Bank of Communications Co. Ltd v Delia Sparkes

[2021] NSWSC 35

Supreme Court

New South Wales

Medium Neutral Citation:

Bank of Communications Co. Ltd v Delia Sparkes [2021] NSWSC 35

Hearing dates:

15, 16 December 2020

Decision date:

01 February 2021

Jurisdiction:

Equity - Commercial List

Before:

Hammerschlag J

Decision:

Certain pleading amendments permitted, certain amendments refused.

Catchwords:

COMMERCIAL LIST – Procedure – Applications by plaintiff for amendment to Commercial List Statements – Certain amendments not originally, but then later opposed – No prejudice shown in granting amendments – Amendments granted – Application to amend by bringing a direct claim against a party previously only joined as a cross-defendant – Assessment of prejudice in light of fact that amendment brought not long before significant trial fixture – Amendment refused.

Cases Cited:

Bank of Communications Co., Ltd v Sparkes [2020] NSWSC 1684

Category:

Procedural rulings

Parties:

Bank of Communications Co., Ltd - First Plaintiff
Westpac Banking Corporation - Second Plaintiff
Banco Bilbao Vizcaya Argentaria S.A. t/as Banco Bilbao Vizcaya Argentaria S.A., Hong Kong Branch - Third Plaintiff
Delia Sparkes - First Defendant
Robert Bakewell - Second Defendant /| Cross Claimant
Sarah Pearce - Third Defendant
Herbert Smith Freehills - Cross Defendant

Representation:

Counsel:

P Meagher - Plaintiffs
M Rose - First Defendant
M R Pesman SC - Second Defendant / Cross Claimant
N Owens SC with G O’Mahoney - Third Defendant
R Dick SC with D Sulan - Cross Defendant
B Ng - Plaintiff in the Liquidators’ Proceedings
C Colquhoun - Plaintiff in Anchorage Proceedings
J Tap - Tenth Defendant in the Liquidators’ Proceedings

Solicitors:
King + Wood Mallesons - Plaintiffs
Norton Rose Fulbright - First Defendant
Baker McKenzie - Second Defendant / Cross Claimant
Johnson Winter & Slattery - Third Defendant
Clifford Chance - Cross Defendant

File Number(s):

2019/316305

EX TEMPORE JUDGMENT

1. HIS HONOUR:   These ex tempore reasons are being given on the second last day of term in a busy List. Some parties did not require reasons, but no party objected to me providing truncated reasons, which these reasons undoubtedly are. I have considered all the arguments but will not re-state them.

2. There are fixed for hearing commencing on 1 March 2021 on an estimate of 40 hearing days, three causes arising out of the failure of the Arrium Group. A brief but useful summary of what the proceedings entail appears in the judgment of Ball J refusing certain amendments on 27 November 2020 which the plaintiffs sought in one of the causes, which has become known as the BoC Proceedings. The first plaintiff is the Bank of Communications Co. Ltd. I will call the plaintiffs in those proceedings collectively BoC: see Bank of Communications Co., Ltd v Sparkes [2020] NSWSC 1684. The other two sets of proceedings have been referred to as the Anchorage Proceedings and the Liquidators’ Proceedings. On any view of things, it will be a substantial case with potentially substantial effects on various parties.

3. As Ball J described it, the amendments concerned what the parties have described as the MAE issue, which is an allegation that by signing draw down notices or causing them to be signed, the defendants (Sparkes, Bakewell, and Pearce) represented, contrary to the fact, that there had been no material change in the Arrium Group’s financial position which constituted a material adverse effect as defined in certain facility agreements.

4. Ball J refused the amendments against all three defendants, amongst others, because his Honour considered that the plaintiff had made a deliberate forensic decision not to raise the MAE issue. In relation to Pearce, additional prejudice would be caused in permitting the amendments.

5. Bakewell and Pearce did not, however, object to the proposed amendments, and BoC now seeks leave to make them. Having regard to their non-opposition, and given that they cannot now identify any legitimate forensic prejudice if they were made, I have concluded that they should be permitted. I give leave to BoC to file an Amended Commercial List Statement incorporating these amendments. BoC is to pay the defendants’ costs thrown away by the amendments.

6. Apart from these amendments, BoC seeks another, much more profound amendment. It seeks for the first time to bring a direct claim against a cross-defendant in the other proceedings, the law firm Herbert Smith Freehills (HSF).

7. This claim mirrors, largely if not entirely, a cross-claim brought by Bakewell which he filed and served on 28 November 2019. That is more than a year ago. BoC had Bakewell’s affidavit evidence on 30 September 2020 although they received the exhibits some days later.

8. Balancing all the considerations for and against allowing the amendment, I have come to the conclusion that it should be refused.

9. On any view of things, this application is brought at a late stage, close to the commencement of a significant fixture. Mr Troiani, BoC’s solicitor, gave an explanation that his clients were not prepared to make a cross-claim piggy-backing on Bakewell’s cross-claim until they had seen his evidence. It is not necessary to consider whether this is a reasonable or prudent course to take or not. I would certainly not describe it as unreasonable or imprudent. But the simple fact is that it delayed BoC in seeking to make this claim.

10. I am also persuaded that the application, even allowing for the serving of Bakewell’s affidavit, could have been brought somewhat sooner or foreshadowed somewhat sooner but I am not confident that in any event it would not have been too late anyway.

11. Although it might be inconvenient, involve additional expense, and perhaps a theoretical possibility of inconsistent findings, BoC could still bring this claim in separate proceedings if it chose to do so

12. On the other hand, HSF puts that if joined directly, it would wish to bring, or at least to consider bringing, a cross-claim against a present non-party, Lazard. Second, it might wish to plead a proportionate liability defence against Pearce, or claim against her, which it may not be permitted to do having regard to Ball J’s judgment. I interpolate that counsel for Pearce made it clear that the suggestion that she could be drawn in indirectly if the claim were permitted would be vigorously resisted. HSF would also wish to consider the option of seeking contribution. It is beyond doubt that the joinder of a third party at this late stage would jeopardise the significant fixture.

13. BoC argues HSF’s suggested prejudice is hypothetical and contrived. I do not think that this can confidently be said to be the case.

14. I was taken to authorities and submissions relating to technical matters of proportionate liability, contribution, and concurrent wrongdoing, on the basis that each party argued that the other party’s prejudice was hypothetical, whereas its own was real. It is inappropriate to determine this application by taking a definitive view that any of the claims, cross-claims, defences, or answers, actual or potential, are without foundation and bound to fail.

15. It is plain that HSF is currently devoting significant time, effort, and resources to preparation for the hearing. Its evidence is due on 18 December 2020. This claim, if permitted, would divert at least some of those resources to considering what the responses should be (even taking into account that the substance of the allegations on which the claim was made have been made elsewhere in the case).

16. BoC had a very long time to consider this claim. Fairness would dictate that HSF should also have a fair time to do so given the lateness of it, that is the application. I do not think that the opportunity that HSF would have would, at this late state, be described as fair or adequate.

17. I interpolate that I raised the possibility of permitting the claim on the condition that HSF could move to have it disallowed on prejudice being established. I have concluded that this would not be an appropriate procedure to follow given, amongst others, that close to the trial resources will be devoted to the preparation of the trial and the outcome would depend on a series of imponderables which, at this point, I think would be an advisable course to take.

18. The application to amend by making a direct claim against HSF in the BoC proceedings is dismissed. BoC is to pay HSF’s costs of the failed application.

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Decision last updated: 02 February 2021