burgmann and A Plus submit that the judge's decision is not attended by sufficient doubt to warrant a grant of leave to appeal. They point to the stringent requirements that need to be satisfied for appellate intervention in an interlocutory discretionary decision relating to practice and procedure. These are set out in the summary described by Santamaria JA and Riordan AJA in Swan Hill Chemicals Pty Ltd v MA & J Tripodi Pty Ltd ('Swan Hill') for the grant of leave to appeal in those circumstances:[44]
On an application for leave to appeal, the Court is required to take into account the following considerations:
(a) The power to order an amendment to a pleading is discretionary and is therefore subject to the limitations identified in House v The King.
(b) The decision of the trial judge was interlocutory in character. In Livingspring Pty Ltd v Kliger Partners, this Court recognised the legislative policy in respect of the hearing of appeals against interlocutory orders and endorsed the statement of the Full Court in Perry v Smith, that 'the object [of cutting down the number of interlocutory appeals] which Parliament had should be recognised by this Court in a liberal manner, and not begrudgingly'. As a consequence, appeals from interlocutory orders should not be permitted except in special circumstances.
(c) The exercise of the discretion to allow an amendment does not determine substantive rights. It is a matter of practice and procedure. Accordingly, an appellate court should exercise particular caution in considering an application for a grant of leave to appeal decisions of that kind. In _Livingspring'_s case, the Court said that we should be guided by the following statement of Sir Frederick Jordan in Re Will of Gilbert:
If a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.
Accordingly, leave to appeal should only be granted where there is sufficient doubt attending the decision below and substantial injustice would be done were the decision to stand. These are stringent requirements.[45]
51 Burgmann and A Plus acknowledge that Aon emphasized a more rigorous approach to late applications for adjournments but they submit that Aon does not stand for authority that such an application cannot be granted; rather, the High Court in Aon was reinforcing the observation that the question of whether leave should be given to an application for a late-stage adjournment, or the like, is decided by a balancing exercise where ample weight should be given to case management factors. Mr Tierney also relied on Aon and the importance it placed on the objective of doing justice between the parties as well as the clarification by French CJ that JL Holdings was not authority for the proposition that waste of public resources and undue delay were not to be taken into account when considering amendments giving rise to an adjournment. French CJ said:
It might be thought a truism that 'case management principles' should not supplant the objective of doing justice between the parties according to law. Accepting that proposition, J L Holdings cannot be taken as authority for the view that waste of public resources and undue delay, with the concomitant strain and uncertainty imposed on litigants, should not be taken into account in the exercise of interlocutory discretions of the kind conferred by r 502.[[46]] Also to be considered is the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification, whether they be for adjournment, for amendments giving rise to adjournment, or for vacation of fixed trial dates resulting in the resetting of interlocutory processes.[47]
52 The continued relevance of the interests of justice as the primary question was affirmed by this Court in Kuipers where it referred with approval to observations made by J Forrest J in Ultra Thoroughbred Racing Pty Ltd v Those Certain Underwriters at Lloyd's, London ('Ultra Thoroughbred').[48] This Court said:
It has been said by this Court that Aon may have 're-invigorated the procedural paradigm' insofar as time, costs and limited judicial resources are relevant considerations in the determination of whether to allow certain interlocutory processes. However, as J Forrest J observed in Ultra, 'the primary question still remains: what do the interests of justice dictate?'; Aon reminds courts that 'the prism through which these interests are viewed is wider than just that of the moving party'.[49]
53 Burgmann and A Plus submit that it cannot be concluded that if Traffic decides to proceed with claims under the Corporations Act the defences based on laches and acquiescence will have no application and Burgmann and A Plus will be in the same position as they are now. They submit that there will be live questions about whether, for example, Burgmann was an 'officer' of Traffic, that question being different to whether he owed fiduciary obligations to Traffic. They further submit that there is no indication that Traffic, even if it applies for the proceeding to be transferred to another court, will withdraw its equitable claims. This means that it is only proper that they should be able to rely on the equitable defences of laches and acquiescence within the context of identifying the full effect of the settlement agreement; to prevent them from doing so would cause them profound, irreparable prejudice especially when the loss claimed is substantial.[50]
54 In our view, the exercise of discretion by the judge, in granting leave to amend the defence and, as a consequence, granting the adjournment, did not miscarry.
55 It is significant that the judge observed that 'this matter finds itself very finely balanced indeed'.[51] This in itself necessarily implies that the judge measured both aspects of the dispute, the arguments supporting the refusal of a grant of leave to amend the defence, based largely on case-management principles, and the arguments in favour of a grant of leave, based primarily on the desire to ensure that a party who has a viable defence has the opportunity to rely on that defence (providing they pay costs in compensation for the prejudice suffered by the other party). Had the judge not evaluated both aspects of the dispute - case management against the ventilation of substantive merits - and given both aspects substantial weight, he could not have described the matter as 'very finely balanced'. The task of evaluating, and balancing, conflicting considerations is precisely the task that a judge, faced with an application to amend, especially a late-stage application, must undertake in the exercise of the discretionary power.
56 Within that context, the references the judge made to Aon cannot be read as token. The judge was correct to refer to Aon as 'rebalancing the range of considerations which bear on adjournment applications' with the consequence that what the judge described as 'procedural justice' is to be given appropriate importance. He recognised that the approach adopted in JL Holdings, which supported the view that procedural efficiency was almost invariably to be given lesser weight than ensuring that the matters were adjudicated upon in accordance with their substantive merits, had been rejected in Aon. He was also correct to observe that the rebalancing undertaken in Aon did not lead to the universal proposition that applications for an adjournment, even at a late stage, must fail. Delay is not necessarily decisive. This follows from the remarks of French CJ, extracted above,[52] where he said that he accepted, and regarded as a truism, the proposition 'that "case management principles" should not supplant the objective of doing justice between the parties according to law'.
57 In our view, the judge understood Aon, correctly, to hold that there is no single universal approach to the question of whether to grant leave in response to an application for adjournment, and that questions about the fair hearing of the substantive merits of the case must be weighed alongside considerations of procedural justice for the litigants in question, the legal system more generally, and the need to preserve public confidence in that system. That the judge was correct in his understanding of Aon is evident from the reliance placed by both Traffic and Burgmann, in their submissions on the appeal, on passages extracted from Aon. Those passages demonstrate that the question of whether to grant leave to amend a defence, or to grant an adjournment, can only be resolved by balancing a range of factors, no one of which is inherently subservient, or deserving of less weight, than any other.
58 His Honour's approach reflects that adopted by this Court as demonstrated by the endorsement in Kuipers, as mentioned above,[53] of the observation of J Forrest J in Ultra Thoroughbred which, as mentioned, was to the effect that, post Aon, 'the primary question still remains: what do the interests of justice dictate?'. Clearly the interests of justice will vary depending upon the circumstances of one case to another; where the interests of justice lie cannot be judged by the application of a single universal rule. The thrust of Aon was to expand the range of interests to be taken into account (including the interests of non-parties who are litigants in other cases) in determining where the interests of justice lie and not to replace one almost universal rule with another. The judge's treatment of Aon shows that he had proper regard to its intent.
59 The focus of Traffic's submission was on the impugned passage of the judge's reasons containing the Latin maxim.[54] The first part of the passage is where the judge, having concluded that a grant of leave to amend the defence should be made, said, 'the interests of justice, in my view dictate that the proposed amendment be allowed'. This observation was entirely in accordance with the primary question as identified by J Forrest J in Ultra Thoroughbred. It is unimpeachable.
60 The second part of the passage is the reliance on the principle expressed by the Latin maxim. This statement was made after the judge had recorded his decision to accede to the applications. The use of the maxim is regrettable because it may convey the impression that the judge was ultimately only concerned with providing a proper ventilation of the substantive merits of the case rather than giving weight to all the factors that make up procedural justice which he had previously identified. It may convey the impression that the substantive merits of the case, independently of any other considerations, were overriding and determinative in the circumstances. However, we consider that this impression is false and ought be rejected. It is not consistent with the bulk of the judge's careful reasons aimed at conveying, accurately, the importance of the factors reflected in the Aon approach to case management. The principle expressed by the maxim does not accurately reflect the judge's finely balanced evaluative approach. It does not contribute to the reasoning whether to grant leave and, if it was intended by the judge to be expressed as a declaration of the implications of the decision to grant leave, it was best avoided. Nevertheless, it was one statement in an oral ruling given immediately during the hearing at the conclusion of the parties' submissions. The use of the maxim must be read in the context of the reasons as a whole from which, in our view, it cannot be concluded that the judge repudiated the import of Aon.
61 The absence of any reference in the judge's reasons to the Civil Procedure Act is immaterial given that no reliance was placed upon it by either Traffic or Burgmann and A Plus at the hearing before the judge. The overarching obligations in ss 7 and 9 are also reflected in the case management principles endorsed in Aon.
62 Furthermore, it is telling that many of the authorities cited on the appeal, including Billington,[55] while they illustrate an endorsement of the importance of
procedural justice, also illustrate, more generally, circumstances in which an appellate court, in accordance with established principle, refuses to interfere with the discretion exercised by a primary judge in arriving at an interlocutory decision on practice and procedure. Where a power is discretionary, it usually follows that another judge may have taken a different view of the circumstances and arrived at a different balance. We consider that here it would have been open for a judge to have refused Burgmann and A Plus leave to amend their defence. However, to demonstrate error by the judge, it was incumbent on Traffic to establish that one of the categories of error identified in House v The King had been made out, and this it was unable to do. We do not consider that Traffic was able to satisfy the stringent requirements, identified in Swan Hill,[56] that apply to appeals of this kind.
63 For these reasons, we do not consider that the judge ignored case management principles and the public interest in the efficient use of court resources or that the decision arrived at was unreasonable or plainly unjust. It is because the judge's decision was interlocutory, not definitely determining substantive rights, and related to matters of practice and procedure, that we consider that the prospects of success of this appeal were no more than fanciful. We would refuse leave to appeal.
65 I agree that the application for leave to appeal should be refused for the reasons explained by Tate and Sifris JJA. The trial judge's reasons do not disclose specific error and his conclusion was open to him as a matter of discretion.
66 I would respectfully add only the following. Even if it were concluded that
his Honour erred in adjourning the proceeding, I would not interfere with the orders made by him at this point in time.
67 As to the first order, the adjournment has taken effect and setting aside the order would be futile.
68 As to the second order giving leave to amend the defence, the facts alleged in the pleading were relevant to the rebuttal of the Reply in any event. They went to the question whether reliance upon the settlement agreement was 'unconscientious' in all the circumstances of the case (irrespective of the specific pleas of acquiescence and laches. In particular, they bore on the effect of the settlement agreement having regard to the principles stated by Dixon CJ, Fullagar, Kitto and Taylor JJ in Grant v John Grant & Sons Pty Ltd[57] to which Tate and Sifris JJA refer at [28] above.
69 Further, the key facts relied upon were in the plaintiff's own knowledge, namely, the sending of the letter making the relevant claim prior to the settlement agreement and the delay in purporting to revive the claim after such settlement agreement.
70 In turn, it was and is neither practicable nor desirable to attempt to quarantine the plaintiff's claim from a full examination of the facts surrounding the settlement and their significance in terms of the equities of the case.
[1] Traffic Technique Pty Ltd v Burgmann (County Court of Victoria, Judge Macnamara, 25 February 2020) ('The Ruling').
[4] Relevantly, r 14.08 provides: 'Unless the Court otherwise orders, pleadings shall be closed - ... (b) where pleadings beyond a defence are ordered or served, at the expiration of 30 days after service of the last of those pleadings.'
[6] These are the allegations in [9], [11] and [12] of the statement of claim, respectively.
[9] County Court of Victoria, Practice Note: Commercial Division Practice - A Practice Note on the Operation and Management of the Commercial Division, 25 March 2019, [33.1] (emphasis in original).
[10] (2009) 239 CLR 175; [2009] HCA 27.
[12] Ibid 223-4 [137] (citations omitted).
[32] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 177 (Gibbs CJ, Aickin, Wilson and Brennan JJ); [1981] HCA 39.
[33] See Sali v SPC Ltd [1993] HCA 47; (1993) 116 ALR 625, 629; [1993] HCA 47.
[35] Aon (2009) 239 CLR 175, 217 [112] (Gummow, Hayne, Crennan, Kiefel and Bell JJ); [2009] HCA 27 (emphasis in original).
[36] Rule 21(1) of the Court Procedure Rules 2006 (ACT) provided that the rules applicable to civil proceedings were to be applied 'with the objective of achieving (a) the just resolution of the real issues in the proceedings; and (b) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties'.
[37] Aon (2009) 239 CLR 175, 213 [98]; [2009] HCA 27.
[39] Ibid [28]. See also Eaton v ISS Catering Services Pty Ltd [2013] VSCA 361; (2013) 42 VR 635, 646-7 [47] (Neave JA, Hargrave and John Dixon AJJA); [2013] VSCA 361 ('Eaton') (where this Court dismissed an appeal from a refusal by a County Court judge to adjourn a personal injury trial to enable the plaintiff to obtain expert evidence). Traffic also relied on the Court's approach to considering the objects in s 9 of the Civil Procedure Act in Kuipers [2015] VSCA 172, [90]-[96].
[40] [2020] VSCA 12 (Beach, Kaye JJA and Croucher AJA).
[43] (1936) 55 CLR 499, 504-5; [1936] HCA 40.
[45] Ibid [21]-[22] (citations omitted). See also Smith v JZ Lee Interiors Pty Ltd [2017] VSCA 65, [4] (Osborn JA, Tate JA agreeing at [80]).
[46] Rule 502(1) of the Court Procedure Rules 2006 (ACT) provided that 'at any stage of a proceeding, the court may give leave for a party to amend ... an originating process, a pleading, an application or any other document filed in the court in a proceeding in the way it considers appropriate'.
[47] Aon (2009) 239 CLR 175, 192 [30]; [2009] HCA 27 (emphasis added).
[48] [2011] VSC 370, [8].
[49] Kuipers [2015] VSCA 172, [33] (citations omitted).
[50] Mr Tierney also submits that it is arguable that as Traffic alleged that reliance on the settlement agreement was unconscientious this necessarily involves an examination of the broad equities of the matter at least with respect to the circumstances preceding entry into the settlement agreement.
[55] See [47] above. See also Eaton [2013] VSCA 361; (2013) 42 VR 635, 646-7 [47] (Neave JA, Hargrave and John Dixon AJJA); [2013] VSCA 361 at n 39 above.
[57] [1954] HCA 23; (1954) 91 CLR 112, 129-30.
Traffic Technique Pty Ltd
Burgmann [2020] VSCA 319
(1954) 91 CLR 112
(1993) 116 ALR 625
(2013) 42 VR 635
(1936) 55 CLR 499
(2009) 239 CLR 175
(2012) 202 FCR 564
(1997) 189 CLR 146
(1981) 148 CLR 170