District Court New South Wales Medium Neutral Citation: QBE Insurance (Australia) Ltd v Gjakovski [2019] NSWDC 200 Hearing dates: 07/05/2019 Date of orders: 07 May 2019 Decision date: 07 May 2019 Jurisdiction: Civil Before: J Smith SC DCJ Decision: (1) The application to amend the defence is refused. (2) The defendant to pay the plaintiff's costs of the application. Catchwords: PROCEDURE – application to file an amended defence – significant delay – inadequate explanation for delay Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 57, 58 & 64 Home Building Act 1989 (NSW), ss 18C, 103D Home Building Regulation 1997 (NSW), s57AC Cases Cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Category: Procedural and other rulings Parties: QBE Insurance (Australia) – Plaintiff Slave Gjakovski - Defendant Representation: Counsel: Mr A W Smith - Plaintiff Mr T D Tzovaras - Defendant Solicitors: Moray & Agnew – Plaintiff JT Law – Defendant File Number(s): 2017/271126 Publication restriction: Not restricted Judgment 1. This matter was commenced by way of statement of claim filed in September 2017 pursuant to which the plaintiff seeks reimbursement for an amount paid by it, under building warranty insurance, in respect of a property in Seaforth. The defendant is a director of the builder of the property in respect of which the money was paid. He filed a defence to the statement of claim on 11 October 2017. 2. The defendant now seeks leave on the first day of the hearing to file an amended defence raising two matters: 1. in proposed [12] and [13]: claiming in essence that the claim made on the insurance policy was only maintainable within two years because it was not in respect of a structural defect. I will call that the limitation defence; 1. in proposed [14] and [15]: claiming that the defendant had entered into a Deed of Agreement with the owners, pursuant to which the owners agreed not to make any claim on the home warranty insurance in consideration of the defendant undertaking certain work specified in [1] of the Deed. I call that the Deed defence. 1. In determining applications for amendment, the overarching question for the Court is whether the dictates of justice require that the amendment be allowed [1] . In this case that question raises a number of relevant issues, including the delay in making the application, the reasons if any, for such delay, the strength of the grounds of defence proposed to be raised, the questions of case management and the prejudice that may or may not be suffered by each of the parties if the amendment were either allowed or disallowed. 2. There is no question that there was significant delay in this case. The defence, as I have said, was in the first place filed in October 2017. That is 18 months ago. In his affidavit, the solicitor for the defendant explains that the Deed defence was not raised even though he received instructions in the middle of 2018 from the defendant to provide legal advice in respect of any cause of action he may have arising from the Deed and the making by the owners of the claim for residential builders warranty insurance. It appears that he did not consider at the time that that Deed had any bearing on the issues of the subject of these proceedings. However, and without apparently turning his mind to the issue in the interim, in the course of preparing for the matter on Friday, which I infer to be Friday 3 May 2019, he instructed Mr Tzovaras, who appears as advocate for the defendant at the hearing, to consider the question of the Deed and discussed the matter with him on Sunday. Advice was apparently received to the effect that the Deed may raise a matter that could be relied upon in defence, and in light of that, an amended defence was prepared and served yesterday, Monday 6 May 2019. 3. There was no explanation given for the delay in raising the limitation defence, and I note in that respect that by letter dated 6 April 2018, solicitors for the defendant were requested to provide particulars of [10] of the defence, which was in the following terms: The claim is out of time, it is out of time to make a claim for reimbursement for the claim payments were in the alternative part of the claim payments pursuant to the Limitations Act 1696, and the Home Building Act 1989. 1. The particulars responding to that request were provided on 10 April 2018 in the following terms: In respect of para 6 of the request, the claim is out of time with respect to any defect that is not a major defect to find s 18C of the Home Building Act 1989. It is outside the two year period. 1. The defendant accepts now that that response was incorrect, s 18C not relating to a claim such as this. 2. In my view, no reasonable excuse or basis has been given for the delay in respect of either of the elements of the proposed amended defence. What is clear is that the defendant, being a party to the Deed, the terms of which I will come to in due course, was aware of all the material facts upon which he now seeks to rely. So too it seems, was the defendant's solicitor whose advice was sought in the middle of 2018, and even though he was currently then under instruction in respect of these proceedings, he did not apparently turn his mind to whether or not there was any connection to these proceedings in the Deed. 3. I accept, as submitted from the bar table, that Mr Tzovaras has only recently been instructed in these proceedings but there is no excuse given at all as to why Mr Tzovaras has only recently been asked for advice. That means that in spite of the matter having been commenced in September 2017, having come before the Court on numerous occasions for directions hearings, and there having been a request for particulars in respect of the defence supplied on 10 April 2018, it was not until the day before the hearing, which was set down in November 2018, or the days before the hearing, that any real effort was made to consider whether there were alternative defences available. 4. In other words, it appears to me that this is the first occasion on which anybody has seriously put their mind to the proper defences that ought to be raised in these proceedings. That is a factor that weighs heavily against the amendment, given the practice note in this Court and ss 56 and 57 of the Civil Procedure Act 2005 (NSW) (CPA). 5. Turning to the relative strength of the proposed amendments, the proposed amendment in respect of the limitation period effectively relies upon the assertion that the defects, which were subject to the claim made by the owners and which had been paid out by the plaintiff, were not structural defects. 6. As they were not structural defects, it is argued the claim had to be made within two years after the completion of the building works the subject of the policy. As the claim was not made within two years, it is asserted that the claim was out of time. Thus, the defence turns upon the assessment of whether or not the defects were structural defects within the meaning of reg 57AC of the Home Building Regulation 1997 (NSW). Mr Tzovaras took me to some authority to suggest that, at the relevant time that required the defects to be in relation to load bearing elements of the building. 7. It may or may not be the case that the defects in this case relate to such elements. However, it is difficult to say on the evidence because the defendant has not filed any evidence, and the plaintiff's evidence which was prepared in the absence of this defence, did not, as far as I am aware, specifically address the question of whether the defects were structural defects within the meaning of reg 57AC of the Regulations as it was at the time of entering into the policy, or the building contract, whatever be the relevant time. I will return to that question in dealing with the potential consequences of an amendment and the prejudice that it might cause to the parties. 8. In respect of the Deed defence it is necessary to say something about the Deed itself. The Deed was made on 17 July 2014. The first clause of the Deed is that the builder will at the builder's own expense, carry out the following works at the property by 4 August 2014, or such other time as agreed in writing by the builder and the owners and then three matters were set out all relating to leaks. The builder was defined to be the defendant and the person bearing the defendant's surname, which I might infer is the defendant's wife, but her identity does not make any difference. 9. Clause 8 which is the clause relied upon in the proposed Deed defence states: In consideration of the works referred to in para 1, the owners agree not to make any claim on the home warranty insurance policy number taken out by Steve and Son - [which I interpolate is the name of the building company] - In respect of the works of the property and the owners will indemnify the builder for any loss incurred by the builder as a result of any claim being made on the home warranty insurance policy by the owners in relation to the dispute, subject to all of the works referred to in para 1 being carried out by 4 August, or such other days as agreed in writing between the parties. 1. The defendant's claim in their proposed amended defence, that in breach of cl 8 the owners submitted a claim to the plaintiff on or about 23 July 2014. They further assert that that submission constituted a repudiation of the Deed. As a result of that repudiation the defendant lost the chance to perform his obligations under the Deed by completing the rectification works and was thereby: 1. discharged of any obligation to complete the building defects the subject of the settlement Deed; 2. released from all claims in connection with the home warranty insurance claim. 1. The plaintiff argues that cl 8 is void pursuant to s 103D of the Home Building Act 1989 (NSW) which provides that a "provision of a contract or another agreement that purports to restrict or remove the rights of a person under this Part is void". 2. The defendant argues in response that this type of agreement is outside the scope of the provisions of s 103D, by which I understand him to suggest that, in effect, cl 8 did not restrict or remove the rights of the owners under that part of the Home Building Act. It may be that there is some argument in respect of that although at first glance it is difficult to see how the agreement not to make any claim is not some restriction on the right to make a claim under the Home Building Act. 3. In any event and perhaps more importantly, in order for the strength of the proposed Deed defence to be assessed, and indeed, in order for it to be determined at trial, a number of facts will need to be analysed which are not before the Court. Importantly, it must be assessed whether or not there was any agreement in writing between the parties that the works in cl 1 be carried out by 4 August 2014. It may, for example, be that there was an agreement that it had been carried out before that date. Further, it might be that the conduct of the defendant was such as to constitute a repudiation which was in turn accepted by the owners. 4. Thirdly, it may be that the conduct of the owners in making a claim on 23 July 2014 was not in fact a repudiation. Further, it might be that on a proper construction of the Deed that the making of the claim left intact the obligation of the defendant and the other builder to perform the works under cl 1. It may be, for example, that they were not prevented by the making of the claim from carrying out the works. That is all speculation which does not assist the defendant in establishing that it had any real merit in the defence raised under cl 14. In my view, that stands against the granting of leave to amend. 5. Something must be said about case management. I have mentioned the practice direction in the civil list of this Court which says that it is the Court's aim to have matters completed within 12 months of filing and that the parties to the proceedings must assist the Court in that endeavour. That is not an idle aim. It is intended to be carried out for the overriding purpose found in s 56 of the CPA to facilitate the just, quick and cheap resolution of the real issues in the proceedings, an obligation that is not only on the Court but also on the parties to proceedings. Case management objects which are referred to in s 57 of the Act have similar objectives. These case management principles are not merely aspirational. 6. Further, it is well accepted now since the decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 that while case management principles do not supplant the objective of doing justice between the parties, the waste of public resources and undue delay with the concomitant strain and the uncertainty imposed on litigants should be taken into account in the exercise of interlocutory discretions conferred on the Court. A further consideration referred to by the Court in that case was the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification: see [30] (French CJ). 7. In this case, it was accepted by the defendant that if the amendment were allowed then any application for adjournment by the plaintiff could not be resisted. That was a concession properly made. As I have said, there were a number of factual matters raised within the proposed amended defence that the plaintiff has simply not had the opportunity to address because they have only just now been put on notice of them. In other words, they have been taken by surprise. Such an adjournment would necessarily not only deprive the plaintiff of the hearing which has been set down since November last year, but also deprive other matters that are currently waiting for trial for a further hearing date. Indeed, it would result in another matter which could have been heard today not being heard. 8. On the other hand, I accept that to some extent, there might be some prejudice to the defendant not being allowed to rely on the defence that, at least at one level, seems to have some cogency. The difficulty, however it seems to me, is any prejudice suffered by the defendant has been brought about by, not only his own delay in bringing forward the Deed, but potentially the inadequate advice that he received on the facts that were presented to his solicitor for the purposes of these proceedings and the delay in instructing Mr Tzovaras to advise and appear in the matter. 9. In summary, the only thing that can be said for the amendment is that there is some cogency in some of the points made in it and in the arguments by Mr Tzovaras as to the merits of those points. However, in my view, that consideration is grossly outweighed by the extensive delay which has not been adequately explained and the issues of case management which attain some significant importance in light of the provisions of the CPA. 10. For those reasons, I will refuse the application to amend the defence and order the defendant pay the plaintiff's costs of the application. ********** Endnote 1. See ss 58 & 64 Civil Procedure Act 2005 (NSW). 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: 24 May 2019