FEDERAL COURT OF AUSTRALIA

Gove Aluminium Limited v EF Maritime Navigation SA [2012] FCA 599

THE COURT ORDERS THAT:

1.    The plaintiffs have leave to amend their statement of claim in accordance with the ruling made today.

2.    The plaintiffs pay:

(a)    the defendant’s costs of the plaintiffs’ application to amend their statement of claim; and

(b)    the defendant’s costs thrown away by reason of the amendment the subject of leave.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction

1    Today, on the third day of trial, the plaintiffs have applied under r 16.53 of the Federal Court Rules 2011 (the Rules) for leave to amend their statement of claim. The application arose out of the defendant’s objection to the admissibility of a supplementary report of Roy Carpenter of 3 June 2012. Mr Carpenter is an expert whose opinion is relied on by the plaintiffs.

2    Without summarising all the current statement of claim, I note that it currently pleads breach of contract evidenced by a bill of lading dated 4 May 2009. The statement of claim relevantly alleges:

1.    wrongfully in breach of contract and/or duty the defendant failed to exercise due diligence before and at the beginning of the voyage to make the vessel “New Eternity” seaworthy;

2.    wrongfully in breach of contract and/or duty the defendant failed to make the holds and other parts of the vessel “New Eternity” fit and safe for carriage of the cargo; and

3.    wrongfully in breach of contract and/or duty the defendant failed properly and carefully to load, handle, stow, carry, keep, care for and discharge the cargo.

3    The plaintiffs submitted that the report was relevant to three allegations: (1) the voyage to Canada could not have been prosecuted from the time it was known that the number 2 fuel tank had become contaminated; (2) the vessel was not cargoworthy at the commencement of the voyage; and (3) the vessel was not seaworthy at the commencement of the voyage.

4    The defendant’s case, as stated by senior counsel yesterday, is that “the contract of carriage under which the plaintiffs sue the defendant, which is the original bill of lading, was varied when that bill of lading was cancelled and the substitute or switched bills of lading were put in their place”. This much appears from the defendant’s Second Further Amended Defence.

5    In their reply, the plaintiffs in substance allege that the contract evidenced in the bill of lading dated 4 May 2009 was not discharged but new contracts evidenced by new bills of lading were entered into.

6    For present purposes, I accept that the supplementary report is relevant to the issue of lack of cargoworthiness. The defendant admits lack of seaworthiness at the commencement of the voyage but denies the other allegations: see second further amended defence at [7]-[9]. That is, the defendant admits a breach of art 3 r 1(a) of the (modified) amended Hague Rules set out in sch 1A of the Carriage of Goods by Sea Act 1991 (Cth).

7    The defendant’s objection to admissibility and the plaintiffs’ response exposed a deficiency in the plaintiffs’ pleading. That is, the plaintiffs have failed to plead the case they now apparently seek to run. There is no pleaded allegation that the voyage to Canada could not have been prosecuted from the time it was known that the number 2 fuel tank had become contaminated. Further, I accept that, as the defendant maintained, the plaintiffs have not pleaded that the contract of carriage contained within the original bill of lading was brought to an end by reason of a repudiation, repudiatory breach or anticipatory breach, by the defendant. This is the case the plaintiffs now want to maintain. The plaintiffs have clearly not pleaded against the defendant that the contract was terminated because the vessel was incapable of performing the voyage to Kitimat. There is no indication that such might be the plaintiffs’ case in any of the particulars that the plaintiffs have provided.

8    The plaintiffs’ application for leave to amend their statement of claim was supported by a draft of their proposed pleading. Senior counsel for the plaintiffs first stated that the occasion of the amendment application was that the defendant had made discovery late, with the result that the plaintiffs had not been aware of relevant communications and correspondence. The plaintiffs maintained that, only when acquainted with the discovered information, had Mr Carpenter been able to make his supplementary report. Ultimately, however, it seemed to me that the plaintiffs accepted, as well they might, that there were deficiencies in their pleading that owed nothing to late discovery on the defendant’s side and that some of the proposed amendments were designed to remedy these deficiencies. The plaintiffs have continued to maintain, however, that their proposed amendments to paras 10B and 10C of their proposed amended statement of claim really were the outcome of late discovery. I will come to this in due course.

9    In opposition to the application for leave to amend, the defendant submits that, save for a proposed amendment to para 8 of the statement of claim (which it did not oppose) the plaintiffs’ proposed amendments introduced a new case that could have been pleaded earlier. If the amendments were allowed, the defendant stated that it would need time to address the amendments. As will be seen, this factor is significant for the disposition of the application for leave to amend.

the relevant principles

10    The Court has a broad discretion to grant leave to amend a pleading, although this discretion must be exercised having regard the circumstances of the case and such relevant considerations as the overarching purpose set out in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act): see Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 273 ALR 147 at 159 [43]. All the circumstances of the case must be considered in order to achieve a just outcome. As was observed in the joint judgment of Gummow, Hayne, Crennan, Kiefel and Bell JJ in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at 213 [98] in relation to the relevant rule of the ACT Supreme Court:

Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed on re-pleading, when delay and cost are taken into account.

11    Their Honours emphasised that the requirements of justice cannot necessarily be met by an order that the applicant pay the costs occasioned by the application, stating at 217 [111]-[112] that:

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. …

A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed on their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to the parties having a sufficient opportunity to identify the issues they seek to agitate. (Emphasis original)

Proposed amendments to a pleading that raise new issues may or may not be allowed at trial in the exercise of the general discretion, in respect of which the objective identified in s 37M is relevant.

Consideration

Proposed paragraphs 9A, 9B, 9C, 10 and 10A

12    The plaintiffs’ proposed amendments (opposed by the defendant) may be distinguished as outlined by the defendant in submissions this morning. That is:

1.    Proposed para 9A of an amended statement of claim would pick up the alleged breaches and plead repudiation. As senior counsel for the defendant observed, this allegation, if permitted, would not greatly add to the evidence but would attract subsequent argument in submission.

2.    Proposed paras 9B to 9C and 10 and 10A would allege termination in three situations.

(a)    Paragraph 9B would plead, in effect, that, by a notice of 13 May 2009, the plaintiffs accepted the defendant’s breach and/or repudiation so as to bring the contract between plaintiffs and defendant to an end. It is said, in particulars, that this was effected by an email from an employee of Rio Tinto Shipping to Pacific Basin. Rio Tinto Shipping is not a plaintiff in this case. The defendant submitted that there were evident difficulties with this pleading. In the circumstances in which this application has been heard, it would not be appropriate to determine this issue finally. It suffices to say that it is clear that the plaintiffs will face a number of obstacles in making out this pleaded proposition.

(b)    Paragraph 9C would plead that, by communication and conduct between 12 May 2009 and 24 June 2009, the plaintiffs accepted the defendant’s repudiation such as to terminate the contract of carriage. The plaintiffs’ particulars refer to emails and other communications from the defendant or its agents; the agreement to divert the vessel to China; and the issuing of new bills of lading. It suffices to say that there are similar difficulties facing the plaintiffs with regard to this allegation.

(c)    Paragraph 10A would follow from new para 10 and would plead that the plaintiffs accepted the defendant’s breach or anticipatory breach in the period 15 to 27 May 2009, by agreeing to the discharge of their cargo at a Chinese port.

13    I accept that, as the defendant submitted, this proposed pleading could all have been done earlier – and well prior to trial. As the defendant’s senior counsel noted, the pleaded conduct and particularised documents were known to the plaintiffs at a much earlier date. To the extent that the plaintiffs sought to rely on the defendant’s late discovery in explaining away this part of the plaintiffs’ application to amend, I would reject this explanation. I accept, moreover, that these proposed pleadings were not responsive to the defendant’s late admission of unseaworthiness. Further, also militating against the grant of leave is that some parts of the amendments would not appear to raise a particularly strong case.

14    To some extent, however, and favouring a grant of leave, some of the plaintiffs’ proposed amended case could have been anticipated, although, I accept that, as the defendant said, precisely what form the plaintiffs’ case would take in this regard was, so far as the defendant was concerned, a matter for speculation. Until the plaintiffs opened their case on the first day of the trial (now two days ago), the defendant could only have guessed as to how the plaintiffs might put their case and, even then, the plaintiffs have not nailed their colours to the mast until today. Effectively, whilst the defendant might have anticipated the course of events, nonetheless, the plaintiffs’ proposed pleading is of a new case.

15    This said, the defendant has made it clear that it will not be prejudiced if leave to amend is given with respect to these proposed amendments, providing some accommodation is given to it. Thus, the defendant has stated that there will be no need to recall witnesses but that it will need time to seek instructions, particularly in relation to amendments to its defence. Further, the defendant will need the opportunity to review discovered documents and other material with these new allegations in mind. There may be other matters necessary to be done upon any amendment of the pleading.

16    In all the circumstances, I would give the plaintiffs leave to make the amendments proposed in paras 9A, 9B and 9C, as well as paras 10 and 10A upon the accommodations that the defendant has fairly sought. As I have said, there was no opposition to the grant of leave in relation to para 8 and leave will be granted accordingly. Ultimately, it seems to me that, as counsel for the plaintiffs effectively accepted, the amendments are needed to make good deficiencies in the pleading.

Proposed paragraphs 10B and 10C

17    I have reached a different conclusion with respect to proposed paras 10B and 10C. Paragraph 10B would read as follows:

Further and in the alternative, there was a term of the contract of carriage that the “New Eternity” would arrive at Kitimat between 20 and 26 May 2009, further or in the alternative that it would proceed to Kitimat with reasonable despatch.

        PARTICULARS

The Plaintiffs refer to the voyage instructions provided to the Master on 17 April 2009 (CB 1190-1199). Alternatively, the term as to reasonable despatch is to be implied by reason of the nature of the contract of carriage and in order to give it commercial efficacy.

The particulars subjoined to that paragraph refer, amongst other things, to the voyage instructions provided to the master.

18    Paragraph 10C would read:

By reason of the breaches of contract or duty referred to in paragraphs 7, 8 and 9 the Defendant breached or was unable to comply with the term alleged at paragraph 10B at any time prior to the termination of the contract referred to in paragraph 9B and 10A above.

19    The references to paras 7, 8 and 9 are to allegations concerning lack of seaworthiness, lack of cargoworthiness and failing properly to load, handle, carry, keep, care for and discharge the cargo. I have already referred to these terms and the terms set out in para 10B and the terminations alleged in paras 9B and 10A. The plaintiffs’ current pleading contains no such term as that sought to be alleged in paras 10B and 10C.

20    The defendant’s position was that it could deal with these allegations if leave were granted but that the evidentiary inquiry on its part that the amendment would necessitate would take weeks, not days. Senior counsel for the defendant noted that the defendant had thus far relied on a Mr Yeh, to give his expert opinion as an insurance manager, but that Mr Yeh could not necessarily be expected to deal with technical matters that might need to be addressed if leave were given in respect of these new allegations. In any case, the allegations in paras 10B and 10C would require investigation into whether the vessel was in a condition that it could not meet its contractual obligations. Such an investigation would need to be made on a range of fronts.

21    I accept that the allegations proposed in these paragraphs would be more far-ranging than those required by the other amendments. In fact, it seems to me that the estimate of weeks may, if the continuation of trial is considered, err on the conservative side. If leave were granted, there is a possibility that the defendant may wish to engage another expert to prepare a report. The plaintiffs would require a sufficient opportunity to address any such report and any other material that the defendant chose to advance in its defence against this part of the plaintiffs’ newly proposed case.

22    If leave to amend were given in respect of proposed paras 10B and 10C, there would be a need to adjourn the current hearing for some time. As matters stand in my docket, no further hearing of any substance could be held before March 2013. It must be borne in mind that this litigation began as long ago as May 2010 and it is desirable that it be brought to an end as soon as may be reasonably practicable. These factors militate against a grant of leave with respect to paras 10B and 10C of the proposed amendments.

23    When the hearing resumed after a short adjournment to consider this application, counsel for the plaintiffs sought to raise a further argument. It was, in substance, that the late proposal of paras 10B and 10C was almost entirely due to the late discovery made by the defendant. There was no affidavit relied on or evidence led in support of the application to amend; and, as indicated already, the argument was raised late in the piece. Understandably, senior counsel for the defendant stated that he was not in a position to respond to this submission. It is difficult in these circumstances to make any considered assessment of the submission now made by the plaintiffs’ counsel.

24    Proposed paras 10B and 10C were said by the plaintiffs to raise an allegation that the vessel was unseaworthy not merely prior to and at the commencement of the voyage, but at all times. When, however, regard is had to the current terms of paras 10B and 10C, it seems to me that they in fact fail to raise that particular allegation.

25    This observation takes me back to the point at which this controversy began. It will be recalled that a relevance objection was taken to Mr Carpenter’s supplementary report (said to have been made late because of late discovered documents). In response to the defendant’s objection, the plaintiffs said that the report was relevant because it established that the voyage to Canada could not have been prosecuted from the time it was known that the number two fuel tank had been contaminated. When pressed, the plaintiffs said that the fact the voyage could not be prosecuted reflected the allegation that the vessel was unseaworthy at all times. As already noted, however, as the pleading currently stands, it does not attach itself to those latter allegations. Thus, even Mr Carpenter’s late supplementary report provides little, if any, support for the proposition that the allegations in paras 10B and 10C only became known at the time that late discovery was made. Indeed, when regard is had to para 10B, upon which para 10C depends, it seems relatively clear that it would plead matters of law which would have been known to the plaintiffs at a much earlier date.

26    For the reasons stated, I would grant leave in respect of proposed paras 8, 9A, 9B, 9C, 10 and 10A of the proposed amended statement of claim. I would not otherwise grant leave.

27    I would add that, whilst I would, for the reasons stated, grant leave in respect of these specified paragraphs, I do so on the basis that none seek to raise, in some collateral way, the additional matters sought to be canvassed in proposed paras 10B and 10C.

Associate:

Dated:    25 June 2012