The Owners – Strata Plan No. 85494 v PBS Building (NSW) Pty Ltd [2024] NSWSC 381

Andrew Hales  |  Sophie Wallwork |  Cedric Barakat

Key takeout

Where a party seeks to amend its pleadings to include additional claims immediately before the expiry of a limitation period, leave to amend may not be granted if the responding party can establish it would be irremediably prejudiced on the basis that it had ‘valid and reliable’ cross-claims, that would be out of time if the amendments were allowed.

Facts

By a notice of motion dated 15 March 2023, 1 business day before the expiry of the 10-year long stop limitation period under section 6.20 of the Environmental Planning and Assessment Act 1979 (NSW), The Owners – Strata Plan No. 85494 (owners) sought leave to file a further amended list statement to add additional fire safety defects to the defects they had already pleaded.

Iris Property Group Pty Ltd (Iris) opposed the owners’ application on the basis that if leave to amend was granted, Iris would suffer ‘irremediable prejudice’ due to the 10 year long stop limitation period having passed. Iris claimed that it would have lost the opportunity to bring cross-claims against third parties in respect of the additional defects.

The owners disputed that the material put forward by Iris was sufficient to establish that Iris had lost the opportunity to bring any viable and realistic (as opposed to theoretical) cross claims for the additional defects. The owners submitted that if leave were refused, they would suffer irremediable prejudice because they would be unable to pursue claims for the additional defects.

The dispute essentially came down to:

1. whether, on the material before the court, Iris had established that it had ‘viable and realistic’ cross claims, or had only established that this was a ‘theoretical possibility’; and
2. whether, in the event that Iris had not established viable and realistic cross claims on the material before the court, the amendments should be allowed with effect from the commencement date of the proceedings.

Decision  

Nixon J granted leave to the owners to file an amended list statement.  This was conditional on the trial judge being required to consider during the substantive hearing whether Iris has been prejudiced by the amendments and in turn, whether the grant of leave to amend should be revoked and the owners’ claims  for additional defects be dismissed. 

The court found that Iris’ identification of cross claims was put at a level of generality that did not establish its claims as viable or realistic. For example, Iris identified potential cross defendants and made broad reference to the cross defendants being generally involved in the supervision and certification of the relevant works. However Iris did not adduce evidence as to the terms of engagement of each cross defendant, nor any other documentary material to identify that the additional defects arose from matters for which the cross defendants were responsible.

Nixon J accepted the owners’ submission that Iris had not provided evidence sufficient to establish that it had, prior to the limitation date, viable and realistic cross claims in respect of the defects the owners sought to add to their pleading. Nixon J noted that it did not automatically follow that the court should allow the amendments sought by the owners nor order that they take effect at the date on which the proceedings commenced.

In considering whether the amendments should be allowed with effect from the commencement date, the court considered that the owners’ delay in obtaining expert reports put Iris in a position where it did not have time to undertake the investigations required to determine the availability of a viable and realistic cross claim for each of the additional defects identified in the expert reports.  Accordingly, it was not ‘just’ for the court to make an order that the amendments take effect from the beginning of proceedings.

Instead, the appropriate course of action was to allow the amendments to be made, but the issue of whether the owners should be permitted to rely on those amendments was referred to the trial judge. The owners were permitted to file a further amended list statement to identify and plead out the specific defects upon which they rely. Following this, Iris would be in a position to investigate and articulate potential cross claims for each of those defects. The trial judge could then assess whether Iris had been exposed to irremediable prejudice by the addition of the fire safety defects and whether leave should be revoked of the additional defects. This process would apply to any further amendment application which sought to add additional defects notified well after the limitation date.