Dudney v Larsson[2015] QDC 223

DISTRICT COURT OF QUEENSLAND

1. [1]
   The Applicants/First and Second Defendants (“defendants”) are being sued by the Respondents (“plaintiffs”) on a contract entered into with the plaintiffs in November 2011, alleging that by reason of the plaintiffs’ misleading or deceptive conduct with respect to the sale and purchase of a boat, they have suffered loss and damage.

2. [2]
   The gravamen of the litigation is the failure of each of two engines on the boat, by “cracking” several times both before and after the contract of sale was completed.

The application

3. [3]
   In the defendants’ application, the following Orders are sought:

"1An order pursuant to Rule 7 UCPR that the time for the defendants to plead in response to the Further Amended Statement of Claim filed 24 June 2015 and served 29 June 2015 be extended to and including 6 August 2015.

2An order striking out paragraph 2A of the [Further] Amended Reply filed 14 August.

3In the alternative to paragraph 1, an order that the defendants have leave to withdraw any deemed admissions (if any) arising from the defendants’ failure to plead in response to the Further Amended Statement of Claim within 8 days

4An order that the plaintiffs pay the defendants’ costs of this application to be assessed on the indemnity basis.”

Chronology

4. [4]
   One of the issues arises from the chronology of filing and correspondence events in the litigation:

Description      Date

Claim and Statement of Claim    23 August 2013

Amended Claim and Statement of Claim  15 November 2013

Notice of Intention to Defend and Defence  03 December 2013

Reply       17 December 2013

[Various Notices of Non-Party Disclosure]   [July 2014 to March 2015]

Further Amended Statement of Claim   24 June 2015

[Letter plaintiff to defendant re expiry of 8 day  [08 July 2015]

timeframe]

Amended Reply     15 July 2015

[Fourth Further Supplementary List of Documents [15 July 2015]

and Request for Trial Date]

[Request by defendants for copies of documents [16 July 2015]

from Second, Third and Fourth Further

Supplementary Lists of Documents]

[Letter defendants to plaintiffs advising   [29 July 2015]

consideration being given to preparation of an

Amended Defence; and advising the matter is

not ready for trial]

Further Amended Reply     14 August 2015

Application      21 August 2015

5. [5]
   It is readily apparent that there was a period of some 18 months (between the filing of the Reply and the Further Amended Statement of Claim), that passed and during which various Notices of Non Party Disclosure were filed and documents sought, and inferentially, received.

6. [6]
   Mr McLennan, in the course of submissions, referred to the difficulty his instructing solicitors had in obtaining information from divers overseas sources with respect to the boat and its engines.

The deemed admissions

7. [7]
   The allegations in the Further Amended Statement of Claim, filed 24 June 2015, at paragraphs 5A, 7(b), (c) and (d), 8A, 8B, 8C, 17A, 19A and 27A are asserted by the plaintiffs to have become deemed admissions because no Amended Defence was filed in the time mandated by the Uniform Civil Procedure Rules (“UCPR”). 

8. [8]
   Those allegations are as follows:

“5A.The chartering of the vessel as pleaded at paragraphs 5 and 6 above was a business and constituted conduct and trade or commerce within the meaning of section 18 of Schedule 2 of the Competition and Consumer Act 2010 (‘the Australian Consumer Law’)”; and

“7.Since completion of construction of the vessel, and prior to sale by the defendants, the engines on the vessel have cracked at the same approximate location (the oil galley between the oil filter and sender unit) resulting in loss of oil or engine failure (‘the engine failure’). The engine failure’s required replacements with new engines on the following occasions:

(b)on or about 16 October 2009, the port engine wasreplaced, after about 500 hours of service; and

(c)on or about 25 March 2010, the starboard engine was replaced, after about 410 hours of service; and

(d)on or about 12 August 2010, the port engine was replaced, after about 299 hours of service”; and

“8ABetween 5 July 2010 and July 2011 various experts from Volvo Penta (the engine manufacturer) and Fontaine Pajot (the vessel manufacturer) attempted to ascertain the cause of the engine failures, including by conducting metallurgical testing on the most recent failed engine, testing the bonding process on the hull and reviewing the engineering of the engine installation”; and

“8BFontaine Pajot and Volvo Penta ultimately recommended changing the engine mounts in order to resolve the engine failures”; and

“8COn or after 3 June 2011, Volvo Penta or its agents made the changes to the engine mounts (‘the engine mount changes’) per the recommendation pleaded at paragraph 8 of the above”; and

“7AThe engine hours of each of the engines were less than 300 hours as at 17 November 2011”; and

“19A.The recommendation pleaded at paragraph 8B above has not resolved the engine failures and the cause of the engine failures remains unknown”; and

“27A.In the alternative to paragraph 27 above, the plaintiff rescinded the contract by filing the Claim on 22 August 2013.”

9. [9]
   The defendants filed an Amended Defence on 06 August 2015 in which paragraph 5A was admitted; paragraphs 7(b), (c) and (d) were not admitted with respect to the number of hours of service of each of the replaced engines; paragraph 8A was not admitted with respect to the specific allegations of metallurgical testing of engines and engine installation and bonding to the hull, respectively by experts from Volvo Penta and Fontaine Pajot; paragraphs 8B and 8C were not admitted with regard to there having been a recommendation made to the defendants by Volvo Penta and Fontaine Pajot; paragraph 17A was denied; paragraph 19A was not admitted; and paragraph 27A was denied.

10. [10]
    The plaintiffs filed a Further Amended Reply on 14 August 2015 alleging the following:

“2A.The defendants have admitted or are deemed to have admitted those allegations pleaded by the plaintiff at paragraphs 5A, 7(b), 7(c), 7(d), 8A, 8B, 8C, 17A, 19A and 27A of the Further Amended Statement of Claim. Those admissions cannot be withdrawn without leave of the Court, and any purported attempt by the defendants to unilaterally withdraw those admissions without leave is ineffective.”

Submissions

11. [11]
    The plaintiffs submitted that non-admissions in the proposed Amended Defence indicated that the subject matter of the deemed admissions are not truly contested or in genuine dispute because:

(i)the allegations relate to a time at which the defendants were the owners and had possession of the boat in question – the defendants are in a position to either admit or deny the allegations;

(ii)there has been ample time for the defendants to conduct enquiries as to the truth or falsity of the allegations. The inference from the lack of any affidavit material about their enquiries is that no reasonable enquiries have been made; and

(iii)the contemporaneous documents obtained during disclosure are evidence that the allegations are true.

12. [12]
    Mr McLennan for the respondents further submitted that the denials were not made in the mandated time pursuant to the UCPR and were therefore deemed admissions; that the non-admissions were non-compliant with the UCPR because the plaintiffs had disclosed documents that informed the defendants about the testing regime and the number of hours of service of each engine, that there could not be a genuine dispute and that no further enquiries or investigations were required or had been in fact undertaken by the defendants; and that deemed admissions required leave of the Court to be withdrawn.

13. [13]
    Mr McLennan referred to a series of disclosed emails that referred to the number of hours of service of each engine; and to a disclosed report about the testing regime.

14. [14]
    Mr Deaves for the defendants conceded that the Amended Defence was filed out of time but that a reasonable explanation had been given for that; that the time delay was inconsequential in all the circumstances; that the plaintiffs had not taken any pleading step in the litigation for a lengthy period before the recent burst of activity with Amended Pleadings; that there was an Amended Defence filed in this case that confirmed there was a genuine dispute; that the defendants were not a party to the emails relied on by the plaintiffs; that the report was not a report of either or both Volvo Penta or Fontaine Pajot, entities specifically pleaded by the respondents, but rather was by another person or entity about whom the defendants knew nothing and to whom no reference was made in the plaintiffs’ Pleadings; and that leave to withdraw deemed admissions was specifically sought in the application should that issue be reached for resolution.

15. [15]
    The defendants point out in correspondence dated 5 April 2015 that the Request for Trial Date was signed by the plaintiffs on the same date as the Plaintiffs’ Fourth Supplementary List of Documents and that both were served on the defendants with the Amended Reply, and hence they say the Request for Trial Date was premature. The plaintiffs’ dispute that this was so or that they had acted unreasonably.

Discussion

16. [16]
    The reason for delays in serving the Amended Defence was explained in an Affidavit deposed by the defendants’ lawyer Mr Naylor as being his absence on leave and the non-availability of counsel due to leave and court commitments, in the short eight day time window provided by the UCPR and the approximate 2 weeks that followed.

17. [17]
    The email correspondence between April 2014 and February 2015 that was disclosed by the plaintiffs and to which reference was made in Submissions by Mr McLennan, seem to be entirely between the plaintiffs and/or their agent and an entity called Volvo Penta Oceania, with references to contacts either made or to be made by the latter entity with an overseas parent or associated entity. There are discussions about investigations into the engine failures and the possible causes of those failures. The defendants were not parties to that email correspondence.

18. [18]
    The “Report” that was disclosed and to which reference was made in Submissions by Mr McLennan, is dated 27 September 2010. It is titled “Failure Analysis of an engine block” and purports to be authored by ‘LAS Industrial’, an Australian entity, signed by a “Principal metallurgist” and a “Corporate signatory” and prepared on behalf of Volva Penta Oceania.

19. [19]
    The plaintiffs’ Pleadings refer to “… various experts from Volvo Penta (the engine manufacturers) and Fontaine Pajot (the vessel manufacturer)” attempting [inter alia] to ascertain the cause of the engine failures. The report was commissioned, it seems, by Volvo Penta Oceania – inferentially an Australian company or subsidiary of an overseas entity – and was prepared by an entity not referred to in the pleadings; Fontaine Pajot is referred to in the pleadings, as is Volvo Penta. The pleadings refer to the “attempts” being made between “05 July 2010 and June 2011” (the report is dated in September 2010).

20. [20]
    In my view it is not unreasonable in the circumstances I have referred to for the defendants to make non-admissions in paragraphs 7(b), (c) and (d), 8A, B and C, 17A and 19A of the Further Amended Statement of Claim, to the plaintiffs’ allegations about hours of service of the engines and in respect of any of the testing regime which was carried out by persons or an entity other than those pleaded by the plaintiffs about the causes of engine failures and potential remedial action. The report does not on its face support the plaintiffs’ allegation that experts from the engine manufacturer and the vessel manufacturer did the investigation. Further, Mr McLennan in submissions (as I earlier adverted to) said that communication with the overseas entities was difficult.

21. [21]
    The remaining paragraphs of the Further Amended Statement of Claim involve mixed allegations of fact and law (paragraph 5A) and law (paragraph 27A) and were admitted or denied respectively by the defendants.

22. [22]
    Mr McLennan referred to an inconsistency between the paragraphs in the Amended Defence that refer to paragraphs 5A and 19 (b) of the Further Amended Statement of Claim, wherein the defendants deny the plaintiffs’ allegation of fraudulent non-disclosure of other engine faults and express the belief “that the modifications made to the vessel at the direction of Volvo Penta in June 2011 had addressed the cause of the cracking in the previous engines”.

23. [23]
    Mr Deaves submitted that there was no inconsistency in those pleadings because the admission in paragraph 5A was made with respect to the attempt to ascertain the cause of the engine failures, but nothing further; and that paragraph 19 (b) expressed a belief that the remedial steps had been successful.

24. [24]
    That is prima facie a reasonable assertion, subject to testing by testimony at the trial.

25. [25]
    Insofar as the content of the emails were concerned, Mr Deaves also referred to inconsistencies in the numbers of hours of service for an engine or engines cited therein as a reason for the non-admissions about that issue.

26. [26]
    However, Mr McLennan’s submission to the effect that the ‘enquiries’ made by the defendants did not comply with rule 166 (3) and (4) UCPR has some resonance in respect of paragraphs 5A, 5B, 5C (b) and 13A of the Amended Defence.

27. [27]
    It seems to me that such non-admissions may require something more in the manner of a “direct explanation”, to demonstrate the asserted “reasonableness” of the enquiries and the “uncertainty” thereby arising about the truth or otherwise of the plaintiffs’ allegations: Cape York Airlines Pty Ltd v QBE Insurance (Australia) Limited [2009] 1 Qd R 116, per Daubney J at [21] to [22], [28] to [30] and [36].

28. [28]
    Subject to the resolution of the late filing (a matter of 14 days) of the Amended Defence issue, I do not consider that these non-admissions are within the ambit of a deemed admission; the disclosure process has been protracted and involves several non-parties and appears to be on-going, with the difficulties referred to by counsel; and the ‘direct explanation to which I have referred may or may not admit of a similar difficulty. Hence I do not consider that rule 161 (5) UCPR is enlivened, the plaintiffs’ having conceded that difficulty in their submissions.

29. [29]
    The Pleading served on the defendants previously to the plaintiffs’ Further Amended Statement of Claim (which was served on 29 June 2015), was filed and served on the defendants on 17 and 18 December 2013 respectively, about eighteen months apart.

30. [30]
    The time limited for filing the Amended Defence (where the defendants have already pleaded) is eight (8) days: NAB Limited v Sinnathamby & Ors [2000] QSC 303 at [5]; and rule 385 UCPR.

31. [31]
    The Further Amended Statement of Claim was served on 15 July 2015 and the Amended Defence was filed and served on 06 August 2015. The eight days required the Amended Defence to be filed on or before 23 July 2015. It was filed fourteen days later.

32. [32]
    Mr McLennan relied on Peterson & Anor v Corby [2014] QDC 177 for his submission that the defendants’ failure to serve their Amended Defence within the time allowed in rule 385 meant the defendants must rely on their original Defence as an answer to their Amended Pleading:  that is, the new allegations in the Further Amended Statement of Claim, pursuant to rule 166(1)(a), are taken to be admitted (deemed admissions). In that case, Judge Reid made his ruling in a trial about an alleged breach of contract for the sale of a residential property, where the defendant appeared in person and the plaintiffs were represented by counsel and solicitors. No authorities were referred to in the judgment and I infer there was no argument, or at least no cogent argument, about that legal issue by the unrepresented defendant that would have assisted his Honour.

33. [33]
    Nevertheless, in this case an Amended Defence has been filed and served. Prima facie it asserts trialable issues with respect to the new or refined allegations in the Further Amended Statement of Claim. The fact that the service of the Amended Defence was non-compliant with the UCPR is an irregularity and does not render the document annulity:  Collie v Edmund & Ors [2006] QSC 343, at [5] per McKenzie J.

34. [34]
    The late filing of the Amended Defence has been explained. Prima facie I do not think 14 days is an unreasonable delay in the circumstances. An explanation has been given and the plaintiffs’ have not identified any real prejudice flowing from the non-compliance with the rules, other than that which inferentially flows from having acquired an adventitious pleading advantage.

35. [35]
    Rule 7 UCPR gives the Court power to extend the time limited for filing of the Amended Defence. The rule has been described as “a remedial provision conferring on a Court a broad power to relieve against injustice”:  Mango Boulevard Pty Ltd v Spencer [2007] QSC 276, per Wilson J.

36. [36]
    There was correspondence between the lawyers about this issue. The plaintiffs took a hard line with respect to the non-compliance. I do not consider that was justified, particularly in the context of my observations above, about the character of the non-admissions in the Amended Defence; my view that the plaintiffs cannot in those circumstances succeed in their contention that the non-admissions are of the nature of “deemed admissions”; and there being only 14 days delay and no assertion of any real prejudice by the plaintiffs.

37. [37]
    The overriding philosophy of the UCPR, as expressed in rule 5, applies equally to the pleading process as it does to other aspects of a proceeding. In sub-rule (2) reference is made to the objective of “avoiding undue delay”. I do not think there has been any such delay by the defendants in the circumstances of this case.

38. [38]
    Further, Chesterman JA wrote in Hanson Construction Materials Pty Ltd v Davey & Anor [2010] QCA 246, a case involving an application to withdraw deemed admissions, that “it is no doubt true that the UCPR are meant to expedite litigation and to limit disputes to issues that are genuinely in contest, but it must, in my respectful opinion, remain the case that the rules do not operate so as to prevent the trial of issues that are genuinely in dispute.”

39. [39]
    I consider that the issues identified in this application and to which I have referred in the judgment are matters of genuine dispute and that they ought be subject of a trial to resolve the respective positions of the party.

Conclusion

40. [40]
    I will make an order in terms of paragraph 1 of the Application.

41. [41]
    It follows that the defendants are entitled to have paragraph 2A of the Further Amended Reply struck out. I will make the order in terms of paragraph 2 of the Application.

42. [42]
    It also follows that I do not need to consider the alternative order (Number 3 in the Application) sought by the defendants.

43. [43]
    I will however, make an order that the defendants have leave to re-plead paragraphs 5A, 5B, 5C (b) and 13A of their Amended Defence, within 14 days.

Costs

44. [44]
    The defendants have succeeded on their Application. They seek costs assessed on the indemnity basis. However, the defendants have been given leave to re-plead their Amended Defence. The plaintiffs made no specific submission on costs. Hence I will reserve the costs of the Application.

ORDERS

1The Application is granted.

2The time for the First and Second Defendants to file and serve the Amended Defence in response to the Further Amended Statement of Claim is extended to 06 August 2015.

3Paragraph 2A of the Further Amended Reply is struck out.

4The First and Second Defendants have leave to re-plead paragraphs 5A, 5B, 5C(b) and 133A of the Amended Defence within fourteen (14) days.

5Costs of the Application are reserved.