Mary Phillips v Ward's Mercantile Agency Pty Limited and Em Farleigh Pty Limited [1988] ACTSC 72 (22 December 1988)

SUPREME COURT OF THE ACT

MARY PHILLIPS v. WARD'S MERCANTILE AGENCY PTY. LIMITED and E.M. FARLEIGH PTY.
LIMITED
S.C. No. 1109 of 1985
Practice and Procedure

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Gallop J.(1)

CATCHWORDS

Practice and Procedure - Appeal from the Registrar against decision refusing amendment to pleadings between defendants - whether pleading raised a new cause of action - whether such cause of action was statute-barred

Practice and Procedure - Application to amend so as to plead new causes of action based on breach of contract to insure and liability to indemnify - whether new causes of action - whether statute-barred

Weldon v. Neal (1887) 19 QBD 394

Golski v. Kirk (1987) 72 ALR 443

Tilcon Ltd v. Land and Real Estate Investments Ltd (1987) 1 WLR 46

Harris v. Raggatt (1965) VR 779

Hall v. National and General Insurance Co. Ltd (1967) VR 355

Christodoulopoulos v. Rowntree & Co. (Australia) Pty Ltd (1971) VR 378

Cervellone v. Besselink Bros. (1984) 55 ACTR 1

Besselink Bros. Pty Ltd. v. Citra Constructions Pty Ltd (unreported decisions, Federal Court, 31 October 1984)

Halsbury, 4th Ed., Vol. 28, paras 662,669

HEARING

CANBERRA
22:12:1988

ORDER

The Court orders that:

(1) the appeal be allowed;
(2) the second defendant have leave to amend the Notice claiming
Contribution or Indemnity so as to add paras. 6 and 7 thereof;
and
(3) the parties have liberty to apply in relation to para. 9.

DECISION

This is an appeal from a decision of the Registrar delivered on 14 June 1988 refusing the second defendant leave to amend its notice to the first defendant claiming contribution pursuant to Order 32, rule 1, so as to include a claim that the first defendant was liable to indemnify the second defendant.

2. The ground for the refusal by the Registrar was essentially that by the amendment the second defendant was raising a new cause of action which is statute barred and is thus not permissible within the doctrine of Weldon v. Neal (1887) 19 QBD 394.

3. By Writ of Summons issued on 3 September 1985 the plaintiff instituted a claim for damages for negligence arising out of an incident on or about 2 October 1979 at 3 Lonsdale Street, Braddon in the Australian Capital Territory. The Statement of Claim, a copy of which was filed on 14 February 1986, identifies the cause of action against the first defendant as a claim in negligence based upon the relationship of employer and employee. The Statement of Claim further reveals that the cause of action against the second defendant is a claim in negligence based upon occupier's liability. Both defendants have denied liability to the plaintiff and alleged contributory negligence.

4. The first defendant has served Notice claiming Contribution or Indemnity from the second defendant alleging occupier's liability and breach of contract between the first and second defendants, particulars whereof are set out in paragraph 6 of the Notice claiming Contribution or Indemnity.

5. The second defendant has served a Notice claiming Contribution or Indemnity from the first defendant alleging negligence, particulars whereof are set out in paragraph 5 of the Notice claiming Contribution or Indemnity:

"5. Further or in the alternative, the plaintiff's
injuries and loss and damage were due to breach by
the firstnamed defendant of the duty that it as
employer owed to the plaintiff to warn the
plaintiff of any hidden danger of which the
firstnamed defendant was aware or should have been
aware.
Particulars of Breach
(a) Failing to warn the plaintiff of the
slipperiness of the stair steps which she
used or was about to use.
(b) Permitting the stair treads to become worn
and slippery.
(c) Failing to repair or arrange for the repair
of stair treads when they became worn and
slippery."

6. The application by the second defendant to amend its Notice of Contribution or Indemnity was instituted by Notice of Motion returnable on 30 May 1988. The nature of the amendment was not specified in that Notice of Motion but it is fully set out in a draft amended notice:

"6. Further or in the alternative, the secondnamed
defendant says that the firstnamed defendant
contracted with it by memorandum of sublease to
lease a portion of the building referred to in the
Statement of Claim for 3 years from 9 May 1977 for
valuable consideration passing from the firstnamed
defendant to the secondnamed defendant and that it
was a written term and condition of that
memorandum of sublease:-
'2(v) That at all times during the term hereof
the sublessee will at his own expense keep
current a public risk policy in the joint
names of the sublessee and sublessor
satisfactory to the sublessor in respect of
the premises in an amount not less than
$100,000.00 and will forthwith when required
by the sublessor produce such policy and
renewals thereof to the sublessor and shall
also indemnify and keep indemnified the
sublessor from and against all claims,
demands actions suits and proceedings arising
out of any accident to or injury suffered by
the sublessee or any servant agent invitee or
licensee of the sublessee while in or upon or
entering upon the said premises or any part
of the said building or arising out of any
injury or damage to the goods of the
sublessee or any servant agent invitee or
licensee of the sublessee whilst such goods
are in or upon the said premises or any other
part of the said building. Provided that the
liability of the sublessee hereunder shall
not extend to any accident injury or damage
caused by or arising out of the act or
default of the sublessors.
7. Pursuant to the said term and condition the
firstnamed defendant is liable to indemnify the
secondnamed defendant in respect of any award of
damages against the secondnamed defendant together
with any costs or interest incurred.
8. Further and in the alternative, and whether or not
the firstnamed defendant is liable to indemnify
the secondnamed defendant, the secondnamed
defendant says that in breach of the first part of
the said term and condition the firstnamed
defendant has failed to keep current a public risk
policy in the joint names of the firstnamed and
secondnamed defendants and that consequent upon
such a breach of contract the secondnamed
defendant may be held liable in damages and
accordingly the secondnamed defendant claims from
the firstnamed defendant damages for the said
breach of contract being the whole of any verdict
awarded against the secondnamed defendant together
with the costs and any interest incurred.
9. The secondnamed defendant therefore claims from
the firstnamed defendant in respect of the
plaintiff's claim against the secondnamed
defendant:
(a) indemnity;
(b) damages;
(c) alternatively, contribution;
(d) interest;
(e) costs.

7. The proposed amendment is to allege that the first defendant breached a term of the contract of lease between the first and second defendants to the effect that the first defendant would take out public risk insurance in the second defendant's name and "indemnify and keep indemnified" the second defendant. The Registrar held that any such breach of contract occurred on 2 October 1979, which is the date pleaded by the plaintiff as the date upon which her causes of action against both defendants arose.

8. It was submitted on the hearing of the appeal that the Registrar's decision in that respect was wrong and that in any event the rule in Weldon v. Neal has never been absolute.

9. Order 32 rule 1 provides:

"1. The Court or Judge may, at any stage of the
proceedings, allow either party to alter or amend its
indorsement or pleadings in such manner, and on such
terms, as are just, and all such amendments shall be
made as are necessary for the purpose of determining
the real questions in controversy between the parties."

10. It is now well settled law in the Australian Capital Territory that a plaintiff (in this case the second defendant) will not be allowed to introduce new claims by amendment which in substance amount to the bringing of a new action for claims already barred by statute. However, where the proposed amendments do not change the cause of action but do no more than particularise the facts by which the plaintiff proposes to sustain it, even though the facts sought to be brought forward under the amendment are quite different from those originally alleged, amendment will be allowed (Golski v. Kirk (1987) 72 ALR 443 per Kelly J. at 451, per Beaumont J. at 455 and per Ryan J. at 457.

11. Generally speaking, an amendment takes effect not from the date when the amendment is made, but from the date of the original document which it amends (Golski v. Kirk, supra, per Beaumont J. at 454 citing Tilcon Ltd v. Land and Real Estate Investments Ltd (1987) 1 WLR 46 at 49-50).

12. It is important to note that by its proposed amendment the second defendant pleads the contractual obligation to take out a public risk policy in the joint names of the first defendant and the second defendant and to indemnify and keep indemnified the second defendant from and against all claims, demands, actions, suits and proceedings. The obligation to take out public risk insurance extends during the term of the contract of lease, which is expressed to be for three years from 9 May 1977. The obligation to indemnify and keep indemnified the second defendant from and against all claims etc. extends to those claims etc. arising out of any accident to or injury suffered by the second defendant or any servant, agent, invitee or licensee of the second defendant while in or upon or entering upon the said premises or any part of the said building during the same period of three years from 9 May 1977.

13. In so far as the proposed amendment seeks to allege a breach of contract for failure to insure, the limitation period has expired and a fresh cause of action based upon that breach of contract is not permissible.

14. It is settled law that in an action for breach of contract the cause of action is the breach. Accordingly, such an action must be brought within six years of the breach; after the expiration of that period the action will be barred, although damage may have accrued to the plaintiff within six years of action brought. If the contract is to do something at a particular time or upon the happening of a contingency, and the thing contracted for is not done, the cause of action arises at the time specified or upon the contingency happening (Halsbury, 4th Edition, Vol. 28, para. 662).

15. In this case the obligation to take out a public risk policy was a continuing obligation during the period of three years from 9 May 1977. That time has now expired and the cause of action arose at the latest at the expiration of that time, namely, 9 May 1980. An action on that cause of action is not maintainable after the expiration of six years (Limitation Ordinance 1985, s.11(1)). Accordingly the amendment proposed by para. 8 set out above of the amended notice of contribution or indemnity should not be permitted and the Registrar was right to refuse that amendment.

16. By para. 7 of the abovementioned notice the second defendant seeks to raise a simple claim to indemnity based, of course, upon the contract to indemnify.

17. Upon a contract to indemnify the statute of limitation runs from the time when the plaintiff (in this case the second defendant) actually suffers the loss, not from the time when the event happens which causes the loss (Halsbury, 4th Edition, Vol. 28, para. 669).

18. As the claim for damages by the plaintiff against the first and second defendants has not yet been determined, it cannot be argued that the second defendant has actually suffered a loss. The second defendant will only suffer a loss, in the sense that the contingency will arise, when a judgment has been entered against the second defendant. The plaintiff may not succeed at all against the second defendant or she may succeed and obtain an award of damages against one or both defendants. The obligation of the first defendant to indemnify the second defendant under the contract of lease will then arise, as will the extent of that obligation.

19. It follows, in my view, that by the proposed para. 7 the second defendant is seeking to raise a new cause of action, but it is not statute-barred because time does not commence to run till the liability to indemnify arises. In the absence of any countervailing considerations, the amendment should be allowed.

20. In deference to the arguments of counsel for the appellant I should deal with his further submission that in any event the rule in Weldon v. Neal has never been absolute. He relied upon Harris v. Raggatt (1965) VR 779; Hall v. National and General Insurance Co. Ltd (1967) VR 355 and Christodoulopoulos v. Rowntree & Co. (Australia) Pty Ltd (1971) VR 378.

21. I adopt with respect the reasoning of Sholl J. in Harris v. Raggatt, supra, and his observations about what is meant by a new cause of action. He said at p 785:

"If we say that the law is that the plaintiff
cannot be allowed, after the period of limitations has
run, to set up a new cause of action, we use the term
in a special sense as meaning a 'new case' varying so
substantially from what has previously been set up that
it would involve investigation of matters of fact or
questions of law, or both, different from what have
already been raised and of which no fair warning has
been given, so that it would be unfair and unjust to
the defendant to put him in peril of a judgment founded
on the new matter. Certainly, if there is set up a
'new case' on the facts, upon which is based a new
claim upon a new and different legal basis - a new
cause of action in that sense - leave will ordinarily
be refused."

22. The proposed amendment in the present case is vastly different to the amendment which Sholl J. was considering in Harris v. Raggatt. The cause of action alleged by the second defendant against the first defendant in the Notice claiming Contribution or Indemnity was based in negligence in failing to warn the plaintiff of the slipperiness of the steps, permitting the stair treads to become worn and slippery and failing to repair or arrange for the repair of stair treads when they became worn and slippery. The proposed amendment is based first upon breach of the obligation to insure and secondly upon the indemnity. It would involve investigation of the terms of the contract between the first defendant and the second defendant and questions of law arising from those terms, which investigation is different from what has already been raised upon the Notices between the two defendants.

23. In my view it would be unfair and unjust to the first defendant to put him in peril of a judgment founded on the new allegation of breach of contract for failure to insure the second defendant. What I have said does not detract from the second defendant's right to amend the Notice claiming Contribution or Indemnity based upon the contractual liability to indemnify.

24. As the Registrar relied upon the decision of Kelly J. in Cervellone v. Besselink Bros. (1984) 55 ACTR 1, it is appropriate to make some reference to that case. The facts of the case are distinguishable from the facts in the present case. In Cervellone v. Besselink Bros. the contract between the defendants cast an obligation upon the sub-contractor/defendant to effect insurances to the satisfaction of the builder/defendant protecting the proprietor of the subject building and both defendants against claims by certain classified people. There was no provision in the contract that the sub-contractor, in addition to insurances, provide another form of protection for the builder by way of personal indemnity. Kelly J. held that there was a breach by the sub-contractor of the obligation to insure and on that ground upheld the builder's claim for complete indemnity based upon the failure to effect the appropriate insurances.

25. The Federal Court held on appeal that his Honour was correct and dismissed the appeal (Besselink Bros. Pty Ltd v. Citra Constructions Pty Ltd (unreported decision, 31 October 1984).

26. I allow the appeal and order that the second defendant have leave to amend the Notice claiming Contribution or Indemnity so as to plead paras. 6 and 7 of the proposed amendment. Paragraph 9 of the proposed amendment will need some consequential redrafting. Paragraphs 9(b) and (c) should be deleted and should not form part of the amendment, but I hesitate to interfere with the drafting of the proposed para. 9. I give liberty to the parties to apply in this respect.

27. I shall hear counsel on the question of costs.