Supreme Court New South Wales Medium Neutral Citation: Lucas Stuart Pty Limited v Hemmes Hermitage Pty Limited [2012] NSWSC 1184 Hearing dates: 26 September 2012 Decision date: 28 September 2012 Jurisdiction: Equity Division - Technology and Construction List Before: Stevenson J Decision: Grant plaintiff leave to file amended pleadings and to rely on Mr Ainsworth's affidavit Catchwords: PRACTICE AND PROCEDURE - pleading - amendment - further evidence - likely costs - delay - explanation - hearing date not imminent Legislation Cited: Building and Construction Industry Security of Payment Act 1999 Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 Cases Cited: AON Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Cropper v Smith (1884) 26 Ch D 700 Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 Category: Interlocutory applications Parties: Lucas Stuart Pty Limited (ACN 067 550 403) (plaintiff, first cross-defendant) Hemmes Hermitage Pty Limited (ACN 001 259 409) (defendant, cross-claimant) Woods Bagot Pty Ltd (ACN 007 762 174) (second cross-defendant) Representation: Counsel: M Ashhurst SC with M Dolenec (plaintiff) T J Breakspear (defendant) Solicitors: BCP Lawyers & Consultants (plaintiff) King Wood & Mallesons (defendant) File Number(s): SC 2009/298813 Publication restriction: Nil EX TEMPORE Judgment 1By Notice of Motion dated 24 August 2012 the plaintiff, Lucas Stuart Pty Limited ("Lucas Stuart"), seeks leave to file a Further Amended Summons and List Statement and an Amended List Response to the cross-claimant's Third Further Amended Cross-Claim. Lucas Stuart also seeks leave to rely on an affidavit of Mr Mark Ainsworth sworn 10 August 2012. Decision 2I propose to grant Lucas Stuart leave to file the amended pleadings and to rely on Mr Ainsworth's affidavit. Background 3Hemmes Hermitage Pty Limited ("Hemmes") is the owner and operator of the "Ivy Hotel" in George Street, Sydney. Lucas Stuart was the builder of the Ivy Hotel. 4On 30 April 2009 Lucas Stuart commenced proceedings against Hemmes claiming that Hemmes was not entitled, pursuant to the terms of a contract called the "Merivale Construction Contract", to call upon bank guarantee and securities Lucas Stuart had provided. 5The claim was subsequently amended to include a claim for delay damages (now quantified in an amount of approximately $3.6 million) and for a return of bank guarantee and securities (in excess of $2 million but currently valued at something in the order of $750,000). 6Hemmes filed a cross-claim alleging building defects for an unspecified sum (subsequently quantified at $9,379,781), liquidated damages of $7,440,000 (subsequently increased to $15,540,000) and the return of moneys paid to Lucas Stuart following a judgment under the Building and Construction Industry Security of Payment Act 1999 of $4,769,948.48. 7On 11 November 2011 the Court ordered that any evidence served in response to Hemmes' evidence in chief not served by 14 December 2011 could not be relied upon by Lucas Stuart without leave (the guillotine order). 8Also on 11 November 2011, the whole proceedings were referred to the Honourable Robert Hunter QC for determination. The reference before Mr Hunter was originally scheduled to commence on 8 October 2012. For reasons not associated with this application, that is, not associated with Lucas Stuart's application to amend its pleadings and to rely upon Mr Ainsworth's affidavit of 10 August 2012, and with the consent of the parties, the reference is now to commence on 4 March 2013. The parties estimate the reference will take 12 weeks. The amendments 9The substance of the amendments is set forth in Lucas Stuart's submissions as follows: - "In paragraphs 16 to 20 of the proposed List Statement, Lucas Stuart alleges that on 23 April 2009 it disputed the decisions made by the Project Director on 14 April 2009 in respect of [Lucas Stuart's] extension of time claims. Further, that the response by Hemmes to this dispute (dated 20 May 2009) was not in accordance with the terms of the Contract and that Lucas Stuart became, in accordance with the terms of the contract, immediately entitled to the extension sought. In the alternative that as neither party activated the dispute resolution provisions Lucas Stuart's extension of time claims remain to be determined in these proceedings; and In paragraphs 23(a)(i) and 23(b)(ii) of the proposed List Statement Lucas Stuart claims that if Hemmes is by operation of the contract deemed to have accepted its extension of time claims then Lucas Stuart is entitled not only to the 183 days and 206 days previously claimed, but also to 236 days and 569 days". 10There is no suggestion that the amendments are futile, in the sense of being so fruitless that they would be struck out if contained in the original proceedings. 11Subject to the dictates of justice described in s 58 of the Civil Procedure Act 2005, all necessary amendments are to be made for the purpose of determining the real questions raised by the proceedings: s 64(2). 12In former times, the general rule was that a party should be entitled to an amendment, even at a late stage, to permit the real issues in dispute between the parties finally to be resolved: Cropper v Smith (1884) 26 Ch D 700 at 710. 13A significant qualification to that rule follows from the case management principles established under the Civil Procedure Act and the Uniform Civil Procedure Rules 2005. 14The common law position has been stated by the majority of the High Court in State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at page 154: - "Case management is not an end in itself. It is an important and useful aid for ensuring the prompt and efficient disposal of litigation. But it ought always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim." 15In Dennis v Australian Broadcasting Corporation [2008] NSWCA 37, Spigelman CJ, with whom Basten and Campbell JJA agreed, observed that while State of Queensland v JL Holdings Pty Ltd remained binding authority with respect to applicable common law principles, those principles could be, and had been, modified by statute both directly and via statutory authority for rules of court: [28]. 16At [29] Spigelman CJ said: - "In this State J L Holdings must now be understood as operating subject to the statutory duty imposed upon the courts by s 56(2) of the Civil Procedure Act 2005, which requires the Court in mandatory terms -'must seek' - to give effect to the overriding purpose - to 'facilitate the just, quick and cheap resolution of the real issues in the proceedings' - when exercising any power under the Act or Rules. That duty constitutes a significant qualification of the power to grant leave to amend a pleading under s 64 of the Civil Procedure Act." 17My attention was also drawn to the observations made by the High Court in AON Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 and, in particular the observation of the plurality that: - (a)speed and efficiency in the resolution of proceedings should not detract from a proper opportunity being given to parties to plead their case, but limits may be placed on repleading when delay and costs are taken into account (at [98]); (b)costs are not necessarily an adequate compensation for time lost and duplication incurred when litigation is delayed by amendments (at [99-101]); and (c)invariably the exercise of the relevant discretion will require an explanation to be given where there is a delay in applying for the amendment (at [102-104]). Likely costs 18Ms Julie Wright, a partner of King Wood Mallesons, the solicitors for Hemmes, has estimated the likely cost of answering the amended pleadings and meeting the further affidavit. 19Ms Wright's evidence was received as estimates of an experienced solicitor. Ms Wright did not offer an explanation as to how she arrived at her estimates; on the other hand, she was not cross-examined in relation to what she said. 20It is obvious that no one in Ms Wright's position could be adamant as to what costs would be incurred. Ms Wright is a very experienced solicitor in this area and in my opinion, I can rely upon her estimate as at least establishing the range of costs that are likely to be incurred if the amendments are granted and leave is given. 21Ms Wright's estimate is that the costs will range between $185,000 and $285,000. That is, of course, a lot of money. But it must be considered in relation to the amounts in issue and the costs which must have been incurred to date, and are likely to be incurred in the preparation for, and at, the 12 week reference. I do not mean to suggest that the figure is trifling; far from it. But it must be regarded in the perspective to which I have referred. The explanation 22The explanation offered for the amendments to the List Statement is set forth in an affidavit sworn by the solicitor for Lucas Stuart, Mr Marty Perry. Mr Perry's evidence was not challenged. 23The substance of the explanation is that, on the advice of senior counsel in conference in June 2012, further consideration was given to whether Lucas Stuart's claim for extension of time had been subject to the dispute resolution process referred to in clause 5 of the relevant contract. That advice resulted in the proposed amended pleadings. No explanation is given as to the delay between June 2012, when the conference with senior counsel took place, and the time of service of the proposed pleading, which was on or about 20 August 2012. 24So far as concerns the amendment to the response to the cross-claim, Mr Perry says this arose from a meeting on 20 August 2012 with an expert witness. The proposed amendments were made promptly thereafter. 25So far as concerns Mr Ainsworth's affidavit, the position is that Mr Ainsworth had already sworn an affidavit in the proceedings, on 16 September 2011. That affidavit is brief. The 10 August 2012 affidavit is some 22 pages in length and is, I am told, accompanied by some three folders of exhibits. 26What prompted the preparation of Mr Ainsworth's 10 August 2012 affidavit was service of an affidavit by Mr Justin Hemmes of 30 March 2012. To some extent, it can be seen from a reading of Mr Ainsworth's affidavit that it is a response to Mr Hemmes' 30 March 2012 affidavit. 27The explanation for the length of Mr Ainsworth's 10 August 2012 affidavit is that, in addition to responding, in terms, to Mr Hemmes' 30 March 2012 affidavit, it was necessary for Lucas Stuart to respond to a claim, said to be made for the first time in Mr Hemmes' affidavit, that Lucas Stuart had agreed to "discount" a tender price. 28That matter is said to arise out of an affirmative defence propounded by Lucas Stuart in its defence to the Hemmes cross-claim. In that defence, Lucas Stuart contends that certain alleged defects were not defects at all, because they were carried out in accordance with something called a "value engineering agreement" made prior to the date of the contract. 29In all these circumstances, the position is that an explanation has been given. It is one I consider to be satisfactory. The enquiries and work that will be necessary 30Detailed and careful submissions have been made to me as to the enquiries that Hemmes will need to make, and the trouble and expense it will incur to meet the proposed amended pleadings and respond to Mr Ainsworth's affidavit. 31I do not think that it would be productive, or appropriate, for me to conduct a detailed analysis of the competing contentions. To do so would involve making observations about some matters, particularly about the proper construction of the relevant contract, which will be the remit of the Referee and upon which it would be inappropriate for me to intrude. 32There is room for debate as to whether all the enquiries and expenses asserted will come to pass. Nonetheless, I have no doubt that Hemmes will be put to trouble and expense to meet the new claims. 33There is, however, no suggestion made by Hemmes that the costs it will incur in meeting the new claims, if granted now, would be more than it would have been had the claims been made earlier. Hearing date not imminent 34When this application was first made on 24 August 2012, the reference was due to start on 12 October 2012. Real questions would have arisen, had the hearing date remained so set, as to how Hemmes could meet the amendments and late service of Mr Ainsworth's affidavit. 35However, it is now over five months until the reference commences. I think it very likely that Hemmes can respond to the proposed amendments and affidavit well within that time. 36Further, now that the reference is to start in March 2013, Mr Breakspear, who appeared for Hemmes in the hearing, with proper candour, said that he could not submit that it was any longer "impossible" to meet the amendments and affidavit. He did submit that the possibility cannot be ruled out that allowing the amendments and granting leave to rely on Mr Ainsworth's affidavit may put the hearing in jeopardy. That seems very unlikely to me. Orders 37Doing the best I can to do justice between the parties, and taking into account all the matters that I have referred to, I make the following orders:- (1)I grant leave to the plaintiff to file a Second Further Amended Summons and Second Further Amended Technology and Construction List Statement in the form of the document annexed and marked "A" to the plaintiff's Notice of Motion of 24 August 2012. (2)I grant leave to the plaintiff to file a Further Technology and Construction List Response to the Third Further Amended Technology and Construction List Cross-Claim in the form of the document annexed and marked "B" to the plaintiff's Notice of Motion of 24 August 2012. (3)I grant leave to the plaintiff to rely on the affidavit of Mark Ainsworth dated 10 August 2012. (4)I order that the plaintiff pay the defendant's costs occasioned by the amendments referred to in orders 1 and 2. (5)I order that the plaintiff pay the defendant's costs occasioned by the late service of Mr Ainsworth's affidavit. (6)I order that the plaintiff to pay the defendant's costs in the application. (7)I grant liberty to the parties to apply for any order granting the Referee power to give leave for the service of further evidence. ********** 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: 08 October 2012