New South Wales Supreme Court CITATION : McMurtire v The Commonwealth & Ors [2002] NSWSC 187 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 20448/1999 HEARING DATE(S) : 21 February 2002 JUDGMENT DATE : 19 March 2002 Mark McMurtire (Plaintiff) The Commonwealth of Australia (First Defendant) PARTIES : The Aboriginal & Torres Strait Islander Commission (Second Defendant) Dumaresq Shire Council (The Defendant) JUDGMENT OF : Master Harrison Mr A Howen (Plaintiff) COUNSEL : Dr DP Robinson (Second Defendant) Mr D McGovern (Third Defendant) Ward Maxwell & Co (Plaintiff) SOLICITORS : Australian Government Solicitor (Second Defendant) Phillips Fox (Third Defendant) CATCHWORDS : Extend time to file amended statement of claim - security for costs LEGISLATION CITED : Supreme Court Rules - Part 2 r 3; Part 20 r 4(5) Franklin House Ltd v ANI Corporation Ltd & Ors (NSWSC unreported, 7 November 1994) Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541; 139 ALR 1 BHP Steel (AIS) Pty Limited v Guidice (& Ors) (NSWCA unreported, 7 March 1997) Council of the City of Sydney v Zegarac (1998) 43 NSWLR 195 Holt v Wynter [2000] NSWCA 142; (200) 49 NSWLR 128 McLean v Sydney Water Corp [2001] NSWCA 122 Milperra Marketing Pty Ltd & Ors v Bayliss [2001] NSWCA 315 Bega Co-operative Society Limited v The Milk Authority of Australia Capital Territory (FCA unreported, 12 May 1992) Bruce v Odhams Press Ltd (1936) 1 KB 697 Pinson v Lloyds and National Provincial Foreign Bank Ltd (1941) 2 KB 72 Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (FCA unreported, French J 3 September 1991) Ratcliffe v Evans (1892) 2 QB 524 Charlie Carter Pty Ltd v The Shop, Distributive and Alied Employees' Associates of Western Australia (1987) 13 FCR 413 CASES CITED : H 1976 Nominees Pty Ltd v Galli (1979) 40 FLR 242 Banque Commerciale SA en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 Truth About Motorways Pty Ltd v Macquarie Infrastructure Ltd [1998] ATPR 41-633 Northam & Anor v Favelle Favco Holdings (unreported, Bryson J, 7 March 1995) George D Emery Co v Wells [1906] AC 515 Francis v Lyon (1907) 4 CLR 1023 Athenian Tankers Management SA v Pyrena Shipping Inc (The Arianna) [1987] 2 Lloyd's Rep 376 (QB) Jaensch v Coffey (1984) 155 CLR 549' 58 ALJR 426; 54 ALR 417 Preston v Star City Pty Ltd [1999] NSWSC 1273 Hill v Van Erp (1997) 188 CLR 159 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; 57 ALJR 358; 46 ALR 402 Blomley v Ryan (1956) 99 CLR 362 Morris v Hanley [2000] NSWSC 957 Chang v Comcar Australia [1999] FCA 1677 Powell v Taylor (1885) 31 ChD 34 DECISION : (1) The plaintiff is to file and serve an affidavit explaining delay in filing an amended statement of claim on or before 23 April 2002; (2) Matter stood over until 30 April 2002 at 10.00 am before me; (3) Leave is not granted to the filing of an amended statement of claim which includes paragraphs 31 and 33. Subject to the explanation for delay being satisfactory, leave will be granted to file and serve the balance of the proposed amended statement of claim; (4) Costs are reserved. - 27 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER HARRISON TUESDAY, 19 MARCH 2002 20448/1999 - MARK McMURTRIE v COMMONWEALTH OF AUSTRALIA & 6 ORS JUDGMENT (Extend time to file amended statement of claim; Security for costs) 1 MASTER: This case has a very sorry history. By notice of motion filed 21 February 2002 the plaintiff seeks an order granting an extension of time within which to file an amended statement of claim. By notice of motion filed 30 November 2001 the third defendant, Dumaresq Shire Council, seeks an order that the plaintiff give it security for its costs of the proceedings; and that the proceedings be stayed until the security is given. The plaintiff relied on his affidavit filed 8 June 2000. No affidavit explaining the delay in seeking to file an amended statement of claim has been filed. The third defendant relied on the affidavits of Simon Patrick Wilson Glascott sworn 14 July 2000 and Christine Elizabeth Forostenko sworn 30 November 2001. 2 Originally by statement of claim the plaintiff sued seven defendants namely, The Commonwealth of Australia as first defendant; the Aboriginal & Torres Strait Islander Commission as second defendant; Dumaresq Shire Council as third defendant; NSW Police Service as fourth defendant; Australian Taxation Office as fifth Defendant; Independent Commission Against Corruption as sixth defendant; and NSW Police Commissioner as seventh defendant. Currently only the second and third defendants remain. 3 The short history of the proceedings is as follows: (1) On 7 October 1999 the plaintiff filed his original handwritten statement of claim. I shall return to this document later in this judgment. (2) On 17 October 2000 the plaintiff, still representing himself, filed an amended statement of claim. It was this statement of claim that was subject to a detailed analysis in my judgment dated 16 November 2000. Leave was granted to the plaintiff to file an amended statement of claim against the second and third defendants within 2 months of that date, ie., by 16 January 2001. The statement of claim was dismissed as against the first and fifth defendants. (3) On 18 January 2001 the plaintiff filed a notice of motion seeking leave to vary order 3 of my judgment so as to allow the plaintiff until 16 April 2001 to file an amended statement of claim. (4) On 7 February 2001 the motion was adjourned to 7 March 2001. The plaintiff was not legally represented. (5) On 1 March 2001, by consent, the proceedings against the fourth, sixth and seventh defendants were dismissed. Hence, as at 1 March 2001 only the second and third defendants, Aboriginal and Torres Strait Islander Commissioner (ATSIC) and Dumaresq Shire Council (DSC) respectively remained and still remain as defendants in these proceedings. (6) On 7 March 2001 the motion was adjourned to 11 April 2001 as the plaintiff had recently appointed new solicitors. (7) On 11 April 2001 the motion was adjourned to 26 April 2001. (8) On 26 April 2001 the motion was adjourned to 7 June 2001. The solicitors for the plaintiff were to draft an amended statement of claim. The solicitors expected to serve the amended statement of claim within 6 weeks. (9) On 7 June 2001 the motion was adjourned to 9 August 2001 because the amended statement of claim was not yet complete. (10) On 9 August 2001 the third defendant received a draft amended statement of claim. (11) On 29 October 2001 I ordered that the plaintiff file and serve a notice of motion seeking leave to file the amended statement of claim within 2 weeks. The plaintiff did not comply with this order. (12) On 30 November 2001 the third defendant Dumaresq Shire Council, filed a notice of motion seeking an order that the plaintiff give it security for its costs of the proceedings; and that the proceedings be stayed until the security is given. (13) On 13 December 2001 I ordered the plaintiff to serve a draft amended statement of claim on the second and third defendants and file any supporting affidavits in relation to an extension of time on or before 14 January 2002. I also ordered the plaintiff or the plaintiff's legal representative to pay the second and third defendants' costs of 13 December 2001, with liberty to restore. The matter was adjourned to date. No further amended statement of claim was served or filed. No affidavits in relation to an extension of time were filed, ie., no explanation for delay has been given by way of affidavit. 4 Thus, the plaintiff has had since 16 November 2000 to complete and serve an amended statement of claim. The plaintiff has been granted at least seven adjournments so that he can properly plead his causes of action against ATSIC and the Council. At court, the plaintiff's counsel informed the second and third defendants that the plaintiff was relying on the amended statement of claim served on 9 August 2001. Application for extension of time to file amended statement of claim 5 Part 2 rule 3 of the SCR states: "Extension and abridgment (1) The Court may, on terms, by order, extend or abridge any time fixed by the rules or by any judgment or order. (2) The Court may extend time under subrule (1) as well after as before the time expires whether or not an application for the extension is made before the time expires. (3) The period within which a person is required by rules or by any order to serve, file or amend any pleading or other document may be extended by consent without an order for extension." Explanation of delay 6 In Franklin House Ltd v ANI Corporation Ltd & Ors, (NSWSC unreported 7 November 1994) Windeyer J stated that a plaintiff seeking an extension of time must put forward grounds for seeking relief. This statement of principle is uncontroversial. In applications for extension of time beyond the limitation period an explanation for delay is crucial. - See Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541; 139 ALR 1; BHP Steel (AIS) Pty Limited v Giudice (& Ors) (NSWCA, unreported, 7 March 1997); Council of the City of Sydney v Zegarac (1998) 43 NSWLR 195; Holt v Wynter [2000] NSWCA 143; (2000) 49 NSWLR 128; McLean v Sydney Water Corp [2001] NSWCA 122; and Milperra Marketing Pty Ltd & Ors v Bayliss [2001] NSWCA 315. 7 In the plaintiff's camp there has been a most surprising lack of compliance with court orders. This I might add has only come about since the plaintiff was legally represented. As previously stated, in relation to the explanation for delay, it was only in court on 21 February 2002 the defendants were advised that it was the amended statement of claim served in August that the plaintiff intended to rely upon. The plaintiff's counsel from the bar table informed the court that the explanation for delay was an obvious one. Apparently many hours of work had been undertaken by the plaintiff's legal representatives to sift through the myriad of paper to put the amended statement of claim in concise form, and it was not necessary to break that time into hours of specific days. Hence, according to the plaintiff's counsel, it was unnecessary to file an affidavit explaining the delay despite the court order to do so. The plaintiff is not seeking an extension of a few days but rather an extension of at least six months. May I respectfully say that this is a most perplexing stance. Prior to engaging legal representation he had been most diligent in attempting to comply with court orders, but demonstrated an understandable lack of legal knowledge. Unusual as it may be, I have decided to consider whether the amended statement of pleads arguable causes of action against the second and third defendants and if it does I will adjourn the matter to allow the plaintiff or the plaintiff's legal representatives to file and serve an affidavit explaining the delay, and then if I find it satisfactory then I will proceed to make the orders sought. Whether the granting of leave would be futile 8 Leave will not be granted to file an amended statement of claim if such leave would be futile. The defendants submitted that the causes of action, namely breach of contract, negligence and unconscionable conduct were firstly, not properly pleaded; secondly, statute barred; and thirdly, those causes of action did not arise out of substantially the same facts. Pleading 9 In Bega Co-operative Society Limited v The Milk Authority of the Australian Capital Territory (FCA unreported, 12 May 1992) Justices Neaves set out the requirements of pleading. It is so very helpful so I shall respectfully summarise it. 10 A pleading is to contain, and contain only, a statement in a summary form of the material facts on which the applicant relies. If it discloses no reasonable cause of action or has a tendency to cause prejudice, embarrassment or delay, the whole or part of it may be struck out. The material facts are all those facts necessary for the purpose of formulating a complete cause of action - see Bruce v Odhams Press Ltd (1936) 1 KB 697 at p 712; Pinson v Lloyds and National Provincial Foreign Bank Ltd (1941) 2 KB 72 at 75. It is not sufficient that the statement of claim simply express a conclusion drawn from facts which are not stated - see Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 114; though in some circumstances to plead a conclusion may be to plead a material fact - see Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (FCA unreported, French J 3 September 1991). Not only must all material facts be pleaded but they must be pleaded with a sufficient degree of specificity, having regard to the general subject-matter, to convey to the opposite party the case that party has to meet - see Ratcliffe v Evans (1892) 2 QB 524 at 532; Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413 at 417. It must be apparent on the fact of the document that the facts pleaded, if proved, would establish the cause of action relied upon - see H 1976 Nominees Pty Ltd v Galli (1979) 40 FLR 242 at 246. It is not a function of particulars to take the place of the necessary averments in the statement of claim. Trade Practices Commission v David Jones (Australia) Pty Ltd at 114. Further a pleading must state the facts that if not specifically pleaded might take the other party by surprise. – see also Banque Commerciale SA en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286; Truth About Motorways Pty Ltd v Macquarie Infrastructure Ltd [1998] ATPR 41-633; and Northam & Anor v Favelle Favco Holdings (unreported, Bryson J, 7 March 1995). (i) Breach of contract 11 In order to found an action for breach of contract, the plaintiff must show that the defendant failed to perform a contractual obligation to the standard required in the time agreed upon for performance: LBC, The Laws of Australia, (at 26 February 2002), 7. Contract: General Principles, '7.6 Breach' [1]. Failure to perform may involve non-performance, defective performance or late performance. 12 It is important to consider the scope of performance called for by the contract as well as the standard of the duty. It is a matter of construction whether the duty imposed by the contract is strict, or requires the exercise of care and diligence: See George D Emery Co v Wells [1906] AC 515, Sir Arthur Wilson (for the Privy Council) at 524; Francis v Lyon (1907) 4 CLR 1023, Isaacs J at 1040. It is then a question of fact whether or not that standard has been complied with: Athenian Tankers Management SA v Pyrena Shipping Inc (The Arianna) [1987] 2 Lloyd's Rep 376 (QB). 13 In commercial contracts, the prima facie standard applicable is a strict duty. In that case, the plaintiff will need to prove that the defendant did not fulfil their obligation under the contract, and identify the particular defects in the defendant's performance. This will be sufficient to establish proof of a prima facie case of breach. The onus then shifts to the promisor to prove performance in accordance with the contract or to establish a defence: LBC, The Laws of Australia, (at 26 February 2002), 7. Contract: General Principles, '7.6. Breach' [1]. 14 The particulars of the agreement between the plaintiff and DEET for the Management Traineeship are pleaded at paragraphs 7.1 to 7.5 of the amended statement of claim. They are - "7.1 The agreement was for a term of four years. 7.2 DEET would support the plaintiff financially through his business for the term of the agreement with payments increasing depending on the level of training achieved by the plaintiff. 7.3 DEET would provide financial support for the plaintiff to undertake further study and training. 7.4 The plaintiff would undertake further study and training. 7.5 The plaintiff would report his participation in the program and comply with the conditions of the program." 15 The plaintiff pleads that the Management Traineeship was transferred from DEET to ATSIC. The second defendant submitted that novation has not been pleaded but the transfer and acceptance of that transfer has been pleaded. The amended statement of claim pleads: "9. In or about May 1992 DEET transferred the management and control of the Management Traineeship to ATSIC. … 11. ATSIC accepted the transfer of the management and control of the Management Traineeship from DEET and commenced administering the traineeship. 12. From the time of the transfer of the Management Traineeship ATSIC undertook the management and control of the Management Traineeship." 16 The plaintiff pleads the breach of contract claim against the second defendant in the following terms: "28. ATSIC by its employees, officers and agents breached the agreement between itself and the plaintiff by: PARTICULARS OF BREACH OF CONTRACT 28.1 Failing to implement the terms of the traineeship transferred from DEET. 28.2 Failing to manage and control the traineeship in accordance with the conditions agreed to by DEET. 28.3 Failing to financially support the plaintiff and his business for the term of the four year agreement as required under the terms of the traineeship. 28.4 Failing to pay the plaintiff in a timely manner the payments required as and when they fell due. 28.5 Changing the criteria applied to the approval of monies payable to the plaintiff. 28.6 Changing the criteria against which the performance of the plaintiff was to be measured. 28.7 Failing to communicate with the plaintiff in a timely manner in relation to the management and control of the traineeship." 17 Although in paragraphs 28.5 and 28.7 there are conclusions which are drawn from facts that have not been pleaded, there are sufficient facts in paragraphs 28.3, 28.4 and 28.6 pleaded which, if proved, would establish breach of contract. It is my view that the plaintiff's pleadings in relation to the second defendant are sufficient to found a cause of action in breach of contract. 18 The plaintiff also alleges breach of contract against the third defendant in relation to the lease agreement. The plaintiff pleads the particulars of the lease agreement in paragraph 15 of the amended statement of claim: "15. On or after January 1993 the plaintiff agreed with DSC to enter into an agreement with DSC for the lease of a parcel of land at Armidale Airport in the State of New South Wales, the terms and conditions of which were as follows: PARTICULARS 15.1 The plaintiff would move his business from Evan's Head to Armidale Airport. 15.2 DSC would lease the plaintiff a parcel of land being Lot 9 Armidale Airport on which the plaintiff could operate his business painting motor vehicles and aircraft. 15.3 That the said lease would include an option for the plaintiff to renew the lease. 15.4 DSC would construct a hangar on Lot 9 and provide finance to the plaintiff for the cost of the hangar at an interest rate about the 180 day Bank Bill rate. 15.5 DSC would approve the plaintiff operating his business painting motor vehicles, aircraft and other aviation related equipment. 15.6 That DSC would not object to the plaintiff erecting signage promoting his business with the signage visible to the main road near the airport. 15.7 That the plaintiff would continue receiving payments from ATSIC." 19 The plaintiff goes on to detail the events which followed. The amended statement of claim pleads: "18. In or about July 1993, relying upon the agreement entered into in about January 1993, the plaintiff took possession of the said land and hangar and commenced fitting out the hangar with plant and equipment necessary to commence training. … 20. In September 1993 the DSC provided the plaintiff with a copy of a lease and Deed of Agreement for signing by the plaintiff. The said documents did not reflect the terms and conditions of the said agreement entered into about January 1993 as a consequence of which the plaintiff did not sign the documents. 21. Between about July 1993 and December 1993 the plaintiff requested DSC to amend the said documents to reflect the terms and conditions of the agreement entered into about January 1993. 22. In December 1993 the plaintiff refused to complete the execution of the lease and Deed of Agreement on the grounds the documents did not reflect the agreement entered into in about January 1993. DSC represented to the plaintiff that if the plaintiff did not sign the said documents the plaintiff would not be permitted to hold the official opening in the presence of the Minister for Regional Development on 3 December 1993. … 25. In November 1995 DSC through its officers, directed the plaintiff to stop work on an aviation related vehicle upon which the plaintiff was working for a customer. 26. On or about 8 February 1996 DSC, without the consent of the plaintiff, entered into possession of Lot 9 Armidale Airport. 27. The plaintiff did not abandon possession of Lot 9 or the hangar." 20 The plaintiff pleads his action in breach of contract against the third defendant in the following terms: "32. DSC by employees, officers and agents breached the contract between itself and the plaintiff. PARTICULARS OF BREACH OF CONTRACT 32.1 Failing to provide to the plaintiff written agreements for execution consistent with the agreements entered into on after January 1993. 32.2 Failing to allow the plaintiff to operate his business without hindrance in respect of the painting of aviation related vehicles and equipment. 32.3 Failing to allow the plaintiff to erect signage advertising his business. 32.4 Taking possession of the hangar and land occupied by the plaintiff." 21 The plaintiff pleads that he entered into an oral lease agreement with DSC in or about January 1993. 22 The plaintiff does not state in the proposed amended statement of claim whether or not he signed the lease and Deed of Agreement in December 1993. He states at para 20 that in September and December 1993 he refused to sign the documents. In para 22 he alleges that the third defendant put pressure on him to sign the documents, saying that if he failed to do so the plaintiff would not be permitted to conduct his official opening as planned. In para 23 the plaintiff pleads that he held the official opening on 3 December 1993. 23 It is unclear from the pleadings whether the plaintiff is pleading breach of contract in respect of the January 1993 or December 1993 lease agreement. If the plaintiff claims that he did not complete the execution of the lease and Deed of Agreement in December 1993, and that the lease subsequently does not exist, then he cannot rely upon that same lease in a claim for breach. On the face of the pleadings the plaintiff refers to the agreement governing the lease having been entered into in January 1993. 24 If the plaintiff is pleading breach of contract in reference to the January 1993 lease, then he is relying on an oral agreement. Although the plaintiff has failed to plead facts to show that the provision of a written agreement referred to in paragraph 32.1 was a term of the contract with the third defendant, and in paragraph 32.3 has failed to state the facts supporting this conclusion, there are sufficient facts pleaded in paragraphs 32.2 and 32.4 which, if proved, would establish breach of the oral lease agreement. It is my view that the plaintiff's pleadings in relation to the third defendant are sufficient to found a cause of action in breach of contract, in respect of the January 1993 agreement. (ii) Negligence 25 The second defendant has submitted that the plaintiff's causes of action in negligence are not properly pleaded. 26 To establish a cause of action in negligence, the plaintiff is required to show that the defendant owed the plaintiff a duty of care, the defendant breached that duty, and the defendant suffered damage which was caused by the breach of duty and was not too remote from it in law. 27 In relation to the existence of a duty of care, the plaintiff has pleaded as follows: "12. From the time of the transfer of the Management Traineeship ATSIC undertook the management and control of the Management Traineeship. 13. From the time of entering into the agreement with DEET the plaintiff relied upon the payments received from DEET as an essential part of his financial business plan in relation to the panel beating and spray painting business he operated at Evans Head. 14. Both DEET and ATSIC by their employees, officers and agents were aware of the plaintiff's financial reliance on the payments that should have been made through the traineeship program. … 29. Further and in the alternative, ATSIC owed a duty of care to the plaintiff in relation to the management and control of the traineeship entered into by the plaintiff." 28 To make out a duty of care, the plaintiff must show reasonable foreseeability of harm and a relationship of proximity between the plaintiff and defendant: Jaensch v Coffey (1984) 155 CLR 549; 58 ALJR 426; 54 ALR 417 (HC), per Gibbs CJ and Deane J, Brennan J contra. 29 In paragraph 29, the plaintiff pleads that ATSIC owes him a duty of care. 30 In relation to the breach of that duty by the defendant, the plaintiff pleads as follows: "17. Between about May and September 1993 ATSIC did not pay the plaintiff the payments required under the Management Traineeship. ATSIC also purported to require the plaintiff to meet conditions as to his performance under the Management Traineeship which were different to those forming part of the original agreement with DEET. … 24. In or about February 1995 ATSIC fell into arrears in relation to payments due to the plaintiff under the Management Traineeship program. ATSIC refused to pay the plaintiff. … 30. In its breach of its duty of care to the plaintiff ATSIC failed to manage and control the traineeship in a manner consistent with their obligations under the traineeship." 31 The plaintiff set out the particulars of that breach in the following terms: "30.1 Failing to manage the traineeship in accordance with the terms of the program as established by DEET. 30.2 Failing to financially support the plaintiff and his business for the term of the four year traineeship program. 30.3 Failing to make payments due to the plaintiff in a timely manner. 30.4 Failing to take notice of the effect of its acts and omissions on the plaintiff's financial capacity to conduct his business. 30.5 Changing the criteria applied to the approval of monies payable to the plaintiff. 30.6 Changing the criteria against which the performance of the plaintiff was to be measured. 30.7 Failing to communicate with the plaintiff in a timely manner in relation to the management and control of the traineeship." 32 The third element required to be pleaded by the plaintiff in order to found a claim in negligence is that of damage and causation. In regard to damage, the plaintiff pleads as follows: "24. In or about February 1995 ATSIC fell into arrears in relation to payments due to the plaintiff under the Management Traineeship program. ATSIC refused to pay the plaintiff. … 26. On or about 8 February 1996 DSC, without the consent of the plaintiff, entered into possession of Lot 9 Armidale Airport. … 34. As a result of the breaches of contract, duty and unconscionable conduct pleaded in respect of the second and third defendants, the plaintiff has suffered economic loss and damage which will be particularised at a later date." 33 The plaintiff has pleaded in paragraph 34 that the breach of duty by the second defendant resulted in economic loss and damage. 34 The claim in negligence is for pure economic loss, a field of liability which is still evolving. In Bryan v Maloney (1995) 182 CLR 609, Mason CJ and Deane and Dawson JJ affirmed the importance of the existence of the requisite relationship of proximity in imposing a duty of care. Their Honours considered that policy considerations dictated that the categories of cases in which the requisite relationship of proximity is found are special. Those cases will often involve the element of known reliance and/or the assumption of responsibility. 35 The concept of proximity will not however suffice as a universal indicator of the existence of a duty of care: Preston v Star City Pty Ltd [1999] NSW SC 1273. In Hill v Van Erp (1997) 188 CLR 159, the High Court considered the applicability of the concept of proximity to a claim for economic loss. Brennan CJ held that the necessary, but not always sufficient, foundation for a duty of care is reasonable foreseeability of damage to another if the relevant task is carelessly performed. His Honour went on to note that recovery for economic loss was not necessarily limited to cases in which there existed an assumption of responsibility and reliance upon it (at 170). 36 Dawson J, with whose reasons Toohey J agreed, said at 178 that: "the requirement of proximity is at least a useful means of expressing the proposition that in the law of negligence reasonable foreseeability of harm may not be enough to establish a duty of care. Something more is required and it is described as proximity. Proximity in that sense expresses the result of a process of reasoning rather than the process itself (See Caparo Plc v Dickman [1990] 2 AC 605 at 632-633; Spring v Guardian Assurance Plc [1995] 2 AC 296 at 343-344; Canadian National Railway Company v Norsk Pacific Steamship Co (1992) 91 DLR (4th) 289 at 344, 387), but it remains a useful term because it signifies that the process of reasoning must be undertaken. But to hope that proximity can describe a common element underlying all those categories of case in which a duty of care is recognised is to expect more of the term than it can provide." 37 Toohey J added that the concept of proximity: "…does operate as a limitation on any notion that liability in negligence arises simply from a duty to avoid harm that is reasonably capable of being foreseen, at any rate in cases not involving direct physical injury or damage. It designates "a separate and general limitation upon the test of reasonable foreseeability in the form of relationships which must exist between plaintiff and defendant before a relevant duty of care will arise"." (at 189). 38 Gaudron J said at 192-193: "It is well settled that where, as here, a plaintiff sues in negligence to recover pure economic loss – financial loss which is not 'causally consequent' upon physical injury to the plaintiff's own person or property: Bryan v Maloney (1995) 182 CLR 609 at 657, per Toohey J, referring to Feldthusen, Economic Negligence 2nd ed (1989) p1 – he or she must establish more than the foreseeability of loss. As earlier indicated, the focus of this court in that regard has been directed to the relationship of proximity and it has been said authoritatively that "the categories of case in which the requisite relationship of proximity with respect to mere economic loss is to be found are properly to be seen as special": Bryan v Maloney (1995) 182 CLR 609 at 619. See also Hawkins v Clayton (1988) 14 CLR 539 at 576." 39 Having considered Hill v Erp and the other relevant authorities, Justice Wood in Preston, observed that: "Of the circumstances that have been identified as necessary in addition to foreseeability and proximity, in economic loss cases, are those of control and vulnerability: see Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 (at 551); Hill v Van Erp (at 198-199 and 234), and Perre v Apand Pty Ltd (eg at par 38 per Gaudron J, paras 118, and 124-129 pr McHugh J, and para 406 per Callinan J)." 40 The vulnerability has been pleaded. 41 The plaintiff has pleaded that the second defendant owed a duty of care to the plaintiff, and has pleaded facts giving rise to the allegation. The amended statement of claim also pleads the breach of that duty by the defendant. Although in paragraphs 30.5 and 30.7 (possibly also 30.4) there are conclusions which are drawn from facts that have not been pleaded, there are sufficient facts in paragraphs 30.1, 30.2, 30.3 and 30.6 pleaded which, if proved, would establish a breach of duty. The plaintiff has pleaded in paragraph 34 that the breach resulted in economic loss and damage. Although the plaintiff has not explicitly pleaded facts supporting his conclusion of causation, it appears on the facts that the repossession of Lot 9 Armidale Airport occurred as a result of the plaintiff falling into arrears in his lease payments, which itself was a direct result of ATSIC's refusal to pay the plaintiff the payments due to him under the Management Traineeship. This pleading in negligence against the second defendant is not hopeless and is one which should go to trial provided the cause of action is not statute barred. 42 In relation to the existence of a duty of care owed by the third defendant to the plaintiff, the plaintiff pleaded as follows: "33. Further and in the alternative, DSC as both a contracting party and consent authority for development and building applications within its local government area, owed a duty of care to the plaintiff to provide information relevant to the agreement the parties were about to enter into and the manner in which DSC would conduct itself and for that information to be accurate." 43 The breach of duty of care by the third defendant is expressed in the particulars of negligence namely: "33.1 Failing to advise the plaintiff of any planning instrument which could have the effect of restricting the plaintiff's conduct of his business compared to the express provisions of the agreement entered into between them. 33.2 Failing to advise the plaintiff that it would prevent him from carrying out work for allegedly not related to the aviation industry while permitting another business within its local government area but not at Armidale Airport to carry out aviation related work." 44 The particulars in paragraph 33.2 relate to the following pleading: "25. In November 1995 DSC through its officers, directed the plaintiff to stop work on an aviation related vehicle upon which the plaintiff was working for a customer." 45 In regard to damage and causation, the plaintiff pleads paragraph 34, which makes a general claim of economic loss and damage suffered as a result of the third defendant's breach of duty. The claim for economic loss has been covered earlier in this judgment. The claim for negligence against the third defendant is not hopeless and should go to trial provided the cause of action is not statute barred. (iii) Unconscionable conduct 46 Unconscionable conduct is an equitable doctrine which provides a basis of relief from transactions which have been procured by the unfair advantage taken by a stronger party of a special disability or disadvantage of a weaker party: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 [57 ALJR 358; 46 ALR 402], Mason J at 461, Deane J at 474. 47 The elements of unconscionable conduct are identified in Blomley v Ryan (1956) 99 CLR 362 and Amadio. The plaintiff must plead the elements as follows. The plaintiff was under a special disability in relation to the defendant at the time the transaction was entered into. As a result of the special disability, the plaintiff could not protect his own interests. The defendant knew of the plaintiff's special disability, or was aware of facts that would raise that possibility in the mind of any reasonable person. The defendant took advantage of the opportunity afforded by the disability, and the taking of advantage was unconscientious. Mason J and Deane J in Amadio suggested that, rather than constituting a fifth element, unconscientiousness might be prima facie established on proof the first four elements. In that case, the onus shifts to the defendant to prove that the transaction was "fair, just and reasonable": Mason J at 468, Deane J at 477. 48 The plaintiff asserts in paragraph 31 that the second defendant, by its employees, officers and agents, has participated in unconscionable conduct in the manner in which it purported to manage and control the traineeship. 49 The plaintiff pleads the particulars as follows: "PARTICULARS OF UNCONSCIONABLE CONDUCT 31.1 Taking advantage of the plaintiff's relative inexperience in business matters. 31.2 Taking advantage of its role as the manager and administrator of the traineeship program in that it set criteria and procedures inconsistent with the terms of the program assigned to it by DEET. 31.3 Failing failure (sic) to make payments in a timely manner in circumstances where its employees, officers and agents were aware of the financial reliance by the plaintiff on those payments and of the plaintiff's legal and financial duties to third parties. 31.4 Using its financial and legal power as the controller and manager of the traineeship program to intimidate the plaintiff by refusing to recognise the original terms of the traineeship program assigned to it by DEET." 50 The facts pleaded by the plaintiff in relation to the unconscionable conduct are as follows: "13. From the time of entering into the agreement with DEET the plaintiff relied upon the payments received from DEET as an essential part of his financial business plan in relation to the panel beating and spray painting business he operated at Evans Head. 14 Both DEET and ATSIC by their employees, officers and agents were aware of the plaintiff's financial reliance on the payments that should have been made through the traineeship program. … 17. Between about May and September 1993 ATSIC did not pay the plaintiff the payments required under the Management Traineeship. ATSIC also purported to require the plaintiff to meet conditions as to his performance under the Management Traineeship which were different to those forming part of the original agreement with DEET." 51 The plaintiff pleads that ATSIC acted unconscionably in its management and control of the traineeship. Essentially the plaintiff's assertion is that ATSIC deviated from the terms of the traineeship by which it was bound in contract, failed to fulfil its contractual obligations in regard to payments, and did so by taking advantage of the plaintiff's relative inexperience in business matters. That is a claim for breach of contract. The remedy the plaintiff desires is specific performance of the contract. The doctrine of unconscionable conduct applies to transactions where a stronger party has procured a transaction by taking advantage of a special disability of the weaker party. The doctrine operates to provide relief to the weaker party by setting aside the transaction, because, by reason of the unconscionable conduct, it would be unfair in the circumstances to enforce it against them. This is not the situation of the plaintiff. Even if the plaintiff's allegations were proved at trial and it was established that the defendant took advantage of the plaintiff and acted unconscionably in the management of the traineeship, there was no transaction procured by ATSIC which the plaintiff seeks to have set aside. It is my view that the action for unconscionable conduct is unsupported by the facts pleaded and should be struck out. The plaintiff has not pleaded unconscionable conduct in respect of the third defendant. Whether the claims are statute barred 52 The defendants submitted that the causes of action, namely breach of contract, negligence and unconscionable conduct were statute-barred and did not arise out of the same facts so Part 20 r 4(5) is not applicable. 53 Part 20 r 4(5) of the SCR rules state: "Statutes of limitation (1) Where any relevant period of limitation expires after the date of filing of a statement of claim and after that expiry an application is made under rule 1 for leave to amend the statement of claim by making the amendment mentioned in any of subrules (3), (4) and (5), the Court may in the circumstances mentioned in that subrule make an order giving leave accordingly, notwithstanding that that period has expired. (2) (Repealed) (3) … (4) … (5) Where a plaintiff, in his statement of claim, makes a claim for relief on a cause of action arising out of any facts, the Court may order that he have leave to make an amendment having the effect of adding or substituting a new cause of action arising out of the same or substantially the same facts and a claim for relief on that new cause of action. (5A) An amendment made pursuant to an order made under this rule shall, unless the Court otherwise orders, relate back to the date of filing the statement of claim. (6) This rule has effect in relation to a summons as it has effect in relation to a statement of claim. (7) This rule does not limit the powers of the Court under rule 1." 54 I turn to the breach of contract action against the second defendant. The original statement of claim pleads the existence of a four year contract with DEET for a Management Traineeship, which was usurped by ATSIC in mid-1992. The original pleadings contain statements that ATSIC failed to fulfil its obligations under that contract, and failed to make timely payments to the plaintiff for up to six months, resulting in arrears of $18,000 by 1995. Although the amended statement of claim provides further details on the contract and the breach by the second defendant, I am satisfied that the cause of action in contract arises out of the same or substantially the same facts as those pleaded in the original statement of claim. 55 In respect of the cause of action in negligence against the second defendant, the statement of claim originally filed makes reference to "ATSIC's negligence". The assertion of ATSIC's alleged negligence in managing the traineeship relies upon substantially the same facts as the claim in breach of contract. I am satisfied therefore that the cause of action in negligence arises out of the same or substantially the same facts pleaded in the original statement of claim. 56 Even if I am wrong and the claim for unconscionable conduct ought to have remained, the original statement of claim makes no reference to the essential facts which give rise to the claim of unconscionable conduct. It is my view that the claim which the plaintiff now seeks to raise cannot be said to arise out of the same or substantially similar facts as those pleaded in the original statement of claim. However it is debatable whether this rule is applicable as strictly speaking, unconscionable conduct is not a cause of action. 57 I turn now to the causes of action pleaded against the third defendant. The original statement of claim pleads the existence of a lease agreement between DSC and the plaintiff, as well as a deed of agreement between DSC and the plaintiff for the construction and purchase of a hangar on the leased land. The original statement of claim filed 7 October 1999 pleads that DSC representatives unlawfully entered the plaintiff's premises at Armidale Airport and unlawfully removed possessions belonging to the plaintiff. In relation to this alleged breach of contract it is my view that the new cause of action in breach of contract arises out of the same or substantially the same facts as those originally pleaded. 58 In respect of the cause of action in negligence however, the plaintiff must fail. The original statement of claim makes no reference to the essential facts giving rise to a cause of action in negligence against the third defendant. It is for this reason that it cannot be said that the action arises out of the same or substantially the same facts as those originally pleaded. However the cause of action in negligence against the third defendant was complete sometime after 8 February 1996 when the third defendant entered into possession of Lot 9 Armidale Airport. The claim for negligence would have become statute barred shortly after 8 February 1999. The statement of claim was filed on 7 October 1999. The cause of action is statute barred. This claim for negligence against the third defendant should be struck out as it is statute barred. Security of costs of third defendant 59 The third defendant sought an order for security for costs. The third defendant submitted that firstly, the plaintiff's claim is manifestly unarguable in its present form; secondly, the plaintiff has no reasonable prospects of obtaining the relief sought, based upon the pleadings as they presently stand; thirdly, an order for security will not bring the proceedings to an end because the plaintiff has availed himself of the Bar Association pro bono scheme, and he has not shown that the provision of security would have that effect; and fourthly the plaintiff has substantial debts which have remained unpaid for a lengthy period of time. 60 The third defendant also submitted that it is unjust that a litigant who is prima facie impecunious and who is substantially indebted to a defendant should expose a defendant to irrecoverable costs where the claim is hopeless and the plaintiff has conducted the action in a manner which substantially increased the costs to the other parties. For these reasons the third defendant submitted that the plaintiff's assets must be directly exposed to a costs order. 61 The court possesses inherent jurisdiction to order such security and can also do so pursuant to Part 53 r 2 SCR. Power comes from the same roots as the inherent power to summarily dismiss actions as frivolous and vexatious: Morris v Hanley [2000] NSWSC 957 at para 11. While impecuniosity is not of itself sufficient to warrant an order for security it is generally a relevant consideration: Chang v Comcar Australia [1999] FCA 1677 at para 25. 62 To date the third defendant has incurred costs in the sum of $28,606.50. The third defendant's solicitor had calculated that the amount of $7,669 has been incurred for court attendances on 24 July 2000, 7 February, 7 March, 11 April, 26 April, 7 June, 9 August and 29 October 2001. The third defendant expects there to be a necessity for subpoenas, discovery and possibly interrogatories and believes that it will incur costs in the order of $60,000 in defending the claim to completion. 63 It is my view that it is not appropriate to order that the plaintiff is to provide security for costs and that there are not sufficient reasons to depart from the general rule laid down in Powell v Taylor (1885) 31 ChD 34, namely, that poverty is no bar to a litigant. Each case depends on its facts. It is my view that the plaintiff believes that he has a genuine cause of action to litigate against the second and third defendants. When he has become aware that he does not have a case against other litigants, he has discontinued against them. The plaintiff's claims have been refined. 64 The plaintiff's pleadings in relation to unconscionable conduct by the second defendant are struck out. The plaintiff's pleadings are however sufficient to found causes of action in breach of contract against the second and third defendants. The claim for negligence against the second defendant should proceed to trial. The claim for negligence in relation to the third defendant does not arise out of the same facts and is statute barred. Leave is not granted to the filing of an amended statement of claim which includes paragraphs 31 and 33. Subject to the explanation for delay being satisfactory, leave will be granted to file and serve the balance of the proposed amended statement of claim. 65 The orders I make at this stage are that: (1) The plaintiff is to file and serve an affidavit explaining delay in filing an amended statement of claim on or before 23 April 2002. (2) I stand the matter over until 30 April 2002 at 10.00 am before me. (3) Leave is not granted to the filing of an amended statement of claim which includes paragraphs 31 and 33. Subject to the explanation for delay being satisfactory, leave will be granted to file and serve the balance of the proposed amended statement of claim. (4) Costs are reserved. ********** Last Modified: 03/20/2002 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.