FEDERAL COURT OF AUSTRALIA

Global Brand Marketing Inc v YD Pty Limited [2010] FCA 323

THE COURT ORDERS THAT:

1.              The applicants have leave to file and serve an amended statement of claim on or before 16 April 2010.

2.              The respondents, including Pegasus Investments & Holdings Pty Ltd (“Pegasus”), file and serve any defences on or before 30 April 2010.

3.              The first and second respondents have leave to file and serve a proposed further amended defence and cross claim in the form initialled by the judge, dated 1 April 2010 and placed on the court file.

4.              The respondents have leave to join Pegasus.

5.              Any party objecting to the pleading of any other party shall, on or before 14 May 2010, file and serve a notice identifying and setting out the basis of the objection or objections.

6.              Any party objecting to the pleading of any other party shall, on or before 14 May 2010, file and serve a notice identifying and setting out the basis of the objection or objections.

7.              The mediation fixed for 6 April 2010 is vacated.

8.              The trial date fixed for 7 April 2010 is vacated.

9.              The first and second respondents’ notice to produce dated 30 March 2010 be stood over to such date as shall be refixed for the trial.

10.          The first and second respondents pay the applicants and Pegasus’ costs of the notice of motion dated 25 March 2010 and the applicants’ costs thrown away by reason of the amendment.

11.              A directions hearing is fixed for 21 May 2010.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

introduction

1                     By a notice of motion dated 25 March 2010, the first respondent and cross claimant, YD Pty Limited (“YD”) and the second respondent, Mr Todd Trenear (“the respondents”) seek:

(a)        leave to join Pegasus Investments & Holdings Pty Ltd (“Pegasus”) as a respondent to the proceeding;

(b)        leave to file and serve an amended defence exhibited to the affidavit of Mr Khajaque Kortian sworn on 25 March 2010; and

(c)        that the applicants pay the costs of the notice of motion.

2                     The respondents’ applications for joinder and amendment were opposed by the applicants and Pegasus, the proposed third party.

3                     The applications are supported by the affidavit of Khajaque Kortian sworn 25 March 2010.

4                     The affidavit of Lisa Egan of the applicants’ solicitors sworn 31 March 2010 was in opposition.

5                     The issue for determination is whether the respondents should be permitted to amend (and as a consequence, join Pegasus) in circumstances where:

6.1       The respondents applied to amend and to join Pegasus on 25 March 2010.

6.2       The trial on the quantum of damages for infringement of the applicants’ registered designs for footwear by, inter alia, the respondents’ sale of infringing footwear is fixed for 7 April 2010.

6.3       The respondents consented to declarations made by Sundberg J on 1 April 2008 that they had infringed the applicants’ registered designs.

6.4       The respondents, in about July 2009, discovered upon the return of subpoena to Pegasus, that Pegasus was one and the same as “Coastal” (their supplier of the infringing footwear) and had executed a deed of settlement dated 9 January 2007 with Global to settle its proceeding issued against Pegasus for infringement of registered designs, including those the subject of this proceeding.

6.5       The deed of settlement (which had previously been subject to confidentiality) contained a release expressed to extend to Pegasus’ customers for claims arising from the subject matter of the proceeding.

6.7       Upon becoming aware of the deed of settlement, the respondents immediately entered into correspondence with the applicants’ solicitors alleging that the release applied to them as customers of Pegasus and was relevant to the present proceeding; and seeking an explanation for the applicants’ conduct in relation to the deed of settlement.

6.8       From August 2009 until its proposal to amend the pleading in March 2010, the respondents did not communicate with the applicants in relation to the claims based on the deed of settlement and release.

6.9       The respondents’ explanation for their failure to seek leave to amend until now, despite their earlier awareness of the deed of settlement, was that counsel had only in the preceding week became aware of Lindgren J’s decision in Airberg Pty Ltd v Cut Price Deli Pty ltd BC9803548 (“Airberg”), which, in essence, held that a third party not privy to, but apparently the subject of a release, may claim the benefit of the promise thereunder upon joinder of the promisee privy to the deed.  Lindgren J contemplated that such joinder was procedural but observed that an unwilling promisee might be compulsorily joined as a trustee of the promise.  The respondents considered that the Airberg decision provided a basis on which they could claim the benefit of the release, in contrast to the more limited principle recognised in Trident General Insurance Co Ltd v McNiece Bros Ltd (1988) 165 CLR 107 (“Trident v McNiece”).

6.10     The applicants submitted that the inclusion of the reference to “customers” in the release was a mistake and that if the respondents were granted leave to amend and to join Pegasus, they would also seek to amend to claim rectification of the deed of settlement, which would entail new pleadings, discovery and the calling of witnesses.

6.11     The applicants did not admit that either of the respondents was a customer of Pegasus.

6.12     Pegasus also opposed the application to join it, submitting that it was too late, that there was no proposed pleading against it and that its joinder was, in any event, unnecessary for the relief the respondents now claimed on the basis of the release.

6.13     While the applicants primarily opposed the application, initially both the applicants and the respondents expressed a preference for the quantum trial to proceed on 7 April 2010 should the respondents’ applications be granted and the applicants plead rectification of the deed of settlement in reply.  The applicants contended that the proceeding was old and that they had secured a number of overseas and interstate witnesses to give evidence at the quantum trial, whose future attendance and cooperation might be unavailable.

6.14     Subsequently, however, the applicants altered their position in relation to vacation of the quantum trial.  They submitted that if the respondents were granted leave to amend, then the quantum trial should be vacated.  The applicants contended that it would be unfair and prejudicial if the quantum trial proceeded as listed but the new matters were tried subsequently, either as separate questions or as part of the same trial, although heard later.

6.15     The respondents contended that the quantum trial should proceed as scheduled, and that the new matters, which were discrete and relatively confined, should be heard later, but as part of the same trial.

Background

6                     The background to the applications is as follows:

7                     The proceeding was commenced in December 2003 by World Brands Management Pty Ltd (“World Brands Management”), Diesel Spa (“Diesel”) and Global Brand Marketing Pty Ltd (“Global”) as applicants, alleging that the respondents infringed of registered designs in relation to footwear, and breach of the Trade Practices Act 1974 (Cth) and passing off.

8                     World Brands Management was the registered owner of the relevant Australian designs and the exclusive distributor of Diesel Footwear in Australia and New Zealand.  Diesel was the Italian designer and manufacturer of an exclusive range of footwear, clothing and accessories.  Global was the exclusive worldwide licensee of Diesel.

9                     The second respondent, Todd Trenear, was the sole director of YD.  The respondents were alleged, inter alia, to have sold infringing footwear.

10                  Over the years, up to six amended versions of the statement of claim and a number of amended defences and cross claims were filed.  There were periods of inactivity.  The proceeding was proposed to be listed for trial in 2005, but apparently lay dormant for a considerable time.

11                  On 8 February 2007, Sundberg J ordered that the issue of liability be heard separately and prior to the issue of quantum.

12                  Sundberg J fixed a trial for 7, 8, 9 and 10 April 2008 and made orders for preparation for trial.

13                  On 1 April 2008, Sundberg J ordered:

1.       The First Respondent has by importing, exhibiting in public, marketing, promoting, offering for sale and selling the Abbots Footwear (as defined in paragraph 55 of the Fourth Further Amended Statement of Claim), infringed Australian Design Number 158140 in breach of s30 of the Designs Act 1906 (Cth).

2.       The First Respondent has by importing, exhibiting in public, marketing, promoting, offering for sale and selling the Jamal Footwear (as defined in paragraph 62 of the Fourth Further Amended Statement of Claim), infringed Australian Design Number 158141 in breach of s30 of the Designs Act 1906 (Cth).

3.       The Second Respondent has acted as a joint tortfeasor with the First Respondent in the conduct constituting the infringement of Australian Designs 158140 and 158141 referred to in paragraphs 1 and 2 above.

THE PARTIES CONSENT TO THE COURT ORDERING THAT:

1.       The Respondents pay the Applicants' costs of the proceeding insofar as they relate to the claims of design infringement of Australian designs 158140 and 158141.

2.       The Applicants pay the Respondents' costs of the proceeding insofar as they relate to:

a.       passing off claims;

b.       contravention of the Trade Practices Act 1974 (Cth);

c.       infringement of Australian design registration no. 144280; and

d.       infringement of copyright.

3.       The Applicants be granted leave to file and serve a Fifth Further Amended Application and Fifth Further Amended Statement of Claim in the form exhibited as Annexures “A” and “B” respectively hereto.

4.       The Respondents/Cross-Claimant be granted leave to file and serve by Wednesday, 2 April 2008 a Further Amended Defence and Cross-Claim.

5.       The Cross-Respondent file and serve its Defence to the Further Amended Cross-Claim by Thursday, 3 April 2008.

6.       The Cross-Claimant file and serve its Reply to the Amended Defence to the Further Amended Cross-Claim by Friday, 4 April 2008.

7.       The Applicants be granted leave for the testimony of Steven Mercer Eden to be given by video link.

8.       The Applicants pay the Respondents costs thrown away by the amendment to its Application and Statement of Claim.

9.       The Respondents pay the Applicants' costs thrown away by reason of the amendment to their Cross Claim.

AND THE COURT ORDERS THAT:

10.   The Applicants have leave to file and serve a further affidavit of Melville John Speers on or before Friday 4 April 2008.

11.   The Applicants have leave to file and serve a further affidavit of Steven Mercer Eden on or before Friday 4 April 2008.

12.   The Applicants pay the Respondents costs of the Second Further Amended Notice of Motion.

13.   There be no other order as to costs.

14                  On 7 May 2008, Sundberg J dismissed both the application and cross claim.

15                  By an affidavit sworn 22 April 2009, Khajaque Kortian, of the solicitors for the respondents deposed to a belief that “Coastline” supplied the same style of footwear as Abbots and Jamal to other retailers and that sale by third party retailers would affect the applicants’ damages based on alleged loss of reputation.  Mr Kortian deposed that the respondents believed that World Brands Management Pty Ltd and/or the applicants had settled with Coastline in relation to such sales or supply.

16                  On 28 May 2009, Sundberg J:

(a)                Set down the proceeding for a hearing on quantum not before 27 July 2009.

(b)               Ordered that any further evidence on which the respondents sought to rely arising from the documents produced pursuant to subpoenas addressed to Pegasus and Coastline dated 27 April 2009 be filed and served on or before 25 June 2009.

17                  On 27 May 2009, Registrar Caporale gave the respondents leave to inspect, uplift and copy non‑confidential documents produced by Pegasus, and the subpoenas otherwise to be stood over to 10 June 2009.  On 24 June 2009, the subpoenas to Pegasus and Coastline were again stood over.  On 8 July 2009, Registrar Hetyey ordered that the subpoenas to Pegasus and Coastline discharged.

18                  The affidavit of Rohan Singh of the respondents’ solicitors (apparently sworn 6 July 2009) deposed that on 1 July 2009, the respondents’ and applicants’ solicitors obtained access to confidential documents and a deed of settlement dated 9 January 2007 was disclosed.

The respondents’ existing defence

19                  The second further amended defence and cross claim dated 7 April 2008, in paragraph 10, the respondents, in relation to the allegations in paragraphs 50 to 63 of the fifth further amended statement of claim (the infringement of the Carlos and Ecko designs by sale of Abbots and Jamal footwear) “refer to the declarations made by consent by the Court on 1 April 2008 herein.”

Proposed amended defence and cross claim

20                  The proposed further amended defence and cross claim by paragraph 11 pleads:

The applicants or any of them are precluded from making a precuniary claim against the respondents or any of them arising from the allegations raised in paragraphs 50 to 60 inclusive of the fifth further amended statement of claim

Particulars

The respondents rely upon the releases set out in the Deed of settlement dated 9 January 2007 between Global Brands Marketing and the respondents’ supplier of the Jamal and Abbots footwear.

The Deed of Settlement

21                  Mr Kortian deposed by his affidavit sworn 25 March 2010 to a deed of settlement between Pegasus and the first applicant, Global Brand Marketing Inc. dated 9 January 2007, which confidential exhibit was produced by Pegasus pursuant to a subpoena dated 27 April 2009.  Mr Kortian also deposed to and exhibited correspondence passing between the lawyers of the various parties in relation to the deed of settlement.

22                  Pegasus (trading as “Coastal”) was identified as the respondents’ supplier.  It was party to the deed of settlement dated 9 January 2007 with Global exhibited to the Kortian affidavit.  The deed of settlement recited that Global had issued a proceeding against Pegasus alleging that it infringed its Australian registered designs, including those at issue in this proceeding; and, on payment of a settlement sum, Pegasus undertook not to manufacture, import or sell Abbots and Jamal footwear while the designs remained registered.

23                  Paragraph 6 of the deed of settlement stated that the parties (and any related body corporate as that term is defined in s 9 of the Corporations Act 2001 (Cth) (Related Bodies Corporate) hereby permanently release and forever discharge each other, their Related Bodies Corporate, directors, customers, servants and agents from and against all and any claim cause of action liability suit or demand which the parties … have or but for this deed may have had against each other…their customers servants or agents prior to the date of this deed for or in respect of or arising out of the subject matter or the conduct of the proceeding and the cross claim.

24                  The respondents contend that Pegasus supplied them with Abbots and Jamal footwear and that YD and Mr Trenear were customers of Pegasus to whom the benefit of a complete release in relation to infringement of the designs and/or mitigation of damages were available under the principle recognised in Airberg.

Correspondence re: Release

25                  By a letter dated 20 November 2005 to Mr Kortian, Middletons, the applicants’ solicitors, sought release from confidentiality to disclose the identity of the respondents’ supplier.  By a letter dated 30 November 2005, the respondents consented.

26                  By letter to Mr Kortian dated 5 May 2009, Middletons informed Mr Kortian that the respondents’ supplier, Coastline, was the trading name and “one and the same” as Pegasus against which the applicants had issued a Federal Court proceeding.  That proceeding had settled, and the terms of settlement had been retrieved.  The letter stated that proceeding had concerned the Carlos and Ecko designs and could be relevant.  The applicants were prepared, in so far as possible, to make the confidential settlement terms available.  The letter inquired as to the seven subpoenas the respondents had issued (returnable 13 May 2009) by order of Registrar Allaway.

27                  By his letter to Middletons dated 28 July 2009, Mr Kortian referred to the terms of the deed of settlement and asserted that cl 7 of the deed operated as a complete release extending to customers of Pegasus.  He stated that Middletons must have been aware of those matters while the applicants were pursuing the quantum claim against the respondents.  The letter sought an urgent explanation for pressing the quantum claim notwithstanding the deed of settlement.  Mr Kortian’s letter to Middletons dated 10 August 2009 sought a response to his letter of 28 July.  It also sought security for costs.  The letter stated that the respondents had not been aware of the Pegasus proceedings or of the deed of settlement until they were produced under the subpoenas.  It suggested that the applicants had sought to rely on the confidentiality terms of the deed to prevent the respondents from becoming aware of the release.  The letter sought consent to disclosure of the deed to Mr Trenear in order to obtain further instructions.

28                  By letter dated 11 August 2009, Middletons referred to a heads of agreement dated 18 October 2006 and maintained that it indicated that the release was never contemplated to apply to customers such as the applicants (against whom litigation was on foot at the time).  The letter asserted that the inclusion of the term “customers” was a mistake and the deed was signed by applicants in the belief that it reflected the mediation and the heads of agreement.

29                  The letter of Middletons dated 14 August 2009 refused security for costs and referred to the admission of infringement.  It stated that Middletons had informed Mr Kortian by a letter dated 3 July 2006 in some detail about the Pegasus proceeding, but asserted that the applicants were neither obliged nor entitled to disclose the heads of agreement or deed of settlement, and were, in any event, unaware of the deed’s effect on the proceeding against YD and Mr Trenear.

30                  By an email dated 24 March 2010, Mr Kortian sought consent to file the third further amended defence and cross claim.  He stated that the applicants had been aware of the issue arising from the release, so they would not be prejudiced.

31                  By a letter dated 24 March 2010, Middletons stated that it did not consent to the proposed amended defence.  Middletons referred to its letter dated 11 August 2009 and stated that until the 17 March email, it had not heard from Mr Kortian since August 2009.

Affidavit of Lisa Egan

32                  Ms Egan, of the applicants’ solicitors, deposed to the history of raising the potential application of the deed of settlement and the correspondence exhibited to Mr Kortian’s affidavit, including the fact that from between 12 August 2009 and 17 March 2010, the respondents did not correspond.

33                  Ms Egan further deposed to the prejudice the applicants will sustain if the quantum trial were adjourned, as the applicants had organised up to nine witnesses, only one of whom was a current employee.  Four witnesses were located overseas and five were located interstate.  Ms Egan deposed that if the quantum trial went off, the costs and effort of arranging the witnesses to give evidence would be wasted.  The witnesses might not be available in future and the problems of recall would be exacerbated.

Airberg Pty Ltd v Cut Price Deli

34                  In Airberg, Lindgren J considered whether a promise to release persons who were not parties to a deed of release was enforceable by them or only by the parties privy to the deed. The relevant “promisee” privy to the deed was no longer a party to the proceeding.

35                  Lindgren J concluded that notwithstanding Trident v McNeice, there was a doctrine of compromise whereby if two parties compromised their differences on terms including that a third party should not be sued in respect of some matter by one of the parties, the third party could effectively claim the benefit of that term, provided that the correct procedural steps were taken and all parties were before the Court.  Steps could therefore be taken to rejoin the relevant party to the deed to the proceeding.  Lindgren J stated:

I turn now to the issue of privity of contract. Notwithstanding Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; (1988) 165 CLR 107, the doctrine of privity of contract remains part of the general principles of the Australian law of contract. Clause 15.3 contains a promise by, relevantly, Airberg  to CPD. It was CPD whose participation was necessary to the sale by the Lockyers of their shares in Airberg  to the Faulkners and the release of Lockyer from his guarantees in favour of CPD. The price which CPD exacted for its consent included a forbearance to sue its directors, servants and agents. In my opinion, cl 15.3 is not enforceable by Sgambellone and Malovany in the absence of CPD as a party. But all is not necessarily lost from their viewpoint. In Foskett's The Law and Practice of Compromise (4^th ed, London, Sweet & Maxwell, 1996) the position is expressed thus:

"It seems that if two parties compromise their differences, one of the terms being that a third party should not be sued in respect of some matter by one of the parties, the third party can effectively claim the benefit of that term provided the correct procedural steps are taken and all parties are before the court: [the learned author refers to Snelling v John Snelling Ltd [1973] 1 QB 87]". (at par 6-18, pp 110-111)

Subject to my being persuaded otherwise by Airberg's submissions, I think that Sgambellone and Malovany are entitled to have CPD re-joined as a respondent with a view to having it cross-claim to enforce the forbearance to sue contained in clause 15.3 of the Deed for the benefit of Sgambellone and Malovany, by seeking a permanent stay or dismissal of the proceeding: see Snelling v John G Snelling Ltd [1973] 1 QB 87 at 98-100 and Bahr v Nicolay [No 2] [1988] HCA 16; (1988) 164 CLR 604 at 656 (Brennan J). If CPD should be unwilling to be joined as a party for the purpose of enforcing the forbearance to sue, it may be that Sgambellone and Malovany would be entitled to compel it to do so as trustee of Airberg's promise: Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; (1988) 165 CLR 107, particularly at 121, 146ff.

Counsel who appeared for Malovany has submitted that if I should take this view, an opportunity should be afforded to Sgambellone and Malovany to move to rejoin CPD. I agree. I therefore propose to give the parties the opportunity of considering these Reasons so that Malovany or Sgambellone or both may have the opportunity, if so advised, to move for the re-joinder of CPD as a party.

Relevant Rules and Legal Principles

36                  Order 13, Rule 2 of the Federal Court Rules provides:

(1)        Subject to the following provisions of this rule, the Court may, at any stage of any proceeding, order that any document in the proceeding be amended, or that any party have leave to amend any document in the proceeding, in either case in such manner as the Court thinks fit.

(2)        All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding, or of correcting any defect or error in any proceeding, or of avoiding multiplicity of proceedings.

37                  Order 6, Rule 2 of the Federal Court Rules provides:

Joinder of parties generally

Two or more persons may be joined as applicants or respondents in any proceeding:

(a)  where:

(i)         if a separate proceeding were brought by or against each of them, as the case may be, some common question of law or of fact would arise in all the proceedings; and

(ii)        all rights to relief claimed in the proceeding (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions; or

(b)  where the Court gives leave so to do.

38                  In AON Risk Services Australia Limited v ANU (2009) 239 CLR 175, the High Court recently re-evaluated the principles governing leave to amend to add an arguable claim in the context of case management.  The High Court rejected the proposition said to be based on the approach in Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 that a party had “something of a right” to amend to raise an arguable issue subject to the payment of costs occasioned by the amendment.  The High Court stated that rather, the question of amendment where leave was required depended on the exercise of the court’s discretionary power. [96]

39                  In AON, the primary judge permitted a party to make substantial amendments on the third day of trial.  The amendments involved allegations of breaches of duty of care, negligence, misleading and deceptive conduct and breaches of the ASIC Act 2001 (Cth).  No explanation of why it was necessary to seek leave to amend was provided.

40                  In AON, the plurality (Gummow, Hayne, Crennan, Kiefel and Bell JJ) stated:

An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation.  There is no such entitlement.  All matters relevant to the exercise of the power to permit amendment should be weighed.  The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. [111]

41                  Their Honours also stated that:

The salient features of the application for leave to amend in this case were, as Lander J pointed out in his dissent, that the amendments sought to introduce new and substantial claims; they were so substantial as to require Aon, in effect, to defend again, as from the beginning; the application was brought during the time set for the trial of the action and would result in the abandonment of the trial if granted; and there was a question whether costs, even indemnity costs, would overcome the prejudicial effects on Aon if the litigation to this point was not productive of an outcome. [104]

42                  The plurality also emphasised that “given…the effects associated with delay” [216] it was incumbent on the party seeking to amend to “tender an explanation as to why the matter had been allowed to proceed to trial in its existing form.  It needed to explain why it was seeking leave to amend at the time of the trial…[The applicant’s] solicitor could have said that [it] only realised the potential for claim as a result of confidential communications, but he made no such claim…  This evidence was no basis for a finding that there had been an oversight and that [the applicant’s] lawyers had not appreciated [the respondent’s] possible involvement until the mediation talks” [216]

43                  In Genworth Financial Mortgage Insurance Pty Ltd v Peter Clisdell Pty Ltd BC 200908259, Jagot J stated:

Inevitably my attention has been drawn to the recent decision of the High Court in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 (Aon), particularly at [5], [35] and [96]-[103]. The respondents have noted that there are many differences between the facts in Aon and the present case. First, this is an application to amend a defence by a defendant, not, as in Aon, an application to amend by an applicant which already had the advantage of consent orders reached through a process of mediation. Second, the Federal Court Rules, specifically Order 13 r 2, are different from the rules of the ACT Supreme Court (Court Procedure Rules 2006 (ACT)), particularly the inclusion therein of the requirement in r 21(1) that in civil proceedings there be a just resolution of the real issues with minimum delay and expense. Third, in Aon, it seems that there was no adequate explanation for the delay in the application to amend, and indeed the delay may have been a tactical decision. The same certainly could not be said in the present case. Finally, in Aon, the majority of the High Court noted at [102] that even where r 21 of the Court Procedure Rules, or a rule to that effect, applied, not every application for an amendment should be refused because it will involve the waste of some cost, and some degree of delay. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. Hence, as the majority recognised at [102]:

It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates.

That is the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the Court’s discretion.

Discussion

44                  In the present case, the quantum trial is fixed for 7 April 2010.  The notice of motion applying to amend the defence and join Pegasus was filed on 25 March 2010.

45                  While neither the applicants nor the respondents complied with the orders for preparation of the quantum trial (causing the Court to list the matter for mention on 29 March 2010) there has now been substantial compliance.

46                  The applicants primarily submitted that the application should be refused, on the basis of the principles stated in AON.  The applicants submitted that, given the date of the Pegasus subpoena and the fact that the respondents were alive to the issue since June or July of 2009 yet only recently sought to amend, in the absence of an excuse, it should be inferred that the application was tactical and should be refused.

47                  The applicants also contend that the amendment and joinder would be futile because there is no privity of contract between the applicants and the promisor under the release, and the limited exception in Trident v McNiece could not apply.  While not conceding that either respondent was a “customer” of Pegasus, they submitted that, in any event, the release could not benefit Mr Trenear, who was clearly not a customer and whose liability was not accessorial, but as a joint tortfeasor.

48                  The applicants also submitted that the proposed pleading does not make clear the basis on which the deed of settlement is relied upon.  The applicants contended that if the proposed amendment and joinder were permitted, they would seek to amend to plead rectification of the deed of settlement, on the basis of mistake.  That would involve an investigation of conduct, the mediation and the alleged customer relationship.  Witnesses would be called.  Initially, the applicants contended, that should the amendment be allowed, their first preference is to proceed with the quantum trial with the new issues to be determined subsequently as separate questions.

49                  In my opinion, the respondents’ points are arguable.  Although the proposed amended pleading in its present form is somewhat scant, the principles on which the respondents rely and the requirement for the joinder of Pegasus (which appears essentially procedural) are made clear in Airberg.

50                  The respondents submitted that it would be unfair to shut out the proposed amendment when the applicants had long known of the deed of settlement and the arguments based on the release.  The timing of the application to amend was satisfactorily explained and in contrast to AON, the proposed amended defence was served on 25 March 2010, three weeks prior to the scheduled commencement of the quantum trial.  Further, the amendment raised discrete questions and unlike AON, did not require the applicants substantially to re‑litigate.  The quantum trial could proceed as part of a “split” trial.

51                  Although the respondents were alert to the issue much earlier, they have sought to amend a late point, jeopardising the quantum trial date in a matter which should be concluded.  Nevertheless, it is clear that the applicants were equally aware, at an earlier date, of the arguments now sought to be pleaded.  The respondents’ explanation for the timing of the application to amend is counsel’s recent awareness of the Airberg decision.  I accept that explanation.

52                  Despite their initial preference, the applicants ultimately resisted the option of proceeding with the scheduled quantum trial if the application for leave is granted.  They submitted that although the relevant quantum witnesses would need to be called in any event, some witnesses might need to be recalled in relation to the new matters.  Further, it would be unfair to require the applicants to examine and cross‑examine witnesses in a split trial and in the context of the uncertainties generated by the respondents’ proposed amendments.

53                  The respondent sought to proceed with the scheduled quantum trial.  It was not readily apparent that there were insuperable obstacles to such a course, which would have minimised inconvenience and the waste of time and costs.  I concluded, however, that it should not be imposed on the applicants.

54                  The vacation of the quantum trial therefore became a necessary incident of granting the respondents’ applications.

55                  In all the unusual circumstances of this case, including:

the existence of the release, its apparent relevance as the basis for an arguable claim; its relatively circumscribed scope; the respondents’ belated knowledge of the deed and their conduct thereafter; the impact of the decision in Airberg only recently appreciated by the respondents’ counsel; the applicants’ preference that the quantum trial should not proceed if the amendments be allowed; the fact that although the proceeding has been long on foot, there has already been one trial and the parties have apparently acquiesced in various stages of non‑progression:

in my opinion, weighing all relevant matters, including the nature and importance of the amendment to the respondents, notwithstanding the delay, wasted costs and prejudice to the applicants (which may not be wholly compensable by a costs order) the respondents’ applications to amend and to join Pegasus should be allowed.

56                  Late on the day of the hearing the application (31 March 2010), the respondents filed and served a further amended version of the proposed pleading.

57                  On the following day (1 April 2010), whilst these reasons were in preparation, the applicants sought to be heard in relation to the new proposed pleading.  As it is necessary to decide expeditiously whether the quantum trial should be vacated, I do so on the basis that the respondents will be granted leave to file an amended defence, which broadly pleads the release issue, without prejudice to the right of other parties to be heard on its precise form.

Associate:

Dated:         1 April 2010