Carpenter v Morris

This proceeding was commenced on 24 May 2016.

It is common ground that, during the period from about 1996 until about early 2003, the second plaintiff and the fourth defendant conducted the business of mining, cutting, and shaping dimension stone at the Grandee Quarry in New South Wales in partnership. On the plaintiffs’ pleaded case, the business of the partnership also extended to the preparation for sale and selling of that dimension stone. The partnership is referred to in the pleadings as the Morris Carpenter Partnership and I will use the same term in these reasons.

The first plaintiff is a director of the second plaintiff.

The first defendant is a director of the fourth defendant and the owner of part of the land comprising the Grandee Quarry together with the second and third defendants. The proceedings settled as between the plaintiffs and the second and third defendants on the first day of the hearing. The eighth and ninth defendants are the current owners of the balance of the land comprising the Grandee Quarry and play a very limited role in this proceeding.

The fifth to seventh defendants are parties alleged to have obtained an exploration licence and applied for a mining lease, and to have dealt with certain material stockpiled on the Grandee Quarry land in the period after 2014.

In very broad terms, this proceeding concerns:

In their Further Amended Statement of Claim filed on 17 May 2019, the plaintiffs claim the following relief against the first and fourth to seventh defendants:

The claims for a declaration of constructive trust and equitable compensation were introduced by the Further Amended Statement of Claim filed in May 2019. The other claims for relief have been pleaded since the proceeding was commenced in May 2016.

A separate defence to the Further Amended Statement of Claim was filed on behalf of each of the first and fourth to seventh defendants on 5 April 2019.

In about August 2019, the fourth defendant’s solicitors asked the solicitor then acting for the plaintiffs (Mr Hargreaves of Palmers Solicitors) to identify the basis on which an order was sought for the taking of accounts and inquiry into all of the dealings and transactions of the Morris Carpenter Partnership and of the partners in relation to that partnership. Specifically, the solicitors for the fourth defendant inquired whether it was alleged that no final account had been taken in relation to the Morris Carpenter Partnership, or whether there was some other basis on which an order for the taking of accounts was sought.

On 12 August 2019, Mr Hargreaves responded to that inquiry in the following terms:

Mr Hargreaves recently ceased acting for the plaintiffs after becoming gravely ill.

On 6 September 2020, the solicitors for the fourth defendant wrote to the present solicitors for the plaintiffs referring to the “admissions” made by Mr Hargreaves in his 12 August 2019 letter and stating that the fourth defendant was proceeding on the basis that the relief sought in relation to the Morris Carpenter Partnership was now “limited only to the appointment of a receiver in respect of the interest of the Morris Carpenter partnership in the stockpile (whatever that might be) and that it is no longer proposed to seek a general accounting for the partnership”.

On 7 September 2020, the plaintiffs’ solicitors replied:

The final hearing of the proceeding commenced on 14 September 2020.

On that day, the first and fourth to seventh defendants moved on a notice of motion filed at 4.30pm on 8 September 2020 (two business days prior to the commencement of the final hearing) seeking leave to amend their respective defences to the Further Amended Statement of Claim by filing defences in the form included in Annexure A to the affidavit of the solicitor for the first and fourth to seventh defendants, Mr Grant Gayler, sworn on 8 September 2020.

The plaintiffs opposed leave being granted in relation to one of the amendments proposed by the first defendant and two amendments proposed by the fourth defendant, but did not oppose leave being granted in respect of the balance of the amendments by the first and fourth to seventh defendants.

The contentious proposed amendments are:

The first and fourth defendants acknowledge that the limitation periods now sought to be relied on were required by r 14.14 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) to be specifically pleaded.

Counsel for the first and fourth defendants candidly acknowledged that they offered no excuse for the lateness of the application for leave to amend, stating that the issues sought to be raised by the contentious amendments had only recently occurred to the legal representatives acting for the first and fourth defendants.

The first and fourth defendants submitted that the plaintiffs could not point to any prejudice arising from the grant of leave to amend, and that it was therefore consistent with ss 56 to 58 of the Civil Procedure Act 2005 (NSW) to grant leave to amend.

The plaintiffs submitted that leave to amend should be refused because the first and fourth defendants had not offered any explanation for the delay in pleading the limitation statute and, in the case of the fourth defendant, the defence of settled accounts. The plaintiffs referred in general terms to Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27.

The plaintiffs submitted that they would be prejudiced if leave to amend were to be granted at this late stage because:

The plaintiffs did not resile from the fact that Mr Hargreaves’ 12 August 2019 letter had been sent on the plaintiffs’ instructions and that the fourth defendant’s solicitors had been entitled to rely on it until the plaintiffs notified them of their reversal of position on 7 September 2020. However, the plaintiffs submitted that the fourth defendant had not identified any prejudice arising from that reversal.

The plaintiffs acknowledged that, if leave were granted in respect of the contentious amendments, this would not cause the plaintiffs to alter their present approach to the conduct of the final hearing. The only change would be that the plaintiffs would need to deal with the additional limitation issues and defence of settled accounts sought to be pleaded.

There was no suggestion that the hearing would need to be vacated, or could not conclude within the two and a half weeks for which it has been set down, if leave to amend were granted.

Nor was there any suggestion that evidence relevant to the defence of settled accounts was no longer available. On the contrary, financial accounts for the Morris Carpenter Partnership for the financial year ended 30 June 2003 are exhibited to an affidavit of Mr Carpenter that was read on the first day of the hearing.

The plaintiffs also submitted that the contenious proposed amendments lacked utility because:

I accept that the absence of any explanation from the defendants for the delay in seeking leave to make these amendments is one matter that counts against the grant of leave to amend. In Aon Risk Services Australia Ltd (supra), French CJ said, in the context of relevantly similar provisions of the Court Procedure Rules 2006 (ACT) (at [24]):

Similar observations were made in the joint judgment of Gummow, Hayne Crennan, Kiefel and Bell JJ where their Honours said (at [97]–[98]):

Their Honours continued (at [102]–[103]):

As Ball J pointed out recently in Lambert v Twigg Investments Pty Ltd (No 2) [2020] NSWSC 466, the significance of the delay in determining whether the grant of leave to amend is consistent with the overriding purpose and the dictates of justice in ss 56 to 58 of the Civil Procedure Act depends on all the circumstances of the case. As his Honour said in that case at [7]:

I accept that the plaintiffs have been preparing for four years for a trial in which no limitation issues have been pleaded to date. However, in so far as it was suggested or implied that the second plaintiff would not have expended the time and cost in pursuing the proceeding and would not have suffered the stresses and strains of litigation for that four year period if the defendants had pleaded earlier the limitation issues and defence of settled accounts now sought to be raised, that suggestion does not withstand scrutiny for two reasons.

First, Mr Hargreaves’ letter of 12 August 2019 reveals that, even at a time when the plaintiffs considered that they no longer wished to press the claim for the taking of an account, they were continuing to press their other claims for relief.

Second, I accept the force of the plaintiffs’ submissions that claims in respect of breaches of contract alleged to have occurred in or after 2013 are not time barred. It follows that there is no apparent reason why the plaintiffs would not have continued to pursue their claims in respect of those alleged breaches, even if the fourth defendant had pleaded the limitation statute earlier and if the plaintiffs had taken the view that claims for restitution and/or equitable compensation were time barred. I hasten to add that the plaintiffs have made no concession that their claims for restitution and/or equitable compensation would be barred by s 14 of the Limitation Act.

Senior counsel for the plaintiffs did not take the Court in any detail through the evidence relied on in support of the submission that the grant of leave in respect of the fourth defendant’s proposed limitation defence would be unjust to the second plaintiff because it would deprive the second plaintiff of profits to which it was entitled. The submission invites the Court to entertain and determine an allegation that has not been pleaded by the plaintiffs (that is, that the fourth defendant received a greater share of profits from the Colin Morris Partnership than that to which it was entitled, and that the second plaintiff was deprived of its share of the profits), and thereby prematurely determine the outcome of the taking of accounts of the partnership. It would be inappropriate to embark on that exercise for the purpose of determining the fourth defendant’s application for leave to amend.

Of course, if leave to amend is granted, and if the plaintiffs subsequently seek leave to amend to plead an allegation of the kind referred to above, and/or seek to contend in reply to the fourth defendant’s limitation defence that s 15 ought not be applied by equity by analogy because reliance on s 15 by the fourth defendant would be unconscionable in the circumstances (cf Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435; [2014] NSWCA 181 at [70]–[76]), then the lateness of the fourth defendant’s amendment would be highly relevant to the outcome of such an application by the plaintiffs.

It is difficult to accept that the plaintiffs would be prejudiced by the proposed amendment to plead a defence of settled accounts because they are unable to seek information from Mr Hargreaves. Senior counsel for the plaintiffs acknowledged that Mr Hargreaves letter of 12 August 2019 was sent on the plaintiffs’ instructions. It is open to senior counsel and his instructing solicitor to seek instructions from the second plaintiff, without troubling Mr Hargreaves. In any event, there is no apparent reason why the plaintiffs would not be able to obtain and inspect Mr Hargreaves files (assuming, for present purposes, that those files have not already been handed over to the plaintiffs’ current solicitors).

I also note that, although counsel for the fourth defendant stated that the defendant had no excuse for the lateness of the application for leave to amend, it seems to me that Mr Hargreaves’ letter of 12 August 2019 does provide an explanation for the failure during the period from 12 August 2019 to 6 September 2020 to seek leave to amend to plead a defence of settled accounts.

For those reasons, and having regard to the plaintiffs’ frank concession that a grant of leave to amend would not change the manner in which they conduct the final hearing, much less require the hearing to be vacated, I consider that the overriding purpose and the dictates of justice warrant the grant of leave to amend in all the circumstances of this case, notwithstanding the defendants’ delay in seeking leave to amend and the lack of explanation for the delay in seeking leave in relation to the limitation amendments.

For completeness, I note that I am not satisfied that the contentious amendments lack utility. The question whether or not Mr Hargreaves’ letter constituted an admission of settled accounts is a matter to be determined at final hearing having regard to the terms of the letter itself and any other evidence that may be submitted to provide relevant context. Whilst the alleged breaches of contract appear to have been pleaded well within the limitation period, s 14 of the Limitation Act may be relevant to the plaintiffs’ claim for restitution for work allegedly done during part of the period from 2004 to 2014, the proposed amendment, on the face of it, cannot be said to lack utility at least insofar as it relates to part of the plaintiffs’ claim for restitution. Of course, I express no view about the merits of the argument introduced by the amendment concerning the application of s 14 of the Limitation Act to the plaintiffs’ claims for relief.

I note that many of the uncontentious amendments in the proposed amended defences of the first and fourth to seventh defendants replace non-admissions with statements that the relevant defendant does not plead to the corresponding paragraph in the Further Amended Statement of Claim as that paragraph contains no allegation against that defendant. I doubt the utility of these amendments, as a failure to plead to an allegation constitutes an admission: Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39 at [62]–[63]. The plaintiffs have expressly raised this in relation to different aspects of the pleadings in their written opening submissions. It is a matter for the defendants whether they wish to proceed with amendments of that nature.

For all of the above reasons, I make the following orders: