Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWSC 1073

New South Wales Supreme Court

CITATION : Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWSC 1073

HEARING DATE(S) : 14/09/06

JUDGMENT DATE : 13 October 2006

JURISDICTION : Equity Division Commercial List

JUDGMENT OF : Barrett J

DECISION : Application for leave to amend refused

CATCHWORDS : PROCEDURE - application by plaintiff to amend - whether amendment futile - where proceedings have been on foot for seven years

LEGISLATION CITED : Civil Procedure Act 2005, ss.56, 58, 64

Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2004] NSWSC 487 Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2005] NSWSC 774 CASES CITED : Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWCA 224 Fexuto Pty Ltd v Lombe [2006] NSWSC 981 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125

Alamdo Holdings Pty Limited - Plaintiff PARTIES : Australian Window Furnishings (NSW) Pty Limited - First Defendant Hunter Douglas Limited - Second Defendant

FILE NUMBER(S) : SC 50135/99

COUNSEL : Mr R.G. McHugh - Plaintiff Mr J.A.C. Potts - Defendant

SOLICITORS : Speed and Stracey - Plaintiff Corrs Chambers Westgarth - Defendants

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

BARRETT J

FRIDAY, 13 OCTOBER 2006

50135/99 ALAMDO HOLDINGS PTY LIMITED v AUSTRALIAN WINDOW FURNISHINGS (NSW) PTY LIMITED & ANOR JUDGMENT 1 I am dealing with an application by the plaintiff (lessor) for leave to amend by filing a further amended summons, which adds a claim that the first defendant (lessee) has failed to reimburse the plaintiff (lessor) upon reasonable demand for moneys paid by the plaintiff that the first defendant (lessee) covenanted to pay under either or both of clause 9.4 and clause 11.5 of the lease, but has not paid. 2 To say that the application to amend comes at a late stage in the proceedings would be an understatement. The plaintiff's summons was filed on 4 November 1999. The proceedings as whole were referred to the Honourable A.J. Rogers QC for inquiry and report. The reference was heard over thirteen days in November and December 2000. An interim report was delivered by the referee to the Commercial List Judge almost three years later, on 16 October 2003. The report described its scope as follows: "In the course of the hearing of the reference, the parties agreed that I should initially report on the question of liability and thereafter, if necessary, after a further hearing, report on quantum. This report is confined to questions of liability but, of necessity addresses damages generally as distinct from quantum." 3 On 29 and 30 March 2004, I heard applications by both parties concerning adoption of the referee's report and related matters. In a judgment delivered on 7 June 2004 ([2004] NSWSC 487), I determined certain questions left outstanding by the referee and dealt with in the parties' contentions concerning rejection of certain parts of the report and adoption of the balance. My judgment of 7 June 2004 addressed various questions of liability under the repair and maintenance provisions of the lease. The parties were directed to bring in short minutes. Certain further matters were dealt with in a judgment of 31 March 2005. On 1 April 2005, I directed that the parties confer in an attempt to agree quantification of those claims in respect of which the plaintiff had succeeded and there had not been any determination of quantum. 4 The parties thereafter engaged in discussions. To assist the process of discussion, the parties sought and I made an order for the determination of a separate question as follows: "Is the plaintiff entitled to recover interest pursuant to the terms of clause 9.4 of the lease dated 28 April 1999 between the plaintiff as lessor, and the first defendant as lessee, on the amounts claimed as damages in these proceedings for breaches of covenants in the said lease by the first defendant?" 5 In a judgment delivered on 2 August 2005 ([2005] NSWSC 774), I answered that question in the negative but added a rider: "The separate question, as it relates to unliquidated damages, must be answered in the negative but with a rider to the effect that there is implied into clause 9.4 the term I have described and that the plaintiff is entitled to recover interest pursuant to the terms of clause 9.4 on liquidated sums that become due by the lessee to the lessor under that implied term." 6 An appeal to the Court of Appeal on various matters related to the defendant's liability as lessee under the lease covenants was heard on 4 and 5 May 2006. The appeal was dismissed on 14 August 2006 ([2006] NSWCA 224). Leave to bring a cross-appeal was refused. I was informed in submissions that an application for special leave to appeal to the High Court on limited issues has been filed. 7 It is in this context that, almost seven years after the proceedings were commenced, I heard the plaintiff's application for leave to amend – an application, I might say, that is strenuously resisted by the defendant not only on the basis of the lateness of the application and the point that has been reached on the pleadings as they stand, but also because the defendant considers the amendment futile; added to which it is said that part of the new claim has been extinguished. 8 Curiously, it seems to me, the submissions made by the plaintiff in support of the application for leave to amend begin by contending that there is no need to add the claim outlined at paragraph [1] above (that is, the claim that the defendant has failed to reimburse the plaintiff on demand by reference to either or both of clause 9.4 and clause 11.5). I quote from the written submissions: "12. The plaintiff ('Alamdo') submits that in these proceedings it has always claimed, in addition to unliquidated damages for breach of covenant, a liquidated amount on account of reimbursement for the costs of the work which Alamdo carried out in making good the premises. 13. First, the relief claimed in the summons included: '1. Judgment in the sum of $928,955.46. 2. Damages. 3. Interest.' 14. Secondly, paragraph C4 of Alamdo's Contentions in the original summons expressly referred to the effect of clauses 9.4 and 11.5 of the Lease (see subparas (k) and (m)). Clause 9.4 of the Lease relevantly provides: 'If the Lessee omits or neglects to pay any money or to do or effect anything which the Lessee has herein covenanted to pay do or effect then on each and every such occasion it shall be lawful for but not obligatory upon the Lessor to pay such money or to do or effect such thing by itself as if it were the Lessee … The Lessee will pay to the Lessor interest at the rate of twenty per centum (20%) per annum on any moneys due by the Lessee to the Lessor on any account whatsoever pursuant to this Lease but unpaid for seven (7) days …' Clause 11.5 of the Lease relevantly provides: 'The Lessee will pay (or reimburse the Lessor for) the Lessor's reasonable legal costs and all duties fees charges and expenses … of or incidental to any and every breach or default by the Lessee hereunder and in or incidental to the exercise or attempted exercise of any right power privilege authority or remedy of the Lessor under or by virtue of this Lease …' 15. Already in these proceedings clause 9.4 has been interpreted by Barrett J (in the judgment of 2 August) as carrying within it a requirement by necessary implication, as follows: '14. … In a case where the lessor pays money as contemplated by the first part of clause 9.4, the implied term requires the lessee to pay to the lessor a sum equivalent to that paid by the lessor. And where the lessor does or causes to be done some other thing as contemplated by the first part of clause 9.4 and, in so doing, pays out money that it is reasonably necessary to outlay in order to do the thing or to cause it to be done, the implied term requires the lessee to pay to the lessor a sum equivalent to that so paid by the lessor. 15. The implied term must, of course, be seen as fixing some time for payment by the lessee. Given the nature of the context (in which the lessor may pay money without the knowledge of the lessee), it must be the case that the lessee's obligation to reimburse does not become due for performance before the lessor gives to the lessee information sufficient to show that the money in question has been paid by the lessor in circumstances attracting the operation of the implied term. Another pre-condition must be that the lessor demands payment by reference to that information and the right of reimbursement arising under the lease. Once both pre-conditions had been satisfied, the law would imply a reasonable time for the lessee to pay, so that the due date for payment (as contemplated by the part of clause 9.4 dealing with interest) would arrive only upon the expiry of that reasonable time after satisfaction of the pre-conditions.' 16. Clauses 9.4 and 11.5 have further been interpreted in the proceedings by Hodgson JA in the Court of Appeal as follows: ' 107. On the second issue, I accept that cl.7.1(c)(i), cl.11.5, and indeed cl.11.12, can give rise to moneys being due by the lessor to the lessee pursuant to this lease, for which there could be a due date for payment and which could then bear interest at 20% if they are not paid within 7 days of that due date, pursuant to cl.9.4. However, in my opinion there would not be moneys due by the lessee to the lessor on any particular date in consequence of those clauses unless and until a proper demand had been made; and in my opinion that demand must sufficiently identify the amount payable, and must also sufficiently identify the basis on which it is payable, by sufficiently adverting to the relevant provision of the lease and the facts and circumstances that engage that provision." 17. Thirdly, the amended summons (filed in court on 1 April 2005) also referred to the effect of clause 7.1 (see subpara.(o)). That clause provided for an indemnity in certain circumstances – in other words, a liquidated sum. 18. Fourthly, Barrett J appears to have proceeded on the footing, when answering the separate question in the way in which he did, that the question whether Alamdo was entitled to claim a liquidated sum was already at issue in the proceedings. It was not suggested that it was necessary for Alamdo to amend. 19. Alamdo also submits that in these proceedings it has always claimed interest on its claim for reimbursement in a fixed sum, and not merely on the claim for damages for breach of covenant. a. Prayer 3 of the relief claimed clearly makes a claim for interest, both on the liquidated sum in prayer 1 and on the damages in prayer 2. b. And paragraph 4(k) of Alamdo's contentions claimed interest pursuant to clause 9.4 of the Lease 'at the rate of 20% pa on any monies due by the Lessee to the Lessor on any account whatsoever pursuant to the Lease'." 9 It is clear from the summons as it stands that both clause 9.4 and clause 11.5 were referred to in paragraph 4 under the heading "Plaintiff's contentions". That paragraph began, "The Lease contained terms and conditions to the following effect ('the Covenants')". In sub-paragraphs (k) and (m) there are condensed paraphrases of clauses 9.4 and 11.5 respectively. In the particulars to paragraph 8 (which paragraph begins, "as a consequence of the Breaches the plaintiff has suffered loss and damage"), appears a sub-paragraph (f): "Interest pursuant to clause 9.4 of the Lease." 10 It is against this background that the plaintiff says, in effect, that amendment is unnecessary and that the application for leave to amend is made out of an abundance of caution. That being so, the plaintiff contends, the matter should be put on to a more explicit footing particularly since the amendment sought will not fail any of the applicable tests derived from ss.56, 58 and 64 of the Civil Procedure Act 2005 (as summarised at [s.64.10] of Ritchie's "Uniform Civil Procedure (NSW)"): (a) that the amendment is so obviously futile that it would be liable to be struck out if it had appeared in the original pleading; (b) that the application for leave to amend is made for an improper purpose; (c) that the amendment causes prejudice to the other party that cannot be compensated by appropriate consequential orders, including costs orders; (d) the amendment is contrary to the interests of justice. 11 As to the first of these matters (futility), it was submitted on behalf of the plaintiff (and I accept) that the question to be addressed is whether the added claim is of the character stated by Barwick CJ in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at p.129: "The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'." 12 The question of futility was addressed in an indirect way by two members of the Court of Appeal. Hodgson JA said at [109] – [110]: