Australian ruling highlights need for timely amendment of pleadings

In a case between the owners of Strata Plan No. 85494 and collapsed building company PBS Building Pty Ltd, the owners sought to add further defects to an existing list of defects in a claim against the only active defendant in the case, Iris Property Group Pty Ltd (Iris).

The owners’ application for leave to add the further defects to the proceeding was made just days before the limitation period – during which Iris could make claims against its subcontractors – expired.

Iris accepted that the additional defects would not amount to a new cause of action, however it opposed the owner’s application. It argued that, if allowed, Iris would face an expanded cause of action and suffer irremediable prejudice because it would be unjustly deprived of the opportunity to bring any cross-claims regarding the additional defects, due to the imminent expiry of the limitation period.

The Court confirmed that the addition of new defects to the owners’ existing list in its pleading did not amount to a new cause of action, and that the additional defects were particulars of the owners’ original claim.

The Court did accept that there had not been enough time for Iris to investigate whether it had legitimate cross-claims before the expiration of the limitation period, as Iris had been given only a few days’ notice of the owners’ intention to add further defects. The Court also held that Iris’ failure to establish whether it had viable and realistic cross-claims ahead of the limitation date was in part due to the owners’ delay in obtaining the necessary reports regarding the new defects and notifying Iris of the additional defects.

For these reasons, the Court granted leave for the owners to make the proposed amendments but added that this would be conditional on the trial judge considering whether Iris had in fact been prejudiced by the amendments, and whether the court’s leave should be revoked in respect of any of the new defects.

Erica Leaman, a litigation expert at Pinsent Masons, said the case highlighted how limitation periods are an important factor when considering the timing and effect of amending pleadings.

“While it is now accepted that adding further defects to a list of defects in a pleading does not represent a new cause of action, it does not automatically follow that a party will be permitted to rely on such amendments. A claimant may still be barred from pursuing such claims if doing so would irreparably prejudice the other party,” Leaman said.

“It is vital that pleadings are amended in a timely manner in order to mitigate the risk that amendments may not be allowed, such that a party is deprived of recovering for such claims.”