District Court New South Wales Medium Neutral Citation: Zheng v Ianni & Ors (No.2) [2021] NSWDC 511 Hearing dates: 24 September 2021 Date of orders: 24 September 2021 Decision date: 24 September 2021 Jurisdiction: Civil Before: Abadee DCJ Decision: See paragraph 23 Catchwords: CIVIL PROCEDURE – application to amend defence – application made on final day of eight-day hearing – whether amendments futile Legislation Cited: Civil Procedure Act 2005 (NSW) s 64 Cases Cited: FBHS (Aust) Pty Ltd v Stone Homes Pty Ltd [2014] NSWCA 312 Ryder v Frohlich [2004] NSWCA 472 Texts Cited: J D Heydon, Heydon on Contract: the General Part (Thomson Reuters, 2019) Category: Procedural rulings Parties: Buzhong Zheng (plaintiff) Najib Daoud (third defendant) Leila Daoud (fourth defendant) Fred Daoud (fifth defendant) Representation: Counsel: Mr J Phillips SC with Mr L Robison for the plaintiff Ms F Sinclair for the third and fourth defendants No appearance for the fifth defendant Solicitors: MGL Lawyers for the plaintiff George Khoury & Co for the third and fourth defendants File Number(s): 2019/00181425 EX TEMPORE Judgment 1. The third and fourth defendants apply to the Court that it exercise its power under s 64 of the Civil Procedure Act 2005 (NSW) ('CP Act') to permit them to amend their defence. 2. The proposed amendments are as follows: "1. The Third and Fourth Defendants do not admit paragraphs 1, 3, 3B, 4, 5, 6, 7, 8 and 10. 2. The Third and Fourth Defendants denies paragraphs 2, 3A and 9 in total. 3. The Third and Fourth Defendants had no dealings with the Plaintiff. 4. The Third and Fourth Defendants had no control over who entered or worked on the property known as 63 Alexandra Street, Drummoyne NSW at the relevant time 5. The First Defendant asked the Third Defendant to leave the site in December 2017. The Third and Fourth Defendants then quit the site as ordered whereby the Contract between the First and Second Defendants (as owners) and the Third and Fourth Defendants (as builders) dated 27 September 2016 ("the Contract") was abandoned or frustrated 6. As to paragraph 2 the Third and Fourth Defendants was were contracted to do building works on the property but ceased doing any works and had quit the site before the relevant time. 7. Alternatively to 5, the First and Second Defendants breached clauses 8 a) i) and or 13 a) of the Contract by interrupting and denying access to the site and or not allowing the works to be carried out by the Third and Fourth Defendants whereupon the Third and Fourth Defendants terminated the contract by quitting the site bringing the Contract to an end under clause 29 (1) a) i). 8. Costs." 1. To the extent that the amendments permit the additional reference to the fourth defendant they are not opposed and are allowed. 2. The plaintiff, who only received notice of the proposed amendments this morning, opposes the application. 3. This proceeding commenced on 11 June 2019. The plaintiff, a tiler by trade, fell through a void in an upstairs bathroom on 12 April 2018 severely injuring himself on a site in Drummoyne. He sued the Owners of the site. He also sued the Builders who the Owners contracted with to supply construction works (the fourth defendant was joined since she was a part owner of the business through which the Builders supplied their services). Finally, he also sued the son of the Builders, Mr Fred Daoud, who, the plaintiff says, acted as the employee, agent, or representative of the Builders. The plaintiff's proceedings against the Owners have settled. The plaintiff has obtained a default judgment against the Builders' son. Other than the question of quantum, the principal question is whether the Builders are liable. 4. By their existing Defence, the Builders' case clearly foreshadowed that they did not consider themselves responsible. Their case, from the outset of their Counsel's Opening Address, and manifestly apparent from their existing formal Defence, was that the Builders, or more precisely Mr Najib ('Nick') Daoud, was instructed by one of the Owners, Mr Frank Ianni, to leave the work site and not return, in December 2017. They rely upon some evidence to suggest that at the time that Nick Daoud was instructed to leave, there was scaffolding around the perimeter of the building. The Builders say that if the scaffolding had remained in situ up to the date when the plaintiff arrived at the site, he would not have suffered the injuries that he did. They say that in the circumstances, they cannot be responsible for the removal of that scaffolding and, further, that even if they might have been in breach of a duty of care, in some way, when they left the site in December 2017, it was the conduct of other persons, that constituted a novus actus interveniens. All of this, I consider, was made tolerably clear in Counsel for the Builders' Opening Address. 5. It was also made clear, in that Opening Address and in closing argument, that the Builders argue that prior to and after December 2017, the Owners entered into a 'side arrangement' with the fifth defendant, about which they say they were ignorant. They argue that the Owners agreed, at about the time that they entered the contract with the Builders, to pay the fifth defendant for specific works falling outside the scope of the Owners' contract with the Builders; although the Builders also accept that Fred Daoud had also engaged in some 'casual labour' to assist them to perform their services; for which Nick Daoud said that he periodically paid Fred, on an ad hoc basis. They argue, further, that after Nick stopped work in December 2017, the Owners continued to engage with Fred Daoud, not only to complete the works he had separately agreed to perform for the Owners, but also the works which the Builders contracted to perform for the Owners. In this way, the Builders say that if the condition of the site when the plaintiff attended it on the date that he fell through the void was unsafe, then the plaintiff should look to either the Owners or Fred Daoud. 6. The application has now been brought at the point where we are now at day 8 of the hearing and Counsel for both parties have supplied the Court with closing written submissions and Counsel for the Builders had virtually completed her closing oral address. 7. It is clear from the plaintiff's perspective that he does not dispute that Nick Daoud no longer performed work after December 2017. But he says that whatever was the reason why he stopped was immaterial: neither the Builders nor the Owners availed themselves of express rights in the contract to terminate. That meant that the Builders retained obligations to perform the works and, perhaps more significantly, retained their right of exclusive possession of the building site conferred on them by the contract. The plaintiff says that before and after December 2017, the Builders either employed or actually authorised Fred Daoud to conduct the works on the site, or they held out to the Owners that he had their authority to do so. If Fred Daoud committed any tort after Nick Daoud left the site, the Builders were vicariously liable; or, alternatively, they breached a non-delegable duty of care. 8. Counsel for the third and fourth defendants' proposed amendments are intended to respond to the Owner's point about the survival of the Builders' obligations even after Nick Daoud had left the site in December 2017. 9. As is indicated, they now wish to say that as a result of Frank Ianni's instruction to Nick Daoud to leave the site, and not return, in December 2017, the Building Contract was abandoned or frustrated. Alternatively, they say that in response to such instruction, the Builders exercised a right under cl 29 of the contract. 10. The Builders argue that these amendments raise no new questions of fact and simply amount to a statement of the legal consequences that would follow from acceptance of the Builders' evidence. 11. Putting aside discretionary considerations that the Court must take into account, as indicated in ss 56-60 of the CP Act, a Court will not permit an amendment if it is futile. 12. Although I am conscious that on an amendment application which is intended to stipulate legal consequences, the Court should not be too strict in concluding that the legal consequences are not arguable, in my opinion, the suggested legal consequences are inarguable, such that the Court would not permit them. It is not necessary to accept as conclusive, the correctness of the plaintiff's contention that the only means by which the contract could be terminated was by exercise, by either party, of the express rights in cll 8 and 29 of the contract. 13. The principles of abandonment were referred to by the Court of Appeal in Ryder v Frohlich [2004] NSWCA 472 per McColl JA (Hodgson JA and Ipp JA agreeing) at [135] – [137]. As McColl JA noted, the question is considered from an objective assessment of the parties' conduct. In my view, it is plainly apparent that it is not enough for the Builders to make out a case of abandonment from an instruction that Nick leave the site. Until then, even on the Builders' own case, Fred Daoud was performing some works on the Builders' behalf. It is notable, on the evidence, that on Nick's account, there was no discussion with Frank as to what would follow from Nick being unable to engage in the work. Specifically, there was no discussion as to whether Fred could continue the works. What matters is that there be conduct by the Owners towards Nick Daoud which, objectively, would lead a person in his position, to think that the Owners did not require the Builders' continued adherence to their obligations as a builder. In my view, the conclusion of abandonment is not arguable. 14. On the point of frustration, it is not enough to establish this as a basis for discharge of a contract where what is really being complained of is conduct by another party which effectively disables the promisor from performing its obligation. That is an assertion of fault, or self-induced frustration based on blame. There must be a 'supervening event' over which the parties have no control: J D Heydon, Heydon on Contract: the General Part [23.440]. This has not been alleged. 15. Accordingly, I would not allow the amendments in paragraph 5 as they would be futile. 16. As to the proposed amendment to paragraph 7, even if the Owners did refuse Nick access to the site in breach of cll 8 and/or 13 of the contract, that did not generate the express right to terminate without satisfaction of the other matters referred to in cl 29: namely, a notice of default by the Builders. There is no evidence of the Builders serving any notice of default. It is unnecessary to consider the potential operation of cl 26, which may be another precondition to the exercise of a right to terminate in the Builders. 17. The amendments proposed in paragraph 7 are also inarguable. 18. In my view, having regard to my opinion that the amendments would be futile, it is unnecessary to consider the various discretionary matters arising from the case management considerations in the CP Act. If it was necessary, I would have thought, however, that the lateness of the application and potential prejudice to the plaintiff would tell against it. 19. In the former respect, this case was already adjourned once, after the trial had commenced. The Builders could reasonably be taken to have anticipated resistance to the points the plaintiff raised, relying as they do upon the terms of the contract. They could have formulated the amendments before now. The case has already extended well beyond the 3-day estimate the parties had previously supplied to the Court. 20. In the latter respect, it has been said that with late amendment applications, it is unnecessary for respondents to establish, by evidence, prejudice that would follow from an amendment being allowed: FBHS (Aust) Pty Ltd v Stone Homes Pty Ltd [2014] NSWCA 312 at [69]. Finally, it seems to me reasonably arguable that the Builders could continue to advance a contention that, notwithstanding any exclusive right to the building site vested in the Builders after Nick Daoud had left, it was Fred Daoud and/or the Owners, not they, who had the real and practical control of the site such that the responsibility for the plaintiff's injuries should not fall upon them; so that rejection of the amendments would not be fatal to their defence. 21. Subject to permitting the insubstantial amendment to paragraphs 5 and 6, regarding the addition of the fourth defendant, the application to amend is refused with costs. ********** 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 September 2021