Baptcare Ltd v Thomas Ingpen & Anor [2022] VSCA 250 (14 November 2022)

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By Jacob Howes, Lawyer, and Nieva Connell, Partner

In this matter, the Victorian Court of Appeal in the Supreme Court considered an appeal of a refused application for leave to amend a defence made four weeks before County Court trial. The Court considered whether the proposed amendments facilitated the identification of real issues in dispute and the just resolution of the proceeding. It is an important reminder that it may be in the interests of justice to allow a late amendment of pleadings, particularly where the amendments will narrow the issues in dispute.

Background

The Plaintiff, Executors of the late Margaret Colborne estate, instituted a proceeding in the County Court against Baptcare Ltd (Baptcare) seeking the repayment of two loans. Mrs Colborne resided at Templestowe Orchards Retirement Village (retirement village) in the years prior to her death. She entered into leases for two units with Templestowe Baptist Church Community Centre Ltd (the leases). Under lease terms, two loans were advanced by Mrs Colborne to Templestowe Baptist Church (the loans). Baptcare subsequently acquired the Retirement Village and with it assumed its rights and liabilities. The leases terminated upon Mrs Colborne’s death and Baptcare took possession of the units which were subsequently demolished.

The dispute between the executors and Baptcare relate to the repayable amount of the loans, which as the pleadings stood would have involved consideration of the terms of the lease, provisions of the Retirement Villages Act 1986 and related regulations, and valuation of the units. Baptcare’s defence was primarily directed towards the construction of the leases, but also raised quantum meruit and promissory estoppel claims. However, in Baptcare’s further and better particulars, Baptcare’s lawyers foreshadowed amending the extant defence ‘in due course’.

Six weeks prior to County Court trial Baptcare gave notice and sought consent of amendment to the defence. Following three unanswered follow up emails and letters, Baptcare filed a summons seeking leave to file and serve an amended defence. The executors indicated to the Court that they opposed the amendments. The alterations were considered significant, but it was not suggested they were not arguable. It abandoned the quantum meruit claim and made a series of admissions not contained the extant defence.

First Instance Decision

The Country Court judge refused Baptcare’s application for leave to file the draft as its amended defence. The judge accepted the executors’ submissions in their entirety, including the following factors:

  1. The application was made only 3 weeks before trial.
  2. If the trial date was vacated, the next available trial would not be until 10 months later.
  3. There was no satisfactory explanation for the lateness of the application.
  4. The further delay of 10 months would cause prejudice to the executors by way of stress and anxiety which cannot be compensated for by an order of costs.
  5. Case management concerns, particularly in the COIVD-19 environment, where vacated trials would inconvenience other litigants.

In refusing the application the judge concluded:

Granting leave to the defendant to file and serve the proposed amended defence would not assist the parties and the Court in the attainment of the overarching purpose set out in the CPA. Accordingly, I consider the overarching purpose of the CPA and the interests of justice are best served by refusing the defendant’s application.

Court of Appeal Decision

The Court of Appeal (in the joint decision of Justice Macaulay and Forrest), first held that for it to reconsider the first instance decision, Baptcare must establish a material error in the House v The King sense (referring to the five types of errors that may lead to an appellate court exercising its own discretion) by the County Court judge in the exercise of his discretion, and secondly must also establish that it would suffer substantial injustice if the appeal was refused.

The Court of Appeal cited the relevant principles applicable for determining whether to allow amendments to an existing defence come from County Court Civil Procedure Rules 2018 and particularly r 36.01(1)(a), the provisions of the CPA related to overarching obligations and the statement of the High Court in Aon Risk Services Australia Ltd v Australian National University[1].  In summary, these principles were such that in deciding to grant leave to a party to amend its pleading, the Court must consider whether the proposed amendments facilitate the identification of real issues in dispute and the just resolution of the proceeding. To do so, among other things, the Court must consider the nature and importance of the proposed amendments weighed against case management considerations such as cost, delay and the potential for unfair prejudice to other parties to the proceeding, the court and other litigants that might arise if the proposed amendments are allowed.

The Court of Appeal found several specific errors on the judge’s part which enliven House v The King principle, including:

  1. The judge’s reasons gave no regard to the consequence of his order in ensuring there was a fair trial of the claim and the defence to it. His reasons focussed on inadequacies of Baptcare’s conduct and its consequences, but did not address the competing interest of Baptcare in ventilating an arguable defence.
  2. The refusal led to bizarre consequences, given Baptcare intended to abandon several aspects of its defence, including the quantum meruit claim, and made a number of admissions. As such several denials and non-admissions remained within the pleaded case.
  3. There was no apparent consideration of the prejudice to Baptcare by it being prevented from raising arguable grounds of defence.
  4. There was no substantive prejudice to the executors as a result of granting the application.

Further, in satisfying the second element of the test, it was held that the refusal to permit the amendment would result in a substantial injustice (affecting their ability to present its case at trial), and as such the Court of Appeal was permitted to re-exercise the judge’s discretion.

The Court of Appeal accepted the considerations and factors referred to by the judge, including that the amendments were substantial. However, such factors were to be balanced against the various factors that were not considered, including the errors enlivening the House v King principle mentioned above, and the following:

  1. The amendments, whilst significant, were foreshadowed in the further and better particulars. The draft was considered six weeks before trial, in contrast with Aon, where notice was given on the day of the trial. Neither side was free from blame, as 13 days passed before the executor’s solicitors responded to Baptcare’s late notice.
  2. The amendments did not seek to introduce new evidence, but rather fleshed out its case and better particularised its defence.
  3. Section 20 of the CPA imposes an overarching obligation upon the lawyers for the executors and Baptcare to cooperate in the conduct of the proceeding, focusing directly to efficacy of pre-trial processes. The executor’s solicitors failed to sufficiently cooperate in their “stonewalling” of Baptcare by not responding for 13 days.
  4. Orders as to cost provided an adequate (but perhaps not perfect) amelioration of the executors’ position.

Ultimately, the Court of Appeal considered that the interest of justice pointed squarely to allowing the appeal and granting Baptcare’s application.

[1] (2009) 239 CLR 175; [2009] HCA 27 (Aon).

For further information, please do not hesitate to contact us.

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