District Court New South Wales Medium Neutral Citation: Flexirent Capital Pty Limited v Kay & Burton Pty Ltd as Trustee for the K&B Unit Trust ABN 64 060 949 539 [2020] NSWDC 479 Hearing dates: 31 July 2020 3 August 2020 Date of orders: 3 August 2020 Decision date: 03 August 2020 Jurisdiction: Civil Before: Montgomery DCJ Decision: 1 Pursuant to Rule 6.24 of the Uniform Civil Procedure Rules 2005 (NSW), Australian Managed Print Services (Vic) Pty Ltd (in liquidation) be added as a party to the proceedings as second plaintiff. 2 Pursuant to Section 64 of the Civil Procedure Act 2005 (NSW), leave is granted to file an Amended Statement of Claim in the form exhibited to the Affidavit of Phillip Noel Parker dated 9 June 2020, on or before 17 August 2020. 3 Costs of the Motion be costs in the cause. 4 I note the concession of the plaintiffs to forgo recovery in an amount in excess of the jurisdiction of this Court. Catchwords: Mercantile Law – Breach of Contract – Leave to Proceed by Amended Statement of Claim – Leave to Add a Company in Liquidation as a Plaintiff – Corporations Act 2001 (Cth), s 471B – Jurisdiction of the District Court of New South Wales Legislation Cited: Civil Procedure Act 2005 (NSW) ss 54, 56, 58, 64, 73 Corporations Act 2001 (Cth) s 471B Cases Cited: Nowlan v Marson Transport Pty Limited [2001] 53 NSWLR White v Overland [2001] FCA 1333 Texts Cited: Precedents of Pleadings by Bullen & Leake and Jacobs Category: Procedural and other rulings Parties: Flexirent Capital Pty Limited (Plaintiff) Kay & Burton Pty Ltd as Trustee for the K&B Unit Trust ABN 64 060 949 539 (Defendant) Representation: Counsel: Mr J Foley (Plaintiff) Mr A Herskope of Counsel (First and Second Defendants) Ms E Murphy of Counsel (First and Second Defendants) Solicitors: Bridges Lawyers (Plaintiff) Kalus Kenny Intelex (First and Second Defendants) File Number(s): 2018/00019194 Publication restriction: N/A Judgment (EX TEMPORE) MOTION FILED BY THE DEFENDANTS ON 9 JUNE 2020 1. By Notice of Motion filed 9 June 2020, there is an application to amend the Statement of Claim by adding a company, Australian Managed Printing Services Pty Limited in liquidation, as a party. That is the effective and substantial adjustment, but the Statement of Claim of course then follows with amendment within itself. The reason that this arises is because of the state of the pleadings in the first instance. What I mean by that is, and I will return to it in a little more detail, originally a Statement of Claim was filed on 18 January 2018 in which the plaintiff named was Flexirent Capital Pty Limited, and a Defence was filed on 20 March 2018. 2. The parties subsequently worked toward trial on the basis of those pleadings. Then on 20 February this year, on an application moved by the defendants, the hearing which was listed to commence that day was vacated and an Amended Defence was filed. The Amended Defence, in essence, pleads the substantial variation that the rental agreements sued upon by the plaintiff through its agent, Australian Managed Printing Services Pty Limited, which will hereafter be referred to as AMPS; were made not by the plaintiff through its agent but rather by AMPS as principal. 3. Para 3(a) of the Amended Defence reads: "(a) Admit that on 18 November 2013, the following agreements (AMPS' Agreements) were entered into: (i) a Rental agreement between the First Defendant as a Customer and Australian Managed Printing Services Pty Limited (AMPS) pursuant to which, inter alia, AMPS agreed to rent to the First Defendant certain goods being a scanner and printers (AMPS Rental Agreement)" 1. I do not, in that short reference, purport to have encapsulated the whole of the changes to the proceedings introduced by amendment of the Defence on 20 February 2020. 2. The point is that the proceedings took a different course, a substantially different course; and consequent of that, there is the application before me now for leave to proceed on the Amended Statement of Claim which, as I have stated, is essentially an application to join AMPS as second plaintiff and amend the recovery action for debt of rent as particularised in the proposed Amended Statement of Claim. 3. The fundamental point, which is of concern here, is the inefficiency of this litigation. The Court's obligation in determination of this application is to bring to the proceedings the "overriding purpose" which is to facilitate just, quick and cheap resolution of the real issues in the proceedings: s 56 CPA. 4. It is relevant to return to the Statement of Claim as originally filed. I commented, I hope not too frivolously, at one point that it contained a style of pleading one might have thought would do justice to the great Bullen & Leake and Jacobs, Precedents of Pleadings. At para 3, it's simply pleaded, "On or about 28 November 2013, the plaintiff, through its agent Australian Managed Printing Services Pty Limited (AMPS), entered into a rental agreement with the first defendant (the agreement) with respect to the rental of certain equipment ('the equipment')" and thereafter follows reference to an allegation of guaranteeing indemnity, as well as reference to demands and claims. 5. The Defence simply pleaded, at para 3, "The defendants deny the allegations and each of the allegations contained in paras 3, 4, 5, 6 and 7 of the Statement of Claim". Thereafter the Defence admitted demands for the payment of rent, but denied the plaintiff's entitlement to it. The defendants concede they made no payments, but pleaded that the plaintiff was not entitled and therefore the defendant had no obligation. 6. Again, I do not set out the pleadings in full but that is the crux of the matter. In a sense, it is hindsight, but in reality the Amended Defence provides straight out exposure of the fact that indeed the defendants saw the case as containing much greater issues than that bland denial in the original Defence at para 3. 7. It has been a long time since pleading of that nature was appropriate. It may be in the final determination of this matter that there is real substance in the defendants' now disclosed substantial proposition of defence on the basis of, "We didn't contract with Flexirent Capital but rather with AMPS". It therefore may be at the hearing that what I referred to as a contained style of Statement of Claim will be exposed as also lacking 8. I addressed to the parties because it immediately came to my mind, the decision of the Court of Appeal in New South Wales of Nowlan v Marson Transport Pty Limited [2001] 53 NSWLR 116; [2001] NSWCA 346 and the references therein (albeit Marsden considered a very different situation of pleading of claims under statutory insurance) to the decision of Allsop J in White v Overland [2001] FCA 1333 at para 4. As his Honour then was, he stated in White v Overland, and it is quoted at para 28 of Nowlan: "However, by way of general principle I would simply like to make perfectly plain my view that in the efficient and proper conduct of civil litigation, even civil litigation hard fought between parties, it should always be recognised that in the propounding of issues for trial the parties should take steps to ensure that all relevant parties to the dispute are cognisant of what the issues are. Any practice of quietly leaving footprints in correspondence or directions hearings to be uncovered some time later in an attempt to reveal that a matter was always in issue should be discouraged firmly. Even if something has been said, where it is evident, or indeed suspected, that the other side is proceeding on the basis of a misconception or has not appreciated something, as a general rule, efficiency, common sense and an appreciation of the costs and resources (both public and private) likely to be wasted by confusion in litigation will mandate that a party through his or her representative ensure that the other is not proceeding on a misconception or that the other does appreciate something that has been said. Litigation is not a game. It is a costly and stressful, though necessary, evil." 1. Quite frankly it is entirely inadequate that this matter was listed in this Court as a commercial matter of some complexity for hearing to commence in February of this year and that it was only after that fixture for hearing was made that there was amendment to the pleadings and that course of amendment is now before me on this Notice of Motion. 2. Order 2 in the Notice of Motion is that, pursuant to s 64 of the Civil Procedure Act, the plaintiff be granted leave to file the proposed Amended Statement of Claim which is exhibited to the affidavit of Philip Noel Parker dated 9 June. Exhibit A in the application is an email from the liquidator dated 28 July 2020, in which he states that in his capacity as liquidator of AMPS, he consents to AMPS being added to these proceedings as second plaintiff. 3. As I have said, the Defence is in essence (and no doubt oversimplifying it) that if rent is owed, it is owed to AMPS. The proposition of the defendants is that they have cross-claims to raise. 4. If AMPS is permitted to proceed now without knowing more about its position to satisfy a debt on the cross-claims in the event that the defendant is successful, any judgment achieved by the defendant's cross‑claims will be, as Mr Herskope called it, a hollow judgment. In support of that position, Mr Herspoke took me to pp 57, 58 and 61 of the exhibit to the affidavit of Mr Kenny dated 1 July 2020, being the Annual Administrative Return for the period 16 March 19 to 15 March 20, showing that AMPS' records included liability of 45 unsecured creditors in the sum of $838,000, which do not include the rent debt sued for by the plaintiff in these proceedings. The liquid sum in the bank is reported to be only $84,000. In his efficient approach to submissions, which included conceding that his arguments made in written submissions on the basis of frivolous and vexatious litigation are technical points and perhaps better made for trial; he identified this prejudice submission as the real point. 5. I come to it in this way; nothing has been put to me to convince me that there is a basis for me to go behind Exhibit A, that is to query or challenge the consent of the liquidator to the joinder of AMPS in these proceedings. At the outset, the parties agreed that nothing in s 471B of the Corporations Act makes joinder of AMPS as a plaintiff, contingent on a grant of leave by this Court. Rather, the situation is that the defendants would need to apply to the Supreme Court of New South Wales for leave to proceed on the Cross‑Claims against AMPS. 6. I have already said that a concern is that this matter was ready for hearing in February as originally pleaded. What has effectively happened is that there has been a whole change to the territory of law and of evidence in the dispute because of the amendments to the Defence then made. In my opinion, whilst Mr Herskope has exposed what he refers to as the prejudice clearly, it is premature and beyond jurisdiction for this Court to deal with his argument of prejudice, except out of consideration of the justice of permitting the amendment. 7. Section 58 of the Civil Procedure Act provides that: "(1) In deciding— (a) whether to make any order or direction for the management of proceedings, including— (i) any order for the amendment of a document the court must seek to act in accordance with the dictates of justice." 1. It occurred to me when this matter was before me on Friday last, 31 July, that it was inviting to inquire whether the plaintiff, Flexirent Capital, might take a pragmatic, commercial approach, to avoid more delay and incurring of costs by applications being made in the Supreme Court for leave to proceed on the Cross‑Claims; that some accommodation be offered to ameliorate the concerns of the defendant for the risk of hollow judgments being obtained. Mr Foley was unable to obtain those instructions from his client. 2. Mr Foley, for the plaintiffs says, in any event, that the cross-claims would be in the nature of set‑offs and therefore there is no prejudice. That is not something I am in a position to decide because it is a proposition best left to a trial judge. Mr Foley properly makes the point that recoverability is irrelevant to the grant of leave to amend the Statement of Claim. A reason I say he properly makes the point, is because taking into account the question of justice, the proposition here is that this case has been vastly changed since February of 2020 and is still significantly at the stage of the commencing process. That is, the Amended Statement of Claim. 3. There is no question of law to be determined on the basis that s 471B or the prejudices to which Mr Herskope has taken the Court would prevent the Statement of Claim being filed, naming each of Flexirent and AMPS in the first instance. To go beyond that and to speculate as to what the result might be of an application for leave in the Supreme Court might be in regard to the bringing of Cross‑Claims against AMPS, requires consideration of s 471B leave, which is beyond the jurisdiction of this Court. 4. Mr Herskope has raised in his argument on prejudice, such things as delay in the bringing of a proceeding. He points to AMPS as a party, after four years having not made a demand on the defendants (by the liquidator or anyone else). These are matters which in my respectful view, but in my opinion, fall within the consideration of leave under s 471B on the cross‑claims. I say "respectful" because it was quite obvious that Mr Herskope was delivering to the Court a clear exposition of a real and pragmatic commercial difficulty which he sees for his clients. As I have said, it was a compilation of submissions relevant to the consideration of justice in the granting of the application. I am in the final result, however, against him. 5. There is one matter that I would ask Mr Foley to address, however, and that is the value of a money claim in excess of $750,000. "FOLEY: No, there's two alternative claims, which exceed this Court's jurisdiction. They were properly pleaded because under the rules it then falls to the defendants to raise objection provided it's under a million dollars… …The defendants have, after we've forwarded that proposed amended statement of claim, have raised that objection. They say they don't consent to our claims going over 750. And as I've said in my submissions, we are content to limit those claims to $750,000 to maintain within the jurisdiction of this Court. HIS HONOUR: Thank you." 1. A point properly raised by the defendant is that claims made in the Amended Statement of Claim exceed the $750,000 jurisdiction of this Court. They appeared, for instance, in paras 4 and 5 of the proposed Amended Statement of Claim. The defendant's properly, it being the earliest opportunity for them to do so, informed the Court and the plaintiffs that they will not consent to proceeding in this Court beyond its jurisdiction. This problem, however, has been removed by the plaintiffs conceding, as they just did, that they waive recovery of value beyond the jurisdiction of the District Court of New South Wales and the proceedings. I will note that in the orders, which I make. ORDERS 1. The orders, which I make, are as follows: 1. Pursuant to Rule 6.24 of the Uniform Civil Procedure Rules 2005 (NSW), Australian Managed Print Services (Vic) Pty Ltd (in liquidation) be added as a party to the proceedings as second plaintiff. 2. Pursuant to Section 64 of the Civil Procedure Act 2005 (NSW), leave is granted to file an Amended Statement of Claim in the form exhibited to the Affidavit of Phillip Noel Parker dated 9 June 2020, on or before 17 August 2020. 3. Costs of the Motion be costs in the cause. 4. I note the concession of the plaintiffs to forgo recovery in an amount in excess of the jurisdiction of this Court. ********** Amendments 27 August 2020 - Amendment only to correct a typographical error on the title page - changed from "Principal Judgment" to "Procedural or other rulings". 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: 27 August 2020