Case: Queensland v JL Holdings Pty Ltd [1997] HCA 1 ; (1997) 189 CLR 146
Outcome: followed
The first question which needs to be determined, in the application to amend, is whether the proposed pleading raises a cause of action which is fairly arguable. I have taken this formulation from the reasons of Dawson, Gaudron and McHugh JJ in Queensland v JL Holdings Pty Ltd [1997] HCA 1 ; (1997) 189 CLR 146 at 154-155. They said that if a matter were fairly arguable then, ordinarily, the party seeking to amend ought to be permitted to argue it, provided that any prejudice to the other side might be compensated by costs. Kirby J, in concurring, also pointed to other prejudices and considerations which may inform a proper exercise of the discretion to permit amendment ( JL Holdings 189 CLR at 170-171). 20 The first representation said to give rise to the expectation pleaded in paragraph 21D came out of the conversation between Mr Burrowes of the bank and Mr Sukkar. Mr Burrowes said that it would be the quickest and best way to proceed, they would be the best rates that he would be able to give and that the application then being discussed would be the quickest way to procure finance. 21 The second representation on which the expectation in paragraph 21D was said to have been raised arose out of a conversation with Mr Bingham. The evidence before me is that he is no longer an officer of the bank, his whereabouts are not known and he was not previously considered to be a person who would be a witness in the proceedings. Mr Sukkar says that Mr Bingham told him over the telephone that the issue of interest rates was raised and Mr Bingham said that the rates then discussed would be the best that Mr Sukkar would be able to achieve. And, at a later time, he said that he wanted ASS, in effect, to proceed quickly in order for Mr Nicolau or Akyman to be satisfied that ASS could raise the funds and proceed with a letter of credit. Mr Bingham was also claimed to have said that they were the best interest rates he would be able to give to the applicants. 44 In JL Holdings 189 CLR at 154-155 Dawson, Gaudron and McHugh JJ referred to considerations of case management as having a relevance, albeit that they should not in the ordinary course outweigh the ultimate need for the Court to do justice between the parties. Likewise, I am of opinion that part of the balance in which justice between the parties in the present application is to be viewed, is the fact that these proceedings have been on foot for six years and involve events that took place over 10 years ago, among other events. The allegations involve quite new claims and matters in the context of the existing pleadings and extensive affidavits. These related to conversations of which Mr Sukkar has been well aware at all times, since he was a party to them when they occurred (see too Jeans v Commonwealth Bank of Australia Ltd (2003) 204 ALR 327 at 334 [32] per Hill, Madgwick and Conti JJ). 45 ASS submitted that some of the material in the documents newly discovered by the bank alerted those advising ASS to the possibility of this claim. But that is not a statement that anyone has made on oath nor has it been tested. I have been asked to infer that that is the case. An amendment of this significance, if granted, would require the bank to review the whole of its case and the way in which its relationship with ASS developed and proceeded in the first half of 1997. I am not satisfied that this task could fairly be undertaken by the bank in a short time. This would mean that the bank would have to find and interview witnesses as well as to subpoena documents from others. It includes the possibility that it would have to find Mr Bingham, its former officer, if he is still able to give evidence and if he has any recollection of the events so long afterwards. It is not suggested by ASS that there are any bank manager's diary notes evidencing any of the three conversations relied on so that, at the moment, there is no contemporaneous record of the conversations upon which anyone can rely. It may be that the bank is able to do a search within its own records and discover those, but the evidence before me indicates that it is likely that in the ordinary course those documents that have not been the subject of discovery could have been destroyed by now, although no search, at the moment, has been undertaken. I have had regard to the possibility that new documents could be located. 46 But even then it may be necessary to subpoena others, such as, for example, Bruce &amp; Stewart. Again, I must have regard to the likelihood that documents which that firm had at the time may now have been destroyed, since some of the applicable limitation periods applying to its dealings with ASS and its principals have since expired, albeit that there is a potential for some causes of action to have remained, such as those depending on damage occurring quite some time after the transactions. 47 All these matters suggest to me that there could be substantial delays in the further hearing of the matter with possibilities of real prejudice to the bank. Moreover, the evidence before me indicates the value of the bank's security is in the order of about $1.5 million less than its claimed debt. There is no evidence from ASS as to its current financial position or its ability to meet any such difference. In JL Holdings 189 CLR at 154 Dawson, Gaudron and McHugh JJ referred to the fact that if the case was fairly arguable then the party seeking the amendment should be permitted to pursue it '... provided that any prejudice to [the other side] might be compensated by costs'. 48 On the evidence, before me, I am not satisfied that there is any real prospect of the bank being compensated by costs in this case were it ultimately to be successful. Indeed, I am satisfied that the bank is likely to suffer a substantial shortfall in the realisation of any security should it succeed in these and the related proceedings in enforcing those securities and recovering judgment against ASS and the guarantors of ASS. In those circumstances it would be an empty mantra for the Court to say simply that an order for costs would be sufficient. ASS's senior counsel indicated during argument that, if its application were granted, attempts would be made to provide evidence of its ability to pay or provide security for $40,000 in a manner satisfactory to the Court to secure the bank's costs thrown away, together with the value of the 10 days' interest on the outstanding moneys claimed by the bank (about $15,000). 49 I am not satisfied that this security would compensate the bank against the prejudice an amendment would occasion. This is not merely because of the bank's loss of the opportunity to have a hearing that has now been fixed to commence this week for over six months. The prospect is that that hearing will be delayed further. In the meantime the shortfall in value of the bank's securities would be likely to increase. In the circumstances I am of opinion that the cause of action sought to be raised by the amendment is not sufficiently strong as to warrant the exercise of my discretion, balancing all the interests of the parties as best I can on the material before me, so as to conclude that it is in the interests of justice to allow the amendment. 50 The second basis on which the application to amend has been contested is that ASS wishes to plead its reliance upon the six representations to which I have referred. The proposed pleading refers to a number of activities which ASS is said to have undertaken in reliance upon the six representations. 51 There is a dispute between the parties as to whether or not the evidence currently filed supports or answers those aspects of reliance. But, it is accepted by ASS that other than two paragraphs in the amended statement of claim, no material facts are pleaded at present which would be sufficient as instances on which ASS could be found to have relied on any of the six representations. ASS pointed to pars 55 and 56 of the amended statement of claim. They alleged that, first, on 11 March 1999 the bank proposed to ASS and Akyman that sales of the EFTPOS product cease until such time as particular identified problems with it were rectified, and, secondly, on 15 March 1999 Akyman responded by telling the bank that its proposal would be addressed by an upgrade to the third release of the product. But those allegations appear to be ones involving activity by Akyman, not by ASS. 54 Here, as ASS accepted at the outset of its argument, the facts pleaded in the amended statement of claim in respect of the six representations required an allegation of reliance in order to complete the essential elements of a cause of action under s 82. But, the pleading omitted any allegation that any of the six misrepresentations caused ASS to do or refrain from doing anything (cf: Wardley Australia Ltd v Western Australia [1992] HCA 55 ; (1992) 175 CLR 514 at 525, 527 per Mason CJ, Dawson, Gaudron and McHugh JJ). Accordingly, the facts pleaded in the current amended statement of claim do not disclose a basis upon which relief might be granted. Hence ASS seeks an amendment to assert the material facts in respect of its reliance. 55 It follows that as the amended statement of claim currently stands, it does not plead, as ASS accepted, a cause of action under s 82(1) of the Act in respect of the six representations to which the new amendments are directed. 56 If ASS were to attempt today to plead for the first time any such cause of action, it would be outside any applicable limitation period under s 82(2) of the Act. That provides that a cause of action under s 82(1) may be commenced at any time within six years after the day on which the cause of action that related to the conduct accrued. No suggestion was made in argument that the causes of action on each of the six representations had not accrued at least by some time in 2004. This has had the consequence that if I do not grant this amendment, the causes of action cannot be retrieved. 61 Of course there will be cases in which material facts have already been pleaded that demonstrate that a remedy not already sought should be allowed to be sought or that some expansion of the circumstances relied on as material facts may be permitted because they are, in substance, fairly pleaded already. But there are also considerations of policy behind the enactment of statutes of limitations, as the judgment of McHugh J in Brisbane South Regional Health Authority v Taylor [1996] HCA 25 ; (1996) 186 CLR 541 at 551-554 demonstrates with clarity. In a case like the present the effect of delay on the quality of justice may be seen to be an important factor in the legislative choice of the six year limitation period in s 82(2) of the Act. 62 Here I think it is fairly safe to infer an oversight has occurred in the pleading of the amended statement of claim which the proposed amendment now seeks to rectify. In JL Holdings 189 CLR at 154-155, 170-171 the Court was mindful that amendments to rectify such oversights ought ordinarily to be granted if they can be done without injustice to the other party. The question here is whether an injustice will be done by taking away from the bank the protection that the limitation period in s 82(2) may have given it against a cause of action incompletely alleged against it. The pleading of the causes of action based on each of the six representations in issue here, as currently on the record of the Court, will result in the action failing because of the absence of any allegation of the material fact of ASS's reliance. 63 I am of opinion that permitting an amendment which would take away from a party a substantive defence granted by legislation, in circumstances where there is no direct procedural rule supporting the grant of an amendment, is capable of causing injustice within the concepts discussed in JL Holdings [1997] HCA 1 ; 189 CLR 146 and the cases to which that decision refers. 64 However, ASS has relied on the provisions of O 13 r 2. That provides: '2 General (1) Subject to the following provisions of this rule, the Court may, at any stage of any proceeding, order that any document in the proceeding be amended, or that any party have leave to amend any document in the proceeding, in either case in such manner as the Court thinks fit. (2) All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding, or of correcting any defect or error in any proceeding, or of avoiding multiplicity of proceedings. (3) Where an application to the Court for leave to make the amendment mentioned in subrules (4), (5) or (6) or paragraph (7) (a) is made after any relevant period of limitation current at the date of commencement of the proceeding has expired, the Court may, nevertheless, grant such leave in the circumstances mentioned in that subrule if it thinks it is just to do so. (4) Where there has been a mistake in the name or identity of a party, an amendment to correct the name of the party may be made notwithstanding that the effect of the amendment is to substitute another person as a party. (5) Where an order to correct a mistake in the name of a party has the effect of substituting another person as a party, the proceeding shall be taken to have commenced with respect to that person on the day the proceeding commenced. (6) An amendment to alter the capacity in which a party sues may be made if the new capacity is one which that party had at the date of the commencement of the proceeding or has since acquired. (7) An amendment may be made even if the effect of the amendment is to add a new claim for relief or foundation in law for a claim for relief (whether by way of substitution for an existing claim for relief or foundation in law or not) if the new claim for relief or foundation in law: (a) arises out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the party applying for leave to make the amendment; or (b) subject to subrule (9), arises, in whole or in part, out of facts or matters that have occurred or arisen since the commencement of the proceeding. (8) Subject to subrule (9), an amendment of a pleading may be made even if the amendment pleads a fact or matter that has occurred or arisen since the commencement of the proceeding. (9) Paragraph (7) (b) and subrule (8) do not permit an amendment that would have an effect inconsistent with any statute that limits the time within which an action or a proceeding of a particular kind may be brought or instituted.'