ATL (Australia) Pty Limited v Cui - [2021] NSWSC 1372

Supreme Court

New South Wales

Medium Neutral Citation: ATL (Australia) Pty Limited v Cui and Ors [2021] NSWSC 1372
Hearing dates: 26 October 2021
Date of orders: 26 October 2021
Decision date: 26 October 2021
Jurisdiction: Common Law
Before: Johnson J
Decision:
The Second Defendant is granted leave to amend the Defence subject to conditions.

Catchwords:
CIVIL PROCEDURE – claim against guarantors under commercial loan agreement – late application by defendant to amend Defence – proposed amendment relying upon principles in Ankar Pty Ltd v National Westminster Finance (Australia) Pty Ltd (1987) 162 CLR 549; [1987] HCA 15 – plaintiff notified of amendment application on eve of hearing – late realisation by defendant that Ankar defence may be available – one letter in a sea of documents - application of ss 56-58, 64 Civil Procedure Act 2005 – belated application – consideration of dictates of justice – leave to amend granted on conditions

Legislation Cited:
Civil Procedure Act 2005

Cases Cited:
Ankar Pty Ltd v National Westminster Finance (Australia) Pty Ltd (1987) 162 CLR 549; [1987] HCA 15
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27
Westpac Banking Corporation v Robinson (1993) 30 NSWLR 668

Texts Cited:
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Category: Procedural rulings
Parties: ATL (Australia) Pty Limited (Plaintiff)
Jinsong Cui (First Defendant)
Jeffrey Tse Hung Lee (Second Defendant)
Tse En Tang (Third Defendant)
Liang Zhao (Fourth Defendant)
Gondon HLHS Pty Ltd (Fifth Defendant)
HLHS Partners Epping Pty Ltd (Sixth Defendant)
Arise Building Pty Ltd (Seventh Defendant)
Tang Asset Management Pty Ltd (Eighth Defendant)
Lansha Asset Management Pty Ltd (Ninth Defendant)
Lee’s Asset Management Pty Ltd (Tenth Defendant)
Arise Group Pty Ltd (Eleventh Defendant)
Representation:
Counsel:
Mr AC Casselden SC; Mr WR Chan (Plaintiff)
Mr DA Smallbone (on amendment application); Mr JM Wheeldon (Second Defendant)
Mr M Wang, solicitor (Eleventh Defendant)
Solicitors:
Dentons (Plaintiff)
Accuro Maxwell (Second Defendant)
Juris Cor Legal (Eleventh Defendant)

File Number(s): 2018/393537
Publication restriction: ---

Judgment

JOHNSON J: By Notice of Motion dated 25 October 2021, the Second Defendant, Jeffrey Tse Hung Lee, seeks the leave of the Court to rely upon a draft Third Further Amended Defence (“the draft Amended Defence”) in proceedings commenced by the Plaintiff, ATL (Australia) Pty Limited.
By Statement of Claim filed on 21 December 2018, the Plaintiff seeks to recover a sum in excess of $13 million from 11 named Defendants.
On 11 November 2020, the proceedings were listed for hearing to commence yesterday, 25 October 2021, with a seven-day estimate.
By the time the hearing was called on yesterday, only two Defendants appeared to defend the Plaintiff's claim, the Second Defendant and the Eleventh Defendant, Arise Group Pty Ltd. With respect to other Defendants, default judgment has been obtained against some and a number of the individual Defendants are bankrupt. One other Defendant, being the Tenth Defendant, Lee’s Asset Management Pty Ltd, did not appear and the hearing of the Plaintiff's claim against that Defendant is to proceed by way of ex parte hearing.
By Further Amended Statement of Claim filed on 23 April 2020, the Plaintiff seeks judgment relevantly against each of the Second Defendant, the Tenth Defendant and the Eleventh Defendant in the sum of $13,889,392.23. The Defendants, including the Second Defendant, are sued as guarantors of a loan in the sum of $14 million advanced by the Plaintiff to Gondon HLHS Epping Pty Ltd (“the Borrower”), pursuant to a Commercial Loan Agreement dated 15 March 2017 between the Plaintiff, the Borrower and the guarantors, including the Second Defendant.
In support of the Notice of Motion, the Second Defendant relies upon the affidavit of Annette Leung, solicitor, dated 25 October 2021. That affidavit was read in support of the application and Ms Leung was not required for cross-examination.
The Plaintiff relies upon the affidavit of David Charles McIntosh, solicitor, dated 25 October 2021. Mr McIntosh was cross-examined on his affidavit.
In addition, the Court was taken to a number of documents which were relevant to the amendment application, with those documents being drawn from the 12 lever-arch folders which contain a large number of documents intended to be relied upon, in one way or another, at the hearing.
The Second Defendant seeks to amend his Defence to rely upon a new Defence as a complete answer to the Plaintiff's claim. As mentioned, the Plaintiff sues the Second Defendant as a guarantor of the loan to the Borrower. Proposed paragraph 16 of the draft Amended Defence contends that the guarantee is avoided by reason of the side agreement struck between the Plaintiff and the Borrower on 14 March 2017 in relation to accrual of interest under the Commercial Loan Agreement of 15 March 2017 (which provided in Clause 24.5 that the Commercial Loan Agreement constituted the entire agreement). It is alleged by the Second Defendant that the existence of a side agreement contained in the letter of 14 March 2017 was not brought to his attention, and that he had no knowledge of it at any time, either before or after his entry into the Commercial Loan Agreement as guarantor.
I should note that the side agreement, the letter of 14 March 2017, made what could be described as a relatively modest adjustment to the commencement date for the payment of interest so that part of the principal of $14 million was to attract interest from 10 March 2017 and part from 13 March 2017 instead of 15 March 2017, as provided for in the Commercial Loan Agreement of 15 March 2017. This side agreement related to the need to convert the money to be advanced from one currency to another before the sum itself was advanced. In monetary terms, as I understand it, the difference between the calculations contained in the side agreement and the calculations contained in the Commercial Loan Agreement of 15 March 2017, amounted to about $60,000.00.
In support of the present application, the Second Defendant relies upon the principles stated by the High Court of Australia in Ankar Pty Ltd v National Westminster Finance (Australia) Pty Ltd (1987) 162 CLR 549 at 557-561; [1987] HCA 15 (“Ankar”).
The Second Defendant’s application to amend has been opposed strenuously by the Plaintiff, particularly in circumstances where the application was itself advanced on the first day of the scheduled seven-day hearing.
In determining the amendment application, the Court is to apply ss.56, 58 and 64 Civil Procedure Act 2005.
It is appropriate to refer to a number of relevant events for the purpose of this decision. I have already noted that the Statement of Claim was filed on 21 December 2018. An issue raised today in evidence, including cross-examination of Mr McIntosh, concerned the basis upon which the sum claimed in the Statement of Claim had been calculated. The particular issue explored in cross-examination of Mr McIntosh was whether the sum of $13,889.392.23, said to be due as at 21 December 2018, had been calculated in accordance with the provisions of the Commercial Loan Agreement of 15 March 2017, or in accordance with the side agreement contained in the letter of 14 March 2017.
The evidence of Mr McIntosh was that the method of calculation was based upon the Commercial Loan Agreement of 15 March 2017 and a calculation sheet (MFI2) was relied upon in this respect. For the purpose of this ruling, I accept that the claim in the Statement of Claim was calculated in accordance with the Commercial Loan Agreement of 15 March 2017.
Following the filing of the Statement of Claim, a number of steps were taken, including Defences being filed and other procedural steps. Subpoenas were issued, directed to a number of entities, including the firms of solicitors who had appeared for the Plaintiff and the Borrower at the time when the Commercial Loan Agreement of 15 March 2017 had been entered into, as well as the letter of 14 March 2017.
By 7 July 2020, I accept that the solicitors for the Second Defendant had obtained under subpoena, a large number of documents produced by the former solicitors for the Plaintiff and the Borrower. I accept that the 14 March 2017 letter was in the hands of the solicitors for the Second Defendant by 7 July 2020. That said, however, it was a letter (with accompanying emails) surrounded by a sea of other documents, said to number some 4,000. I have already mentioned the 12 folders of material that are before the Court for the purpose of this hearing.
I accept that the significance of the 14 March 2017 letter, as potentially providing an Ankar defence, had not dawned on the solicitors acting for the Second Defendant at that time.
By 14 August 2020, the Second Defendant filed his Second Further Amended Defence. After that and other pleadings had been filed, the pleadings were closed so that, on 11 November 2020, the Court, through the Registrar, fixed the matter for hearing to commence on 25 October 2021 with a seven-day estimate.
For reasons that are not clear and are (to say the least) unfortunate, these proceedings have not received any case management for nearly a year. The parties did not take any step to bring the matter before the Court. The Court took no step to bring the proceedings forward to assess their level of preparedness for what was going to be a hearing of significant length in an apparently complex commercial claim.
It may be that the circumstances which saw no case management for nearly a year related to the COVID-19 pandemic. I do not stop to investigate further why there was no case management, but it is the regrettable fact that there has not been any management of that type.
On 11 October 2021, the solicitors for the Second Defendant served on the solicitors for the Plaintiff a further affidavit of the Second Defendant. There had been an earlier affidavit of the Second Defendant filed and served as part of the steps taken prior to November 2020.
The affidavit of the Second Defendant of 11 October 2021 addressed several issues, amongst those being a reference to the letter of 14 March 2017 described as the side agreement. The affidavit contained an assertion that the Second Defendant had not seen that letter before and was unaware of its existence. What is clear is that, by that time, the legal representatives for the Second Defendant had formed the view that there was some relevance of the letter of 14 March 2017 to the proceedings which were then two weeks away from a final hearing.
The service of the affidavit upon the solicitors for the Plaintiff met the response that it was late, and out of time, with questions being raised about its relevance to the proceedings as they then stood. No step was taken at that time by the legal representatives for the Second Defendant to indicate to the legal representatives for the Plaintiff that there was an intention to rely upon an Ankar defence. There was no indication that there was to be an application to amend the Defence. It must be kept in mind that an Ankar defence, if successfully mounted, is capable of being a complete defence upon the basis that there had been an alteration in the loan contract which was not known to the guarantor so that the guarantor ought not be held responsible. That, in a rather loose and imprecise way, is my understanding of the Ankar principle.
Why it is that the solicitors for the Second Defendant did not, at that stage, indicate an intention to rely upon the Ankar principle is unexplained. The affidavit of Ms Leung says nothing about that. What her affidavit does do is indicate that, as preparation for the hearing accelerated, no doubt with the hearing date looming, this aspect was picked up, leading to the affidavit of the Second Defendant of 11 October 2021 being served on the Plaintiff.
Thereafter, between 11 and 18 October 2021, emails passed between the solicitors for the Second Defendant and the Plaintiff. The Plaintiff was complaining about the late service of the affidavit, indicating that there would be objection to it, and enquiring effectively as to what it had to do with the proceedings.
Rather than answering that fairly obvious question, the solicitors for the Second Defendant invited the Plaintiff to indicate what the prejudice was to the Plaintiff from this evidence. It might be thought that this was a fairly unproductive exchange of emails, in circumstances where the Plaintiff could not be expected to identify an area of prejudice without having some idea about what the affidavit had to do with the proceedings. The short answer is that reference should have been made to the Ankar principle.
If that had been done then, there is every prospect that, apart from there being a breakout of hostilities in correspondence between the parties, there may well have been a listing before this Court leading to an application to amend the Defence, which would have been capable of a hearing probably before the Duty Judge. None of that happened.
By 19 October 2021, the hearing had been allocated to me and contact was made by my Associate with the parties seeking material in advance of the hearing in the ordinary course, including the Court Book and introductory documents such as an outline of submissions, a statement of issues in dispute and agreed, a chronology, and other documents which are well known as an introduction to a Judge coming to hear a case of this type.
Documents were supplied by the solicitors for the Plaintiff, including an opening submission and a statement of issues agreed and in dispute signed only on behalf of the Plaintiff. The solicitor for the Second Defendant had not responded to the Plaintiff's request to place a joint statement of issues before the Court.
In addition, a Court Book (comprising nine volumes) was delivered to my chambers, followed by a supplementary Court Book (three volumes) coming from the solicitors for the Second Defendant.
Accordingly, by the end of the week (22 October 2021), the Court was armed with 12 volumes and some introductory material from the Plaintiff.
At 11.28 pm on Thursday, 21 October 2021, the solicitors for the Second Defendant, no doubt having engaged in some nocturnal preparation, provided a draft Amended Defence to the solicitors for the Plaintiff. This document, however, did not contain an Ankar defence. This might be regarded as curious, having regard to the content of the affidavit of 11 October 2021 from the Second Defendant.
At 5.26 pm on Sunday, 24 October 2021 (the eve of the hearing), the solicitors for the Second Defendant provided by email to the solicitors for the Plaintiff and to my Associate, a draft Defence and submissions with respect to the proceedings which referred to the Ankar principle. This was the first time that the solicitors for the Second Defendant indicated an intention to rely upon the Ankar principle.
When the matter came before the Court at 10.15 am yesterday, the attention of the Court was drawn fairly quickly to this very recent development. The Plaintiff complained that the Second Defendant was seeking to amend to add a new Defence and that this was being done at the eleventh hour.
Faced with that state of affairs, the Court gave directions yesterday for the filing of a Notice of Motion and affidavit in support by the Second Defendant, who was seeking the indulgence of the Court to amend the Defence, and for the Plaintiff to rely upon affidavits with respect to the same issue, with the Notice of Motion to be heard this morning.
Today, the Court has undertaken the hearing of the Notice of Motion and I am delivering this judgment at what is now 10 past 4 in the afternoon. For the purpose of this ruling, it is neither necessary or possible to address, in the elegant terms of a reserved judgment, the issues which have been ventilated.
I emphasise that all of this is happening on what should have been the second day of the final hearing. My decision from here will be concise and will seek to address particular issues.
As is conceded by Senior Counsel for the Plaintiff, I am satisfied that the Second Defendant has an arguable defence based on the Ankar principle. That said, this is, of course, a starting point of the ruling. I am not in a position to express any concluded view about the strength of the arguable defence. It is, however, an arguable defence and one which, if successful, is capable of being a complete defence to the Plaintiff's claim.
To the extent that submissions were made for the Second Defendant that indicated that this was a question of law which did not require any extensive evidentiary examination by the Plaintiff, I do not accept that submission. The affidavit of Mr McIntosh has indicated steps which the Plaintiff would seek to take if the amendment was allowed. I accept that there is a proper basis for the Plaintiff to have an opportunity to investigate the matters if the amendment is allowed. I accept that the Plaintiff would experience prejudice in this regard as the Plaintiff's principal is in Hong Kong and not Sydney. That said, the Plaintiff's principal is attending the hearing by audio-visual link and there is a clear ability to communicate with the principal for the purpose of taking instructions, albeit at long distance.
Next, the Second Defendant has advanced no explanation as to why reference was only made to the Ankar principle for the first time in the Sunday evening email on 24 October 2021. It would seem clear enough that the Second Defendant's affidavit of 11 October 2021 had been drawn with an Ankar defence in mind. That said, it is curious that the first version of an Amended Defence (sent on the late evening of Thursday, 21 October 2021), did not itself include an Ankar defence. What is clear is that the first reference to the Ankar principle was in the Sunday evening email.
Submissions were made as to whether this constituted a form of intentional ambush by the Second Defendant of the Plaintiff. There was no cross-examination of Ms Leung on this aspect. It seems to me that the more likely course of events was that, in a rather shambolic way, as the hearing day loomed and without the appropriate intervention of a directions hearing before a Judge to focus everyone's minds, the Second Defendant's lawyers were heading towards a hearing date and decided to start looking at the documents in more detail. By 11 October 2021, a view had been formed that there was forensic utility in a further affidavit from the Second Defendant which raised the letter of 14 March 2017.
Thereafter, an element of loose preparation continued to manifest itself in the Second Defendant's camp, which ultimately saw a reference to Ankar for the first time last Sunday evening. It is difficult to see what forensic advantage the Second Defendant would have in not mentioning it on Thursday, but only mentioning it on the following Sunday ahead of the Monday hearing. I am not persuaded that there was anything sinister going on. On the other hand, I am not satisfied either that there was a particularly competent level of legal representation being undertaken for the Second Defendant.
To the extent that the Second Defendant sought to rely on principles in Westpac Banking Corporation v Robinson (1993) 30 NSWLR 668 at 688, in support of an argument that the Plaintiff had a duty to disclose the 14 March 2017 letter to the Second Defendant, I consider that this argument remains an open question in the proceedings. It might be thought that the Plaintiff's legal representatives would have a complete set of all documents that bore upon the issue including the 14 March 2017 letter. I have already mentioned, however, the sea of documents, all of which have been copied and put in 12 folders for the purpose of this case. Whether there is any duty which the Plaintiff had to disclose the document is not something about which I express any concluded view, particularly in the pressured and imprecise way in which I am called upon to deal with the present application.

The evidence of Mr McIntosh was that, although the letter of 14 March 2017 was undoubtedly amongst the materials available to the Plaintiff, its significance had not become apparent until the Second Defendant finally mentioned the Ankar principle in the email sent last Sunday afternoon. I accept the evidence of Mr McIntosh in that respect.
There is evidence in Mr McIntosh's affidavit concerning the further steps that the Plaintiff would need to take to investigate this issue if leave to amend the Defence is allowed. This evidence extended to the costs expected to be incurred in that respect as well as costs thrown away. There was no challenge to that part of Mr McIntosh's affidavit.
I turn to consider concisely factors under s.58 Civil Procedure Act 2005 by reference to matters which I have already touched upon, in one way or another, so far in this judgment.
If the amendment is disallowed, there will be a degree of injustice to the Second Defendant. There is an arguable defence which is capable, if successful, of constituting a complete defence to the Plaintiff's claim. The extent to which this issue will become a significant factual issue at the hearing remains to be seen.
The Second Defendant has been tardy in the extreme in bringing this issue forward. There has been, to say the least, unsatisfactory compliance, indeed noncompliance, with the obligations upon litigants and their legal representatives under s.56 Civil Procedure Act 2005 on the part of the Second Defendant.
I have had regard to the various provisions of the Civil Procedure Act 2005 to which mention has been made, together with the decision of the High Court of Australia in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [94]-[103]. Those principles require the Court to have regard to various factors which can point in different directions in the resolution of the interlocutory application to amend the Defence.
The Second Defendant has a fairly arguable Ankar defence. He has been not sufficiently compliant with the obligations of a litigant to engage in proceedings in advance of a hearing. I have considered submissions made with respect to the capacity of the Second Defendant to meet a costs condition to meet the Plaintiff's position, if the amendment is allowed.
I have had regard, as well, under s.57 Civil Procedure Act 2005 to the fact that this hearing has proceeded as a live hearing, an exceptional step under the COVID-19 conditions which prevail in this State. The parties were informed at the end of last week that they had obtained a rare commodity in having a large courtroom in which this case could be heard and determined. What that meant is that other litigants did not have this opportunity. These include other litigants who may have been ready for their case to proceed, and who have to rely upon what many consider to be a second level quality of hearing by way of audio-visual link. That aspect weighs in the exercise of discretion as well. Two days of this live hearing have now been devoted to either preparing for this amendment application or hearing it.
I have not found this application easy to determine. There are competing considerations and there are substantial arguments for and against allowing the amendment.
In the end, I have concluded that the Second Defendant should be granted leave to amend the Defence, but on strict terms, including as to costs. I am satisfied that it would be unjust to shut out the Second Defendant from relying upon this proposed Defence.
That said, the proper outcome will see the imposition of conditions, including as to costs, as part of this discretionary ruling. It is the expectation of the Court that the legal representatives for the Second Defendant and all other parties, but particularly the Second Defendant, will comply strictly with their obligations for the balance of the proceedings.

[The proceedings were adjourned until 10.15 am on 27 October 2021 to allow the parties to consider their positions in light of the Court’s ruling on the amendment application].

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Decision last updated: 28 October 2021

Medium Neutral Citation:	ATL (Australia) Pty Limited v Cui and Ors [2021] NSWSC 1372
Hearing dates:	26 October 2021
Date of orders:	26 October 2021
Decision date:	26 October 2021
Jurisdiction:	Common Law
Before:	Johnson J
Decision:	The Second Defendant is granted leave to amend the Defence subject to conditions.
Catchwords:	CIVIL PROCEDURE – claim against guarantors under commercial loan agreement – late application by defendant to amend Defence – proposed amendment relying upon principles in Ankar Pty Ltd v National Westminster Finance (Australia) Pty Ltd (1987) 162 CLR 549; [1987] HCA 15 – plaintiff notified of amendment application on eve of hearing – late realisation by defendant that Ankar defence may be available – one letter in a sea of documents - application of ss 56-58, 64 Civil Procedure Act 2005 – belated application – consideration of dictates of justice – leave to amend granted on conditions
Legislation Cited:	Civil Procedure Act 2005
Cases Cited:	Ankar Pty Ltd v National Westminster Finance (Australia) Pty Ltd (1987) 162 CLR 549; [1987] HCA 15 Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 Westpac Banking Corporation v Robinson (1993) 30 NSWLR 668
Texts Cited:	---
Category:	Procedural rulings
Parties:	ATL (Australia) Pty Limited (Plaintiff) Jinsong Cui (First Defendant) Jeffrey Tse Hung Lee (Second Defendant) Tse En Tang (Third Defendant) Liang Zhao (Fourth Defendant) Gondon HLHS Pty Ltd (Fifth Defendant) HLHS Partners Epping Pty Ltd (Sixth Defendant) Arise Building Pty Ltd (Seventh Defendant) Tang Asset Management Pty Ltd (Eighth Defendant) Lansha Asset Management Pty Ltd (Ninth Defendant) Lee’s Asset Management Pty Ltd (Tenth Defendant) Arise Group Pty Ltd (Eleventh Defendant)
Representation:	Counsel: Mr AC Casselden SC; Mr WR Chan (Plaintiff) Mr DA Smallbone (on amendment application); Mr JM Wheeldon (Second Defendant) Mr M Wang, solicitor (Eleventh Defendant) Solicitors: Dentons (Plaintiff) Accuro Maxwell (Second Defendant) Juris Cor Legal (Eleventh Defendant)
File Number(s):	2018/393537
Publication restriction:	---