Supreme Court New South Wales Medium Neutral Citation: Signorelli v MG South Pty Ltd [2012] NSWSC 1329 Hearing dates: 29 October 2012 Decision date: 02 November 2012 Jurisdiction: Common Law Before: Harrison J Decision: 1. Grant leave to the second defendants to file an amended defence in the form proposed. 2. Order the second defendants to pay the costs of the plaintiff of and incidental to the second defendants' application for leave to amend the defence on an indemnity basis. 3. Order that the costs of the hearing for any day or days beyond the first two days scheduled for the trial that are caused or occasioned by the second defendants' amended defence are to be the plaintiff's costs in the proceedings on the ordinary basis. Catchwords: PROCEDURE - defence - application for leave to amend - Civil Liability Act 2002 ss 34 and 35 - proportionate liability - whether apportionable claim - whether claim sufficiently arguable to justify grant of leave - delay in bringing application - leave granted - costs payable on indemnity basis Legislation Cited: Civil Liability Act 2002 Cases Cited: Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Mitchell Morgan Nominees v Vella [2011] NSWCA 390 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 Category: Procedural and other rulings Parties: Paul John Signorelli (Plaintiff) MG South Pty Ltd (First Defendant) P E Baltins, A L Mattiussi, L Polito & R Tosolini (Second Defendants) Representation: J L Sharpe (Plaintiff) J S Emmett (Second defendant) Costa & Associates (Plaintiff) Lander & Rogers (First Defendant) Middletons (Second Defendants) File Number(s): 2010/373492 Judgment 1HIS HONOUR: The second defendants move the Court by notice of motion filed 16 October 2012 for leave to amend their defence. The terms of the amendments are referred to later in these reasons. The plaintiff opposes the application. The first defendant does not do so. The application can only be properly understood with knowledge of the procedural history of the litigation so far. Background 2The plaintiff commenced these proceedings by statement of claim filed on 10 November 2010 seeking damages from his former real estate agent, the first defendant, and his former solicitors, the second defendants, for losses allegedly sustained by him as the result of the sale of his property at Blakehurst that fell through. John Nazloomian agreed to purchase the property for $1.88M on 25 July 2009 and was required by the terms of the contract to pay a deposit of ten percent of the purchase price, which he purported to do by provision of a deposit bond. It seems that the first defendant accepted a copy of the bond on exchange rather than the original. The second defendants acted for the plaintiff on the sale and are alleged to have advised the plaintiff that the exchange was valid notwithstanding this fact. Despite requests for the provision of the original deposit bond, Mr Nazloomian never provided it. The second defendants then advised the plaintiff to terminate the contract. That was done by letter dated 12 October 2009 sent by the second defendants to Mr Nazloomian's solicitor. The plaintiff ultimately re-sold the property for $1.7M. He now alleges that the defendants were negligent and seeks to recover the sum of $180,000 from them, being the difference between the original contract price and the price on re-sale. 3The plaintiff alleges that the first defendant was negligent in the following ways. First, that it accepted a copy of the deposit bond rather than the original. Secondly, that it failed prior to the exchange of contracts to verify with Vero General Insurance that the bond was "valid, current and thereby enforceable". Thirdly, that it exchanged contracts and accepted a copy of the deposit bond without first obtaining legal advice about the "validity" of the exchange in the circumstances. The plaintiff has particularised other allegations of negligence to which it is unnecessary to refer. 4The plaintiff alleges that the second defendants were negligent in the following ways. First, that they failed prior to the exchange of contracts to verify with Vero General Insurance that the bond was "valid, current and thereby enforceable". Secondly, that they failed promptly to require the purchaser to provide the original of the deposit bond. Thirdly, that they failed to require the purchaser to pay the deposit by some other means. Fourthly, that they advised the plaintiff to terminate the contract when the plaintiff had no such right. Fifthly, that they terminated the contract in the circumstances. The plaintiff has particularised another allegation of negligence to which it is also unnecessary to refer. 5The second defendants filed their defence on 21 June 2011. The first defendant filed its defence on 22 July 2011. On 24 August 2012 the first defendant filed an amended defence without leave alleging that the second defendants, the purchaser's agent Mr Nathan Elali and the purchaser himself were concurrent wrongdoers. The first defendant's failure to seek leave to amend the defence predictably led to an application for such leave that ultimately came before Campbell J. His Honour delivered a judgment on that application to which I shall shortly refer. 6The amendments that were sought by the first defendant included allegations that the second defendants were concurrent wrongdoers and for that purpose the proposed amended defence repeated the allegations made by the plaintiff against them in the statement of claim. The amendments also included allegations that Mr Elali and Mr Nazloomian were concurrent wrongdoers. The first defendant contended that the plaintiff's claims against it were apportionable claims within the meaning of s 34 of the Civil Liability Act 2002. It also alleged that if it was liable to the plaintiff, then the second defendants, Mr Elali and Mr Nazloomian were concurrent wrongdoers within the meaning of s 35 of that Act. 7Campbell J heard the application and delivered reasons for judgment on 12 October 2012. He granted leave to the first defendant to amend its defence to include claims in the way I have described. He ordered the first defendant to pay the plaintiff's costs of the application but granted him liberty to apply in respect of costs already incurred that may be found to have been wasted as a result of the application to amend. His Honour also directed the parties to inform the Registrar if the hearing listed for two days in December was to be retained. 8I am informed that the second defendants attended the hearing of the first defendant's notice of motion but took no active part in the proceedings. Consideration 9The terms of the proposed amendments to the second defendants' defence are conveniently divisible into two groups. The first group is in these terms: "Nathan Elali and John Nazloomian 29A On 25 July 2009: (a) Nathan Elali, as agent for John Nazloomian, offered to purchase the property from the plaintiff for $1,880,000 (Offer); (b) in order to induce the plaintiff to accept the Offer, Mr Elali as agent of Mr Nazloomian: (i) proffered to the first defendant, in his capacity as agent for the plaintiff, a document entitled 'Deposit Power Guarantee Confirmation Fax' dated 25 June 2009; (ii) expressly represented to the first defendant that the original of the Deposit Power Guarantee would be produced by him to the second defendant on 27 July 2009; (iii) impliedly represented to the first defendant that either he or Mr Nazloomian had custody or control of the original of the Deposit Power Guarantee. 29B Between 25 July 2009 and 1 October 2009, Mr Elali and Mr Nazloomian: (a) failed to produce the original of the Deposit Power Guarantee; (b) further or alternatively, did not have custody or control of the original of the Deposit Power Guarantee; (c) failed to instruct their solicitors to advise the second defendant that they did not have custody or control of the original of the Deposit Power Guarantee and that they were not likely to have custody or control of it in the foreseeable future; (d) impliedly represented to the plaintiff that: (i) they had custody or control of the original of the Deposit Power Guarantee; (ii) they intended to produce the original of the Deposit Power Guarantee to the plaintiff; (iii) Mr Nazloomian intended to perform his obligations under the contract he purported to enter into with the plaintiff on 25 July 2009. 29C The conduct of Mr Elali and Mr Nazloomian referred to in paragraphs 29A and 29B above was misleading or deceptive in contravention of s 42 of the Fair Trading Act 1987 because at all material times: (a) Mr Elali and Mr Nazloomian did not have custody or control of the original of the Deposit Power Guarantee; (b) Mr Elali and Mr Nazloomian did not expect to have custody or control of the original of the Deposit Power Guarantee in the foreseeable future; (c) Mr Elali and Mr Nazloomian did not intend to produce the original of the Deposit Power Guarantee to the plaintiff; (d) Mr Nazloomian did not intend to perform his obligations under the contract he purported to enter into with the plaintiff on 25 July 2009." 10The second group of proposed amendments is in these terms: "29D Further or in the alternative, the contract obliged Mr Nazloomian to provide a valid and enforceable deposit bond for $85,000. 29E The Deposit Power Guarantee Confirmation Fax provided that the original Deposit Power Guarantee must be presented to make a claim. 29F In breach of the contract, Mr Nazloomian, through himself or his agents, failed to provide the original Deposit Power Guarantee to the plaintiff. 29G The breach alleged in paragraph 29F above was a failure by Mr Nazloomian, through himself or his agents, to take reasonable care to obtain or retain custody of the original Deposit Power Guarantee." 11The terms of the provisions of the Civil Liability Act that are said to have promoted these amendments are relevantly as follows: "34 Application of Part (1) This Part applies to the following claims ("apportionable claims"): (a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury, (b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1987 for a contravention of section 42 of that Act (as in force before its repeal by the Fair Trading Amendment (Australian Consumer Law) Act 2010 ) or under the Australian Consumer Law (NSW) for a contravention of section 18 of that Law. (1A) For the purposes of this Part, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind). (2) In this Part, a "concurrent wrongdoer", in relation to a claim, is a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim... 35 Proportionate liability for apportionable claims (1) In any proceedings involving an apportionable claim: (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss, and (b) the court may give judgment against the defendant for not more than that amount. (2) If the proceedings involve both an apportionable claim and a claim that is not an apportionable claim: (a) liability for the apportionable claim is to be determined in accordance with the provisions of this Part, and (b) liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant. (3) In apportioning responsibility between defendants in the proceedings: (a) the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law, and (b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings. (4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings..." 12Nowhere in the proposed amended defence is there any reference to these provisions. That is to be contrasted with the terms of the amendments that were the subject of the first defendant's application heard by Campbell J. Be that as it may, no point was taken about the pleading before me and all parties proceeded upon the basis that the proposed amendments agitated a claim of the type anticipated by these provisions of the Act. 13The plaintiff's opposition to the amendments was put on three bases. First, that the amendments were futile because either Mr Elali and Mr Nazloomian were not concurrent wrongdoers or the claims in respect of them were not apportionable claims. In particular the plaintiff contended that their acts or omissions did not cause, either independently of each other or jointly, the damage or loss that is the subject of the plaintiff's claim. The plaintiff argued that the points, which the proposed amendments sought to raise, were not sufficiently arguable to justify the grant of leave to amend that is sought. 14Secondly, the plaintiff submitted that the application to amend was too late or inadequately explained and in general terms fell foul of sentiments most emphatically discussed in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175. 15Thirdly, the plaintiff contended that there was a chance that it would suffer prejudice if the amendments were permitted. 16The second defendants' application to amend fairly sought to confront these arguments. 17I was directed to Mitchell Morgan Nominees v Vella [2011] NSWCA 390 and Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187. In the former case Giles JA said this at [40] - [41]: "[40] Where the tortfeasor's act or omission causes personal injury, there is damage in the form of the injury (the broken leg) and damage in the form of the financial consequences. The damage is not simply a financial detriment, and the damages are distinct from the damage. Where the tortfeasor's act or omission causes damages to property, again the damage (the dent in the car) is distinct from the damages. Where the claim is for economic loss because the tortfeasor's act or omission caused harm to an economic interest, the loss is also not simply a financial detriment. Just as it is necessary to identify the plaintiff's injury in a case of personal injury, or the property and the harm to it if the claim were for damages for harm to an interest in property, it is necessary to identify the economic interest and the harm to it. [41] For s35, the economic interest should not be identified at the general level of not being financially worse off. That would merge loss or damage with damages, and would be at odds with corresponding identification of the loss or damage where there is harm to an interest in property. At the correct level of identification, in the present case there are different interests. Mitchell Morgan could be fraudulently induced to pay out money. It could protect itself and avoid losing the money if it obtained adequate and enforceable security. The loss, or the harm to an economic interest, is in the one case paying out money when it would not otherwise have done so, and in the other case not having the benefit of security for the money paid out. The losses the subject of the claims for economic loss against Messrs Caradonna and Flammia and the loss the subject of the claim for economic loss against Hunt & Hunt are different." 18His Honour continued a little later at [46] - [48] concerning the operation of Part 4 of the Act in these terms: "[46] Part 4 of the Civil Liability Act is matched in legislation of the Commonwealth and other States and Territories. Its purpose is to alleviate what was seen as harsh operation of the principles by which one of several tortfeasors who caused the same loss was liable to the plaintiff for the whole of that loss, and was left to recovery from a co-tortfeasor under contribution legislation (s 5(1)(c) of the 1946 Act and its analogues in other jurisdictions). [47] The effect of Pt 4 is far-reaching. It shifts the burden of irrecoverability because a co-wrongdoer cannot be found or is insolvent from the defendant wrongdoer(s) to the plaintiff, and extends to liability beyond liability in tort. As part of the scheme, a defendant must inform the plaintiff of a potential concurrent wrongdoer so that the plaintiff can consider claiming against that person also (ss 35A, 38). The plaintiff can later proceed against another concurrent wrongdoer, but cannot be over-compensated (s 37). But s 35 applies whether or not all concurrent wrongdoers are parties to the proceedings (s 35(4)). [48] For consistency with contribution under s 5(1)(c), a defendant who is a concurrent wrongdoer cannot be required to contribute to damages recoverable from another concurrent wrongdoer (s 36). There is a necessary relationship between contribution recoverable by a tortfeasor from any other tortfeasor who is, or would if sued have been, liable "in respect of the same damage" under s 5(1)(c), and limitation of liability under s 35 of the Civil Liability Act where the acts or omissions of more than one person "caused ... the damage or loss the subject of the claim". The words are different, but conceptually they must correspond or the change worked to joint and several liability would not mesh with the contribution legislation." 19In the latter decision Barrett J considered the issue of when the determination of the status of a person or entity as an allegedly concurrent wrongdoer was to be determined. His Honour said this at [19] - [22]: "[19] It seems to me clear that a person will be a "concurrent wrongdoer" only if the court makes findings about the existence of "loss or damage" and about which acts or omissions "caused" the loss or damage. It is only when those findings are made that it is possible to identify, as contemplated by s 34(2), each person whose acts or omissions, as found, "caused" the "loss or damage", as found. At that point, and not before, a person can be seen to be a "concurrent wrongdoer". [20] The relevant "claim" - that is, the claim in relation to which the identified person is a "concurrent wrongdoer" - can only be the claim in respect of which the findings concerning loss or damage and causation are made. That claim is, of necessity, a claim already litigated, not a pending or foreshadowed claim. Its nature and content (and, therefore, its status under s 34(1)) will be discoverable by looking at the findings that cause it to be determined as it is determined. If, on those findings, it is seen that the loss or damage (as established in "an action for damages") arose from a failure to take reasonable care and did not arise out of personal injury, the case will be within s 34(1)(a); and if it is seen that there was a contravention of s 42 of the Fair Trading Act, the case will be within s 34(1)(b). In either such case, the already litigated "claim" will be an "apportionable claim" because of s 34(1) and, if, on the findings made, the acts or omissions of several persons "caused" the "damage or loss" as found, the persons will be "concurrent wrongdoers". [21] The need to know the outcome of the claim in order to apply Part 4 is emphasised by s 34A. The operation of that section - and, therefore, the ambit of Part 4 as a whole - depends on the ability to know, among other things, whether a person "intended to cause" or "fraudulently caused" the "loss or damage that is the subject of the claim". These things can be judged only after the loss or damage and its causes have been identified through a process of fact finding and analysis. Viewed in prospect and in its pending state, a claim might allege an intentional or fraudulent act or omission, but it is impossible to say, at that point, whether any loss or damage was caused and, if it was, what caused it - in particular, whether it was intentionally caused or fraudulently caused. [22] On this basis, the nature of a "claim", for the purposes of Part 4, will be determined by what the court has decided in the case, not by what might be prayed or pleaded in an initiating process or points of claim. In short, "claim" refers to a claim as proved and established, not a claim as made or advanced." 20The plaintiff contended before Campbell J that the first defendant's amendments were unarguable. Specifically dealing with that proposition, his Honour said this at 6: "Initially I was attracted to the proposition that the case seemed to be covered by the decision of the Court of Appeal in Mitchell Nominees v Vella...In argument [counsel] persuaded me that notwithstanding that decision, the claim is sufficiently arguable for present purposes by reference to the decisions of Kayteal v Dignan [2011] NSWSC 197 per Brereton J and Perpetual v Milanex [2011] NSWSC 367. [Counsel] reminded me that it is not for me to determine the matter definitively at this preliminary stage. It is only if I was convinced that the point was hopeless that I would form the view that it would be futile to permit the amendment. I am not convinced the point is hopeless and in this regard I note that the High Court of Australia granted special leave to appeal from the decision in Mitchell Nominees...". 21It seems to me in the present circumstances that it would be potentially productive of some difficulties for the parties if I were to take a different view to the one adopted by his Honour when dealing with the first defendant's application. I appreciate that I am not bound to do so but as a matter of practical reality it seems to me to be preferable to do so. I am also not aware of whether or not Campbell J was referred to what was said by Barrett J in Reinhold but the matters there discussed appear to me to be of some potential significance. It is difficult and arguably premature at this stage to attempt to assess whether any particular person is a concurrent wrongdoer in advance of the making of findings about the existence of loss or damage and about which acts or omissions caused it. There is also a potential for procedural disruption at the trial concerning the question of whether or not Mr Elali and Mr Nazloomian are or are not concurrent wrongdoers, and whether or not the plaintiff's claim is an apportionable claim having regard to their alleged responsibility for the plaintiff's damage, if the first and second defendants' applications for leave to amend their defences result in different outcomes. 22The application by the second defendants is late. It is somewhat remarkable that it was not brought forward and heard at the same time as the first defendant's application. The fact that it was not does the second defendants no credit in my view. I am not persuaded that the position taken by the second defendants before Campbell J was solely or even principally informed by a desire to avoid costs so much as it was a considered decision to await the result and then decide what to do. Far from saving costs, the second defendants have increased the costs for the plaintiff by requiring him to respond to this application as a separate matter. 23I am again to some extent influenced by Campbell J's decision in the application before him. He was prepared to operate upon the basis that the first defendant's explanation for the delay was satisfactory. However, the second defendants must necessarily satisfy me that their delay in seeking leave does not disqualify them in accordance with the applicable principles. In that respect they rely upon the affidavit of Shayne Murray Thompson sworn 17 October 2012. Paragraphs 9 and 10 of that affidavit are as follows: "9 Consistent with my desire to keep the defence costs to a minimum, I did not, prior to 12 October 2012, think that it was appropriate to expand the second defendants' defence and therefore the scope of the proceedings, to include a proportionate liability defence on the basis that the purchaser and his agent are concurrent wrongdoers. Now that the first defendant has expanded the scope of its defence to include a proportionate liability defence on that basis, I have concluded that the second defendants should similarly amend their defence because now that the first defendant has made its amendments, the second defendants' amendment in proposed paragraphs 29A to 29C will not expand the scope of the proceeding. 10 Proposed paragraphs 29D to 29G seek to raise a concurrent wrongdoer defence by reference to the same facts that are raised by the existing defence of failure to mitigate, being paragraph 22 of the second defendants' defence. Now that the first defendant has expanded its defence to include a proportionate liability defence on the basis of the conduct of the purchaser and his agent, I have concluded that this alternative argument, which is based on the same substantive allegations that are made in paragraph 22 of the defence, should be made." 24I do not consider this to be a satisfactory explanation for the lateness of the application. It is no more than a statement to the effect that the second defendants' lawyers should have thought about applying to make the amendment sooner but either failed to do so or decided not to. However, this is with some minor differences no more and no less than the type of reasons offered by the first defendant for the delay that Campbell J was prepared to accept. It would in my view produce an uncomfortable tension between his Honour's conclusions and mine if I were to treat a similar explanation in a dissimilar way. The costs consequences, however, which his Honour favoured, do not also have to be the same in this application. 25Mr Sharpe of counsel for the plaintiff quite properly conceded that the length of the hearing would not be greatly extended if the amendment were permitted and that the evidence that might be required in addition to the evidence already filed would also be little different if at all from the evidence exchanged so far. There was no other procedural prejudice to the plaintiff that Mr Sharpe identified and no substantive prejudice of any kind. Conclusions and orders 26In my opinion the second defendants should be granted leave to file an amended defence in the form proposed. I do not express any concluded view upon the legal question of whether or not the provisions of the Act apply in the circumstances upon which the amendment has been based. It seems to me that the matters raised by the second defendants are not hopeless and are fairly arguable. I consider that the circumstances of this application are such that the second defendants should pay the costs of the plaintiff of and incidental to the second defendants' application for leave to amend the defence on an indemnity basis. The first defendant should not be entitled to any costs associated with this application. I order that the costs of the hearing for any day or days beyond the first two days scheduled for the trial that are caused or occasioned by the second defendants' amended defence are to be the plaintiff's costs in the proceedings on the ordinary basis. ********** 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: 02 November 2012